PART
I
ITEM
1. BUSINESS
OVERVIEW
Accelera
Innovations, Inc. (
“we,” “us,” the “Company,”
or
“Accelera”), a Delaware corporation, is a healthcare service company which is focused on integrating its licensed
technology assets into our newly acquired companies Behavioral Health Care Associates, Ltd. and SCI Home Health, Inc. (d/b/a Advance
Lifecare Home Health) to reduce operating costs and expand operations. The technology was licensed to us by our majority shareholder
Synergistic Holdings, LLC, a privately-held company organized under the laws of Illinois, pursuant to which the Company was granted
a thirty (30) year exclusive, non-transferrable worldwide license for proprietary Internet-based, software platform (“Accelera
Technology”) that is designed to provide interoperable technology that is intended to improve the quality of care while
reducing the cost as described below.
We
will not be able to commercialize the Accelera Technology without additional capital. If we do not raise additional funds of at
least $55 million for the advancement of the Accelera Technology over the next three years, we will lose our rights to the technology.
We will require significant additional financing in order to meet the milestones and requirements of its business plan and avoid
discontinuation of the license. Funding would be required for staffing, marketing, public relations and the necessary distribution
to expanding the scope of our offering to include the global market. We intend to seek an aggregate of $55 million in 2016 through
the sale of equity or convertible debt securities and were unable to raise a sufficient amount of capital in 2015. 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 its efforts to achieve future funding.
Health
Care Services
Our
mission is to improve patient outcomes and lower costs, through educating providers, leveraging our technology and changing the
model of payment to a value-based system.
The
company now provides 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. In support of the billing and practice management services, we provide in-house Psychiatric evaluations,
complete neuropsychological testing, assessments and treatment services, counseling and medication management. Furthermore, we
provide comprehensive laboratory services including EKG, Drug Screens, blood work ups and sleep lab evaluation. Detoxification
services include alcohol and all drugs and substances with directorship to methadone maintenance programs. We also provide Military
Entrance Processing Station (MEPS) screenings and performs research trials as a contracted site for several pharmaceutical firms.
In
addition, we are engaged in the acquisition and operation of home health business that will allow the acquisitions the autonomy
to continue to run their business, but also take advantage of our administrative services and business tools. Some of those services
will include the use of clinical software, group purchasing and marketing expertise.
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 and meet the ARRA (Federal Mandated Meaningful Use) criteria.
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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
office staff. This application is intended to allow the patient to access their medical record information in a secure environment.
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Accelera
HIE - The Health Information Exchange application is intended to allow providers and payors of healthcare to exchange secure
data by creating the continuum of care for the patient, and decreasing 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 provide
tools to lower the cost of patient care.
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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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Accelera
also intends to provide its cloud based healthcare services through monthly or yearly subscription agreements (“software-as-a-service”
also known as “SaaS”) to the healthcare industry. The Company intends on positioning itself as a technology and service
solution for providers and payers such as the hospitals, medical offices, medical insurance companies, Accountable Care Organizations,
Patient Centered Medical Homes, and Provider Service Networks who are seeking to create an interoperable technology platform that
is patient-centric.
The
coordinated care would begin with the office visit using the Accelera Practice Management and Electronic Medical Record applications.
The provider may also access disparate patient consults and share the patient’s record using the Accelera Health Information
Exchange and Portal. When the patient is admitted to the hospital setting, all of the functions are intended to be automated using
the Accelera Hospital Information System. The physician would continue to have full access to the patient’s information
to receive accurate and efficient information. If the primary care physician is part of an Accountable Care Organization, then
those reports required by Center for Medicare and Medicaid will be created and distributed using the Accelera Accountable Care
Organization application.
The
Accelera Patient Management Record is designed to identify patients with preventable, yet escalating associated costs, then directs
intense online self-management services to improve the quality-of-life for the patient and deliver more effective health information.
Patients would be electronically triaged using the Center for Medicare and Medicaid (CMS) rule-set for disease management, as
well as proprietary evidence-based disease management rules. These rules are based on clinical standards from major health organizations.
This is intended to allow providers, as well as patients, to monitor care through targeted interventions. The technology platform
is intended to allow healthcare providers to anticipate patient care needs, motivate patient compliance, activate evidence-based
standards of care, and improve efficiency.
The
Accelera Analytic product is designed for potential customers that include healthcare payers, provider organizations, government
entities worldwide, and employer groups. Accelera products are designed to identify, analyze, and minimize healthcare risk by
data mining and predictive analysis while containing costs and improving the quality of care. Accelera also intends to develop
modeling software to predict medical costs and help improve the financing, organization, and delivery of health services.
The
Accelera Security solution is designed to reduce or stop the security breach at the point of care, by auditing the user and encasing
the applications in a discrete shell. Without proper access, the application will separate the data elements from each other,
patient name will not be associated with demographic or clinical information. Patient data is split into two parts, the patient
identifier is separated from the clinic/medical data and both are encrypted. An encrypted data key unlocks the dual encryption
bringing the information together and is intended to increase patients’ confidence in the information technology utilized.
The
Accelera Solution is designed to improve patient care, reduce costs, eliminate redundant data entry, improve operational efficiency,
but most importantly, bring together long term needs of the caregivers and is intended to satisfy the business requirements of
the healthcare enterprise.
The
intended benefits of our solutions include:
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Lowers
administration costs through a less invasive call-back system - email alerts, text messages, online alerts
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A
benefit of batch health care analytics is the use of “predictive modeling across multiple clinical conditions. This
process is designed to identify undiagnosed conditions for patients within an insurer’s patient population, or suggest
interventions to prevent conditions from developing.
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Reducing
occurrences and cost related to a healthcare data breaches.
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Reducing
the hardware environment and cost by using our cloud technology.
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Improving
patient care and safety.
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Helping
healthcare organizations maintain their market positions and meet their financial commitments.
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Products
Accelera
intends to offers the following products and services:
Accelera
Analytics
Real-time
health care analytics are programs that are intended to analyze clinical information at the point of care and support health providers
as they make prescriptive decisions. Accelera’s real-time systems are designed to be “active knowledge systems”,
which use two or more items of patient data to generate case-specific advice
Batch
health care analytics is a technical application that is designed to retrospectively evaluate population data sets (i.e. records
of patients in a large medical system, or claims data from an insured population). These evaluations can be used to supplement
disease management or population health management efforts.
Accelera
Analytic product is designed for potential customers that include healthcare payers, provider organizations, government entities
worldwide, and employer groups. Accelera products are intended to help you identify, analyze, and minimize healthcare risk while
containing costs and improving the quality of care. Accelera also intends develop modeling software to predict medical costs and
help improve the financing, organization, and delivery of health services.
The
Accelera Analytic engine is designed to help healthcare organizations better assess and reduce their risk from catastrophic perils
such as hurricanes, earthquakes, floods, tornadoes, and tsunamis. This includes risk not only from physical damage but also from
direct and contingent business interruption losses across the entire network.
Accelera
Security
The
Accelera Security is designed to provide a unified platform for managing security and systems compliance across all clients and
servers regardless of location or network connectivity. The application is intended to prevent end users whether on-site, remote
or off-line from copying or transmitting patient data to external devices or unauthorized locations.
Accelera
EMR and PM
The
Accelera Electronic Medical Record (EMR) and Practice Management application is intended to provide a comprehensive solution for
medical groups and physician enterprises, whether they are independent or part of an integrated network. The practice management
solution is designed to give physician groups the flexibility to manage their business under many different reimbursement models.
The solution is designed to include risk management, managed care capabilities, and a clinical system for managing patient care.
Additional capabilities to help accelerate cash flow; reduce cash flow and increase productivity included decision support, data
quality analysis and electronic data interchange.
Accelera
HIE and Portal
The
Accelera Health Information Exchange (HIE) and Portal, is designed to link all health care data such as diagnosis, medications,
laboratory results, patient behavioral health, radiology films, patient and doctor to the data repository. Besides increasing
accuracy these applications are intended to help alleviate patient frustration with having to provide duplicate information from
one setting of care to another; thereby enhancing customer satisfaction. The HIE unites disparate systems across rural and metropolitan
locations, converting the data into useful clinical dashboards to help comply with preventive care guidelines and develop ACO’s.
Accelera
HIS
The
Accelera Hospital Information System solution automates the operation of individual departments and their respective functions
within the inpatient environment. These hospital-based transaction and decision support systems form the core of systems that
in conjunction with other tools designed to directly support clinical decision making, help streamline the care process over the
continuum of care. They include applications for patient care, laboratory, pharmacy, radiology, surgery, materials management,
emergency department, financials and management decision support.
Accelera
ACO
Accelera
Accountable Care Organization (ACO) application is a tool designed to accurately report to CMS (Centers of Medicare and Medicaid
Services) the usage of provider claims and reimbursement. The tool also analyses ways to improve care and lower cost across the
ACO.
Accelera’s
differentiating factor, as mentioned above, is how we intend to securely integrate the virtual world into our overall strategies.
We intend to use cloud technology to continuously get closer to the patient; respond to application issues within minutes and
connect with other providers and payers.
Our
keys to success over the next five years are:
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Acquiring
health care Providers or groups with strong revenue and positive EBITDA of 10% to 20% of annual revenue.
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Decreasing
the expenses and increasing revenue within our acquisitions by utilizing our technology applications and platforms.
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Becoming
more involved in Telemedicine including acquisitions and using our cloud-based Health Information Exchange.
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Creating
Best Practice within post-acute care acquisitions.
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Target
Market Segment Strategy
Accelera
will work to align communication protocols so acute and post-acute care providers can communicate as seamlessly as possible. These
protocols guide providers in discussing patient status, particularly when a patient’s condition changes. Clear channels
of communication, a common approach for discussing patients and the information technology infrastructure to exchange clinical
information are helping reduce readmissions and emergency department visits. Referring or attending providers feel more comfortable
providing clinical guidance to Post Acute Care staff instead of requesting that the patient be sent to the emergency room. According
to Brown-Wilson’s Black Book Rankings Survey, the annual healthcare spending in 2015 soared to $3.5 trillion; medical errors
cost $19.5 billion a year. Providers understand the need for technology to lower the cost of care and mitigate risk.
As
policy changes place more accountability for the selection of the most appropriate Post-Acute Care setting on referring providers,
it will be increasingly important to support these providers in making the best choices for patients. As a first step, referring
providers need more information on available Post-Acute Care options and data indicating the unique clinical capacities and quality
outcomes for Post-Acute Care providers in the community. Once an individual patient has been admitted to the appropriate Post-Acute
Care setting, acute-care clinicians need access to complete patient data that can be shared across settings, including from the
Post-Acute Care setting back to the referring provider. Many of these data-sharing goals require a robust health information technology
infrastructure that some facilities are just beginning to build. A Common Assessment Tool Could Help Providers Make the Best Decisions
for Patients Policymakers and providers agree on the need for a single assessment tool that uses common data metrics for all Post
acute Care settings. A uniform tool could not only help providers and patients work together to select the most appropriate Post-Acute
Care setting and encourage efficient data sharing among providers, but also could improve data analysis. Currently, each Post-Acute
Care setting has its own methods and tools for admitting and discharging.
Medicare
and Medicaid are focused on reducing hospital readmissions and variations in spending and margins across PAC and LTC settings,
as well as ensuring appropriate service utilization. Overall, we have significant opportunities to improve care and limit costs
for populations with chronic conditions. Forces driving change include:
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Financial
penalties for hospitals
– and, soon, for SNFs and other PAC providers — for avoidable hospital readmissions.
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A
shift to value-based (versus volume-based) payments and a commitment to population-health management
to improve quality
and control costs.
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Increased
capitated managed care arrangements for elderly and disabled populations.
To stay in network, PAC and LTC providers must
demonstrate quality and cost effectiveness.
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A
focus on standardized health and functional assessments
to ensure patients are placed in
the lowest-cost facility
that meets their needs.
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A
rise in quality measurement and reporting.
PAC and LTC providers must develop metrics to assess their results—and
implement needed improvements.
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Intellectual
Property
We
rely on a combination of copyright, trademark and trade secret laws, as well as confidentiality procedures and contractual restrictions,
to establish and protect our proprietary rights. These laws, procedures and restrictions provide only limited protection. We currently
have no issued patents or pending patent applications.
We
endeavor to enter into agreements with our employees and contractors and with parties with whom we do business in order to limit
access to and disclosure of our proprietary information. We cannot be certain that the steps we have taken will prevent unauthorized
use or reverse engineering of our technology. Moreover, others may independently develop technologies that are competitive with
ours or that infringe on our intellectual property. The enforcement of our intellectual property rights also depends on any legal
actions against these infringers being successful, but these actions may not be successful, even when our rights have been infringed.
Home
Health Competitors
Home
health care companies offer a wide range of skilled medical services such as nursing care, physical therapy and occupational therapy
from qualified medical professionals in addition to various services from home health aides. Other home care companies might offer
assistance with daily activities, such as bathing and eating. Home care services are conducted in the comfort of your home. There
is a directory of 12,300 Medicare-certified home health agencies and 21,452 other home care companies in the United States.
We
believe the health care industry is fragmented and rapidly evolving. Our competitors vary in size, scope and breadth of the products
and services they offer. We offer a software-as-subscription program that provides health care services similar to or directly
in competition with health care services offered by hospital groups, electronic medical record service providers and practice
management service providers.
We
believe that success in the health care industry, particularly in the areas of primary and chronic care, is dependent upon the
ability of providers to:
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provide
easy access, convenience, and a quality experience to consumers;
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lower
the cost of health care by streamlining operations, lowering operating expenses, and reducing errors, and human intervention;
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automate
the entire health care lifecycle and integrate the business and care aspects of health care; and
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use
technology to facilitate evaluation and diagnosis, treatment, after-care management, and billing and collections.
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Electronic
Medical Record Competitors
Allscripts
is one of the leading EMR companies which offer large volumes of data generated by high-acuity care. They provide customized views
so individual clinicians can find the data they need to make timely, accurate decisions. This service has limited patient view
into the data. A recent step towards entering this space occurred when Allscripts installed their EMR software at Sloan-Kettering
Cancer Center to address the Joint Commission on Accreditation of healthcare Organizations (JCAHO) for hospital organizations
to do a better job of patient supervision handoffs. But as of yet, the patient cannot see an online version of doctor recommended
care as Accelera intends to provide.
Practice
Management Competitors
Allscripts,
eClinicalworks & Epic Systems Corporation focus their business on the practice side of the equation. Recently, these companies
are bundling patient module which a patient logs onto the system to access patient data.
Some
of our current or potential competitors are larger and have more resources than we do. Many of our competitors enjoy substantial
competitive advantages, such as greater name recognition, longer operating histories, and larger marketing budgets, as well as
substantially greater financial resources. In addition, these traditional health care providers are more widely accepted and known
to consumers, whereas Accelera’s business model and service has yet to gain widespread recognition and acceptance. Furthermore,
because of these advantages, existing and potential customers might accept any of our competitor’s services, even if they
may be inferior to ours. If our potential customers choose to use any of these competitive offerings, our revenue could decrease
and we could be required to make additional expenditures to compete more effectively.
Recent
Industry Developments
Post-acute
care is a critical part of healthcare reform in the US as more people with multiple illnesses are moved through the various parts
of our healthcare system with suboptimal care and high cost overruns as a result. Each year nearly nine million people-24,000
per day are discharged from short term acute care hospitals and require some form of post-acute care. Patients typically see a
range of providers and specialists promoting communication problems and other errors resulting in higher costs.
These
problems result in a substantial number of hospital re-admissions. According to Medpac, among Medicare patients- 20% are re-hospitalized
within 90 days. More than 75% of these re-admits (at a cost of more than $26 billion per year) are thought to be avoidable.
In
an attempt to address this large expense Medicare started in October 2012, penalizing hospitals with high readmission rates. The
penalties were up to 3% in 2014. The industry is motivated to address the lack of coordination in post-acute care. Medicare spending
on post-acute care is estimated to be $63.5 billion market.
GOVERNMENT
REGULATIONS
As
a participant in the healthcare industry, our operations and relationships, and those of our customers, are regulated by a number
of federal, state and local governmental entities. The impact of this regulation on us is direct, to the extent we are ourselves
subject to these laws and regulations, and is also indirect in that, in a number of situations, even though we may not be directly
regulated by specific healthcare laws and regulations, our products must be capable of being used by our potential customers in
a manner that complies with those laws and regulations. Inability of our potential customers to do so could affect the marketability
of our products or our compliance with our potential customer contracts, or even expose us to direct liability under the theory
that we had assisted our potential customers in a violation of healthcare laws or regulations. Because our business relationships
with physicians will be unique and the healthcare technology industry as a whole is relatively young, the application of many
state and federal regulations to our business operations and to our potential customers is uncertain. Indeed, there are federal
and state fraud and abuse laws, including anti-kickback laws and limitations on physician referrals, and laws related to distribution
and marketing, including off-label promotion of prescription drugs that may be directly or indirectly applicable to our operations
and relationships or the business practices of our potential customers. It is possible that a review of our business practices
or those of our potential customers by courts or regulatory authorities could result in a determination that could adversely affect
us. In addition, the healthcare regulatory environment may change in a way that restricts our existing operations or our growth.
The healthcare industry is expected to continue to undergo significant changes for the foreseeable future, which could have an
adverse effect on our business, financial condition and results of operations. We cannot predict the effect of possible future
legislation and regulation.
Our
Corporate History
We
were incorporated on April 29, 2008 in Delaware 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 when we identified healthcare technology, obtained exclusive rights
and became a healthcare technology service provider.
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 acquired 17,000,000 shares of the Company’s common stock for a price of $0.0001 per share. At
the same time, Accelerated Venture Partners, LLC cancelled 3,750,000 shares of the Company’s common stock. Following these
transactions, Synergistic Holdings, LLC owned approximately 93.15% of the Company’s issued and outstanding shares of common
stock. Simultaneously with the share purchase, Timothy Neher resigned from the Company’s Board of Directors and John Wallin
was simultaneously appointed to the Company’s Board of Directors. Such transaction represented a change of control of the
Company.
On
August 22, 2011, the Company entered into a Licensing Agreement (“Licensing Agreement”) with our majority shareholder
Synergistic Holdings, LLC (“Licensor”) pursuant to which the Company was granted an exclusive, non-transferrable worldwide
license for proprietary Internet-based, software that is designed to improve the functionality and performance of healthcare services
by making clinical healthcare data available to healthcare consumers.
On
April 13, 2012, the Company entered into an amended Licensing Agreement (“Agreement”) with Synergistic Holdings LLC,
(Licensor) whereas the Company and Licensor agreed to amend the August 22, 2011 Licensing Agreement. The Company licensed additional
technology from Licensor and the parties agreed to modify the terms, conditions, representations and warranties regarding the
technology and to clarify any obligations the Licensor may have with third parties.
Pursuant
to the Agreement the Company was granted an exclusive, non-transferrable worldwide license for proprietary Internet-based, software
“Accelera Technology” that is intended to improve the functionality and performance of healthcare services by making
clinical healthcare data available to healthcare consumers. This relevant 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 is designed to delivers the results to insurance companies, doctors, hospitals, and employers.
Except
for the rights granted under the Agreement, Licensor 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 as amended April 12, 2012 and by oral agreement in fiscal 2014 will continue
for thirty (30) years, provided that the Licensee is not in breach or default of any of the terms or conditions contained in this
Agreement. 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 $30 million over three years for qualifying development and
commercialization expenses related to Accelera Technology.
The
Company and Synergistic Holdings, LLC (“Synergistic”), a controlling 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 license agreement
entered into between the Company and Synergistic 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 commencement date of the agreement until the
payment dates for the following amounts:
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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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In
addition, the Company is required to fund certain specified expenses related to the deployment of Accelera Technology as specified
in the Agreement. The Licensor will receive a royalty of fifteen percent (15%) of all gross revenues resulting from the use of
the technology by Licensee in the first year, ten percent (10%) the second year and one quarter of one percent (.025%) of all
gross revenues resulting from the use of the technology by Licensee for the remainder of the License Agreement, the cornerstone
of which is the technology. The license is terminated upon the occurrence of events of default specified in the Agreement and
outlined as followed:
If
any of the Parties are in breach or default of the terms or conditions contained in this 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 this Agreement.
Licensee
may, at its option, terminate this Agreement at any time by doing the following:
By
ceasing to use the Accelera Technology facilitated by any Licensed Products in their entirety or by giving sixty (60) days prior
written notice to Licensor of such cessation and of Licensee’s intent to terminate, and upon receipt of such notice, Licensor
may immediately begin negotiations with other potential licensees and all other obligations of Licensee under this Agreement will
continue to be in effect until the date of termination. By tendering payment of all accrued royalties and other payments due to
Licensor as of the date of the notice of termination and evidencing to the Licensor that provision has been made for any prospective
royalties and other payments to which Licensor may be entitled after the date of termination.
Licensor
may terminate the Agreement if Licensee is in breach or default of the terms or conditions contained in this Agreement and does
not rectify or remedy that breach or default within 90 days from the date of receipt of notice by Licensor requiring that default
or breach to be remedied, then Licensor, may alter License granted by this Agreement with regards to its exclusivity, its territorial
application and restrictions on its application.
Licensor
may terminate the Agreement if Licensee is in breach or default of the terms or conditions contained in this Agreement and does
not rectify or remedy that breach or default within 90 days from the date of receipt of notice by Licensor requiring that default
or breach to be remedied, then Licensor, may alter License granted by this Agreement with regards to its exclusivity, its territorial
applications and restrictions on its application.
On
May 7, 2015, the Company and Synergistic agreed to amend the Synergistic 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
common shares 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 Synergistic Licensing Agreement was amended to delete the Company’s
exclusive rights under such agreement.
On
October 4, 2013, the Company entered into a Standby Equity Purchase 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
(the “
Equity Line
”).
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.
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. Investors should read the Investment Agreement together with the
other information concerning the Company that the Company publicly files in reports and statements with the Securities and Exchange
Commission (the “
SEC
”).
Pursuant
to the terms of a Registration Rights between the Company and the Investor (the “
Registration Rights
”),
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 for good and valuable consideration, the receipt and sufficiency of which was acknowledged, Lambert Private Equity, LLC is
entitled effective as October 4, 2013, 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 shares at the 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, our wholly owned subsidiary, Accelera Healthcare Management Service Organization LLC, (“Accelera HMSO”)
executed a Stock Purchase Agreement, as amended (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 is payable
on May 31, 2015, $750,000 is payable on July 30, 2015, and $2,800,000 is payable on December 31, 2015. Prior to Dr. Wolfram’s
receipt of the $1,000,000 payment, he has 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.
**On
November 20, 2013, the Company entered into an employment agreement with Blaise J. Wolfrum, M.D., as the President of the Accelera
business unit “Behavioral Health Care Associates” reporting to John Wallin, CEO of Accelera. In consideration of the
services, the Company agreed to issue a stock option to purchase 600,000 shares of the Company’s Common Stock under the
terms of the Company’s 2011 Stock Option Plan at an exercise price of $.0001 per share. The 600,000 shares shall vest over
the course of the three years, earned annually, at 200,000 shares each year; after the commencement of employment so long as he
remain an employee of the Company. Furthermore, the shares 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 from the agreement shall immediately vest and become fully exercisable. The employment agreement
with Dr. Wolfrum provides that the Company shall pay Blaise a base salary of $300,000 per year to be paid at the times and subject
to the Company’s standard payroll practices, subject to applicable withholding. Mr. Wolfrum will begin receiving compensation
at the time Accelera completes the Due Diligence, Valuation and Audited Financials of the Behavioral Health Care Associates business
performed by an Accelera appointed audit firm. The Board of Directors will implement a bonus structure based on goals, objectives
and performance.
TerminationAgreement
with Blaise J. Wolfrum, MD
Accelera
Innovations, Inc. (the “Company”), Blaise J. Wolfrum, M.D. (the “Seller”), and Behavioral Health Care
Associates, Ltd., an Illinois corporation (the “Behavioral”) (collectively the “Parties”), entered into
a Stock Purchase Agreement dated on or about November 20, 2013, First Amendment to the Stock Purchase Agreement dated February
24, 2014, Second Amendment to the Stock Purchase Agreement dated March 18, 2014, Third Amendment to the Stock Purchase Agreement
dated May 30, 2014, Fourth Amendment to the Stock Purchase Agreement dated May 31, 2015, Employment Agreement and Employee Confidentiality,
Non-Circumvention and Non-Solicitation Agreement dated on or about November 20, 2013, Stock Pledge and Escrow Agreement dated
on or about November 20, 2013, Stock Power Certificate dated on or about November 20, 2013, Bill of Sale dated on or about November
20, 2013, Assignment of Stock dated on or about November 20, 2013, and other written and oral agreements or understandings relating
to the aforementioned agreements (hereinafter collectively referred to as the “Stock Sale Agreement”).
On
March 31, 2016, the Parties executed a Termination Agreement (the “Termination Agreement”) by which the Stock Sale
Agreement was terminated effect as of January 1, 2016 except for the following Surviving Obligations:
A.
The Parties agree and reaffirm their previous agreement that the Company has conveyed and transferred or shall convey or transfer
Seventy Thousand (70,000) Shares of Stock in the Company. The Seller shall be fully vested in the Seventy Thousand (70,000) Shares
of Stock upon the execution of this Agreement by all Parties. The Seventy Thousand (70,000) Shares of Stock shall be unrestricted
and free trading stock and free and clear of all liens, security interests, pledges, restrictions, encumbrances, equities, claims,
charges, voting agreements, voting trusts, proxies and rights of any kind, nature or description, except for restrictions imposed
under federal securities laws.
B.
The Company, at its sole cost and expense, shall immediately take any and all actions required to remove all restrictions on the
Seventy Thousand (70,000) Shares of Stock in the Company, including, without limitation, the provision of an attorney opinion
letter satisfactory to the Company to the extent legally permissible under federal securities laws.
C.
The Parties agree that the Company has transferred or conveyed or shall transfer and convey Six Hundred Thousand (600,000) Shares
of Stock in the Company. The Seller shall be fully vested the Six Hundred Thousand (600,000) Shares of Stock upon the execution
of this Agreement by all Parties. The Six Hundred Thousand (600,000) Shares of Stock shall be free and clear of all liens, security
interests, pledges, restrictions, encumbrances, equities, claims, charges, voting agreements, voting trusts, proxies and rights
of any kind, nature or description, except for the terms and conditions of the Lock-Up and Leak-Out Agreement dated November 20,
2013 and restrictions imposed under federal securities laws.
D.
The Company, at its sole cost and expense, shall take any and all actions required to remove all restrictions on the Six Hundred
Thousand (600,000) Shares of Stock, including, without limitation, the provision of an attorney opinion letter satisfactory to
the Company to the extent legally permissible under federal securities laws, subject to the terms and conditions of the Lock-Up
and Leak-Out Agreement dated November 20, 2013.
E.
The transfer of Shares from the Company to Seller is irrevocable and non-refundable under any circumstance. The Parties agree
that the transfer of Shares from the Company to Seller shall not be deemed to be consideration under or pursuant to the Stock
Sale Agreement.
In
addition, the Seller agreed to permit the Company, at its sole cost and expense, to conduct a commercially reasonable audit of
Behavioral consistent with the nature and scope of previous audits performed by the Company of Behavioral. Further, the Company
agreed to file a Form 8-K with the U.S. Securities and Exchange Commission disclosing the terms of the Termination Agreement.
Resignation
and Release Agreement with Blaise J. Wolfrum, MD
In
conjunction with the Termination Agreement, the Company, Blaise J. Wolfrum, M.D., and Accelera Healthcare Management Service Organization,
LLC (“Accelera Healthcare”) executed a
Resignation and Release Agreement effective as of January 1, 2016 pursuant
to which Blaise J. Wolfrum, M.D. 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 Blaise J. Wolfrum, M.D., from any and all claims, actions, lawsuits, obligations, or liability,
monetary or otherwise arising from or related to the Operating Agreement of Accelera Healthcare, 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 Blaise J. Wolfrum, M.D.,
any claim, lawsuit, action, or other request for relief arising from or related to the Operating Agreement of Accelera Healthcare,
his performance and actions as Manager Accelera Healthcare, or any other issue or matter arising prior to or on the date of full
execution of this Agreement.
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 as of 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”).
ITEM
1A. RISK FACTORS
Before
you invest in our securities, you should be aware that there are various risks. You should consider carefully these risk factors,
together with all of the other information included in this Current Report on Form 8-K, as well as elsewhere in our SEC filings
before you decide to purchase our securities. Independent of the risk factors we list, you should further be aware that none of
the Company’s securities are registered for resale with the Securities and Exchange Commission, so they can only be purchased
under an applicable exemption from registration or if the Company registers the securities under the Securities Act of 1933. If
any of the following risks and uncertainties develop into actual events, our business, financial condition or results of operations
could be materially adversely affected.
Events
giving rise to the restatement of our financial statements included in our Annual Reports for the years ended December 31, 2013
and 2014 may lead to additional risks and uncertainties, including shareholder litigation, governmental investigations, rescission,
events of default, loss of investor confidence, and negative impacts on our stock price.
As
previously disclosed in Company’s Current Report on Form 8-K filed with the SEC on July 21, 2015, the Company’s Board
of Directors determined that the Company’s financial statements included in: (i) its quarterly reports on Form 10-Q for
the periods ended March 31, 2013, June 30, 2013 and September 30, 2013, (ii) its annual report on Form 10-K for the year ended
December 31, 2013, (iii) its quarterly reports on Form 10-Q for the periods ended March 31, 2014, June 30, 2014 and September
30, 2014, and (iv) its annual report on Form 10-K for the year ended December 31, 2014 (collectively, the “Financial Statements”)
could not be relied on. The Financial Statements contained errors related to (i) failure to record issuances of the Company’s
common and preferred stock, the receipt of funds related to these issuances and the accounting for the use of the proceeds from
these sales, (ii) disclosure of a related party transactions, and (iii) the valuation of shares of the Company’s common
stock issued as compensation. In addition, as described later in this report in Part I, Item 3. Legal Proceedings, the Securities
and Exchange Commission issued subpoenas to our company, our Chief Executive Officer and the Chairman of the Board of Directors
for our company in connection with a formal investigation of our company (Case No. C-08191). As a result of these events, we have
become subject to a number of additional risks and uncertainties, including substantial unanticipated costs for accounting and
legal fees in connection with or related to the restatement and potential shareholder litigation, governmental investigations,
disgorgement, civil monetary penalties and rescission by the investors who purchased our securities in 2013 and 2014. We will
incur additional substantial defense and investigation costs regardless of the outcome of any such litigation or governmental
investigation. Likewise, such events may cause a diversion of our management’s time and attention. If we do not prevail
in any such litigation or governmental investigation, we could be required to pay substantial damages or settlement costs. In
addition, the fact that we have determined that our Financial Statements must be restated may lead to the triggering of events
of default under existing agreements, a loss of investor confidence and have negative impacts on the trading price of our common
stock.
Our
independent auditors have expressed substantial doubt about our ability to continue as a going concern, which may hinder our ability
to continue as a going concern and our ability to obtain future financing.
In
their report dated August 3, 2016, our independent auditors stated that our financial statements for the period ended December
31, 2015 were prepared assuming that we would continue as a going concern. Our ability to continue as a going concern is an issue
raised as a result of recurring losses from operations and cash flow deficiencies since our inception. We continue to experience
net losses. Our ability to continue as a going concern is subject to our ability to generate a profit and/or obtain necessary
funding from outside sources, including obtaining additional funding from the sale of our securities, increasing sales or obtaining
loans and grants from various financial institutions where possible. If we are unable to continue as a going concern, you may
lose your entire investment.
We
may not be able to raise the funds necessary to pay the purchase price of BHCA and the Seller may terminate the acquisition at
any time prior to receipt of a substantial payment
We
presently do not have the cash or commitments for financing to pay Dr. Wolfrum the purchase price of $4,550,000 for his shares
of BHCA, of which $1,000,000 is payable on May 31, 2015, $750,000 is payable on July 30, 2015, and $2,800,000 is payable on December
31, 2015. Furthermore, prior to Dr. Wolfram’s receipt of the $1,000,000 payment, he has the right to cancel and terminate
his agreement with us. If we are unable to raise the cash needed to complete this acquisition or if Dr. Wolfrum elects terminate
the agreement to sell BHCA to us or we are unable to raise additional funds to finance this purchase we will lose a significant
asset from which we derive primarily all of our revenues. The loss of our ownership of BHCA will have a material adverse effect
on our business, our financial condition, including liquidity and profitability, and our results of operations.
We
were formed April 29, 2008 and have a limited operating history and, accordingly, you will not have any basis on which to evaluate
our ability to achieve our business objectives.
We
were formed in April 2008 with limited operating results to date. Since we do not have an established operating history and have
limited sales, you will have no basis upon which to evaluate our ability to achieve our business objectives.
The
absence of any significant operating history for us makes forecasting our revenue and expenses difficult, and we may be unable
to adjust our spending in a timely manner to compensate for unexpected revenue shortfalls or unexpected expenses.
As
a result of the absence of any operating history for us, it is difficult to accurately forecast our future revenue. In addition,
we have limited meaningful historical financial data upon which to base planned operating expenses. Current and future expense
levels are based on our operating plans and estimates of future revenue. Revenue and operating results are difficult to forecast
because they generally depend on our ability to promote and sell our services. As a result, we may be unable to adjust our spending
in a timely manner to compensate for any unexpected revenue shortfall, which would result in further substantial losses. We may
also be unable to expand our operations in a timely manner to adequately meet demand to the extent it exceeds expectations.
Our
limited operating history does not afford investors a sufficient history on which to base an investment decision.
We
are currently in the early stages of developing our business. There can be no assurance that at this time that we will operate
profitably or that we will have adequate working capital to meet our obligations as they become due.
Investors
must consider the risks and difficulties frequently encountered by early stage companies, particularly in rapidly evolving markets.
Such risks include the following:
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Competition
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Ability
to anticipate and adapt to a competitive market;
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Ability
to effectively manage expanding operations; amount and timing of operating costs and capital expenditures relating to expansion
of our business, operations, and infrastructure; and
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Dependence
upon key personnel to market and sell our services and the loss of one of our key managers may adversely affect the marketing
of our services.
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Our
business strategy may not be successful and we may not successfully address these risks. In the event that we do not successfully
address these risks, our business, prospects, financial condition, and results of operations could be materially and adversely
affected and we may not have the resources to continue or expand our business operations.
Conflicts
of interest between the Company and its officers and directors may impede the operational ability of the Company.
Our
directors including our Chairman Mr. Geoff Thompson and our CEO, Mr. John Wallin are engaged in outside business activities, Mr.
Thompson is the founder and director of Synergistic Holdings, LLC and Mr. Wallin has been the CEO and director of Synergistic
Holdings, LLC since 2009, the Company’s majority shareholder and Licensor of the Company’s technology, which may result
in a conflict of interest in allocating his time between our operations and his other business activities. Although Mr. Wallin
has a full time employment agreement with the Company his other business affairs may require him to devote more substantial amounts
of time to such affairs, it could limit his ability to devote time to our affairs and could have a negative impact on our ability
efficiently operate the Company as a result, Mr. Thompson and Mr. Wallin will be in a position to make business decisions adverse
to Accelera Innovations to the benefit of Synergistic Holdings.
We
are substantially dependent on a third party
The
Company is currently dependent upon technology licensed from Synergistic Holdings, LLC. The Company will be required to
pay a license fee in the amount of 10,000 common shares 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.
We
have no profitable operating history and May Never Achieve Profitability
From
inception (April 29, 2008) through December 31, 2015, the Company has an accumulated deficit of $63,927,121. We are an early stage
company and have a limited history of operations and have only started generated revenues since November 2013 from operations.
We are faced with all of the risks associated with a company in the early stages of development. Our business is subject to numerous
risks associated with a relatively new, low-capitalized company engaged in our business sector. Such risks include, but are not
limited to, competition from well-established and well-capitalized companies, and unanticipated difficulties regarding the marketing
and sale of our services. We may not ever generate significant commercial sales or achieve profitability. Should this be the case,
our common stock could become worthless and investors in our common stock or other securities could lose their entire investment.
We
have a need to raise additional capital
The
Company will not be able to complete additional acquisitions and commercialize its technology without additional capital, if we
do not raise substantial additional funds. The Company will require significant additional financing in order to meet the milestones
and requirements of its Business Plan and avoid discontinuation of the License. Funding would be required for staffing, marketing,
public relations and the necessary research precedent to expanding the scope of its offering. The Company intends to seek an aggregate
of $35,000,000 in an offering through the sale of equity or convertible debt securities, the issuance of these securities could
dilute existing shareholders. The Company’s funding plans include selling additional capital stock and/or borrowing to fund
the aforementioned expenses. The Company intends to approach Hedge Funds, Venture Capital Groups, Private Investment Groups and
other Institutional Investment Groups in its efforts to achieve future funding. It is estimated that $9,874,940 will be used for
management, engineering, sales and marketing, $18,000,000 will be used for acquisitions, infrastructure, and an estimated $4,000,000
will be spent on legal, accounting, rent and other payables leaving $3,125,050 in reserve for increased working capital.
It’s
estimated the minimum amount of capital the company needs to raise over the next twelve months is $30,000,000 to continue operations.
There is no guarantee that the Company will be able to raise this or any amount of additional capital and a failure to do so would
have a significant adverse effect on the Company’s ability, or would cause significant delays in its ability to address
the market for content delivery and achieve its Business Plan. Neither the Company nor any of its advisors or consultants has
significant experience in raising funds similar to the $30,000,000 estimated to be required.
Dependence
on our Management, without whose services Company business operations could cease.
At
this time, our management is wholly responsible for the development and execution of our business plan. Our management is under
no contractual obligation to remain employed by us. If our management should choose to leave us for any reason before we have
hired additional personnel our operations may fail. Even if we are able to find additional personnel, it is uncertain whether
we could find qualified management who could develop our business along the lines described herein or would be willing to work
for compensation the Company could afford. Without such management, the Company could be forced to cease operations and investors
in our common stock or other securities could lose their entire investment.
Lack
of additional working capital may cause curtailment of any expansion plans while raising capital through sale of equity securities
would dilute existing shareholders’ percentage of ownership
.
Our
available capital resources will not be adequate to fund our working capital requirements based upon our present level of operations
for the 12-month period subsequent to December 31, 2015. A shortage of capital would affect our ability to fund our working capital
requirements. If we require additional capital, funds may not be available on acceptable terms, if at all. In addition, if we
raise additional capital through the sale of equity or convertible debt securities, the issuance of these securities could dilute
existing shareholders. If funds are not available, we could be placed in the position of having to cease all operations.
Our
success is substantially dependent on general economic conditions and business trends, particularly in healthcare, a downturn
of which could adversely affect our operations
The
success of our operations depends to a significant extent upon a number of factors relating to business spending. These factors
include economic conditions, activity in the financial markets, general business conditions, personnel cost, inflation, interest
rates and taxation. Our business is affected by the general condition and economic stability of our customers and their continued
willingness to work with us in the future. An overall decline in the demand for technology could cause a reduction in our sales
and the Company could face a situation where it never achieves sales and thereby be forced to cease operations.
We
are subject to compliance with securities law, which exposes us to potential liabilities, including potential rescission rights.
We
have offered and sold our common stock to investors pursuant to certain exemptions from the registration requirements of the Securities
Act of 1933, as well as those of various state securities laws. The basis for relying on such exemptions is factual; that is,
the applicability of such exemptions depends upon our conduct and that of those persons contacting prospective investors and making
the offering. We have not received a legal opinion to the effect that any of our prior offerings were exempt from registration
under any federal or state law. Instead, we have relied upon the operative facts as the basis for such exemptions, including information
provided by investors themselves. If any prior offering did not qualify for such exemption, an investor would have the right to
rescind its purchase of the securities if it so desired. It is possible that if an investor should seek rescission, such investor
would succeed. A similar situation prevails under state law in those states where the securities may be offered without registration
in reliance on the partial preemption from the registration or qualification provisions of such state statutes under the National
Securities Markets Improvement Act of 1996. If investors were successful in seeking rescission, we would face severe financial
demands that could adversely affect our business and operations. Additionally, if we did not in fact qualify for the exemptions
upon which it has relied, we may become subject to significant fines and penalties imposed by the SEC and state securities agencies.
Anti-takeover
effects of certain provisions of Delaware State law hinder a potential takeover of Accelera Innovations, Inc.
We
may be subject to Section 203 of the DGCL, an anti-takeover statute. In general, Section 203 of the DGCL prohibits a publicly
held Delaware corporation from engaging in a “business combination” with an “interested stockholder” for
a period of three years following the time the person became an interested stockholder, unless the business combination or the
acquisition of shares that resulted in a stockholder becoming an interested stockholder is approved in a prescribed manner. Generally,
a “business combination” includes a merger, asset or stock sale, or other transaction resulting in a financial benefit
to the interested stockholder. Generally, an “interested stockholder” is a person who, together with affiliates and
associates, owns (or within three years prior to the determination of interested stockholder status did own) 15% or more of a
corporation’s voting stock. The existence of this provision would be expected to have an anti-takeover effect with respect
to transactions not approved in advance by our board of directors, including discouraging attempts that might result in a premium
over the market price for the shares of common stock held by our stockholders.
For
purposes of Delaware law, an “interested stockholder” is any person who that (i) is the owner of 15% or more of the
outstanding voting stock of the corporation, or (ii) is an affiliate or associate of the corporation and was the owner of 15%
or more of the outstanding voting stock of the corporation at any time within the 3-year period immediately prior to the date
on which it is sought to be determined whether such person is an interested stockholder, and the affiliates and associates of
such person; provided, however, that the term “interested stockholder” shall not include (x) any person who (A) owned
shares in excess of the 15% limitation set forth herein as of, or acquired such shares pursuant to a tender offer commenced prior
to, December 23, 1987, or pursuant to an exchange offer announced prior to the aforesaid date and commenced within 90 days thereafter
and either (I) continued to own shares in excess of such 15% limitation or would have but for action by the corporation or (II)
is an affiliate or associate of the corporation and so continued (or so would have continued but for action by the corporation)
to be the owner of 15% or more of the outstanding voting stock of the corporation at any time within the 3-year period immediately
prior to the date on which it is sought to be determined whether such a person is an interested stockholder or (B) acquired said
shares from a person described in item (A) of this paragraph by gift, inheritance or in a transaction in which no consideration
was exchanged; or (y) any person whose ownership of shares in excess of the 15% limitation set forth herein is the result of action
taken solely by the corporation; provided that such person shall be an interested stockholder if thereafter such person acquires
additional shares of voting stock of the corporation, except as a result of further corporate action not caused, directly or indirectly,
by such person. For the purpose of determining whether a person is an interested stockholder, the voting stock of the corporation
deemed to be outstanding shall include stock deemed to be owned by the person through (i) Beneficially owns such stock, directly
or indirectly; or (ii) Has (A) the right to acquire such stock (whether such right is exercisable immediately or only after the
passage of time) pursuant to any agreement, arrangement or understanding, or upon the exercise of conversion rights, exchange
rights, warrants or options, or otherwise; provided, however, that a person shall not be deemed the owner of stock tendered pursuant
to a tender or exchange offer made by such person or any of such person’s affiliates or associates until such tendered stock
is accepted for purchase or exchange; or (B) the right to vote such stock pursuant to any agreement, arrangement or understanding;
provided, however, that a person shall not be deemed the owner of any stock because of such person’s right to vote such
stock if the agreement, arrangement or understanding to vote such stock arises solely from a revocable proxy or consent given
in response to a proxy or consent solicitation made to 10 or more persons; or (iii) Has any agreement, arrangement or understanding
for the purpose of acquiring, holding, voting, or disposing of such stock with any other person that beneficially owns, or whose
affiliates or associates beneficially own, directly or indirectly, such stock.
The
definition of the term “business combination” is sufficiently broad to cover virtually any kind of transaction that
would allow a potential acquiror to use the corporation’s assets to finance the acquisition or otherwise to benefit its
own interests rather than the interests of the corporation and its other stockholders.
The
effect of Delaware’s business combination law is to potentially discourage parties interested in taking control of our company
from doing so if it cannot obtain the approval of our board of directors.
We
may need additional capital that could dilute the ownership interest of investors.
We
require substantial working capital to fund our business. If we raise additional funds through the issuance of equity, equity-related
or convertible debt securities, these securities may have rights, preferences or privileges senior to those of the rights of holders
of our common stock and they may experience additional dilution. There may not be additional financing available to us on favorable
terms when required, or at all. Since our inception, we have experienced negative cash flow from operations and expect to experience
significant negative cash flow from operations in the future. The issuance of additional common stock by the Company may have
the effect of further diluting the proportionate equity interest and voting power of holders of our common stock.
Because
we do not intend to pay any cash dividends on our common stock, our stockholders will not be able to receive a return on their
shares unless they sell them.
We
intend to retain any future earnings to finance the expansion of our business. We do not anticipate paying any cash dividends
on our common stock in the foreseeable future. Unless we pay dividends, our stockholders will not be able to receive a return
on their shares unless they sell them. Stockholders may never be able to sell shares when desired. Before you invest in our securities,
you should be aware that there are various risks. You should consider carefully these risk factors, together with all of the other
information included in this annual report before you decide to purchase our securities. If any of the following risks and uncertainties
develop into actual events, our business, financial condition or results of operations could be materially adversely affected.
Our
common stock is subject to the Penny Stock Regulations
Once
it commences trading (if ever) our common stock could be subject to the SEC’s “penny stock” rules to the extent
that the price remains less than $5.00. Those rules, which require delivery of a schedule explaining the penny stock market and
the associated risks before any sale, may further limit your ability to sell your shares.
The
SEC has adopted regulations, which generally define “penny stock” to be an equity security that has a market price
of less than $5.00 per share. Our common stock currently has no “market price” and when and if a trading market develops,
may fall within the definition of penny stock and subject to rules that impose additional sales practice requirements on broker-dealers
who sell such securities to persons other than established customers and accredited investors (generally those with assets in
excess of $1,000,000, or annual incomes exceeding $200,000 or $300,000, together with their spouse).
For
transactions covered by these rules, the broker-dealer must make a special suitability determination for the purchase of such
securities and have received the purchaser’s prior written consent to the transaction. Additionally, for any transaction,
other than exempt transactions, involving a penny stock, the rules require the delivery, prior to the transaction, of a risk disclosure
document mandated by the Commission relating to the penny stock market. The broker-dealer also must disclose the commissions payable
to both the broker-dealer and the registered representative, current quotations for the securities and, if the broker-dealer is
the sole market-maker, the broker-dealer must disclose this fact and the broker-dealer’s presumed control over the market.
Finally, monthly statements must be sent disclosing recent price information for the penny stock held in the account and information
on the limited market in penny stocks. Consequently, the `penny stock` rules may restrict the ability of broker-dealers to sell
our common stock and may affect the ability of investors to sell their common stock in the secondary market.
Our
common stock is illiquid and may in the future be subject to price volatility unrelated to our operations
Our
common stock is thinly traded and the market price could fluctuate substantially due to a variety of factors, including market
perception of our ability to achieve our planned growth, quarterly operating results of other companies in the same industry,
trading volume in our common stock, changes in general conditions in the economy and the financial markets or other developments
affecting our competitors or us. In addition, the stock market is subject to extreme price and volume fluctuations. This volatility
has had a significant effect on the market price of securities issued by many companies for reasons unrelated to their operating
performance and could have the same effect on our common stock. Sales of substantial amounts of common stock, or the perception
that such sales could occur, could adversely affect the market price of our common stock (if and when a market price is established)
and could impair our ability to raise capital through the sale of our equity securities.
We
have not voluntarily implemented various corporate governance measures, in the absence of which, shareholders may have more limited
protections against interested director transactions, conflicts of interest and similar matters.
Recent
Federal legislation, including the Sarbanes-Oxley Act of 2002, has resulted in the adoption of various corporate governance measures
designed to promote the integrity of the corporate management and the securities markets. Some of these measures have been adopted
in response to legal requirements. Others have been adopted by companies in response to the requirements of national securities
exchanges, such as the NYSE or the Nasdaq Stock Market, on which their securities are listed. Among the corporate governance measures
that are required under the rules of national securities exchanges are those that address board of directors’ independence,
audit committee oversight, and the adoption of a code of ethics. We have not yet adopted any of these corporate governance measures
and, since our securities are not yet listed on a national securities exchange, we are not required to do so. It is possible that
if we were to adopt some or all of these corporate governance measures, stockholders would benefit from somewhat greater assurances
that internal corporate decisions were being made by disinterested directors and that policies had been implemented to define
responsible conduct. Prospective investors should bear in mind our current lack of corporate governance measures in formulating
their investment decisions.
RISKS
RELATED TO OUR INDUSTRY
If
physicians and hospitals do not accept our products and services, or delay in deciding whether to purchase our products and services,
our business, financial condition and results of operations will be adversely affected.
Our
business model depends on our ability to sell our products and services. Acceptance of our products and services requires physicians
and hospitals to adopt different behavior patterns and new methods of conducting business and exchanging information. Physicians
and hospitals may not integrate our products and services into their workflow and other participants in the healthcare market
may not accept our products and services as a replacement for traditional methods of conducting healthcare transactions. Achieving
market acceptance for our products and services will require substantial sales and marketing efforts and the expenditure of significant
financial and other resources to create awareness and demand by participants in the healthcare industry. If we fail to achieve
broad acceptance of our products and services by physicians, hospitals and other healthcare industry participants or if we fail
to position our services as a preferred method for information management and healthcare delivery, our business, financial condition
and results of operations will be adversely affected.
We
may not see the benefits of government programs initiated to accelerate the adoption and utilization of health information technology
and to counter the effects of the current economic situation.
While
government programs have been initiated to improve the efficiency and quality of the healthcare sector and also counter the effects
of the current economic situation, including expenditures to stimulate business and accelerate the adoption and utilization of
health care technology, we may not receive any of those funds. For example, the passage of the Health Information Technology for
Economic and Clinical Health Act, or HITECH, under the American Recovery and Reinvestment Act of 2009 (ARRA) authorizes what is
expected to be up to almost $30 billion in expenditures, including discretionary funding, to further adoption of electronic health
records. Although we believe that our service offerings will meet the requirements of the HITECH Act in order for our clients
to qualify for financial incentives for implementing and using our services, there can be no certainty that any of the planned
financial incentives, if made, will be made in regard to our services. We also cannot predict the speed at which physicians will
adopt electronic health record systems in response to such government incentives, whether physicians will select our products
and services or whether physicians will implement an electronic health record system at all. Any delay in the purchase and implementation
of electronic health records systems by physicians in response to government programs, or the failure of physicians to purchase
an electronic health record system, could have an adverse effect on our business, financial condition and results of operations.
It is also possible that Congress will repeal or not fund HITECH or otherwise amend it in a manner that would be unfavorable to
our business.
Our
failure to compete successfully could cause our revenue or market share to decline.
The
market for our products and services is intensely competitive and is characterized by rapidly evolving technology and product
standards, technology and user needs and the frequent introduction of new products and services. Some of our competitors may be
more established, benefit from greater name recognition and have substantially greater financial, technical and marketing resources
than us. Moreover, we expect that competition will continue to increase as a result of potential incentives provided by the Stimulus
and consolidation in both the information technology and healthcare industries. If one or more of our competitors or potential
competitors were to merge or partner with another of our competitors, the change in the competitive landscape could adversely
affect our ability to compete effectively. We compete on the basis of several factors, including:
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Breadth
and depth of services;
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Reputation;
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Reliability,
accuracy and security;
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Client
service;
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Price;
and
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Industry
expertise and experience
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Our
principal existing competitors in the physician healthcare information systems and services market include Aprima Medical Software
(formerly iMedica Corporation), athenahealth Inc., Cerner Corporation, eClinicalWorks Inc., Emdeon Business Services LLC, Epic
Systems Corporation, General Electric Company, McKesson Corporation, Quality Systems, Inc., Sage Software, Inc., The Trizetto
Group, Inc., and Wellsoft Corporation.
Our
principal existing competitors in the hospital and post-acute healthcare information systems and services market include Cerner
Corporation, eDischarge, Epic Systems Corporation, General Electric Company, Maxsys Ltd., McKesson Corporation, MedHost, Meditech,
Midas+, Picis, ProviderLink, Quadramed, Siemens AG and WellSoft. We may not be able to compete successfully against current and
future competitors or with the competitive pressures that we face and this could materially adversely affect our business, financial
condition and results of operations.
It
is difficult to predict the sales cycle and implementation schedule for our software solutions.
The
duration of the sales cycle and implementation schedule for our software solutions depends on a number of factors, including the
nature and size of the potential customer and the extent of the commitment being made by the potential customer, which is difficult
to predict. Our sales and marketing efforts with respect to hospitals and large health organizations generally involve a lengthy
sales cycle due to these organizations’ complex decision-making processes. Additionally, in light of increased government
involvement in healthcare, and related changes in the operating environment for healthcare organizations, our potential customers
may react by curtailing or deferring investments, including those for our services. If potential customers take longer than we
expect to decide whether to purchase our solutions, our selling expenses could increase and our revenues could decrease, which
could harm our business, financial condition and results of operations. If customers take longer than we expect to implement our
solutions, our recognition of related revenue would be delayed, which would adversely affect our business, financial condition
and results of operations.
Our
future success depends upon our ability to grow, and if we are unable to manage our growth effectively, we may incur unexpected
expenses and be unable to meet our customers’ requirements.
We
will need to expand our operations if we successfully achieve market acceptance for our products and services. We may not be able
to expend our systems, procedures, controls and existing space will be adequate to support expansion of our operations. Our future
operating results will depend on the ability of our officers and key employees to manage changing business conditions and to implement
and improve our technical, administrative, financial control and reporting systems. We may not be able to expand and upgrade our
systems and infrastructure to accommodate these increases. Difficulties in managing any future growth could have a significant
negative impact on our business, financial condition and results of operations because we may incur unexpected expenses and be
unable to meet our customers’ requirements.
Competition
for our employees could be intense, and we may not be able to attract and retain the highly skilled employees we need to support
our business.
Our
ability to provide high-quality services to our clients depends in large part upon our employees’ experience and expertise.
We must attract and retain highly qualified personnel with a deep understanding of the healthcare and health information technology
industries. We compete with a number of companies for experienced personnel and many of these companies, including clients and
competitors, have greater resources than we have and may be able to offer more attractive terms of employment. In addition, we
intend to invest significant time and expense in training our employees, which increases their value to clients and competitors
who may seek to recruit them and increases the costs of replacing them. If we fail to retain our employees, the quality of our
services could diminish, which could have a material adverse effect on our business, financial condition and results of operations.
If
we are unable to successfully introduce new products or services or fail to keep pace with advances in technology, our business,
financial condition and results of operations will be adversely affected
.
The
successful implementation of our business model depends on our ability to adapt to evolving technologies and increasingly aggressive
industry standards and introduce new products and services accordingly. We may not be able to introduce new products on schedule,
or at all, or that such products will achieve market acceptance. Moreover, competitors may develop competitive products that could
adversely affect our results of operations. A failure by us to introduce planned products or other new products or to introduce
these products on schedule could have an adverse effect on our business, financial condition and results of operations.
If
we cannot adapt to changing technologies, our products and services may become obsolete, and our business could suffer. Because
the health information technology market is characterized by rapid technological change, we may be unable to anticipate changes
in our current and potential customers’ requirements that could make our existing technology obsolete. Our success will
depend, in part, on our ability to continue to enhance our existing products and services, develop new technology that addresses
the increasingly sophisticated and varied needs of our prospective customers, license leading technologies and respond to technological
advances and emerging industry standards and practices on a timely and cost-effective basis. The development of our proprietary
technology entails significant technical and business risks. We may not be successful in using new technologies effectively or
adapting our proprietary technology to evolving customer requirements or emerging industry standards, and, as a result, our business
could suffer.
Our
business depends in part on and will continue to depend in part on our ability to establish and maintain additional strategic
relationships.
To
be successful, we must establish strategic relationships with leaders in a number of healthcare and health information technology
industry segments. This is critical to our success because we believe that these relationships contribute towards our ability
to:
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Extend
the reach of our products and services to a larger number of physicians and hospitals and to other participants in the Healthcare
industry;
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Develop
and deploy new products and services;
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Further
enhance the Accelera Innovations brand; and
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Generate
additional revenue and cash flows.
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Entering
into strategic relationships is complicated because strategic partners may decide to compete with us in some or all of our markets.
In addition, we may not be able to maintain or establish relationships with key participants in the healthcare industry if we
conduct business with their competitors. We will depend, in part, on our strategic partners’ ability to generate increased
acceptance and use of our products and services. If we fail to establish additional relationships, or if our strategic relationships
fail to benefit us as expected, we may not be able to execute our business plan, and our business, financial condition and results
of operations may suffer.
Future
acquisitions may result in potentially dilutive issuances of equity securities, the incurrence of indebtedness and increased amortization
expense.
Future
acquisitions may result in dilutive issuances of equity securities, the incurrence of debt, the assumption of known and unknown
liabilities, the write off of software development costs and the amortization of expenses related to intangible assets, all of
which could have an adverse effect on our business, financial condition and results of operations.
If
our products fail to perform properly due to errors or similar problems, our business could suffer.
Complex
software, such as ours, often contains defects or errors, some of which may remain undetected for a period of time. It is possible
that such errors may be found after the introduction of new software or enhancements to existing software. We continually introduce
new solutions and enhancements to our solutions, and, despite testing by us, it is possible that errors may occur in our software.
If we detect any errors before we introduce a solution, we might have to delay deployment for an extended period of time while
we address the problem. If we do not discover software errors that affect our new or current solutions or enhancements until after
they are deployed, we would need to provide enhancements to correct such errors. Errors in our software could result in:
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Harm
to our reputation;
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Lost
sales;
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Delays
in commercial releases;
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Product
liability claims;
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Delays
in or loss of market acceptance of our solutions;
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License
terminations or renegotiations; and
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Unexpected
expenses and diversion of resources to remedy errors.
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Furthermore,
our customers might use our software together with products from other companies or those that they have developed internally.
As a result, when problems occur, it might be difficult to identify the source of the problem. Even when our software does not
cause these problems, the existence of these errors might cause us to incur significant costs, divert the attention of our technical
personnel from our solution development efforts, impact our reputation and cause significant customer relations problems.
Our
business depends on our intellectual property rights, and if we are unable to protect them, our competitive position may suffer.
Our
business plan is predicated on our proprietary systems and technology products. Accordingly, protecting our intellectual property
rights is critical to our continued success and our ability to maintain our competitive position. In addition to existing trademark,
trade secret and copyright law, we protect our proprietary rights through confidentiality agreements and technical measures. We
do not have any patents on our technology. We generally enter into non-disclosure agreements with our employees and consultants
and limit access to our trade secrets and technology. Nonetheless, in some instances, third parties may have access to source-code
versions of software. Furthermore, our use and distribution of open source software and modules in connection with our business
also presents risks. Open source commonly refers to software whose source code is subject to a license allowing it to be modified,
combined with other software and redistributed, subject to restrictions set forth in the license. We cannot be certain that, under
the terms of those licenses, our software will not become publicly available or that we will be found to be in material compliance
with such agreements. The steps we have taken may not have and may not continue to prevent misappropriation of our technology
and misappropriations of our intellectual property have occurred in the past. Misappropriation of our intellectual property could
have an adverse effect on our competitive position. In addition, we may have to engage in litigation in the future to enforce
or protect our intellectual property rights or to defend against claims of infringement, misappropriation or other violations
of third-party intellectual property rights. We may incur substantial costs and the diversion of management’s time and attention
as a result and an adverse decision could have a negative impact on our business.
If
we are deemed to infringe, misappropriate or violate the proprietary rights of third parties, we could incur unanticipated expense
and be prevented from providing our products and services.
We
are and may continue to be subject to intellectual property infringement, misappropriation or other intellectual property violation
claims as our applications’ functionality overlaps with competitive products and third parties may claim that we do not
own or have rights to use all intellectual property rights used in the conduct of our business. Claims may be occasionally asserted
against us, and may have infringements, misappropriation or claims alleging intellectual property violations asserted against
us in the future. We could incur substantial costs and diversion of management resources defending any such claims. Furthermore,
a party making a claim against us could secure a judgment awarding substantial damages, as well as injunctive or other equitable
relief that could effectively block our ability to provide products or services. In addition, our licenses for any intellectual
property of third parties that might be required for our products or services may not be available on commercially reasonable
terms, or at all. Such claims also might require indemnification of our clients at significant expense.
If
our content and service providers fail to perform adequately, or to comply with laws, regulations or contractual covenants, our
reputation and our business, financial condition and results of operations could be adversely affected.
We
will depend on independent content and service providers for communications and information services and for many of the benefits
we provide through our software applications and services, including the maintenance of managed care pharmacy guidelines, drug
interaction reviews, the routing of transaction data to third-party payers and the hosting of our applications. Our ability to
rely on these services could be impaired as a result of the failure of such providers to comply with applicable laws, regulations
and contractual covenants, or as a result of events affecting such providers, such as power loss, telecommunication failures,
software or hardware errors, computer viruses and similar disruptive problems, fire, flood and natural disasters. Any such failure
or event could adversely affect our relationships with our customers and damage our reputation. This would adversely affect our
business, financial condition and results of operations. In addition, we may have no means of replacing content or services on
a timely basis or at all if they are inadequate or in the event of a service interruption or failure. We also rely on independent
content providers for the majority of the clinical, educational and other healthcare information that we provide. In addition,
we depend on our content providers to deliver high quality content from reliable sources and to continually upgrade their content
in response to demand and evolving healthcare industry trends. If these parties fail to develop and maintain high quality, attractive
content, the value of our brand and our business, financial condition and results of operations could be impaired.
We
may be liable for use of content we provide.
We
will provide content for use by healthcare providers in treating patients. Third-party contractors provide us with most of this
content. If this content is incorrect or incomplete, adverse consequences, including death, may occur and give rise to product
liability and other claims against us. In addition, certain of our solutions provide applications that relate to patient clinical
information, and a court or government agency may take the position that our delivery of health information directly, including
through licensed practitioners, or delivery of information by a third party site that a consumer accesses through our websites,
exposes us to personal injury liability, or other liability for wrongful delivery or handling of healthcare services or erroneous
health information. While we intend to have product liability insurance coverage in an amount that we believe is sufficient for
our business, we cannot assure you that this coverage will prove to be adequate or will continue to be available on acceptable
terms, if at all. A claim brought against us that is uninsured or under-insured could harm our business, financial condition and
results of operations. Even unsuccessful claims could result in substantial costs and diversion of management resources.
If
our security is breached, we could be subject to liability, and customers could be deterred from using our services.
Our
business relies on electronic transmission of confidential patient and other information. We believe that any well-publicized
compromise of our network security or a misappropriation of patient information or other data would adversely affect our reputation
and would require us to devote significant financial and other resources to alleviate such problems. In addition, our existing
or potential customers could be deterred from using our products and services, and we could be subject to liability and regulatory
action. We could face financial loss, litigation and other liabilities to the extent that our activities or the activities of
third-party contractors involve the storage and transmission of
U.S.
healthcare system reform at both the federal and state level, could increase government involvement in healthcare, lower reimbursement
rates and otherwise change the business environment of our potential customers and the other entities with which we have a business
relationship. We cannot predict whether or when future healthcare reform initiatives at the federal or state level or other initiatives
affecting our business will be proposed, enacted or implemented or what impact those initiatives may have on our business, financial
condition or results of operations. Our potential customers and the other entities with which we have a business relationship
could react to these initiatives and the uncertainty surrounding these proposals by curtailing or deferring investments, including
those for our products and services. Additionally, the government has signaled increased enforcement activity targeting healthcare
fraud and abuse, which could adversely impact our business, either directly or indirectly. To the extent that our potential customers,
most of whom are providers, may be affected by this increased enforcement environment, our business could correspondingly be affected.
Additionally, government regulation could alter the clinical workflow of physicians, hospitals and other healthcare participants,
thereby limiting the utility of our products and services to potential customers and curtailing broad acceptance of our products
and services. Further examples of government involvement could include requiring the standardization of technology relating to
electronic health records, providing potential customers with incentives to adopt electronic health record solutions or developing
a low-cost government sponsored electronic health record solution, such as the VistA-Office electronic health record. Additionally,
certain safe harbors to the federal Anti-Kickback Statute and corresponding exceptions to the federal Stark law may alter the
competitive landscape. These safe harbors and exceptions are intended to accelerate the adoption of electronic prescription systems
and electronic health records systems, and therefore provide new and attractive opportunities for us to work with hospitals and
other donors who wish to provide our solutions to physicians. At the same time, such safe harbors and exceptions may result in
increased competition from providers of acute electronic health record solutions, whose hospital customers may seek to donate
their existing acute electronic health record solutions to physicians for use in ambulatory settings.
If
the electronic healthcare information market fails to develop as quickly as expected, our business, financial condition and results
of operations will be adversely affected.
The
electronic healthcare information market is in the early stages of development and is rapidly evolving. A number of market entrants
have introduced or developed products and services that are competitive with one or more components of the solutions we offer.
We expect that additional companies will continue to enter this market, especially in response to recent government subsidies.
In new and rapidly evolving industries, there is significant uncertainty and risk as to the demand for, and market acceptance
of, recently introduced products and services. Because the markets for our products and services are new and evolving, we are
not able to predict the size and growth rate of the markets with any certainty. There may not be a market for our products and
services that will develop and, if they do, they will be strong and continue to grow at a sufficient pace. If markets fail to
develop, develop more slowly than expected or become saturated with competitors, our business, financial condition and results
of operations will be adversely affected.
Consolidation
in the healthcare industry could adversely affect our business, financial condition and results of operations.
Many
healthcare industry participants are consolidating to create integrated healthcare delivery systems with greater market power.
As provider networks and managed care organizations consolidate, thus decreasing the number of market participants, competition
to provide products and services like ours will become more intense, and the importance of establishing relationships with key
industry participants will become greater. These industry participants may try to use their market power to negotiate price reductions
for our products and services. Further, consolidation of management and billing services through integrated delivery systems may
decrease demand for our products. If we were forced to reduce our prices, our business would become less profitable unless we
were able to achieve corresponding reductions in our expenses.
ITEM
1B. UNRESOLVED STAFF COMMENTS
Not
applicable.
ITEM
2. PROPERTIES
We
maintain our corporate office at 20511 Abbey Drive, Frankfort, Illinois 60423. Advance Lifecare operates from a 1,900 square foot
leased facility located at 3590 Hobson Rd, Woodridge, IL 60517 which expires on September 15, 2016. Behavioral Health operates
from a 5,988 leased facility located at 1375 E. Schaumburg Rd Suite 230, Schaumburg IL 60194 which expires on October 31, 2016
and another 2,000 square foot facility located at 484 N. Lee St., Des Plaines, IL 60016 which is on a month to month basis.
ITEM
3. LEGAL PROCEEDINGS
In
2015, the Securities and Exchange Commission (the “SEC”) issued subpoenas to our company, our Chief Executive Officer
and the Chairman of the Board of Directors for our company in connection with a formal investigation of our company (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.
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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48
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Chairman
of the Board
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John
F. Wallin
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66
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Chief
Executive Officer, Chief Financial Officer* and Chief Marketing Officer
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James
R. Millikan
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64
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Chief
Operating Officer
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Daniel
Freeman
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60
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Former
Chief Financial Officer*
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Cynthia
Boerum
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62
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Chief
Strategic Officer
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Patrick
Custardo
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64
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Chief
Acquisitions Officer
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Blaise
J. Wolfrum M.D.
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56
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President
of Behavioral Health Care
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*
Mr. Wallin took over the role as our interim Chief Financial Officer on March 20, 2015 upon the resignation of Mr. Freeman on
that date.
Blaise Wolfrum resigned as of January 1, 2016
Geoff
Thompson, Chairman of the Board
Mr.
Thompson is the Chairman of the Board and founder of Accelera Innovations, since 2008, his experience with IPO’s and Mergers
and Acquisitions has positioned the company for eminent success. 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 Mr. Thompson 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, MN. As Streamline grew into a multi-state company the Thompsons 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. In 2001 Mr. Thompson launched Stremline Mortgage company after relocating to Minneapolis, MN. As Streamline
grew into a multi-state company the Thompsons 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. Thompsons professional
career started in 1993 when he took on the role of finance and insurance manager for Bergstrom Automotive Group in Neenah Wisconsin.
Mr.
Thompson brings our board his considerable experience in the strategic planning and growth of companies and qualifies him to continue
to serve as the Chairman of the board of directors of our company.
John
Wallin, Chief Executive Officer, Chief Financial Officer and Chief Marketing Officer
Mr.
Wallin is Chief Executive Officer, Chief Marketing Officer and since March 24, 2015 our Interim Chief Financial Officer and has
been Chief Executive Officer, Chief Marketing Officer and Director of Synergistic Holdings, LLC since 2009. Mr. Wallin has over
30 years of experience in the financial services industry. Prior to Synergistic Holdings, LLC, Mr. Wallin was President and Chief
Marketing Officer at GWG Advantage in Minneapolis from 2007 to 2009. Previously, Mr. Wallin held 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.
Walling received his B.S. in 1976 and Masters in Education in 1982 from Chicago State University.
Daniel
Freeman, Former Chief Financial Officer
Prior
to joining the Company, Mr. Freeman was Vice President and Principle with DS&B, Ltd, Certified Public Accountants in Minneapolis,
Minnesota from 2008 to 2014. He has been the lead on audits and reviews of companies ranging from startup entrepreneurs to companies
with revenues in excess of $250 million. He has led many strategic planning sessions in addition to providing accounting, audit
and tax guidance with companies of all sizes. Previously, Mr. Freeman held positions of President and Managing Partner of Freeman
Wehmhoff and Gatlin PLLC a Certified Public Accounting firm in Minneapolis, Minnesota from 2002 to 2008 and as the founder he
grew the practice by offering auditing, accounting and tax services to a wide variety of clients in a vast cross section of industries.
He also held the positions of Vice President and Principle of Blanski Peter Kronlage & Zoch, PA, Certified Public Accountants
in Minneapolis Minnesota from 1995 to 2002. Prior to joining Blanski Peter Kronlage & Zoch, P.A. he gained a wide range of
experience working for local certified public accounting firms and private companies. Mr. Freeman is Certified Public Accountant,
Chartered Global Management Accountant and a Certified Information Technology Professional. He has also attained his yellow belt
in lean six sigma in the health care industry. Mr. Freeman received a Bachelor of Science in Business Administration degree from
Drake University in Des Moines, Iowa in 1979 and his Masters of Business Administration at the University of St. Thomas in Saint
Paul, Minnesota in 1989.
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 company in Hyberdad, India, from 2009 to 2011. The leadership included
national and international sales teams. Previously, Ms. Boerum held 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 Innovations, Inc., in December 2012. He started his career as Vice President of Mergers and Acquisitions
with Northern Continent Capital Funds, 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 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.
Blaise
J. Wolfrum, M.D., President of Behavioral Health Care
Dr.
Wolfrum became the President of Accelera’s President of Behavioral Health Care in November 2013, Dr. Wolfrum is the founder
and CEO of Behavioral Health Care Associates in Schaumburg, IL, created in 1994. Dr. Wolfrum is Board Certified in psychiatry
and addictions by the American Board of Psychiatry and Neurology and is a fellow of the American Psychiatric Association. Dr.
Wolfrum created Behavioral Health Care to bring to Chicago a comprehensive and innovative healing approach that combines the best
of evaluation and diagnosis with patient focused therapy. Dr. Wolfrum brings 27 years of experience as a MD, he attended Loyola
University Medical School and did his internship and residency at Hayden Donahue Mental Health Institute. On November 20, 2013,
Behavioral Health Care Associates was acquired by Accelera Innovation Inc. and Dr. Wolfrum will continue to operate and lead the
company through an Operating Agreement with Accelera Healthcare Management Service Organization, LLC.
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, the current levels of compensation to corporate officers and the beneficial ownership by one
shareholder of more than [0]% of our outstanding common stock. 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 of Directors 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 directors have 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
Typically,
our directors do not receive any compensation as directors and there is no other compensation being considered at this time.
Compliance
with Section 16(a) of the Securities Exchange Act of 1934
Section
16(a) of the Securities Exchange Act of 1934, as amended, 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 Securities and Exchange Commission initial statements
of beneficial ownership, reports of changes in ownership and annual reports concerning their ownership of our common shares and
other equity securities, on Forms 3, 4 and 5 respectively. Executive officers, directors and greater than 10% shareholders are
required by the Securities and Exchange Commission 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
2015.
ITEM
11. EXECUTIVE COMPENSATION
The
following table summarizes all compensation recorded by us in 2015 for our principal executive officers, each other executive
officer serving as such whose annual compensation exceeded $100,000, and additional individual for whom disclosure would have
been made in this table but for the fact that the individual was not serving as an executive officer of our Company at December
31, 2015:
2015
SUMMARY COMPENSATION TABLE
Name
and
Principal
Position
|
|
Year
|
|
Salary
($)
|
|
Bonus
($) Stock Awards ($)
|
|
Option
Awards ($)
|
|
Non-Equity
Incentive Plan Compensation ($)
|
|
Nonqualified
Deferred Compensation ($)
|
|
All
Other Compensation ($)
|
|
Total
($)
|
|
John
Wallin (1)
|
|
|
2015
|
|
|
|
0
|
|
|
0 0
|
|
|
786,720
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
786,720
|
|
|
|
|
|
2014
|
|
|
|
0
|
|
|
0 0
|
|
|
1,955,420
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
1,955,420
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James Millikan (2)
|
|
|
2015
|
|
|
|
0
|
|
|
0 0
|
|
|
450,000
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
450,000
|
|
|
|
|
|
2014
|
|
|
|
0
|
|
|
0 0
|
|
|
1,116,668
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
1,116,668
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Daniel Freeman (3)
|
|
|
2014
|
|
|
|
0
|
|
|
0 0
|
|
|
1,125,332
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
1,125,332
|
|
|
|
(1)
|
Chief
Executive Officer. In addition, Mr. Wallin was appointed interim Chief Financial Officer as of March 20, 2015.
|
|
|
|
|
|
|
(2)
|
Chief
Operating Officer
|
|
|
|
|
|
|
(3)
|
Former
Chief Financial Officer – resigned on March 20, 2015.
|
Our
director has not received monetary compensation since our inception to the date of this Form 10-K. We currently do not pay any
compensation to our director or officer for serving on our board of directors or as management
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 options, the options
awarded will vest in equal annual installments over a four-year period. Also, Blaise Wolfrum has 600,000 options; Rose Gallagher
has 154,583 options; Daniel Gallagher has 825,000 options and Daniel Freeman has 914,667 and Jimmy LaCaba has 60,000 options.
EMPLOYMENT
AGREEMENTS WITH EXECUTIVE OFFICERS
Effective
April 26, 2012, the Company entered into an employment agreement with John F. Wallin, as the President and Chief Executive Officer
“CEO” of the Company. The employment agreement with Mr. Wallin provides that, upon completion of $2,000,000 in financing,
the Company shall begin to pay John a base salary of $250,000 per year, to be paid at the times and subject to the Company’s
standard payroll practices, subject to applicable withholding. 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 with the 2013 fiscal year. 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
consideration of the services, the Company agreed to issue a stock option to purchase 1,750,000 shares of the Company’s
common stock at an exercise price of $.0001 per share, vesting over a four year period. The stock option shall vest with respect
to 20% of the total number of shares which are the subject of the option (350,000 shares) immediately after the effective date
of the agreement, thereafter the remaining shares granted under the option shall vest ratably on a monthly basis (29,166 shares
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 from this agreement and others shall 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 “COO”
of the Company reporting to the President and CEO. The employment agreement with Mr. Millikan provides that, upon completion of
two million dollars in financing, the Company shall begin to pay Jim a base salary of $175,000 per year, to be paid at the times
and subject to the Company’s standard payroll practices, subject to applicable withholding. 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 with the 2013 fiscal year. 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
consideration of the services, the Company agreed to issue a stock option to purchase 1,000,000 shares of the Company’s
common stock at an exercise price of $.0001 per share, vesting over a four year period. The stock option shall vest with respect
to 20% of the total number of shares which are the subject of the option (200,000 shares) immediately after the effective date
of the agreement, thereafter the remaining shares granted under the option shall vest ratably on a monthly basis (16,666 shares
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 from this agreement and others shall 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 “CSO”
of the Company reporting to the President and CEO. The employment agreement with Ms Boerum provides that, upon completion of two
million dollars in financing, the Company shall begin to pay Cynthia a base salary of $150,000 per year, to be paid at the times
and subject to the Company’s standard payroll practices, subject to applicable withholding. 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 with the 2013 fiscal year. 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
consideration of the services, the Company agreed to issue a stock option to purchase 1,000,000 shares of the Company’s
common stock at an exercise price of $.0001 per share, vesting over a four year period. The stock option shall vest with respect
to 20% of the total number of shares which are the subject of the option (200,000 shares) immediately after the effective date
of the agreement, thereafter the remaining shares granted under the option shall vest ratably on a monthly basis (16,666 shares
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 from this agreement and others shall 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 “CAO”
of the Company reporting to the President and CEO. In consideration of the services, the Company agreed to issue a stock option
to purchase 1,000,000 shares of the Company’s common stock at an exercise price of $.0001 per share, vesting over a four-year
period. The stock option shall vest with respect to 20% of the total number of shares which are the subject of the option (200,000
shares) immediately after the effective date of the agreement, thereafter the remaining shares granted under the option shall
vest ratably on a monthly basis (16,666 shares 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 from this agreement and others shall immediately
vest and become fully exercisable. The employment agreement with Mr. Custardo provides that, upon completion of two million dollars
in financing, the Company shall begin to pay Patrick a base salary of $150,000 per year, to be paid at the times and subject to
the Company’s standard payroll practices, subject to applicable withholding. 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, she will be eligible for bonus compensation, payable immediately following completion of the Company’s financial
statements for each full fiscal year, commencing with the 2013 fiscal year. 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.
Effective
November 20, 2013, the Company entered into an employment agreement with Blaise J. Wolfrum, M.D., as the President of the Accelera
business unit “Behavioral Health Care Associates” reporting to John Wallin, CEO of Accelera. In consideration of the
services, the Company agreed to issue a stock option to purchase Six Hundred Thousand (600,000) shares of the Company’s
Common Stock under the terms of the Company’s 2011 Stock Option Plan at an exercise price of $.0001 per share. The Six Hundred
Thousand (600,000) shares shall vest over the course of the Three (3) years, earned annually, at Two Hundred Thousand (200,000)
shares each year; after the commencement of employment so long as he remain an employee of the Company. Furthermore, the shares
are subject to a Six (6) month lock-up agreement and a Twenty Seven (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 from
the agreement shall immediately vest and become fully exercisable. The employment agreement with Dr. Wolfrum provides that the
Company shall pay Blaise a base salary of $300,000 per year to be paid at the times and subject to the Company’s standard
payroll practices, subject to applicable withholding. Mr. Wolfrum will begin receiving compensation at the time Accelera completes
the Due Diligence, Valuation and Audited Financials of the Behavioral Health Care Associates business performed by an Accelera
appointed audit firm. The Board of Directors will implement a bonus structure based on goals, objectives and performance.
Effective
December 13, 2013, Accelera entered into a three-year Employment Agreement with Rose M. Gallagher as the President of Accelera’s
At Home Health Care business unit reporting to John Wallin, Accelera’s CEO. In consideration of the services, Accelera agreed
to immediately grant Ms. Gallagher 585,000 common shares at a price of $0.0001 per share, and an option to purchase 1,000,000
common shares at a price of $0.0001 per share, to be vested Two Hundred and Fifty Thousand (250,000) shares annually for 4 years,
beginning March 12, 2014; with final vested shares on March 12, 2017, all the shares will be issued in accordance with the terms
of the Accelera’s 2011 Stock Option Plan. Furthermore, the shares are subject to a Six (6) month lock-up agreement and a
Twenty Seven (27) month leak-out agreement limiting the sale of shares over the period. Additionally, Accelera agreed to compensate
Ms. Gallagher
$150,000 per annum, which shall be paid bi-weekly 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
.
Outstanding
Equity Awards at 2015 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, 2015.
|
Name
|
|
Number
of
Securities
Underlying
Unexercised
Options Exercisable
|
|
|
Number
of
Securities
Underlying
Unexercised
Options
Unexercisable
|
|
|
Weighted
Average Exercise
Price
|
|
Expiration
Date
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John Wallin
|
|
|
983,428
|
|
|
|
65,572
|
-
|
$
|
.0001-
|
|
2022-
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
James Millikan
|
|
|
562,500
|
|
|
|
37,500
|
|
-
$
|
.0001-
|
|
2022-
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Daniel Freeman
|
|
|
489,000
|
|
|
|
-
|
|
-
$
|
.0001-
|
|
2024-
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
ITEM
12. OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The
following table lists, as of August 3, 2016, the number of shares of common stock of our Company that are beneficially owned by
(i) each person or entity known to our Company to be the beneficial owner of more than 5% of the outstanding common stock; (ii)
each officer and director of our 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 Securities and Exchange Commission. 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 Securities and Exchange Commission 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 45,713,716 shares of our common stock issued and outstanding as of August 3, 2016.
|
|
|
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
|
|
|
|
|
|
|
|
12.009
|
%
|
|
|
|
0511 Abbey Drive, Frankfort, Illinois
60423
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
Accelerated Venture Partners LLC
|
|
|
3,500,000
|
|
|
|
|
|
|
|
14.219
|
%
|
|
|
|
1840 Gateway Dr. Suite 200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foster City, CA 94404
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock:
|
|
Victory Investment Management LLC (1)
20511 Abbey Dr. Frankfort, IL 60423
|
|
|
5,000,000
|
|
|
|
|
|
|
|
10.938
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock:
|
|
NGT Holdings LLC (1) 20511 Abbey Dr.
Frankfort, IL 60423
|
|
|
8,250,000
|
|
|
|
|
|
|
|
18.047
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock:
|
|
Geoffrey Thompson, Chairman of Board
(2)
|
|
|
3169
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
John Wallin, Chief Executive Officer,
Chief Financial Officer (2) (3)
|
|
|
1,662,502
|
|
|
|
58,332
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
James Millikan, Chief Operating Officer
(2)
|
|
|
950,002
|
|
|
|
33,333
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Stock
|
|
Daniel Freeman,
Chief Financial Officer (3) (4)
|
|
|
329,333
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All
executive officers and directors as a group
|
|
|
|
|
25,184,567
|
|
|
|
91,665
|
|
|
|
|
|
|
(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 3169 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 Dr. Frankfort, IL 60423.
|
|
|
|
|
(3.
|
Of
these shares, Mr. Wallin holds 3,525 jointly with his spouse.
|
|
|
|
|
(4.
|
Mr.
Freeman ceased to be an executive officer as of March 20, 2015
|
|
|
|
|
(5.
|
Of
these shares, 500 shares are held jointly with Mr. Freeman’s spouse, 1,000 shares are held by Freeman Farms, LLC, 1,000
shares are held by DVN Freeman Family Farms, LLC, 1,000 shares are held by Deer River Farms, LLC, 1,000 shares are held by
Freeman Ag Enterprises, LLC, and 1,000 shares are held by Freeman Spring Valley Farms, LLC. Each of the limited liability
companies is owned by Mr. Freeman, and Mr. Freeman has voting and dispositive control over the shares held by the limited
liability companies.
|
*less
than 5 %.
ITEM
13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
On
April 13, 2012, the Company entered into an amended Licensing Agreement (“Agreement”) with Synergistic Holdings LLC,
(Licensor) whereas the Company and Licensor agreed to amend the August 22, 2011 Licensing Agreement.
[to
be updated upon completion of financial statements.]
The
Company and Synergistic Holdings, LLC (“Synergistic”), a controlling 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 license agreement
entered into between the Company and Synergistic 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 commencement date of the agreement until the
payment dates for the following amounts:
(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.
Tec
Explorer is a related party through common ownership. Tec Explorer supplied working capital to the Company to fund primarily software
acquisition costs, accounting services, commissions and subcontract costs during 2010 through 2013. Synergistic Holdings, LLC
assumed all obligations to Tec Explorer during 2014 and 2013 on behalf of the Company. This verbal agreement was agreed to by
all three companies.
On
May 7, 2015, the Company and Synergistic agreed to amend the Synergistic 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
common shares 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 Synergistic Licensing Agreement was amended to delete the Company’s
exclusive rights under such agreement.
ITEM
14. PRINCIPAL ACCOUNTING FEES AND SERVICES
The
following table shows the fees that were billed for the audit and other services provided by
Anton
& Chia, LLP
for the fiscal years ended December 31, 2015 and 2014.
|
|
|
2015
|
|
|
2014
|
|
|
|
|
|
|
|
|
|
|
Audit Fees
|
|
$
|
42,000
|
|
|
$
|
66,860
|
|
|
Audit-Related Fees
|
|
|
3043.52
|
|
|
|
9282
|
|
|
Tax Fees
|
|
|
-
|
|
|
|
-
|
|
|
All Other Fees
|
|
|
-
|
|
|
|
-
|
|
|
Total
|
|
$
|
45,043.52
|
|
|
$
|
76142
|
|
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, 2015 AND 2014
NOTE
1 – ORGANIZATION AND BASIS OF PRESENTATION
Accelera
Innovations, Inc., formerly Accelerated Acquisitions IV, Inc. (“Accelera” or 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 (“Purchaser”) 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 their
5,000,000 shares of the Company’s common stock par value $0.0001 for cancellation. Following these transactions, Synergistic
Holdings, LLC owned 93.15% of the Company’s 18,250,000 issued and outstanding shares of common stock par value $0.0001 and
the interest of Accelerated Venture Partners, LLC was reduced to approximately 6.85% of the total issued and outstanding shares.
Simultaneously with the share purchase, Timothy Neher resigned from the Company’s Board of Directors and John Wallin was
simultaneously 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.
Accelera
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 has acquired Behavioral Health Care Associates, Ltd. (“BHCA”)
(See Note 18) and 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.
NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES
OF CONSOLIDATION - Accelera operates companies in the personal health care industry. Accelera operates out of three service centers
serving counties in the Chicago, Illinois area. The consolidated financial statements include the accounts of Accelera and its
100% owned subsidiaries, Behavioral Health and SCI Home Health. 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 December 31, 2015 and 2014, 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. Uncollectible accounts are charged off when all reasonable efforts to collect the accounts have been exhausted.
ACCELERA
INNOVATIONS, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2015 AND 2014
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, 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.
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 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.
ACCELERA
INNOVATIONS, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2015 AND 2014
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 December 31, 2015. These financial instruments include stock options granted to the officers in 2015 and 2014.
ACCELERA
INNOVATIONS, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2015 AND 2014
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, 2015, the Company identified the following liability that is required to be presented on the balance sheet at fair
value (see Note 11):
RECENT
ACCOUNTING PRONOUNCEMENTS
In
January 2015, the FASB issued Accounting Standards Update (ASU) No. 2015-01 (Subtopic 225-20) -
Income Statement - Extraordinary
and Unusual Items
. ASU 2015-01 eliminates the concept of an extraordinary item from GAAP. As a result, an entity will no longer
be required to segregate extraordinary items from the results of ordinary operations, to separately present an extraordinary item
on its income statement, net of tax, after income from continuing operations or to disclose income taxes and earnings-per-share
data applicable to an extraordinary item. However, ASU 2015-01 will still retain the presentation and disclosure guidance for
items that are unusual in nature and occur infrequently. ASU 2015-01 is effective for periods beginning after December 15, 2015.
The adoption of ASU 2015-01 is not expected to have a material effect on the Company’s consolidated financial statements.
Early adoption is permitted.
In
February, 2015, the FASB issued Accounting Standards Update (ASU) No. 2015-02,
Consolidation (Topic 810): Amendments to the
Consolidation Analysis.
ASU 2015-02 provides guidance on the consolidation evaluation for reporting organizations that are
required to evaluate whether they should consolidate certain legal entities such as limited partnerships, limited liability corporations,
and securitization structures (collateralized debt obligations, collateralized loan obligations, and mortgage-backed security
transactions). ASU 2015-02 is effective for periods beginning after December 15, 2015. The adoption of ASU 2015-02 is not expected
to have a material effect on the Company’s consolidated financial statements. Early adoption is permitted.
In
September, 2015, the FASB issued ASU No. 2015-16,
Business Combinations (Topic 805).
Topic 805 requires that an acquirer
retrospectively adjust provisional amounts recognized in a business combination, during the measurement period. To simplify the
accounting for adjustments made to provisional amounts, the amendments in the Update require that the acquirer recognize adjustments
to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amount
is determined. The acquirer is required to also record, in the same period’s financial statements, the effect on earnings
of changes in depreciation, amortization, or other income effects, if any, as a result of the change to the provisional amounts,
calculated as if the accounting had been completed at the acquisition date. In addition an entity is required to present separately
on the face of the income statement or disclose in the notes to the financial statements the portion of the amount recorded in
current-period earnings by line item that would have been recorded in previous reporting periods if the adjustment to the provisional
amounts had been recognized as of the acquisition date. ASU 2015-16 is effective for fiscal years beginning December 15, 2015.
The adoption of ASU 2015-016 is not expected to have a material effect on the Company’s consolidated financial statements.
In
November 2015, the FASB issued ASU No. 2015-17,
Balance Sheet Classification of Deferred Taxes
. The new guidance requires
that all deferred tax assets and liabilities, along with any related valuation allowance, be classified as noncurrent on the balance
sheet. This update is effective for annual periods beginning after December 15, 2016 and interim periods within those annual periods.
The Company does not anticipate the adoption of this ASU will have a significant impact on its consolidated financial position,
results of operations, or cash flows.
In
February 2016, the FASB issued ASU No. 2016-02,
Leases (Topic 842)
. The guidance in ASU No. 2016-02 supersedes the lease
recognition requirements in ASC Topic 840,
Leases (FAS 13)
. ASU 2016-02 requires an entity to recognize assets and liabilities
arising from a lease for both financing and operating leases, along with additional qualitative and quantitative disclosures.
ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, with early adoption permitted. The Company is currently
evaluating the effect this standard will have on its consolidated financial statements.
ACCELERA
INNOVATIONS, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2015 AND 2014
Other
recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the American Institute of Certified
Public Accountants, and the United States Securities and Exchange Commission did not or are not believed by management to have
a material impact on the Company’s present or future consolidated financial statements.
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
ACCOUNTS
RECEIVABLE, NET
Accounts
receivable, net at December 31, 2015 and 2014 consist of the following:
|
|
|
2015
|
|
|
2014
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
-
|
|
|
|
757,896
|
|
|
Less allowance
for doubtful accounts
|
|
|
-
|
|
|
|
(152,100
|
)
|
|
|
|
$
|
-
|
|
|
$
|
605,796
|
|
PROPERTY
AND EQUIPMENT, NET
Property
and equipment, net at December 31, 2015 and 2014 consist of the following:
|
|
|
2015
|
|
|
2014
|
|
|
|
|
|
|
|
|
|
|
Furniture and fixtures
|
|
$
|
3,940
|
|
|
$
|
2,150
|
|
|
Office equipment
|
|
|
5,641
|
|
|
|
4,824
|
|
|
|
|
|
9,581
|
|
|
|
6,974
|
|
|
Less accumulated
depreciation
|
|
|
(692
|
)
|
|
|
(593
|
)
|
|
|
|
$
|
8,889
|
|
|
$
|
6,381
|
|
Depreciation
expense for the years ended December 31, 2015 and 2014 was $1,259 and $593, 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 had minimal revenue since inception and had an accumulated deficit of $63,927,121 as of December
31, 2015. 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
events or circumstances that may prevent the accomplishment of our business objectives, include, with limitation, (i) the fact
that, if the Company does not raise a minimum of $30,000,000 within the next 12 months to pay debts incurred in connection with
the Company’s acquisition of BHCA, SCI, Traditions Home Care, Inc., Grace Home Health Care, Inc. and Watson Health Care,
Inc. and Affordable Nursing, Inc.
ACCELERA
INNOVATIONS, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2015 AND 2014
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 - DISCONTINUED OPERATIONS
On
December 31, 2014, the Company entered into a Separation Agreement with At Home Health Services LLC and All Staffing Services,
LLC (“LLC’s) to terminate the purchase agreement entered into on December 13, 2013. The historical financial results
of the LLC’s are reflected in the Company’s unaudited condensed consolidated interim financial statements and footnotes
as discontinued operations for all periods presented.
The
following table displays summarized activity in the Company’s unaudited condensed consolidated statements of operations
for discontinued operations during the year ended December 31, 2014.
|
Net sales
|
|
$
|
741,406
|
|
|
Operating loss
|
|
|
(286,223
|
)
|
|
Loss before income taxes
|
|
|
(221,766
|
)
|
|
Income tax expense
|
|
|
-
|
|
|
Loss from discontinued operations, net
of tax
|
|
|
(221,766
|
)
|
As
for the years ended December 31, 2015, there was no activity in the Company’s unaudited condensed consolidated statement
of operations as a result of the Separation Agreement.
NOTE
6 - ACQUISITION – BEHAVIORAL HEALTH CARE ASSOCIATES, LTD.
On
November 20, 2013, Accelera executed a Stock Purchase Agreement (the “SPA”) and its wholly owned subsidiary, Accelera
Healthcare Management Service Organization LLC (“Accelera HMSO”), executed an Operating Agreement with Blaise J. Wolfrum,
M.D. and Behavior Health Care Associates, Ltd. (“BHCA”). Accelera acquired 100% of the 100,000 issued and outstanding
shares of BHCA from Dr. Wolfrum. Accelera HMSO as a wholly owned subsidiary of Accelera will operate BHCA in accordance with the
Operating Agreement. The SPA was amended as of May 30, 2014 and further amended on May 31, 2015.
Pursuant
the SPA, the Company 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 September 30, 2015, $750,000 is payable on November 30, 2015, and $2,800,000 is payable on December 31, 2015. Prior
to Dr. Wolfram’s receipt of the $1,000,000 payment, he has the right to cancel and terminate the SPA. In addition, as consideration
for entering into various amendments to the SPA, the Company issued Dr. Wolfrum a total of 50,000 shares of our common stock which
the Company agreed to register for resale upon completion of a public offering of its securities. The payment due on September
30, 2015, November 30, 2015 and December 31, 2015 have not been paid and the acquisition loan is currently in default. See Note
18.
NOTE
7 - ACQUISITION – AT HOME AND ALL STAFFING
On
December 13, 2013 Accelera 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 Accelera agreed to purchase and Gallagher agreed to sell, all of
Gallagher’s interests in the Subject LLCs. The Company also entered into an Operating Agreement with the Subject LLCs.
ACCELERA
INNOVATIONS, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2015 AND 2014
Pursuant
to the Purchase Agreement, Accelera agreed to pay Gallagher or her assignee of $1,420,000, with the sum of $500,000 within ninety
(90) days of the Initial Closing Date, the sum of $420,000 dollars within eight (8) months of the Initial closing Date, the aforementioned
payments dates has been verbally extended until the Company receives financing. Furthermore, Accelera shall pay a sum equal to
the Net Accounts Receivable, meaning the amount applicable to the Subject LLCs as of the Initial Closing Date equal to (a) the
bank account balances plus (b) accrued accounts receivable balances, plus (c) a proration through the Initial Closing Date of
the prepaid expenses, bonds, and licensing fees of the Subject LLCs, plus (d) an amount equal to the security deposit on the lease
for the business address minus (d) the balance of the accounts payables of the Subject LLCs as of the Initial Closing Date. For
the above purposes, the terms accounts receivable and accounts payable shall be determined in accordance with standard accounting
principles within twelve (12) months of the Initial Closing Date and the sum of $500,000 dollars within eighteen (18) months of
the Initial Closing Date. The Initial Closing Date was December 9, 2013, the Final Closing Date is June 12, 2015 at Gallagher’s
office in Mokena, IL.
On
December 23, 2014, a Settlement Agreement (“Agreement”) was executed between the Company and its related entities
and subsidiaries (“Accelera’’), Geoffrey Thompson, an Individual, and At Home Health Management, LLC, (collectively
referred to as “Purchaser’’) and At Home Health Services, LLC, All Staffing Services, LLC and Georgia Peaches,
LLC, and the Rose M. Gallagher Revocable Trust dated November 30, 1994, and Rose Gallagher individually and as Trustee of the
Rose M. Gallagher Revocable Trust dated November 30, 1994, and Daniel Gallagher, individually (collectively referred to as “Seller’’).
The Seller and Purchaser are collectively referred to as the “Parties”.
The
Agreement indicated that there was a default under the purchase agreement and employment agreement with Rose M. Gallagher and
Daniel Gallagher. The agreement also indicated that the Purchaser failed to pay the promissory note that had been executed with
Georgia Peaches, LLC.
The
Parties to the Agreement agree to among other things to (1) terminate the purchase agreement; (2) terminate the employment agreements
with Rose M. Gallagher and Daniel Gallagher; (3) a resolution under the purchase and employment agreements; (4) a resolution of
the promissory note with Georgia Peaches, LLC; and (5) additional matters as indicated in the Agreement.
The
Parties have agreed to resolve the disputes under the purchase and employment agreements as follows: (1) Seller has previously
been issued Stock Certificate Number 1102 for 585,000 shares of Accelera Innovations, Inc. common stock. By execution of this
Agreement, Purchaser irrevocably confirms that the 585,000 shares are fully vested and rightfully owned by Seller and under no
circumstance shall be cancelled, rescinded, or otherwise not honored by Purchaser; (2) Purchaser shall issue 500,000 shares each
to Rose Gallagher and Daniel Gallagher as consideration under the Employment Agreements; and (3) Purchaser shall execute a term
promissory note in the principal amount of $344,507.
The
Parties have agreed to resolve the disputes under the promissory note to Georgia Peaches, LLC as follows: (1) included in the
term promissory note of $344,507 (interest at a rate of 11% per annum shall begin to accrue on this note beginning January 1,
2015 and will be due and payable at time of final payment according to the Payment Schedule of $25,000 on March 1, 2015 and $337,602
on June 1, 2015) is the delinquent principal and interest under the original promissory note with Georgia Peaches, LLC and (2)
Purchaser shall issue 10,000 shares to the Rose M. Gallagher Revocable Trust dated November 30, 1994. The Company is in default
of the promissory note and has a 90 day cure period. The Company paid $5,000 on April 8, 2015. The Company did not cured the default
within the 90 cure period.
NOTE
8 - ACQUISITION – SCI HOME HEALTH, INC (DBA ADVANCE LIFECARE HOME HEALTH)
On
August 25, 2014, the Company 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 the Company 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 adjusted purchase price of $431,070 (the “Stock Purchase”).
ACCELERA
INNOVATIONS, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2015 AND 2014
Pursuant
to the terms of the Stock Purchase Agreement, the purchase price was paid as follows: (i) $20,000 via wire transfer concurrently
with execution of the Stock Purchase Agreement, and (ii) $430,000 via wire transfer upon approval of the required license transfer
by the Illinois Department of Public Health. Pursuant to the Stock Purchase Agreement, revenues generated by SCI, but received
by the Company, after the closing of the Stock Purchase will belong to SCI, and SCI agreed to reimburse the Company for expenses
generated by SCI after the closing of the Stock Purchase. The Stock Purchase Agreement contains customary representations and
warranties and is subject to certain events of default.
NOTE
9 - SHORT-TERM NOTES PAYABLES
Short-term
notes payable at December 31, 2015 and 2014 consisted of the following:
|
|
|
2015
|
|
|
2014
|
|
|
|
|
|
|
|
|
|
|
At Home and All Staffing
acquisition note payable (See Note 7)
|
|
|
344,507
|
|
|
|
344,507
|
|
|
AOK Property Investments (1)
|
|
|
525,000
|
|
|
|
500,000
|
|
|
Note dated May
28, 2015 for $35,000; daily payment of $184.73 for 252 days
|
|
|
32,014
|
|
|
|
-
|
|
|
|
|
$
|
901,521
|
|
|
$
|
844,507
|
|
(1)
The Company entered into a $344,507 promissory note (the “Trust Note”) with the Rose. M Gallagher Revocable Trust
(“Trust”) in conjunction with the Settlement Agreement (see Note 7). The Trust Note bears interest at 11.0% per annum.
The first payment of $25,000 is due on March 1, 2015. The final principal and interest payment is due on June 1, 2015. The entire
outstanding principal balance of Trust Note may be prepaid at any time, in whole or in part, without premium or penalty, and the
interest accrued on the remaining principal balance shall be adjusted accordingly. 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 promises to pay
one thousand 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,
SCI, 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 is due on January 15, 2015 and bears interest in the amount of 500,000 shares of the Company’s
common stock, which interest is 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.
ACCELERA
INNOVATIONS, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2015 AND 2014
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.
A
portion of the proceeds of the loan from AOK was used by the Company to fund the Stock Purchase (see Note 8), which closed on
October 7, 2014.
NOTE
10 - CONVERTIBLE NOTES
On
August 28, 2015, the Company issued a convertible note to an investor that provides for a maximum borrowing of $250,000. During
the 2015, the Company borrowed $55,556 under this convertible note. The convertible note (i) is unsecured, (ii) contains a 10%
original issue discount (iii) is interest free for the first 90 days and 12% per annum thereafter, and (iv) is due on August 28,
2017. The outstanding balance of under this convertible note is convertible at any time at the option of the investor into shares
of the Company’s common stock that is determined by dividing the amount to be converted by 60% of the lowest trading price
in the 25 trading days prior to the conversion.
On
December 16, 2015, the Company issued a convertible note payable in the amount of $118,685. The convertible note (i) is unsecured,
(ii) bears interest at 8% per annum, and (iii) is due on October 11, 2016. The outstanding balance of under this convertible note
is convertible at any time at the option of the holder into shares of the Company’s common stock that is determined by dividing
the amount to be converted by 50% of the average of the lowest trading prices during the 10 trading days prior to the conversion.
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 was calculated to be $305,325, which is recorded
as a derivative liability as of the date of issuance. The derivative liability was first recorded as a debt discount up to the
face amount of the convertible notes of $174,240 with the remaining $136,640 begin charge as a financing cost during 2015. The
debt discount is being amortized over the term of the convertible note. The Company recognized additional interest expense of
$15,434 during 2015 related to the amortization of the debt discount.
NOTE
11 - DERIVATIVE LIABILITY
The
convertible note discussed in Note 10 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, 2015:
|
Stock price
|
|
$
|
0.141
|
|
|
Risk free rate
|
|
|
0.64
|
%
|
|
Volatility
|
|
|
325
|
%
|
|
Conversion/ Exercise price
|
|
$
|
0.07-.085
|
|
|
Dividend rate
|
|
|
0
|
%
|
|
Term (years)
|
|
|
0.8 to 1.7
|
|
ACCELERA
INNOVATIONS, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2015 AND 2014
The
following table represents the Company’s derivative liability activity for the period ended December 31, 2015:
|
|
|
Amount
|
|
|
|
|
|
|
|
Derivative liability balance, December 31, 2014
|
|
$
|
-
|
|
|
Issuance of derivative liability during the
period ended December 31, 2015
|
|
|
305,325
|
|
|
Change in derivative
liability during the period ended December 31, 2015
|
|
|
(2,745
|
)
|
|
Derivative liability balance, December
31, 2015
|
|
$
|
302,580
|
|
NOTE
12 - COMMITMENTS
Planned
Acquisition of Grace Home Health Care, Inc.
On
November 25, 2014, the Company entered into a stock purchase agreement (the “Grace SPA”) with Grace Home Health Care,
Inc. (“Grace”), a provider of home health care services, as well as Angelito D. Cadiente, and Loida F. Cadiente (collectively
the “Grace Sellers”), pursuant to which we agreed to purchase, and the Sellers agreed to sell, all of their Grace
shares, collectively representing all of the outstanding shares of common stock of Grace, as well as all of Grace’s assets,
for an aggregate purchase price of $5,250,000 (the “Grace Purchase Price”). The Grace Purchase Price is to be paid
by us as follows: $2,625,000 on or before January 15, 2015 (the “Grace Closing Date”), $1,312,500 nine months after
the Grace Closing Date, and $1,312,500.00 twelve months after the Grace Closing Date. However, the Company has the right to extend
the Grace Closing Date by an additional forty-five (45) days, in order for its to secure the requisite funding, so long as the
Company gives notice to the Grace Sellers on or before December 15, 2014. On June 15, 2015, the agreement was amended to extend
the final closing until October 1, 2015 and issued 50,000 shares to the Grace Sellers as consideration for the extension. On September
15, 2015, the parties agreed to extend the final closing until January 1, 2016. The Grace SPA contains customary representations
and warranties and is subject to certain events of default.
The
Company has also agreed to hire Angelo L. Cadiente as Grace’s Chief Executive Officer upon the Grace Closing Date. Under
the terms of his proposed employment agreement, Mr. Cadiente will become the Chief Executive Officer for Grace for a period of
three years beginning on the Grace Closing Date and pay him an annual base salary of $175,000 plus a bonus in an amount equal
to 5% of the increase in Grace’s gross revenue from the base gross revenue earned in the previous year and an additional
amount equal to 10% of the base earnings before interest, taxes, depreciation and amortization (“EBITDA”) increases
of Grace from the base EBITDA of Grace in the previous year. In addition, Mr. Cadiente will be entitled to four weeks of vacation,
twelve sick days and health benefits and reimbursement of out of pocket expenses for business entertainment in connection with
his duties. Mr. Cadiente is subject to a restriction on solicitation of Grace’s customers or clients following termination
of his employment agreement for a period of one year. Since no consideration has been paid as of December 31, 2015, the acquisition
is consider incomplete and not final.
Planned
Acquisition of the assets of Watson Health Care, Inc. and Affordable Nursing, Inc.
On
November 25, 2014, the Company entered into an asset purchase agreement (the “Watson-Affordable Nursing APA”) with
Watson Health Care, Inc. (“Watson”) and Affordable Nursing, Inc. (“Affordable”) (Watson and Affordable
are collectively referred to as the “Sellers”), providers of home health care services, pursuant to which the Company
agreed to purchase, and the Sellers agreed to sell, all of their assets, for an aggregate purchase price of $3,000,000 (the “Watson-Affordable
Purchase Price”). The Watson-Affordable Purchase Price will be paid by us as follows: $1,000,000 on or before January 15,
2015 (the “Watson-Affordable Closing Date”), $1,000,000 on or before nine months after the Watson-Affordable Closing
Date, and $1,000,000 on or before twelve months after the Watson-Affordable Closing Date. However, the Company has the right to
extend the Watson-Affordable Closing Date by an additional sixty (60) days. On September 15, 2015, the parties agreed to extend
the final closing until January 1, 2016. The Watson-Affordable APA contains customary representations and warranties and is subject
to certain events of default. In addition, Kevin Watson, the sole owner of Watson and Affordable and the Company will mutually
agree to a transition period where Mr. Watson will work with Watson and Affordable to transition their operations to the Company.
Further, the Company, Watson and Affordable will identify certain employees of Watson and Affordable who will enter into employment
agreements with the Company. Since no consideration has been paid as of December 31, 2015, the acquisition is consider incomplete
and not final.
ACCELERA
INNOVATIONS, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2015 AND 2014
Planned
Acquisition of Traditions Home Care, Inc.
On
January 5, 2015, the Company entered into a stock purchase agreement (the “Traditions SPA”) with Traditions Home Care,
Inc. (“Traditions”), a provider of home health care services, as well as Sonny Nix and John Noah (collectively the
“Sellers”), pursuant to which the Company agreed to purchase, and the Sellers agreed to sell, all of their shares
of Traditions, collectively representing all of the outstanding shares of common stock of Traditions, as well as all of Traditions’
assets, for an aggregate purchase price of $6,000,000 (the “Purchase Price”). The Purchase Price is to be paid by
the Company as follows: $3,000,000 on or before December 31, 2015 (the “Closing Date”), $1,500,000 nine months after
the Closing Date, and $1,500,000 twelve months after the Closing Date. However, the Company has the right to extend the Closing
Date by an additional forty-five (45) days, in order for it to secure the requisite funding, so long as the Company gives notice
to the Sellers on or before March 1, 2015. The Traditions SPA contains customary representations and warranties, and is subject
to certain events of default.
The
Company has also agreed to hire Sonny Nix (“Nix”) as Traditions’ Chief Executive Officer, pursuant to the terms
of the employment agreement attached as Exhibit B to the Traditions SPA (the “Employment Agreement”). The Employment
Agreement will only become effective upon closing of the Traditions SPA. Under the Employment Agreement, Nix will become the Chief
Executive Officer for Traditions for a period of three years beginning on the Closing Date and pay him an annual base salary of
$150,000 plus a bonus in an amount equal to 5% of the increase in Traditions’ gross revenue from the base gross revenue
earned in the previous year, and an additional amount equal to 10% of the base earnings before interest, taxes, depreciation and
amortization (“EBITDA”) increases of Traditions from the base EBITDA of Traditions in the previous year. In addition,
Nix will be entitled to three weeks of vacation, twelve sick days, and health benefits. Nix is subject to a restriction on solicitation
of Traditions’ customers or clients following termination of his Employment Agreement for a period of one year. Since no
consideration has been paid as of December 31, 2015, the acquisition is consider incomplete and not final. On July 6, 2015, the
agreement was amended to extend the closing date to October 1, 2015. On September 15, 2015, the parties agreed to extend the final
closing until January 1, 2016.
Termination
of Chief Financial Officer
On
May 8, 2015, the Company entered into a separation agreement with Daniel Freeman, the Company’s former Chief Financial Officer.
Under the terms of the separation agreement, the Company agreed to pay Mr. Freeman $100,000 at such time as the Company closes
on a financing transaction or offering of its securities where the Company receives a minimum of $2,000,000 in cash and accelerated
the vesting of and awarded Mr. Freeman options to purchase 409,000 shares of the Company’s unregistered common stock at
a price of $.0001 per share which expire on September 30, 2024. The separation agreement included a release of claims by Mr. Freeman
in favor of the Company and other standard provisions included in separation agreements.
NOTE
13 - 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
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 our option in cash or such dividends shall be accreted to, and increase, the outstanding Stated
Value,
|
ACCELERA
INNOVATIONS, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2015 AND 2014
|
|
●
|
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 December 31, 2015.
There
are 100,000,000 shares of $.0001 par value common shares authorized. The Company has 45,011,216 and 40,445,926 issued and outstanding
shares as of December 31, 2015 and 2014, respectively.
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 years ended December 31, 2015. In addition, the Company also issued 25,000 shares
for cash proceeds of $15,000.
On
October 4, 2013, the Company entered into a Standby Equity Purchase 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 (the “Equity Line”).
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 for good and valuable consideration, the receipt and sufficiency of which was acknowledged, Lambert Private Equity, LLC is
entitled effective as October 4, 2013, 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 shares at the 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 5:00 pm New York time on September 3, 2018 the expiration date. As of December 31, 2015, no funds have been
received from this agreement.
NOTE
14 - 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 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 $4,265,889 and $6,520,378 for the years ended
December 31, 2015 and 2014, respectively, which were included in general and administrative expenses. As of December 31, 2015,
there was $1,646,144 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 1.5 years.
ACCELERA
INNOVATIONS, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2015 AND 2014
The
following is a summary of the outstanding options, as of December 31, 2015:
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
Weighted
|
|
|
Weighted
|
|
|
Average
|
|
|
|
|
|
|
|
Average
|
|
|
Average
|
|
|
Remaining
|
|
|
|
|
Options
|
|
|
Intrinsic
|
|
|
Exercise
|
|
|
Contractual
|
|
|
|
|
Outstanding
|
|
|
Value
|
|
|
Price
|
|
|
Life
|
|
|
Outstanding,
December 31, 2013
|
|
|
4,849,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
2,060,000
|
|
|
$
|
4.00
|
|
|
$
|
0.0001
|
|
|
|
3.0
|
|
|
Exercised
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forfeited/Expires
|
|
|
(1,020,417
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding, December
31, 2014
|
|
|
5,888,583
|
|
|
|
4.00
|
|
|
|
0.0001
|
|
|
|
2.5
|
|
|
Granted
|
|
|
425,667
|
|
|
|
2.52
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forfeited/Expires
|
|
|
(511,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding,
December 31, 2015
|
|
|
5,803,250
|
|
|
|
3.89
|
|
|
|
0.0001
|
|
|
|
1.5
|
|
|
Exercisable,
December 31, 2015
|
|
|
5,188,929
|
|
|
|
3.89
|
|
|
|
0.0001
|
|
|
|
0.9
|
|
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
15 - RELATED PARTY TRANSACTIONS
The
Company and Synergistic Holdings, LLC (“Synergistic”), a controlling 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 license agreement
entered into between the Company and Synergistic 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 commencement date of the agreement until the
payment dates for the following amounts:
|
|
(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.
|
Tec
Explorer is a related party through common ownership. Tec Explorer supplied working capital to the Company to fund primarily software
acquisition costs, accounting services, commissions and subcontract costs during 2010 through 2013. Synergistic Holdings, LLC
assumed all obligations to Tec Explorer during 2014 and 2013 on behalf of the Company. This verbal agreement was agreed to by
all three companies.
ACCELERA
INNOVATIONS, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2015 AND 2014
On
May 7, 2015, the Company and Synergistic agreed to amend the Synergistic 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
common shares 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 Synergistic Licensing Agreement was amended to delete the Company’s
exclusive rights under such agreement.
NOTE
16 - 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, 2015, the Company had a loss and
for the period April 29, 2008 (date of inception) through December 31, 2015. The net operating losses resulting from operating
activities result in deferred tax assets of approximately $22,797,000 at the effective statutory rates which will expire by the
year 2028. The deferred tax asset has been off-set by an equal valuation allowance. There are no current or deferred income tax
expense or benefit recognized for the years ended December 31, 2015 and 2014.
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, 2015 and 2014 is as follows:
|
|
|
2015
|
|
|
2014
|
|
|
|
|
|
|
|
|
|
|
Federal statutory rates
|
|
$
|
(234,527
|
)
|
|
$
|
(774,183
|
)
|
|
State income taxes, net of federal effect
|
|
|
(35,283
|
)
|
|
|
(177,987
|
)
|
|
Stock Compensation
|
|
|
(5,255,049
|
)
|
|
|
(11,436,152
|
)
|
|
Impairment of intangibles
|
|
|
-
|
|
|
|
(1,635,587
|
)
|
|
Allowance for doubtful accounts
|
|
|
(224,665
|
)
|
|
|
(58,996
|
)
|
|
Valuation allowance
against net deferred tax assets
|
|
|
5,749,524
|
|
|
|
14,082,905
|
|
|
|
|
$
|
-
|
|
|
$
|
0
|
|
The
tax effects of temporary differences that give rise to significant portions of the deferred tax asset at December 31, 2015 and
2014 is as follows:
|
|
|
2015
|
|
|
2014
|
|
|
|
|
|
|
|
|
|
|
Deferred income tax assets:
|
|
|
|
|
|
|
|
|
|
Net operation loss carryforwards
|
|
|
1,494,954
|
|
|
|
1,225,144
|
|
|
Property, equipment and intangibles
|
|
|
1,635,587
|
|
|
|
1,635,587
|
|
|
Share-based compensation
|
|
|
19,382,880
|
|
|
|
14,127,831
|
|
|
Book
to tax differences for allowance for uncollectible accounts
|
|
|
283,658
|
|
|
|
58,993
|
|
|
Total deferred income
tax assets
|
|
|
22,797,079
|
|
|
|
17,047,555
|
|
|
Less:
valuation allowance
|
|
|
(22,797,079
|
)
|
|
|
(17,047,555
|
)
|
|
Total deferred
income tax asset
|
|
$
|
-
|
|
|
$
|
-
|
|
ACCELERA
INNOVATIONS, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2015 AND 2014
The
valuation allowance increased by $5,749,524 and $14,082,902 in 2015 and 2014, respectively, as a result of the Company’s
generating additional net operating losses.
The
Company has recorded as of December 31, 2015 and 2014 a valuation allowance of $22,797,079 and $17,047,555, 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, 2015.
The
Company has net operating loss carry-forwards of approximately $3,600,000. Such amounts are subject to IRS code section 382 limitations
and begin to expire in 2028. The 2014 and 2015 tax year is still subject to audit.
NOTE
17 – RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS
As
previously disclosed in the Company’s current report on Form 8-K filed with the SEC on July 21, 2015, the Company’s
Board of Directors determined that the Company’s financial statements included in (i) its quarterly reports on Form 10-Q
for the periods ended March 31, 2013, June 30, 2013 and September 30, 2013, (ii) its annual report on Form 10-K for the year ended
December 31, 2013, (iii) its quarterly reports on Form 10-Q for the periods ended March 31, 2014, June 30, 2014 and September
30, 2014, and (iv) its annual report on Form 10-K for the year ended December 31, 2014 could not be relied on.
The
financial statements contained errors related to (i) issuances of the Company’s preferred stock, the receipt of funds related
to these issuances and the accounting for the use of the proceeds from these sales in each of the periods covered by the financial
statements disclosed above, (ii) disclosure of a related party transactions, and (iii) the valuation of shares of the Company’s
common stock issued as compensation.
As
more fully described in the financial statements contained herein, management determined that previously issued financial statements
for the year ended December 31, 2014 contained an error, which was non-cash in nature, relating to the issuance of Company preferred
stock, the receipt of funds related to such issuance and the accounting for the use of proceeds from such sale. The Company evaluated
the impact of this error under the SEC’s authoritative guidance on materiality and determined that the impact of this error
on the financial statements for the year ended December 31, 2104 was material. On July 20, 2015, after review by the Company’s
independent registered public accounting firm, the Company’s Board of Directors concluded that the Company should restate
its financial statements for the year ended December 31, 2014 to reflect the correction of the previously identified error in
the financial statements for this period.
In
order to reflect the error described herein, the Company restated its financial statements for the year ended December 31, 2014.
There was no impact to our statement of operations or actual cash balances as a result of this error, and this error does not
change net cash flows from operating activities, investing activities, and financing activities.
The
Company’s affiliate received cash proceeds from investors for preferred stock subscriptions in the Company. The 48,562 shares
of preferred stock have not been issued because the Company has not filed the Certificate of Designations with the State of Delaware,
and the proceeds were deposited directly into the bank account of Synergistic, the Company’s affiliate. The preferred shares
have not been issued to the investors and the Company has recorded the preferred stock subscriptions as a liability under preferred
stock payable as of December 31, 2014.
After
a detailed review of the facts, the Company has concluded that the common stock and preferred stock to be issued as of December
31, 2014 should have been recorded in the financial statements for the year ended December 31, 2014.
ACCELERA
INNOVATIONS, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2015 AND 2014
The
following tables present the restated items for the applicable date.
|
|
|
As
Originally
|
|
|
Amount
of
|
|
|
|
|
|
|
|
Presented
|
|
|
Restatement
|
|
|
As
Restated
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
54,862
|
|
|
$
|
-
|
|
|
$
|
54,862
|
|
|
Accounts receivable,
net
|
|
|
605,796
|
|
|
|
-
|
|
|
|
605,796
|
|
|
Prepaid expenses
|
|
|
6,026
|
|
|
|
-
|
|
|
|
6,026
|
|
|
Due
from stockholder
|
|
|
-
|
|
|
|
109,620
|
|
|
|
109,620
|
|
|
Total current assets
|
|
|
666,684
|
|
|
|
109,620
|
|
|
|
776,304
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
|
6,381
|
|
|
|
-
|
|
|
|
6,381
|
|
|
Security deposit
|
|
|
1,805
|
|
|
|
-
|
|
|
|
1,805
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
ASSETS
|
|
$
|
674,870
|
|
|
$
|
109,620
|
|
|
$
|
784,490
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS’ DEFICIT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term note
payable
|
|
$
|
844,507
|
|
|
$
|
-
|
|
|
$
|
844,507
|
|
|
Advanced from related
party
|
|
|
31,810
|
|
|
|
(31,810
|
)
|
|
|
-
|
|
|
Accounts payable
|
|
|
88,689
|
|
|
|
-
|
|
|
|
88,689
|
|
|
Preferred stock
subscription payable
|
|
|
652,462
|
|
|
|
141,430
|
|
|
|
793,892
|
|
|
Accrued expenses
|
|
|
226,099
|
|
|
|
-
|
|
|
|
226,099
|
|
|
Unearned
revenue
|
|
|
957
|
|
|
|
-
|
|
|
|
957
|
|
|
Total current liabilities
|
|
|
1,844,524
|
|
|
|
109,620
|
|
|
|
1,954,144
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term subordinated
unsecured notes payable
|
|
|
4,550,000
|
|
|
|
-
|
|
|
|
4,550,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES
|
|
|
6,394,524
|
|
|
|
109,620
|
|
|
|
6,504,144
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS’
DEFICIT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Common stock
|
|
|
4,046
|
|
|
|
-
|
|
|
|
4,046
|
|
|
Additional paid-in
capital
|
|
|
43,278,757
|
|
|
|
-
|
|
|
|
43,278,757
|
|
|
Accumulated
deficit
|
|
|
(49,002,457
|
)
|
|
|
-
|
|
|
|
(49,002,457
|
)
|
|
Total stockholders’
deficit
|
|
|
(5,719,654
|
)
|
|
|
-
|
|
|
|
(5,719,654
|
)
|
|
TOTAL
LIABILITIES AND STOCKHOLDERS’ DEFICIT
|
|
$
|
674,870
|
|
|
$
|
109,620
|
|
|
$
|
784,490
|
|
NOTE
18 - SUBSEQUENT EVENTS
The
Company, Blaise J. Wolfrum, M.D., and Behavioral (the “Parties”) entered into a Stock Purchase Agreement dated on
or about November 20, 2013, as amended. On March 31, 2016, the Parties executed a Termination Agreement by which the Stock Sale
Agreement was terminated effect as of January 1, 2016. Behavioral will be accounted for as a discontinued operation in all future
financial statements issued by the Company.