Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2017 | May 18, 2017 | |
Document And Entity Information | ||
Entity Registrant Name | Rennova Health, Inc. | |
Entity Central Index Key | 931,059 | |
Document Type | 10-Q/A | |
Document Period End Date | Mar. 31, 2017 | |
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 | 7,103,796 | |
Document Fiscal Period Focus | Q1 | |
Document Fiscal Year Focus | 2,017 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets (Unaudited) - USD ($) | Mar. 31, 2017 | Dec. 31, 2016 |
Current assets: | ||
Cash | $ 1,365,053 | $ 77,979 |
Accounts receivable, net | 1,297,585 | 1,467,580 |
Prepaid expenses and other current assets | 206,444 | 216,642 |
Income tax refunds receivable | 1,458,438 | 1,458,438 |
Total current assets | 4,327,520 | 3,220,639 |
Property and equipment, net | 3,594,579 | 3,096,602 |
Deposits | 159,557 | 165,152 |
Other assets | 231,268 | 0 |
Total assets | 8,312,924 | 6,482,393 |
Current liabilities: | ||
Accounts payable (includes related parties) | 3,301,427 | 3,351,388 |
Accrued expenses | 2,970,330 | 4,135,146 |
Income taxes payable | 700,436 | 942,433 |
Current portion of notes payable | 7,724,614 | 9,011,247 |
Current portion of notes payable, related party | 243,500 | 328,500 |
Current portion of capital lease obligations | 1,271,860 | 1,796,053 |
Total current liabilities | 16,212,167 | 19,564,767 |
Other liabilities: | ||
Capital lease obligations, net of current portion | 1,387,272 | 1,774,121 |
Derivative liabilities | 56,046,310 | 29,401 |
Total liabilities | 73,645,749 | 21,368,289 |
Stockholders' equity: | ||
Common stock, $0.01 par value, 500,000,000 shares authorized, 5,881,670 and 2,800,377 shares issued and outstanding | 58,817 | 28,004 |
Additional paid-in-capital | 44,953,912 | 45,726,862 |
Accumulated deficit | (110,345,571) | (60,640,864) |
Total stockholders' deficit | (65,332,825) | (14,885,896) |
Total liabilities and stockholders' deficit | 8,312,924 | 6,482,393 |
Series G Preferred Stock [Member] | ||
Stockholders' equity: | ||
Preferred stock | 2 | 2 |
Series H Preferred Stock [Member] | ||
Stockholders' equity: | ||
Preferred stock | $ 15 | $ 100 |
Condensed Consolidated Balance3
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares | Mar. 31, 2017 | Dec. 31, 2016 |
Common stock par value | $ .01 | $ .01 |
Common stock shares authorized | 500,000,000 | 500,000,000 |
Common stock shares issued | 5,881,670 | 2,800,377 |
Common stock shares outstanding | 5,881,670 | 2,800,377 |
Series G Preferred Stock [Member] | ||
Preferred stock shares authorized | 14,000 | 14,000 |
Preferred stock par value | $ .01 | $ 0.01 |
Preferred stock shares issued | 215 | 215 |
Preferred stock shares outstanding | 215 | 215 |
Series H Preferred Stock [Member] | ||
Preferred stock shares authorized | 14,202 | 14,202 |
Preferred stock par value | $ .01 | $ 0.01 |
Preferred stock shares issued | 1,565 | 10,019 |
Preferred stock shares outstanding | 1,565 | 10,019 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations (Unaudited) - USD ($) | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Revenues | ||
Net Revenues | $ 1,176,113 | $ 1,878,813 |
Operating expenses: | ||
Direct costs of revenue | 292,304 | 564,200 |
General and administrative expenses | 4,224,239 | 5,954,046 |
Sales and marketing expenses | 314,866 | 873,440 |
Engineering expenses | 380,197 | 522,768 |
Bad debt expense | (2,911) | 1,285 |
Depreciation and amortization | 592,945 | 727,270 |
Total operating expenses | 5,801,640 | 8,643,009 |
Loss from operations | (4,625,527) | (6,764,196) |
Other income (expense): | ||
Other income | 0 | 100,010 |
Change in fair value of derivative instruments | 571,719 | 3,433,588 |
Interest expense | (45,647,649) | (1,013,413) |
Total other (expense) income | (45,075,930) | 2,520,185 |
Loss before income taxes | (49,701,457) | (4,244,011) |
Income tax expense | 3,250 | 0 |
Net loss | $ (49,704,707) | $ (4,244,011) |
Net loss per common share: Basic and diluted | $ (10.15) | $ (8.59) |
Weighted average number of shares outstanding during the period - Basic and diluted | 4,897,647 | 493,887 |
Condensed Consolidated Stateme5
Condensed Consolidated Statement Of Changes In Stockholders’ Deficit (Unaudited) - 3 months ended Mar. 31, 2017 - USD ($) | Series G Preferred Stock [Member] | Series H Preferred Stock [Member] | Preferred Stock | Common Stock | Additional Paid-In Capital | Retained Earnings | Total |
Beginning balance, shares at Dec. 31, 2016 | 215 | 10,019 | 10,234 | 2,800,377 | |||
Beginning balance, value at Dec. 31, 2016 | $ 2 | $ 100 | $ 102 | $ 28,004 | $ 45,726,862 | $ (60,640,864) | $ (14,885,896) |
Conversion of preferred stock into common stock, shares converted | (6,280) | ||||||
Conversion of preferred stock into common stock, converted share value | $ (63) | $ (63) | |||||
Conversion of preferred stock into common stock, stock issued value | 23,259 | (23,196) | |||||
Common stock issued in exchange for warrants, value | $ 295 | 57,560 | 57,855 | ||||
Shares issued in settlement of notes payable, shares | 400,000 | ||||||
Shares issued in settlement of notes payable, value | $ 4,000 | 436,000 | 440,000 | ||||
Exchange of preferred stock for convertible debentures, shares | (2,174) | (2,174) | |||||
Exchange of preferred stock for convertible debentures, value | $ (22) | $ (22) | (2,173,978) | (2,174,000) | |||
Conversion of debentures into common stock, shares | 315,171 | ||||||
Conversion of debentures into common stock, value | $ 3,152 | 486,032 | 489,184 | ||||
Rounding up of common shares in connection with reverse stock split, shares | 7,897 | ||||||
Rounding up of common shares in connection with reverse stock split, value | $ 79 | (79) | |||||
Common stock granted to employees, shares | 2,778 | ||||||
Common stock granted to employees, value | $ 28 | (28) | |||||
Reclassification of derivative liabilities | 409,524 | 409,524 | |||||
Stock-based compensation | 35,215 | 35,215 | |||||
Net loss | (49,704,707) | (49,704,707) | |||||
Ending balance, shares at Mar. 31, 2017 | 215 | 1,565 | 1,780 | 5,881,670 | |||
Ending balance, value at Mar. 31, 2017 | $ 15 | $ 2 | $ 17 | $ 58,817 | $ 44,953,912 | $ (110,345,571) | $ (65,332,825) |
Condensed Consolidated Stateme6
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Cash flows used in operating activities: | ||
Net loss | $ (49,704,707) | $ (4,244,011) |
Adjustments to reconcile net loss to net cash used in operations: | ||
Depreciation and amortization | 592,945 | 727,270 |
Non-cash gain on derivative instruments | (571,719) | (3,433,588) |
Stock issued for services | 0 | 9,310 |
Stock-based compensation | 35,215 | 0 |
Bad debt (recoveries) expense | (2,911) | 1,285 |
Non-cash interest expense | 44,074,628 | 0 |
Amortization of debt discount | 943,160 | 789,376 |
Non-cash settlement of debt | (50,000) | 0 |
(Gain) loss on extinguishment of debt | 0 | (100,000) |
Changes in operating assets and liabilities: | ||
Accounts receivable | 172,906 | 1,096,357 |
Prepaid expenses and other current assets | 10,198 | (126,863) |
Security deposits | 5,595 | 0 |
Accounts payable | (49,961) | (923,381) |
Accrued expenses | (1,164,816) | (684,981) |
Income tax assets and liabilities | (241,997) | (101,015) |
Net cash used in operating activities | (5,951,464) | (6,990,241) |
Cash flows used in investing activities: | ||
Purchase of property and equipment | (1,090,922) | (19,002) |
Net cash used in investing activities | (1,090,922) | (19,002) |
Cash flows provided by financing activities: | ||
Proceeds from issuance of related party notes payable and advances | 3,395,000 | 3,000,000 |
Proceeds from issuance of notes payable and convertible debentures | 9,892,500 | 5,000,000 |
Payments on related party notes payable and advances | (3,430,000) | (4,600,000) |
Payments on notes payable | (616,998) | 0 |
Payments on capital lease obligations | (911,042) | (323,181) |
Net cash provided by financing activities | 8,329,460 | 3,076,819 |
Net increase (decrease) in cash | 1,287,074 | (3,932,424) |
Cash at beginning of period | 77,979 | 8,833,230 |
Cash at end of period | $ 1,365,053 | $ 4,900,806 |
1. Organization and Basis of Pr
1. Organization and Basis of Presentation | 3 Months Ended |
Mar. 31, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Organization and Basis of Presentation | Basis of Presentation The accompanying unaudited condensed consolidated interim financial statements should be read in conjunction with the 2016 audited financial statements included in the Company’s Annual Report on Form 10-K, filed with the U.S. Securities and Exchange Commission (the “SEC”) on April 10, 2017. These condensed consolidated interim financial statements have been prepared in accordance with the 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 months ended March 31, 2017 and 2016, 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. Reverse Stock Split On February 7, 2017, the Company’s Board of Directors approved an amendment to the Company’s Certificate of Incorporation to effect a 1-for-30 reverse stock split of the Company’s shares of common stock effective on February 22, 2017 (the “Reverse Stock Split”). The stockholders of the Company had approved an amendment to the Company’s Certificate of Incorporation on December 22, 2016 to effect a reverse split of all of the Company’s shares of common stock at a specific ratio within a range from 1-for-10 to 1-for-30, and granted authorization to the Board of Directors to determine in its discretion the specific ratio and timing of the reverse split prior to December 31, 2017. As a result of the Reverse Stock Split, every 30 shares of the Company’s then outstanding common stock was combined and automatically converted into one share of the Company’s common stock, par value $0.01 per share. In addition, the conversion and exercise prices of all of the Company’s outstanding preferred stock, common stock purchase warrants, stock options and convertible notes payable were proportionately adjusted at the 1:30 reverse split ratio in accordance with the terms of such instruments. Proportionate voting rights and other rights of common stockholders were not affected by the Reverse Stock Split, other than as a result of the rounding up of fractional shares, as no fractional shares were issued in connection with the Reverse Stock Split. The reverse stock split became effective at the close of business on February 22, 2017 and the Company’s common stock began trading on The NASDAQ Capital Market on a post-split basis on February 23, 2017. The par value and other terms of the common stock were not affected by the Reverse Stock Split. The authorized capital of the Company of 500,000,000 shares of common stock and 5,000,000 shares of preferred stock were also unaffected by the Reverse Stock Split. All share, per share and capital stock amounts for all periods presented have been restated to give effect to the Reverse Stock Split. 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 accumulated significant losses and has negative cash flows from operations, and at March 31, 2017 had a working capital deficit and stockholders’ deficit of $11.7 million and $65.2 million, respectively, which raise substantial doubt about its ability to continue as a going concern. In addition, the Company’s cash position is critically deficient, critical payments are not being made in the ordinary course and certain indebtedness in the amount of $6.0 million matured on March 31, 2017, which the Company does not have the financial resources to satisfy (see note 4), all of which raises substantial doubt about the Company’s ability to continue as a going concern. The Company is currently executing on a plan of action to reduce the number of laboratory facilities it operates from five such facilities into one, with a corresponding reduction in the number of employees and associated operating expenses, in order to reduce costs. In addition, the Company issued $12.4 million of convertible debentures in the first three months of 2017, for which it received net proceeds of $9.9 million (see note 5), and intends to seek additional financing on similar terms within the next few months. There are currently no commitments for any such funding. There can be no assurance that the Company will be able to achieve its business plan, raise any additional capital or secure the additional financing necessary to implement its current operating plan. The ability of the Company to continue as a going concern is dependent upon its ability to significantly reduce its operating costs, increase its revenues and eventually regain profitable operations. 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 | 3 Months Ended |
Mar. 31, 2017 | |
Receivables [Abstract] | |
Accounts Receivable | Accounts receivable at March 31, 2017 and December 31, 2016 consisted of the following: March 31, December 31, 2017 2016 Accounts receivable - laboratory services $ 6,998,918 $ 13,220,498 Accounts receivable - all others 732,888 701,583 Total accounts receivable 7,731,806 13,922,081 Less: Allowance for discounts (6,089,059 ) (12,103,547 ) Allowance for bad debts (345,162 ) (350,954 ) Accounts receivable, net $ 1,297,585 $ 1,467,580 |
3. Property and Equipment
3. Property and Equipment | 3 Months Ended |
Mar. 31, 2017 | |
Property, Plant and Equipment [Abstract] | |
Property and Equipment | Property and equipment at March 31, 2017 and December 31, 2016 consisted of the following: March 31, December 31, 2017 2016 Medical equipment $ 696,195 $ 696,195 Buiding 1,056,000 – Equipment 490,746 490,746 Equipment under capital leases 4,497,025 4,497,025 Furniture 525,689 525,689 Leasehold improvements 1,335,971 1,335,971 Vehicles 196,534 196,534 Computer equipment 634,237 634,237 Software 1,774,269 1,739,348 11,206,666 10,115,745 Less accumulated depreciation (7,612,087 ) (7,019,143 ) Property and equipment, net $ 3,594,579 $ 3,096,602 On January 13, 2017, the Company completed an asset purchase agreement to acquire certain assets related to Scott County Community Hospital, based in Oneida, Tennessee (the “Hospital Assets”). The Hospital Assets include a 52,000 square foot hospital building and 6,300 square foot professional building on approximately 4.3 acres. Scott County Community Hospital, which has since been renamed as Big South Fork Medical Center, is classified as a Critical Access Hospital (rural). The Company acquired the Hospital Assets out of bankruptcy for a purchase price of $1.0 million, and the purchase price has been recorded as property and equipment in the Company’s consolidated balance sheet. The Company intends to reopen the hospital during the third quarter of 2017, subject to the receipt of the necessary licenses and regulatory approvals. Depreciation expense on property and equipment was $0.6 million and $0.7 million for the three months ended March 31, 2017 and 2016, 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 months ended March 31, 2017 and 2016. |
4. Notes Payable
4. Notes Payable | 3 Months Ended |
Mar. 31, 2017 | |
Debt Disclosure [Abstract] | |
Notes Payable | The Company and its subsidiaries are party to a number of loans with affiliates and unrelated parties. At March 31, 2017 and December 31, 2016, notes payable consisted of the following: Notes Payable – Third Parties March 31, 2017 December 31, 2016 Loan payable under prepaid forward purchase contract $ 5,000,000 $ 5,000,000 Loan payable to TCA Global Master Fund, LP ("TCA") in the original principal amount of $3 million at 16% interest (the "TCA Debenture"). Principal and interest payments due in various installments through September 17, 2017. 2,383,002 3,000,000 Notes payable to CommerceNet and Jay Tenenbaum in the original principal amount of $500,000, bearing interest at 6% per annum (the "Tegal Notes"). Prinicpal and interest payments are due annually from July 12, 2015 through July 12, 2017 341,612 341,612 Other convertible notes payable – 440,000 Unamortized discount on other convertible notes – (179,889 ) Derivative liability associated with the TCA Debenture, at fair value – 409,524 7,724,614 9,011,247 Less current portion (7,724,614 ) (9,011,247 ) Notes payable - third parties, net of current portion $ – $ – 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 and $0 as of March 31, 2017. 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 was required to pay the difference. To date, the Company has not recovered any payments against the accounts receivable. As of March 31, 2017, the Company has accrued $1.0 million for the counterparty’s required investment return, which is reflected in accrued expenses in the accompanying consolidated balance sheet, and $6.0 million was due to the counterparty on March 31, 2017. The Company does not have the financial resources to repay this obligation. The Company did not make the required monthly principal and interest payments due under the TCA Debenture for the period from October 2016 through March 2017. On February 2, 2017, the Company made a payment to TCA in the amount of $0.4 million which was applied to accrued and unpaid interest and fees, including default interest, as of the date of payment. On March 21, 2017, the Company made a payment to TCA in the amount of $0.75 million, of which approximately $0.1 million was applied to accrued and unpaid interest and fees in accordance with the terms of the TCA Debenture. Also on March 21, 2017, the Company entered into a letter agreement with TCA, which (i) waives any payment defaults through March 21, 2017; (ii) provides for the $0.75 million payment discussed above; (iii) sets forth a revised repayment schedule whereby the remaining principal plus interest aggregating to approximately $2.6 million is repaid in various monthly installments from April of 2017 through September of 2017; and (iv) provides for payment of an additional service fee in the amount of $150,000, which is due upon the earlier of September 20, 2017 or the date on which a previously filed registration statement filed by the Company is declared effective by the SEC, and is reflected in accrued expenses in the accompanying consolidated balance sheet at March 31, 2017. In addition, TCA entered into an intercreditor agreement with the purchasers of the convertible debentures (see note 5) which sets forth rights, preferences and priorities with respect to the security interests in the Company’s assets. On September 15, 2016, the Company entered into an agreement with two investors whereby the Company sold to the investors convertible notes in the aggregate principal amount of $0.4 million (the “September 2016 Notes”). The September 2016 Notes were convertible into shares of the Company’s common stock at a conversion price of $7.50 per share. In conjunction with the sale of the September 2016 Notes, the Company issued warrants to purchase an aggregate of 66,667 shares of the Company’s common stock at an exercise price of $12.00 per share. Based on the allocation of the net proceeds from the September 2016 Notes to the fair value of the warrants, and the resulting beneficial conversion features, the Company recognized a discount for the entire face value of the September 2016 Notes, which was accreted through the notes’ maturity date of March 15, 2017. On March 13, 2017, the September 2016 Notes, along with the accompanying warrants, were exchanged for 400,000 shares of the Company’s common stock. The Company did not make the principal payments under the Tegal Notes that were due on July 12, 2016. On November 3, 2016, the Company received a default notice from the holders of the Tegal Notes demanding immediate repayment of the outstanding principal and accrued interest aggregating to $0.4 million. On December 7, 2016 the Company received a breach of contract complaint with a request for entry of a default judgment (see note 13). To date, the Company has yet to repay this amount. Notes Payable – Related Parties March 31, 2017 December 31, 2016 Loan payable to Alcimede LLC, bearing interest at 6% per annum, with all principal and interest due on August 2, 2017 $ 168,500 $ 218,500 Other advances from related parties 75,000 110,000 243,500 328,500 Less current portion (243,500 ) (328,500 ) Total notes payable, related parties $ – $ – 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. Alcimede has since agreed to extend the maturity date of the loan to August 2, 2017. 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, and the loan outstanding was reduced in satisfaction of the aggregate exercise price of $2.5 million. In August of 2016, $0.3 million was repaid by the Company through the issuance of shares of common stock. In March of 2017, the Company and Mr. Lagan agreed that a payment made to Mr. Lagan in the amount of $50,000 would be deducted from the outstanding balance of the note, and the remaining balance due on this loan as of March 31, 2017 was $0.2 million. During the three months ended March 31, 2017, the Company repaid $0.1 million that was outstanding to a former principal stockholder, and borrowed an additional $75,000 from this same stockholder. |
5. Convertible Debentures
5. Convertible Debentures | 3 Months Ended |
Mar. 31, 2017 | |
Notes to Financial Statements | |
Convertible Debentures | On February 2, 2017, the Company issued $1.6 million aggregate principal amount of Original Issue Discount Convertible Debentures due three months from the date of issuance (the “February Debentures”) and warrants to purchase an aggregate of 100,000 shares of common stock, which can be exercised at any time after August 17, 2017 at an exercise price of $2.58 per share (the “Warrants”), to an accredited investor for a purchase price of $1.5 million. The February Debentures were convertible at a conversion price of $2.58 per share (subject to adjustment). On March 21, 2017, the Company issued $10.85 million aggregate principal amount of Senior Secured Original Issue Discount Convertible Debentures due March 21, 2019 (the “Convertible Debentures”) and three series of warrants to purchase an aggregate of 19,608,426 shares of the Company’s common stock to several accredited investors. The Company received net proceeds from this transaction in the approximate amount of $8.4 million. The Company used $3.8 million of the net proceeds to repay the 2017 Diamantis Note (see note 6) and $0.75 million of the net proceeds to make the partial repayment on the TCA Debenture (see note 4). The remainder of the net proceeds were used for general corporate purposes. In conjunction with the issuance of the Convertible Debentures, the holder of the February Debentures exchanged these debentures for $2.5 million of new debentures (the “Exchange Debentures” and, collectively with the Convertible Debentures, the “Debentures”) on the same terms as, and pari passu with, the Convertible Debentures, and warrants to purchase 4,453,917 shares of the Company’s common stock. The Company recorded non-cash interest expense in the amount of $0.4 million as a result of this exchange. Additionally, the holders of an aggregate of $2.2 million stated value of the Company’s Series H Convertible Preferred Stock (the “Series H Preferred Stock”) exchanged such preferred stock into $2.7 million principal amount of Exchange Debentures and warrants to purchase 4,871,853 shares of the Company’s common stock. All of the Debentures contain a 24% original issue discount, have no regularly scheduled interest payments except in the event of a default and have a maturity date of March 21, 2019. The warrants issued with the Convertible Debentures and the Exchange Debentures are collectively referred to as the “Debenture Warrants.” The Debentures are convertible into shares of the Company’s common stock at an initial conversion price of $1.66 per share, subject to adjustment as more fully described in the Debentures. The Debentures will begin to amortize monthly commencing on the 90 th The exercise price of the Debenture Warrants is subject to reset in the event of offerings or other issuances of common stock, or rights to purchase common stock, at a price below the then exercise price, as well as other customary anti-dilution protections. As a result of these provisions, both the Debentures and the Debenture Warrants are deemed to be not indexed to the Company’s common stock, and the Company recognized derivative liabilities for the embedded conversion feature of the Debentures and the Debenture Warrants in the amount of $15.3 million and $41.3 million, respectively. The Company recognized a discount for 100% of the principal value of the Debentures and non-cash interest expense in the amount of $43.7 million in connection with the recognition of these derivative liabilities. The carrying amount of the Debentures, which is reflected in other assets in the accompanying consolidated balance sheet as of March 31, 2017, is as follows: March 31, 2017 Convertible Debentures $ 10,850,000 Exchange Debentures 4,671,076 Discount on Debentures (15,356,925 ) Deferred financing fees (395,419 ) (231,268 ) Less current portion – Convertible Debentures $ (231,268 ) |
6. Related Party Transactions
6. Related Party Transactions | 3 Months Ended |
Mar. 31, 2017 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | In addition to the transactions discussed in note 4, the Company had the following related party transactions during the three months ended March 31, 2017 and 2016: In January and February of 2017, the Company received advances aggregating $3.3 million from Christopher Diamantis, a director of the Company. The advances, along with $0.5 million of previously accrued but unpaid interest, were due on demand, bearing interest at 10% per annum. The Company used the advances to pay the purchase price for the Hospital Assets and for general corporate purposes. On March 7, 2017, the Company issued a promissory note to Mr. Diamantis in the amount of $3.8 million (the “2017 Diamantis Note”) in connection with these advances received in 2017, plus accrued and unpaid interest of $0.5 million. In conjunction with the issuance of the 2017 Diamantis Note, the Company also issued to Mr. Diamantis warrants to purchase 250,000 shares of the Company’s common stock. The 2017 Diamantis Note was repaid on March 21, 2017 with the proceeds received from the issuance of the Convertible Debentures (see note 5). Alcimede billed the Company $0.1 million for consulting fees pursuant to a consulting agreement for each of the three months ended March 31, 2017 and 2016. Monarch Capital, LLC ("Monarch") billed the Company for consulting fees pursuant to a consulting agreement in the amount of $60,000 and $50,000 for the three months ended March 31, 2017 and 2016, respectively. Michael Goldberg, a director of the Company up until his resignation effective April 24, 2017, is the Managing Director of Monarch. |
7. Capital Lease Obligations
7. Capital Lease Obligations | 3 Months Ended |
Mar. 31, 2017 | |
Debt Disclosure [Abstract] | |
Capital Lease Obligations | The Company leases various assets under capital leases expiring through 2020 as follows: March 31, December 31, 2017 2016 Medical equipment $ 4,497,025 $ 4,497,025 Less accumulated depreciation (3,069,139 ) (2,809,511 ) Net $ 1,427,886 $ 1,687,514 Aggregate future minimum rentals under capital leases are as follows: Year ended December 31, 2017 (April through December) $ 965,811 2018 1,427,375 2019 377,919 2020 32,611 Total 2,803,716 Less interest 144,584 Present value of minimum lease payments 2,659,132 Less current portion of capital lease obligations 1,271,860 Capital lease obligations, net of current portion $ 1,387,272 |
8. Stockholders' Equity
8. Stockholders' Equity | 3 Months Ended |
Mar. 31, 2017 | |
Equity [Abstract] | |
Stockholders' Equity | Preferred Stock During the three months ended March 31, 2017, 6,280 shares of Series H Preferred Stock were converted into 2,325,929 shares of common stock in accordance with the terms of the Series H Preferred Stock. Also during the three months ended March 31, 2017, 2,174 shares of Series H Preferred Stock were exchanged for Exchange Debentures with an aggregate principal amount of $2.7 million and warrants (see note 5). Common Stock On January 17, 2017, 2,778 shares of common stock were issued to an employee. On February 22, 2017, the Reverse Stock Split became effective (see note 1). The Reverse Stock Split resulted in the issuance of 7,897 shares of common stock due to the rounding up of fractional shares. On March 13, 2017, the Company issued 400,000 shares of common stock in settlement of $0.4 million of outstanding notes and warrants (see note 4). On March 15, 2017, the Company agreed to issue 29,518 shares of common stock to a holder of a like number of warrants to purchase the Company’s common stock in exchange for the warrants. During the three months ended March 31, 2017, Exchange Debentures with a principal amount of $0.5 million were converted into 315,171 shares of common stock (see note 5). 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. During the three months ended March 31, 2017 and 2016, the Company recognized stock-based compensation in the amount of $35,215 and $0, respectively, for the vesting of outstanding stock options. The following table summarizes the Company’s stock option activity for the three months ended March 31, 2017: Number of options Weighted-average exercise price Weighted-average contractual term Outstanding at December 31, 2016 709,025 $ 129.43 8.93 Granted – – Expired – – Forfeit – – Exercised – – Outstanding at March 31, 2017 709,025 $ 129.43 8.68 Exercisable at March 31, 2017 642,357 $ 144.53 As of March 31, 2017, 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 1.12 years. Warrants The Company, as part of various debt and equity financing transactions, has issued warrants to purchase shares of the Company’s common stock. The following summarizes the information related to warrants issued and the activity during the three months ended March 31, 2017: Number of warrants Weighted average exercise price Balance at December 31, 2016 1,407,647 $ 11.70 Warrants issued during the period 29,284,193 $ 1.66 Warrants exchanged for other securities (96,185 ) $ 12.46 Warrants exercised during the period – $ – Warrants expired during the period – $ – Balance at March 31, 2017 30,595,655 $ 2.09 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 months ended March 31, 2017 and 2016, 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 March 31, 2017 and 2016, the following potential common stock equivalents were excluded from the calculation of diluted loss per share as their effect was anti-dilutive: For the Three Months Ended March 31, 2017 2016 Warrants 30,595,665 229,952 Convertible preferred stock 595,556 380,766 Convertible debt 10,007,141 293,045 Stock options 709,025 60,756 41,907,387 964,519 |
9. Supplemental Disclosure of C
9. Supplemental Disclosure of Cash Flow Information | 3 Months Ended |
Mar. 31, 2017 | |
Supplemental Cash Flow Elements [Abstract] | |
Supplemental Disclosure of Cash Flow Information | Cash paid for interest $ 881,457 $ 520,000 Cash paid for income taxes $ 296,313 $ – Non-cash investing and financing activities: Exchange of preferred stock for convertible debentures and warrants $ 2,695,760 $ – Exchange of convertible debentures for convertible debentures and warrants $ 2,464,500 Notes payable settled through issuance of common stock $ 440,000 $ – Debentures converted into common stock $ 486,032 $ – Conversions of preferred stock into common stock $ 6,280,000 $ – |
10. Commitments and Contingenci
10. Commitments and Contingencies | 3 Months Ended |
Mar. 31, 2017 | |
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 for approximately $0.2 million, and the settlement was consummated on August 25, 2016. In October of 2016, the plaintiffs in this matter filed a motion with the court seeking payment for attorneys’ fees in the approximate amount of $0.7 million. On March 24, 2017, the court granted plaintiffs’ motion for payment of attorneys’ fees in the amount of $0.3 million, and the Company has accrued this amount in its consolidated financial statements. In February 2016, the Company received notice that the Internal Revenue Service (the “IRS”) had placed a lien against Medytox Solutions, Inc. and its subsidiaries relating to unpaid 2014 taxes due, plus penalties and interest, in the amount of $5.0 million. The Company paid $0.1 million toward its 2014 tax liability in March 2016. The Company filed its 2015 Federal tax return on March 15, 2016 and the accompanying election to carryback the reported net operating losses was filed in April 2016. On August 24, 2016, the lien was released, and in September of 2016 the Company received a refund from the IRS in the amount of $1.9 million. In November of 2016, the IRS commenced an audit of the Company’s 2015 Federal tax return. The Company is currently unable to predict the outcome of the audit or any liability to the Company that may result from the audit. On September 27, 2016, a tax warrant was issued against the Company by the Florida Department of Revenue (the “DOR”) for unpaid state income taxes in the approximate amount of $0.9 million, including penalties and interest. On January 25, 2017, the Company paid the DOR $250,000 as partial payment on this liability, and in February 2017 the Company entered into a Stipulation Agreement with the DOR which will allow the Company to pay the remainder of the amount due to the DOR over a period of 12 months. If at any time during the Stipulation period the Company fails to timely file any required tax returns with the DOR or does not meet the payment obligations under the Stipulation Agreement, the entire amount due will be accelerated. In December of 2016, TCS-Florida, L.P. (“Tetra”), filed suit against the Company for failure to make the required payments under an equipment leasing contract that the Company had with Tetra (see note 9). On January 3, 2017, Tetra received a Default Judgment against the Company in the amount of $2.6 million, representing the balance owed on the leases, as well as additional interest, penalties and fees. The Company has recognized this amount in its consolidated financial statements as of December 31, 2016. In January and February of 2017, the Company made payments to Tetra in connection with this judgment aggregating to $0.7 million, and on February 15, 2017 the Company entered into a forbearance agreement with Tetra whereby the remaining $1.9 million due will be paid in 24 equal monthly installments, commencing on May 1, 2017. In December of 2016, DeLage Landen Financial Services, Inc. (“DeLage”), filed suit against the Company for failure to make the required payments under an equipment leasing contract that the Company had with DeLage (see note 9). On January 24, 2017, DeLage received a default judgment against the Company in the approximate amount of $1.0 million, representing the balance owed on the lease, as well as additional interest, penalties and fees. The Company has recognized this amount in its consolidated financial statements as of December 31, 2016. On February 8, 2017, a Stay of Execution was filed and under its terms the balance due will be paid in variable monthly installments through January of 2019, with an implicit interest rate of 4.97%. On December 7, 2016, the holders of the Tegal Notes (see note 4) filed suit against the Company seeking payment for the amounts due under the notes in the aggregate of $0.4 million, including accrued interest. A request for entry of default judgment was filed on January 24, 2017. The Company has attempted to work out a payment arrangement with the plaintiffs, but to date has not been able to consummate such an arrangement. A Case Management Conference is scheduled for September 5, 2017. Potential De-Listing of the Company’s Stock On April 18, 2017, the Company was notified by Nasdaq that the stockholders’ equity balance reported on its Form 10-K for the year ended December 31, 2016 fell below the $2.5 million minimum requirement for continued listing under the Nasdaq Capital Market’s Listing Rule 5550(b)(1) (the “Rule”). As of December 31, 2016, the Company’s stockholders’ deficit balance was $14.9 million. In accordance with the Rule, the Company has until June 2, 2017 to prepare and submit a plan to Nasdaq outlining how it intends to regain compliance. If the plan is accepted, the Company can be granted up to 180 calendar days from April 18, 2017 to evidence compliance. There can be no guarantee that the Company will be able to regain compliance with the continued listing requirement of Nasdaq Marketplace Rule 5550(b)(1) or that its plan will be accepted by Nasdaq. The Company is currently evaluating its available options to resolve the deficiency and regain compliance with the Nasdaq minimum stockholders’ equity requirement. |
11. Segment Information
11. Segment Information | 3 Months Ended |
Mar. 31, 2017 | |
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 four reportable business segments: · Clinical Laboratory Operations · Supportive Software Solutions · Decision Support and Informatics · Hospital Operations 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 for the year ended December 31, 2016. Selected financial information for the Company’s operating segments is as follows: Three Months Ended March 31, 2017 2016 Net revenues - External Clinical Laboratory Operations $ 767,010 $ 1,465,137 Supportive Software Solutions 236,945 230,026 Decision Support and Informatics 172,158 183,650 $ 1,176,113 $ 1,878,813 Net revenues - Intersegment Supportive Software Solutions $ 78,326 $ 296,348 $ 78,326 $ 296,348 (Loss) income from operations Clinical Laboratory Operations $ (1,341,998 ) $ (2,650,540 ) Supportive Software Solutions (718,546 ) (1,313,313 ) Decision Support and Informatics (301,001 ) (881,566 ) Hospital Operations (467,316 ) – Corporate (1,804,517 ) (1,952,437 ) Eliminations 7,851 33,660 $ (4,625,527 ) $ (6,764,196 ) Depreciation and amortization Clinical Laboratory Operations $ 434,468 $ 581,101 Supportive Software Solutions 157,563 164,428 Decision Support and Informatics 8,453 14,527 Corporate 312 875 Eliminations (7,851 ) (33,661 ) $ 592,945 $ 727,270 Capital expenditures Clinical Laboratory Operations $ – $ 16,885 Supportive Software Solutions – 2,117 Hospital Operations 1,090,922 – $ 1,090,922 $ 19,002 March 31, 2017 December 31, 2016 Total assets Clinical Laboratory Operations $ 3,568,569 $ 4,081,136 Supportive Software Solutions 1,870,578 2,602,428 Decision Support and Informatics 246,930 379,652 Hospital Operations 1,342,804 – Corporate 3,839,108 2,130,191 Eliminations (2,786,333 ) (2,711,014 ) $ 8,081,656 $ 6,482,393 |
12. Recently Issued Accounting
12. Recently Issued Accounting Standards | 3 Months Ended |
Mar. 31, 2017 | |
Accounting Changes and Error Corrections [Abstract] | |
Recently Issued Accounting Standards | The following table provides a brief description of recently issued accounting standards: Title and reference Prescribed Commentary Effective Date Accounting Standard Update (“ASU”) No. 2015-11, “Inventory” (Topic 330): Simplifying the Measurement of Inventory. Fiscal years beginning after December 15, 2016 and for interim periods therein. In July 2015, the FASB issued ASU No. 2015-11, “Inventory” (Topic 330): Simplifying the Measurement of Inventory (“ASU 2015-11”). ASU 2015-11 simplifies the measurement of inventory by requiring certain inventory to be subsequently measured at the lower of cost and net realizable value. The amendments in this guidance are effective for fiscal years beginning after December 15, 2016 and for interim periods therein and did not have a significant impact on the Company’s consolidated financial statements upon adoption. ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606)” Fiscal years beginning after December 15, 2017 and for interim periods therein. In May 2014, the FASB issued guidance that outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most recent current revenue recognition guidance, including industry-specific guidance. The core principle of the revenue model is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance also specifies the accounting for certain incremental costs of obtaining a contract and costs to fulfill a contract with a customer. Entities have the option of applying either a full retrospective approach to all periods presented or a modified approach that reflects differences prior to the date of adoption as an adjustment to equity. In April 2015, FASB deferred the effective date of this guidance until January 1, 2018 and the Company is currently assessing the impact of this guidance on its consolidated financial statements. ASU No. 2014-15, “Presentation of Financial Statements - Going Concern” (Subtopic 205-40): Disclosure of Uncertainty about an Entity's Ability to Continue as a Going Concern. Fiscal years, and interim periods within those years, beginning on or after December 15, 2016, with early adoption permitted. In August 2014, the FASB issued ASU No. 2014-15, “Presentation of Financial Statements - Going Concern” (Subtopic 205-40): Disclosure of Uncertainty about an Entity's Ability to Continue as a Going Concern (“ASU 2014-15”). ASU 2014-15 provides guidance that establishes management's responsibility to evaluate whether there is substantial doubt about an entity's ability to continue as a going concern and setting rules for how this information should be disclosed in the financial statements. Adoption of this new standard did not have a significant impact on the Company’s consolidated financial statements. See note 1 regarding management’s current disclosures regarding the Company’s ability to continue as a going concern. ASU No. 2015-17, “Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes” (“ASU 2015-17”) Fiscal years beginning on or after December 15, 2016, with early adoption permitted. In November 2015, the FASB issued ASU No. 2015-17, “Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes” (“ASU 2015-17”). Topic 740, Income Taxes, requires an entity to separate deferred income tax liabilities and assets into current and noncurrent amounts in a classified statement of financial position. Deferred tax liabilities and assets are classified as current or noncurrent based on the classification of the related asset or liability for financial reporting. Deferred tax liabilities and assets that are not related to an asset or liability for financial reporting are classified according to the expected reversal date of the temporary difference. To simplify the presentation of deferred income taxes, the amendments in ASU 2015-17 require that deferred income tax liabilities and assets be classified as noncurrent in a classified statement of financial position. For public business entities, the amendments in this update are effective for financial statements issued for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Adoption of ASU 2015-17 did not have a material impact on the Company’s consolidated financial statements. Accounting Standards Update (“ASU”) No. 2016-02, “Leases (Topic 842)” (“ASU 2016-02”) Annual and interim periods within the annual period beginning after December 15, 2018. In February 2016, the FASB issued Accounting Standards Update (“ASU”) No. 2016-02, “Leases (Topic 842)” (“ASU 2016-02”). The amendments in this update create Topic 842, Leases, and supersede the leases requirements in Topic 840, Leases. Topic 842 specifies the accounting for leases. The objective of Topic 842 is to establish the principles that lessees and lessors shall apply to report useful information to users of financial statements about the amount, timing, and uncertainty of cash flows arising from a lease. The main difference between Topic 842 and Topic 840 is the recognition of lease assets and lease liabilities for those leases classified as operating leases under Topic 840. Topic 842 retains a distinction between finance leases and operating leases. The classification criteria for distinguishing between finance leases and operating leases are substantially similar to the classification criteria for distinguishing between capital leases and operating leases in the previous leases guidance. The result of retaining a distinction between finance leases and operating leases is that under the lessee accounting model in Topic 842, the effect of leases in the statement of comprehensive income and the statement of cash flows is largely unchanged from previous GAAP. The amendments in ASU 2016-02 are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years for public business entities. Early application of the amendments in ASU 2016-02 is permitted. The Company has not yet determined the impact that adoption of ASU 2016-02 will have on its consolidated financial statements. |
13. Subsequent Events
13. Subsequent Events | 3 Months Ended |
Mar. 31, 2017 | |
Subsequent Events [Abstract] | |
Subsequent Events |
1. Organization and Basis of 20
1. Organization and Basis of Presentation (Policies) | 3 Months Ended |
Mar. 31, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation | Basis of Presentation The accompanying unaudited condensed consolidated interim financial statements should be read in conjunction with the 2016 audited financial statements included in the Company’s Annual Report on Form 10-K, filed with the U.S. Securities and Exchange Commission (the “SEC”) on April 10, 2017. These condensed consolidated interim financial statements have been prepared in accordance with the 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 months ended March 31, 2017 and 2016, 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. |
Reverse Stock Split | Reverse Stock Split On February 7, 2017, the Company’s Board of Directors approved an amendment to the Company’s Certificate of Incorporation to effect a 1-for-30 reverse stock split of the Company’s shares of common stock effective on February 22, 2017 (the “Reverse Stock Split”). The stockholders of the Company had approved an amendment to the Company’s Certificate of Incorporation on December 22, 2016 to effect a reverse split of all of the Company’s shares of common stock at a specific ratio within a range from 1-for-10 to 1-for-30, and granted authorization to the Board of Directors to determine in its discretion the specific ratio and timing of the reverse split prior to December 31, 2017. As a result of the Reverse Stock Split, every 30 shares of the Company’s then outstanding common stock was combined and automatically converted into one share of the Company’s common stock, par value $0.01 per share. In addition, the conversion and exercise prices of all of the Company’s outstanding preferred stock, common stock purchase warrants, stock options and convertible notes payable were proportionately adjusted at the 1:30 reverse split ratio in accordance with the terms of such instruments. Proportionate voting rights and other rights of common stockholders were not affected by the Reverse Stock Split, other than as a result of the rounding up of fractional shares, as no fractional shares were issued in connection with the Reverse Stock Split. The reverse stock split became effective at the close of business on February 22, 2017 and the Company’s common stock began trading on The NASDAQ Capital Market on a post-split basis on February 23, 2017. The par value and other terms of the common stock were not affected by the Reverse Stock Split. The authorized capital of the Company of 500,000,000 shares of common stock and 5,000,000 shares of preferred stock were also unaffected by the Reverse Stock Split. All share, per share and capital stock amounts for all periods presented have been restated to give effect to the Reverse Stock Split. |
Going Concern | 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 accumulated significant losses and has negative cash flows from operations, and at March 31, 2017 had a working capital deficit and stockholders’ deficit of $11.7 million and $65.2 million, respectively, which raise substantial doubt about its ability to continue as a going concern. In addition, the Company’s cash position is critically deficient, critical payments are not being made in the ordinary course and certain indebtedness in the amount of $6.0 million matured on March 31, 2017, which the Company does not have the financial resources to satisfy (see note 4), all of which raises substantial doubt about the Company’s ability to continue as a going concern. The Company is currently executing on a plan of action to reduce the number of laboratory facilities it operates from five such facilities into one, with a corresponding reduction in the number of employees and associated operating expenses, in order to reduce costs. In addition, the Company issued $12.4 million of convertible debentures in the first three months of 2017, for which it received net proceeds of $9.9 million (see note 5), and intends to seek additional financing on similar terms within the next few months. There are currently no commitments for any such funding. |
2. Accounts Receivable (Tables)
2. Accounts Receivable (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Receivables [Abstract] | |
Schedule of accounts receivable | March 31, December 31, 2017 2016 Accounts receivable - laboratory services $ 6,998,918 $ 13,220,498 Accounts receivable - all others 732,888 701,583 Total accounts receivable 7,731,806 13,922,081 Less: Allowance for discounts (6,089,059 ) (12,103,547 ) Allowance for bad debts (345,162 ) (350,954 ) Accounts receivable, net $ 1,297,585 $ 1,467,580 |
3. Property and Equipment (Tabl
3. Property and Equipment (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Property, Plant and Equipment [Abstract] | |
Schedule of property and equipment | March 31, December 31, 2017 2016 Medical equipment $ 696,195 $ 696,195 Buiding 1,056,000 – Equipment 490,746 490,746 Equipment under capital leases 4,497,025 4,497,025 Furniture 525,689 525,689 Leasehold improvements 1,335,971 1,335,971 Vehicles 196,534 196,534 Computer equipment 634,237 634,237 Software 1,774,269 1,739,348 11,206,666 10,115,745 Less accumulated depreciation (7,612,087 ) (7,019,143 ) Property and equipment, net $ 3,594,579 $ 3,096,602 |
4. Notes Payable (Tables)
4. Notes Payable (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Debt Disclosure [Abstract] | |
Schedule of notes payable | March 31, 2017 December 31, 2016 Loan payable under prepaid forward purchase contract $ 5,000,000 $ 5,000,000 Loan payable to TCA Global Master Fund, LP ("TCA") in the original principal amount of $3 million at 16% interest (the "TCA Debenture"). Principal and interest payments due in various installments through September 17, 2017. 2,383,002 3,000,000 Notes payable to CommerceNet and Jay Tenenbaum in the original principal amount of $500,000, bearing interest at 6% per annum (the "Tegal Notes"). Prinicpal and interest payments are due annually from July 12, 2015 through July 12, 2017 341,612 341,612 Other convertible notes payable – 440,000 Unamortized discount on other convertible notes – (179,889 ) Derivative liability associated with the TCA Debenture, at fair value – 409,524 7,724,614 9,011,247 Less current portion (7,724,614 ) (9,011,247 ) Notes payable - third parties, net of current portion $ – $ – |
Schedule of notes payable - related parties | March 31, 2017 December 31, 2016 Loan payable to Alcimede LLC, bearing interest at 6% per annum, with all principal and interest due on August 2, 2017 $ 168,500 $ 218,500 Other advances from related parties 75,000 110,000 243,500 328,500 Less current portion (243,500 ) (328,500 ) Total notes payable, related parties $ – $ – |
5. Convertible Debentures (Tabl
5. Convertible Debentures (Table) | 3 Months Ended |
Mar. 31, 2017 | |
Notes to Financial Statements | |
Convertible Debentures | March 31, 2017 Convertible Debentures $ 10,850,000 Exchange Debentures 4,671,076 Discount on Debentures (15,356,925 ) Deferred financing fees (395,419 ) (231,268 ) Less current portion – Convertible Debentures $ (231,268 ) |
6. Capital Lease Obligations (T
6. Capital Lease Obligations (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Debt Disclosure [Abstract] | |
Schedule of capital leases | March 31, December 31, 2017 2016 Medical equipment $ 4,497,025 $ 4,497,025 Less accumulated depreciation (3,069,139 ) (2,809,511 ) Net $ 1,427,886 $ 1,687,514 |
Aggregate future minimum rentals under capital leases | Year ended December 31, 2017 (April through December) $ 965,811 2018 1,427,375 2019 377,919 2020 32,611 Total 2,803,716 Less interest 144,584 Present value of minimum lease payments 2,659,132 Less current portion of capital lease obligations 1,271,860 Capital lease obligations, net of current portion $ 1,387,272 |
7. Stockholders' Equity (Tables
7. Stockholders' Equity (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Equity [Abstract] | |
Option activity | Number of options Weighted-average exercise price Weighted-average contractual term Outstanding at December 31, 2016 709,025 $ 129.43 8.93 Granted – – Expired – – Forfeit – – Exercised – – Outstanding at March 31, 2017 709,025 $ 129.43 8.68 Exercisable at March 31, 2017 642,357 $ 144.53 |
Warrant activity | Number of warrants Weighted average exercise price Balance at December 31, 2016 1,407,647 $ 11.70 Warrants issued during the period 29,284,193 $ 1.66 Warrants exchanged for other securities (96,185 ) $ 12.46 Warrants exercised during the period – $ – Warrants expired during the period – $ – Balance at March 31, 2017 30,595,655 $ 2.09 |
Antidilutive Securities | For the Three Months Ended March 31, 2017 2016 Warrants 30,595,665 229,952 Convertible preferred stock 595,556 380,766 Convertible debt 10,007,141 293,045 Stock options 709,025 60,756 41,907,387 964,519 |
9. Supplemental Disclosure of27
9. Supplemental Disclosure of Cash Flow Information (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Supplemental Cash Flow Elements [Abstract] | |
Cash Flow Information | Three Months Ended March 31, 2017 2016 Cash paid for interest $ 881,457 $ 520,000 Cash paid for income taxes $ 296,313 $ – Non-cash investing and financing activities: Exchange of preferred stock for convertible debentures and warrants $ 2,695,760 $ – Exchange of convertible debentures for convertible debentures and warrants $ 2,464,500 Notes payable settled through issuance of common stock $ 440,000 $ – Debentures converted into common stock $ 486,032 $ – Conversions of preferred stock into common stock $ 6,280,000 $ – |
11. Segment Information (Tables
11. Segment Information (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Segment Reporting [Abstract] | |
Segment information | Three Months Ended March 31, 2017 2016 Net revenues - External Clinical Laboratory Operations $ 767,010 $ 1,465,137 Supportive Software Solutions 236,945 230,026 Decision Support and Informatics 172,158 183,650 $ 1,176,113 $ 1,878,813 Net revenues - Intersegment Supportive Software Solutions $ 78,326 $ 296,348 $ 78,326 $ 296,348 (Loss) income from operations Clinical Laboratory Operations $ (1,341,998 ) $ (2,650,540 ) Supportive Software Solutions (718,546 ) (1,313,313 ) Decision Support and Informatics (301,001 ) (881,566 ) Hospital Operations (467,316 ) – Corporate (1,804,517 ) (1,952,437 ) Eliminations 7,851 33,660 $ (4,625,527 ) $ (6,764,196 ) Depreciation and amortization Clinical Laboratory Operations $ 434,468 $ 581,101 Supportive Software Solutions 157,563 164,428 Decision Support and Informatics 8,453 14,527 Corporate 312 875 Eliminations (7,851 ) (33,661 ) $ 592,945 $ 727,270 Capital expenditures Clinical Laboratory Operations $ – $ 16,885 Supportive Software Solutions – 2,117 Hospital Operations 1,090,922 – $ 1,090,922 $ 19,002 March 31, 2017 December 31, 2016 Total assets Clinical Laboratory Operations $ 3,568,569 $ 4,081,136 Supportive Software Solutions 1,870,578 2,602,428 Decision Support and Informatics 246,930 379,652 Hospital Operations 1,342,804 – Corporate 3,839,108 2,130,191 Eliminations (2,786,333 ) (2,711,014 ) $ 8,081,656 $ 6,482,393 |
1. Organization and Presentatio
1. Organization and Presentation (Details Narrative) - USD ($) | 3 Months Ended | |
Mar. 31, 2017 | Dec. 31, 2016 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Working capital | $ (11,900,000) | |
Stockholder deficit | (65,332,825) | $ (14,885,896) |
Proceeds from convertible debt | 9,892,500 | |
Issuance of convertible debentures | $ 12,400,500 | |
Reverse stock split information | 1-for-30 reverse stock split effective Feb. 22, 2017 |
2. Accounts Receivable (Details
2. Accounts Receivable (Details - Accounts receivable) - USD ($) | Mar. 31, 2017 | Dec. 31, 2016 |
Accounts receivable, gross | $ 7,731,806 | $ 13,922,081 |
Less: Allowance for discounts | (6,089,059) | (12,103,547) |
Less: Allowance for bad debts | (345,162) | (350,954) |
Accounts receivable, net | 1,297,585 | 1,467,580 |
Clinical Laboratory Operations [Member] | ||
Accounts receivable, gross | 6,998,918 | 13,220,498 |
All others [Member] | ||
Accounts receivable, gross | $ 732,888 | $ 701,583 |
3. Property and Equpment (Detai
3. Property and Equpment (Details - Equipment) - USD ($) | Mar. 31, 2017 | Dec. 31, 2016 |
Property and equipment, gross | $ 11,206,666 | $ 10,115,745 |
Accumulated depreciation | (7,612,087) | (7,019,143) |
Property and equipment, net | 3,594,579 | 3,096,602 |
Medical equipment [Member] | ||
Property and equipment, gross | 696,195 | 696,195 |
Buildings [Member] | ||
Property and equipment, gross | 1,056,000 | 0 |
Equipment [Member] | ||
Property and equipment, gross | 490,746 | 490,746 |
Equipment under capital leases [Member] | ||
Property and equipment, gross | 4,497,025 | 4,497,025 |
Furniture [Member] | ||
Property and equipment, gross | 525,689 | 525,689 |
Leasehold Improvements [Member] | ||
Property and equipment, gross | 1,335,971 | 1,335,971 |
Vehicles [Member] | ||
Property and equipment, gross | 196,534 | 196,534 |
Computer Equipment [Member] | ||
Property and equipment, gross | 634,237 | 634,237 |
Software [Member] | ||
Property and equipment, gross | $ 1,774,269 | $ 1,739,348 |
3. Property and Equipment (Deta
3. Property and Equipment (Details Narrative) - USD ($) | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Depreciation | $ 600,000 | $ 700,000 |
Impairment expense | 0 | $ 0 |
Hospital Assets [Member] | ||
Property and equipment addition | $ 1,000,000 |
4. Notes Payable (Details-Notes
4. Notes Payable (Details-Notes Payable) - USD ($) | Mar. 31, 2017 | Dec. 31, 2016 |
Notes payable | $ 7,724,614 | $ 9,011,247 |
Less: current portion | (7,724,614) | (9,011,247) |
Notes payable, net of current portion | 0 | 0 |
Unamortized discount | 0 | (179,889) |
Note payable 1 [Member] | ||
Notes payable | 5,000,000 | 5,000,000 |
TCA Global Master Fund, LP [Member] | Note payable 2 [Member] | ||
Notes payable | 2,383,002 | 3,000,000 |
Derivative Liability, Fair Value | 0 | 409,524 |
CommerceNet and Tenenbaum [Member] | Note payable 3 [Member] | ||
Notes payable | 341,612 | 341,612 |
Former Share holder [Member] | Note payable 4 [Member] | ||
Notes payable | $ 0 | $ 440,000 |
4. Notes Payable (Details-Not34
4. Notes Payable (Details-Notes Payable Related Party) - USD ($) | Mar. 31, 2017 | Dec. 31, 2016 |
Note payable related parties | $ 243,500 | $ 328,500 |
Less current portion | (243,500) | (328,500) |
Notes payable related parties | 0 | 0 |
Notes Payable Related Parties [Member] | Alcimede [Member] | ||
Note payable related parties | 168,500 | 218,500 |
Notes Payable Related Parties [Member] | Related Parties [Member] | ||
Note payable related parties | $ 75,000 | $ 110,000 |
4. Notes Payable (Details Narra
4. Notes Payable (Details Narrative) - USD ($) | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Repayment of note payable | $ 616,998 | $ 0 |
Pledged receivables | 0 | $ 4,300,000 |
Accrued liabilities for investment return | 1,000,000 | |
Accrued liabilities for investment return, current portion | 600,000 | |
Former Share holder [Member] | ||
Repayment of note payable | 100,000 | |
Loan from related party | 75,000 | |
Note payable 2 [Member] | ||
Debt original face amount | $ 3,000,000 | |
Interest rate | 16.00% | |
Maturity date | Sep. 11, 2017 | |
Note payable 2 [Member] | February 7, 2017 [Member] | ||
Repayment of note payable | $ 400,000 | |
Note payable 2 [Member] | March 31, 2017 [Member] | ||
Repayment of note payable | 750,000 | |
Note payable 3 [Member] | ||
Debt original face amount | $ 500,000 | |
Interest rate | 6.00% | |
Maturity date | Jul. 12, 2017 | |
September 2016 Notes [Member] | ||
Shares issued in settlement of notes payable, shares | 400,000 |
5. Convertible Debentures (Deta
5. Convertible Debentures (Details) | Mar. 31, 2017USD ($) |
Notes to Financial Statements | |
Convertible Debentures | $ 10,850,000 |
Exchange Debentures | 4,671,076 |
Discount on Debentures | (15,356,925) |
Deferred financing fees | (395,419) |
Total Convertible Debentures | (231,268) |
Less current portion | 0 |
Convertible Debentures | $ (231,268) |
5. Convertible Debentures (De37
5. Convertible Debentures (Details Narrative) - USD ($) | 3 Months Ended | ||
Mar. 31, 2017 | Mar. 31, 2016 | Dec. 31, 2016 | |
Proceeds from convertible debt | $ 9,892,500 | ||
Non-cash interest expense | 44,074,628 | $ 0 | |
Derivative liabilities | 56,046,310 | $ 29,401 | |
Gain on change in fair value of derivative liabilities | 600,000 | ||
Series H Preferred Stock [Member] | |||
Stock exchanged, amount exchanged | 2,200,000 | ||
Debenture Warrants [Member] | |||
Non-cash interest expense | $ 43,700,000 | ||
Stock exchanged, warrants issued | 4,871,853 | ||
Fair value of warrants | $ 41,300,000 | ||
Debentures [Member] | |||
Embedded conversion option, fair value | 15,300,000 | ||
February Debentures [Member] | |||
Debt face value | 1,600,000 | ||
Convertible debentures exchanged | (1,500,000) | ||
Convertible Debentures [Member] | |||
Debt face value | $ 10,850,000 | ||
Warrants issued | 19,608,426 | ||
Proceeds from convertible debt | $ 8,400,000 | ||
Exchange Debentures [Member] | |||
Warrants issued | 4,453,917 | ||
Convertible debentures exchanged | $ 2,500,000 | ||
Non-cash interest expense | 400,000 | ||
Stock exchanged, amount issued | 2,700,000 | ||
Exchange Debentures [Member] | Common Stock [Member] | |||
Stock exchanged, amount exchanged | $ 500,000 | ||
Stock exchanged, stock issued | 315,171 |
6. Related Party Transactions (
6. Related Party Transactions (Details Narrative) - USD ($) | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Christopher Diamantis | ||
Advance received from related party | $ 3,300,000 | |
Accrued interest | $ 500,000 | |
Interest rate | 10.00% | |
Christopher Diamantis | 2017 Diamantis Note [Member] | ||
Promissory note | $ 3,800,000 | |
Warrants issued | 250,000 | |
Alcimede [Member] | ||
Consulting fees paid | $ 100,000 | $ 100,000 |
Monarch Capital [Member] | ||
Consulting fees paid | $ 60,000 | $ 50,000 |
7. Capital Lease Obligations (D
7. Capital Lease Obligations (Details-Capital leased assets) - USD ($) | Mar. 31, 2017 | Dec. 31, 2016 |
Capital Lease Obligations [Abstract] | ||
Medical equipment | $ 4,497,025 | $ 4,497,025 |
Less accumulated depreciation | (3,069,139) | (2,809,511) |
Capital lease obligations | $ 1,427,886 | $ 1,687,514 |
7. Capital Lease Obligations 40
7. Capital Lease Obligations (Details-Future payments) - USD ($) | Mar. 31, 2017 | Dec. 31, 2016 |
December 31 | ||
2017 (April through December) | $ 965,811 | |
2,018 | 1,427,375 | |
2,019 | 377,919 | |
2,020 | 32,611 | |
Total | 2,803,716 | |
Less interest | 144,584 | |
Present value of minimum lease payments | 2,659,132 | |
Less current portion of capital lease obligations | 1,271,860 | $ 1,796,053 |
Capital lease obligations, net of current portion | $ 1,387,272 | $ 1,774,121 |
8. Stockholders' Equity (Detail
8. Stockholders' Equity (Details - Options) - Stock Options [Member] - $ / shares | 3 Months Ended | 12 Months Ended |
Mar. 31, 2017 | Dec. 31, 2016 | |
Number of options | ||
Options Outstanding, beginning balance | 709,025 | |
Forfeited | 0 | |
Expired | 0 | |
Exercised | 0 | |
Options Outstanding, ending balance | 709,025 | 709,025 |
Options Exercisable | 642,357 | |
Weighted average exercise price | ||
Options Outstanding, beginning balance | $ 129.43 | |
Options Outstanding, ending balance | 129.43 | $ 129.43 |
Options Exercisable | $ 144.53 | |
Weighted average contractual term | ||
Options Outstanding, ending balance | 8 years 8 months 5 days | 8 years 11 months 4 days |
8. Stockholders' Equity (Deta42
8. Stockholders' Equity (Details - Warrant activity) - Warrant [Member] | 3 Months Ended |
Mar. 31, 2017$ / sharesshares | |
Number of warrants | |
Warrants outstanding, beginning balance | shares | 1,407,647 |
Warrants issued | shares | 29,284,193 |
Warrants exchanged for other securities | shares | (96,185) |
Warrants exercised | shares | 0 |
Warrants expired | shares | 0 |
Warrants outstanding, ending balance | shares | 30,595,655 |
Weighted average exercise price | |
Weighted average exercise price, warrants outstanding, beginning balance | $ / shares | $ 11.70 |
Weighted average exercise price, warrants issued | $ / shares | 1.66 |
Weighted average exercise price, Warrants exchanged for other securities | $ / shares | 12.46 |
Weighted average exercise price, Warrants exercised | $ / shares | 0 |
Weighted average exercise price, Warrants expired | $ / shares | 0 |
Weighted average exercise price, warrants outstanding, ending balance | $ / shares | $ 2.09 |
8. Stockholders' Equity (Deta43
8. Stockholders' Equity (Details - Antidilutive shares) - shares | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Antidilutive shares | 41,907,387 | 964,519 |
Warrant [Member] | ||
Antidilutive shares | 30,595,665 | 229,952 |
Convertible Preferred Stock [Member] | ||
Antidilutive shares | 595,556 | 380,766 |
Convertible Debt [Member] | ||
Antidilutive shares | 10,007,141 | 293,045 |
Stock Options [Member] | ||
Antidilutive shares | 709,025 | 60,756 |
8. Stockholders' Equity (Deta44
8. Stockholders' Equity (Details Narrative) - USD ($) | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Shares issued in settlement of notes payable, value | $ 440,000 | $ 0 |
Stock-based compensation | 35,215 | $ 0 |
Unrecognized compensation costs | $ 300,000 | |
Unrecognized compensation weighted average amortization period | 1 year 1 month 13 days | |
Employee [Member] | ||
Stock issued new, shares | 2,778 | |
Warrant Holder [Member] | ||
Common stock issued in exchange for warrants, shares | 29,518 | |
Series H Preferred Stock [Member] | Common Stock | ||
Conversion of preferred stock into common stock, shares converted | (6,280) | |
Conversion of preferred stock into common stock, common stock issued | 2,325,929 | |
Series H Preferred Stock [Member] | Exchange Debentures [Member] | ||
Conversion of preferred stock into common stock, shares converted | (2,174) | |
Conversion of preferred stock into common stock, debentures issued | $ 2,700,000 | |
Exchange Debentures [Member] | Common Stock | ||
Debt exchanged, amount exchanged | $ 500,000 | |
Debt exchanged, shares issued | 315,171 | |
Common Stock | ||
Rounding up of common shares in connection with reverse stock split, shares | 7,897 | |
Shares issued in settlement of notes payable, shares | 400,000 | |
Shares issued in settlement of notes payable, value | $ 4,000 |
9. Supplemental Disclosure of45
9. Supplemental Disclosure of Cash Flow Information (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Supplemental Cash Flow Elements [Abstract] | ||
Cash paid for interest | $ 881,457 | $ 520,000 |
Cash paid for income taxes | 296,313 | 0 |
Non-cash investing and financing activities: | ||
Exchange of preferred stock for convertible debentures and warrants | 2,695,760 | 0 |
Exchange of convertible debentures for convertible debentures and warrants | 2,464,500 | 0 |
Notes payable settled through issuance of common stock | 440,000 | 0 |
Debentures converted into common stock | 486,032 | 0 |
Conversions of preferred stock into common stock | $ 6,280,000 | $ 0 |
10. Commitments and Contingen46
10. Commitments and Contingencies (Details Narrative) | 3 Months Ended |
Mar. 31, 2017USD ($) | |
Former Employees [Member] | |
Settlement payable | $ 300,000 |
Tetra [Member] | |
Settlement payable | 1,900,000 |
Payments of litigation settlement | 700,000 |
DeLage Landen Financial [Member] | |
Settlement payable | 1,000,000 |
Florida DOR [Member] | |
Income tax penalties and interest paid | 250,000 |
Income tax penalties and interest accrued | $ 900,000 |
11. Segment Reporting (Details-
11. Segment Reporting (Details-Operations) - USD ($) | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Net revenues - External | $ 1,176,113 | $ 1,878,813 |
Net revenues - Inter Segment | 78,326 | 296,348 |
(Loss) income from operations | (4,625,527) | (6,764,196) |
Depreciation and amortization | 592,945 | 727,270 |
Capital expenditures | 1,090,922 | 19,002 |
Clinical Laboratory Operations [Member] | ||
Net revenues - External | 767,010 | 1,465,137 |
(Loss) income from operations | (1,341,998) | (2,650,540) |
Depreciation and amortization | 434,468 | 581,101 |
Capital expenditures | 0 | 16,885 |
Supportive Software Solutions [Member] | ||
Net revenues - External | 236,945 | 230,026 |
Net revenues - Inter Segment | 78,326 | 296,348 |
(Loss) income from operations | (718,546) | (1,313,313) |
Depreciation and amortization | 157,563 | 164,428 |
Capital expenditures | 0 | 2,117 |
Decision Support and Informatics Operations [Member] | ||
Net revenues - External | 172,158 | 183,650 |
(Loss) income from operations | (301,001) | (881,566) |
Depreciation and amortization | 8,453 | 14,527 |
Hospital Operations [Member] | ||
(Loss) income from operations | (467,316) | 0 |
Capital expenditures | 1,090,922 | 0 |
Corporate [Member] | ||
(Loss) income from operations | (1,804,517) | (1,952,437) |
Depreciation and amortization | 312 | 875 |
Eliminations [Member] | ||
(Loss) income from operations | 7,851 | 33,660 |
Depreciation and amortization | $ (7,851) | $ (33,661) |
11. Segment Reporting (Detail48
11. Segment Reporting (Details-Assets) - USD ($) | Mar. 31, 2017 | Dec. 31, 2016 |
Total assets | $ 8,312,924 | $ 6,482,393 |
Eliminations [Member] | ||
Total assets | (2,786,333) | (2,711,014) |
Clinical Laboratory Operations [Member] | ||
Total assets | 3,568,569 | 4,081,136 |
Supportive Software Solutions [Member] | ||
Total assets | 1,870,578 | 2,602,428 |
Decision Support and Informatics Operations [Member] | ||
Total assets | 246,930 | 379,652 |
Hospital Operations [Member] | ||
Total assets | 1,342,804 | |
Corporate [Member] | ||
Total assets | $ 3,839,108 | $ 2,130,191 |