PART
I
ITEM
1. BUSINESS
OVERVIEW
Accelera
Innovations, Inc. (
“we,” “us,” the “Company,”
or
“Accelera”), a Delaware corporation, is a healthcare service company focused on integrating its licensed technology
assets into acquired companies. The technology was licensed to us by our significant shareholder Synergistic Holdings, LLC, a
privately-held company organized under the laws of Illinois, in the form of a thirty (30) year exclusive, non-transferrable worldwide
license for proprietary Internet-based, software platform (the “Accelera Technology”) that is designed to improve
the functionality and performance of healthcare services by making clinical healthcare data available to healthcare consumers.
We
will not be able to commercialize the Accelera Technology without additional capital. If we do not raise additional funds of approximately
$30 million for the advancement of the Accelera Technology over the next 12 months, we will lose our rights to the technology.
We will require significant additional financing in order to meet the milestones and requirements of our business plan and avoid
discontinuation of the license. Funding is required for staffing, marketing, public relations and the necessary distribution to
expand the scope of our business to include the global market. We intend to seek an aggregate of $5 million in financing in the
near term through the sale of equity or convertible debt securities. The issuance of these securities will dilute existing shareholders’
interests in the Company. The Company intends to approach hedge funds, venture capital groups, private investment groups and other
institutional investment groups in an effort to achieve its funding goals.
Health
Care Services
Our
mission is to improve patient outcomes and lower costs through educating providers, leveraging our technology and changing the
conventional model of payment to a value-based system.
We
aim to provide the highest quality care in the home, spanning every age group and level of care — from pediatrics to geriatrics,
to critical care or just being there. Our team of home health care professionals now includes nurses, physical therapists, occupational
therapists, speech language pathologists, medical social workers, and home health aides.
We
provide billing, practice management and administrative services to doctors and other clinicians who provide services to nursing
homes and individual clients.
LICENSED
ACCELERA TECHNOLOGY
Software
Description
We
plan to incorporate the following software applications into our recent acquisitions and license and sell such software separately:
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Accelera
EMR- A certified Electronic Medical Record application designed to be used primarily in physician offices to automate the
patient’s clinical chart.
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Accelera
PM -The Practice Management application designed to be used primarily in physician offices to automate the physician’s
revenue cycle management system.
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Accelera
Patient Portal - The Patient Portal application designed to be used as a communication tool between patient and physician
staff. This application will allow the patient to view their on medical record.
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Accelera
HIE - The Health Information Exchange application is intended to allow providers and payors of healthcare to secure patient’s
data and lower healthcare cost.
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Accelera
ACO - The Accountable Care Organization (“ACO”) application needed to operate
an ACO environment.
This
application is designed to offer the ACO business the ability to report to CMS the usage of Medicare benefits and is intended
to lower patient and healthcare cost.
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Accelera
HIS - The Hospital Information System application is designed to includes all applications
to manage
most hospital
information systems.
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Our
Corporate History
We
were incorporated on April 29, 2008 under the name Accelerated Acquisitions IV, Inc. and engaged in the investigation and acquisition
of a target company or business seeking the perceived advantages of being a publicly held corporation. We changed our name to
Accelera Innovations, Inc. on October 18, 2011.
On
June 13, 2011, Synergistic Holdings, LLC, a company owned or controlled by Geoff Thompson, Chairman of our board of directors,
and his wife Nancy Thompson (“Synergistic”), acquired 17,000,000 shares of our common stock at a price of $0.0001
per share. At the same time, Accelerated Venture Partners, LLC, our former controlling stockholder, cancelled 3,750,000 shares
of our common stock. Following these transactions, Synergistic owned approximately 93.15% of our issued and outstanding common
stock. Concurrent with the share purchase and cancellation, Timothy Neher, our former sole officer and director, resigned from
the board of directors and John Wallin was appointed to the board. These transactions represented a change of control of the Company.
Licensing
Agreement with Synergistic Holdings, LLC
On
August 22, 2011, the Company entered into a licensing agreement (the “Licensing Agreement”) with Synergistic pursuant
to which the Company received an exclusive, non-transferrable worldwide license for the Accelera Technology.
On
April 13, 2012, the Company entered into an amended licensing agreement (the “Amendment Agreement”) with Synergistic
whereby the Company and Synergistic agreed to amend the Licensing Agreement. The Company licensed additional technology from Synergistic
and the parties agreed to modify the terms, conditions, representations and warranties regarding the Accelera Technology and to
clarify any obligations Synergistic may have with third parties.
The
Accelera Technology is intended to improve the functionality and performance of healthcare services by making clinical healthcare
data available to healthcare consumers. This data is intended to serve as the backbone for self-management tools that are designed
to allow these same healthcare consumers to facilitate the self-management portion of their doctor-prescribed care plan and focus
on the most costly disease states. This is intended to be accomplished through the proprietary technology, which is designed to
identify and measure the severity of the sickness level based upon evidence-based clinical and medical rules and to deliver the
results to insurance companies, doctors, hospitals and employers.
Except
for the rights granted under the Licensing Agreement, as amended, Synergistic retains all rights, title and interest to Accelera
Technology and any additions thereto—although the license includes the Company’s right to utilize such additions.
The
term of the license commenced on August 22, 2011 and by oral agreement in fiscal 2014 will continue for thirty (30) years, provided
that we are not in breach or default of any of the terms or conditions contained in the Licensing Agreement, as amended. In addition
to other requirements, the continuation of the license is conditioned on the Company generating net revenues in the normal course
of operations or the funding by the Company of approximately $30 million over three years for qualifying development and commercialization
expenses related to the Accelera Technology.
On
December 5, 2014, the Company and Synergistic agreed to cancel 796,671 shares of the Company’s common stock owned by Synergistic
and forgive certain indebtedness owed by the Company to Synergistic in the amount of $1,018,618. In addition, the Company entered
into an oral agreement to amend the terms of the Licensing Agreement to reduce the total amount of reimbursable distribution and
commercialization expenses due under the License Agreement by $585,181 to $29,414,819 and defer the date of certain payment obligations
by the Company under the Licensing Agreement as follows:
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(a)
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$5,000,000
no later than December 31, 2015;
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(b)
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An
additional $7,500,000 no later than December 31, 2016;
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(c)
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An
additional $10,000,000 no later than December 31, 2017; and
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(d)
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An
additional $6,914,819 no later than December 31, 2018.
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The
Company has not paid the December 31, 2015 payment of $5,000,000 and the additional $7,500,000 due on December 31, 2016
The
Company is required to fund certain specified expenses related to the deployment of the Accelera Technology as specified in the
Licensing Agreement. Synergistic will receive a royalty of fifteen percent (15%) of all gross revenues resulting from the use
of the technology by the Company in the first year, ten percent (10%) in the second year and one quarter of one percent (.025%)
of all gross revenues resulting from the use of the technology by the Company for the remainder of the Licensing Agreement. The
license can be terminated upon the occurrence of events of default specified in the Licensing Agreement and outlined as follows:
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If
any of the parties are in breach or default of the terms or conditions contained in the Licensing Agreement and do not rectify
or remedy that breach or default within 90 days from the date of receipt of notice by the other party requiring that default
or breach to be remedied, then the other party may give to the party in default a notice in writing terminating the Licensing
Agreement.
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The
Company may, at its option, terminate the Licensing Agreement at any time by ceasing to use the Accelera Technology and offer
the services facilitated by any Licensed Products (as defined in the Licensing Agreement); by giving sixty (60) days prior
written notice to Synergistic of such cessation and of the Company’s intent to terminate, and upon receipt of such notice,
Synergistic may immediately begin negotiations with other potential licensees and all other obligations of the Company under
the Licensing Agreement will continue to be in effect until the date of termination; by tendering payment of all accrued royalties
and other payments due to Synergistic as of the date of the notice of termination; and evidencing to Synergistic that provision
has been made for any prospective royalties and other payments to which Synergistic may be entitled after the date of termination.
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In
addition, Synergistic may alter the license granted by the Licensing Agreement with regards to its exclusivity, its territorial
application and restrictions on its application if the Company is in breach or default of the terms or conditions contained in
the Licensing Agreement and does not rectify or remedy that breach or default within 90 days from the date of receipt of notice
by Synergistic requiring that default or breach to be remedied.
On
May 7, 2015, the Company and Synergistic agreed to further amend the Licensing Agreement to eliminate the Company’s $29,414,819
funding requirement under Article 3 and replace it with a requirement to pay a license fee in the amount of $10,000 upon completion
and acceptance of each installation of the software at a location for each affiliate or subsidiary of the Company and the sum
of $10,000 on each anniversary after each such installation during the period of time in which the software is used at such location.
In addition, the Company will be responsible for the reasonable installation costs incurred by Synergistic in connection with
the installation and setup of the software as required by the Company. The license fee may be paid in cash or the Company’s
common stock. In addition, the Licensing Agreement was amended to delete the Company’s exclusive rights under the agreement.
Investment
Agreement with Lambert Private Equity, LLC
On
October 4, 2013, the Company entered into a standby equity purchase agreement (the “Investment Agreement”) with Lambert
Private Equity, LLC, a Delaware limited liability company (the “Investor”). Pursuant to the Investment Agreement,
the Investor committed to purchase, subject to certain restrictions and conditions, up to $100,000,000 (which can be extended
to $200,000,000 under the same terms) of the Company’s common stock, over a period of 36 months from the first trading day
following the effectiveness of the registration statement registering the resale of shares purchased by the Investor pursuant
to the Investment Agreement. As of the date of this report, no shares had been issued by the Company or purchased by the Investor
under the Investment Agreement.
The
Company may draw on the facility from time to time, as and when it determines appropriate in accordance with the terms and conditions
of the Investment Agreement. The maximum amount that the Company is entitled to put to the Investor in any one draw down notice
is no more than $2,000,000 and not exceeding 285,710 shares. The purchase price shall be set at ninety percent (90%) of the lowest
daily volume weighted average price (VWAP) of the Company’s common stock during the fifteen (15) consecutive trading day
period beginning on the date of delivery of the applicable draw down notice. The Company has the right to withdraw all or any
portion of any put, except that portion of the put that has already been sold to a third party, including any portion of a put
that is below the minimum acceptable price set forth on the put notice, before the closing. There are put restrictions applied
on days between the draw down notice date and the closing date with respect to that particular put. During such time, the Company
shall not be entitled to deliver another draw down notice. In addition, the Investor will not be obligated to purchase shares
if the Investor’s total number of shares beneficially held at that time would exceed 4.99% of the number of shares of the
Company’s common stock as determined in accordance with Rule 13d-1(j) of the Securities Exchange Act of 1934, as amended
(the “Exchange Act”). In addition, the Company is not permitted to draw on the facility unless there is an effective
registration statement (as further explained below) to cover the resale of the shares.
The
Investment Agreement further provides that the Company and the Investor are each entitled to customary indemnification from the
other for, among other things, any losses or liabilities they may suffer as a result of any breach by the other party of any provisions
of the Investment Agreement or Registration Rights Agreement (as defined below), or as a result of any lawsuit brought by a third-party
arising out of or resulting from the other party’s execution, delivery, performance or enforcement of the Investment Agreement.
The
Investment Agreement also contains customary representations and warranties of each of the parties. The assertions embodied in
those representations and warranties were made for purposes of the Investment Agreement and are subject to qualifications and
limitations agreed to by the parties in connection with negotiating the terms of the Investment Agreement. In addition, certain
representations and warranties were made as of a specific date, may be subject or a contractual standard of materiality different
from what a shareholder or investor might view as material, or may have been used for purposes of allocating risk between the
respective parties rather than establishing matters as facts.
Pursuant
to the terms of a registration rights agreement between the Company and the Investor (the “Registration Rights Agreement”),
the Company is obligated to file one or more registrations statements with the SEC to register the resale by Investor of the shares
of common stock issued or issuable under the Investment Agreement. In addition, the Company is obligated to use all commercially
reasonable efforts to have the registration statement declared effective by the SEC within 180 days after the registration statement
is filed.
As
an inducement to Investor to enter in to the Investment Agreement and as consideration for the Investor making the investment
the Investor received 285,710 shares of common stock and 100% warrant/option coverage. The option to purchase shares certified
that the Investor was entitled, effective as of October 4, 2013 and subject to the terms and conditions of the option, to purchase
from the Company up to a total of 14,287,710 shares of the Company’s common stock at a price of the lesser of (a) $7.00
or (b) 110% of the lowest daily VWAP for the common stock as reported by Bloomberg during the thirty (30) trading days prior to
the date the Investor exercised the warrant, prior to 5:00pm (New York time) on September 3, 2018, the expiration date.
Acquisition
of Behavioral Health Care Associates, Ltd.
On
November 20, 2013, we entered into a stock purchase agreement (the “SPA”) with Behavioral Health Care Associates,
Ltd. (“BHCA”), an Illinois company, and its owner, Blaise J. Wolfrum, M.D., to acquire 100% of the issued and outstanding
shares of BHCA from Dr. Wolfrum. The SPA was amended as of May 30, 2014.
Pursuant the SPA, we agreed to pay to Dr.
Wolfrum a purchase price of $4,550,000 for his shares of BHCA, of which $1,000,000 was payable on May 31, 2015, $750,000 was payable
on July 30, 2015, and $2,800,000 was payable on December 31, 2015. Prior to Dr. Wolfram’s receipt of the initial $1,000,000
payment, he had the right to cancel and terminate the SPA. In addition, as consideration for entering into various amendments
to the SPA, we agreed to issue Dr. Wolfrum a total of 50,000 shares of our common stock which we agreed to register for resale
upon completion of a public offering of our securities. We originally recorded the purchase of BHCA on November 11, 2013 and began
consolidating the operating results of BHCA from that date. We never made any of the required installment payments in accordance
with the SPA and the stock of BHCA was never transferred to us. As a result, we have determined that the financial statements
of BHCA should have never been consolidated with our financial statements since we was never able to take control of BHCA due
to non-payment of the purchase price. The 2015 financial statements included elsewhere in this Form 10K have been restated to
remove BHCA from our consolidated financial statements.
On
November 20, 2013, the Company entered into an employment agreement with Dr. Wolfrum as the President of the Accelera business
unit “Behavioral Health Care Associates”.
On
March 31, 2016, the Company, Dr. Wolfrum and BHCA entered into a termination agreement (the “Termination Agreement”)
pursuant to which the various agreements between the parties were terminated effective January 1, 2016 except for certain surviving
obligations as set forth in the Termination Agreement.
In
conjunction with the Termination Agreement, the Company, Dr. Wolfrum and Accelera Healthcare Management Service Organization,
LLC (“Accelera Healthcare”) executed a resignation and release agreement effective as of January 1, 2016 pursuant
to which Dr. Wolfrum resigned as manager and from any and all positions with Accelera Healthcare. Further, the Company and Accelera
Healthcare, and any of their affiliates or other parties claiming by or through the Company or Accelera Healthcare, agreed to
release and discharge Dr. Wolfrum from any and all claims, actions, lawsuits, obligations, or liability, monetary or otherwise
arising from or related to the operating agreement between Accelera Healthcare and Dr. Wolfrum dated November 11, 2013 (the “Operating
Agreement”), his performance and actions as Manager of Accelera Healthcare, or any other issue or matter arising prior to
or on the date of full execution of the resignation and release agreement. In addition, the Company and Accelera Healthcare, and
any of their affiliates or other parties claiming by or through the Company or Accelera Healthcare, agreed not to make, commence,
file, or assert against Dr. Wolfrum any claim, lawsuit, action, or other request for relief arising from or related to the Operating
Agreement, his performance and actions as Manager of Accelera Healthcare, or any other issue or matter arising prior to or on
the date of full execution of the resignation and release agreement.
The
Behavioral Health Care Associates Ltd agreement was signed in 2013 and as noted numerous extensions were signed; the Company never
officially made a first payment therefore we are restating our 2015 consolidated financials.
Termination
of Planned Acquisition of At Home Health Services LLC
On
December 13, 2013, we entered into a purchase agreement with At Home Health Services LLC, All Staffing Services, LLC (together,
the “Subject LLCs”) and Rose Gallagher, individually and as Trustee of the Rose M. Gallagher Revocable Trust dated
November 30, 1994 (“Gallagher”), pursuant to which we agreed to purchase and Gallagher agreed to sell, all of Gallagher’s
interests in the Subject LLCs. We terminated this agreement effective December 31, 2014.
Acquisition
of with SCI Home Health, Inc. (d/b/a Advance Lifecare Home Health)
On
August 25, 2014, we entered into a stock purchase agreement (the “Stock Purchase Agreement”) with SCI Home Health,
Inc. (d/b/a Advance Lifecare Home Health) (“SCI”), Ethel dela Cruz, Virgilia Avila, Ma Lourdes Reyes Celicious, Cristina
Soriano, Michelle Cartas and Jimmy Lacaba (collectively, the “Sellers”), pursuant to which we agreed to purchase,
and the Sellers agreed to sell, all their SCI shares, collectively representing all of the outstanding shares of common stock
of SCI, for an aggregate purchase price of $450,000 (the “Stock Purchase”). This transaction closed in October 2104,
at which time SCI became our wholly owned subsidiary.
ITEM
1A. RISK FACTORS
Not
required.
ITEM
1B. UNRESOLVED STAFF COMMENTS
None.
ITEM
2. PROPERTIES
We
maintain our corporate office at 20511 Abbey Drive, Frankfort, Illinois 60423. SCI formerly operated from a 1,900 square foot
facility located at 3590 Hobson Road, Woodridge, Illinois 60517, which has since closed and the lease expired.
ITEM
3. LEGAL PROCEEDINGS
In
2015, the Securities and Exchange Commission (the “SEC”) issued subpoenas to us, our Chief Executive Officer and our
Chairman of the Board in connection with a formal investigation of our affairs (Case No. C-08191). We have responded to the subpoenas
and no further action has been taken by the SEC as of the date of this report.
In
addition, in November and December 2016, certain of our officers and employees received subpoenas from the SEC requesting certain
information regarding a separate formal investigation.
On
May 5, 2016, LG Capital Funding LLC provided the Company with a $52,500.00 convertible note. On March 28, 2017 a complaint was
filed by LG Capital to settle the convertible note.
Other
than as described above, we do not know of any material, active or pending legal proceedings against us, nor are we involved as
a plaintiff in any material proceedings or pending litigation. There are no proceedings in which any of our directors, officers
or affiliates, or any registered beneficial shareholders are an adverse party or have a material interest adverse to us.
ITEM
4. MINE SAFETY DISCLOSURES
Not
applicable.
PART
III
ITEM
10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Set
forth below are the names and ages of our directors and executive officers and their principal occupations at present and for
at least the past five years.
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Name
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Age
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Position(s)
with the Company
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Geoffrey
Thompson
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49
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Chairman
of the Board
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John
F. Wallin
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67
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Chief
Executive Officer, Chief Financial Officer and Chief Marketing Officer
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Cynthia
Boerum
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63
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Chief
Strategic Officer
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Patrick
Custardo
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65
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Chief
Acquisitions Officer
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Geoffrey
Thompson, Chairman of the Board
Mr.
Thompson founded Accelera in 2008 as serves as the Chairman of the Board. In 2008, Mr. Thompson transitioned Global Wealth Solutions
into GWS Financial Services which started to create unique financial products which included Private Placement Memorandums with
principal protection, Private Placed Life Insurance, Private Placed Variable Annuities, Premium Financed estate transfers and
Supplemental Employee Retirement Plans. In 2005, he launched Global Wealth Solutions, a client consulting firm with a heavy focus
on strategic investing and advanced finance strategies.
In
2001 Mr. Thompson launched Stremline Mortgage company after relocating to Minneapolis, Minnesota. As Streamline grew into a multi-state
company he opened Streamline Title and started acquiring properties under Streamline Real Estate investments. The companies then
grew into a real estate development company under the banner of Presidium. Mr. Thompson’s professional career started in
1993 when he took on the role of finance and insurance manager for Bergstrom Automotive Group in Neenah, Wisconsin.
John
Wallin, Chief Executive Officer, Chief Financial Officer and Chief Marketing Officer
Mr.
Wallin is our Chief Executive Officer and Chief Marketing Officer, and since March 20, 2015 has also acted as our Chief Financial
Officer. Mr. Wallin has been Chief Executive Officer, Chief Marketing Officer and Director of Synergistic since 2009.
Mr.
Wallin has over 30 years of experience in the financial services industry. Prior to his involvement with Synergistic, Mr. Wallin
was President and Chief Marketing Officer at GWG Advantage in Minneapolis from 2007 to 2009. Previously, Mr. Wallin held the positions
of Executive Director of Medicare Advantage-PFFS at American Insurance Marketing Corporation from 2005 to 2007, Senior Sales Executive/
National Sales and Chief Marketing Officer at RNA-Rock Island from 2002 to 2005, Senior Vice President/Regional Financial Services
Manager at Allstate Financial Services from 2000 to 2002, Senior Vice President, National Key Account Manager at Federated Investors
from 1998 to 2000, Vice President BISYS Funds from 1995 to 1998, Senior Vice President of Marketing and National Accounts at Putnam
Mutual Funds and Senior Vice President of Marketing and National Accounts at Kemper Financial Services from 1989 to 1992. Mr.
Wallin received his B.Sc. in 1976 and Masters in Education in 1982 from Chicago State University.
Cynthia
Boerum, Chief Strategic Officer
Ms.
Boerum became the Chief Strategic Officer of the Company in April 2012. Prior to joining the Company, Ms. Boerum was Vice President
of Sales and Consultant for Accentia International Outsourcing in Hyberdad, India, from 2009 to 2011. The leadership included
national and international sales teams.
Previously,
Ms. Boerum held the positions of Vice President of Sales for Opus Healthcare in Austin, Texas from 2004 to 2007 and positioned
the company for acquisition by NextGen. She also held the positions of Enterprise Vice President of National Accounts and Sales
Manager for the top 32 health organizations nationally at McKesson from 1989 to 2003. During this time she received various top
performer awards, not only from McKesson, but also the state of Minnesota. Ms. Boerum received her clinical experience at Shady
Grove Adventist Hospital, in Maryland, from 1979 to 1989. Ms. Boerum attended the ADN program at Frederick Community College in
Maryland.
Patrick
Custardo, Chief Acquisitions Officer
Mr.
Custardo joined Accelera in December 2012. He started his career as Vice President of Mergers and Acquisitions with Northern Continent
Capital Funds in Chicago, Illinois. He left that position to create Sentry Financial Corporation, an investment banking firm specializing
in acquisitions and divestitures. In 2006, he acquired a small third-party medical billing company and through personal investment,
transformed it into a regional Revenue Cycle Management (RCM) firm. In conjunction with other health care professionals, he has
been instrumental in the founding of an Accountable Care Organization. He has been published in Health Care journals and is regarded
as a Medicare expert in the industry.
Board
Committees
Our
securities are not quoted on an exchange that has requirements that a majority of our board members be independent and we are
not currently otherwise subject to any law, rule or regulation requiring that all or any portion of our board of directors include
“independent” directors, nor are we required to establish or maintain an audit committee or other committee of our
board of directors.
The
board does not have standing audit, compensation or nominating committees. The board does not believe these committees are necessary
based on the size of our company and the current levels of compensation paid to corporate officers. The board will consider establishing
audit, compensation and nominating committees at the appropriate time.
The
entire board of directors participates in the consideration of compensation issues and of director nominees. Candidates for director
nominees are reviewed in the context of the current composition of the board and the Company’s operating requirements and
the long-term interests of its stockholders. In conducting this assessment, the board considers skills, diversity, age, and such
other factors as it deems appropriate given the current needs of the board and the Company, to maintain a balance of knowledge,
experience and capability.
The
board’s process for identifying and evaluating nominees for director, including nominees recommended by stockholders, will
involve compiling names of potentially eligible candidates, conducting background and reference checks, conducting interviews
with the candidate and others (as schedules permit), meeting to consider and approve the final candidates and, as appropriate,
preparing an analysis with regard to particular recommended candidates.
Through
their own business activities and experiences each of our directors has come to understand that in today’s business environment,
development of useful products and identification of undervalued medical providers, along with other related efforts, are the
keys to building our company. The directors will seek out individuals with relevant experience to operate and build our current
and proposed business activities.
Director
Compensation
Our
directors do not receive any compensation in consideration for their services as directors and there is no other compensation
being considered at this time.
Compliance
with Section 16(a) of the Exchange Act
Section
16(a) of the Exchange Act requires our executive officers and directors, and persons who beneficially own more than 10% of a registered
class of our equity securities to file with the SEC initial statements of beneficial ownership, reports of changes in ownership
and annual reports concerning their ownership of our common stock and other equity securities, on Forms 3, 4 and 5, respectively.
Executive officers, directors and greater than 10% shareholders are required by SEC regulations to furnish us with copies of all
Section 16(a) reports they file. Based on our review of the copies of such forms received by us, and to the best of our knowledge,
all executive officers, directors and persons holding greater than 10% of our issued and outstanding stock have filed the required
reports in a timely manner during 2016.
ITEM
11. EXECUTIVE COMPENSATION
The
following table summarizes all compensation recorded by us during the years ended December 31, 2016 and 2015 for our principal
executive officers, each other executive officer serving as such whose annual compensation exceeded $100,000, and additional individual
for whom disclosure would have been made in this table but for the fact that the individual was not serving as an executive officer
of our Company at December 31, 2016. Pursuant to Item 402(a)(5) of Regulation S-K we have omitted certain columns from the table
since there was no compensation awarded to, earned by or paid to these individuals required to be reported in such columns in
either year.
SUMMARY
COMPENSATION TABLE
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Name
and Principal Position
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Year
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Salary
($)
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Option
Awards ($)
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Total
($)
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John
Wallin (1)
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2016
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0
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131,144
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131,144
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2015
|
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0
|
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786,720
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|
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786,720
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|
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James
Millikan (2)
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|
2016
|
|
|
|
0
|
|
|
|
75,000
|
|
|
|
75,000
|
|
|
|
|
|
2015
|
|
|
|
0
|
|
|
|
450,000
|
|
|
|
450,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Daniel
Freeman (3)
|
|
|
2016
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
|
2015
|
|
|
|
0
|
|
|
|
30,000
|
|
|
|
30,000
|
|
|
|
(1)
|
Chief
Executive Officer. In addition, Mr. Wallin has acted as our Chief Financial Officer since March 20, 2015.
|
|
|
|
|
|
|
(2)
|
Chief
Operating Officer (retired on April 1, 2017).
|
|
|
|
|
|
|
(3)
|
Former
Chief Financial Officer (resigned on March 20, 2015).
|
None
of our directors has received any monetary compensation from our inception to the date of this annual report. We currently do
not pay any compensation to our directors for serving on our board of directors.
Stock
Option Grants
We
currently have 5,803,250 options outstanding under our 2011 Stock Option Plan which have been granted to key employees.
John Wallin has 1,049,000 options, James Millikan has 600,000, Cynthia Boerum and Patrick Custardo each have 800,000, and the
options awarded will vest in equal annual installments over a four-year period. Also, Daniel Freeman has 914,667 and Jimmy LaCaba
has 60,000.
Employment
Agreements
Effective
April 26, 2012, the Company entered into an employment agreement with John F. Wallin as the President and Chief Executive Officer
of the Company. The employment agreement with Mr. Wallin provides that, upon completion of $2,000,000 in financing, the Company
shall pay him a base salary of $250,000 per year at the times and subject to the Company’s standard payroll practices, subject
to applicable withholding. The base salary shall be reviewed at least annually, and increased as determined by the board. So long
as Mr. Wallin has not been terminated for cause, as defined in the employment agreement, he will be eligible for bonus compensation,
payable immediately following completion of the Company’s financial statements for each full fiscal year, commencing in
2013. Mr. Wallin’s annual bonus targets are still being developed by the Company and will be adjusted from time to time,
based upon the Company’s achieving 100% of certain financial metrics plan targets to be determined by the board.
In
further consideration for Mr. Wallin’s services, the Company agreed to grant options to purchase 1,750,000 shares of the
Company’s common stock at an exercise price of $0.0001 per share, vesting over a four year period. The options vest with
respect to 20% of the total number (350,000) immediately after the effective date of the agreement, and thereafter the remaining
options vest ratably on a monthly basis (29,166 per month) at the end of each month over a 48-month period. Notwithstanding the
foregoing, in the event of a closing of a Change of Control transaction all options immediately vest and become fully exercisable.
Effective
April 26, 2012, the Company entered into an employment agreement with James R. Millikan as the Chief Operating Officer of the
Company. The employment agreement with Mr. Millikan provides that, upon completion of $2,000,000 in financing, the Company shall
pay him a base salary of $175,000 per year at the times and subject to the Company’s standard payroll practices, subject
to applicable withholding. The base salary shall be reviewed at least annually, and increased as determined by the board. So long
as Mr. Millikan has not been terminated for cause, as defined in the employment agreement, he will be eligible for bonus compensation,
payable immediately following completion of the Company’s financial statements for each full fiscal year, commencing in
2013. Mr. Millikan’s annual bonus targets are still being developed by the Company and will be adjusted from time to time,
based upon the Company’s achieving 100% of certain financial metrics plan targets to be determined by the board.
In
further consideration for Mr. Millikan’s services, the Company agreed to grant options to purchase 1,000,000 shares of the
Company’s common stock at an exercise price of $0.0001 per share, vesting over a four year period. The options vest with
respect to 20% of the total number (200,000) immediately after the effective date of the agreement, and thereafter the remaining
options vest ratably on a monthly basis (16,666 per month) at the end of each month over a 48-month period. Notwithstanding the
foregoing, in the event of a closing of a Change of Control transaction all options immediately vest and become fully exercisable.
Effective
April 26, 2012, the Company entered into an employment agreement with Cynthia Boerum as the Chief Strategic Officer of the Company.
The employment agreement with Ms. Boerum provides that, upon completion of $2,000,000 in financing, the Company shall pay her
a base salary of $150,000 per year at the times and subject to the Company’s standard payroll practices, subject to applicable
withholding. The base salary shall be reviewed at least annually, and increased as determined by the board. So long as Ms. Boerum
has not been terminated for cause, as defined in the employment agreement, she will be eligible for bonus compensation, payable
immediately following completion of the Company’s financial statements for each full fiscal year, commencing in 2013. Ms.
Boerum’s annual bonus targets are still being developed by the Company and will be adjusted from time to time, based upon
the Company’s achieving 100% of certain financial metrics plan targets to be determined by the board.
In
further consideration of Ms. Boerum’s services, the Company agreed to grant options to purchase 1,000,000 shares of the
Company’s common stock at an exercise price of $0.0001 per share, vesting over a four year period. The options vest with
respect to 20% of the total number (200,000) immediately after the effective date of the agreement, and thereafter the remaining
options vest ratably on a monthly basis (16,666 per month) at the end of each month over a 48-month period. Notwithstanding the
foregoing, in the event of a closing of a Change of Control transaction, all options immediately vest and become fully exercisable.
Effective
January 1, 2013, the Company entered into an employment agreement with Patrick Custardo as the Chief Acquisitions Officer of the
Company. The employment agreement with Mr. Custardo provides that, upon completion of $2,000,000 in financing, the Company shall
pay him a base salary of $150,000 per year at the times and subject to the Company’s standard payroll practices, subject
to applicable withholding. The base salary shall be reviewed at least annually, and increased as determined by the board. So long
as Mr. Custardo has not been terminated for cause, as defined in the employment agreement, he will be eligible for bonus compensation,
payable immediately following completion of the Company’s financial statements for each full fiscal year, commencing in
2013. Mr. Custardo’s annual bonus targets are still being developed by the Company and will be adjusted from time to time,
based upon the Company’s achieving 100% of certain financial metrics plan targets to be determined by the Board.
In
further consideration of Mr. Custardo’s services, the Company agreed to grant options to purchase 1,000,000 shares of the
Company’s common stock at an exercise price of $0.0001 per share, vesting over a four-year period. The options vest with
respect to 20% of the total number (200,000) immediately after the effective date of the agreement, and thereafter the remaining
options vest ratably on a monthly basis (16,666 per month) at the end of each month over a 48-month period. Notwithstanding the
foregoing, in the event of a closing of a Change of Control transaction, all options immediately vest and become fully exercisable.
Effective
November 20, 2013, the Company entered into an employment agreement with Blaise J. Wolfrum, M.D., as the President of BHCA. The
employment agreement with Dr. Wolfrum provides that the Company shall pay him a base salary of $300,000 per year at the times
and subject to the Company’s standard payroll practices, subject to applicable withholding, and that the board will implement
a bonus structure based on goals, objectives and performance.
In
further consideration of Dr. Wolfrum’s services, the Company agreed to grant options to purchase 600,000 shares of the Company’s
common stock at an exercise price of $0.0001 per share, vesting over the course of three years at a rate of 200,000 each year
so long as he remain an employee of the Company. The shares of common stock underlying the options are subject to a six month
lock-up agreement and a 27 month leak-out agreement limiting the sale of shares over the period. Notwithstanding the foregoing,
in the event of a closing of a Change of Control transaction, all options immediately vest and become fully exercisable.
Dr.
Wolfrum’s employment agreement was terminated pursuant to the Termination Agreement.
Effective
December 13, 2013, the Company entered into a three-year employment agreement with Rose M. Gallagher as the President of Accelera’s
At Home Health Care business unit. The employment agreement with Ms. Gallagher provides that that Company shall pay her a base
salary of $150,000 per annum on a bi-weekly basis in accordance with the Company’s customary payroll practices. Ms. Gallagher
will begin receiving compensation at the time Accelera completes the Due Diligence, Valuation and Audited Financials of the At
Home Health Care business that includes the Subject LLC’s performed by an Accelera’s appointed accounting firm, approximately
ninety (90) days from the employment offer. The Board of Directors intends to implement a bonus structure based on goals, objectives
and performance
.
In
further consideration for Ms. Gallagher’s services, the Company agreed to grant options to purchase 585,000 shares of the
Company’s common stock at an exercise price of $0.0001 per share, and options to purchase 1,000,000 shares of the Company’s
common stock at an exercise price of $0.0001 per share, vesting as to 250,000 shares annually for four years beginning on March
12, 2014. The shares of common stock underlying the options are subject to a six month lock-up agreement and a 27 month leak-out
agreement limiting the sale of shares over the period.
Ms.
Gallagher’s employment agreement was terminated pursuant to a termination agreement effective December 31, 2014.
Outstanding
Equity Awards at Fiscal Year-End
The
following table provides information regarding all restricted stock, stock options and SAR awards (if any) held by our officers
listed in the summary compensation table above as of December 31, 2016.
|
Name
|
|
Number
of Securities Underlying Unexercised Options Exercisable
|
|
|
Number
of Securities Underlying Unexercised Options Unexercisable
|
|
|
Weighted
Average Exercise Price
|
|
|
Expiration
Date
|
|
|
John
Wallin
|
|
|
1,049,000
|
|
|
|
-
|
|
|
$
|
0.0001
|
|
|
|
2022
|
|
|
James
Millikan
|
|
|
600,000
|
|
|
|
-
|
|
|
$
|
0.0001
|
|
|
|
2022
|
|
|
Daniel
Freeman
|
|
|
914,667
|
|
|
|
-
|
|
|
$
|
0.0001
|
|
|
|
2024
|
|
ITEM
12. OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The
following table lists, as of April 14, 2017, the number of shares of common stock of the Company that are beneficially owned by
(i) each person or entity known to the Company to be the beneficial owner of more than 5% of the outstanding common stock; (ii)
each officer and director of the Company; and (iii) all officers and directors as a group. Information relating to beneficial
ownership of common stock by our principal shareholders and management is based upon information furnished by each person using
“beneficial ownership” concepts under the rules of the SEC. Under these rules, a person is deemed to be a beneficial
owner of a security if that person has or shares voting power, which includes the power to vote or direct the voting of the security,
or investment power, which includes the power to vote or direct the voting of the security. The person is also deemed to be a
beneficial owner of any security of which that person has a right to acquire beneficial ownership within 60 days. Under the SEC’s
rules, more than one person may be deemed to be a beneficial owner of the same securities, and a person may be deemed to be a
beneficial owner of securities as to which he or she may not have any pecuniary beneficial interest. Except as noted below, each
person has sole voting and investment power. The percentages below are calculated based on 78,158,673 shares of our common stock
issued and outstanding as of the date of this report.
|
|
|
Name
and Address
|
|
Number
of Shares
|
|
|
Beneficial
Ownership
|
|
|
Percent
of
|
|
|
Title
of Class
|
|
of
Beneficial Owner
|
|
Owned
Beneficially
|
|
|
within
60 days
|
|
|
Class
Owned
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Stock
|
|
Synergistic
Holdings, LLC (1)
|
|
|
5,489,561
|
|
|
|
|
|
|
|
7.02
|
%
|
|
|
|
20511
Abbey Drive Frankfort, IL 60423
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Stock
|
|
Victory
Investment Management LLC (1) 20511 Abbey Drive Frankfort, IL 60423
|
|
|
5,
000,000
|
|
|
|
|
|
|
|
6,40
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Stock
|
|
NGT
Holdings LLC (1) 20511 Abbey Drive Frankfort, IL 60423
|
|
|
8,250,000
|
|
|
|
|
|
|
|
10.56
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Stock
|
|
Geoffrey
Thompson, Chairman of Board (2)
|
|
|
3,169
|
|
|
|
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Stock
|
|
John
Wallin, Chief Executive Officer, Chief Financial Officer (2)
|
|
|
1,752,050
|
(3)
|
|
|
|
|
|
|
2.21
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All
executive officers and directors as a group
|
|
|
|
|
20,494,780
|
|
|
|
|
|
|
|
25.87
|
%
|
|
(1)
|
Mr
Thompson is deemed to be the beneficial holder of Synergistic Holdings LLC, Victory Investment Management LLC and NGT Holdings
LLC. Of Mr. Thompson’s shares, 18,739,561 are held with Synergistic Holdings LLC, Victory Investment Management LLC
and NGT Holdings LLC and 3,169 shares are held jointly with his spouse. Mr. Thompson has voting and dispositive control over
the shares held by Synergistic Holdings LLC, Victory Investment Management LC and NGT Holdings LLC.
|
|
|
|
|
(2)
|
The
beneficial holders address is c/o Accelera Innovations, Inc., 20511 Abbey Drive, Frankfort, IL 60423.
|
|
|
|
|
(3)
|
Includes
1,050 shares held jointly by Mr. Wallin and his spouse, and 1,049,000 options exercisable at a price of $0.0001 per share.
|
*less
than 1 %.
ITEM
13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
On
December 5, 2014, the Company and Synergistic, a major shareholder of the Company, agreed to cancel 796,671 shares of the Company’s
common stock owned by Synergistic and forgive certain indebtedness owed by the Company to Synergistic in the amount of $1,018,618.
In addition, the Company entered into an oral agreement to amend the Licensing Agreement to reduce the total amount of reimbursable
distribution and commercialization expenses due under the Licensing Agreement by $585,181 to $29,414,819 and defer the date of
certain payment obligations by the Company under the Licensing Agreement as follows:
(a)
$5,000,000 no later than December 31, 2015;
(b)
An additional $7,500,000 no later than December 31, 2016;
(c)
An additional $10,000,000 no later than December 31, 2017; and
(d)
An additional $6,914,819 no later than December 31, 2018.
On
May 7, 2015, the Company and Synergistic agreed to amend the Licensing Agreement to eliminate the Company’s $29,414,819
funding requirement under Article 3 and replace it with a requirement to pay a license fee in the amount of $10,000 upon completion
and acceptance of each installation of the software at a location for each affiliate or subsidiary of the Company and the sum
of $10,000 on each anniversary after each such installation during the period of time in which the software is used at such location.
In addition, the Company will be responsible for the reasonable installation costs incurred by Synergistic in connection with
the installation and setup of the software as required by the Company. The license fee may be paid in cash or the Company’s
common stock. In addition, the Licensing Agreement was amended to delete the Company’s exclusive rights under such agreement.
At
December 31, 2016 and 2015, advances from related party were $403,092 and $243,799, respectively. These advances are non-interest
bearing and payable upon demand.
Other
than as described above, we have not entered into any transactions with our officers, directors, persons nominated for these positions,
beneficial owners of 5% or more of our common stock, or family members of those persons wherein the amount involved in the transaction
or a series of similar transactions exceeded the lesser of $120,000 or 1% of the average of our total assets for the last two
fiscal years.
ITEM
14. PRINCIPAL ACCOUNTING FEES AND SERVICES
The
following table shows the fees that were billed for the audit and other services provided by AJ Robbins CPA and Anton & Chia
LLP for the fiscal years ended December 31, 2016 and 2015.
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
Audit
Fees
|
|
$
|
110,357
|
|
|
$
|
66,860
|
|
|
Audit-Related
Fees
|
|
|
3,044
|
|
|
|
9282
|
|
|
Tax
Fees
|
|
|
-
|
|
|
|
-
|
|
|
All
Other Fees
|
|
|
-
|
|
|
|
-
|
|
|
Total
|
|
$
|
113,401
|
|
|
$
|
76,142
|
|
Audit
Fees
—This category includes the audit of our annual financial statements, review of financial statements included in
our Quarterly Reports on Form 10-Q and services that are normally provided by the independent registered public accounting firm
in connection with engagements for those fiscal years. This category also includes advice on audit and accounting matters that
arose during, or as a result of, the audit or the review of interim financial statements.
Audit-Related
Fees
—This category consists of assurance and related services by the independent registered public accounting firm that
are reasonably related to the performance of the audit or review of our financial statements and are not reported above under
“Audit Fees.” The services for the fees disclosed under this category include consultation regarding our correspondence
with the Commission and other accounting consulting.
Tax
Fees
—This category consists of professional services rendered by our independent registered public accounting firm for
tax compliance and tax advice. The services for the fees disclosed under this category include tax return preparation and technical
tax advice.
All
Other Fees
—This category consists of fees for other miscellaneous items.
Our
board of directors has adopted a procedure for pre-approval of all fees charged by our independent registered public accounting
firm. Under the procedure, the board approves the engagement letter with respect to audit, tax and review services. Other fees
are subject to pre-approval by the board, or, in the period between meetings, by a designated member of board. Any such approval
by the designated member is disclosed to the entire board at the next meeting.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2016 AND 2015
NOTE
1 – ORGANIZATION AND BASIS OF PRESENTATION
Accelera
Innovations, Inc., formerly Accelerated Acquisitions IV, Inc. (the “Company”) was incorporated in the State of Delaware
on April 29, 2008 for the purpose of raising capital intended to be used in connection with its business plan which may include
a possible merger, acquisition or other business combination with an operating business.
On
June 13, 2011, Synergistic Holdings, LLC (“Synergistic”) agreed to acquire 17,000,000 shares of the Company’s
common stock, par value $0.0001 per share. At the same time, Accelerated Venture Partners, LLC agreed to tender 3,750,000 of its
5,000,000 shares of the Company’s common stock, par value $0.0001 per share, for cancellation. Following these transactions,
Synergistic owned 93.15% of the Company’s 18,250,000 issued and outstanding shares of common stock, par value $0.0001 per
share, and the interest of Accelerated Venture Partners, LLC was reduced to approximately 6.85% of the total issued and outstanding
shares. Concurrent with the share purchase, Timothy Neher resigned from the Company’s Board of Directors and John Wallin
was appointed to the Company’s Board of Directors. Such action represented a change of control of the Company.
On
October 18, 2011, the Company filed a Certificate of Amendment to its Certificate of Incorporation with the Secretary of State
of Delaware and changed its name from Accelerated Acquisition IV, Inc. to Accelera Innovations, Inc.
The
Company is a healthcare service company which is focused on acquiring companies primarily in the post-acute care patient services
and information technology services industries. The Company currently owns SCI Home Health, Inc. (d/b/a Advance Lifecare Home
Health) (“SCI”), which offers personal care to patients in the Chicago, Illinois area.
The
accompanying consolidated financial statements and have been prepared in conformity with accounting principles generally accepted
in the United States of America (“GAAP”).
NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES
OF CONSOLIDATION - The Company operates companies in the personal health care industry. The Company operates out of one service
center serving the Chicago, Illinois area. The consolidated financial statements for the year ended December 31, 2016 include
the accounts of the Company and its 100% owned subsidiary SCI, Significant intercompany accounts and transactions have been eliminated
in consolidation.
USE
OF ESTIMATES - The preparation of consolidated financial statements in conformity with accounting principles generally accepted
in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the
reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Significant
estimates in these financial statements include allowance for doubtful accounts, the valuation of intangibles, valuation allowance
for deferred taxes, estimated useful life of property and equipment and the fair value of stock and options issues for services
and interest.
CASH
- All cash is maintained with a major financial institution in the United States. Deposits with this bank may exceed the amount
of insurance provided on such deposits. Temporary cash investments with an original maturity of three months or less are considered
to be cash equivalents. The Company had no cash equivalents as of December 31, 2016 and 2015, respectively. The Company has not
suffered any credit issues when deposits have exceeded the amount of insurance provided for such deposits.
ACCELERA
INNOVATIONS, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2016 AND 2015
ACCOUNTS
RECEIVABLE - Accounts receivable are recorded at estimated value, net of allowance for doubtful accounts. Accounts receivable
are not interest bearing. The allowance for doubtful accounts is based upon management’s best estimate and past collection
experience. For accounts greater than 180 days, the Company carries a 100% allowance. Uncollectible accounts are charged off when
all reasonable efforts to collect the accounts have been exhausted.
PROPERTY
AND EQUIPMENT - Property and equipment is stated at cost. Depreciation is provided on a straight-line basis over the estimated
useful lives of the assets. Maintenance and repairs are charged to expense as incurred; major renewals and betterments are capitalized.
When items of property and equipment are sold or retired, the related cost and accumulated depreciation are removed from the accounts,
and any gain or loss is included in income.
DERIVATIVE
FINANCIAL INSTRUMENTS - The Company evaluates all of its agreements to determine if such instruments have derivatives or contain
features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the
derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the
fair value reported in the statements of operations. For stock-based derivative financial instruments, the Company uses the Black-Scholes-Merton
option pricing model to value the derivative instruments at inception and on subsequent valuation dates. The classification of
derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the
end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current
based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet
date. As of December 31, 2016 and 2015, the Company’s only derivative financial instrument was an embedded conversion feature
associated with convertible notes due to the conversion price being a percentage of the market price of the Company’s common
stock.
PREFERRED
STOCK SUBSCRIPTION PAYABLE - During the years ended December 31, 2014 and 2013, an affiliate of the Company entered into subscription
agreements with 13 investors. Pursuant to the terms of the subscription agreements, the affiliate agreed to issue shares of the
Company’s 8% Convertible Preferred Stock that it was authorized to issue as of May 7, 2015. In exchange, the Company received
aggregate proceeds from the investors of $652,462. Accordingly, the Company is obligated to issue an aggregate of 198,473 shares
of 8% Convertible Preferred Stock to the investors with a stated value of $4.00 per share or an aggregate of $793,892. The net
proceeds of $652,462 have been received by or on behalf of the Company and recorded as preferred stock subscription payable net
of $141,430 of original issue discount related to such offering which amount was expensed. Upon obtaining the Certificate of Designation
for the 8% Convertible Preferred Stock on May 7, 2015, the Company has included the aggregate amount of $793,892 of preferred
stock as part of stockholders’ equity. Prior to May 7, 2015, the preferred stock subscription payable was included as a
current liability.
COMMON
STOCK - The Company records common stock issuances when all of the legal requirements for the issuance of such common stock have
been satisfied.
REVENUE
RECOGNITION - Revenue related to services and administrative support services is recognized ratably at the time services have
been performed and pre-approved by payer. Gross service revenue is recorded in the accounting records on an accrual basis at the
provider’s established rates, regardless of whether the health care entity expects to collect that amount. The Company will
reserve a provision for contractual adjustment and discounts and deduct from gross service revenue. The Company believes that
recognizing revenue at the time the services have been performed because the Company’s revenue policies meet the following
four criteria in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”)
605-10-S25,
Revenue Recognition
: Overall, (i) persuasive evidence that arrangement exists, (ii) services has occurred,
(iii) the price is fixed and determinable and (iv) collectability is reasonably assured. The Company reports revenues net of any
sales, use and value added taxes.
COST
OF REVENUES - Costs of revenues are comprised of fees paid to members of the Company’s medical staff, other direct costs
including transcription, film and medical record obtainment and transportation; and other indirect costs including labor and overhead
related to the generation of revenues.
ACCELERA
INNOVATIONS, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2016 AND 2015
ADVERTISING
COSTS - The Company’s policy regarding advertising is to expense advertising when incurred.
INCOME
TAXES - The Company accounts for income taxes in accordance with ASC Topic 740,
Income Taxes
. ASC 740 requires a company
to use the asset and liability method of accounting for income taxes, whereby deferred tax assets are recognized for deductible
temporary differences, and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are
the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by
a valuation allowance when, in the opinion of management, it is more likely than not that some portion, or all of, the deferred
tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates
on the date of enactment.
Under
ASC 740, a tax position is recognized as a benefit only if it is “more likely than not” that the tax position would
be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount
of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more
likely than not” test, no tax benefit is recorded. The adoption had no effect on the Company’s consolidated financial
statements.
STOCK
BASED COMPENSATION - The Company has share-based compensation plans under which employees, consultants, suppliers and directors
may be granted restricted stock, as well as options and warrants to purchase shares of the Company’s common stock at the
fair market value at the time of grant. Stock-based compensation cost to employees is measured by the Company at the grant date,
based on the fair value of the award, over the requisite service period under ASC 718,
Compensation – Stock Compensation
.
For options issued to employees, the Company recognizes stock compensation costs utilizing the fair value methodology over the
related period of benefit. Grants of stock to non-employees and other parties are accounted for in accordance with ASC 505,
Equity
,
at the measurement date. For awards with service or performance conditions, the Company generally recognizes expense over the
service period or when the performance condition is met.
LOSS
PER SHARE - Basic loss per share is computed by dividing net loss attributable to common stockholders by the weighted average
common shares outstanding for the period. Diluted loss per share is computed giving effect to all potentially dilutive common
shares. Potentially dilutive common shares may consist of incremental shares issuable upon the exercise of stock options and warrants
and the conversion of notes payable to common stock. In periods in which a net loss has been incurred, all potentially dilutive
common shares are considered anti-dilutive and thus are excluded from the calculation.
FINANCIAL
INSTRUMENTS - ASC 820,
Fair Value Measurements and Disclosures
, defines fair value as the exchange price that would be
received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset
or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value
hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from independent
sources (observable inputs) and (2) an entity’s own assumptions about market participant assumptions developed based on
the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels,
which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and
the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below:
|
●
|
Level
1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets
or liabilities.
|
|
|
|
|
●
|
Level
2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly
or indirectly, including quoted prices for similar assets or liabilities in active markets; quoted prices for identical or
similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the
asset or liability (e.g., interest rates); and inputs that are derived principally from or corroborated by observable market
data by correlation or other means.
|
|
|
|
|
●
|
Level
3 - Inputs that are both significant to the fair value measurement and unobservable.
|
ACCELERA
INNOVATIONS, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2016 AND 2015
Fair
value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as
of December 31, 2016. These financial instruments include stock options granted to the officers in 2016 and 2015.
The
Company uses Level 2 inputs for its valuation methodology for its derivative liability as its fair value was determined by using
the Black-Scholes-Merton pricing model based on various assumptions. The Company’s derivative liability is adjusted to reflect
fair value at each period end, with any increase or decrease in the fair value being recorded in results of operations as adjustments
to fair value of derivatives.
At
December 31, 2016 and 2015, the Company identified the following liability that is required to be presented on the balance sheet
at fair value (see Note 7):
|
|
|
Fair
Value
|
|
|
Fair
Value Measurements at
|
|
|
|
|
As
of
|
|
|
December
31, 2016
|
|
|
Description
|
|
December
31, 2016
|
|
|
Using
Fair Value Hierarchy
|
|
|
|
|
|
|
|
Level
1
|
|
|
Level
2
|
|
|
Level
3
|
|
|
Derivative
liability - conversion feature
|
|
$
|
149,269
|
|
|
|
-
|
|
|
|
149,269
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
149,269
|
|
|
|
-
|
|
|
|
149,269
|
|
|
|
-
|
|
|
|
|
Fair
Value
|
|
|
Fair
Value Measurements at
|
|
|
|
|
As
of
|
|
|
December
31, 2015
|
|
|
Description
|
|
December
31, 2015
|
|
|
Using
Fair Value Hierarchy
|
|
|
|
|
|
|
|
Level
1
|
|
|
Level
2
|
|
|
Level
3
|
|
|
Derivative
liability - conversion feature
|
|
$
|
302,580
|
|
|
|
-
|
|
|
|
302,580
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
302,580
|
|
|
|
-
|
|
|
|
302,580
|
|
|
|
-
|
|
RECENT
ACCOUNTING PRONOUNCEMENTS
In
January 2017, the FASB issued Accounting Standards Update (“ASU”) 2017-01,
Business Combinations (Topic 805) Clarifying
the Definition of a Business
. The amendments in this update clarify the definition of a business with the objective of adding
guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions or disposals of assets
or businesses. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, and
consolidation. The guidance is effective for interim and annual periods beginning after December 15, 2017 and should be applied
prospectively on or after the effective date. The Company is in the process of evaluating the impact of ASU 2017-01 on its financial
statements.
In
November 2016, the FASB issued ASU 2016-18,
Statement of Cash Flows (Topic 230): Restricted Cash,
which requires restricted
cash to be presented with cash and cash equivalents on the statement of cash flows and disclosure of how the statement of cash
flows reconciles to the balance sheet if restricted cash is shown separately from cash and cash equivalents on the balance sheet.
ASU 2016-18 is effective for interim and annual periods beginning after December 15, 2017, with early adoption permitted. The
Company is in the process of evaluating the impact of ASU 2016-18 on its financial statements.
ACCELERA
INNOVATIONS, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2016 AND 2015
In
October 2016, the FASB issued ASU 2016-16,
Income Taxes (Topic 740): Intra-Entity Transfer of Assets Other than Inventory
,
which requires the recognition of the income tax consequences of an intra-entity transfer of an asset, other than inventory, when
the transfer occurs. ASU 2016-16 is effective for interim and annual periods beginning after December 15, 2018, with early adoption
permitted. The Company is in the process of evaluating the impact of ASU 2016-16 on its financial statements.
In
August 2016, the FASB issued ASU 2016-15
, Statement of Cash Flows (Topic 230), Classification of Certain Cash Receipts and
Cash Payments
. ASU 2016-15 provides guidance for targeted changes with respect to how cash receipts and cash payments are
classified in the statements of cash flows, with the objective of reducing diversity in practice. ASU 2016-15 is effective for
interim and annual periods beginning after December 15, 2017, with early adoption permitted. The Company is in the process of
evaluating the impact of ASU 2016-15 on its statements of cash flows.
In
March 2016, the FASB issued ASU 2016-09,
Stock Compensation (Topic 718), Improvements to Employee Share-Based Payment Accounting
.
ASU 2016-09, which amends several aspects of accounting for employee share-based payment transactions including the accounting
for income taxes, forfeitures, and statutory tax withholding requirements, and classification in the statement of cash flows.
ASU 2016-09 is effective for fiscal years beginning after December 15, 2016 and interim periods within annual periods beginning
after December 15, 2016, with early adoption permitted. The Company is in the process of evaluating the impact of ASU 2016-09
on its financial statements.
In
February 2016, the FASB issued ASU 2016-02,
Leases (Topic 842)
. ASU 2016-02 requires lessees to recognize lease assets
and lease liabilities on the balance sheet and requires expanded disclosures about leasing arrangements. ASU 2016-02 is effective
for fiscal years beginning after December 15, 2018 and interim periods in fiscal years beginning after December 15, 2018, with
early adoption permitted. The Company is in the process of evaluating the impact of
ASU
2016-02
on its financial statements.
In
August 2014, the FASB issued ASU 2014-15,
Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going
Concern
, which provides guidance on determining when and how to disclose going-concern uncertainties in the financial statements.
ASU 2014-15 requires management to perform interim and annual assessments of an entity’s ability to continue as a going
concern within one year of the date the financial statements are issued. An entity must provide certain disclosures if conditions
or events raise substantial doubt about the entity’s ability to continue as a going concern. ASU 2014-15 is effective for
annual periods ending after December 15, 2016, and interim periods thereafter. Early adoption is permitted. The Company is in
the process of evaluating the impact of ASU 2014-15 on its financial statements and disclosures.
In
May 2014, the FASB issued ASU 2014-09,
Revenue from Contracts with Customers
. ASU 2014-09 is a comprehensive revenue recognition
standard that will supersede nearly all existing revenue recognition guidance under current GAAP and replace it with a principle-based
approach for determining revenue recognition. ASU 2014-09 will require that companies recognize revenue based on the value of
transferred goods or services as they occur in the contract. The ASU also will require additional disclosure about the nature,
amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and
changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. ASU 2014-09 is effective for interim
and annual periods beginning after December 15, 2017. Early adoption is permitted only in annual reporting periods beginning after
December 15, 2016, including interim periods therein. Entities will be able to transition to the standard either retrospectively
or as a cumulative-effect adjustment as of the date of adoption. The Company is in the process of evaluating the impact of ASU
2014-09 on its financial statements and disclosures.
ACCELERA
INNOVATIONS, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2016 AND 2015
Management
does not believe that any recently issued, but not yet effective, accounting standards could have a material effect on the accompanying
financial statements. As new accounting pronouncements are issued, the Company will adopt those that are applicable under the
circumstances.
RECLASSIFICATIONS
- Certain prior year amounts have been reclassified to conform to the current period presentation. These reclassifications had
no impact on net earnings, financial position or cash flows.
NOTE
3 – BALANCE SHEET INFORMATION
PROPERTY
AND EQUIPMENT, NET
Property
and equipment, net at December 31, 2016 and 2015 consist of the following:
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
Furniture
and fixtures
|
|
$
|
3,940
|
|
|
$
|
3,940
|
|
|
Office
equipment
|
|
|
5,641
|
|
|
|
5,641
|
|
|
|
|
|
9,581
|
|
|
|
9,581
|
|
|
Less
accumulated depreciation
|
|
|
(2,692
|
)
|
|
|
(692
|
)
|
|
|
|
$
|
6,889
|
|
|
$
|
8,889
|
|
Depreciation
expense for the years ended December 31, 2016 and 2015 was $2,000 and $1,259, respectively.
NOTE
4 – GOING CONCERN
The
accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.
The Company has incurred a net loss for the year ended December 31, 2016 of $1,925,294 and had an accumulated deficit of $61,612,829
as of December 31, 2016. In view of these matters, the Company’s ability to continue as a going concern is dependent upon
the Company’s ability to add profitable operating companies and to achieve a level of profitability. The Company intends
on financing its future development activities and its working capital needs largely from the sale of equity securities with some
additional funding from other traditional financing sources, including term notes, until such time that funds provided by operations
are sufficient to fund working capital requirements.
The
Company’s only operating subsidiary is SCI. Revenues from SCI have significantly decreased primarily due to the sudden departure
of the administrator of SCI. The Company has transitioned this position to a new administrator and filed these changes with the
IDPH (Illinois Department of Public Health). There are claims to be processed and invoiced when IDPH approves; through the uniform
process and the new SCI administrator, the Company expects this to be resolved in the near future.
The
consolidated financial statements of the Company do not include any adjustments relating to the recoverability and classification
of recorded assets, or the amounts and classifications of liabilities that might be necessary should the Company be unable to
continue as a going concern.
ACCELERA
INNOVATIONS, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2016 AND 2015
NOTE
5 – SHORT-TERM NOTES PAYABLES
Short-term
notes payable at December 31, 2016 and 2015 consisted of the following:
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
At
Home and All Staffing acquisition note payable (1)
|
|
|
344,507
|
|
|
|
344,507
|
|
|
AOK
Property Investments (2)
|
|
|
525,000
|
|
|
|
525,000
|
|
|
Note
dated May 28, 2015 for $35,000; daily payment of $184.73 for 252 days
|
|
|
16,659
|
|
|
|
32,014
|
|
|
|
|
$
|
886,166
|
|
|
$
|
901,521
|
|
(1)
The Company entered into a $344,507 promissory note (the “Trust Note”) with the Rose. M Gallagher Revocable Trust
(the “Trust”) in conjunction with a settlement agreement dated December 23, 2014. The Trust Note bears interest at
11.0% per annum. The first payment of $25,000 was due on March 1, 2015, with the final principal and interest payment due on June
1, 2015. The Company is in default of the Trust Note and has a 90-day cure period. The Company paid $5,000 on April 8, 2015.
If
an event of default under the Trust Note occurs, the Trust may accelerate the Trust Note’s maturity date so that the unpaid
principal amount, together with accrued interest, is immediately due in its entirety. In addition, the Company promised to pay
$1,000 dollars as consideration for costs of collection of the Trust Note, including but not limited to attorneys’ fees
paid or incurred on account of such collection, whether or not suit is filed with respect thereto and whether such cost or expense
is paid or incurred, or to be paid or incurred, prior to or after the entry of judgment. Pursuant to the terms of the Trust Note,
an event of default occurs if (i) the Company fails to make any payment required by the Trust Note when due, (ii) the Company
fails to observe or perform any covenant, condition or agreement under the Trust Note, (iii) a proceeding with respect to the
Company is commenced for the benefit of creditors, including but not limited to any bankruptcy or insolvency law; or (iv) the
Company becomes insolvent.
ACCELERA
INNOVATIONS, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2016 AND 2015
(2)
On October 1, 2014, AOK Property Investments LLC (“AOK”), a third party lender, lent the Company and its subsidiary,
Advanced Life Management, LLC (“ALM”) , an aggregate of $500,000. In consideration of AOK’s
delivery of an aggregate of $500,000 to the Company and ALM, the Company and ALM executed and delivered a promissory note (the
“AOK Note”) in favor of AOK in the aggregate principal amount of $500,000. The AOK Note was due on January 15, 2015
and bears interest in the amount of 500,000 shares of the Company’s common stock, which interest was due and payable on
or before January 15, 2015. If the Company and ALM fail to pay any portion of principal or interest when due, interest will continue
to accrue and be payable to AOK at the rate of 1,667 shares of Company common stock per day until all principal and accrued interest
is fully paid. On July 10, 2015, the Company and AOK entered in an amended note agreement whereby AOK loaned the Company an additional
$25,000 and extended the due date of the note to December 31, 2015, and the Company agreed to issue an additional 500,000 shares
of common stock for failing to pay the principal and interest on the loan when originally due. The Company recorded the issuance
of 500,000 shares of common stock to AOK at a value of $1,360,907. The loan was not repaid on its extended due date and is currently
in default.
If
an event of default under the AOK Note occurs, AOK may accelerate the AOK Note’s maturity date so that the unpaid principal
amount, together with accrued interest, is immediately due in its entirety. Pursuant to the terms of the AOK Note, an event of
default occurs if (i) the Company or ALM fails to make any payment required by the AOK Note when due, (ii) the Company or SCI
voluntarily dissolves or ceases to exist, or any final and non-appealable order or judgment is entered against the Company or
SCI ordering its dissolution, (iii) the Company or ALM fails to pay, becomes insolvent or unable to pay, or admits in writing
an inability to pay its debts as they become due, or makes a general assignment for the benefit of creditors; or (iv) a proceeding
with respect to the Company or ALM is commenced for the benefit of creditors, including but not limited to any bankruptcy or insolvency
law.
NOTE
6 – CONVERTIBLE NOTES
Convertible
notes at December 31, 2016 and 2015 consist of the following:
|
|
|
2016
|
|
|
2015
|
|
|
Convertible
note dated August 28, 2015; interest of $6,667 due after 90 days; due August 28, 2017; convertible into shares of common stock
at the lesser of $1.00 or 60% of the lowest trading price 25 days prior to conversion.
|
|
$
|
-
|
|
|
$
|
55,556
|
|
|
Convertible
note dated December 16, 2015; non-interest bearing; convertible into shares of common stock at 50% of the market price on
the date of conversion.
|
|
|
118,684
|
|
|
|
118,684
|
|
|
Convertible
note dated March 10, 2016; interest of $3,333 due after 90 days; due August 28, 2017; convertible into shares of common stock
at the lesser of $1.00 or 60% of the lowest trading price 25 days prior to conversion.
|
|
|
9,363
|
|
|
|
-
|
|
|
Convertible
note dated May 5, 2016; interest at 8% per annum; due May 5, 2017; convertible into shares of common stock at 65% of the lowest
trading price 20 days prior to conversion.
|
|
|
46,625
|
|
|
|
-
|
|
|
Total
convertible notes
|
|
|
174,672
|
|
|
|
174,240
|
|
|
Unamortized
debt discount
|
|
|
(19,395
|
)
|
|
|
(158,806
|
)
|
|
Convertible
notes, net of discount
|
|
|
155,277
|
|
|
|
15,434
|
|
|
Less
current portion
|
|
|
(152,952
|
)
|
|
|
-
|
|
|
Long-term
portion
|
|
$
|
2,325
|
|
|
$
|
15,434
|
|
ACCELERA
INNOVATIONS, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2016 AND 2015
Due
to the variable conversion price associated with these convertible notes, the Company has determined that the conversion feature
is considered a derivative liability. The embedded conversion feature at inception is recorded as a derivative liability as of
the date of issuance. The derivative liability was recorded as a debt discount up to the face amount of the convertible notes
with the remaining amount being charge as a financing cost. The debt discount is being amortized over the term of the convertible
notes. The Company recognized additional interest expense of $277,439 and $15,434 during the years ended December 31, 2016 and
2015, respectively, related to the amortization of the debt discount.
A
rollfoward of the convertible note from December 31, 2014 to December 31, 2016 is below:
|
Convertible
notes, December 31, 2014
|
|
$
|
-
|
|
|
Issued
for cash
|
|
|
50,000
|
|
|
Accounts
payable converted to convertible note
|
|
|
118,685
|
|
|
Issued
for original issue discount
|
|
|
5,556
|
|
|
Debt
discount related to new convertible notes
|
|
|
(174,241
|
)
|
|
Amortization
of debt discounts
|
|
|
15,434
|
|
|
Convertible
notes, December 31, 2015
|
|
|
15,434
|
|
|
Issued
for cash
|
|
|
77,500
|
|
|
Issued
for original issue discount
|
|
|
8,028
|
|
|
Conversion
to common stock
|
|
|
(85,096
|
)
|
|
Debt
discount related to new convertible notes
|
|
|
(138,028
|
)
|
|
Amortization
of debt discounts
|
|
|
277,439
|
|
|
Convertible
notes, December 31, 2016
|
|
$
|
155,277
|
|
NOTE
7 – DERIVATIVE LIABILITY
The
convertible note discussed in Note 6 has a variable conversion price which results in the conversion feature being recorded as
a derivative liability.
The
fair value of the derivative liability is recorded and shown separately under current liabilities. Changes in the fair value of
the derivative liability is recorded in the statement of operations under other income (expense).
The
Company uses the Black-Scholes-Merton option pricing model with the following assumptions to measure the fair value of derivative
liability at December 31, 2016 and 2015:
|
|
|
2016
|
|
|
2015
|
|
|
Stock
price
|
|
$
|
0.0051
|
|
|
$
|
0.141
|
|
|
Risk
free rate
|
|
|
0.59
|
%
|
|
|
0.64
|
%
|
|
Volatility
|
|
|
325
|
%
|
|
|
325
|
%
|
|
Conversion/Exercise
price
|
|
$
|
0.0025
- 0.007
|
|
|
$
|
0.07-0.085
|
|
|
Dividend
rate
|
|
|
0
|
%
|
|
|
0
|
%
|
|
Terms
(years)
|
|
|
0.1
to 0.7
|
|
|
|
0.8
to 1.7
|
|
ACCELERA
INNOVATIONS, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2016 AND 2015
The
following table represents the Company’s derivative liability activity for the years ended December 31, 2016 and 2015:
|
Derivative
liability at December 31, 2014
|
|
$
|
-
|
|
|
Derivative
liability associated with new convertible note
|
|
|
305,325
|
|
|
Change
in fair value of derivative liability during period
|
|
|
(2,745
|
)
|
|
Derivative
liability at December 31, 2015
|
|
|
302,580
|
|
|
Derivative
liability associated with new convertible note
|
|
|
265,533
|
|
|
Change
in fair value of derivative liability during period
|
|
|
(418,844
|
)
|
|
Derivative
liability at December 31, 2016
|
|
$
|
149,269
|
|
NOTE
8 – STOCKHOLDERS’ DEFICIT
The
Company has two classes of stock, preferred stock and common stock. There are 10,000,000 shares of $.0001 par value preferred
stock authorized, 500,000 of which were designated as 8% Convertible Preferred Stock as of May 7, 2015.
The
500,000 shares of 8% Convertible Preferred Stock have the following the designations, rights, and preferences:
|
|
●
|
The
state value of each share is $4.00,
|
|
|
|
|
|
|
●
|
Holders
of shares of 8% Convertible Preferred Stock do not have any voting rights,
|
|
|
|
|
|
|
●
|
The
shares pay quarterly dividends in arrears at the rate of 8% per annum and on each conversion date. Subject to certain conditions,
the dividends are payable at the Company’s option in cash or such dividends shall be accreted to, and increase, the
outstanding stated value,
|
|
|
|
|
|
|
●
|
Each
share is convertible into shares of the Company’s common stock at a conversion price of $4.00 per share, subject to
adjustment, and
|
|
|
|
|
|
|
●
|
The
conversion price of the 8% Convertible Preferred is subject to proportional adjustment in the event of stock splits, stock
dividends and similar corporate events.
|
There
were 198,473 shares of 8% Convertible Preferred Stock issued and outstanding as of December 31, 2016.
There
are 100,000,000 shares of $.0001 par value common shares authorized. The Company had 69,569,444 and 45,011,216 issued and outstanding
shares as of December 31, 2016 and 2015, respectively.
During
the year ended December 31, 2016, the Company issued 24,558,228 shares for the conversion of $87,106 of convertible notes payable.
ACCELERA
INNOVATIONS, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2016 AND 2015
The
Company issued 3,810,290 shares for services with a fair value of $7,731,493 and 500,000 shares for an extension of loan payment
terms with a fair value of $1,360,907 for the year ended December 31, 2015. In addition, the Company also issued 25,000 shares
for cash proceeds of $15,000.
NOTE
9 – STOCK-BASED COMPENSATION
The
Company recognizes stock-based compensation expense in its statement of operations based on the fair value of employee stock options
and stock grant awards as measured on the grant date. For stock options, the Company uses the Black-Scholes option pricing model
to determine the value of the awards granted. The Company amortizes the estimated value of the options as of the grant date over
the stock options’ vesting period, which is generally four years.
The
Company has estimated the value of common stock into which the options are exercisable at $4.00 per share for financial reporting
purposes. This amount was determined based on the price the Company’s stock was sold for in past private placements, the
minimum stock price required for listing on any Nasdaq market, and the amount also approximates a $85 million valuation for the
entire Company, which is considered “micro-cap” by most equity analysts. The stock based compensation expense is an
estimate and significant judgment was involved in attempting to determine the value of common stock. When a majority of the stock
options were granted, the Company’s common stock was not traded publicly, and no stock was traded in private markets either,
except for privately negotiated sales to the founder and other private investors and the founder of the technology from which
the Company subsequently licensed rights. The Company does not have any offers for purchase of its common stock in any stage,
and no stock is currently registered for resale with the Securities and Exchange Commission.
The
Company believes the only material estimate used in estimating the value of stock options was the estimated fair value of the
common stock, and that assumed volatility, term, interest rate and dividend yield changes would not result in material differences
in stock option valuations. The Company recognized stock-based compensation expense of $1,616,144 and $4,265,889 for the years
ended December 31, 2016 and 2015, respectively, which were included in general and administrative expenses. As of December 31,
2016, there was $30,000 of total unrecognized compensation cost related to unvested stock-based compensation awards, which is
expected to be recognized through September 2018.
The
following is a summary of the outstanding options, as of December 31, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
Weighted
|
|
|
Weighted
|
|
|
Average
|
|
|
|
|
|
|
|
Average
|
|
|
Average
|
|
|
Remaining
|
|
|
|
|
Options
|
|
|
Intrinsic
|
|
|
Exercise
|
|
|
Contractual
|
|
|
|
|
Outstanding
|
|
|
Value
|
|
|
Price
|
|
|
Life
|
|
|
Outstanding,
December 31, 2014
|
|
|
5,888,583
|
|
|
|
4.00
|
|
|
$
|
0.0001
|
|
|
|
2.5
|
|
|
Granted
|
|
|
425,667
|
|
|
|
2.52
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forfeited/Expired
|
|
|
(511,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding,
December 31, 2015
|
|
|
5,803,250
|
|
|
|
3.89
|
|
|
|
0.0001
|
|
|
|
1.5
|
|
|
Granted
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forfeited/Expired
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding,
December 31, 2016
|
|
|
5,803,250
|
|
|
|
3.89
|
|
|
|
0.0001
|
|
|
|
0.5
|
|
|
Exercisable,
December 31, 2016
|
|
|
5,777,000
|
|
|
|
3.89
|
|
|
|
0.0001
|
|
|
|
0.5
|
|
ACCELERA
INNOVATIONS, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2016 AND 2015
Weighted
average assumptions in the calculation of option value:
|
Risk-free
interest rate
|
|
|
0.83
|
%
|
|
Expected
life of the options
|
|
|
4
years
|
|
|
Expected
volatility
|
|
|
268
|
%
|
|
Expected
dividend yield
|
|
|
0
|
%
|
|
Forfeiture
rate
|
|
|
0
|
%
|
NOTE
10 – RELATED PARTY TRANSACTIONS
On
December 5, 2014, the Company and Synergistic, a major shareholder of the Company, agreed to cancel 796,671 shares of the Company’s
common stock owned by Synergistic and forgive certain indebtedness owed by the Company to Synergistic in the amount of $1,018,618.
In addition, the Company entered into an oral agreement to amend the licensing agreement entered into between the Company and
Synergistic (the “Licensing Agreement”) to reduce the total amount of reimbursable distribution and commercialization
expenses due under the Licensing agreement by $585,181 to $29,414,819 and defer the date of certain payment obligations by the
Company under the Licensing Agreement as follows:
|
|
(a)
|
$5,000,000
no later than December 31, 2015;
|
|
|
|
|
|
|
(b)
|
An
additional $7,500,000 no later than December 31, 2016;
|
|
|
|
|
|
|
(c)
|
An
additional $10,000,000 no later than December 31, 2017; and
|
|
|
|
|
|
|
(d)
|
An
additional $6,914,819 no later than December 31, 2018.
|
No
payments have been made to date.
On
May 7, 2015, the Company and Synergistic agreed to amend the Licensing Agreement to eliminate the Company’s $29,414,819
funding requirements under Article 3 and replace it with a requirement to pay a license fee in the amount of $10,000 upon completion
and acceptance of each installation of the software at a location for each affiliate or subsidiary of the Company and the sum
of $10,000 on each anniversary after each such installation during the period of time in which the software is used at such location.
In addition, the Company will be responsible for the reasonable installation costs incurred by Synergistic in connection with
the installation and setup of the software as required by the Company. The license fee may be paid in cash or the Company’s
common stock. In addition, the Licensing Agreement was amended to delete the Company’s exclusive rights under such agreement.
At
December 31, 2016 and 2015, advances from related party were $403,092 and $243,799, respectively. These advances are non-interest
bearing and payable upon demand.
NOTE
11 – INCOME TAXES
The
Company has not recognized an income tax benefit for its operating losses generated based on uncertainties concerning its ability
to generate taxable income in future periods. The tax benefit for the periods presented is offset by a valuation allowance established
against deferred tax assets arising from the net operating losses and other temporary differences, the realization of which could
not be considered more likely than not. In future periods, tax benefits and related deferred tax assets will be recognized when
management considers realization of such amounts to be more likely than not. As of December 31, 2016, the Company had a loss and
for the period April 29, 2008 (date of inception) through December 31, 2016. The net operating losses resulting from operating
activities result in deferred tax assets of approximately $23,552,000 at the effective statutory rates which will expire by the
year 2033. The deferred tax asset has been offset by an equal valuation allowance. There are no current or deferred income tax
expense or benefit recognized for the years ended December 31, 2016 and 2015.
ACCELERA
INNOVATIONS, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2016 AND 2015
A
reconciliation of income taxes computed at the United States federal statutory income tax rate to the provision for income taxes
for the years ended December 31, 2016 and 2015 is as follows:
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
Federal
statutory rates
|
|
$
|
786,859
|
|
|
$
|
(5,074,386
|
)
|
|
State
income taxes, net of federal effect
|
|
|
118,376
|
|
|
|
(763,397
|
)
|
|
Gain
on discontinued operations
|
|
|
(1,658,314
|
)
|
|
|
-
|
|
|
Other
permanent differences
|
|
|
(2,296
|
)
|
|
|
88,259
|
|
|
Valuation
allowance against net deferred tax assets
|
|
|
755,375
|
|
|
|
5,749,524
|
|
|
|
|
$
|
-
|
|
|
$
|
-
|
|
The
tax effects of temporary differences that give rise to significant portions of the deferred tax asset at December 31, 2016 and
2015 is as follows:
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
Deferred
income tax assets:
|
|
|
|
|
|
|
|
|
|
Net
operation loss carryforwards
|
|
|
1,618,174
|
|
|
|
1,494,954
|
|
|
Property,
equipment and intangibles
|
|
|
1,635,587
|
|
|
|
1,635,587
|
|
|
Share-based
compensation
|
|
|
20,015,035
|
|
|
|
19,382,880
|
|
|
Book
to tax differences for allowance for uncollectible accounts
|
|
|
283,658
|
|
|
|
283,658
|
|
|
Total
deferred income tax assets
|
|
|
23,552,454
|
|
|
|
22,797,079
|
|
|
Less:
valuation allowance
|
|
|
(23,552,454
|
)
|
|
|
(22,797,079
|
)
|
|
Total
deferred income tax asset
|
|
$
|
-
|
|
|
$
|
-
|
|
The
valuation allowance increased by $755,375 and $5,749,524 in 2016 and 2015, respectively, as a result of the Company’s generating
additional net operating losses.
The
Company has recorded as of December 31, 2016 and 2015 a valuation allowance of $23,552,454 and $22,797,079, respectively; as management
believes that it is more likely than not that the deferred tax assets will not be realized in future years. Management has based
its assessment on the Company’s lack of profitable operating history.
The
Company annually conducts an analysis of its tax positions and has concluded that it had no uncertain tax positions as of December
31, 2016.
The
Company has net operating loss carry-forwards of approximately $3,900,000. Such amounts are subject to IRS code section 382 limitations
and begin to expire in 2033. The 2015 and 2016 tax years are still subject to audit.
NOTE
12 – RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS
On
November 11, 2013, the Company entered into a stock purchase agreement with Behavioral Health Care Associates, Ltd. (“BHCA”)
to purchase 100% of the issued and outstanding share of BHCA common stock for $4,550,000. The purchase price was to be paid in
installments over a period of approximately 24 months. The Company originally recorded the purchase of BHCA on November 11, 2013
and began consolidating the operating results of BHCA from that date. The Company never made any of the required installment payments
in accordance with the stock purchase agreement and the stock of BHCA was never transferred to the Company. As a result, the Company
has determined that the financial statements of BHCA should have never been consolidated with those of the Company since the Company
was never able to take control of BHCA due to non-payment of the purchase price. The prior year financial statements have been
restated to remove BHCA from the consolidated financial statements of the Company.
The
following tables present the restated financial statements as of and for the year ended December 31, 2015. All the adjustments
are a result of removing BHCA from the Company’s consolidated financial statements.
ACCELERA
INNOVATIONS, INC.
BALANCE
SHEET
AS
OF DECEMBER 31, 2015
|
|
|
As
Originally
|
|
|
Amount
of
|
|
|
|
|
|
|
|
Presented
|
|
|
Restatement
|
|
|
As
Restated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
474,564
|
|
|
$
|
(474,564
|
)
|
|
$
|
0
|
|
|
Prepaid
expenses
|
|
|
29,793
|
|
|
|
0
|
|
|
|
29,793
|
|
|
Total
current assets
|
|
|
504,357
|
|
|
|
(474,564
|
)
|
|
|
29,793
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property
and equipment, net
|
|
|
8,889
|
|
|
|
0
|
|
|
|
8,889
|
|
|
Security
deposit
|
|
|
1,805
|
|
|
|
0
|
|
|
|
1,805
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
ASSETS
|
|
$
|
515,051
|
|
|
$
|
(474,564
|
)
|
|
$
|
40,487
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS’ DEFICIT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
overdraft
|
|
$
|
0
|
|
|
$
|
6,624
|
|
|
$
|
6,624
|
|
|
Short-term
note payable
|
|
|
901,521
|
|
|
|
0
|
|
|
|
901,521
|
|
|
Subordinated
unsecured note payable
|
|
|
4,550,000
|
|
|
|
(4,550,000
|
)
|
|
|
0
|
|
|
Advanced
from related party
|
|
|
243,799
|
|
|
|
0
|
|
|
|
243,799
|
|
|
Accounts
payable
|
|
|
474,510
|
|
|
|
(65,591
|
)
|
|
|
408,919
|
|
|
Accrued
expenses
|
|
|
427,764
|
|
|
|
(105,183
|
)
|
|
|
322,581
|
|
|
Derivative
liability
|
|
|
302,580
|
|
|
|
0
|
|
|
|
302,580
|
|
|
Total
current liabilities
|
|
|
6,900,174
|
|
|
|
(4,714,150
|
)
|
|
|
2,186,024
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible
note
|
|
|
15,434
|
|
|
|
0
|
|
|
|
15,434
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES
|
|
|
6,915,608
|
|
|
|
(4,714,150
|
)
|
|
|
2,201,458
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS’
DEFICIT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred
stock
|
|
|
20
|
|
|
|
0
|
|
|
|
20
|
|
|
Common
stock
|
|
|
4,501
|
|
|
|
0
|
|
|
|
4,501
|
|
|
Additional
paid-in capital
|
|
|
57,522,043
|
|
|
|
0
|
|
|
|
57,522,043
|
|
|
Accumulated
deficit
|
|
|
(63,927,121
|
)
|
|
|
4,239,586
|
|
|
|
(59,687,535
|
)
|
|
Total
stockholders’ deficit
|
|
|
(6,400,557
|
)
|
|
|
4,239,586
|
|
|
|
(2,160,971
|
)
|
|
TOTAL
LIABILITIES AND STOCKHOLDERS’ DEFICIT
|
|
$
|
515,051
|
|
|
$
|
(474,564
|
)
|
|
$
|
40,487
|
|
ACCELERA
INNOVATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF OPERATIONS
YEAR
ENDED DECEMBER 31, 2015
|
|
|
As
Originally
|
|
|
Amount
of
|
|
|
|
|
|
|
|
Presented
|
|
|
Restatement
|
|
|
As
Restated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
3,623,131
|
|
|
$
|
(2,489,416
|
)
|
|
$
|
1,133,715
|
|
|
Cost
of revenues
|
|
|
1,856,401
|
|
|
|
(1,698,690
|
)
|
|
|
157,711
|
|
|
Gross
profit
|
|
|
1,766,730
|
|
|
|
(790,726
|
)
|
|
|
976,004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General
and administrative expenses
|
|
|
14,892,236
|
|
|
|
(899,715
|
)
|
|
|
13,992,521
|
|
|
Total
operating expenses
|
|
|
14,892,236
|
|
|
|
(899,715
|
)
|
|
|
13,992,521
|
|
|
Loss
from operations
|
|
|
(13,125,506
|
)
|
|
|
108,989
|
|
|
|
(13,016,517
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
income (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense and financing costs
|
|
|
(1,801,903
|
)
|
|
|
0
|
|
|
|
(1,801,903
|
)
|
|
Change
in fair value of derivative liability
|
|
|
2,745
|
|
|
|
0
|
|
|
|
2,745
|
|
|
Total
other income (expenses)
|
|
|
(1,799,158
|
)
|
|
|
0
|
|
|
|
(1,799,158
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
before provision for taxes
|
|
|
(14,924,664
|
)
|
|
|
108,989
|
|
|
|
(14,815,675
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision
for income taxes
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(14,924,664
|
)
|
|
$
|
108,989
|
|
|
$
|
(14,815,675
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred
stock dividend
|
|
|
41,413
|
|
|
|
0
|
|
|
|
41,413
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss attributed to common stockholders
|
|
$
|
(14,966,077
|
)
|
|
$
|
108,989
|
|
|
$
|
(14,857,088
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average shares outstanding - basic and diluted
|
|
|
42,919,132
|
|
|
|
0
|
|
|
|
42,919,132
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
per share - basic and diluted
|
|
$
|
(0.35
|
)
|
|
$
|
0.00
|
|
|
$
|
(0.35
|
)
|
ACCELERA
INNOVATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENT OF CASH FLOWS
YEAR
ENDED DECEMBER 31, 2015
|
|
|
As
Originally
|
|
|
Amount
of
|
|
|
|
|
|
|
|
Presented
|
|
|
Restatement
|
|
|
As
Restated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING
ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(14,924,664
|
)
|
|
$
|
108,989
|
|
|
$
|
(14,815,675
|
)
|
|
Adjustments
to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
1,259
|
|
|
|
0
|
|
|
|
1,259
|
|
|
Stock
options expense
|
|
|
4,265,889
|
|
|
|
0
|
|
|
|
4,265,889
|
|
|
Shares
issued for services
|
|
|
7,731,493
|
|
|
|
0
|
|
|
|
7,731,493
|
|
|
Shares
issued for extending loan payment terms
|
|
|
1,437,487
|
|
|
|
0
|
|
|
|
1,437,487
|
|
|
Amortization
of debt discount
|
|
|
15,434
|
|
|
|
0
|
|
|
|
15,434
|
|
|
Change
in fair value of derivative liability
|
|
|
(2,745
|
)
|
|
|
0
|
|
|
|
(2,745
|
)
|
|
Financing
costs associated with convertible note
|
|
|
136,640
|
|
|
|
0
|
|
|
|
136,640
|
|
|
Offering
cost for preferred stock subscription
|
|
|
141,430
|
|
|
|
0
|
|
|
|
141,430
|
|
|
Change
in current assets and liabilities:
|
|
|
|
|
|
|
0
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
605,796
|
|
|
|
(452,318
|
)
|
|
|
153,478
|
|
|
Prepaid
expenses and current assets
|
|
|
(23,767
|
)
|
|
|
0
|
|
|
|
(23,767
|
)
|
|
Accounts
payable
|
|
|
385,821
|
|
|
|
(65,591
|
)
|
|
|
320,230
|
|
|
Accrued
expenses
|
|
|
200,708
|
|
|
|
(5,721
|
)
|
|
|
194,987
|
|
|
Net
cash used in operating activities
|
|
|
(29,219
|
)
|
|
|
(414,641
|
)
|
|
|
(443,860
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INVESTING
ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase
of property and equipment
|
|
|
(3,767
|
)
|
|
|
0
|
|
|
|
(3,767
|
)
|
|
Net
cash used in investing activities
|
|
|
(3,767
|
)
|
|
|
0
|
|
|
|
(3,767
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FINANCING
ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds
from the sale of stock
|
|
|
15,000
|
|
|
|
0
|
|
|
|
15,000
|
|
|
Proceeds
from convertible notes
|
|
|
50,000
|
|
|
|
0
|
|
|
|
50,000
|
|
|
Proceeds
from notes payable
|
|
|
250,000
|
|
|
|
0
|
|
|
|
250,000
|
|
|
Payment
on notes payable
|
|
|
(74,301
|
)
|
|
|
0
|
|
|
|
(74,301
|
)
|
|
Cash
overdraft
|
|
|
0
|
|
|
|
(5,061
|
)
|
|
|
(5,061
|
)
|
|
Advances
from (payments to) related parties
|
|
|
211,989
|
|
|
|
0
|
|
|
|
211,989
|
|
|
Net
cash provided by financing activities
|
|
|
452,688
|
|
|
|
(5,061
|
)
|
|
|
447,627
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
INCREASE (DECREASE) IN CASH
|
|
|
419,702
|
|
|
|
(419,702
|
)
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH,
BEGINNING BALANCE
|
|
|
54,862
|
|
|
|
(54,862
|
)
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH,
ENDING BALANCE
|
|
$
|
474,564
|
|
|
$
|
(474,564
|
)
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH
PAID FOR:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
Income
taxes
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NON-CASH
INVESTING AND FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible
notes and accrued interest converted to common stock
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
Convertible
note issued for liabilities
|
|
$
|
118,685
|
|
|
$
|
0
|
|
|
$
|
118,685
|
|
NOTE
13 – SUBSEQUENT EVENTS
Management
has reviewed events between December 31, 2016 and April 14, 2017 and no significant events were identified.