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EX-32.1 - ACCELERA INNOVATIONS, INC.ex32-1.htm
EX-31.1 - ACCELERA INNOVATIONS, INC.ex31-1.htm

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-K

 

[X] Annual Report Pursuant to Section 13 or 15(D) of the Securities Exchange Act of 1934

 

for the fiscal year ended December 31, 2016

 

[  ] Transition Report Under Section 13 or 15(D) of the Securities Exchange Act of 1934

 

for the transition period from _______________ to _______________

 

Commission File Number: 000-53392

 

ACCELERA INNOVATIONS, INC.

(Exact name of registrant as specified in its charter)

 

Delaware   26-2517763

(State or other jurisdiction

of incorporation or organization)

 

(IRS Employer

Identification No.)

 

20511 Abbey Drive

Frankfort, Illinois

  60423
(Address of principal executive offices)   (Zip Code)

 

Registrant’s telephone number, including area code: (866) 866-0758

 

Securities registered under Section 12(b) of the Exchange Act: None

 

Securities registered under Section 12(g) of the Exchange Act:

 

Common Stock, par value $0.0001 per share

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [  ] No [X]

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes [  ] No [X]

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [  ] No [X]

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [  ]

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.[  ]

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large Accelerated Filer

  Accelerated Filer   Non-Accelerated Filer [  ]   Smaller Reporting Company
[  ]   [  ]   (Do not check if a smaller reporting company)   [X]

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [  ] No [X]

 

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter. $1,857,450, based on 27,315,436  shares of the registrant’s common stock and a closing price of $0.068 per share on June 30, 2016

 

As of April 14, 2017 there were 78,158,673 shares of the registrant’s common stock outstanding.

 

 

 

 
  

 

TABLE OF CONTENTS

 

PART I
      4
ITEM 1.   BUSINESS 9
ITEM 1A.   RISK FACTORS 9
ITEM 1B.   UNRESOLVED STAFF COMMENTS 9
ITEM 2.   PROPERTIES 9
ITEM 3.   LEGAL PROCEEDINGS 10
ITEM 4.   MINE SAFETY DISCLOSURES 10
       
PART II
       
ITEM 5.   MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES 10
ITEM 6.   SELECTED FINANCIAL DATA 11
ITEM 7.   MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 12
ITEM 7A.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 16
ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 16
ITEM 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE 17
ITEM 9A.   CONTROLS AND PROCEDURES 17
ITEM 9B.   OTHER INFORMATION 18
       
PART III
       
ITEM 10.   DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE 19
ITEM 11.   EXECUTIVE COMPENSATION 21
ITEM 12.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND ELATED STOCKHOLDER MATTERS 24
ITEM 13.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE 25
ITEM 14   PRINCIPAL ACCOUNTANT FEES AND SERVICES 25
       
PART IV
       
ITEM 15.   EXHIBITS, FINANCIAL STATEMENT SCHEDULES 26
       
SIGNATURES 29

 

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FORWARD-LOOKING STATEMENTS

 

This annual report contains forward-looking statements. The Securities and Exchange Commission (the “Commission”) encourages companies to disclose forward-looking information so that investors can better understand a company’s future prospects and make informed investment decisions. This report and other written and oral statements that we make from time to time contain such forward-looking statements that set out anticipated results based on management’s plans and assumptions regarding future events or performance. We have tried, wherever possible, to identify such statements by using words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” “will” and similar expressions in connection with any discussion of future operating or financial performance. In particular, these include statements relating to future actions, future performance or results of current and anticipated sales efforts, expenses, the outcome of contingencies, such as legal proceedings, and financial results. Factors that could cause our actual results of operations and financial condition to differ materially are discussed in greater detail under Item 1A, “Risk Factors” of this report.

 

We caution that the factors described herein and other factors could cause our actual results of operations and financial condition to differ materially from those expressed in any forward-looking statements we make and that investors should not place undue reliance on any such forward-looking statements. Further, any forward-looking statement speaks only as of the date on which such statement is made, and we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of anticipated or unanticipated events or circumstances. New factors emerge from time to time, and it is not possible for us to predict all of such factors. Further, we cannot assess the impact of each such factor on our results of operations or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

 

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PART I

 

ITEM 1. BUSINESS

 

OVERVIEW

 

Accelera Innovations, Inc. (“we,” “us,” the “Company,” or “Accelera”), a Delaware corporation, is a healthcare service company focused on integrating its licensed technology assets into acquired companies. The technology was licensed to us by our significant shareholder Synergistic Holdings, LLC, a privately-held company organized under the laws of Illinois, in the form of a thirty (30) year exclusive, non-transferrable worldwide license for proprietary Internet-based, software platform (the “Accelera Technology”) that is designed to improve the functionality and performance of healthcare services by making clinical healthcare data available to healthcare consumers.

 

We will not be able to commercialize the Accelera Technology without additional capital. If we do not raise additional funds of approximately $30 million for the advancement of the Accelera Technology over the next 12 months, we will lose our rights to the technology. We will require significant additional financing in order to meet the milestones and requirements of our business plan and avoid discontinuation of the license. Funding is required for staffing, marketing, public relations and the necessary distribution to expand the scope of our business to include the global market. We intend to seek an aggregate of $5 million in financing in the near term through the sale of equity or convertible debt securities. The issuance of these securities will dilute existing shareholders’ interests in the Company. The Company intends to approach hedge funds, venture capital groups, private investment groups and other institutional investment groups in an effort to achieve its funding goals.

 

Health Care Services  

 

Our mission is to improve patient outcomes and lower costs through educating providers, leveraging our technology and changing the conventional model of payment to a value-based system.

 

We aim to provide the highest quality care in the home, spanning every age group and level of care — from pediatrics to geriatrics, to critical care or just being there. Our team of home health care professionals now includes nurses, physical therapists, occupational therapists, speech language pathologists, medical social workers, and home health aides.

 

We provide billing, practice management and administrative services to doctors and other clinicians who provide services to nursing homes and individual clients.

 

LICENSED ACCELERA TECHNOLOGY

 

Software Description

 

We plan to incorporate the following software applications into our recent acquisitions and license and sell such software separately:

 

  Accelera EMR- A certified Electronic Medical Record application designed to be used primarily in physician offices to automate the patient’s clinical chart.
   
  Accelera PM -The Practice Management application designed to be used primarily in physician offices to automate the physician’s revenue cycle management system.
   
  Accelera Patient Portal - The Patient Portal application designed to be used as a communication tool between patient and physician staff. This application will allow the patient to view their on medical record.
   
  Accelera HIE - The Health Information Exchange application is intended to allow providers and payors of healthcare to secure patient’s data and lower healthcare cost.
     
 

Accelera ACO - The Accountable Care Organization (“ACO”) application needed to operate an ACO environment.

This application is designed to offer the ACO business the ability to report to CMS the usage of Medicare benefits and is intended to lower patient and healthcare cost.

     
 

Accelera HIS - The Hospital Information System application is designed to includes all applications to manage most hospital information systems.

 

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Our Corporate History

 

We were incorporated on April 29, 2008 under the name Accelerated Acquisitions IV, Inc. and engaged in the investigation and acquisition of a target company or business seeking the perceived advantages of being a publicly held corporation. We changed our name to Accelera Innovations, Inc. on October 18, 2011.

 

On June 13, 2011, Synergistic Holdings, LLC, a company owned or controlled by Geoff Thompson, Chairman of our board of directors, and his wife Nancy Thompson (“Synergistic”), acquired 17,000,000 shares of our common stock at a price of $0.0001 per share. At the same time, Accelerated Venture Partners, LLC, our former controlling stockholder, cancelled 3,750,000 shares of our common stock. Following these transactions, Synergistic owned approximately 93.15% of our issued and outstanding common stock. Concurrent with the share purchase and cancellation, Timothy Neher, our former sole officer and director, resigned from the board of directors and John Wallin was appointed to the board. These transactions represented a change of control of the Company.

 

Licensing Agreement with Synergistic Holdings, LLC

 

On August 22, 2011, the Company entered into a licensing agreement (the “Licensing Agreement”) with Synergistic pursuant to which the Company received an exclusive, non-transferrable worldwide license for the Accelera Technology.

 

On April 13, 2012, the Company entered into an amended licensing agreement (the “Amendment Agreement”) with Synergistic whereby the Company and Synergistic agreed to amend the Licensing Agreement. The Company licensed additional technology from Synergistic and the parties agreed to modify the terms, conditions, representations and warranties regarding the Accelera Technology and to clarify any obligations Synergistic may have with third parties.

 

The Accelera Technology is intended to improve the functionality and performance of healthcare services by making clinical healthcare data available to healthcare consumers. This data is intended to serve as the backbone for self-management tools that are designed to allow these same healthcare consumers to facilitate the self-management portion of their doctor-prescribed care plan and focus on the most costly disease states. This is intended to be accomplished through the proprietary technology, which is designed to identify and measure the severity of the sickness level based upon evidence-based clinical and medical rules and to deliver the results to insurance companies, doctors, hospitals and employers.

 

Except for the rights granted under the Licensing Agreement, as amended, Synergistic retains all rights, title and interest to Accelera Technology and any additions thereto—although the license includes the Company’s right to utilize such additions.

 

The term of the license commenced on August 22, 2011 and by oral agreement in fiscal 2014 will continue for thirty (30) years, provided that we are not in breach or default of any of the terms or conditions contained in the Licensing Agreement, as amended. In addition to other requirements, the continuation of the license is conditioned on the Company generating net revenues in the normal course of operations or the funding by the Company of approximately $30 million over three years for qualifying development and commercialization expenses related to the Accelera Technology.

 

On December 5, 2014, the Company and Synergistic agreed to cancel 796,671 shares of the Company’s common stock owned by Synergistic and forgive certain indebtedness owed by the Company to Synergistic in the amount of $1,018,618. In addition, the Company entered into an oral agreement to amend the terms of the Licensing Agreement to reduce the total amount of reimbursable distribution and commercialization expenses due under the License Agreement by $585,181 to $29,414,819 and defer the date of certain payment obligations by the Company under the Licensing Agreement as follows:

 

  (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.

 

 

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The Company has not paid the December 31, 2015 payment of $5,000,000 and the additional $7,500,000 due on December 31, 2016

 

The Company is required to fund certain specified expenses related to the deployment of the Accelera Technology as specified in the Licensing Agreement. Synergistic will receive a royalty of fifteen percent (15%) of all gross revenues resulting from the use of the technology by the Company in the first year, ten percent (10%) in the second year and one quarter of one percent (.025%) of all gross revenues resulting from the use of the technology by the Company for the remainder of the Licensing Agreement. The license can be terminated upon the occurrence of events of default specified in the Licensing Agreement and outlined as follows:

 

  If any of the parties are in breach or default of the terms or conditions contained in the Licensing Agreement and do not rectify or remedy that breach or default within 90 days from the date of receipt of notice by the other party requiring that default or breach to be remedied, then the other party may give to the party in default a notice in writing terminating the Licensing Agreement.
     
  The Company may, at its option, terminate the Licensing Agreement at any time by ceasing to use the Accelera Technology and offer the services facilitated by any Licensed Products (as defined in the Licensing Agreement); by giving sixty (60) days prior written notice to Synergistic of such cessation and of the Company’s intent to terminate, and upon receipt of such notice, Synergistic may immediately begin negotiations with other potential licensees and all other obligations of the Company under the Licensing Agreement will continue to be in effect until the date of termination; by tendering payment of all accrued royalties and other payments due to Synergistic as of the date of the notice of termination; and evidencing to Synergistic that provision has been made for any prospective royalties and other payments to which Synergistic may be entitled after the date of termination.

 

In addition, Synergistic may alter the license granted by the Licensing Agreement with regards to its exclusivity, its territorial application and restrictions on its application if the Company is in breach or default of the terms or conditions contained in the Licensing Agreement and does not rectify or remedy that breach or default within 90 days from the date of receipt of notice by Synergistic requiring that default or breach to be remedied.

 

On May 7, 2015, the Company and Synergistic agreed to further amend the Licensing Agreement to eliminate the Company’s $29,414,819 funding requirement under Article 3 and replace it with a requirement to pay a license fee in the amount of $10,000 upon completion and acceptance of each installation of the software at a location for each affiliate or subsidiary of the Company and the sum of $10,000 on each anniversary after each such installation during the period of time in which the software is used at such location. In addition, the Company will be responsible for the reasonable installation costs incurred by Synergistic in connection with the installation and setup of the software as required by the Company. The license fee may be paid in cash or the Company’s common stock. In addition, the Licensing Agreement was amended to delete the Company’s exclusive rights under the agreement.

 

Investment Agreement with Lambert Private Equity, LLC

 

On October 4, 2013, the Company entered into a standby equity purchase agreement (the “Investment Agreement”) with Lambert Private Equity, LLC, a Delaware limited liability company (the “Investor”). Pursuant to the Investment Agreement, the Investor committed to purchase, subject to certain restrictions and conditions, up to $100,000,000 (which can be extended to $200,000,000 under the same terms) of the Company’s common stock, over a period of 36 months from the first trading day following the effectiveness of the registration statement registering the resale of shares purchased by the Investor pursuant to the Investment Agreement. As of the date of this report, no shares had been issued by the Company or purchased by the Investor under the Investment Agreement.

 

The Company may draw on the facility from time to time, as and when it determines appropriate in accordance with the terms and conditions of the Investment Agreement. The maximum amount that the Company is entitled to put to the Investor in any one draw down notice is no more than $2,000,000 and not exceeding 285,710 shares. The purchase price shall be set at ninety percent (90%) of the lowest daily volume weighted average price (VWAP) of the Company’s common stock during the fifteen (15) consecutive trading day period beginning on the date of delivery of the applicable draw down notice. The Company has the right to withdraw all or any portion of any put, except that portion of the put that has already been sold to a third party, including any portion of a put that is below the minimum acceptable price set forth on the put notice, before the closing. There are put restrictions applied on days between the draw down notice date and the closing date with respect to that particular put. During such time, the Company shall not be entitled to deliver another draw down notice. In addition, the Investor will not be obligated to purchase shares if the Investor’s total number of shares beneficially held at that time would exceed 4.99% of the number of shares of the Company’s common stock as determined in accordance with Rule 13d-1(j) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). In addition, the Company is not permitted to draw on the facility unless there is an effective registration statement (as further explained below) to cover the resale of the shares.

 

The Investment Agreement further provides that the Company and the Investor are each entitled to customary indemnification from the other for, among other things, any losses or liabilities they may suffer as a result of any breach by the other party of any provisions of the Investment Agreement or Registration Rights Agreement (as defined below), or as a result of any lawsuit brought by a third-party arising out of or resulting from the other party’s execution, delivery, performance or enforcement of the Investment Agreement.

 

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The Investment Agreement also contains customary representations and warranties of each of the parties. The assertions embodied in those representations and warranties were made for purposes of the Investment Agreement and are subject to qualifications and limitations agreed to by the parties in connection with negotiating the terms of the Investment Agreement. In addition, certain representations and warranties were made as of a specific date, may be subject or a contractual standard of materiality different from what a shareholder or investor might view as material, or may have been used for purposes of allocating risk between the respective parties rather than establishing matters as facts.

 

Pursuant to the terms of a registration rights agreement between the Company and the Investor (the “Registration Rights Agreement”), the Company is obligated to file one or more registrations statements with the SEC to register the resale by Investor of the shares of common stock issued or issuable under the Investment Agreement. In addition, the Company is obligated to use all commercially reasonable efforts to have the registration statement declared effective by the SEC within 180 days after the registration statement is filed.

 

As an inducement to Investor to enter in to the Investment Agreement and as consideration for the Investor making the investment the Investor received 285,710 shares of common stock and 100% warrant/option coverage. The option to purchase shares certified that the Investor was entitled, effective as of October 4, 2013 and subject to the terms and conditions of the option, to purchase from the Company up to a total of 14,287,710 shares of the Company’s common stock at a price of the lesser of (a) $7.00 or (b) 110% of the lowest daily VWAP for the common stock as reported by Bloomberg during the thirty (30) trading days prior to the date the Investor exercised the warrant, prior to 5:00pm (New York time) on September 3, 2018, the expiration date.

 

Acquisition of Behavioral Health Care Associates, Ltd.

 

On November 20, 2013, we entered into a stock purchase agreement (the “SPA”) with Behavioral Health Care Associates, Ltd. (“BHCA”), an Illinois company, and its owner, Blaise J. Wolfrum, M.D., to acquire 100% of the issued and outstanding shares of BHCA from Dr. Wolfrum. The SPA was amended as of May 30, 2014.

 

Pursuant the SPA, we agreed to pay to Dr. Wolfrum a purchase price of $4,550,000 for his shares of BHCA, of which $1,000,000 was payable on May 31, 2015, $750,000 was payable on July 30, 2015, and $2,800,000 was payable on December 31, 2015. Prior to Dr. Wolfram’s receipt of the initial $1,000,000 payment, he had the right to cancel and terminate the SPA. In addition, as consideration for entering into various amendments to the SPA, we agreed to issue Dr. Wolfrum a total of 50,000 shares of our common stock which we agreed to register for resale upon completion of a public offering of our securities. We originally recorded the purchase of BHCA on November 11, 2013 and began consolidating the operating results of BHCA from that date. We never made any of the required installment payments in accordance with the SPA and the stock of BHCA was never transferred to us. As a result, we have determined that the financial statements of BHCA should have never been consolidated with our financial statements since we was never able to take control of BHCA due to non-payment of the purchase price. The 2015 financial statements included elsewhere in this Form 10K have been restated to remove BHCA from our consolidated financial statements.

 

On November 20, 2013, the Company entered into an employment agreement with Dr. Wolfrum as the President of the Accelera business unit “Behavioral Health Care Associates”.

 

On March 31, 2016, the Company, Dr. Wolfrum and BHCA entered into a termination agreement (the “Termination Agreement”) pursuant to which the various agreements between the parties were terminated effective January 1, 2016 except for certain surviving obligations as set forth in the Termination Agreement.

 

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In conjunction with the Termination Agreement, the Company, Dr. Wolfrum and Accelera Healthcare Management Service Organization, LLC (“Accelera Healthcare”) executed a resignation and release agreement effective as of January 1, 2016 pursuant to which Dr. Wolfrum resigned as manager and from any and all positions with Accelera Healthcare. Further, the Company and Accelera Healthcare, and any of their affiliates or other parties claiming by or through the Company or Accelera Healthcare, agreed to release and discharge Dr. Wolfrum from any and all claims, actions, lawsuits, obligations, or liability, monetary or otherwise arising from or related to the operating agreement between Accelera Healthcare and Dr. Wolfrum dated November 11, 2013 (the “Operating Agreement”), his performance and actions as Manager of Accelera Healthcare, or any other issue or matter arising prior to or on the date of full execution of the resignation and release agreement. In addition, the Company and Accelera Healthcare, and any of their affiliates or other parties claiming by or through the Company or Accelera Healthcare, agreed not to make, commence, file, or assert against Dr. Wolfrum any claim, lawsuit, action, or other request for relief arising from or related to the Operating Agreement, his performance and actions as Manager of Accelera Healthcare, or any other issue or matter arising prior to or on the date of full execution of the resignation and release agreement.

 

The Behavioral Health Care Associates Ltd agreement was signed in 2013 and as noted numerous extensions were signed; the Company never officially made a first payment therefore we are restating our 2015 consolidated financials.

 

Termination of Planned Acquisition of At Home Health Services LLC

 

On December 13, 2013, we entered into a purchase agreement with At Home Health Services LLC, All Staffing Services, LLC (together, the “Subject LLCs”) and Rose Gallagher, individually and as Trustee of the Rose M. Gallagher Revocable Trust dated November 30, 1994 (“Gallagher”), pursuant to which we agreed to purchase and Gallagher agreed to sell, all of Gallagher’s interests in the Subject LLCs. We terminated this agreement effective December 31, 2014.

 

Acquisition of with SCI Home Health, Inc. (d/b/a Advance Lifecare Home Health)

 

On August 25, 2014, we entered into a stock purchase agreement (the “Stock Purchase Agreement”) with SCI Home Health, Inc. (d/b/a Advance Lifecare Home Health) (“SCI”), Ethel dela Cruz, Virgilia Avila, Ma Lourdes Reyes Celicious, Cristina Soriano, Michelle Cartas and Jimmy Lacaba (collectively, the “Sellers”), pursuant to which we agreed to purchase, and the Sellers agreed to sell, all their SCI shares, collectively representing all of the outstanding shares of common stock of SCI, for an aggregate purchase price of $450,000 (the “Stock Purchase”). This transaction closed in October 2104, at which time SCI became our wholly owned subsidiary.

 

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ITEM 1A. RISK FACTORS

 

Not required.

 

ITEM 1B. UNRESOLVED STAFF COMMENTS

 

None.

 

ITEM 2. PROPERTIES

 

We maintain our corporate office at 20511 Abbey Drive, Frankfort, Illinois 60423. SCI formerly operated from a 1,900 square foot facility located at 3590 Hobson Road, Woodridge, Illinois 60517, which has since closed and the lease expired.

 

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ITEM 3. LEGAL PROCEEDINGS

 

In 2015, the Securities and Exchange Commission (the “SEC”) issued subpoenas to us, our Chief Executive Officer and our Chairman of the Board in connection with a formal investigation of our affairs (Case No. C-08191). We have responded to the subpoenas and no further action has been taken by the SEC as of the date of this report.

 

In addition, in November and December 2016, certain of our officers and employees received subpoenas from the SEC requesting certain information regarding a separate formal investigation.

 

On May 5, 2016, LG Capital Funding LLC provided the Company with a $52,500.00 convertible note. On March 28, 2017 a complaint was filed by LG Capital to settle the convertible note.

 

Other than as described above, we do not know of any material, active or pending legal proceedings against us, nor are we involved as a plaintiff in any material proceedings or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered beneficial shareholders are an adverse party or have a material interest adverse to us.  

 

ITEM 4. MINE SAFETY DISCLOSURES

 

Not applicable.

 

PART II

 

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

 

Our common stock is quoted on the OTCQB under the symbol “ACNV”. On April 13, 2017, the closing price for our common stock was $0.0077.

 

As of April 14, 2017 there were approximately 239 holders of record of our common stock, an unknown number of additional holders whose stock is held in “street name” and 78,158,673 shares of common stock issued and outstanding.

 

Dividends

 

We have not declared or paid dividends on our common stock since our formation, and we do not anticipate paying dividends in the foreseeable future. Declaration or payment of dividends, if any, in the future, will be at the discretion of our board of directors and will depend on our then current financial condition, results of operations, capital requirements and other factors deemed relevant by the board. There are no contractual restrictions on our ability to declare or pay dividends.

 

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Preferred Stock

 

The Company has two classes of stock, preferred stock and common stock. There are 10,000,000 shares of $0.0001 par value preferred stock authorized, 500,000 of which were designated as 8% Convertible Preferred Stock on 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 do not have any voting rights,
     
  The shares pay quarterly dividends in arrears at the rate of 8% per annum and on each conversion date. Subject to certain conditions, the dividends are payable at our option in cash or such dividends shall be accreted to, and increase, the outstanding stated value,
     
  Each share is convertible into shares of our common stock at a conversion price of $4.00 per share, subject to adjustment discussed below, and
     
  The conversion price of the shares is subject to proportional adjustment in the event of stock splits, stock dividends and similar corporate events.

 

There were 198,473 shares of 8% Convertible Preferred Stock issued and outstanding as of December 31, 2016.

 

ITEM 6. SELECTED FINANCIAL DATA

 

Not required.

 

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

OVERVIEW

 

Plan of Operations

 

We are a healthcare service company focused on acquiring companies primarily in the post-acute care patient services and information technology services industries. In October 2014, we acquired SCI Home Health, Inc. (d/b/a Advance Lifecare Home Health), an Illinois corporation (“SCI”) that offers home health services to patients in the Chicago, Illinois area. In addition, we planned to acquire an interest in several other home health care service providers; however, each of those transactions was abandoned by mutual agreements of the parties in January 2016.

 

In January 2017, we began to consider transitioning from being a home health agency acquirer to a company involved in assisted living real estate transactions.

 

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Recent Developments

 

On April 1, 2017, James Millikan retired as our Chief Operating Officer.

 

Results of Operations

 

The following comparative analysis on results of operations was based primarily on the comparative financial statements, footnotes and related information for the periods identified below and should be read in conjunction with the financial statements and the notes to those statements that are included elsewhere in this report. The following is a summary of the Company’s operational results for the years ended December 31, 2016 and 2015:

 

    Years Ended              
    December 31,     December 31,     Dollar     Percentage  
    2016     2015     Change     Change  
Revenue   $ 2,750     $ 1,133,715     $ (1,130,965 )     -99.8 %
Cost of revenue     -       157,711       (157,711 )     -100.0 %
Gross profit     2,750       976,004       (973,254 )     -99.7 %
Total operating expenses     1,900,962       13,992,521       (12,091,559 )     -86.4 %
Other expense     (27,082 )     (1,799,158 )     1,772,076       -98.5 %
Net loss     (1,925,294)       (14,815,675 )     12,890,381       -87.0 %

 

Revenue

 

Total revenue decreased by $1,130,965 to $2,750 for the year ended December 31, 2016 compared to $1,133,715 in the same period in 2015. This decrease in total revenue is primarily due to the sudden departure of the administrator of SCI. We have transitioned this position to a new administrator and filed these changes with IDPH (Illinois Department of Public Health). There are claims to be processed and invoiced when IDPH approves, through the uniform process, the new administrator, we expect this to be resolved in the near future.

 

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Gross Profit

 

Gross profit decreased by $973,254 to $2,750 for the year ended December 31, 2016 compared to $976,004 in the same period in 2015. This decrease in gross profit is primarily due to the sudden departure of the administrator of SCI as described above.

 

Operating Expenses

 

Total operating expenses for the year ended December 31, 2016 decreased by $12,091,559 to $1,900,962, compared to $13,992,521 during the same period in 2015. The decrease is principally a result of lower stock option expense and common stock issued for services, and lower operating cost for SCI.

 

Other Expenses

 

Total other expenses for the year ended December 31, 2016 decreased by $1,772,076 to $27,082, compared to $1,799,158 during the same period in 2015. The decrease is due to lower interest expense and financing costs for the year ended December 31, 2016 as a result of penalty interest incurred in 2015 offset by a gain related to the change in the value of our derivative liability all in connection with the issuance of convertible notes payable during the 2016 year.

 

Net loss

 

The net loss for the year ended December 31, 2016 was $1,925,294, a decrease of $12,890,381 compared to $14,815,675 during the same period in 2015, as a result of factors described above.

 

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Liquidity and Capital Resources

 

Liquidity is the ability of an enterprise to generate adequate amounts of cash to meet its needs for cash requirements. As of December 31, 2016, our working capital deficit amounted to $2,389,904, an increase of $233,673 as compared to working capital deficit of $2,156,231 as of December 31, 2015. This increase is primarily a result of add notes payables issued in 2016. Our working capital deficit at December 31, 2016 included current assets of $2,750 offset by current liabilities of $2,392,654.

 

Net cash used in operating activities was $214,814 during the year ended December 31, 2016 compared to $443,860 in the same period in 2015. The decrease in cash used in operating activities is primarily attributable the lack of revenue generated from operations in 2016.

 

Net cash used in investing activities during the year ended December 31, 2016 was $0 compared to $3,767 in the same period in 2015.

 

Net cash provided by financing activities during the year ended December 31, 2016 was $214,814 compared to $447,627 in the same period in 2015. The decrease is primarily a result of a decrease in the proceeds from notes payable and advances from related parties in 2016.

 

Cash Requirements

 

Our future capital requirements will depend on numerous factors, including the extent we continue to make acquisitions and our ability to control costs. We estimate that we will need to raise a minimum amount of $5,000,000 over the next 12 months to pay debts incurred, fund future acquisitions and continue operations. We will be reliant upon shareholder loans, private placements or public offerings of debt and equity to fund our planned acquisitions and systems rollout. There can be no assurance that additional capital will be available to us. Other than the Standby Equity Purchase Agreement we entered into with Lambert Private Equity, LLC to sell, subject to certain restrictions and conditions, up to $100,000,000 (which can be extended to $200,000,000 under the same terms) of our common stock, we currently have no agreements, arrangements or understandings with any person to obtain funds through bank loans, lines of credit or any other sources. We are not currently eligible to sell all of the securities under the Standby Equity Purchase Agreement and cannot determine when we will meet all the requirements necessary in order to begin selling securities under that agreement. Consequently, we have no arrangements or plans currently in effect that would allow us to immediately raise capital and our inability to raise funds for the above purposes will have a severe negative impact on our ability to carry out our plans to complete acquisitions and fund our operations.

 

We do not currently have any contractual restrictions on our ability to incur debt and, accordingly we could incur significant amounts of indebtedness to finance operations. Any such indebtedness could contain covenants which would restrict our operations.

 

Going Concern

 

As reflected in the consolidated financial statements of the Company included in this report, we reported a net loss from continuing operations of $1,925,294 for the year ended December 31, 2016 and at December 31, 2016, a working capital deficit, stockholders’ deficit and accumulated deficit of $2,389,904, $2,383,015 and $61,612,829, respectively. These matters raise substantial doubt about our ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent on our ability to further implement our business plan, raise additional capital, and generate positive cash flow. The unaudited consolidated financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern.

 

Critical Accounting Policies

 

We have identified the following policies below as critical to our business and results of operations. Our reported results are impacted by the application of the following accounting policies, certain of which require management to make subjective or complex judgments. These judgments involve making estimates about the effect of matters that are inherently uncertain and may significantly impact quarterly or annual results of operations. For all of these policies, management cautions that future events rarely develop exactly as expected, and the best estimates routinely require adjustment. Specific risks associated with these critical accounting policies are described in the following paragraphs.

 

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Principles of Consolidation

 

The Company operates companies in the personal health care industry. The Company operates out of one service center serving the Chicago, Illinois area. The consolidated financial statements for the year ended December 31, 2016 include the accounts of the Company and its 100% owned subsidiary SCI., Significant intercompany accounts and transactions have been eliminated in consolidation

 

Derivative Financial Instruments

 

We evaluate all of our 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, we use 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. Our 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 our common stock.

 

Stock-based Compensation

 

ASC 718, “Compensation-Stock Compensation” requires recognition in the financial statements of the cost of employee services received in exchange for an award of equity instruments over the period the employee is required to perform the services in exchange for the award (presumptively the vesting period). We measure the cost of employee services received in exchange for an award based on the grant-date fair value of the award. We account for non-employee share-based awards based upon ASC 505-50, “Equity-Based Payments to Non-Employees.” ASC 505-50 requires the costs of goods and services received in exchange for an award of equity instruments to be recognized using the fair value of the goods and services or the fair value of the equity award, whichever is more reliably measurable. The fair value of the equity award is determined on the measurement date, which is the earlier of the date that a performance commitment is reached or the date that performance is complete. Generally, our awards do not entail performance commitments. When an award vests over time such that performance occurs over multiple reporting periods, we estimate the fair value of the award as of the end of each reporting period and recognize an appropriate portion of the cost based on the fair value on that date. When the award vests, we adjust the cost previously recognized so that the cost ultimately recognized is equivalent to the fair value on the vesting date, which is presumed to be the date performance is complete.

 

Off-Balance Sheet Arrangements

 

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.

 

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Not required.

 

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

 

See the Index to Financial Statements and Financial Statement Schedules beginning on page F-1 of this report.

 

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

 

None.

 

ITEM 9A. CONTROLS AND PROCEDURES

 

Evaluation of Disclosure Controls and Procedures

 

As required by Rule 13a-15(b) under the Exchange Act, we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls as of the end of the period covered by this report, December 31, 2016. This evaluation was carried out under the supervision and with the participation of our principal executive officer and our principal financial officer (the “Certifying Officers”). Based upon that evaluation, our Certifying Officers concluded that as of the end of the period covered by this report, December 31, 2016, our disclosure controls and procedures were ineffective.

 

Management’s Annual Report on Internal Control Over Financial Reporting

 

Our management is responsible for establishing and maintaining adequate internal control, as defined in the Exchange Act. These internal controls are designed to provide reasonable assurance that the reported financial information is presented fairly, that disclosures are adequate and that the judgments inherent in the preparation of financial statements are reasonable. There are inherent limitations in the effectiveness of any system of internal controls including the possibility of human error and overriding of controls. Consequently, an ineffective internal control system can only provide reasonable, not absolute, assurance with respect to reporting financial information.

 

Our internal control over financial reporting includes policies and procedures that: (i) pertain to maintaining records that, in reasonable detail, accurately and fairly reflect our transactions; (ii) provide reasonable assurance that transactions are recorded as necessary for preparation of our financial statements in accordance with generally accepted accounting principles and that the receipts and expenditures of company assets are made in accordance with our management and directors authorization; and (iii) provide reasonable assurance regarding the prevention of or timely detection of unauthorized acquisition, use or disposition of assets that could have a material effect on our financial statements.

 

Management has undertaken an assessment of the effectiveness of our internal control over financial reporting based on the framework and criteria established in the 2013 Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based upon this evaluation, our management concluded that, due to the material weaknesses described below, our internal control over financial reporting was ineffective as of December 31, 2016.

 

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements would not be prevented or detected on a timely basis.

 

The specific material weaknesses identified by our management relate to limited resources and our inadequate number of personnel to allow for proper segregation of duties and the requisite internal controls and application of accounting principles generally accepted in the United States of America. John F. Wallin functions as our Chief Executive Officer and Chief Financial Officer and as such, has not established adequate processes and channels of communication to provide the timely and accurate flow of information to others. This weakness in internal controls has prevented the timely recording of company transactions and execution of reliable financial closing procedures. Management has determined that our internal audit function is also significantly deficient due to insufficient resources to perform internal audit functions. Finally, management determined that the lack of an audit committee of our Board of Directors also contributes to insufficient oversight of our accounting and audit functions. Also, certain aspects of the financial reporting process were materially deficient because we lack a sufficient complement of personnel with a level of accounting expertise and an adequate supervisory review structure that is commensurate with our financial reporting requirements.

 

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We expect to be materially dependent upon a third party to provide us with accounting consulting services for the foreseeable future. Until such time as we have a chief financial officer with the requisite expertise in GAAP, there are no assurances that the material weaknesses in our disclosure controls and procedures and internal control over financial reporting will not result in errors in our financial statements which could lead to a restatement of those financial statements.

 

Our management, including our principal executive officer and our principal financial officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Due to the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our Company have been detected.

 

This report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to SEC rules that permit the Company to provide only management’s report in this report.

 

Changes in Internal Control

 

There were no changes in our internal control over financial reporting during the quarter ended December 31, 2016 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

ITEM 9B. OTHER INFORMATION

 

None.

 

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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.

 

Name   Age   Position(s) with the Company
         
Geoffrey Thompson   49   Chairman of the Board
John F. Wallin   67   Chief Executive Officer, Chief Financial Officer and Chief Marketing Officer
Cynthia Boerum   63   Chief Strategic Officer
Patrick Custardo   65   Chief Acquisitions Officer

 

Geoffrey Thompson, Chairman of the Board

 

Mr. Thompson founded Accelera in 2008 as serves as the Chairman of the Board. In 2008, Mr. Thompson transitioned Global Wealth Solutions into GWS Financial Services which started to create unique financial products which included Private Placement Memorandums with principal protection, Private Placed Life Insurance, Private Placed Variable Annuities, Premium Financed estate transfers and Supplemental Employee Retirement Plans. In 2005, he launched Global Wealth Solutions, a client consulting firm with a heavy focus on strategic investing and advanced finance strategies.

 

In 2001 Mr. Thompson launched Stremline Mortgage company after relocating to Minneapolis, Minnesota. As Streamline grew into a multi-state company he opened Streamline Title and started acquiring properties under Streamline Real Estate investments. The companies then grew into a real estate development company under the banner of Presidium. Mr. Thompson’s professional career started in 1993 when he took on the role of finance and insurance manager for Bergstrom Automotive Group in Neenah, Wisconsin.

 

John Wallin, Chief Executive Officer, Chief Financial Officer and Chief Marketing Officer

 

Mr. Wallin is our Chief Executive Officer and Chief Marketing Officer, and since March 20, 2015 has also acted as our Chief Financial Officer. Mr. Wallin has been Chief Executive Officer, Chief Marketing Officer and Director of Synergistic since 2009.

 

Mr. Wallin has over 30 years of experience in the financial services industry. Prior to his involvement with Synergistic, Mr. Wallin was President and Chief Marketing Officer at GWG Advantage in Minneapolis from 2007 to 2009. Previously, Mr. Wallin held the positions of Executive Director of Medicare Advantage-PFFS at American Insurance Marketing Corporation from 2005 to 2007, Senior Sales Executive/ National Sales and Chief Marketing Officer at RNA-Rock Island from 2002 to 2005, Senior Vice President/Regional Financial Services Manager at Allstate Financial Services from 2000 to 2002, Senior Vice President, National Key Account Manager at Federated Investors from 1998 to 2000, Vice President BISYS Funds from 1995 to 1998, Senior Vice President of Marketing and National Accounts at Putnam Mutual Funds and Senior Vice President of Marketing and National Accounts at Kemper Financial Services from 1989 to 1992. Mr. Wallin received his B.Sc. in 1976 and Masters in Education in 1982 from Chicago State University.

 

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Cynthia Boerum, Chief Strategic Officer

 

Ms. Boerum became the Chief Strategic Officer of the Company in April 2012. Prior to joining the Company, Ms. Boerum was Vice President of Sales and Consultant for Accentia International Outsourcing in Hyberdad, India, from 2009 to 2011. The leadership included national and international sales teams.

 

Previously, Ms. Boerum held the positions of Vice President of Sales for Opus Healthcare in Austin, Texas from 2004 to 2007 and positioned the company for acquisition by NextGen. She also held the positions of Enterprise Vice President of National Accounts and Sales Manager for the top 32 health organizations nationally at McKesson from 1989 to 2003. During this time she received various top performer awards, not only from McKesson, but also the state of Minnesota. Ms. Boerum received her clinical experience at Shady Grove Adventist Hospital, in Maryland, from 1979 to 1989. Ms. Boerum attended the ADN program at Frederick Community College in Maryland.

 

Patrick Custardo, Chief Acquisitions Officer

 

Mr. Custardo joined Accelera in December 2012. He started his career as Vice President of Mergers and Acquisitions with Northern Continent Capital Funds in Chicago, Illinois. He left that position to create Sentry Financial Corporation, an investment banking firm specializing in acquisitions and divestitures. In 2006, he acquired a small third-party medical billing company and through personal investment, transformed it into a regional Revenue Cycle Management (RCM) firm. In conjunction with other health care professionals, he has been instrumental in the founding of an Accountable Care Organization. He has been published in Health Care journals and is regarded as a Medicare expert in the industry.

 

Board Committees

 

Our securities are not quoted on an exchange that has requirements that a majority of our board members be independent and we are not currently otherwise subject to any law, rule or regulation requiring that all or any portion of our board of directors include “independent” directors, nor are we required to establish or maintain an audit committee or other committee of our board of directors.

 

The board does not have standing audit, compensation or nominating committees. The board does not believe these committees are necessary based on the size of our company and the current levels of compensation paid to corporate officers. The board will consider establishing audit, compensation and nominating committees at the appropriate time.

 

The entire board of directors participates in the consideration of compensation issues and of director nominees. Candidates for director nominees are reviewed in the context of the current composition of the board and the Company’s operating requirements and the long-term interests of its stockholders. In conducting this assessment, the board considers skills, diversity, age, and such other factors as it deems appropriate given the current needs of the board and the Company, to maintain a balance of knowledge, experience and capability.

 

The board’s process for identifying and evaluating nominees for director, including nominees recommended by stockholders, will involve compiling names of potentially eligible candidates, conducting background and reference checks, conducting interviews with the candidate and others (as schedules permit), meeting to consider and approve the final candidates and, as appropriate, preparing an analysis with regard to particular recommended candidates.

 

Through their own business activities and experiences each of our directors has come to understand that in today’s business environment, development of useful products and identification of undervalued medical providers, along with other related efforts, are the keys to building our company. The directors will seek out individuals with relevant experience to operate and build our current and proposed business activities.

 

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Director Compensation

 

Our directors do not receive any compensation in consideration for their services as directors and there is no other compensation being considered at this time.

 

Compliance with Section 16(a) of the Exchange Act

 

Section 16(a) of the Exchange Act requires our executive officers and directors, and persons who beneficially own more than 10% of a registered class of our equity securities to file with the SEC initial statements of beneficial ownership, reports of changes in ownership and annual reports concerning their ownership of our common stock and other equity securities, on Forms 3, 4 and 5, respectively. Executive officers, directors and greater than 10% shareholders are required by SEC regulations to furnish us with copies of all Section 16(a) reports they file. Based on our review of the copies of such forms received by us, and to the best of our knowledge, all executive officers, directors and persons holding greater than 10% of our issued and outstanding stock have filed the required reports in a timely manner during 2016.

 

ITEM 11. EXECUTIVE COMPENSATION

 

The following table summarizes all compensation recorded by us during the years ended December 31, 2016 and 2015 for our principal executive officers, each other executive officer serving as such whose annual compensation exceeded $100,000, and additional individual for whom disclosure would have been made in this table but for the fact that the individual was not serving as an executive officer of our Company at December 31, 2016. Pursuant to Item 402(a)(5) of Regulation S-K we have omitted certain columns from the table since there was no compensation awarded to, earned by or paid to these individuals required to be reported in such columns in either year.

 

SUMMARY COMPENSATION TABLE

 

Name and Principal Position  Year   Salary ($)   Option Awards ($)   Total ($) 
John Wallin (1)   2016    0    131,144    131,144 
    2015    0    786,720    786,720 
                     
James Millikan (2)   2016    0    75,000    75,000 
    2015    0    450,000    450,000 
                     
Daniel Freeman (3)   2016    N/A     N/A      N/A 
    2015    0    30,000    30,000 

 

  (1) Chief Executive Officer. In addition, Mr. Wallin has acted as our Chief Financial Officer since March 20, 2015.
     
  (2) Chief Operating Officer (retired on April 1, 2017).
     
  (3) Former Chief Financial Officer (resigned on March 20, 2015).

 

None of our directors has received any monetary compensation from our inception to the date of this annual report. We currently do not pay any compensation to our directors for serving on our board of directors.

 

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Stock Option Grants

 

We currently have 5,803,250  options outstanding under our 2011 Stock Option Plan which have been granted to key employees. John Wallin has 1,049,000 options, James Millikan has 600,000, Cynthia Boerum and Patrick Custardo each have 800,000, and the options awarded will vest in equal annual installments over a four-year period. Also, Daniel Freeman has 914,667 and Jimmy LaCaba has 60,000.  

 

Employment Agreements

 

Effective April 26, 2012, the Company entered into an employment agreement with John F. Wallin as the President and Chief Executive Officer of the Company. The employment agreement with Mr. Wallin provides that, upon completion of $2,000,000 in financing, the Company shall pay him a base salary of $250,000 per year at the times and subject to the Company’s standard payroll practices, subject to applicable withholding. The base salary shall be reviewed at least annually, and increased as determined by the board. So long as Mr. Wallin has not been terminated for cause, as defined in the employment agreement, he will be eligible for bonus compensation, payable immediately following completion of the Company’s financial statements for each full fiscal year, commencing in 2013. Mr. Wallin’s annual bonus targets are still being developed by the Company and will be adjusted from time to time, based upon the Company’s achieving 100% of certain financial metrics plan targets to be determined by the board.

 

In further consideration for Mr. Wallin’s services, the Company agreed to grant options to purchase 1,750,000 shares of the Company’s common stock at an exercise price of $0.0001 per share, vesting over a four year period. The options vest with respect to 20% of the total number (350,000) immediately after the effective date of the agreement, and thereafter the remaining options vest ratably on a monthly basis (29,166 per month) at the end of each month over a 48-month period. Notwithstanding the foregoing, in the event of a closing of a Change of Control transaction all options immediately vest and become fully exercisable.

 

Effective April 26, 2012, the Company entered into an employment agreement with James R. Millikan as the Chief Operating Officer of the Company. The employment agreement with Mr. Millikan provides that, upon completion of $2,000,000 in financing, the Company shall pay him a base salary of $175,000 per year at the times and subject to the Company’s standard payroll practices, subject to applicable withholding. The base salary shall be reviewed at least annually, and increased as determined by the board. So long as Mr. Millikan has not been terminated for cause, as defined in the employment agreement, he will be eligible for bonus compensation, payable immediately following completion of the Company’s financial statements for each full fiscal year, commencing in 2013. Mr. Millikan’s annual bonus targets are still being developed by the Company and will be adjusted from time to time, based upon the Company’s achieving 100% of certain financial metrics plan targets to be determined by the board.

 

In further consideration for Mr. Millikan’s services, the Company agreed to grant options to purchase 1,000,000 shares of the Company’s common stock at an exercise price of $0.0001 per share, vesting over a four year period. The options vest with respect to 20% of the total number (200,000) immediately after the effective date of the agreement, and thereafter the remaining options vest ratably on a monthly basis (16,666 per month) at the end of each month over a 48-month period. Notwithstanding the foregoing, in the event of a closing of a Change of Control transaction all options immediately vest and become fully exercisable.

 

Effective April 26, 2012, the Company entered into an employment agreement with Cynthia Boerum as the Chief Strategic Officer of the Company. The employment agreement with Ms. Boerum provides that, upon completion of $2,000,000 in financing, the Company shall pay her a base salary of $150,000 per year at the times and subject to the Company’s standard payroll practices, subject to applicable withholding. The base salary shall be reviewed at least annually, and increased as determined by the board. So long as Ms. Boerum has not been terminated for cause, as defined in the employment agreement, she will be eligible for bonus compensation, payable immediately following completion of the Company’s financial statements for each full fiscal year, commencing in 2013. Ms. Boerum’s annual bonus targets are still being developed by the Company and will be adjusted from time to time, based upon the Company’s achieving 100% of certain financial metrics plan targets to be determined by the board.

 

In further consideration of Ms. Boerum’s services, the Company agreed to grant options to purchase 1,000,000 shares of the Company’s common stock at an exercise price of $0.0001 per share, vesting over a four year period. The options vest with respect to 20% of the total number (200,000) immediately after the effective date of the agreement, and thereafter the remaining options vest ratably on a monthly basis (16,666 per month) at the end of each month over a 48-month period. Notwithstanding the foregoing, in the event of a closing of a Change of Control transaction, all options immediately vest and become fully exercisable.

 

Effective January 1, 2013, the Company entered into an employment agreement with Patrick Custardo as the Chief Acquisitions Officer of the Company. The employment agreement with Mr. Custardo provides that, upon completion of $2,000,000 in financing, the Company shall pay him a base salary of $150,000 per year at the times and subject to the Company’s standard payroll practices, subject to applicable withholding. The base salary shall be reviewed at least annually, and increased as determined by the board. So long as Mr. Custardo has not been terminated for cause, as defined in the employment agreement, he will be eligible for bonus compensation, payable immediately following completion of the Company’s financial statements for each full fiscal year, commencing in 2013. Mr. Custardo’s annual bonus targets are still being developed by the Company and will be adjusted from time to time, based upon the Company’s achieving 100% of certain financial metrics plan targets to be determined by the Board.

 

In further consideration of Mr. Custardo’s services, the Company agreed to grant options to purchase 1,000,000 shares of the Company’s common stock at an exercise price of $0.0001 per share, vesting over a four-year period. The options vest with respect to 20% of the total number (200,000) immediately after the effective date of the agreement, and thereafter the remaining options vest ratably on a monthly basis (16,666 per month) at the end of each month over a 48-month period. Notwithstanding the foregoing, in the event of a closing of a Change of Control transaction, all options immediately vest and become fully exercisable.

 

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Effective November 20, 2013, the Company entered into an employment agreement with Blaise J. Wolfrum, M.D., as the President of BHCA. The employment agreement with Dr. Wolfrum provides that the Company shall pay him a base salary of $300,000 per year at the times and subject to the Company’s standard payroll practices, subject to applicable withholding, and that the board will implement a bonus structure based on goals, objectives and performance.

 

In further consideration of Dr. Wolfrum’s services, the Company agreed to grant options to purchase 600,000 shares of the Company’s common stock at an exercise price of $0.0001 per share, vesting over the course of three years at a rate of 200,000 each year so long as he remain an employee of the Company. The shares of common stock underlying the options are subject to a six month lock-up agreement and a 27 month leak-out agreement limiting the sale of shares over the period. Notwithstanding the foregoing, in the event of a closing of a Change of Control transaction, all options immediately vest and become fully exercisable.

 

Dr. Wolfrum’s employment agreement was terminated pursuant to the Termination Agreement.

 

Effective December 13, 2013, the Company entered into a three-year employment agreement with Rose M. Gallagher as the President of Accelera’s At Home Health Care business unit. The employment agreement with Ms. Gallagher provides that that Company shall pay her a base salary of $150,000 per annum on a bi-weekly basis in accordance with the Company’s customary payroll practices. Ms. Gallagher will begin receiving compensation at the time Accelera completes the Due Diligence, Valuation and Audited Financials of the At Home Health Care business that includes the Subject LLC’s performed by an Accelera’s appointed accounting firm, approximately ninety (90) days from the employment offer. The Board of Directors intends to implement a bonus structure based on goals, objectives and performance.

 

In further consideration for Ms. Gallagher’s services, the Company agreed to grant options to purchase 585,000 shares of the Company’s common stock at an exercise price of $0.0001 per share, and options to purchase 1,000,000 shares of the Company’s common stock at an exercise price of $0.0001 per share, vesting as to 250,000 shares annually for four years beginning on March 12, 2014. The shares of common stock underlying the options are subject to a six month lock-up agreement and a 27 month leak-out agreement limiting the sale of shares over the period.

 

Ms. Gallagher’s employment agreement was terminated pursuant to a termination agreement effective December 31, 2014.

 

Outstanding Equity Awards at Fiscal Year-End

 

The following table provides information regarding all restricted stock, stock options and SAR awards (if any) held by our officers listed in the summary compensation table above as of December 31, 2016.

 

Name  Number of Securities Underlying Unexercised Options Exercisable   Number of Securities Underlying Unexercised Options Unexercisable   Weighted Average Exercise Price   Expiration Date 
John Wallin   1,049,000    -   $0.0001    2022 
James Millikan   600,000    -   $0.0001    2022 
Daniel Freeman   914,667    -   $0.0001    2024 

 

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ITEM 12. OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

 

The following table lists, as of April 14, 2017, the number of shares of common stock of the Company that are beneficially owned by (i) each person or entity known to the Company to be the beneficial owner of more than 5% of the outstanding common stock; (ii) each officer and director of the Company; and (iii) all officers and directors as a group. Information relating to beneficial ownership of common stock by our principal shareholders and management is based upon information furnished by each person using “beneficial ownership” concepts under the rules of the SEC. Under these rules, a person is deemed to be a beneficial owner of a security if that person has or shares voting power, which includes the power to vote or direct the voting of the security, or investment power, which includes the power to vote or direct the voting of the security. The person is also deemed to be a beneficial owner of any security of which that person has a right to acquire beneficial ownership within 60 days. Under the SEC’s rules, more than one person may be deemed to be a beneficial owner of the same securities, and a person may be deemed to be a beneficial owner of securities as to which he or she may not have any pecuniary beneficial interest. Except as noted below, each person has sole voting and investment power. The percentages below are calculated based on 78,158,673 shares of our common stock issued and outstanding as of the date of this report.

 

   Name and Address  Number of Shares   Beneficial Ownership   Percent of 
Title of Class  of Beneficial Owner  Owned Beneficially   within 60 days   Class Owned 
                
Common Stock  Synergistic Holdings, LLC (1)   5,489,561        7.02%
   20511 Abbey Drive Frankfort, IL 60423               
                   
Common Stock  Victory Investment Management LLC (1) 20511 Abbey Drive Frankfort, IL 60423   5,000,000        6,40%
                   
Common Stock  NGT Holdings LLC (1) 20511 Abbey Drive Frankfort, IL 60423   8,250,000         10.56%
                   
Common Stock  Geoffrey Thompson, Chairman of Board (2)   3,169          *  
                   
Common Stock  John Wallin, Chief Executive Officer, Chief Financial Officer (2)    1,752,050(3)         2.21%
                   
All executive officers and directors as a group      20,494,780         25.87%

 

(1) Mr Thompson is deemed to be the beneficial holder of Synergistic Holdings LLC, Victory Investment Management LLC and NGT Holdings LLC. Of Mr. Thompson’s shares, 18,739,561 are held with Synergistic Holdings LLC, Victory Investment Management LLC and NGT Holdings LLC and 3,169 shares are held jointly with his spouse. Mr. Thompson has voting and dispositive control over the shares held by Synergistic Holdings LLC, Victory Investment Management LC and NGT Holdings LLC.
   
(2) The beneficial holders address is c/o Accelera Innovations, Inc., 20511 Abbey Drive, Frankfort, IL 60423.
   
(3) Includes 1,050 shares held jointly by Mr. Wallin and his spouse, and 1,049,000 options exercisable at a price of $0.0001 per share.

 

*less than 1 %.

 

-24
  

 

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

 

On December 5, 2014, the Company and Synergistic, a major shareholder of the Company, agreed to cancel 796,671 shares of the Company’s common stock owned by Synergistic and forgive certain indebtedness owed by the Company to Synergistic in the amount of $1,018,618. In addition, the Company entered into an oral agreement to amend the Licensing Agreement to reduce the total amount of reimbursable distribution and commercialization expenses due under the Licensing Agreement by $585,181 to $29,414,819 and defer the date of certain payment obligations by the Company under the Licensing Agreement as follows:

 

(a) $5,000,000 no later than December 31, 2015;

 

(b) An additional $7,500,000 no later than December 31, 2016;

 

(c) An additional $10,000,000 no later than December 31, 2017; and

 

(d) An additional $6,914,819 no later than December 31, 2018.

 

On May 7, 2015, the Company and Synergistic agreed to amend the Licensing Agreement to eliminate the Company’s $29,414,819 funding requirement under Article 3 and replace it with a requirement to pay a license fee in the amount of $10,000 upon completion and acceptance of each installation of the software at a location for each affiliate or subsidiary of the Company and the sum of $10,000 on each anniversary after each such installation during the period of time in which the software is used at such location. In addition, the Company will be responsible for the reasonable installation costs incurred by Synergistic in connection with the installation and setup of the software as required by the Company. The license fee may be paid in cash or the Company’s common stock. In addition, the Licensing Agreement was amended to delete the Company’s exclusive rights under such agreement.

 

At December 31, 2016 and 2015, advances from related party were $403,092 and $243,799, respectively. These advances are non-interest bearing and payable upon demand.

 

Other than as described above, we have not entered into any transactions with our officers, directors, persons nominated for these positions, beneficial owners of 5% or more of our common stock, or family members of those persons wherein the amount involved in the transaction or a series of similar transactions exceeded the lesser of $120,000 or 1% of the average of our total assets for the last two fiscal years.

 

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

 

The following table shows the fees that were billed for the audit and other services provided by AJ Robbins CPA and Anton & Chia LLP for the fiscal years ended December 31, 2016 and 2015.

 

   2016   2015 
         
Audit Fees  $110,357   $66,860 
Audit-Related Fees   3,044    9282 
Tax Fees   -    - 
All Other Fees   -    - 
Total  $113,401   $76,142 

 

-25
  

 

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.

 

PART IV

 

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

 

(a) Financial Statements and Schedules:

 

The consolidated financial statements and Report of Independent Registered Public Accounting Firm are listed in the “Index to Financial Statements and Schedules” on page F-1 and begin with page F-1. All schedules are omitted because they are not applicable or the required information is shown in the financial statements or notes thereto.

 

(b) Exhibits:

 

            Exhibit Number   Date of
Exhibit No.   Description   Form   in form   Filing
                 
3.1   Certificate of Incorporation   10   3.1   08/28/2008
                 
3.2   Certificate of Amendment of Certificate of Incorporation   S-1   3.1.2   05/22/2012
                 
3.3   Bylaws   10   3.2    08/28/2008
                 
3.4   Certificate of Designations of 8% Convertible Preferred Stock   8-K   3.4   05/13/2015
                 
10.1   Subscription Agreement by and among the Company and Synergistic Holdings, LLC, dated as of June 13, 2011   8-K   10.1   06/17/2011
                 
10.2   Consulting Agreement by and among the Company and Accelerated Venture Partners, LLC, dated as of June 16, 2011   8-K   10.4   06/17/2011
                 
10.3   Licensing Agreement by and among the Company and Synergistic Holdings, LLC, dated as of August 22, 2011   8-K   10.1   08/29/2011
                 
10.4   First Amendment and Modification to Licensing Agreement by and among the Company and Synergistic Holdings, LLC, dated as of April 13, 2012   8-K   10.1   04/16/2012
                 
10.5   2011 Employee, Director and Consultant Stock Plan   10-K   10.6   04/16/2012
                 
10.6+   Employment Agreement by and among the Company and John Wallin dated as of April 26, 2012   8-K   10.1   04/30/2012
                 
10.7+   Employment Agreement by and among the Company and James Millikan dated as of April 26, 2012   8-K   10.2   04/30/2012
                 
10.8+   Employment Agreement by and among the Company and Cindy Boerum dated as of April 26, 2012   8-K   10.3   04/30/2012

 

-26
  

 

10.9   Form of Lock-up and Leak Out Agreement between the Company and holder of common stock of the Company   S-1   10.9   05/22/2012
                 
10.10   Stock Purchase Agreement by and among the Company and Blaise J. Wolfrum, M.D., dated as of November 11, 2013   8-K   10.1   12/02/2013
                 
10.11   Operating Agreement by and among Accelera Healthcare Management Service Organization LLC and Blaise J. Wolfrum, M.D., dated as of November 11, 2013   8-K   10-2   12/02/2013
                 
10.12   Security Agreement by and among Company and Blaise J. Wolfrum, M.D., dated as of November 11, 2013   8-K   10-3   12/02/2013
                 
10.13   Secured Promissory Note issued by the Company to Blaise J. Wolfrum, M.D. dated as of November 11, 2013   8-K   10-4   12/02/2013
                 
10.14   Assignment of Stock in by and among the Company and Blaise J. Wolfrum, M.D., dated as of November 11, 2013   8-K   10-5   12/02/2013
                 
10.15+   Employment Agreement by and among the Company and Blaise J. Wolfrum, M.D., dated as of November 20, 2013   8-K   10-6   12/02/2013
                 
10.16   Lock-up and Leak-Out Agreement by and among the Company and Blaise J. Wolfrum M.D., dated as of November 11, 2013   8-K   10-7   12/02/2013
                 
10.17   Purchase Agreement by and among the Company, At Home Health Services LLC, All Staffing Services, LLC, Rose Gallagher and the Rose M. Gallagher Revocable Trust dated November 30, 1994, dated as of December 13, 2013   8-K   10-1   12/16/2013
                 
10.18   Operating Agreement by and among the Company and At Home Health Management LLC dated as of December 13, 2013   8-K   10-2   12/16/2013
                 
10.19+   Employment Agreement by and among the Company and Rose M. Gallagher dated as of December 13, 2013   8-K   10-3   12/16/2013
                 
10.20+   Employment Agreement by and among the Company and Daniel P. Gallagher dated as of December 13, 2013   8-K   10-4   12/16/2013
                 
10.21   Second Amendment and Modification to Licensing Agreement by and among the Company and Synergistic Holdings, LLC, dated as of April 12, 2014   10-K   10.20   04/15/2014
                 
10.22+   Employment Agreement by and among the Company and Daniel Freeman dated as of October 6, 2014   8-K   10.1   10/08/2014
                 
10.23   Stock Purchase Agreement by and among the Company, Ethel dela Cruz, Virgilia Avila, Ma Lourdes Reyes Celicious, Cristina Soriano, Michelle Cartas and Jimmy Lacaba ated as of August 25, 2014   8-K   10-1   10/14/2014
                 
10.24   Promissory Note issued by the Company to AOK Property Investments LLC dated as of October 1, 2014   8-K   10-2   10/14/2014
                 
10.25   Stock Purchase Agreement by and among the Company and Grace Home Health Care, Inc. dated as of November 25, 2014   8-K   10.1   12/04/2014
                 
10.26   Asset Purchase Agreement by and among the Company and Watson Health Care, Inc. dated as of November 25, 2014   8-K   10.2   12/04/2014

 

-27
  

 

                 
10.27   Stock Purchase Agreement by and among the Company, Sonny Nix and John Noah dated as of January 5, 2015   8-K   10.1   01/09/2015
                 
10.28   Amendment to Purchase Agreement by and among the Company and Traditions Home Health, Inc. dated as of January 5, 2015   10-Q   10.28   05/20/2015
                 
10.29   Second Amendment to Licensing Agreement by and among the Company and Synergistic Holdings, LLC dated as of May 7, 2015   10-Q   10.29   05/20/2015
                 
10.30   Separation Agreement by and among the Company and Daniel Freeman dated as of May 8, 2015   10-Q   10.30   05/20/2015
                 
10.31   Amendment to Stock Purchase Agreement by and among the Company and Grace Home Health Care dated as of May 7, 2015   10.Q   10.31   05/20/2015
                 
10.32   Amendment to Asset Purchase Agreement by and among the Company, Watson Health Care Inc. and Affordable Nursing Inc. dated May 20, 2015       10.32   05/20/2015
                 
10.33   Settlement Agreement and Release by and among the Company, Geoffrey J. Thompson, Nancy Thompson, GWS Financial Services, Inc., Synergistic Holdings, LLC, Earl Kopriva and Robert C. Acri dated as of July 1, 2015   8-K   10.1   07/07/2015
                 
10.34   Termination Agreement by and among the Company and Blaise J. Wolfrum, M,D,, dated as of March 31, 2016   8-K   10.1   04/06/2016
                 
10.35   Resignation and Release Agreement by and among the Company, Blaise J. Wolfrum, M.D., and Accelera Healthcare Management Service Organization LLC dated as of January 1, 2016   8-K   10.2   04/06/2016
                 
31.1   Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer and Principal Financial Officer           X
                 
32.1   Section 1350 Certification of Principal Executive Officer and Principal Financial Officer           X
                 
101.INS**   XBRL Instance           X
                 
101.SCH**   XBRL Taxonomy Extension Schema           X
                 
101.CAL**   XBRL Taxonomy Extension Calculation Linkbase           X
                 
101.DEF**   XBRL Taxonomy Extension Definition Linkbase           X
                 
101.LAB**   XBRL Taxonomy Extension Labels Linkbase           X
                 
101.PRE**   XBRL Taxonomy Extension Presentation Linkbase           X

 

+ Management compensation plan or arrangement.

 

** XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of this annual report on Form 10-K for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

 

-28
  

 

SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

  Accelera Innovations, Inc.
     
  By: /S/ John Wallin
Dated: April 17, 2017   John Wallin
    Chief Executive Officer

 

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

 

Signature   Title   Date
         
    Chief Executive Officer and   April 14, 2017
    Chief Financial Officer    
    (Principal Executive Officer and    
    Principal Financial and    
/S/ John Wallin   Accounting Officer)    
John Wallin        
         
/S/ Geoffrey Thompson   Chairman of the Board   April 14, 2017
Geoffrey Thompson        

 

-29
  

 

Accelera Innovations, Inc. and Subsidiaries

Consolidated Financial Statements

For The Years Ended December 31, 2016 and 2015

 

Contents

 

  Page
   
Reports of Independent Registered Public Accounting Firm F-2
   
Report of AJ Robbins CPA LLC F-2
   
Consolidated Financial Statements:  
   
Consolidated Balance Sheets as of December 31, 2016 and 2015 F-3
   
Consolidated Statements of Operations for the years ended December 31, 2016 and 2015 F-4
   
Consolidated Statement of Changes in Stockholder Deficit for the years ended December 31, 2016 and 2015 F-5
   
Consolidated Statements of Cash Flows for the years ended December 31, 2016 and 2015 F-6
   
Notes to Consolidated Financial Statements F-7

 

 F-1 
 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

 

AJ Robbins CPA, LLC

Certified Public Accountant 

 

 

To the Board of Directors and

Stockholders of Accelera Innovations, Inc.

 

We have audited the accompanying consolidated balance sheets of Accelera Innovations, Inc and Subsidiaries (collectively “the Company”) as of December 31, 2016 and 2015, and the related consolidated statements of operations, changes in stockholders’ deficit, and cash flows for the years then ended. The Company’s management is responsible for these consolidated financial statements. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Accelera Innovations, Inc. as of December 31, 2016 and 2015, and the consolidated results of their operations and their cash flows for each of the years then ended, in conformity with accounting principles generally accepted in the United States of America.

 

As discussed in Note12 to the financial statements, the 2015 financial statements have been restated to correct a misstatement.

 

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 4 to the consolidated financial statements, the Company has had minimal revenue since inception and has experienced recurring operating losses. These conditions, among others, raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans concerning these matters are also described in Note 4 to the consolidated financial statements. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

/s/AJ Robbins CPA LLC
Denver, Colorado 

 

April 17, 2017  

 

aj@ajrobbins.com

3773 Cherry Creek North Drive, Suite 575 East, Denver, Colorado 80209

(B)303-331-6190 (M)720-339-5566 (F)303-845-9078

 

 F-2 
 

 

ACCELERA INNOVATIONS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

 

   December 31, 2016   December 31, 2015 
       (restated) 
ASSETS          
           
Current Assets:          
Cash  $-   $- 
Accounts receivable, net   2,750    - 
Prepaid expenses and other current assets   -    29,793 
Total current assets   2,750    29,793 
           
Property and equipment, net   6,889    8,889 
Security deposit   -    1,805 
TOTAL ASSETS  $9,639   $40,487 
           
LIABILITIES AND STOCKHOLDERS’ DEFICIT          
           
Current Liabilities:          
Cash overdraft  $-   $6,624 
Short-term notes payable   886,166    901,521 
Advances from related party   403,092    243,799 
Accounts payable   465,379    408,919 
Accrued expenses   333,471    322,581 
Convertible note, net of discount of $19,395 and $0   155,277    - 
Derivative liability   149,269    302,580 
Total current liabilities   2,392,654    2,186,024 
           
Convertible note, net of discount of $0 and $158,806   -    15,434 
TOTAL LIABILITIES   2,392,654    2,201,458 
           
Commitment and contingencies   -    - 
           
STOCKHOLDERS’ DEFICIT          
Preferred stock, $0.0001 par value, 10,000,000 shares authorized, 0 shares issued and outstanding   -    - 
8% convertible preferred stock, 500,000 shares authorized 198,473 shares issued and outstanding; $4.00 stated value   20    20 
Common stock, $0.0001 par value, 100,000,000 shares authorized, 69,569,444 and 45,011,216 shares issued and outstanding at December 31, 2016 and 2015   6,957    4,501 
Additional paid-in capital   59,222,837    57,522,043 
Accumulated deficit   (61,612,829)   (59,687,535)
Total stockholders’ deficit   (2,383,015)   (2,160,971)
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT  $9,639   $40,487 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 F-3 
 

 

ACCELERA INNOVATIONS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

 

    Years Ended December 31,  
    2016     2015  
          (restated)  
Revenues   $ 2,750     $ 1,133,715  
Cost of revenues     -       157,711  
Gross profit     2,750       976,004  
                 
Operating expenses:                
General and administrative expenses     1,900,962       13,992,521  
Total operating expenses     1,900,962       13,992,521  
Loss from operations     (1,898,212 )     (13,016,517 )
                 
Other income (expense)                
Interest expense and financing costs     (445,926 )     (1,801,903 )
Change in fair value of derivative liability     418,844       2,745  
Total other income (expenses)     (27,082 )     (1,799,158 )
                 
Loss before provision for taxes     (1,925,294 )     (14,815,675 )
                 
Provision for income taxes     -       -  
                 
Net loss   $ (1,925,294 )   $ (14,857,675 )
                 
Preferred stock dividend     47,503       41,413  
                 
Net loss attributed to common stockholders   $ (1,972,797)     $ (14,857,088 )
                 
Weighted average shares outstanding - basic and diluted     48,727,220       42,919,132  
                 
Loss per share - basic and diluted   $ (0.04 )   $ (0.35 )

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 F-4 
 

 

ACCELERA INNOVATIONS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ DEFICIT

FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015

 

    8% Convertible
Preferred Stock
    Common Stock     Additional
Paid-in
    Accumulated     Total
Stockholders’
 
    Shares     Amount     Shares     Amount     Capital     Deficit     Equity  
Balance, December 31, 2014 (restated)     -       -       40,445,926       4,046       43,278,757       (44,871,860 )     (1,589,057 )
                                                         
Issuance of 8% convertible preferred stock     198,473       20                       793,872               793,892  
Shares issued for services                     3,810,290       380       7,731,113               7,731,493  
Shares issued for cash                     255,000       25       14,975               15,000  
Shares issued for extension of loan payment terms                     500,000       50       1,437,437               1,437,487  
Fair value of options vested                                     4,265,889               4,265,889  
Net loss (restated)                                             (14,815,675 )     (14,815,675 )
                                                         
Balance, December 31, 2015 (restated)     198,473       20       45,011,216       4,501       57,522,043       (59,687,535 )     (2,160,971 )
                                                         
Shares issued for convertible debt                     24,558,228       2,456       84,650               87,106  
Fair value of options vested                                     1,616,144               1,616,144  
Net loss                                             (1,925,294)       (1,925,294)  
                                                         
Balance, December 31, 2016     198,473     $ 20       69,569,444     $ 6,957     $ 59,222,837     $ (61,612,829 )   $ (2,383,015 )

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 F-5 
 

 

ACCELERA INNOVATIONS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS

 

    Years Ended December 31,  
    2016     2015  
          (restated)  
OPERATING ACTIVITIES:                
Net loss   $ (1,925,294)     $ (14,815,675 )
Adjustments to reconcile net loss to net cash used in operating activities:                
Depreciation     2,000       1,259  
Stock options expense     1,616,144       4,265,889  
Shares issued for services     -       7,731,493  
Shares issued for extending loan payment terms             1,437,487  
Amortization of debt discount     277,439       15,434  
Change in fair value of derivative liability     (418,844 )     (2,745 )
Financing costs associated with convertible note     135,533       136,640  
Offering cost for preferred stock subscription     -       141,430  
Change in current assets and liabilities:                
Accounts receivable     (2,750 )     153,478  
Prepaid expenses and current assets     31,598       (23,767 )
Accounts payable     56,460       320,230  
Accrued expenses     12,900       194,987  
Net cash used in operating activities     (214,814 )     (443,860 )
                 
INVESTING ACTIVITIES:                
Purchase of property and equipment     -       (3,767 )
Net cash used in investing activities     -       (3,767 )
                 
FINANCING ACTIVITIES:                
Proceeds from the sale of stock     -       15,000  
Proceeds from convertible notes     77,500       50,000  
Proceeds from notes payable     -       250,000  
Payment on notes payable     (15,355 )     (74,301 )
Cash overdraft     (6,624 )     (5,061 )
Advances from (payments to) related parties     159,293       211,989  
Net cash provided by financing activities     214,814       447,627  
                 
NET INCREASE (DECREASE) IN CASH     -       -  
                 
CASH, BEGINNING BALANCE     -       -  
                 
CASH, ENDING BALANCE   $ -     $ -  
                 
CASH PAID FOR:                
Interest   $ -     $ -  
Income taxes   $ -     $ -  
                 
NON-CASH INVESTING AND FINANCING ACTIVITIES:                
Convertible notes and accrued interest converted to common stock   $ 87,106     $ -  
Convertible note issued for liabilities   $ -     $ 118,685  

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 F-6 
 

 

ACCELERA INNOVATIONS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015

 

NOTE 1 – ORGANIZATION AND BASIS OF PRESENTATION

 

Accelera Innovations, Inc., formerly Accelerated Acquisitions IV, Inc. (the “Company”) was incorporated in the State of Delaware on April 29, 2008 for the purpose of raising capital intended to be used in connection with its business plan which may include a possible merger, acquisition or other business combination with an operating business.

 

On June 13, 2011, Synergistic Holdings, LLC (“Synergistic”) agreed to acquire 17,000,000 shares of the Company’s common stock, par value $0.0001 per share. At the same time, Accelerated Venture Partners, LLC agreed to tender 3,750,000 of its 5,000,000 shares of the Company’s common stock, par value $0.0001 per share, for cancellation. Following these transactions, Synergistic owned 93.15% of the Company’s 18,250,000 issued and outstanding shares of common stock, par value $0.0001 per share, and the interest of Accelerated Venture Partners, LLC was reduced to approximately 6.85% of the total issued and outstanding shares. Concurrent with the share purchase, Timothy Neher resigned from the Company’s Board of Directors and John Wallin was appointed to the Company’s Board of Directors. Such action represented a change of control of the Company.

 

On October 18, 2011, the Company filed a Certificate of Amendment to its Certificate of Incorporation with the Secretary of State of Delaware and changed its name from Accelerated Acquisition IV, Inc. to Accelera Innovations, Inc.

 

The Company is a healthcare service company which is focused on acquiring companies primarily in the post-acute care patient services and information technology services industries. The Company currently owns SCI Home Health, Inc. (d/b/a Advance Lifecare Home Health) (“SCI”), which offers personal care to patients in the Chicago, Illinois area.

 

The accompanying consolidated financial statements and have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”).

 

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

PRINCIPLES OF CONSOLIDATION - The Company operates companies in the personal health care industry. The Company operates out of one service center serving the Chicago, Illinois area. The consolidated financial statements for the year ended December 31, 2016 include the accounts of the Company and its 100% owned subsidiary SCI, Significant intercompany accounts and transactions have been eliminated in consolidation.

 

USE OF ESTIMATES - The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

 

Significant estimates in these financial statements include allowance for doubtful accounts, the valuation of intangibles, valuation allowance for deferred taxes, estimated useful life of property and equipment and the fair value of stock and options issues for services and interest.

 

CASH - All cash is maintained with a major financial institution in the United States. Deposits with this bank may exceed the amount of insurance provided on such deposits. Temporary cash investments with an original maturity of three months or less are considered to be cash equivalents. The Company had no cash equivalents as of December 31, 2016 and 2015, respectively. The Company has not suffered any credit issues when deposits have exceeded the amount of insurance provided for such deposits.

 

 F-7 
 

 

ACCELERA INNOVATIONS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015

 

ACCOUNTS RECEIVABLE - Accounts receivable are recorded at estimated value, net of allowance for doubtful accounts. Accounts receivable are not interest bearing. The allowance for doubtful accounts is based upon management’s best estimate and past collection experience. For accounts greater than 180 days, the Company carries a 100% allowance. Uncollectible accounts are charged off when all reasonable efforts to collect the accounts have been exhausted.

 

PROPERTY AND EQUIPMENT - Property and equipment is stated at cost. Depreciation is provided on a straight-line basis over the estimated useful lives of the assets. Maintenance and repairs are charged to expense as incurred; major renewals and betterments are capitalized. When items of property and equipment are sold or retired, the related cost and accumulated depreciation are removed from the accounts, and any gain or loss is included in income.

 

DERIVATIVE FINANCIAL INSTRUMENTS - The Company evaluates all of its agreements to determine if such instruments have derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations. For stock-based derivative financial instruments, the Company uses the Black-Scholes-Merton option pricing model to value the derivative instruments at inception and on subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date. As of December 31, 2016 and 2015, the Company’s only derivative financial instrument was an embedded conversion feature associated with convertible notes due to the conversion price being a percentage of the market price of the Company’s common stock.

 

PREFERRED STOCK SUBSCRIPTION PAYABLE - During the years ended December 31, 2014 and 2013, an affiliate of the Company entered into subscription agreements with 13 investors. Pursuant to the terms of the subscription agreements, the affiliate agreed to issue shares of the Company’s 8% Convertible Preferred Stock that it was authorized to issue as of May 7, 2015. In exchange, the Company received aggregate proceeds from the investors of $652,462. Accordingly, the Company is obligated to issue an aggregate of 198,473 shares of 8% Convertible Preferred Stock to the investors with a stated value of $4.00 per share or an aggregate of $793,892. The net proceeds of $652,462 have been received by or on behalf of the Company and recorded as preferred stock subscription payable net of $141,430 of original issue discount related to such offering which amount was expensed. Upon obtaining the Certificate of Designation for the 8% Convertible Preferred Stock on May 7, 2015, the Company has included the aggregate amount of $793,892 of preferred stock as part of stockholders’ equity. Prior to May 7, 2015, the preferred stock subscription payable was included as a current liability.

 

COMMON STOCK - The Company records common stock issuances when all of the legal requirements for the issuance of such common stock have been satisfied.

 

REVENUE RECOGNITION - Revenue related to services and administrative support services is recognized ratably at the time services have been performed and pre-approved by payer. Gross service revenue is recorded in the accounting records on an accrual basis at the provider’s established rates, regardless of whether the health care entity expects to collect that amount. The Company will reserve a provision for contractual adjustment and discounts and deduct from gross service revenue. The Company believes that recognizing revenue at the time the services have been performed because the Company’s revenue policies meet the following four criteria in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 605-10-S25, Revenue Recognition: Overall, (i) persuasive evidence that arrangement exists, (ii) services has occurred, (iii) the price is fixed and determinable and (iv) collectability is reasonably assured. The Company reports revenues net of any sales, use and value added taxes.

 

COST OF REVENUES - Costs of revenues are comprised of fees paid to members of the Company’s medical staff, other direct costs including transcription, film and medical record obtainment and transportation; and other indirect costs including labor and overhead related to the generation of revenues.

 

 F-8 
 

 

ACCELERA INNOVATIONS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015

 

ADVERTISING COSTS - The Company’s policy regarding advertising is to expense advertising when incurred.

 

INCOME TAXES - The Company accounts for income taxes in accordance with ASC Topic 740, Income Taxes. ASC 740 requires a company to use the asset and liability method of accounting for income taxes, whereby deferred tax assets are recognized for deductible temporary differences, and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion, or all of, the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

 

Under ASC 740, a tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. The adoption had no effect on the Company’s consolidated financial statements.

 

STOCK BASED COMPENSATION - The Company has share-based compensation plans under which employees, consultants, suppliers and directors may be granted restricted stock, as well as options and warrants to purchase shares of the Company’s common stock at the fair market value at the time of grant. Stock-based compensation cost to employees is measured by the Company at the grant date, based on the fair value of the award, over the requisite service period under ASC 718, Compensation – Stock Compensation. For options issued to employees, the Company recognizes stock compensation costs utilizing the fair value methodology over the related period of benefit. Grants of stock to non-employees and other parties are accounted for in accordance with ASC 505, Equity, at the measurement date. For awards with service or performance conditions, the Company generally recognizes expense over the service period or when the performance condition is met.

 

LOSS PER SHARE - Basic loss per share is computed by dividing net loss attributable to common stockholders by the weighted average common shares outstanding for the period. Diluted loss per share is computed giving effect to all potentially dilutive common shares. Potentially dilutive common shares may consist of incremental shares issuable upon the exercise of stock options and warrants and the conversion of notes payable to common stock. In periods in which a net loss has been incurred, all potentially dilutive common shares are considered anti-dilutive and thus are excluded from the calculation.

 

FINANCIAL INSTRUMENTS - ASC 820, Fair Value Measurements and Disclosures, defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below:

 

Level 1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.
   
Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates); and inputs that are derived principally from or corroborated by observable market data by correlation or other means.
   
Level 3 - Inputs that are both significant to the fair value measurement and unobservable.

 

 F-9 
 

 

ACCELERA INNOVATIONS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015

 

Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of December 31, 2016. These financial instruments include stock options granted to the officers in 2016 and 2015.

 

The Company uses Level 2 inputs for its valuation methodology for its derivative liability as its fair value was determined by using the Black-Scholes-Merton pricing model based on various assumptions. The Company’s derivative liability is adjusted to reflect fair value at each period end, with any increase or decrease in the fair value being recorded in results of operations as adjustments to fair value of derivatives.

 

At December 31, 2016 and 2015, the Company identified the following liability that is required to be presented on the balance sheet at fair value (see Note 7):

 

    Fair Value     Fair Value Measurements at  
    As of     December 31, 2016  
Description   December 31, 2016     Using Fair Value Hierarchy  
          Level 1     Level 2     Level 3  
Derivative liability - conversion feature   $ 149,269       -       149,269       -  
                                 
Total   $ 149,269       -       149,269       -  

 

    Fair Value     Fair Value Measurements at  
    As of     December 31, 2015  
Description   December 31, 2015     Using Fair Value Hierarchy  
          Level 1     Level 2     Level 3  
Derivative liability - conversion feature   $ 302,580       -       302,580       -  
                                 
Total   $ 302,580       -       302,580       -  

 

RECENT ACCOUNTING PRONOUNCEMENTS

 

In January 2017, the FASB issued Accounting Standards Update (“ASU”) 2017-01, Business Combinations (Topic 805) Clarifying the Definition of a Business. The amendments in this update clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions or disposals of assets or businesses. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation. The guidance is effective for interim and annual periods beginning after December 15, 2017 and should be applied prospectively on or after the effective date. The Company is in the process of evaluating the impact of ASU 2017-01 on its financial statements.

 

In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash, which requires restricted cash to be presented with cash and cash equivalents on the statement of cash flows and disclosure of how the statement of cash flows reconciles to the balance sheet if restricted cash is shown separately from cash and cash equivalents on the balance sheet. ASU 2016-18 is effective for interim and annual periods beginning after December 15, 2017, with early adoption permitted. The Company is in the process of evaluating the impact of ASU 2016-18 on its financial statements.

 

 F-10 
 

 

ACCELERA INNOVATIONS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015

 

In October 2016, the FASB issued ASU 2016-16, Income Taxes (Topic 740): Intra-Entity Transfer of Assets Other than Inventory, which requires the recognition of the income tax consequences of an intra-entity transfer of an asset, other than inventory, when the transfer occurs. ASU 2016-16 is effective for interim and annual periods beginning after December 15, 2018, with early adoption permitted. The Company is in the process of evaluating the impact of ASU 2016-16 on its financial statements.

 

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230), Classification of Certain Cash Receipts and Cash Payments. ASU 2016-15 provides guidance for targeted changes with respect to how cash receipts and cash payments are classified in the statements of cash flows, with the objective of reducing diversity in practice. ASU 2016-15 is effective for interim and annual periods beginning after December 15, 2017, with early adoption permitted. The Company is in the process of evaluating the impact of ASU 2016-15 on its statements of cash flows.

 

In March 2016, the FASB issued ASU 2016-09, Stock Compensation (Topic 718), Improvements to Employee Share-Based Payment Accounting. ASU 2016-09, which amends several aspects of accounting for employee share-based payment transactions including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, and classification in the statement of cash flows. ASU 2016-09 is effective for fiscal years beginning after December 15, 2016 and interim periods within annual periods beginning after December 15, 2016, with early adoption permitted. The Company is in the process of evaluating the impact of ASU 2016-09 on its financial statements.

 

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). ASU 2016-02 requires lessees to recognize lease assets and lease liabilities on the balance sheet and requires expanded disclosures about leasing arrangements. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018 and interim periods in fiscal years beginning after December 15, 2018, with early adoption permitted. The Company is in the process of evaluating the impact of ASU 2016-02 on its financial statements.

 

In August 2014, the FASB issued ASU 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, which provides guidance on determining when and how to disclose going-concern uncertainties in the financial statements. ASU 2014-15 requires management to perform interim and annual assessments of an entity’s ability to continue as a going concern within one year of the date the financial statements are issued. An entity must provide certain disclosures if conditions or events raise substantial doubt about the entity’s ability to continue as a going concern. ASU 2014-15 is effective for annual periods ending after December 15, 2016, and interim periods thereafter. Early adoption is permitted. The Company is in the process of evaluating the impact of ASU 2014-15 on its financial statements and disclosures.

 

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers. ASU 2014-09 is a comprehensive revenue recognition standard that will supersede nearly all existing revenue recognition guidance under current GAAP and replace it with a principle-based approach for determining revenue recognition. ASU 2014-09 will require that companies recognize revenue based on the value of transferred goods or services as they occur in the contract. The ASU also will require additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. ASU 2014-09 is effective for interim and annual periods beginning after December 15, 2017. Early adoption is permitted only in annual reporting periods beginning after December 15, 2016, including interim periods therein. Entities will be able to transition to the standard either retrospectively or as a cumulative-effect adjustment as of the date of adoption. The Company is in the process of evaluating the impact of ASU 2014-09 on its financial statements and disclosures.

 

 F-11 
 

 

ACCELERA INNOVATIONS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015

 

Management does not believe that any recently issued, but not yet effective, accounting standards could have a material effect on the accompanying financial statements. As new accounting pronouncements are issued, the Company will adopt those that are applicable under the circumstances.

 

RECLASSIFICATIONS - Certain prior year amounts have been reclassified to conform to the current period presentation. These reclassifications had no impact on net earnings, financial position or cash flows.

 

NOTE 3 – BALANCE SHEET INFORMATION

 

PROPERTY AND EQUIPMENT, NET

 

Property and equipment, net at December 31, 2016 and 2015 consist of the following:

 

   2016   2015 
         
Furniture and fixtures  $3,940   $3,940 
Office equipment   5,641    5,641 
    9,581    9,581 
Less accumulated depreciation   (2,692)   (692)
   $6,889   $8,889 

 

Depreciation expense for the years ended December 31, 2016 and 2015 was $2,000 and $1,259, respectively.

 

NOTE 4 – GOING CONCERN

 

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The Company has incurred a net loss for the year ended December 31, 2016 of $1,925,294 and had an accumulated deficit of $61,612,829 as of December 31, 2016. In view of these matters, the Company’s ability to continue as a going concern is dependent upon the Company’s ability to add profitable operating companies and to achieve a level of profitability. The Company intends on financing its future development activities and its working capital needs largely from the sale of equity securities with some additional funding from other traditional financing sources, including term notes, until such time that funds provided by operations are sufficient to fund working capital requirements.

 

The Company’s only operating subsidiary is SCI. Revenues from SCI have significantly decreased primarily due to the sudden departure of the administrator of SCI. The Company has transitioned this position to a new administrator and filed these changes with the IDPH (Illinois Department of Public Health). There are claims to be processed and invoiced when IDPH approves; through the uniform process and the new SCI administrator, the Company expects this to be resolved in the near future.

 

The consolidated financial statements of the Company do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classifications of liabilities that might be necessary should the Company be unable to continue as a going concern.

 

 F-12 
 

 

ACCELERA INNOVATIONS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015

 

NOTE 5 – SHORT-TERM NOTES PAYABLES

 

Short-term notes payable at December 31, 2016 and 2015 consisted of the following:

 

   2016   2015 
         
At Home and All Staffing acquisition note payable (1)   344,507    344,507 
AOK Property Investments (2)   525,000    525,000 
Note dated May 28, 2015 for $35,000; daily payment of $184.73 for 252 days   16,659    32,014 
   $886,166   $901,521 

 

(1) The Company entered into a $344,507 promissory note (the “Trust Note”) with the Rose. M Gallagher Revocable Trust (the “Trust”) in conjunction with a settlement agreement dated December 23, 2014. The Trust Note bears interest at 11.0% per annum. The first payment of $25,000 was due on March 1, 2015, with the final principal and interest payment due on June 1, 2015. The Company is in default of the Trust Note and has a 90-day cure period. The Company paid $5,000 on April 8, 2015.

 

If an event of default under the Trust Note occurs, the Trust may accelerate the Trust Note’s maturity date so that the unpaid principal amount, together with accrued interest, is immediately due in its entirety. In addition, the Company promised to pay $1,000 dollars as consideration for costs of collection of the Trust Note, including but not limited to attorneys’ fees paid or incurred on account of such collection, whether or not suit is filed with respect thereto and whether such cost or expense is paid or incurred, or to be paid or incurred, prior to or after the entry of judgment. Pursuant to the terms of the Trust Note, an event of default occurs if (i) the Company fails to make any payment required by the Trust Note when due, (ii) the Company fails to observe or perform any covenant, condition or agreement under the Trust Note, (iii) a proceeding with respect to the Company is commenced for the benefit of creditors, including but not limited to any bankruptcy or insolvency law; or (iv) the Company becomes insolvent.

 

 F-13 
 

 

ACCELERA INNOVATIONS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015

 

(2) On October 1, 2014, AOK Property Investments LLC (“AOK”), a third party lender, lent the Company and its subsidiary, Advanced Life Management, LLC (“ALM”)   , an aggregate of $500,000. In consideration of AOK’s delivery of an aggregate of $500,000 to the Company and ALM, the Company and ALM executed and delivered a promissory note (the “AOK Note”) in favor of AOK in the aggregate principal amount of $500,000. The AOK Note was due on January 15, 2015 and bears interest in the amount of 500,000 shares of the Company’s common stock, which interest was due and payable on or before January 15, 2015. If the Company and ALM fail to pay any portion of principal or interest when due, interest will continue to accrue and be payable to AOK at the rate of 1,667 shares of Company common stock per day until all principal and accrued interest is fully paid. On July 10, 2015, the Company and AOK entered in an amended note agreement whereby AOK loaned the Company an additional $25,000 and extended the due date of the note to December 31, 2015, and the Company agreed to issue an additional 500,000 shares of common stock for failing to pay the principal and interest on the loan when originally due. The Company recorded the issuance of 500,000 shares of common stock to AOK at a value of $1,360,907. The loan was not repaid on its extended due date and is currently in default.

 

If an event of default under the AOK Note occurs, AOK may accelerate the AOK Note’s maturity date so that the unpaid principal amount, together with accrued interest, is immediately due in its entirety. Pursuant to the terms of the AOK Note, an event of default occurs if (i) the Company or ALM fails to make any payment required by the AOK Note when due, (ii) the Company or SCI voluntarily dissolves or ceases to exist, or any final and non-appealable order or judgment is entered against the Company or SCI ordering its dissolution, (iii) the Company or ALM fails to pay, becomes insolvent or unable to pay, or admits in writing an inability to pay its debts as they become due, or makes a general assignment for the benefit of creditors; or (iv) a proceeding with respect to the Company or ALM is commenced for the benefit of creditors, including but not limited to any bankruptcy or insolvency law.

 

NOTE 6 – CONVERTIBLE NOTES

 

Convertible notes at December 31, 2016 and 2015 consist of the following:

 

   2016   2015 
Convertible note dated August 28, 2015; interest of $6,667 due after 90 days; due August 28, 2017; convertible into shares of common stock at the lesser of $1.00 or 60% of the lowest trading price 25 days prior to conversion.  $-   $55,556 
Convertible note dated December 16, 2015; non-interest bearing; convertible into shares of common stock at 50% of the market price on the date of conversion.   118,684    118,684 
Convertible note dated March 10, 2016; interest of $3,333 due after 90 days; due August 28, 2017; convertible into shares of common stock at the lesser of $1.00 or 60% of the lowest trading price 25 days prior to conversion.   9,363    - 
Convertible note dated May 5, 2016; interest at 8% per annum; due May 5, 2017; convertible into shares of common stock at 65% of the lowest trading price 20 days prior to conversion.   46,625    - 
Total convertible notes   174,672    174,240 
Unamortized debt discount   (19,395)   (158,806)
Convertible notes, net of discount   155,277    15,434 
Less current portion   (152,952)   - 
Long-term portion  $2,325   $15,434 

 

 F-14 
 

 

ACCELERA INNOVATIONS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015

 

Due to the variable conversion price associated with these convertible notes, the Company has determined that the conversion feature is considered a derivative liability. The embedded conversion feature at inception is recorded as a derivative liability as of the date of issuance. The derivative liability was recorded as a debt discount up to the face amount of the convertible notes with the remaining amount being charge as a financing cost. The debt discount is being amortized over the term of the convertible notes. The Company recognized additional interest expense of $277,439 and $15,434 during the years ended December 31, 2016 and 2015, respectively, related to the amortization of the debt discount.

 

A rollfoward of the convertible note from December 31, 2014 to December 31, 2016 is below:

 

Convertible notes, December 31, 2014   $ -  
Issued for cash     50,000  
Accounts payable converted to convertible note     118,685  
Issued for original issue discount     5,556  
Debt discount related to new convertible notes     (174,241 )
Amortization of debt discounts     15,434  
Convertible notes, December 31, 2015     15,434  
Issued for cash     77,500  
Issued for original issue discount     8,028  
Conversion to common stock     (85,096 )
Debt discount related to new convertible notes     (138,028 )
Amortization of debt discounts     277,439  
Convertible notes, December 31, 2016   $ 155,277  

 

NOTE 7 – DERIVATIVE LIABILITY

 

The convertible note discussed in Note 6 has a variable conversion price which results in the conversion feature being recorded as a derivative liability.

 

The fair value of the derivative liability is recorded and shown separately under current liabilities. Changes in the fair value of the derivative liability is recorded in the statement of operations under other income (expense).

 

The Company uses the Black-Scholes-Merton option pricing model with the following assumptions to measure the fair value of derivative liability at December 31, 2016 and 2015:

 

    2016     2015  
Stock price $ 0.0051     $ 0.141  
Risk free rate     0.59 %     0.64 %
Volatility     325 %     325 %
Conversion/Exercise price   $ 0.0025 - 0.007     $ 0.07-0.085  
Dividend rate     0 %     0 %
Terms (years)     0.1 to 0.7       0.8 to 1.7  

 

 F-15 
 

 

ACCELERA INNOVATIONS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015

 

The following table represents the Company’s derivative liability activity for the years ended December 31, 2016 and 2015:

 

Derivative liability at December 31, 2014  $- 
Derivative liability associated with new convertible note   305,325 
Change in fair value of derivative liability during period   (2,745)
Derivative liability at December 31, 2015   302,580 
Derivative liability associated with new convertible note   265,533 
Change in fair value of derivative liability during period   (418,844)
Derivative liability at December 31, 2016  $149,269 

 

NOTE 8 – STOCKHOLDERS’ DEFICIT

 

The Company has two classes of stock, preferred stock and common stock. There are 10,000,000 shares of $.0001 par value preferred stock authorized, 500,000 of which were designated as 8% Convertible Preferred Stock as of May 7, 2015.

 

The 500,000 shares of 8% Convertible Preferred Stock have the following the designations, rights, and preferences:

 

  The state value of each share is $4.00,
     
  Holders of shares of 8% Convertible Preferred Stock do not have any voting rights,
     
  The shares pay quarterly dividends in arrears at the rate of 8% per annum and on each conversion date. Subject to certain conditions, the dividends are payable at the Company’s option in cash or such dividends shall be accreted to, and increase, the outstanding stated value,
     
  Each share is convertible into shares of the Company’s common stock at a conversion price of $4.00 per share, subject to adjustment, and
     
  The conversion price of the 8% Convertible Preferred is subject to proportional adjustment in the event of stock splits, stock dividends and similar corporate events.

 

There were 198,473 shares of 8% Convertible Preferred Stock issued and outstanding as of December 31, 2016.

 

There are 100,000,000 shares of $.0001 par value common shares authorized. The Company had 69,569,444 and 45,011,216 issued and outstanding shares as of December 31, 2016 and 2015, respectively.

 

During the year ended December 31, 2016, the Company issued 24,558,228 shares for the conversion of $87,106 of convertible notes payable.

 

 F-16 
 

 

ACCELERA INNOVATIONS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015

 

The Company issued 3,810,290 shares for services with a fair value of $7,731,493 and 500,000 shares for an extension of loan payment terms with a fair value of $1,360,907 for the year ended December 31, 2015. In addition, the Company also issued 25,000 shares for cash proceeds of $15,000.

 

NOTE 9 – STOCK-BASED COMPENSATION

 

The Company recognizes stock-based compensation expense in its statement of operations based on the fair value of employee stock options and stock grant awards as measured on the grant date. For stock options, the Company uses the Black-Scholes option pricing model to determine the value of the awards granted. The Company amortizes the estimated value of the options as of the grant date over the stock options’ vesting period, which is generally four years.

 

The Company has estimated the value of common stock into which the options are exercisable at $4.00 per share for financial reporting purposes. This amount was determined based on the price the Company’s stock was sold for in past private placements, the minimum stock price required for listing on any Nasdaq market, and the amount also approximates a $85 million valuation for the entire Company, which is considered “micro-cap” by most equity analysts. The stock based compensation expense is an estimate and significant judgment was involved in attempting to determine the value of common stock. When a majority of the stock options were granted, the Company’s common stock was not traded publicly, and no stock was traded in private markets either, except for privately negotiated sales to the founder and other private investors and the founder of the technology from which the Company subsequently licensed rights. The Company does not have any offers for purchase of its common stock in any stage, and no stock is currently registered for resale with the Securities and Exchange Commission.

 

The Company believes the only material estimate used in estimating the value of stock options was the estimated fair value of the common stock, and that assumed volatility, term, interest rate and dividend yield changes would not result in material differences in stock option valuations. The Company recognized stock-based compensation expense of $1,616,144 and $4,265,889 for the years ended December 31, 2016 and 2015, respectively, which were included in general and administrative expenses. As of December 31, 2016, there was $30,000 of total unrecognized compensation cost related to unvested stock-based compensation awards, which is expected to be recognized through September 2018.

 

The following is a summary of the outstanding options, as of December 31, 2016:

 

                      Weighted  
          Weighted     Weighted     Average  
          Average     Average     Remaining  
    Options     Intrinsic     Exercise     Contractual  
    Outstanding     Value     Price     Life  
Outstanding, December 31, 2014     5,888,583       4.00     $ 0.0001       2.5  
Granted     425,667       2.52                  
Exercised     -