| Recent Accounting Pronouncements |
| Title
and reference |
|
Prescribed |
|
Commentary |
| Effective Date |
| ASU No.
2015-16, “Business Combinations” (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments. |
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Fiscal
years beginning after December 15, 2015, including interim periods within those fiscal years. |
|
In
September 2015, the FASB issued ASU No. 2015-16, “Business Combinations” (Topic 805): Simplifying the Accounting
for Measurement-Period Adjustments (“ASU 2015-16”). ASU 2105-16 requires that (i) an acquirer recognize adjustments
to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts
are determined, (ii) the acquirer record, in the same period’s financial statements, the effect on earnings of changes
in depreciation, amortization, or other income effects, if any, as a result of the change to the provisional amounts, calculated
as if the accounting had been completed at the acquisition date, and (iii) an entity present separately on the face of the
income statement or disclose in the notes the portion of the amount recorded in current-period earnings by line item that
would have been recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized as
of the acquisition date. The amendments in this Update apply to all entities that have reported provisional amounts for items
in a business combination for which the accounting is incomplete by the end of the reporting period in which the combination
occurs and during the measurement period have an adjustment to provisional amounts recognized. Adoption of ASU No. 2015-16
did not have a significant impact on the Company’s consolidated financial statements. |
| ASU
No. 2015-15, “Interest—Imputation of Interest” (Subtopic 835-30): Presentation and Subsequent Measurement
of Debt Issuance Costs Associated with Line-of-Credit Arrangements. |
|
Effective
upon issuance |
|
In
August 2015, the FASB issued ASU No. 2015-15, “Interest—Imputation of Interest” (Subtopic 835-30): Presentation
and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements (“ASU 2015-15”).
In ASU 2015-15, the SEC adds guidance to Subtopic 835-30 pursuant to the SEC Staff Announcement at the June 18, 2015 Emerging
Issues Task Force meeting about the presentation and subsequent measurement of debt issuance costs associated with line-of-credit
arrangements. In April 2015, the FASB issued ASU 2015-03, “Interest—Imputation of Interest” (Subtopic 835-30):
Simplifying the Presentation of Debt Issuance Costs, which requires entities to present debt issuance costs related to a recognized
debt liability as a direct deduction from the carrying amount of that debt liability. According to the SEC, the guidance in
ASU 2015-03 does not address presentation or subsequent measurement of debt issuance costs related to line-of-credit arrangements.
Given the absence of authoritative guidance within ASU 2015-03 for debt issuance costs related to line-of-credit arrangements,
the SEC staff would not object to an entity deferring and presenting debt issuance costs as an asset and subsequently amortizing
the deferred debt issuance costs ratably over the term of the line-of-credit arrangement, regardless of whether there are
any outstanding borrowings on the line-of-credit arrangement. The guidance in ASU 2015-03 is effective for fiscal years beginning
after December 15, 2015, including interim periods within those fiscal years. The guidance in ASU 2015-15 is effective upon
issuance. Adoption of ASU 2015-15 and ASU 2015-03 did not have a significant impact on the Company’s consolidated financial
statements. |
| ASU No.
2015-14, “Revenue from Contracts with Customers” (Topic 606): Deferral of the Effective Date. |
|
Effective
upon issuance |
|
In
August 2015, the FASB issued ASU No. 2015-14, “Revenue from Contracts with Customers” (Topic 606): Deferral of
the Effective Date (“ASU 2015-14”). ASU 2015-14 effectively defers the effective date of ASU No. 2014-09, “Revenue
from Contracts with Customers” (Topic 606), by one year for all entities. In May 2014, the FASB issued ASU 2014-09 with
an effective date for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting
period for public business entities, certain not-for-profit entities, and certain employee benefit plans. The effective date
for all other entities was for annual reporting periods beginning after December 15, 2017, and interim periods within annual
periods beginning after December 15, 2018. ASU 2015-14 is effective upon issuance. ASU 2015-14 is not expected to have a significant
impact on the Company’s consolidated financial statements. |
| Accounting
Standard Update (“ASU”) No. 2015-11, “Inventory” (Topic 330): Simplifying the Measurement of Inventory. |
|
Fiscal
years beginning after December 15, 2016 and for interim periods therein. |
|
In
July 2015, the FASB issued ASU No. 2015-11, “Inventory” (Topic 330): Simplifying the Measurement of Inventory
(“ASU 2015-11”). ASU 2015-11 simplifies the measurement of inventory by requiring certain inventory to be subsequently
measured at the lower of cost and net realizable value. The amendments in this guidance are effective for fiscal years beginning
after December 15, 2016 and for interim periods therein and are not expected to have a significant impact on the Company’s
consolidated financial statements upon adoption. |
| ASU No.
2015-04, “Compensation - Retirement Benefits” (Topic 715): Practical Expedient for the Measurement Date of an
Employer’s Defined Benefit Obligation and Plan Assets. |
|
Interim
and fiscal periods beginning after December 15, 2015. |
|
In
April 2015, the FASB issued ASU No. 2015-04, “Compensation - Retirement Benefits” (Topic 715). ASU 2015-04 will
allow employers with fiscal year ends that do not coincide with a calendar month end to make an accounting policy election
to measure defined benefit plan assets and obligations as of the end of the month closest to their fiscal year ends (i.e.,
on an alternative measurement date). An employer that makes this election must consistently apply the practical expedient
from year to year and to all of its defined benefit plans. ASU 2015-04 will be effective for interim and fiscal periods beginning
after December 15, 2015; prospective application is required and early adoption is permitted. This guidance did not have any
impact on the Company’s financial position, results of operations or cash flows. |
| ASU No.
2015-02, “Consolidation” (Topic 810): Amendments to the Consolidation Process. |
|
Annual
periods, and interim periods within those annual periods, beginning after December 15, 2015. |
|
In
February 2015, the FASB issued ASU No. 2015-02, “Consolidation” (Topic 810): Amendments to the Consolidation Process
(“ASU 2015-02”). ASU 2015-02 amends the consolidation analysis for limited partnerships and other variable interest
entities (“VIEs”). Adoption of this guidance did not have a significant impact on the Company’s consolidated
financial statements. |
| ASU
No. 2015-01, Income Statement - “Extraordinary and Unusual Items” (Subtopic 225-20): Simplifying the Income Statement
Presentation by Eliminating the Concept of Extraordinary Items. |
|
Fiscal
years, and interim periods within those fiscal years, beginning after December 15, 2015. |
|
In
January 2015, the FASB issued ASU No. 2015-01, Income Statement - “Extraordinary and Unusual Items” (Subtopic
225-20): Simplifying the Income Statement Presentation by Eliminating the Concept of Extraordinary Items (“ASU 2015-01”).
ASU 2015-01 eliminates from GAAP the concept of extraordinary items. This guidance is effective for fiscal years, and interim
periods within those fiscal years, beginning after December 15, 2015. Adoption of this guidance did not have a material impact
on the Company’s consolidated financial statements. |
| ASU No.
2014-15, “Presentation of Financial Statements - Going Concern” (Subtopic 205-40): Disclosure of Uncertainty about
an Entity's Ability to Continue as a Going Concern. |
|
Fiscal
years, and interim periods within those years, beginning on or after December 15, 2016, with early adoption permitted. |
|
In
August 2014, the FASB issued ASU No. 2014-15, “Presentation of Financial Statements - Going Concern” (Subtopic
205-40): Disclosure of Uncertainty about an Entity's Ability to Continue as a Going Concern (“ASU 2014-15”). ASU
2014-15 provides guidance that establishes management's responsibility to evaluate whether there is substantial doubt about
an entity's ability to continue as a going concern and setting rules for how this information should be disclosed in the financial
statements. The Company does not expect this new standard to have a significant impact on its consolidated financial statements. See
note 1 regarding management’s current disclosures regarding the Company’s ability to continue as a going concern. |
| ASU No.
2014-12, “Compensation - Stock Compensation”(Topic 718): Accounting for Share-based Payments. |
|
Annual
and interim periods within the annual period beginning after December 15, 2015. |
|
In
June 2014, the FASB issued ASU No. 2014-12, “Compensation - Stock Compensation” (Topic 718): Accounting for Share-based
Payments (“ASU 2014-12”). ASU 2014-12 provides guidance that impacts the accounting for share-based performance
awards. This guidance requires that a performance target that affects vesting that could be achieved after the requisite service
period be treated as a performance condition. As such, the performance target should not be reflected in estimating the grant-date
fair value of the award. This guidance is effective for annual and interim periods within the annual period beginning after
December 15, 2015. Adoption of this guidance did not have a material impact on the Company’s consolidated financial
statements. |
| ASU
No. 2015-17, “Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes” (“ASU 2015-17”) |
|
Fiscal
years beginning on or after December 15, 2016, with early adoption permitted. |
|
In
November 2015, the FASB issued ASU No. 2015-17, “Income Taxes (Topic 740): Balance Sheet Classification of Deferred
Taxes” (“ASU 2015-17”). Topic 740, Income Taxes, requires an entity to separate deferred income tax liabilities
and assets into current and noncurrent amounts in a classified statement of financial position. Deferred tax liabilities and
assets are classified as current or noncurrent based on the classification of the related asset or liability for financial
reporting. Deferred tax liabilities and assets that are not related to an asset or liability for financial reporting are classified
according to the expected reversal date of the temporary difference. To simplify the presentation of deferred income taxes,
the amendments in ASU 2015-17 require that deferred income tax liabilities and assets be classified as noncurrent in a classified
statement of financial position. For public business entities, the amendments in this update are effective for financial statements
issued for annual periods beginning after December 15, 2016, and interim periods within those annual periods. The Company
does not expect the adoption of ASU 2015-17 to have a material impact on its consolidated financial statements. |
| Accounting
Standards Update (“ASU”) No. 2016-02, “Leases (Topic 842)” (“ASU 2016-02”) |
|
Annual
and interim periods within the annual period beginning after December 15, 2018. |
|
In
February 2016, the FASB issued Accounting Standards Update (“ASU”) No. 2016-02, “Leases (Topic 842)”
(“ASU 2016-02”). The amendments in this update create Topic 842, Leases, and supersede the leases requirements
in Topic 840, Leases. Topic 842 specifies the accounting for leases. The objective of Topic 842 is to establish the principles
that lessees and lessors shall apply to report useful information to users of financial statements about the amount, timing,
and uncertainty of cash flows arising from a lease. The main difference between Topic 842 and Topic 840 is the recognition
of lease assets and lease liabilities for those leases classified as operating leases under Topic 840. Topic 842 retains a
distinction between finance leases and operating leases. The classification criteria for distinguishing between finance leases
and operating leases are substantially similar to the classification criteria for distinguishing between capital leases and
operating leases in the previous leases guidance. The result of retaining a distinction between finance leases and operating
leases is that under the lessee accounting model in Topic 842, the effect of leases in the statement of comprehensive income
and the statement of cash flows is largely unchanged from previous GAAP. The amendments in ASU 2016-02 are effective for fiscal
years beginning after December 15, 2018, including interim periods within those fiscal years for public business entities.
Early application of the amendments in ASU 2016-02 is permitted. The Company has not yet determined the impact that adoption
of ASU 2016-02 will have on its consolidated financial statements. |
Note 18
– Subsequent Events
On September
27, 2016, a tax warrant was issued against the Company by the Florida Department of Revenue (the “DOR”) for unpaid
state income taxes in the approximate amount of $0.9 million, including penalties and interest. On January 25, 2017, the Company
paid the DOR $250,000 as partial payment on this liability, and in February 2017 the Company entered into a stipulation agreement
with the DOR which will allow the Company to pay the remainder of the amount due to the DOR over a period of 12 months. If at
any time during the stipulation period the Company fails to timely file any required tax returns with the DOR or does not meet
the payment obligations under the stipulation agreement, the entire amount due will be accelerated.
In December
of 2016, TCS-Florida, L.P. (“Tetra”), filed suit against the Company for failure to make the required payments under
an equipment leasing arrangement that the Company had with Tetra (see note 9). On January 3, 2017, Tetra received a default judgment
against the Company in the amount of $2.6 million, representing the balance owed on the lease, as well as additional interest,
penalties and fees. The Company has recognized this amount in its consolidated financial statements as of December 31, 2016. In
January and February of 2017, the Company made payments to Tetra in connection with this judgment aggregating to $0.7 million,
and on February 15, 2017 the Company entered into a forbearance agreement with Tetra whereby the remaining $1.9 million due under
the default judgment would be paid in 24 equal monthly installments, commencing on May 1, 2017.
In December
of 2016, DeLage Landen Financial Services, Inc. (“DeLage”), filed suit against the Company for failure to make the
required payments under an equipment leasing arrangement that the Company had with DeLage (see note 9). On January 24, 2017, DeLage
received a default judgment against the Company in the approximate amount of $1.0 million, representing the balance owed on the
lease, as well as additional interest, penalties and fees. The Company has recognized this amount in its consolidated financial
statements as of December 31, 2016. On February 8, 2017, the Company entered into a payment agreement with DeLage whereby the
amount due would be paid in variable monthly installments through January of 2019, with an implicit interest rate of 4.97%.
On January
13, 2017, the Company completed an asset purchase agreement to acquire certain assets related to Scott County Community Hospital,
based in Oneida, Tennessee (the “Hospital Assets”). The Hospital Assets include a 52,000 square foot hospital building
and 6,300 square foot professional building on approximately 4.3 acres. Scott County Community Hospital is classified as a Critical
Access Hospital (rural). The Company acquired the Hospital Assets out of bankruptcy for a purchase price of $1.0 million. The
Company intends to reopen the hospital during the second or third quarter of 2017, subject to the receipt of the necessary licenses
and regulatory approvals.
On February
2, 2017, the Company entered into a Securities Purchase Agreement with several accredited investors. Pursuant to the Purchase
Agreement, the Company to issued $1.6 million aggregate principal amount of Original Issue Discount Convertible Debentures due
three months from the date of issuance (the “February Debentures”) and warrants to purchase an aggregate of 3,000,000
shares of common stock, which can be exercised at any time after August 17, 2017 at an exercise price of $0.086 per share (the
“Warrants”), for a purchase price of $1.5 million. The Debentures were convertible at a conversion price of $0.086
per share (subject to adjustment).
On February
22, 2017, the Reverse Stock Split became effective (see note 1).
In January
and February of 2017, the Company received advances aggregating $3.3 million from Mr. Diamantis. The advances, along with $0.5
million of previously accrued but unpaid interest, were due on demand, bearing interest at 10% per annum. The Company used the
advances to pay the purchase price for the Hospital Assets and for general corporate purposes. On March 7, 2017, the Company issued
a promissory note to Mr. Diamantis in the amount of $3.8 million (the “2017 Diamantis Note”) in connection with these
advances received in 2017, plus accrued and unpaid interest of $0.5 million.
On March
13, 2017, the September 2016 Notes, along with the accompanying warrants, were exchanged for 400,000 shares of the Company’s
common stock.
On March
21, 2017, the Company entered into a Securities Purchase Agreement (the “SPA”) with several accredited investors,
pursuant to which the Company issued $10.85 million aggregate principal amount of Senior Secured Original Issue Discount Convertible
Debentures due two years from the date of issuance (the “Convertible Debentures”) and three series of warrants to
purchase shares of the Company’s common stock. The Company received net proceeds from this transaction in the approximate
amount of $8.4 million. The Company used $3.8 million of the net proceeds to repay the 2017 Diamantis Note and $0.75 million of
the net proceeds to make a partial repayment on the TCA Debenture. The remainder of the net proceeds is being used for general
corporate purposes. In conjunction with the issuance of the Convertible Debentures, the holder of the February Debentures exchanged
these debentures for $2.5 million of new debentures (the “Exchange Debentures” and, collectively with the Convertible
Debentures, the “Debentures”) on the same terms as, and pari passu with, the Convertible Debentures. Additionally,
the holder of $2.0 million stated value of the Company’s Series H Preferred Stock exchanged such preferred stock into $2.5
million principal amount of Exchange Debentures. All of the Debentures contain a 24% original issue discount.
The Debentures
are convertible into shares of the Company’s common stock at an initial conversion price of $1.66 per share, subject to
adjustment as more fully described in the Debentures. The Debentures will begin to amortize monthly commencing on the 90th
day following the closing date, except for the Exchange Debentures related to the Series H Preferred Stock, which began
to amortize monthly on the closing date. On each monthly amortization date, the Company may elect to repay 5% of the original
principal amount of Debentures in cash or, in lieu thereof, the conversion price of such Debentures will thereafter be 85% of
the volume weighted average price at the time of conversion. In the event the Company does not elect to pay such amortization
amounts in cash, each investor, in their sole discretion, may increase the conversion amount subject to the alternative conversion
price by up to four times the amortization amount. The Debentures contain customary affirmative and negative covenants. The conversion
price is subject to “full ratchet” and other customary anti-dilution protections as more fully described in the Debentures.
The Debentures are secured by all of the Company’s assets and are guaranteed by all of the Company’s subsidiaries.
The Series
A Warrants are immediately exercisable for up to a number of shares of our common stock equal to 100% of the shares underlying
the Debentures and have a term of five years. The Series B Warrants are immediately exercisable for up to a number of shares of
common stock equal to 100% of the shares underlying the Debentures for a period of 18 months. The Series C Warrants are exercisable
for up to a number of shares of common stock equal to 100% of the shares underlying the Debentures and have a term of five years,
however these Warrants only become exercisable if, when and to the extent that the holders exercise the Series B Warrants. The
Series A and Series C Warrants each have an exercise price of $1.95 per share and the Series B Warrants have an exercise price
of $1.66. All of the warrants are subject to “full ratchet” and other customary anti-dilution protections.
The SPA requires
the Company to file a registration statement registering for resale the shares underlying the Debentures and warrants on or before
April 7, 2017, and to use its best efforts to cause the registration statement to be declared effective within 45 days of filing,
or within 75 days if the registration statement is reviewed. Additionally, the Company is required to seek shareholder approval
to issue in excess of 20% of the Company’s issued and outstanding shares of common stock.
In February
2017, the Company made a payment to TCA in the amount of $0.4 million. In conjunction with the issuance of the Convertible Debentures
on March 21, 2017, the Company entered into a letter agreement with TCA, which (i) waives the payment defaults from October of
2016 through March of 2017; (ii) provides for the $0.75 million payment discussed above; (iii) sets forth a revised repayment
schedule whereby the remaining principal plus interest aggregating to approximately $2.6 million is repaid in various monthly
installments from April of 2017 through September of 2017; and (iv) provides for payment of an additional service fee in the amount
of $150,000. In addition, TCA entered into an intercreditor agreement with the purchasers of the Convertible Debentures which
sets forth rights, preferences and priorities with respect to the security interests in the Company’s assets.
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