Notes
to Unaudited Condensed Consolidated Financial Statements
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”).
The
unaudited interim condensed consolidated financial statements have been prepared by us pursuant to the rules and regulations of
the Securities and Exchange Commission. The information furnished herein reflects all adjustments (consisting of normal recurring
accruals and adjustments) which are, in the opinion of management, necessary to fairly present the operating results for the respective
periods. Certain information and footnote disclosures normally present in the annual consolidated financial statements prepared
in accordance with accounting principles generally accepted in the United States of America have been omitted pursuant to such
rules and regulations. These unaudited condensed consolidated interim financial statements should be read in conjunction with
the audited consolidated financial statements and notes for the year ended December 31, 2016. The results of the three months
ended March 31, 2017 are not necessarily indicative of the results to be expected for the full year ending December 31, 2017.
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 unaudited condensed consolidated interim 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 March 31, 2017 and December 31, 2016, respectively. The Company
has not suffered any credit issues when deposits have exceeded the amount of insurance provided for such deposits.
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 most 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 March 31, 2017 and December 31, 2016, 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.
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 Company 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. 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 the ASC 505 at measurement date. For awards with service or performance
conditions, the Company generally recognize 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 - FASB Accounting Standards Codification (ASC) 820
Fair Value Measurements and Disclosures
(ASC 820) 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.
|
Fair
value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as
of March 31, 2017 and December 31, 2016.
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
March 31, 2017 and December 31, 2016, the Company identified the following liability that is required to be presented on the balance
sheet at fair value (see Note 8):
|
|
|
|
|
|
Fair
Value Measurements at
|
|
|
|
|
Fair
Value
|
|
|
March
31, 2017
|
|
|
|
|
As
of
|
|
|
Using
Fair Value Hierarchy
|
|
|
Description
|
|
March
31, 2017
|
|
|
Level
1
|
|
|
Level
2
|
|
|
Level
3
|
|
|
Derivative
liability - conversion feature
|
|
$
|
160,206
|
|
|
$
|
-
|
|
|
|
160,206
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
160,206
|
|
|
$
|
-
|
|
|
|
160,206
|
|
|
|
-
|
|
|
|
|
|
|
|
Fair
Value Measurements at
|
|
|
|
|
Fair
Value
|
|
|
December
31, 2016
|
|
|
|
|
As
of
|
|
|
Using
Fair Value Hierarchy
|
|
|
Description
|
|
December
31, 2016
|
|
|
Level
1
|
|
|
Level
2
|
|
|
Level
3
|
|
|
Derivative
liability - conversion feature
|
|
$
|
149,269
|
|
|
$
|
-
|
|
|
|
149,269
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
149,269
|
|
|
$
|
-
|
|
|
|
149,269
|
|
|
|
-
|
|
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.
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.
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 March 31, 2017 and December 31, 2016 consist of the following:
|
|
|
March
31, 2017
|
|
|
December
31, 2016
|
|
|
|
|
|
|
|
|
|
|
Furniture and fixtures
|
|
$
|
3,940
|
|
|
$
|
3,940
|
|
|
Office equipment
|
|
|
5,641
|
|
|
|
5,641
|
|
|
|
|
|
9,581
|
|
|
|
9,581
|
|
|
Less accumulated
depreciation
|
|
|
(3,192
|
)
|
|
|
(2,692
|
)
|
|
Property and
equipment, net
|
|
$
|
6,389
|
|
|
$
|
6,889
|
|
Depreciation
expense for the three months ended March 31, 2017 and 2015 was $500 and $500, respectively.
NOTE
4 - GOING CONCERN
The
accompanying unaudited condensed consolidated interim financial statements have been prepared assuming that the Company will continue
as a going concern. The Company has incurred a net loss for the three months ended March 31, 2017 and the year ended December
31, 2016 of $75,499 and $1,925,294, respectively, and had an accumulated deficit of $61,688,328 as of March 31, 2017. 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 public 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
unaudited condensed consolidated interim 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.
NOTE
5 - SHORT-TERM NOTES PAYABLES
Short-term
notes payable at March 31, 2017 and December 31, 2016 consisted of the following:
|
|
|
March
31, 2017
|
|
|
December
31, 2016
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
|
16,659
|
|
|
|
|
$
|
886,166
|
|
|
$
|
886,166
|
|
(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.
(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 March 31, 2017 and December 31, 2016 consist of the following:
|
|
|
March
31, 2017
|
|
|
December
31, 2016
|
|
|
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
|
|
|
|
46,625
|
|
|
Total convertible notes
|
|
|
165,309
|
|
|
|
174,672
|
|
|
Unamortized debt
discount
|
|
|
(4,219
|
)
|
|
|
(19,395
|
)
|
|
Convertible notes,
net of discount
|
|
$
|
161,090
|
|
|
$
|
155,277
|
|
Due
to the variable conversion price associated with these convertible notes, the Company has determined that the conversion feature
is considered derivative liabilities. 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 $15,176 during the three months ended March 31, 2017 related to the
amortization of the debt discount.
A
rollfoward of the convertible note from December 31, 2016 to March 31, 2017 is below:
|
Convertible notes, December 31, 2016
|
|
$
|
155,277
|
|
|
Conversion to common stock
|
|
|
(9,363
|
)
|
|
Amortization
of debt discounts
|
|
|
15,176
|
|
|
Convertible notes, March 31, 2017
|
|
$
|
161,090
|
|
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 March 31, 2017 and December 31, 2016:
|
|
|
March
31, 2017
|
|
|
December
31, 2016
|
|
|
Stock price
|
|
$
|
0.0039
|
|
|
$
|
0.0051
|
|
|
Risk free rate
|
|
|
0.59
|
%
|
|
|
0.59
|
%
|
|
Volatility
|
|
|
325
|
%
|
|
|
325
|
%
|
|
Conversion/Exercise price
|
|
$
|
0.0020
- 0.0024
|
|
|
$
|
0.0025
- 0.007
|
|
|
Dividend rate
|
|
|
0
|
%
|
|
|
0
|
%
|
|
Terms (years)
|
|
|
0.1
to 0.4
|
|
|
|
0.1
to 0.7
|
|
The
following table represents the Company’s derivative liability activity for the period ended March 31, 2017:
|
Derivative liability at December 31, 2016
|
|
$
|
149,269
|
|
|
Change in fair
value of derivative liability during period
|
|
|
10,937
|
|
|
Derivative liability at March 31,
2017
|
|
$
|
160,206
|
|
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
shares authorized, 500,000 of which have been 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
stated 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 our option in cash or such dividends shall be accreted to, and increase, the outstanding Stated
Value,
|
|
|
|
|
|
|
●
|
Each
share is convertible into shares of our common stock at a conversion price of $4.00 per share, subject to adjustment discussed
below, 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 March 31, 2017 and December 31, 2016.
There
are 100,000,000 shares of $.0001 par value common shares authorized. The Company has 78,158,673 and 69,569,444 issued and outstanding
shares as of March 31, 2017 and December 31, 2016, respectively.
During
the three months ended March 31, 2017, the Company issued 8,589,229 shares for the conversion of $9,363 and $8,775 of convertible
notes payable and accrued interest, respectively.
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 per share for financial reporting
purposes. This amount was determined based on the price our 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 issued,
the Company’s common stock has not traded publicly, and no stock was traded in private markets either, except for privately
negotiated sales to the founder and other private investors of the company 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 registered for resale with the Securities and Exchange Commission.
The
Company believes the only material estimate used in estimating the value 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 $7,500 and $613,644 for the three months ended
March 31, 2017 and 2016, respectively, which were included in general and administrative expenses. As of March 31, 2017, there
was $22,500 of total unrecognized compensation cost related to unvested stock-based compensation awards, which is expected to
be recognized over the weighted average remaining vested period of approximately 0.75 years.
The
following is a summary of the outstanding options, as of March 31, 2017:
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
Weighted
|
|
|
Average
|
|
|
|
|
|
|
|
|
Average
|
|
|
Average
|
|
|
Remaining
|
|
|
|
|
|
Options
|
|
|
Intrinsic
|
|
|
Exercise
|
|
|
Contractual
|
|
|
|
|
|
Outstanding
|
|
|
Value
|
|
|
Price
|
|
|
Life
|
|
|
Outstanding,
December 31, 2016
|
|
|
|
5,803,250
|
|
|
|
3.89
|
|
|
|
0.0001
|
|
|
|
0.5
|
|
|
Granted
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forfeited/Expires
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding,
March 31, 2017
|
|
|
|
5,803,250
|
|
|
|
3.89
|
|
|
|
0.0001
|
|
|
|
0.3
|
|
|
Exercisable,
March 31, 2017
|
|
|
|
5,780,750
|
|
|
|
3.89
|
|
|
|
0.0001
|
|
|
|
0.3
|
|
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
March 31, 2017 and December 31, 2016, advances from related party was $403,092 and $403,092, respectively. These advances are
non-interest bearing and payable upon demand.
NOTE
11 – 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 for the three months ended March 31, 2015. All the adjustments are
a result of removing BHCA from the Company’s consolidated financial statements.
ACCELERA
INNOVATIONS, INC. AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE
MONTHS ENDED MARCH 31, 2017
|
|
|
As
Originally
|
|
|
Amount
of
|
|
|
|
|
|
|
|
Presented
|
|
|
Restatement
|
|
|
As
Restated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
Cost of revenues
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Gross
profit
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General
and administrative expenses
|
|
|
705,160
|
|
|
|
-
|
|
|
|
705,160
|
|
|
Total
operating expenses
|
|
|
705,160
|
|
|
|
-
|
|
|
|
705,160
|
|
|
Loss
from operations
|
|
|
(705,160
|
)
|
|
|
-
|
|
|
|
(705,160
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
and financing costs
|
|
|
(90,476
|
)
|
|
|
-
|
|
|
|
(90,476
|
)
|
|
Change
in fair value of derivative liability
|
|
|
53,537
|
|
|
|
-
|
|
|
|
53,537
|
|
|
Total
other income (expenses)
|
|
|
(36,939
|
)
|
|
|
-
|
|
|
|
(36,939
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before provision
for taxes
|
|
|
(742,099
|
)
|
|
|
-
|
|
|
|
(742,099
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision
for income taxes
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss from continuing
operations
|
|
|
(742,099
|
)
|
|
$
|
-
|
|
|
$
|
(742,099
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued operations,
net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain
from disposal of discontinued operation
|
|
|
4,239,585
|
|
|
|
(4,239,585
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
3,497,486
|
|
|
|
(4,239,585
|
)
|
|
|
(742,099
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred
stock dividend
|
|
|
15,834
|
|
|
|
-
|
|
|
|
15,834
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss attributed to common stockholders
|
|
$
|
3,481,652
|
|
|
$
|
(4,239,585
|
)
|
|
$
|
(757,933
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
shares outstanding - basic and diluted
|
|
|
45,140,337
|
|
|
|
-
|
|
|
|
45,140,337
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
per share - basic and diluted
|
|
$
|
0.08
|
|
|
$
|
(0.09
|
)
|
|
$
|
(0.02
|
)
|
ACCELERA
INNOVATIONS, INC. AND SUBSIDIARIES
CONSENSED
CONSOLIDATED STATEMENT OF CASH FLOWS
THREE
MONTHS ENDED MARCH 31, 2017
|
|
|
As Originally
|
|
|
Amount of
|
|
|
|
|
|
|
|
Presented
|
|
|
Restatement
|
|
|
As Restated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
3,497,486
|
|
|
$
|
(4,239,585
|
)
|
|
$
|
(742,099
|
)
|
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on discontinued operations
|
|
|
(4,239,585
|
)
|
|
|
4,239,585
|
|
|
|
-
|
|
|
Depreciation
|
|
|
500
|
|
|
|
-
|
|
|
|
500
|
|
|
Stock options expense
|
|
|
613,644
|
|
|
|
-
|
|
|
|
613,644
|
|
|
Amortization of debt discount
|
|
|
60,913
|
|
|
|
-
|
|
|
|
60,913
|
|
|
Change in fair value of derivative liability
|
|
|
(53,537
|
)
|
|
|
-
|
|
|
|
(53,537
|
)
|
|
Financing costs associated with convertible note
|
|
|
19,562
|
|
|
|
-
|
|
|
|
19,562
|
|
|
Change in current assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
|
(14,783
|
)
|
|
|
-
|
|
|
|
(14,783
|
)
|
|
Accrued expenses
|
|
|
10,001
|
|
|
|
-
|
|
|
|
10,001
|
|
|
Net cash used in operating activities
|
|
|
(105,799
|
)
|
|
|
-
|
|
|
|
(105,799
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash retained by discontinued operation
|
|
|
(481,188
|
)
|
|
|
481,188
|
|
|
|
-
|
|
|
Net cash used in investing activities
|
|
|
(481,188
|
)
|
|
|
481,188
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from convertible notes
|
|
|
25,000
|
|
|
|
-
|
|
|
|
25,000
|
|
|
Payment on notes payable
|
|
|
(15,700
|
)
|
|
|
-
|
|
|
|
(15,700
|
)
|
|
Cash overdraft
|
|
|
6,242
|
|
|
|
(6,624
|
)
|
|
|
(382
|
)
|
|
Advances from (payments to) related parties
|
|
|
96,881
|
|
|
|
-
|
|
|
|
96,881
|
|
|
Net cash provided by financing activities
|
|
|
112,423
|
|
|
|
(6,624
|
)
|
|
|
105,799
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCREASE (DECREASE) IN CASH
|
|
|
(474,564
|
)
|
|
|
474,564
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH, BEGINNING BALANCE
|
|
|
474,564
|
|
|
|
(474,564
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH, ENDING BALANCE
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH PAID FOR:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
Income taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NON-CASH INVESTING AND FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible notes and accrued interest converted to common stock
|
|
$
|
24,000
|
|
|
$
|
-
|
|
|
$
|
24,000
|
|