GNOW American CareSource Holdings Inc (CE)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of our financial condition and results of operations should be read together with our financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q. This discussion and analysis contains forward-looking statements that are based upon current expectations and involve risks, assumptions and uncertainties. You should review the “Risk Factors” section of this Quarterly Report on Form 10-Q for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements described in the following discussion and analysis.

Overview

We engage in two lines of business: our urgent and primary care business, which we operate under the tradenames GoNow Doctors and Medac, and our legacy ancillary network business. These lines of business are supported through a shared services function.

On November 2, 2015 we commenced efforts to sell our legacy ancillary network business to our largest client and manager of the business, HealthSmart, in order to continue our focus on our urgent and primary care business. Assuming we reach mutually agreeable terms with HealthSmart, we anticipate closing the transaction in 2016. Accordingly, we have concluded that the ancillary network business qualifies as discontinued operations and financial results for the ancillary network business are presented as discontinued operations in our consolidated statements of operations, and the related asset and liability accounts are presented on our consolidated balance sheets as held for sale as of March 31, 2016 and December 31, 2015. Amounts previously reported have been reclassified, as necessary, to conform to this presentation to allow for meaningful comparison of continuing operations.

Our Urgent and Primary Care Business

In May 2014, we announced our entry into the urgent and primary care market. During the remainder of 2014, through our wholly-owned subsidiaries, we consummated five transactions resulting in our acquisition of ten urgent and primary care centers, located in Georgia (3), Florida (2), Alabama (3), and Virginia (2). In December 2015, we completed a key asset acquisition with a four-site urgent care operator in North Carolina. In January 2016, we closed one of our Georgia centers and in April 2016, we sold the two Virginia centers.

Our healthcare centers offer a wide array of services for non-life-threatening medical conditions. We strive to improve access to quality medical care by offering extended hours and weekend service primarily on a walk-in basis. Our centers offer a broad range of medical services that generally fall within the urgent care, primary care, family care, and occupational medicine classifications. Specifically, we offer non-life-threatening, out-patient medical care for the treatment of acute, episodic, and some chronic medical conditions. When hospitalization or specialty care is needed, referrals to appropriate providers are made.

Patients typically visit our centers on a walk-in basis when their condition is not severe enough to warrant an emergency visit, when they do not have a relationship with a primary care provider, or when treatment by their primary care provider is inconvenient. We also attempt to capture follow-up, preventative and general primary care business after walk-in visits. The services provided at our centers include, but are not limited to, the following:

Our centers generally are equipped with digital x-ray machines, electrocardiograph machines and basic laboratory equipment, and are generally staffed with a combination of licensed physicians, nurse practitioners, physician assistants, medical support staff, and administrative support staff. Our medical support staff includes licensed nurses, certified medical assistants, laboratory technicians, and registered radiographic technologists.

Our patient volume, and therefore our revenue, is sensitive to seasonal fluctuations in urgent and primary care activity. Typically, winter months see a higher occurrence of influenza, bronchitis, pneumonia and similar illnesses; however, the timing and severity of these outbreaks can vary dramatically. Additionally, as consumers shift towards high deductible insurance plans, they are responsible for a greater percentage of their bill, particularly in the early months of the year before other healthcare spending has occurred. Our inability to collect the full patient liability portion of the bill at the time of service may lead to an increase in bad debt expense during that period. Our quarterly operating results may fluctuate significantly in the future depending on these and other factors.

In keeping with our retail approach to the business, in the fourth quarter of 2015, we initiated a rebranding campaign with our new tradename, GoNow Doctors. We believe our new name and logo will enable us to effectively market our services in our existing and target communities. We intend to use this name in all states except North Carolina. The trade name acquired in our December 2015 transaction, Medac, has been the trusted brand for urgent care services in the Wilmington, North Carolina market for over 30 years. As a result, we will retain the Medac name and will continue use of the name throughout our North Carolina expansion. We believe our new logo and tradenames will enable us to effectively market our services in our existing and target communities.

We intend to grow our urgent and primary care business by developing and acquiring new centers in strategic areas located in the eastern and southeastern United States, by expanding our service offerings in our existing centers, by increasing the volume of patients treated in our centers through advertising and other efforts, and by improving overall operating efficiency in our centers.

Disposition of our Virginia Centers

On April 1, 2016, we exited the Virginia urgent and primary care market by consummating the sale of our two Virginia subsidiaries to UrgeMedical Group, Inc. For the period ended March 31, 2016 and March 31 2015, our Virginia subsidiaries reported net revenues of approximately $254,000 and $275,000, respectively, and net operating loss of approximately $(151,000) and $(132,000), respectively.

The sales price for the Virginia subsidiaries was $610,000, $50,000 of which was paid in cash at closing and the balance by delivery of two promissory notes. The first promissory note has an initial principal balance of $160,000 and interest accrues on the outstanding balance at 1.5% per annum. The note is payable in two installments, the first installment of $50,000 is due within 90 days after closing and the second installment of $110,000 is due within 150 days after closing. If, however, UrgeMedical pays $150,000 plus all accrued interest within 90 days, the entire note will be deemed satisfied in full.

The second promissory note has an initial principal balance of $400,000 and interest accrues on the outstanding balance at 5.0% per annum. Interest-only payments are due each month beginning July 1, 2016. Principal is due in three equal installments of $133,333 on the first, second and third anniversaries of the effective date of the closing date.

Our Legacy Business

We concluded that our legacy ancillary network business qualifies as discontinued operations. Accordingly, the financial results from the ancillary network business for the three months ended March 31, 2016 and 2015 are presented as discontinued operations in our consolidated statements of operations, and the related asset and liability accounts are presented as held for sale as of March 31, 2016 and 2015. Amounts previously reported have been reclassified, as necessary, to conform to this presentation to allow for meaningful comparison of continuing operations.

Our ancillary network business offers cost containment strategies to our payor clients, primarily through the utilization of a comprehensive national network of ancillary healthcare service providers. This service is marketed to a number of healthcare companies including TPAs, insurance companies, large self-funded organizations, various employer groups and PPOs. We are able to lower the payors’ ancillary care costs through our network of high quality, cost effective providers that we have under contract at more favorable terms than the payors can generally obtain on their own. Payors route healthcare claims to us after service is performed by participant providers in our network. We process those claims and charge the payor according to an agreed upon, contractual rate. Upon processing the claim, we are paid directly by the payor or the insurer for the service. We then pay the medical service provider according to a separately negotiated contractual rate. We assume the risk of generating positive margin, which is calculated as the difference between the payment we receive for the service from the payor and the amount we are obligated to pay the service provider.

On October 1, 2014, we entered into a management services agreement with HealthSmart. Under the management services agreement, HealthSmart manages the operation of our ancillary network business, subject to the supervision of a five-person oversight committee comprised of three members selected by us and two members selected by HealthSmart. As a result of this arrangement, we no longer employ the workforce of our ancillary network business. Under the management services agreement, HealthSmart operates our ancillary network business for a management fee equal to the sum of (a) 35% of the net profit derived from operation of our ancillary network business, plus (b) 120% of all direct and documented operating expenses and liabilities actually paid during such calendar month by HealthSmart in connection with providing its management services. For purposes of the fee calculation, the term “net profit” means gross ancillary network business revenue, less the sum of (x) the provider payments and administrative fees and (y) 120% of all direct and documented operating expenses and liabilities actually paid during such calendar month by HealthSmart in connection with providing its management services. Any remaining net profit accrues to us on a monthly basis, which we recognize as service agreement revenue. During the term of the agreement, HealthSmart is responsible for the payment of all expenses incurred in providing the management services with respect to our ancillary network business, including personnel salaries and benefits, the cost of supplies and equipment, and rent. The initial term of the management services agreement was three years, and it will terminate upon the consummation of the disposition of the ancillary network business.

* Presented as a discontinued operations in statement of operations.

Our Urgent and Primary Care Business

Our urgent and primary care business segment reported operating income before depreciation of $62,000 and an operating loss before depreciation of $(450,000), respectively, for the three months ended March 31, 2016 and 2015, an increase of $512,000 over the prior year period. We entered the urgent and primary care business in May 2014 and we currently own or operate 11 urgent and primary care centers in the east and southeastern United States. The following factors, among several others, contributed to our segment operating income in the three months ended March 31, 2016:

Net Revenues

Net revenues are recognized at the time services are rendered at the estimated net realizable amounts from patients, third-party payors and others, after reduction for estimated contractual adjustments pursuant to agreements with third-party payors and an estimate for bad debts. Our urgent and primary care business net revenues increased $2.3 million, or 87% over the prior year period. For the three months ended March 31, 2016, we experienced, in the aggregate, approximately 40,600 patient visits, which resulted in an average of 33 patient visits per day per center and the average reimbursement per patient visit excluding service revenue was approximately $109. For the three months ended March 31, 2015, we experienced, in the aggregate, approximately 23,000 patient visits, which resulted in an average of 29 patient visits per day per center and the average reimbursement per patient visit was approximately $116. We believe our patient volume figures, and therefore our revenue, will improve at our centers as we continue our marketing and advertising efforts in our target markets. Contributing to this projected increase will be the expansion of our occupational medicine service line (on-the-job injuries, pre-employment drug screens, pre-employment physicals), which we intend to grow through our direct marketing efforts. We also expect to see improvements in our total revenue as a result of certain efficiency measures we intend to take with respect to our billing and coding practices

We also anticipate further increases to net revenue as we continue to improve our billing, collection, and all other aspects of our revenue cycle process.

Salaries, Wages, Contract Medical Professional Fees and Related Expenses

Salaries, wages, contract medical professional fees and related expenses are the most significant operating expense components of our urgent and primary care business and consist of compensation and benefits to our clinical providers and staff at our centers. We employ a staffing model at each center that generally includes at least one board-certified physician, one or more physician assistants or nurse practitioners, nurses or medical assistants and a front office staff member on-site at all times. Salaries, wages, contract medical professional fees and related expenses for the three months ended March 31, 2016 increased $1.4 million, or 63.0%, over the prior year period. The increase is largely attributable to the addition of the four Medac centers.

For the three months ended March 31, 2016 and 2015, salaries, wages, contract medical professional fees and related expenses were 70.7% and 81.2%, respectively, of our urgent and primary care business net revenues. The reduction was the result of, among other things, a decreased usage of temporary and other higher-cost medical providers. Temporary medical providers are generally between 25% and 40% more expensive than our typical, full-time providers. We intend to continue to focus on recruiting and retaining talented physicians and mid-level providers, which we believe will further reduce our clinic staffing costs.

Facility Expenses

Facility expenses consist of our urgent and primary care centers’ rent, property tax, insurance, utilities, telephone, and internet expenses. Facility expenses for the three months ended March 31, 2016 increased $189,000, or 75.0%, over the prior year period. For the three months ended March 31, 2016 and 2015, facility expenses were 8.8% and 9.4%, respectively, of our urgent and primary care business net revenues. The increase in expenses was due to our operation of the four additional Medac facilities during the three months ended March 31, 2016 as compared to the three months ended March 31, 2015.

Medical Supplies

Medical supplies consist of medical, pharmaceutical, and laboratory supplies used at our centers. Medical supplies expense in the first quarter of 2016 decreased $14,000, or 6.2%, from the prior period. For the three months ended March 31, 2016 and 2015, medical supplies expenses were 4.2% and 8.4%, respectively, of our urgent and primary care business net revenues. The decrease in expenses was due to more efficient management, our 2015 consolidation of medical supplies vendors, and entry into a group purchasing relationship to gain access to certain preferential pricing terms for certain supply and service items. We believe we will continue to benefit from these actions as we expand our urgent and primary care business.

Other Operating Expenses

Other operating expenses (including electronic medical records, computer systems and maintenance and support) primarily consist of radiology and laboratory fees, premiums paid for medical malpractice and other insurance, marketing, information technology, non-medical professional fees, including accounting and legal, merchant fees, equipment rental and amounts paid to our third-party revenue cycle manager to bill and collect our urgent and primary care revenue. Other operating expenses increased $280,000, or 58.8%, over the prior year period. The increase was due to our operation of more facilities during the three months ended March 31, 2016 than during the three months ended March 31, 2015. For the three months ended March 31, 2016 and 2015, other operating expenses were 15.1% and 17.8% , respectively, of our urgent and primary care business net revenues.

Depreciation and Amortization

Depreciation and amortization primarily consists of depreciation and amortization related to our medical property and equipment. Depreciation and amortization in the first three months of 2016 increased $45,000, or 30.2%, over the prior year period. The increase was due to our operation of more facilities during the three months ended March 31, 2016 than during the three months ended March 31, 2015. For the three months ended March 31, 2016 and 2015, depreciation and amortization expenses were 3.9% and 5.6%, respectively, of our urgent and primary care business net revenues.

Ancillary Network Business

Since October 1, 2014, HealthSmart has managed our ancillary network business under the management agreement discussed above. We experienced deterioration in our ancillary network business segment beginning in 2015 due to continuing changes in the healthcare marketplace. We reported operating income of $299,000 for the three months ended March 31, 2016 compared to $(15,000) for the three months ended March 31, 2015. This increase of $314,000 is due to a 6% reduction in provider margin partially offset by a 1.2% increase in management fees.

As discussed above, we concluded that this line of business qualifies as discontinued operations as of March 31, 2016. Accordingly, financial results for the ancillary network business are presented as discontinued operations in our consolidated statements of operations, and the related asset and liability accounts are presented as held for sale as of March 31, 2016. Amounts previously reported have been reclassified, as necessary, to conform to this presentation to allow for meaningful comparison of continuing operations.

Shared Services

Shared services include the common costs related to both the urgent and primary care and ancillary network lines of business such as the salaries of our executive management team whose time is allocable across both business segments. The following functions are also included in shared services: finance and accounting, human resources, legal, marketing, information technology, and general administration.

As of March 31, 2016, shared services employed 10 full-time employees compared to 18 at March 31, 2015. Shared services expenses totaled $1.4 million and $2.6 million, respectively, for the three months ended March 31, 2016 and 2015, a decrease of $1.2 million, or 45.2%. The decrease was primarily due to significant reduction in corporate staff and professional fees.

Liquidity and Capital Resources

We had negative working capital of $14.6 million at March 31, 2016 compared to negative working capital of $13.2 million at December 31, 2015. The decrease in working capital was primarily due to a $1.6 million decrease in cash used to fund first quarter losses. We expect to incur additional operating losses until we acquire or develop sufficient centers to generate positive operating income.

Our financial statements have been prepared on a going concern basis, which contemplates the recoverability of assets and satisfaction of liabilities in the normal course of business. Based on the information herein, there is a substantial doubt as to the Company’s ability to continue as a going concern. We hope to raise additional capital in 2016 to fund anticipated future operating losses, to satisfy our debt obligations as they become due and to facilitate the expansion of our urgent and primary care business; however, there are no assurances we will be able to secure this capital at terms acceptable to us or at all. We may raise such capital through the sale of assets or through one or more public or private equity offerings, debt financings, borrowings or a combination thereof. If we raise funds through the incurrence of additional debt or the issuance of debt securities, the lenders or purchasers of debt securities may require security that is senior to the rights of our common stockholders. In addition, our incurrence of additional debt could result in the imposition of covenants that restrict our operations or limit our ability to achieve our business objectives. The issuance of any new equity securities will likely dilute the interest of our current stockholders. In light of our historical performance, additional capital may not be available when needed on acceptable terms, or at all. If adequate funds are not available, we will need to, among other things, curb our expansion plans, which would have a material adverse impact on our business prospects and results of operations. In addition, we may be required to reduce our operations, including further reductions in headcount, and sell assets. However, we may be unable to sell assets or undertake other actions to meet our operational needs. As a result, we may be unable to pay our ordinary expenses, including our debt service, on a timely basis. The table below reconciles the loss before income taxes to the net increase in cash for the three months ended March 31, 2016:

Our cash and cash equivalents balance was approximately $1.0 million as of March 31, 2016, as compared to $2.6 million as of December 31, 2015. We had borrowing capacity under existing lines of credit of $0.0 and $700,000, respectively, at March 31, 2016 and December 31, 2015. We expect to extend the maturity of our lines of credit; however, there are no assurances that we will be successful in doing so. At May 13, 2016 we had cash available to us of approximately $478,000 but no capacity to borrow under our lines of credit. We raised equity capital, net of offering costs, of $6.2 million during the year ended December 31, 2015. We have not raised equity capital in 2016.

On December 9, 2015, we consummated a registered firm commitment underwritten public offering and sale (the “2015 Offering”) of (i) 9,642,857 Class A Units, with each Class A Unit consisting of one share of our common stock, par value $0.01 per share (the “Common Stock”) and one immediately exercisable five-year warrant to purchase one share of Common Stock with a warrant exercise price of $0.875 (collectively, the “Class A Units”), (ii) 750 Class B Units, with each Class B Unit consisting of one share of the our Series A Convertible Preferred Stock with a stated value of $1,000 and convertible into 1,429 shares of the Company’s Common Stock and five-year warrants to purchase 1,429 shares of Common Stock, with a warrant exercise price of $0.875 per share (collectively, the “Class B Units” and, together with the Class A Units, the “Securities”) and (iii) immediately exercisable five-year warrants to purchase 370,567 shares of Common Stock with a warrant exercise price of $0.875 per share, sold pursuant to an option we granted to the underwriter, Aegis Capital Corp. (“Aegis”), to purchase additional Securities to cover overallotments. The Securities issued in the 2015 Offering were sold pursuant to an underwriting agreement with Aegis. We received proceeds of $6,221,364, net of all underwriting discounts, commissions and certain reimbursements, pursuant to the underwriting agreement, after legal, accounting and other costs of $1,278,636.

We have two credit agreements with Wells Fargo. On July 30, 2014, we entered into a $5,000,000 revolving line of credit and on December 4, 2014, we entered into a second credit agreement for a $6,000,000 revolving line of credit, which was increased to $7,000,000 on August 12, 2015. Our obligations to repay advances under the credit agreements are evidenced by revolving line of credit notes, each with a fluctuating interest rate per annum of 1.75% above daily one month LIBOR, as in effect from time to time. The July 30, 2014 credit agreement matures on June 1, 2016, and the December 4, 2014 agreement matures on October 1, 2016. The obligations under the credit agreements are secured by all the assets of the Company and its subsidiaries. The credit agreements include ordinary and customary covenants related to, among other things, additional debt, further encumbrances, sales of assets, and investments and lending. As of March 31, 2016, the weighted-average interest rate on these borrowings was approximately 2.18%.

Borrowings under the credit agreements are also secured by guarantees provided by certain officers and directors of the Company, among others. On July 30, 2014, we issued to the guarantors of the July 2014 obligations warrants to purchase an aggregate of 800,000 shares of our common stock in consideration of their guaranteeing such indebtedness. The July 2014 warrants vested immediately and are exercisable any time prior to their expiration on October 30, 2019 at an exercise price of $3.15 per share. In addition, on December 4, 2014, we issued to the guarantors of the December 2014 obligations warrants to purchase an aggregate of 960,000 shares of our common stock in consideration of their guaranteeing such indebtedness. The December 2014 warrants vested immediately and are exercisable any time prior to their expiration on December 4, 2019 at an exercise price of $2.71 per share. In connection with the $1,000,000 increase in the line of credit under the December 2014 credit agreement, on August 12, 2015, we issued warrants to the guarantors to purchase an additional 300,000 shares of our common stock in consideration of their guaranteeing such indebtedness. The August 2015 warrants vested immediately and are exercisable at any time prior to their expiration on August 12, 2020 at an exercise price of $1.70 per share.

The exercise prices of the July 2014 warrants, the December 2014 warrants, and one of the August 2015 warrants under which 50,010 shares are purchasable, were adjusted downward to $1.46 per share, the closing price of our common stock on August 28, 2015. The adjustment resulted from our issuing restricted stock to our directors pursuant to our director compensation plan at a price per share less than the exercise price of such warrants. The exercise prices of all such warrants were further adjusted to $0.70 per share, the public offering price of the Class A Units in our 2015 Offering. The remaining, unadjusted August 2015 warrants, under which 249,990 shares are purchasable, were issued to Company directors (Messrs. Pappajohn and Oman). Therefore, any adjustments to such warrants require stockholder approval. We intend to seek such approval at our 2016 annual meeting of stockholders, and if approved, the exercise price of the remaining August 2015 warrants will be adjusted similarly to $0.70 per share.

Holders of warrants representing substantially all of the shares issuable under the July 2014 warrants have waived any adjustment in the number of shares that could be purchased pursuant to their warrants as a result of the change in the exercise price. Furthermore, with the exception of the potential adjustment to the remaining August 2015 warrants held by Messrs. Pappajohn and Oman, all of the warrant holders have waived any further adjustments to the exercise price of the outstanding warrants.

On December 15, 2015, our wholly-owned subsidiary, ACSH Management, purchased from Medac and its shareholders, substantially all the assets used in the operations of its four urgent care centers for $4,370,000 in cash, the assumption of $768,000 in liabilities and a $560,000 note payable that accrues interest at five percent (5%) that matures on June 15, 2017. Medac remains an urgent care operating entity, owned by a single physician, with which ACSH Management has entered into various agreements. ACSH Management has the power to direct certain of Medac’s significant activities and has the right to receive benefits from Medac that are significant to Medac. We have determined, therefore, that Medac is a VIE and that ACSH Management is the primary beneficiary. Consequently, we have consolidated Medac and its financial results since the date we closed the Medac Asset Acquisition. ACSH Management has entered into a $1.0 million secured line of credit for the benefit of Medac to fund certain of Medac’s operating losses and to cover costs necessary to expand the Medac brand in North Carolina.

At March 31, 2016, $185,000 was due under promissory notes issued to the sellers in the transactions entered into during the year ended December 31, 2014 to acquire primary and urgent are centers. The notes accrue interest at an annual rate of five percent (5%).

A summary of all acquisition notes issued prior to the Medac Asset Acquisition is as follows:

Nasdaq Listing

Our common stock is listed on The NASDAQ Capital Market, and we are therefore subject to its continued listing requirements, including requirements with respect to the market value of publicly-held shares, minimum bid price per share, and minimum stockholder's equity, among others, and requirements relating to board and committee independence. If we fail to satisfy one or more of the requirements, we may be delisted from The NASDAQ Capital Market.

On May 21, 2015, we received a letter from NASDAQ indicating that as of March 31, 2015, our reported stockholders’ equity of $407,000 did not meet the $2.5 million minimum required to maintain continued listing, as set forth in NASDAQ Listing Rule 5550(b)(1). The letter further stated that as of May 20, 2015 we did not meet either of the alternatives of market value of listed securities or net income from continuing operations.

Under NASDAQ rules, we submitted a plan to NASDAQ to regain compliance, which NASDAQ accepted, granting us until November 17, 2015 to evidence compliance. However, because we did not raise equity capital as we anticipated, we did not evidence compliance with NASDAQ Listing Rule 5550(b)(1) by November 17, 2015. On November 18, 2015, we received a letter from NASDAQ stating that we had not regained compliance with the continued listing requirements of The NASDAQ Capital Market. As a result, NASDAQ determined that our common stock would be delisted from The NASDAQ Capital Market effective November 30, 2015. We appealed that determination which stayed the delisting of our common stock until the appeal was heard on January 14, 2016 by the NASDAQ Hearings Panel. Following the hearing, the NASDAQ Hearings Panel continued our listing through May 16, 2016 in order to allow us to meet the $2.5 million minimum stockholders’ equity requirement for continued listing on The NASDAQ Capital Market.

 On January 8, 2016, we received a deficiency letter from NASDAQ indicating that as of January 8, 2016, our common stock failed to maintain a minimum bid price of $1.00 per share for 30 consecutive days in violation of NASDAQ Listing Rule 5550(a)(2). The notification had no immediate effect on the listing of our common stock on The NASDAQ Capital Market and our common stock is continuing to trade on The NASDAQ Capital Market. Under NASDAQ rules, we were granted a 180-day period within which to regain compliance.

We do not believe that we will meet the $2.5 million minimum stockholders’ equity requirement for continued listing on The NASDAQ Capital Market by May 16, 2016. Consequently, we expect that NASDAQ will deem us not to be in compliance with their listing standards and terminate the listing of our common stock on The NASDAQ Capital Market.

If we are delisted from The NASDAQ Capital Market, we expect to list our common stock on the OTCQB Venture Market, operated by OTC Markets Group Inc. We have applied to trade our common stock on the OTCQB, and expect trading would begin on the trading day immediately following the day NASDAQ effects a delisting of our common stock. Our common stock would trade on the OTCQB under its current trading symbol "GNOW." This transition to the OTCQB would not affect our business operations. We will continue to file periodic and other required reports with the Securities and Exchange Commission under applicable federal securities laws.

Delisting from The NASDAQ Capital Market may adversely affect our ability to raise additional financing through the public or private sale of equity securities, may significantly affect the ability of investors to trade our securities and may negatively affect the value and liquidity of our common stock. Delisting also could have other negative results, including the potential loss of employee confidence, the loss of institutional investor interest and the potential loss of business development opportunities. We could also face significant adverse consequences including, among others:

Critical Accounting Policies and Estimates

There have been no material changes to our critical accounting policies and estimates from the information provided in our Annual Report on Form 10-K for the year ended December 31, 2015.