Note 18 – Discontinued Operations

On July 12, 2017, the Company announced plans to spin off AMSG and in the third quarter of 2017, the Company’s Board of Directors voted unanimously to spin off the Company’s wholly-owned subsidiary, Health Technology Solutions, Inc. (“HTS”), as independent publicly traded companies by way of tax-free distributions to the Company’s stockholders. While these spin offs have taken longer than anticipated, completion of these spin offs is now expected to occur in the first quarter of 2020. The spin offs are subject to numerous conditions, including effectiveness of Registration Statements on Form 10 to be filed with the Securities and Exchange Commission, and consents, including under various funding agreements previously entered into by the Company. A record date to determine those stockholders entitled to receive shares in the spin offs should be approximately 30 to 60 days prior to the dates of the spin offs. The strategic goal of the spin offs is to create three public companies, each of which can focus on its own strengths and operational plans.

In accordance with ASC 205-20 and having met the criteria for “held for sale”, as the Company reached this decision prior to December 31, 2017, the Company has reflected amounts relating to AMSG and HTS as disposal groups classified as held for sale and included as part of discontinued operations. Prior to being classified as “held for sale,” AMSG had been the Company’s Decision Support and Informatics segment, except for the Company’s subsidiary, Alethea Laboratories, Inc., which had been included in the Clinical Laboratory Operations segment and now is part of AMSG, and HTS had been the Company’s Supportive Software Solutions segment. Segment operation disclosures in Note 17 no longer include amounts relating to AMSG and HTS following the reclassification to discontinued operations.

Carrying amounts of major classes of assets and liabilities classified as held for sale and included as part of discontinued operations in the consolidated balance sheets as of December 31, 2018 and 2017 consisted of the following:

AMSG Assets and Liabilities:

HTS Assets and Liabilities:

Consolidated Discontinued Operations Assets and Liabilities:

Major line items constituting loss from discontinued operations in the consolidated statements of operations for the years ended December 31, 2018 and 2017 consisted of the following:

AMSG Income (Loss) from Discontinued Operations:

HTS Loss from Discontinued Operations:

**Revenue from services, includes related party revenue of $0.7 million and $0.7 million, respectively

Consolidated Loss from Discontinued Operations:

Acquisition of Genomas, Inc. on September 27, 2017

On September 29, 2016, the Company announced that it had entered into a Stock Purchase Agreement (the “Purchase Agreement”) to acquire the remaining outstanding equity securities of Genomas, Inc. (“Genomas”) that the Company did not already own, representing approximately 85% of the outstanding equity interests in Genomas, for 1,750,000 shares of the Company’s newly - designated Series F Preferred Stock. (The Series F Preferred Stock is more fully described in Note 14 and below.) Genomas is a biomedical company that develops PhyzioType Systems for DNA-guided management and prescription of drugs used to treat mental illness, pain, heart disease, and diabetes. The Company had previously announced that on July 19, 2016 it acquired approximately 15% of the outstanding equity of Genomas from Hartford Healthcare Corporation (“Hartford”), along with approximately $1.5 million of notes payable to Hartford and certain rights to and license participation in technology that is used by Genomas, for $250,000 in cash. The closing of this acquisition under the Purchase Agreement, which was subject to, among other things, receipt of regulatory and licensure approvals as well as other customary closing conditions, did not occur until September 27, 2017. As a result of delays in the closing of the transaction, the Company expensed all amounts previously paid to the company aggregating $1.0 million during the fourth quarter of 2016, including outstanding advances to Genomas in the amount of $0.4 million. Genomas will be spun-off as part of AMSG, so it is presented here in discontinued operations.

The Series F Preferred Stock issued effective September 27, 2017 has an aggregate stated value of $1,750,000, and is convertible into shares of the Company’s common stock at any time after the one-year anniversary of the closing date at a conversion price per common share equal to the greater of $14,625 or the average closing sales price of the Company’s common stock for the 10 trading days immediately preceding the conversion. The maximum number of common shares issuable upon the conversion of the Series F Preferred Stock is 120. The Company valued the Series F Preferred Stock based on the value of the common stock issuable upon conversion on the date of the acquisition, which was $174,097.

The following table summarizes the fair values of assets acquired and liabilities assumed at the acquisition date of Genomas. See the discussion below regarding the impairment of the goodwill acquired.

During the fourth quarter of 2017, the Company determined that the goodwill acquired in the Genomas acquisition was impaired and, accordingly, it recorded an impairment charge of $914,972 in the discontinued operations of AMSG for the year ended December 31, 2017.