Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Jun. 30, 2016 | Aug. 10, 2016 | |
Document And Entity Information | ||
Entity Registrant Name | Rennova Health, Inc. | |
Entity Central Index Key | 931,059 | |
Document Type | 10-Q | |
Document Period End Date | Jun. 30, 2016 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Is Entity a Well-known Seasoned Issuer? | No | |
Is Entity a Voluntary Filer? | No | |
Is Entity's Reporting Status Current? | Yes | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 42,351,400 | |
Document Fiscal Period Focus | Q2 | |
Document Fiscal Year Focus | 2,016 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets (Unaudited) - USD ($) | Jun. 30, 2016 | Dec. 31, 2015 |
Current assets: | ||
Cash | $ 485,241 | $ 8,833,230 |
Accounts receivable, net | 7,849,283 | 8,149,484 |
Prepaid expenses and other current assets | 1,506,204 | 1,193,077 |
Income tax refunds receivable | 2,516,042 | 2,415,013 |
Total current assets | 12,356,770 | 20,590,804 |
Property and equipment, net | 5,760,694 | 7,148,295 |
Deposits | 235,184 | 232,774 |
Total assets | 18,352,648 | 27,971,873 |
Current liabilities: | ||
Accounts payable (includes related parties) | 3,775,440 | 4,360,035 |
Accrued expenses | 3,116,378 | 5,285,455 |
Current portion of notes payable | 7,546,335 | 269,031 |
Current portion of notes payable, related party | 5,112,990 | 5,133,888 |
Current portion of capital lease obligations | 658,633 | 1,323,708 |
Total current liabilities | 20,209,776 | 16,372,117 |
Other liabilities: | ||
Notes payable, net of current portion | 910,422 | 2,903,898 |
Capital lease obligations, net of current portion | 2,394,172 | 2,394,171 |
Other non-current liabilities | 2,031,821 | 0 |
Derivative liabilities | 3,743,777 | 7,495,486 |
Total liabilities | 29,289,968 | 29,165,672 |
Commitments and contingencies | ||
Stockholders' equity: | ||
Common stock, $0.01 par value, 500,000,000 shares authorized, 14,886,331 shares issued and outstanding at June 30, 2016, 50,000,000 shares authorized, 14,651,837 shares issued and outstanding at December 31, 2015 | 148,863 | 143,951 |
Additional paid-in-capital | 27,046,509 | 26,688,837 |
Accumulated deficit | (38,133,279) | (28,027,177) |
Total stockholders' deficit | (10,937,320) | (1,193,799) |
Total liabilities and stockholders' deficit | 18,352,648 | 27,971,873 |
Series B Preferred Stock [Member] | ||
Stockholders' equity: | ||
Preferred stock, 5,000,000 shares authorized: | 50 | 50 |
Series C Preferred Stock [Member] | ||
Stockholders' equity: | ||
Preferred stock, 5,000,000 shares authorized: | 87 | 90 |
Series E Preferred Stock [Member] | ||
Stockholders' equity: | ||
Preferred stock, 5,000,000 shares authorized: | $ 450 | $ 450 |
Condensed Consolidated Balance3
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares | Jun. 30, 2016 | Dec. 31, 2015 |
Preferred stock shares authorized | 5,000,000 | |
Common stock par value | $ .01 | $ .01 |
Common stock shares authorized | 500,000,000 | 50,000,000 |
Common stock shares issued | 14,886,331 | 14,651,837 |
Common stock shares outstanding | 14,886,331 | 14,651,837 |
Series B Preferred Stock [Member] | ||
Preferred stock shares authorized | 5,000 | 5,000 |
Preferred stock par value | $ .01 | $ .0001 |
Preferred stock shares issued | 5,000 | 5,000 |
Preferred stock shares outstanding | 5,000 | 5,000 |
Series C Preferred Stock [Member] | ||
Preferred stock shares authorized | 10,350 | 10,350 |
Preferred stock par value | $ .01 | $ 0.01 |
Preferred stock shares issued | 8,740 | 9,000 |
Preferred stock shares outstanding | 8,740 | 9,000 |
Series E Preferred Stock [Member] | ||
Preferred stock shares authorized | 45,000 | 100,000 |
Preferred stock par value | $ .01 | $ 0.01 |
Preferred stock shares issued | 45,000 | 45,000 |
Preferred stock shares outstanding | 45,000 | 45,000 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations (Unaudited) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2016 | Jun. 30, 2015 | Jun. 30, 2016 | Jun. 30, 2015 | |
Revenues | ||||
Net Revenues | $ 3,053,712 | $ 9,381,651 | $ 4,932,525 | $ 23,030,433 |
Operating expenses: | ||||
Direct costs of revenue | 390,103 | 2,668,357 | 954,303 | 6,699,631 |
General and administrative | 5,894,327 | 9,396,040 | 11,848,373 | 15,035,973 |
Sales and marketing expenses | 590,271 | 1,139,567 | 1,463,711 | 2,321,788 |
Engineering | 567,409 | 0 | 1,090,177 | 0 |
Bad debt | 100 | 99,754 | 1,385 | 99,754 |
Depreciation and amortization | 701,687 | 669,641 | 1,428,957 | 1,250,434 |
Total operating expenses | 8,143,897 | 13,973,359 | 16,786,906 | 25,407,580 |
Loss from operations | (5,090,185) | (4,591,708) | (11,854,381) | (2,377,147) |
Other income (expense): | ||||
Other income | 2 | 2 | 100,012 | 23 |
Change in fair value of derivative instruments | 1,293,072 | 0 | 4,726,660 | 0 |
(Loss) gain on legal settlement | (17,652) | 0 | (17,652) | 275,028 |
Interest expense | (2,047,328) | (542,442) | (3,060,741) | (1,047,543) |
Total other (expense) income | (771,906) | (542,440) | 1,748,279 | (772,492) |
Loss before income taxes | (5,862,091) | (5,134,148) | (10,106,102) | (3,149,639) |
(Benefit) provision for income taxes | 0 | (878,700) | 0 | 98,800 |
Net loss | (5,862,091) | (4,255,448) | (10,106,102) | (3,248,439) |
Preferred stock dividends | 0 | 797,344 | 0 | 1,320,394 |
Net loss attributable to common stockholders | $ (5,862,091) | $ (5,052,792) | $ (10,106,102) | $ (4,568,833) |
Net loss per common share: Basic and diluted | $ (.40) | $ (.42) | $ (.69) | $ (.38) |
Weighted average number of shares outstanding during the period - Basic and diluted | 14,777,036 | 12,012,282 | 14,753,283 | 11,902,415 |
Condensed Consolidated Stateme5
Condensed Consolidated Statement of Changes in Stockholders' Deficit - 6 months ended Jun. 30, 2016 - USD ($) | Series B Preferred Stock | Series E Preferred Stock | Series C Preferred Stock | Preferred Stock | Common Stock | Additional Paid-In Capital | Retained Earnings | Total |
Beginning balance, shares at Dec. 31, 2015 | 5,000 | 45,000 | 9,000 | 59,000 | 14,651,837 | |||
Beginning balance, value at Dec. 31, 2015 | $ 50 | $ 450 | $ 90 | $ 590 | $ 143,951 | $ 26,688,837 | $ (28,027,177) | $ (1,193,799) |
Conversion of Series C Preferred shares into common stock, shares | (260) | 167,743 | ||||||
Conversion of Series C Preferred shares into common stock, value | $ (3) | $ (3) | $ 4,244 | (4,241) | ||||
Cashless exercise of warrants, shares | 43,809 | |||||||
Cashless exercise of warrants, value | $ 438 | (438) | ||||||
Shares issued in adjustment of prior conversion of preferred stock, shares | 50,606 | |||||||
Shares issued in adjustment of prior conversion of preferred stock, value | $ 506 | (506) | ||||||
Common shares cancelled, shares | (40,964) | |||||||
Common shares cancelled, value | $ (410) | 410 | ||||||
Issuance of shares for services, shares | 13,300 | |||||||
Issuance of shares for services, value | $ 133 | 9,177 | 9,310 | |||||
Stock-based compensation | 353,271 | 353,271 | ||||||
Net loss | (10,106,102) | (10,106,102) | ||||||
Ending balance, shares at Jun. 30, 2016 | 5,000 | 45,000 | 8,740 | 59,000 | 14,886,331 | |||
Ending balance, value at Jun. 30, 2016 | $ 50 | $ 450 | $ 87 | $ 587 | $ 148,863 | $ 27,046,509 | $ (38,133,279) | $ (10,937,320) |
Condensed Consolidated Stateme6
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) | 6 Months Ended | |
Jun. 30, 2016 | Jun. 30, 2015 | |
Cash flows provided by (used in) operating activities: | ||
Net loss | $ (10,106,102) | $ (3,248,439) |
Adjustments to reconcile net loss to net cash used in operations: | ||
Depreciation and amortization | 1,428,957 | 1,250,434 |
Non-cash gain on derivative instruments | (4,726,660) | 0 |
Stock issued for services | 9,310 | 2,400,000 |
Stock-based compensation | 353,271 | 669,421 |
Bad debts | 1,385 | 10,416,953 |
Accretion of beneficial conversion feature as interest | 2,087,881 | 684,329 |
Gain on extinguishment of debt | (100,000) | 0 |
Gain on legal settlement | 0 | (275,028) |
Changes in operating assets and liabilities: | ||
Accounts receivable | 298,816 | (15,424,348) |
Prepaid expenses and other current assets | (313,127) | (401,961) |
Security deposits | (2,410) | (41,057) |
Accounts payable | (584,595) | 528,318 |
Accrued expenses | (137,256) | 1,355,035 |
Income tax assets and liabilities | (101,029) | (548,231) |
Deferred tax assets and liabilities | 0 | 76,200 |
Net cash used in operating activities | (11,891,559) | (2,558,374) |
Cash flows used in investing activities: | ||
Purchase of property and equipment | (41,356) | (324,750) |
Net cash used in investing activities | (41,356) | (324,750) |
Cash flows provided by (used in) financing activities: | ||
Dividends on Series B preferred stock | 0 | (1,320,394) |
Proceeds from issuance of notes payable, related party | 3,000,000 | 3,030,000 |
Proceeds from issuance of notes payable | 5,000,000 | 0 |
Payments on notes payable, related party | (5,250,000) | (57,500) |
Payments on capital lease obligations | (665,074) | (474,305) |
Proceeds from issuance of related party advances | 3,165,000 | 0 |
Payments on related party advances | (1,665,000) | 0 |
Net cash provided by financing activities | 3,584,926 | 1,177,801 |
Net decrease in cash | (8,347,989) | (1,705,323) |
Cash at beginning of period | 8,833,230 | 2,406,246 |
Cash at end of period | $ 485,241 | $ 700,923 |
1. Organization and Basis of Pr
1. Organization and Basis of Presentation | 6 Months Ended |
Jun. 30, 2016 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Organization and Basis of Presentation | Rennova Health, Inc. (“Rennova”), together with its subsidiaries (the “Company”, “we”, “us” or “our”), is a vertically integrated provider of healthcare related products and services. The Company’s principal lines of business are (i) clinical laboratory operations, (ii) supportive software solutions, which includes Electronic Health Records (“EHR”), Medical Billing Services and Laboratory Information Services (“LIS”) and (iii) decision support and informatics operations. Merger between the Company and Medytox Solutions, Inc. On November 2, 2015, pursuant to the terms of the Agreement and Plan of Merger, dated as of April 15, 2015, by and among the Company, CollabRx Merger Sub, Inc. (“Merger Sub”), a direct wholly-owned subsidiary of the Company formed for the purpose of the merger, and Medytox Solutions, Inc. (“Medytox”), Merger Sub merged with and into Medytox, with Medytox as the surviving company and a direct, wholly-owned subsidiary of the Company (the “Merger”). Prior to closing, the Company amended its certificate of incorporation to effect a 1-for-10 reverse stock split and to change its name from CollabRx, Inc. to Rennova Health, Inc. In connection with the Merger, (i) each share of common stock of Medytox was converted into the right to receive approximately 0.4096 shares of common stock of the Company, (ii) each share of Series B Preferred Stock of Medytox was converted into the right to receive one share of Series B Convertible Preferred Stock of the Company, and (iii) each share of Series E Convertible Preferred Stock of Medytox was converted into the right to receive one share of Series E Convertible Preferred Stock of the Company. Holders of Company equity prior to the closing of the Merger (including all outstanding Company common stock and all restricted stock units, options and warrants exercisable for shares of Company common stock) held approximately 10% of the Company's common stock immediately following the closing of the Merger, and holders of Medytox equity prior to the closing of the Merger (including all outstanding Medytox common stock and all outstanding options exercisable for shares of Medytox common stock, but less certain options that were cancelled upon the closing pursuant to agreements between Medytox and such optionees) held approximately 90% of the Company's common stock immediately following the closing of the Merger, in each case on a fully diluted basis, provided, however, outstanding shares of the newly designated Series B Convertible Preferred Stock and Series E Convertible Preferred Stock, certain outstanding convertible promissory notes exercisable for Company common stock after the closing and certain option grants expected to be made following the closing of the Merger are excluded from such ownership percentages. The Merger resulted in a change in control of the Company, and as a result this transaction was accounted for as a reverse merger and recapitalization in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") and, as such, the financial statements presented prior to November 2, 2015 are those of Medytox and the financial statements presented after November 2, 2015 reflect the operations of the combined company. All common share amounts prior to November 2, 2015 have been retroactively restated to reflect the 1-for-10 reverse stock split and the conversion ratio of Medytox common stock to common stock of the Company as a result of the Merger. On November 3, 2015, the common stock of Rennova Health, Inc. commenced trading on the Nasdaq Capital Market under the symbol “RNVA.” Prior to that date, the Company’s common stock was listed on the NASDAQ Capital Market under the symbol “CLRX.” Immediately after the consummation of the Merger, the Company had 13,750,010 shares of common stock, 5,000 shares of Series B Convertible Preferred Stock and 45,000 shares of Series E Convertible Preferred Stock issued and outstanding. Basis of Presentation The accompanying unaudited condensed consolidated interim financial statements should be read in conjunction with the 2015 audited annual financial statements included in the Company’s Annual Report on Form 10-K/A, filed with the U.S. Securities and Exchange Commission (the “SEC”) on May 17, 2016. These condensed consolidated interim financial statements have been prepared in accordance with instructions to Form 10-Q and Article 8 of Regulation S-X of the SEC, and therefore omit or condense certain footnotes and other information normally included in consolidated interim financial statements prepared in accordance with U.S. GAAP. All material intercompany balances and transactions have been eliminated in consolidation. In the opinion of the Company’s management, the unaudited interim condensed consolidated financial statements contain all adjustments (consisting only of normal recurring accruals) considered necessary for the fair presentation of the financial position and results of operations and cash flows for the interim periods reported herein. The results of operations presented are not necessarily indicative of the results to be expected for any other interim period or for the entire year. During the three and six months ended June 30, 2016 and 2015, comprehensive loss was equal to the net loss amounts presented in the accompanying condensed consolidated statements of operations. In addition, certain prior year balances have been reclassified to conform to the current presentation. Going Concern The Company’s consolidated financial statements are prepared using U.S. GAAP applicable to a going concern that contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has recently accumulated significant losses and has negative cash flows from operations, and at June 30, 2016 had a working capital deficit and stockholders’ deficit of $7.9 million and $10.9 million, respectively, which raise substantial doubt about its ability to continue as a going concern. Management's plans with respect to alleviating the adverse financial conditions which raise substantial doubt about the Company’s ability to continue as a going concern are as follows: The Company is currently executing on a plan of action to increase the volume of samples processed by its laboratories and to increase the number of customers for its supportive software solutions. In addition, the Company has undertaken additional cost saving measures, including personnel reductions and a reorganization of the Company’s sales force under the direction of the new Chief Executive Officer of the Company’s Medytox Medical, Marketing & Sales, Inc. subsidiary. No conclusion can be drawn at this time about the ultimate efficacy of these plans of action. In order to support the Company’s continued operations and enhance its working capital position, two financings were completed. On March 31, 2016, the Company received proceeds of $5.0 million from pledging certain of its accounts receivable as collateral to a prepaid forward purchase contract (see note 4). On July 19, 2016, the Company closed a public offering of its equity securities and received net proceeds of approximately $7.3 million (see note 12). In addition, the Company is entitled to $2.5 million in income tax refunds, the claim for which was filed with the IRS in early April 2016. There can be no assurance as to the timing of the receipt of the income tax refunds for which the Company has filed. There can be no assurance that the Company will be able to achieve its business plans, raise any additional capital or secure additional financing, if necessary, to achieve its current operating plan. The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plan described in the preceding paragraphs and eventually regain profitability. The accompanying consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. |
2. Accounts Receivable
2. Accounts Receivable | 6 Months Ended |
Jun. 30, 2016 | |
Receivables [Abstract] | |
Accounts Receivable | Accounts receivable at June 30, 2016 and December 31, 2015 consisted of the following: June 30, December 31, 2016 2015 Accounts receivable - clinical laboratory operations $ 100,532,443 $ 105,332,339 Accounts receivable - supportive software solutions 772,033 569,351 Total accounts receivable 101,304,476 105,901,690 Less: Allowance for discounts (93,280,117 ) (97,577,130 ) Allowance for bad debts (175,076 ) (175,076 ) Accounts receivable, net $ 7,849,283 $ 8,149,484 |
3. Property and Equipment
3. Property and Equipment | 6 Months Ended |
Jun. 30, 2016 | |
Property, Plant and Equipment [Abstract] | |
Long-Lived Assets | Property and equipment at June 30, 2016 and December 31, 2015 consisted of the following: June 30, December 31, 2016 2015 Medical equipment $ 922,551 $ 991,903 Equipment 577,316 547,555 Equipment under capital leases 5,663,333 5,663,332 Furniture 562,117 560,400 Leasehold improvements 1,776,957 1,760,125 Vehicles 196,534 196,534 Computer equipment 757,425 661,234 Software 1,845,054 1,878,848 12,301,287 12,259,931 Less accumulated depreciation (6,540,593 ) (5,111,636 ) Property and equipment, net $ 5,760,694 $ 7,148,295 Depreciation expense on property and equipment was $0.7 million for the three months ended June 30, 2016 and 2015, and $1.4 million and $1.2 million for the six months ended June 30, 2016 and 2015, respectively. Management periodically reviews the valuation of long-lived assets, including property and equipment, for potential impairment. Management did not recognize any impairment of these assets during the three and six months ending June 30, 2016 and 2015. |
4. Notes Payable
4. Notes Payable | 6 Months Ended |
Jun. 30, 2016 | |
Debt Disclosure [Abstract] | |
Notes Payable | The Company and its subsidiaries are party to a number of loans with affiliates and unrelated parties. At June 30, 2016 and December 31, 2015, notes payable consisted of the following: Notes Payable – Third Parties June 30, 2016 December 31, 2015 Loan payable under prepaid forward purchase contract $ 5,000,000 $ – Loan payable to TCA Global Master Fund, LP in the principal amount of $3,000,000 at 16% interest, with interest only payments through September 11, 2016 (the "TCA Debenture"). Principal and interest payments due monthly from October 11, 2016 through September 11, 2017. 3,000,000 3,000,000 Note payable to CommerceNet in the original principal amount of $250,000, bearing interest at 6% per annum. Principal and interest payments are made annually from July 12, 2015 through July 12, 2017 170,806 170,806 Note payable to Jay Tenenbaum in the original principal amount of $250,000, bearing interest at 6% per annum. Principal and interest payments are made annually from July 12, 2015 through July 12, 2017 170,806 170,806 Loan payable to former shareholder of Epinex Diagnostics Laboratories, Inc. in the original principal amount of $400,000, at 0% interest, with principal payments due in periodic installments of $100,000 from November 26, 2014 through February 26, 2016 (the "Epinex Note") – 100,000 Unamortized discount on TCA Note (305,188 ) (453,025 ) Unamortized discount on Epinex Note – (1,775 ) Derivative liability associated with the TCA Note, at fair value 420,333 186,117 8,456,757 3,172,929 Less current portion (7,546,335 ) (269,031 ) Note payable - third parties, net of current portion 910,422 2,903,898 On March 31, 2016, the Company entered into an agreement to pledge certain of its accounts receivable as collateral against a prepaid forward purchase contract whereby the Company received consideration in the amount of $5.0 million. The receivables had an estimated collectable value of $8.7 million which had been adjusted down to approximately $4.3 million on the Company’s balance sheet as of March 31, 2016. As of June 30, 2016, the carrying value of these receivables was $1.5 million. In exchange for the consideration received, the counterparty received the right to: (i) a 20% per annum investment return from the Company on the consideration, with a minimum repayment term of six months and minimum return of $0.5 million, (ii) all payments recovered from the accounts receivable up to $5.25 million, if paid in full within six months, or $5.5 million, if not paid in full within six months, and (iii) 20% of all payments of the accounts receivable in excess of amounts received in (i) and (ii). On March 31, 2017, to the extent that the counterparty has not been paid $6.0 million, the Company is required to pay the difference. Christopher Diamantis, a director of the Company, guaranteed the Company's payment obligation of up to $6.0 million. For providing the guarantee, and to the extent that the counterparty receives amounts payable under clause (ii) above exceeding $5.0 million, Mr. Diamantis will be paid a fee by the counterparty equal to the amount by which the amount received under clause (ii) above exceeds $5.0 million ($250,000 or $500,000, depending on the timing of payment). The Company is currently negotiating with Jay Tenenbaum and CommerceNet to exchange their notes for equity securities of the Company. In connection with such negotiations, the Company did not make the principal payments that were due on July 12, 2016. As a result, the entire amounts outstanding as of June 30, 2016 are reflected in current liabilities in the accompanying consolidated financial statements. No assurance can be given that an exchange will be consummated on terms that are acceptable to the Company, or at all. Notes Payable – Related Parties June 30, 2016 December 31, 2015 Convertible debenture dated December 31, 2014 which bears interest at 10% per annum and is due December 31, 2016 (the "D&D Debenture"). The note provides the lender, D&D Funding II, LLC, the option to convert the note into the Company's common stock at a 25% discount to the average trading price (as defined in the note agreement) for ten consecutive trading days prior to the conversion date $ 750,000 $ 3,000,000 Loan payable to Alcimede, LLC, bearing interest at 6% per annum, with all principal and interest due on February 2, 2017 500,000 500,000 Loan payable to Christopher Diamantis 2,700,000 1,600,000 Loan payable to Thomas Mendolia 400,000 – Unamortized discount on D&D Debenture (297,843 ) (2,236,112 ) Derivative liabilities associated with the D&D Debenture, at fair value 1,060,833 2,270,000 Current portion of notes payable, related parties 5,112,990 5,133,888 On December 31, 2014, the Company borrowed $3.0 million from D&D Funding II, LLC (“D&D”) and issued the D&D Debenture. Christopher Diamantis, a director of the Company, is the manager and 50% owner of D&D. In January 2016, the Company temporarily repaid the $3.0 million due under the D&D Debenture. In addition to the principal amount, the Company paid $0.3 million in cash for interest for 2015. In March 2016, the Company re-borrowed 100% of the principal amount repaid in January 2016, and repaid $2.25 million in April 2016 using the proceeds from the accounts receivable pledge agreement described above, leaving an outstanding balance on the D&D Debenture of $750,000 as of June 30, 2016, all of which was repaid in July 2016. The D&D Debenture was convertible into the Company’s Common Stock at a 25% discount to the trailing ten-day average closing price at any time prior to the repayment. In the event of conversion, the holder of the D&D Debenture was also entitled to receive a number of warrants to purchase the Company’s Common Stock equal to the number of shares issued upon conversion with exercise prices equal to the trailing ten-day average closing price of our Common Stock. These two features are derivative instruments that are re-valued quarterly and are reflected in the table above. As a result of the partial repayment of the D&D Debenture in April 2016, a pro rata portion of the associated derivative liability was reclassified into stockholders’ equity. In the fourth quarter of 2015, the Company borrowed $1.6 million from Mr. Diamantis, which was due January 7, 2016. In January 2016, the Company repaid the $1.6 million due Mr. Diamantis, along with $0.1 million in cash for interest. In May and June of 2016, the Company received additional short-term advances from Mr. Diamantis aggregating to $2.7 million, all of which was repaid in July 2016. In connection with these advances, the Company agreed to pay Mr. Diamantis interest in the amount of $0.5 million which was paid in August 2016 through the issuance of shares of the Company’s common stock and warrants to purchase shares of common stock (see note 12). In the second quarter of 2016, the Company received short-term advances from Thomas Mendolia, a principal stockholder of the Company, in the amount of $415,000, $15,000 of which was repaid during the period. On February 3, 2015, the Company borrowed $3.0 million from Alcimede LLC (“Alcimede”). Seamus Lagan, the Company’s President and Chief Executive Officer, is the sole manager of Alcimede. The note has an interest rate of 6% and was originally due on February 2, 2016. On June 29, 2015, Alcimede exercised options granted in October 2012 to purchase one million shares of the Company’s common stock at an exercise price of $2.50 per share. The loan outstanding was reduced in satisfaction of the aggregate exercise price of $2.5 million, and the remaining principal balance due on the loan as of June 30, 2016 is $0.5 million. In August 2016, a portion of this amount was repaid by the Company through the issuance of shares of common stock (see note 12). In February 2016, a Alcimede agreed to extend the maturity date of the loan to February 2, 2017. |
5. Related Party Transactions
5. Related Party Transactions | 6 Months Ended |
Jun. 30, 2016 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | In addition to the transactions discussed in note 4 and note 12, the Company had the following related party transactions during the six months ended June 30, 2016 and 2015: Alcimede billed the Company $0.3 million for consulting fees pursuant to a consulting agreement for each of the six months ended June 30, 2016 and 2015. During the second quarter of 2016, the Company received a short-term advance from Jason Adams, the CompanyÂ’s Chief Financial Officer, in the amount of $50,000, all of which was repaid during the quarter. On August 1, 2015, Medytox entered into a non-exclusive consulting agreement with Monarch Capital, LLC ("Monarch"). Michael Goldberg, at the time a director of Medytox and currently a director of the Company, is the Managing Director of Monarch. Under this agreement, Monarch provides business and financial advice. The term of the agreement is through August 31, 2016, and is subject to automatic renewal for an additional one year unless Medytox provides the consultant with 180 daysÂ’ prior written notice of its intent not to renew. Monarch billed the Company $0.1 million for consulting fees pursuant to this agreement for the six months ended June 30, 2016. On June 30, 2015, the Company issued 200,000 shares of common stock to SS International Consulting Ltd., of which a former director of the Company is the sole manager, pursuant to a consulting contract. The foregoing transactions were completed at armÂ’s length at values commensurate with those of independent third parties. |
6. Capital Lease Obligations
6. Capital Lease Obligations | 6 Months Ended |
Jun. 30, 2016 | |
Debt Disclosure [Abstract] | |
Capital Lease Obligations | The Company leases various assets under capital leases expiring through 2020 as follows: June 30, December 31, 2016 2015 Medical equipment $ 5,663,333 $ 5,663,332 Less accumulated depreciation (2,772,173 ) (2,093,920 ) Net $ 2,891,160 $ 3,569,412 Aggregate future minimum rentals under capital leases are as follows: December 31, 2016 $ 775,918 2017 1,432,542 2018 845,330 2019 217,412 2020 32,611 Total 3,303,813 Less interest 251,008 Present value of minimum lease payments 3,052,805 Less current portion of capital lease obligations 658,633 Capital lease obligations, net of current portion $ 2,394,172 |
7. Stockholders' Equity
7. Stockholders' Equity | 6 Months Ended |
Jun. 30, 2016 | |
Equity [Abstract] | |
Stockholders' Equity | Preferred Stock During the six months ended June 30, 2015, the former Medytox Series B preferred shareholders earned dividends totaling $1.3 million. At June 30, 2016 and December 31, 2015, accrued dividends of $1.7 million and $2.1 million, respectively, were included in accrued expenses. In conjunction with the Merger, all outstanding Medytox Series B preferred shares were cancelled in connection with the Merger in exchange for shares of Rennova Series B Convertible Preferred Stock, which are not entitled to receive dividends unless dividends are declared on the Company’s common stock. During the six months ended June 30, 2016, Series C preferred shareholders converted a total of 260 shares of Series C Preferred Stock into 167,743 shares of common stock. Common Stock On March 9, 2016, the Company filed an amendment to its certificate of incorporation to increase the number of shares of common stock that the Company is authorized to issue from 50 million to 500 million. During the six months ended June 30, 2016, the Company issued an aggregate of 13,300 shares of its common stock to a consultant for services. The Company recognized $9,310 in compensation costs associated with these issuances. Also during the six months ended June 30, 2016, the Company issued 43,809 shares of common stock for the cashless exercise of outstanding warrants, issued 50,606 shares of common stock as an adjustment to previously converted preferred stock and cancelled 40,964 shares of common stock previously issued to an employee. During the six months ended June 30, 2015, the Company recognized $2.8 million in compensation expense related to the issuance of Medytox common stock to employees and consultants. Stock Options The Company currently maintains and sponsors the Tegal Corporation 2007 Incentive Award Plan (the “2007 Equity Plan”). Tegal Corporation is the predecessor entity to CollabRx. The 2007 Equity Plan, as amended, provides for the issuance of stock options and other equity awards to the Company’s officers, directors, employees and consultants. On May 2, 2016, the Company granted options to employees, directors and consultants to purchase an aggregate of 15,643,000 shares of the Company’s common stock under the 2007 Equity Plan. The Company recorded compensation expense in the amount of $0.4 million during the three and six months ended June 30, 2016 in connection with these grants. During the six months ended June 30, 2015, the Company recorded approximately $269,000 of compensation expense related to outstanding options to purchase Medytox common stock. These amounts are reflected in General and administrative expenses in the accompanying consolidated statements of operations. The following table summarizes the Company’s stock option activity for the six months ended June 30, 2016: Number of options Weighted Balance at December 31, 2015 1,600,674 $ 7.73 Options granted during the period 15,643,000 $ 5.16 Options exercised during the period – $ – Options forfeited during the period – $ – Options expired during the period – $ – Options outstanding at June 30, 2016 17,243,674 $ 5.40 Options exercisable at June 30, 2016 13,823,674 $ 6.48 The Company’s stock options are measured at fair value on the date of grant, and compensation expense is recorded over the requisite service period. The options granted during the six months ended June 30, 2016 were valued using a binomial option-pricing model using the following assumptions: Expected term 9.89 years Expected volatility 168% Risk free interest rate 1.88% Dividend yield 0% As of June 30, 2016, the Company had approximately $0.3 million of unrecognized compensation cost related to stock options granted under the Company’s 2007 Equity Plan, which is expected to be recognized over a weighted-average period of 1.36 years. Basic and Diluted Loss per Share Basic loss per share excludes dilution and is computed by dividing loss attributable to common stockholders by the weighted-average number of common shares outstanding during the period. Diluted loss per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the income of the Company. For the three and six months ended June 30, 2016 and 2015, basic loss per share is the same as diluted loss per share. Diluted loss per share excludes all dilutive potential shares if their effect is anti-dilutive. As of June 30, 2016 and 2015, the following potential common stock equivalents were excluded from the calculation of diluted loss per share as their effect was anti-dilutive: June 30, June 30, 2016 2015 Stock options outstanding 17,243,674 9,771,908 Warrants outstanding 6,834,569 – Convertible debt 6,915,626 409,638 Convertible preferred stock 11,948,047 72,711 42,941,916 10,254,256 |
8. Income Taxes
8. Income Taxes | 6 Months Ended |
Jun. 30, 2016 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | The Company recognized no income tax expense or benefit for the six months ended June 30, 2016. The Company recognized income tax expense of $98,800 for the six months ended June 30, 2015. The Company’s effective income tax rate for the six months ended June 30, 2016 and 2015 were 0.0% and (3.1)%, respectively. Changes to the effective tax rates relate primarily to the recognition of a valuation allowance on 100% of net deferred tax assets for the six months ended June 30, 2016. The Company applies a “more likely than not” threshold to the recognition and nonrecognition of tax positions. A change in judgment related to prior years’ tax positions is recognized in the quarter of such change. The Company had no reserve for uncertain tax positions as of June 30, 2016 or December 31, 2015. The Company recognizes interest and/or penalties related to income tax matters in income tax expense and in income taxes payable. The table below presents a reconciliation of statutory income tax rates to our effective rates: Six Months Ended June 30, 2016 2015 Expected federal income tax at statutory rate 35.0% 34.0% State income taxes, net of federal deduction 2.1% -0.2% Permanent differences -0.1% -36.9% Change in valuation allowance -37.0% 0.0% 0.0% -3.1% |
9. Supplemental Disclosure of C
9. Supplemental Disclosure of Cash Flow Information | 6 Months Ended |
Jun. 30, 2016 | |
Supplemental Cash Flow Elements [Abstract] | |
Supplemental Disclosure of Cash Flow Information | Six Months Ended June 30, 2016 2015 Cash paid for interest $ 858,741 $ 136,028 Cash paid for income taxes $ – $ 570,831 Non-cash investing and financing activities: Exercise of stock options as reduction of notes payable, related party $ – $ (2,500,000 ) Assets acquired through capital leases $ – $ 1,046,126 Acquisition of noncontrolling interest in Biohealth Medical Laboratory, Inc.: Deposits on acquisition $ – $ 259,875 Goodwill $ – $ (138,871 ) Noncontrolling interest $ – $ (121,004 ) |
10. Commitments and Contingenci
10. Commitments and Contingencies | 6 Months Ended |
Jun. 30, 2016 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Legal Matters From time to time, the Company may be involved in a variety of claims, lawsuits, investigations and proceedings related to contractual disputes, employment matters, regulatory and compliance matters, intellectual property rights and other litigation arising in the ordinary course of business. The Company operates in a highly regulated industry which may inherently lend itself to legal matters. Management is aware that litigation has associated costs and that results of adverse litigation verdicts could have a material effect on the Company's financial position or results of operations. Management, in consultation with legal counsel, has addressed known assertions and predicted unasserted claims below. The Company’s Epinex Diagnostics Laboratories, Inc. subsidiary had been sued in a California state court by two former employees who alleged that they were wrongfully terminated, as well as for a variety of unpaid wage claims. The parties entered into a settlement agreement of this matter on July 29, 2016, and the Company expects the settlement to be consummated in the third quarter of 2016. As a result of the settlement, the Company accrued approximately $0.2 million on its balance sheet as of June 30, 2016. In February 2016, the Company received notice that the Internal Revenue Service had placed a lien against Medytox Solutions, Inc. and its subsidiaries relating to unpaid 2014 taxes due, plus penalties and interest, totaling $4,964,020. The Company paid $100,000 toward its 2014 tax liability in March 2016. The Company filed its 2015 Federal tax return on March 15, 2016. The 2015 return and the accompanying election to carryback the reported net operating losses, which was filed in April 2016, should permit the Company to have the lien lifted when reviewed and processed by the IRS. Potential De-Listing of the Company’s Stock On March 16, 2016, the Company was notified by Nasdaq that the bid price of the Company's common stock closed below the minimum $1.00 per share requirement for continued inclusion under Nasdaq Rule 5550(a)(2) (the “Bid Price Rule”). In accordance with Nasdaq Rule 5810(c)(3)(A), the Company has 180 calendar days, or until September 12, 2016, to regain compliance. If at any time before September 12, 2016, the bid price of the Company's common stock closes at $1.00 per share or more for a minimum of 10 consecutive business days, the Company will regain compliance with the Bid Price Rule. If the Company does not regain compliance by September 12, 2016, an additional 180 days may be granted to regain compliance, so long as the Company meets The Nasdaq Capital Market initial listing criteria (except for the bid price requirement). |
11. Segment Information
11. Segment Information | 6 Months Ended |
Jun. 30, 2016 | |
Segment Reporting [Abstract] | |
Segment Reporting | Operating segments are defined under U.S. GAAP as components of an enterprise for which discrete financial information is available and are evaluated regularly by the enterprise’s chief operating decision maker in determining how to allocate resources and assess performance. The Company operates in three reportable business segments: · Clinical Laboratory Operations, which specializes in providing urine and blood toxicology and pain medication testing to physicians, clinics and rehabilitation facilities in the United States. · Supportive Software Solutions, including EHR and medical billing and laboratory information management systems. · Decision Support and Informatics, which develops and markets medical information and clinical support products and services intended to set a standard for the clinical interpretation of genomics-based precision medicine. The accounting policies of the reportable segments are the same as those described in Note 2, Summary of Significant Accounting Policies, of the Company’s audited consolidated financial statements included in the Company’s Annual Report on Form 10-K/A for the year ended December 31, 2015. Selected financial information for the Company’s operating segments is as follows: Three Months Ended June 30, Six Months Ended June 30, 2016 2015 2016 2015 Net revenues - External Clinical Laboratory Operations $ 2,512,163 $ 8,924,951 $ 3,977,300 $ 22,424,754 Supportive Software Solutions 325,102 456,700 555,128 605,679 Decision Support and Informatics 216,447 – 400,097 – $ 3,053,712 $ 9,381,651 $ 4,932,525 $ 23,030,433 Net revenues - Inter Segment Supportive Software Solutions 237,993 444,629 534,341 828,737 $ 237,993 $ 444,629 $ 534,341 $ 828,737 Income (loss) from operations Clinical Laboratory Operations $ (1,047,690 ) $ 1,291,465 $ (3,698,230 ) $ 6,356,886 Supportive Software Solutions (1,234,194 ) (1,362,273 ) (2,547,507 ) (2,720,262 ) Decision Support and Informatics (675,714 ) – (1,557,280 ) – Corporate (2,166,251 ) (4,548,962 ) (4,118,688 ) (6,067,549 ) Eliminations 33,664 28,062 67,324 53,778 $ (5,090,185 ) $ (4,591,708 ) $ (11,854,381 ) $ (2,377,147 ) Depreciation and amortization Clinical Laboratory Operations $ 562,134 $ 521,024 $ 1,143,235 $ 968,349 Supportive Software Solutions 162,059 175,507 326,487 335,863 Decision Support and Informatics 10,283 – 24,810 – Corporate 874 (26,890 ) 1,749 – Eliminations (33,663 ) – (67,324 ) (53,778 ) $ 701,687 $ 669,641 $ 1,428,957 $ 1,250,434 Capital expenditures Clinical Laboratory Operations $ 14,473 $ 84,867 $ 31,358 $ 272,752 Supportive Software Solutions 7,881 26,741 9,998 51,998 $ 22,354 $ 111,608 $ 41,356 $ 324,750 June 30, 2016 December 31, 2015 Total assets Clinical Laboratory Operations $ 13,578,567 $ 15,152,583 Supportive Software Solutions 2,605,016 2,896,473 Decision Support and Informatics 314,335 4,307,053 Corporate 4,716,237 12,711,284 Eliminations (2,861,507 ) (7,095,520 ) $ 18,352,648 $ 27,971,873 |
12. Subsequent Events
12. Subsequent Events | 6 Months Ended |
Jun. 30, 2016 | |
Subsequent Events [Abstract] | |
Subsequent Events | On July 17, 2016, the Company issued an aggregate of 583,335 shares of common stock to three of its executive officers as compensation. In addition, the Company granted 83,334 shares of restricted common stock to an employee which will vest over a period of six months from the date of grant and have yet to be issued. The foregoing grants were issued under the 2007 Equity Plan. On July 11, 2016, the Company entered into Exchange Agreements with the holders of the Company’s Series C Convertible Preferred Stock and the holders of the Company’s 6,451,613 warrants to purchase shares of common stock issued December 30, 2015 (the “December 2015 Warrants”), to exchange such securities for shares of newly-authorized Series G Convertible Preferred Stock with a stated value of $1,000 per share (“Series G Preferred Stock”) and new warrants to purchase shares of common stock (the “Exchange”). The Exchange closed on July 19, 2016 in conjunction with the public offering discussed below, and the outstanding 8,740 shares of Series C Preferred Stock and the December 2015 Warrants were exchanged for 13,793 shares of Series G Preferred Stock and new warrants to purchase 10,249,517 shares of the Company’s common stock (the “Exchange Warrants”). On July 6, 2016, stockholders representing approximately 74% of the voting power of the Company approved the Exchange. The Exchange was made in reliance upon the exemption from the registration requirements of the Securities Act of 1933, as amended, pursuant to Section 3 (a)(9) thereof based on the representations of the holders. No commission or other remuneration was paid or given directly or indirectly for soliciting the Exchange. The Series G Preferred Stock is convertible into common stock at the stated value divided by $0.45. The exercise price of the Exchange Warrants is $0.45 per share. No gain or loss was recognized by the Company as result of the Exchange, however the Company did record a gain on the change in fair value of the December 2015 Warrants of $1.7 million in July 2016. On July 19, 2016, the Company closed a public offering of its equity securities whereby the Company issued 19,115,000 shares of its common stock and warrants to purchase an additional 19,115,000 shares of its common stock and received net proceeds of approximately $7.3 million. In conjunction with this offering, the Company also issued an additional 303,633 warrants to cover over-allotments. The proceeds will be used for working capital and general corporate purposes, continued development of new diagnostics processes and methodologies, continued development, roll out and implementation of EHR and Revenue Cycle Management services, acquisitions and expansions of the Company’s business and the repayment of certain related party notes and advances. Between July 19, 2016 and August 4, 2016, a total of 1,148 shares of Series G Preferred Stock were converted into 2,550,680 shares of common stock in accordance with the terms of the Series G Preferred Stock. On July 19, 2016, the Company purchased all of the debt and equity interests in Genomas, Inc. (“Genomas”) held by Hartford Healthcare Corporation, consisting of 500,000 shares of Series A Preferred Stock of Genomas, 345,000 shares of Series B Preferred Stock of Genomas, an aggregate of approximately $1.5 million of Genomas notes payable to Hartford Healthcare Corporation and certain rights to and license participation in technology that is used by Genomas (the “Genomas Assets”). Genomas is a biomedical company that develops PhyzioType Systems for DNA-guided management and prescription of drugs used to treat mental illness, pain, heart disease, and diabetes. The purchase price for the Genomas Assets was $250,000 in cash. The Genomas preferred stock acquired in this transaction represents approximately 15% of the outstanding equity of Genomas. In July 2016, the Company repaid the outstanding $750,000 balance on the D&D Debenture, and repaid the outstanding $2.7 million that was owed to Mr. Diamantis. Also in July 2016, the Company borrowed $350,000 from Aella, Ltd., a principal stockholder. This amount was repaid in the same month with a portion of the proceeds of the July 19, 2016 public offering. In August 2016, the Company exchanged an aggregate of approximately $2.0 million of indebtedness and other obligations to various related parties for an aggregate of 5,211,080 shares of common stock and warrants to purchase 3,123,313 shares of the Company’s common stock. The warrants issued have an exercise price of $0.45 per share, are immediately exercisable and have a five-year term. The issuance of the shares of common stock and warrants was exempt from the registration requirements of the Securities Act of 1933, as amended, in accordance with Section 4(a)(2) thereof, as a transaction by an issuer not involving any public offering. |
2. Accounts Receivable (Tables)
2. Accounts Receivable (Tables) | 6 Months Ended |
Jun. 30, 2016 | |
Receivables [Abstract] | |
Schedule of accounts receivable | June 30, December 31, 2016 2015 Accounts receivable - clinical laboratory operations $ 100,532,443 $ 105,332,339 Accounts receivable - supportive software solutions 772,033 569,351 Total accounts receivable 101,304,476 105,901,690 Less: Allowance for discounts (93,280,117 ) (97,577,130 ) Allowance for bad debts (175,076 ) (175,076 ) Accounts receivable, net $ 7,849,283 $ 8,149,484 |
3. Property and Equipment (Tabl
3. Property and Equipment (Tables) | 6 Months Ended |
Jun. 30, 2016 | |
Property, Plant and Equipment [Abstract] | |
Schedule of property and equipment | June 30, December 31, 2016 2015 Medical equipment $ 922,551 $ 991,903 Equipment 577,316 547,555 Equipment under capital leases 5,663,333 5,663,332 Furniture 562,117 560,400 Leasehold improvements 1,776,957 1,760,125 Vehicles 196,534 196,534 Computer equipment 757,425 661,234 Software 1,845,054 1,878,848 12,301,287 12,259,931 Less accumulated depreciation (6,540,593 ) (5,111,636 ) Property and equipment, net $ 5,760,694 $ 7,148,295 |
4. Notes Payable (Tables)
4. Notes Payable (Tables) | 6 Months Ended |
Jun. 30, 2016 | |
Debt Disclosure [Abstract] | |
Schedule of notes payable | June 30, 2016 December 31, 2015 Loan payable under prepaid forward purchase contract $ 5,000,000 $ – Loan payable to TCA Global Master Fund, LP in the principal amount of $3,000,000 at 16% interest, with interest only payments through September 11, 2016 (the "TCA Debenture"). Principal and interest payments due monthly from October 11, 2016 through September 11, 2017. 3,000,000 3,000,000 Note payable to CommerceNet in the original principal amount of $250,000, bearing interest at 6% per annum. Principal and interest payments are made annually from July 12, 2015 through July 12, 2017 170,806 170,806 Note payable to Jay Tenenbaum in the original principal amount of $250,000, bearing interest at 6% per annum. Principal and interest payments are made annually from July 12, 2015 through July 12, 2017 170,806 170,806 Loan payable to former shareholder of Epinex Diagnostics Laboratories, Inc. in the original principal amount of $400,000, at 0% interest, with principal payments due in periodic installments of $100,000 from November 26, 2014 through February 26, 2016 (the "Epinex Note") – 100,000 Unamortized discount on TCA Note (305,188 ) (453,025 ) Unamortized discount on Epinex Note – (1,775 ) Derivative liability associated with the TCA Note, at fair value 420,333 186,117 8,456,757 3,172,929 Less current portion (7,546,335 ) (269,031 ) Note payable - third parties, net of current portion 910,422 2,903,898 |
Schedule of notes payable - related parties | June 30, 2016 December 31, 2015 Convertible debenture dated December 31, 2014 which bears interest at 10% per annum and is due December 31, 2016 (the "D&D Debenture"). The note provides the lender, D&D Funding II, LLC, the option to convert the note into the Company's common stock at a 25% discount to the average trading price (as defined in the note agreement) for ten consecutive trading days prior to the conversion date $ 750,000 $ 3,000,000 Loan payable to Alcimede, LLC, bearing interest at 6% per annum, with all principal and interest due on February 2, 2017 500,000 500,000 Loan payable to Christopher Diamantis 2,700,000 1,600,000 Loan payable to Thomas Mendolia 400,000 – Unamortized discount on D&D Debenture (297,843 ) (2,236,112 ) Derivative liabilities associated with the D&D Debenture, at fair value 1,060,833 2,270,000 Current portion of notes payable, related parties 5,112,990 5,133,888 |
6. Capital Lease Obligations (T
6. Capital Lease Obligations (Tables) | 6 Months Ended |
Jun. 30, 2016 | |
Debt Disclosure [Abstract] | |
Schedule of capital leases | June 30, December 31, 2016 2015 Medical equipment $ 5,663,333 $ 5,663,332 Less accumulated depreciation (2,772,173 ) (2,093,920 ) Net $ 2,891,160 $ 3,569,412 |
Aggregate future minimum rentals under capital leases | December 31, 2016 $ 775,918 2017 1,432,542 2018 845,330 2019 217,412 2020 32,611 Total 3,303,813 Less interest 251,008 Present value of minimum lease payments 3,052,805 Less current portion of capital lease obligations 658,633 Capital lease obligations, net of current portion $ 2,394,172 |
7. Stockholders' Equity (Tables
7. Stockholders' Equity (Tables) | 6 Months Ended |
Jun. 30, 2016 | |
Equity [Abstract] | |
Option activity | Number of options Weighted Balance at December 31, 2015 1,600,674 $ 7.73 Options granted during the period 15,643,000 $ 5.16 Options exercised during the period – $ – Options forfeited during the period – $ – Options expired during the period – $ – Options outstanding at June 30, 2016 17,243,674 $ 5.40 Options exercisable at June 30, 2016 13,823,674 $ 6.48 |
Assumptions used | Expected term 9.89 years Expected volatility 168% Risk free interest rate 1.88% Dividend yield 0% |
Antidilutive Securities | June 30, June 30, 2016 2015 Stock options outstanding 17,243,674 9,771,908 Warrants outstanding 6,834,569 – Convertible debt 6,915,626 409,638 Convertible preferred stock 11,948,047 72,711 42,941,916 10,254,256 |
8. Income Taxes (Tables)
8. Income Taxes (Tables) | 6 Months Ended |
Jun. 30, 2016 | |
Income Tax Disclosure [Abstract] | |
Reconciliation of the statutory federal income tax rate | Six Months Ended June 30, 2016 2015 Expected federal income tax at statutory rate 35.0% 34.0% State income taxes, net of federal deduction 2.1% -0.2% Permanent differences -0.1% -36.9% Change in valuation allowance -37.0% 0.0% 0.0% -3.1% |
9. Supplemental Disclosure of25
9. Supplemental Disclosure of Cash Flow Information (Tables) | 6 Months Ended |
Jun. 30, 2016 | |
Supplemental Cash Flow Elements [Abstract] | |
Cash Flow Information | Six Months Ended June 30, 2016 2015 Cash paid for interest $ 858,741 $ 136,028 Cash paid for income taxes $ – $ 570,831 Non-cash investing and financing activities: Exercise of stock options as reduction of notes payable, related party $ – $ (2,500,000 ) Assets acquired through capital leases $ – $ 1,046,126 Acquisition of noncontrolling interest in Biohealth Medical Laboratory, Inc.: Deposits on acquisition $ – $ 259,875 Goodwill $ – $ (138,871 ) Noncontrolling interest $ – $ (121,004 ) |
11. Segment Information (Tables
11. Segment Information (Tables) | 6 Months Ended |
Jun. 30, 2016 | |
Segment Reporting [Abstract] | |
Segment information | Three Months Ended June 30, Six Months Ended June 30, 2016 2015 2016 2015 Net revenues - External Clinical Laboratory Operations $ 2,512,163 $ 8,924,951 $ 3,977,300 $ 22,424,754 Supportive Software Solutions 325,102 456,700 555,128 605,679 Decision Support and Informatics 216,447 – 400,097 – $ 3,053,712 $ 9,381,651 $ 4,932,525 $ 23,030,433 Net revenues - Inter Segment Supportive Software Solutions 237,993 444,629 534,341 828,737 $ 237,993 $ 444,629 $ 534,341 $ 828,737 Income (loss) from operations Clinical Laboratory Operations $ (1,047,690 ) $ 1,291,465 $ (3,698,230 ) $ 6,356,886 Supportive Software Solutions (1,234,194 ) (1,362,273 ) (2,547,507 ) (2,720,262 ) Decision Support and Informatics (675,714 ) – (1,557,280 ) – Corporate (2,166,251 ) (4,548,962 ) (4,118,688 ) (6,067,549 ) Eliminations 33,664 28,062 67,324 53,778 $ (5,090,185 ) $ (4,591,708 ) $ (11,854,381 ) $ (2,377,147 ) Depreciation and amortization Clinical Laboratory Operations $ 562,134 $ 521,024 $ 1,143,235 $ 968,349 Supportive Software Solutions 162,059 175,507 326,487 335,863 Decision Support and Informatics 10,283 – 24,810 – Corporate 874 (26,890 ) 1,749 – Eliminations (33,663 ) – (67,324 ) (53,778 ) $ 701,687 $ 669,641 $ 1,428,957 $ 1,250,434 Capital expenditures Clinical Laboratory Operations $ 14,473 $ 84,867 $ 31,358 $ 272,752 Supportive Software Solutions 7,881 26,741 9,998 51,998 $ 22,354 $ 111,608 $ 41,356 $ 324,750 June 30, 2016 December 31, 2015 Total assets Clinical Laboratory Operations $ 13,578,567 $ 15,152,583 Supportive Software Solutions 2,605,016 2,896,473 Decision Support and Informatics 314,335 4,307,053 Corporate 4,716,237 12,711,284 Eliminations (2,861,507 ) (7,095,520 ) $ 18,352,648 $ 27,971,873 |
1. Organization and Presentatio
1. Organization and Presentation (Details Narrative) - USD ($) | 6 Months Ended | 7 Months Ended | |
Jun. 30, 2016 | Jul. 19, 2016 | Dec. 31, 2015 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||
Working capital | $ (7,900,000) | ||
Stockholder deficit | (10,937,320) | $ (1,193,799) | |
Proceeds from pledged receivables | $ 5,000,000 | ||
Proceeds from sale of stock | $ 7,300,000 |
2. Accounts Receivable (Details
2. Accounts Receivable (Details - Accounts receivable) - USD ($) | Jun. 30, 2016 | Dec. 31, 2015 |
Accounts receivable, gross | $ 101,304,476 | $ 105,901,690 |
Less: Allowance for discounts | (93,280,117) | (97,577,130) |
Less: Allowance for bad debts | (175,076) | (175,076) |
Accounts receivable, net | 7,849,283 | 8,149,484 |
Clinical Laboratory Operations [Member] | ||
Accounts receivable, gross | 100,532,443 | 105,332,339 |
Supportive Software Solutions [Member] | ||
Accounts receivable, gross | $ 772,033 | $ 569,351 |
3. Property and Equpment (Detai
3. Property and Equpment (Details - Equipment) - USD ($) | Jun. 30, 2016 | Dec. 31, 2015 |
Property and equipment, gross | $ 12,301,287 | $ 12,359,931 |
Accumulated depreciation | (6,540,593) | (5,111,636) |
Property and equipment, net | 5,760,694 | 7,148,295 |
Medical equipment [Member] | ||
Property and equipment, gross | 922,551 | 991,903 |
Equipment [Member] | ||
Property and equipment, gross | 577,316 | 547,555 |
Assets Held Under Capital Leases [Member] | ||
Property and equipment, gross | 5,663,333 | 5,663,332 |
Furniture [Member] | ||
Property and equipment, gross | 562,117 | 560,400 |
Leasehold Improvements [Member] | ||
Property and equipment, gross | 1,776,957 | 1,760,125 |
Vehicles [Member] | ||
Property and equipment, gross | 196,534 | 196,534 |
Computer Equipment [Member] | ||
Property and equipment, gross | 757,425 | 661,234 |
Software [Member] | ||
Property and equipment, gross | $ 1,845,054 | $ 1,878,848 |
3. Property and Equipment (Deta
3. Property and Equipment (Details Narrative) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2016 | Jun. 30, 2015 | Jun. 30, 2016 | Jun. 30, 2015 | |
Property, Plant and Equipment [Abstract] | ||||
Depreciation | $ 700,000 | $ 700,000 | $ 1,400,000 | $ 1,200,000 |
Impairment expense | $ 0 | $ 0 |
4. Notes Payable (Details-Notes
4. Notes Payable (Details-Notes Payable) - USD ($) | Jun. 30, 2016 | Dec. 31, 2015 |
Notes payable | $ 8,456,757 | $ 3,172,929 |
Less: current portion | (7,546,335) | (269,031) |
Notes payable, net of current portion | 910,422 | 2,903,898 |
Note payable 1 [Member] | ||
Notes payable | 5,000,000 | 0 |
Note payable 2 [Member] | TCA Global Master Fund, LP [Member] | ||
Notes payable | 3,000,000 | 3,000,000 |
Unamortized discount | (305,188) | (453,025) |
Fair value of derivatives | 420,333 | 186,117 |
Note payable 3 [Member] | CommerceNet [Member] | ||
Notes payable | 170,806 | 170,806 |
Note payable 4 [Member] | Tennenbaum [Member] | ||
Notes payable | 170,806 | 170,806 |
Note payable 5 [Member] | Former Shareholder [Member] | ||
Notes payable | 0 | 100,000 |
Unamortized discount | $ 0 | $ (1,775) |
4. Notes Payable (Details-Not32
4. Notes Payable (Details-Notes Payable Related Party) - USD ($) | Jun. 30, 2016 | Dec. 31, 2015 |
Notes payable related parties | $ 5,112,990 | $ 5,133,888 |
Notes payable - related party 1 [Member] | Notes payable - related party [Member] | D & D Funding [Member] | ||
Note payable related parties | 750,000 | 3,000,000 |
Unamortized discount | (297,843) | (2,236,112) |
Fair value of derivatives | 1,060,833 | 2,270,000 |
Notes payable - related party 2 [Member] | Notes payable - related party [Member] | Alcimede [Member] | ||
Note payable related parties | 500,000 | 500,000 |
Notes payable - related party 3 [Member] | Notes payable - related party [Member] | Diamantis [Member | ||
Note payable related parties | 2,700,000 | 1,600,000 |
Notes payable - related party 4 [Member] | Notes payable - related party [Member] | Mendolina [Member] | ||
Note payable related parties | $ 400,000 | $ 0 |
4. Notes Payable (Details Narra
4. Notes Payable (Details Narrative) - USD ($) | 6 Months Ended | |
Jun. 30, 2016 | Jun. 30, 2015 | |
Proceeds from issuance of related party advances | $ 3,165,000 | $ 0 |
Payments on related party advances | (1,665,000) | $ 0 |
Note payable 2 [Member] | TCA Global Master Fund, LP [Member] | ||
Debt original face amount | $ 3,000,000 | |
Interest rate | 16.00% | |
Maturity date | Sep. 11, 2017 | |
Note payable 3 [Member] | CommerceNet [Member] | ||
Debt original face amount | $ 250,000 | |
Interest rate | 1.06% | |
Maturity date | Jul. 12, 2017 | |
Note payable 4 [Member] | Tennenbaum [Member] | ||
Debt original face amount | $ 250,000 | |
Interest rate | 1.06% | |
Maturity date | Jul. 12, 2017 | |
Note payable 5 [Member] | Former Shareholder [Member] | ||
Debt original face amount | $ 5,000,000 | |
Interest rate | 20.00% | |
Maturity date | Mar. 30, 2017 | |
Notes payable - related party 1 [Member] | D & D Funding [Member] | Notes payable - related party [Member] | ||
Interest rate | 10.00% | |
Maturity date | Dec. 31, 2016 | |
Notes payable - related party 2 [Member] | Alcimede [Member] | Notes payable - related party [Member] | ||
Interest rate | 6.00% | |
Maturity date | Feb. 2, 2017 | |
Note payable 1 [Member] | ||
Receivables pledged | $ 1,500,000 | |
Notes payable - related party 4 [Member] | Mendolina [Member] | Notes payable - related party [Member] | ||
Proceeds from issuance of related party advances | 415,000 | |
Payments on related party advances | $ 15,000 |
5. Related Party Transactions (
5. Related Party Transactions (Details Narrative) - USD ($) | 3 Months Ended | 6 Months Ended | |
Jun. 30, 2016 | Jun. 30, 2016 | Jun. 30, 2015 | |
Proceeds from issuance of related party advances | $ 3,165,000 | $ 0 | |
Payments on related party advances | (1,665,000) | 0 | |
Alcimede [Member] | |||
Consulting fees paid | 300,000 | $ 300,000 | |
Jason Adams [Member] | |||
Proceeds from issuance of related party advances | $ 50,000 | ||
Payments on related party advances | $ 50,000 | ||
Monarch Capital [Member] | |||
Consulting fees paid | $ 100,000 | ||
SS International Consulting, Ltd. [Member] | |||
Issuance of shares for services, shares | 200,000 |
6. Capital Lease Obligations (D
6. Capital Lease Obligations (Details-Capital leased assets) - USD ($) | Jun. 30, 2016 | Dec. 31, 2015 |
Capital Lease Obligations [Abstract] | ||
Medical equipment | $ 5,663,333 | $ 5,663,332 |
Less accumulated depreciation | (2,772,173) | (2,093,920) |
Capital lease obligations | $ 2,891,160 | $ 3,569,412 |
6. Capital Lease Obligations 36
6. Capital Lease Obligations (Details-Future payments) - USD ($) | Jun. 30, 2016 | Dec. 31, 2015 |
December 31 | ||
2,016 | $ 775,918 | |
2,017 | 1,432,542 | |
2,018 | 845,330 | |
2,019 | 217,412 | |
2,020 | 32,611 | |
Total | 3,303,813 | |
Less interest: | 251,008 | |
Present value of minimum lease payments | 3,052,805 | |
Less current portion of capital lease obligations | 658,633 | $ 1,323,708 |
Capital lease obligations, net of current portion | $ 2,394,172 | $ 2,394,171 |
7. Stockholders' Equity (Detail
7. Stockholders' Equity (Details - Options) | 6 Months Ended |
Jun. 30, 2016$ / sharesshares | |
Number of options | |
Options outstanding, beginning balance | shares | 1,600,674 |
Options granted | shares | 15,643,000 |
Options exercised | shares | 0 |
Options forfeited | shares | 0 |
Options expired | shares | 0 |
Options outstanding, ending balance | shares | 17,243,674 |
Options exercisable | shares | 13,823,674 |
Weighted average exercise price | |
Options outstanding, beginning balance | $ / shares | $ 7.73 |
Options granted | $ / shares | 5.16 |
Options exercised | $ / shares | |
Options forfeited | $ / shares | |
Options expired | $ / shares | |
Options outstanding, ending balance | $ / shares | 5.40 |
Options exercisable | $ / shares | $ 6.48 |
7. Stockholders' Equity (Deta38
7. Stockholders' Equity (Details - Assumptions) | 7 Months Ended |
Jul. 19, 2016 | |
Equity [Abstract] | |
Expected term | 9 years 10 months 21 days |
Expected volatility | 168.00% |
Risk free interest rate | 1.88% |
Dividend yield | 0.00% |
7. Stockholders' Equity (Deta39
7. Stockholders' Equity (Details - Antidilutive shares) - shares | 6 Months Ended | |
Jun. 30, 2016 | Jun. 30, 2015 | |
Antidilutive securities | 42,941,916 | 10,254,256 |
Stock Options [Member] | ||
Antidilutive securities | 17,243,674 | 9,771,908 |
Warrant [Member] | ||
Antidilutive securities | 6,834,569 | 0 |
Convertible Debt [Member] | ||
Antidilutive securities | 6,915,626 | 409,638 |
Convertible Preferred Stock [Member] | ||
Antidilutive securities | 11,948,047 | 72,711 |
7. Stockholders' Equity (Deta40
7. Stockholders' Equity (Details Narrative) - USD ($) | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2016 | Jun. 30, 2015 | Jun. 30, 2016 | Jun. 30, 2015 | Dec. 31, 2015 | |
Dividends earned | $ 0 | $ 797,344 | $ 0 | $ 1,320,394 | |
Stock issued for services, value | 9,310 | ||||
Unrecognized compensation cost | 300,000 | $ 300,000 | |||
Unrecognized compensation cost amortization period | 1 year 4 months 10 days | ||||
Options Granted [Member] | |||||
Share based compensation expense | 400,000 | $ 400,000 | |||
Medytox [Member] | Common stock to employees and consultants [Member] | |||||
Share based compensation expense | 2,800,000 | ||||
Medytox [Member] | Outstanding options [Member] | |||||
Share based compensation expense | 269,000 | ||||
Warrant Exercises [Member] | |||||
Stock issued for warrants exercised | 43,809 | ||||
Previously converted preferred stock [Member] | |||||
Shares issued in adjustment of prior conversion of preferred stock, shares | 50,606 | ||||
Previously issued to employee [Member] | |||||
Stock cancelled, shares | 40,964 | ||||
Consultant [Member] | |||||
Stock issued for services, shares issued | 13,300 | ||||
Stock issued for services, value | $ 9,310 | ||||
Medytox Series B Preferred Stock [Member] | |||||
Dividends earned | $ 1,300,000 | ||||
Accrued dividends | $ 2,100,000 | $ 2,100,000 | $ 1,700,000 | ||
Series C Preferred Stock [Member] | |||||
Preferred stock converted into common, preferred shares converted | 260 | ||||
Preferred stock converted into common, common shares issued | 167,743 |
8. Income Taxes (Details-Effect
8. Income Taxes (Details-Effective income tax rate) | 6 Months Ended | |
Jun. 30, 2016 | Jun. 30, 2015 | |
Income Tax Disclosure [Abstract] | ||
Expected federal income tax at statutory rate | 35.00% | 34.00% |
State income taxes, net of federal deduction | 2.10% | (0.20%) |
Permanent differences | (0.10%) | (36.90%) |
Change in valuation allowance | (37.00%) | 0.00% |
Income tax provision (benefit) | 0.00% | (3.10%) |
8. Income Taxes (Details Narrat
8. Income Taxes (Details Narrative) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2016 | Jun. 30, 2015 | Jun. 30, 2016 | Jun. 30, 2015 | |
Income Tax Disclosure [Abstract] | ||||
Income tax expense | $ 0 | $ (878,700) | $ 0 | $ 98,800 |
9. Supplemental Disclosure of43
9. Supplemental Disclosure of Cash Flow Information (Details) - USD ($) | 6 Months Ended | |
Jun. 30, 2016 | Jun. 30, 2015 | |
Supplemental Cash Flow Elements [Abstract] | ||
Cash paid for interest | $ 858,741 | $ 136,028 |
Cash paid for income taxes | 0 | 570,831 |
Non-cash investing and financing activities: | ||
Exercise of stock options as reduction of notes payable, related party | 0 | (2,500,000) |
Assets acquired through capital leases | 0 | 1,046,126 |
Acquisition of noncontrolling interest in Biohealth Medical Laboratory, Inc.: | ||
Deposits on acquisition | 0 | 259,875 |
Goodwill | 0 | (138,871) |
Noncontrolling interest | $ 0 | $ (121,004) |
10. Commitments and Contingen44
10. Commitments and Contingencies (Details Narrative) | 6 Months Ended |
Jun. 30, 2016USD ($) | |
Litigation accrual | $ 200,000 |
Medytox [Member] | |
Accrued tax liability | 4,964,020 |
Payment of income tax | $ 100,000 |
11. Segment Reporting (Details-
11. Segment Reporting (Details-Operations) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2016 | Jun. 30, 2015 | Jun. 30, 2016 | Jun. 30, 2015 | |
Net revenues - External | $ 3,053,712 | $ 9,381,651 | $ 4,932,525 | $ 23,030,433 |
Net revenues - Inter Segment | 237,993 | 444,629 | 534,341 | 828,737 |
Income (loss) from operations | (5,090,185) | (4,591,708) | (11,854,381) | (2,377,147) |
Depreciation and amortization | 701,687 | 669,641 | 1,428,957 | 1,250,434 |
Capital expenditures | 22,354 | 111,608 | 41,356 | 324,750 |
Eliminations [Member] | ||||
Income (loss) from operations | 33,664 | 28,062 | 67,324 | 53,778 |
Depreciation and amortization | (33,663) | 0 | (67,324) | (53,778) |
Clinical Laboratory Operations [Member] | ||||
Net revenues - External | 2,512,163 | 8,924,951 | 3,977,300 | 22,424,754 |
Net revenues - Inter Segment | 237,993 | 444,629 | ||
Income (loss) from operations | (1,047,690) | 1,291,465 | (3,698,230) | 6,356,886 |
Depreciation and amortization | 562,134 | 521,024 | 1,143,235 | 968,349 |
Capital expenditures | 14,473 | 84,867 | 31,358 | 272,752 |
Supportive Software Solutions [Member] | ||||
Net revenues - External | 325,102 | 456,700 | 555,128 | 605,679 |
Net revenues - Inter Segment | 534,341 | 828,737 | ||
Income (loss) from operations | (1,234,194) | (1,362,273) | (2,547,507) | (2,720,262) |
Depreciation and amortization | 162,059 | 175,507 | 326,487 | 335,863 |
Capital expenditures | 7,881 | 26,741 | 9,998 | 51,998 |
Decision Support and Informatics Operations [Member] | ||||
Net revenues - External | 216,447 | 0 | 400,097 | 0 |
Income (loss) from operations | (675,714) | 0 | (1,557,280) | 0 |
Depreciation and amortization | 10,283 | 0 | 24,810 | 0 |
Corporate [Member] | ||||
Income (loss) from operations | (2,166,251) | (4,548,962) | (4,118,688) | (6,067,549) |
Depreciation and amortization | $ 874 | $ (26,890) | $ 1,749 | $ 1,358 |
11. Segment Reporting (Detail46
11. Segment Reporting (Details-Assets) - USD ($) | Jun. 30, 2016 | Dec. 31, 2015 |
Total assets | $ 18,352,648 | $ 27,971,873 |
Eliminations [Member] | ||
Total assets | (7,095,520) | (2,861,507) |
Clinical Laboratory Operations [Member] | ||
Total assets | 13,578,567 | 15,152,583 |
Supportive Software Solutions [Member] | ||
Total assets | 2,605,016 | 2,896,473 |
Decision Support and Informatics Operations [Member] | ||
Total assets | 314,335 | 4,307,053 |
Corporate [Member] | ||
Total assets | $ 4,716,237 | $ 12,711,284 |