Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2017

Liquidity

Our operations are subject to certain risks and uncertainties including, among others, current and potential competitors with greater resources, dependence on significant customers, lack of operating history, and uncertainty of future profitability and possible fluctuations in financial results. Since our inception, we have financed our operations by raising debt, issuing equity and equity-linked instruments, and executing licensing arrangements, and to a lesser extent by generating royalties and product revenues. We have incurred, and continue to incur, recurring losses and

negative cash flows. At

June 30, 2017,

we had cash and cash equivalents on hand of approximately

$0.3

million, and had

outstanding debt.

The accompanying condensed consolidated financial statements have been prepared assuming that we will continue as a going concern, which contemplates continuity of operations, realization of assets, and satisfaction of liabilities in the ordinary course of business. The propriety of using the going-concern basis is dependent upon, among other things, the achievement of future profitable operations, the ability to generate sufficient cash from operations, and potential other funding sources, including cash on hand, to meet our obligations as they become due.

We recently withdrew our S-

registration statement for the public offering of shares of common stock. We exercised our rights under the Backstop Commitment and as of

August 11, 2017

closed on the issuance of

9,650,000

shares of common stock for gross proceeds of

$2.3

million. The issuance of an additional

3,150,000

shares to

one

Backstop investor for gross proceeds of

$0.7

million has

not

yet closed. We believe based on the operating cash requirements and capital expenditures expected for the next

twelve

months, that our current resources, projected revenue from sales of Aurix (including any additional revenue generated as a result of our collaboration with Restorix Health), and limited license fees and royalties from our license of certain aspects of the ALDH technology, are insufficient to support our operations beyond

March 2018

. As such, we believe that substantial doubt about our ability to continue as a going concern exists.

may

not

be able to raise additional funds on acceptable terms, or at all. If we are unable to secure suf

ficient capital to fund our operating activities, we

may

be required to curtail portions of our strategic plan or to cease operations. If we are unable to meet our planned revenue goals during the

second

half of

2017

, we will need to begin reducing our operating costs. If we are unable to increase revenues or control costs, we

may

be forced to delay the completion of, or significantly reduce the scope of, our current business plan, delay some of our development and clinical or marketing efforts, delay our plans to penetrate the market serving Medicare beneficiaries and fulfill the related data gathering requirements as stipulated by the Medicare CED coverage determination, delay the pursuit of commercial insurance reimbursement for our wound treatment technologies, postpone the hiring of new personnel, or, under certain dire financial circumstances, cease our operations entirely.

We plan to continue financing our operations with external capital for the foreseeable future.

However, we

may

not

be able to raise additional funds on acceptable terms, or at all. If we are unable to secure sufficient capital to fund our operating activities, we

may

be required to curtail portions of our strategic plan or to cease operations. If we are unable to meet our planned revenue goals during the

second

and

third

quarters of

2017,

we will need to begin reducing our operating costs. If we are unable to increase revenues or control costs, we

may

As noted in Note

–

Fresh Start Accounting

, as part of fresh start accounting, the Successor Company adopted the significant accounting policies of the Predecessor Company. As a result, the following summary of significant accounting policies applies to both the Predecessor Company and Successor Company with the exception of recently adopted accounting pronouncements effective

January 1, 2017.

Basis of Accounting, Policy [Policy Text Block]

Basis of Presentation

The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). In our opinion, the accompanying unaudited interim condensed consolidated financial statements include all adjustments, consisting of normal recurring adjustments, which are necessary to present fairly our financial position, results of operations and cash flows. The condensed consolidated balance sheet at

December 31, 2016,

has been derived from audited financial statements of the Successor Company as of that date. The interim unaudited condensed consolidated results of operations are

not

necessarily indicative of the results that

may

occur for the full fiscal year. More specifically, upon emergence from bankruptcy on the Effective Date, the Company applied fresh start accounting, resulting in the Company becoming a new entity for financial reporting purposes (see Note

–

Fresh Start Accounting

). As a result of the application of fresh start accounting and the effects of the implementation of the Plan of Reorganization, the financial statements on or after

May 5, 2016

are

not

comparable to the financial statements prior to that date. Certain information and footnote disclosure normally included in financial statements prepared in accordance with U.S. GAAP have been omitted pursuant to instructions, rules and regulations prescribed by the United States Securities and Exchange Commission, or the SEC. We believe that the disclosures provided herein are adequate to make the information presented

not

misleading when these unaudited interim condensed consolidated financial statements are read in conjunction with the audited financial statements and notes previously included in the Successor Company’s Annual Report on Form

-K for the year ended

December 31, 2016.

Consolidation, Policy [Policy Text Block]

Principles of Consolidation

The condensed consolidated financial statements include the accounts of the Company and its wholly-owned and controlled subsidiary Aldagen, Inc. (“Aldagen”). All significant inter-company accounts and transactions are eliminated in consolidation.

Use of Estimates, Policy [Policy Text Block]

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires us 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 financial statements and the reported amount of revenues and expenses during the reporting period. In the accompanying condensed consolidated financial statements, estimates are used for, but

not

limited to, the application of fresh start accounting, stock-based compensation, allowance for inventory obsolescence, allowance for doubtful accounts, valuation of derivative liabilities, contingent liabilities, fair value and depreciable lives of long-lived assets (including property and equipment, intangible assets and goodwill), deferred taxes and associated valuation allowance and the classification of our long-term debt. Actual results could differ from those estimates.

Concentration Risk, Credit Risk, Policy [Policy Text Block]

Credit Concentration

We generate accounts receivable from the sale of our products. In addition, other receivables consist primarily of the receivable due from our contract manufacturer for the cost of raw materials required to manufacture the Angel products that are purchased by the Company and immediately resold, at cost, to the contract manufacturer and a refund due for Delaware franchise taxes. Specific customer

or other receivables balances in excess of

10%

of total receivables at

March 31, 2017

and

December 31, 2016

were as follows:

	Successor		Successor
	June 30 , 2017		December 31, 2016
Other receivable A		72%		58%
Customer B		-		10%

Revenue from significant customers exceeding

10%

of total revenues for the periods presented was as follows:

	Successor		Successor		Predecessor
	Three months ended June 30, 2017		Period from May 5, 2016 through June 30, 2016		Period from April 1, 2016 through May 4, 2016
Customer A		-		-		66%
Customer B		-		24%		-
Customer C		22%		19%		-
Customer D		-		16%		-
Customer E		15%		-		-
Customer F		13%		-		-

	Successor		Successor		Predecessor
	Six months ended June 30, 2017		Period from May 5, 2016 through June 30, 2016		Period from January 1, 2016 through May 4, 2016
Customer A		-		-		78%
Customer B		-		24%		-
Customer C		28%		19%		-
Customer D		10%		16%		-

Historically, we used single suppliers for several components of the Aurix product line. We outsource the manufacturing of various products to contract manufacturers. While we believe these manufacturers demonstrate competency, reliability and stability, there is

assurance that

one

or more of them will

not

experience an interruption or inability to provide us with the products needed to satisfy customer demand. Additionally, while most of the components of Aurix are generally readily available on the open market, a reagent, bovine thrombin, is available exclusively through Pfizer, with whom we have an established vendor relationship.

Cash and Cash Equivalents, Policy [Policy Text Block]

Cash Equivalents

We consider all highly liquid instruments purchased with an original maturity of

three

months or less to be cash equivalents. Cash and cash equivalents potentially subject us to a concentration of cr

edit risk, as approximately

$81,000

held in financial institutions was in excess of the FDIC insurance limit of

$250,000

June 30, 2017.

We maintain our cash and cash equivalents in the form of money market deposit accounts and qualifying money market funds, and checking accounts with financial institutions that we believe are credit worthy.

Receivables, Policy [Policy Text Block]

Accounts Receivables

We generate accounts receivables from the sale of our products. We provide for an allowance against receivables for estimated losses that

may

result from a customer

’s inability or unwillingness to pay. The allowance for doubtful accounts is estimated primarily based upon historical write-off percentages, known problem accounts, and current economic conditions. Accounts are written off against the allowance for doubtful accounts when we determine that amounts are

not

collectable. Recoveries of previously written-off accounts are recorded when collected. At both

June 30, 2017

and

December 31, 2016,

we maintained an allowance for doubtful accounts of approximately

$409,000,

as we fully reserved for the value added tax receivable and the receivable due from the contract manufacturer of the Company's prior Angel product line as of

June 30, 2017

and

December 31, 2016.

Inventory, Policy [Policy Text Block]

Inventory

Our inventory is produced by

third

-party manufacturers and consists of raw materials and finished goods. Inventory cost is determined on a

first

-in,

first

-out basis and is stated at the lower of cost or net realizable value. We maintain an inventory of kits, reagents, and other disposables that have shelf-lives that generally range from

months to

two

years.

As of

June 30

2017,

our inventory consisted of approximately

$29,600

of finished goods and

$68,800

of raw materials. As of

December 31, 2016,

our inventory consisted of approximately

$18,100

of finished goods and

$59,800

of raw materials.

We provide for an allowance against inventory for estimated losses that

may

result in excess and obsolete inventory (i.e., from the expiration of products). Our allowance for expired inventory is estimated based upon the inventory

’s remaining shelf-life and our anticipated ability to sell such inventory, which is estimated using historical usage and future forecasts, within its remaining shelf life. At

June 30, 2017

and

December 31, 2016,

the Company maintained an allowance for expired and excess and obsolete inventory of approximately

$9,200

and

$8,000,

respectively. Expired products are segregated and used for demonstration purposes only; the Company records the associated expense for this reserve to cost of sales in the condensed consolidated statements of operations.

Property, Plant and Equipment, Policy [Policy Text Block]

Property and Equipment

Property and equipment is stated at cost less accumulated depreciation and is depreciated, using the straight-line method, over its estimated useful life ranging from

one

four

years for all assets except for furniture, lab, and manufacturing equipment, which is depreciated over

four

and

six

years, respectively. Upon emergence from bankruptcy, property and equipment remaining lives were estimated based on the estimated remaining useful lives of the assets. Leasehold improvements are amortized, using the straight-line method, over the lesser of the expected lease term or its estimated useful life ranging from

three

six

years. Amortization of leasehold improvements is included in depreciation expense. Maintenance and repairs are charged to operations as incurred. When assets are disposed of, the cost and related accumulated depreciation are removed from the accounts and any gain or loss is included in other income (expense).

Centrifuges

may

be sold or placed at

charge with customers. Depreciation expense for centrifuges that are available for sale or placed at

charge with customers are charged to cost of sales. Depreciation expense for centrifuges used for sales and marketing and other internal purposes are charged to general and administrative expenses.

Property and equipment is reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset

may

not

be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset. Recoverability measurement and estimating of undiscounted cash flows is done at the lowest possible level for which we can identify assets. If such assets are considered to be impaired, impairment is recognized as the amount by which the carrying amount of assets exceeds the fair value of the assets.

Goodwill and Intangible Assets, Policy [Policy Text Block]

Goodwill and Other Intangible Assets

Predecessor intangible assets and goodwill

In conjunction with the application of fresh start accounting, all then-remaining finite lived intangible assets, including those acquired as part of our acquisition of the Angel business, were written off as of the Effective Date (see Note

–

Fresh Start Accounting

Successor intangible assets and goodwill

In the Successor Company financial statements, intangible assets were established as part of fresh start accounting and relate to trademarks, technology, clinician relationships, and goodwill (see Note

–

Fresh Start Accounting

Our finite-lived intangible assets include trademarks, technology (including patents), and clinician relationships, and are amortized over their useful lives and reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset

may

not

be recoverable. If any indicators were present, we test for recoverability by comparing the carrying amount of the asset to the net undiscounted cash flows expected to be generated from the asset. If those net undiscounted cash flows do

not

exceed the carrying amount (i.e., the asset is

not

recoverable), we would perform the next step, which is to determine the fair value of the asset and record an impairment loss, if any. We periodically reevaluate the useful lives for these intangible assets to determine whether events and circumstances warrant a revision in their remaining useful lives.

Goodwill represents the excess of reorganization value over the fair value of tangible and identifiable intangible assets and the fair value of liabilities as of the Effective Date. Goodwill is

not

amortized, but is subject to periodic review for impairment. Goodwill is reviewed annually, as of

December 31,

and whenever events or changes in circumstances indicate that the carrying amount of the goodwill might

not

be recoverable. We perform our review of goodwill on our

one

reporting unit.

Prior to the adoption of Accounting Standards

Update

2017

–

Intangibles - Goodwill and Other (Topic

350

): Simplifying the Test for Goodwill Impairment

effective

January 1, 2017,

before employing detailed impairment testing methodologies, we

first

evaluated the likelihood of impairment by considering qualitative factors relevant to our reporting unit. When performing the qualitative assessment, we evaluated events and circumstances that would affect the significant inputs used to determine the fair value of the goodwill. Events and circumstances evaluated include: macroeconomic conditions that could affect us, industry and market considerations for the medical device industry that could affect us, cost factors that could affect our performance, our financial performance (including share price), and consideration of any company specific events that could negatively affect us, our business, or the fair value of our business. If we determined that it was more likely than

not

that goodwill was impaired, we then applied detailed testing methodologies. Otherwise, we concluded that

impairment has occurred.

Detailed impairment testing involve

d comparing the fair value of our

one

reporting unit to its carrying value, including goodwill. If the fair value exceeded carrying value, then it was concluded that

goodwill impairment had occurred. If the carrying value of the reporting unit exceeded its fair value, a

second

step was required to measure possible goodwill impairment loss. The

second

step included hypothetically valuing the tangible and intangible assets and liabilities of our

one

reporting unit as if it had been acquired in a business combination. The implied fair value of our

one

reporting unit's goodwill was then compared to the carrying value of that goodwill. If the carrying value of our

one

reporting unit's goodwill exceeded the implied fair value of the goodwill, we recognized an impairment loss in an amount equal to the excess,

not

to exceed the carrying value.

Under the new guidance, we perform our annual, or interim, goodwill impairment test by comparing the fair value of our

one

reporting unit with its carrying amount. We recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should

not

exceed the total amount of goodwill allocated to that reporting unit. We consider income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable. The Successor Company's intangible assets and goodwill were

not

considered to be impaired as of

December 31, 2016

and they were

not

considered impaired with the adoption of Accounting Standards Update

2017

04.

As a result of events and circumstances in the quarter ended

June 30, 2017,

including a sustained reduction in our stock price, we determined that it was more likely than

not

that our fair value was reduced below the carrying value of our net equity, requiring an impairment test as of

June 30, 2017.

We compared our carrying value to our fair value as reflected by our

June 30, 2017

market capitalization and concluded that our carrying value exceeded our fair value by approximately

$2.8

million. Consequently, we recognized a non-cash goodwill impairment charge of approximately

$2.1

million to write-down goodwill to its estimated fair value of

zero

as of

June 30, 2017.

Revenue Recognition, Policy [Policy Text Block]

Revenue Recognition

– Successor Company

We recognize revenue when the

four

basic criteria for recognition are met: (

) persuasive evidence of an arrangement exists; (

) delivery has occurred or services have been rendered; (

) consideration is fixed or determinable; and (

) collectability is reasonably assured.

We provide for the sale of our products, including disposable processing sets and supplies to customers. Revenue from the sale of products is recognized upon shipment of products to the customers.

We do

not

maintain a reserve for returned products, as in the past those returns have

not

been material and are

not

expected to be material in the future. Percentage-based fees on licensee sales of covered products are generally recorded as products are sold by licensees, and are reflected as royalties in the condensed consolidated statements of operations. Direct costs associated with product sales and royalty revenues are recorded at the time that revenue is recognized.

Revenue Recognition

– Predecessor Company

The Predecessor Company provided for the sale of our products, including disposable processing sets and supplies to customers, and to Arthrex as distributor of the Angel product line. Revenue from the sale of products was recognized upon shipment.

Usage or leasing of blood separation equipment

As a result of the acquisition of the Angel business, we acquired various multiple element revenue arrangements that combined the (i) usage or leasing of blood separation processing equipment, (ii) maintenance of processing equipment, and (iii) purchase of disposable processing sets and supplies. We assigned these multiple element revenue arrangements to Arthrex in

2013

pursuant to a license agreement, and further assigned all of our rights, title and interest in and to such license agreement to Deerfield as of the Effective Date; as such, the Successor Company

longer recognizes revenue under these arrangements.

License Agreement with Rohto

The Company

’s license agreement with Rohto (see Note

– Distribution, Licensing and Collaboration Arrangements

) contains multiple elements that include the delivered license and other ancillary performance obligations, such as maintaining its intellectual property and providing regulatory support and training to Rohto. The Company has determined that the ancillary performance obligations are perfunctory and incidental, and are expected to be minimal and infrequent. Accordingly, the Company combined the ancillary performance obligations with the delivered license and recognized revenue as a single unit of accounting, following revenue recognition guidance applicable to the license. Other elements contained in the license agreement, such as fees and royalties related to the supply and future sale of the product, are contingent and will be recognized as revenue when earned.

Segment Reporting, Policy [Policy Text Block]

Segments and Geographic Information

Approximately

22%

and

10%

of our total revenue was generated outside of the United States for the

three

months ended

June 30, 2017

and

2016,

respectively, and approximately

28%

and

11%

of our total revenue was generated outside of the United States for the

six

months ended

June 30, 2017

and

2016,

respectively. We operate in

one

business segment.

Share-based Compensation, Option and Incentive Plans Policy [Policy Text Block]

Stock-Based Compensation

Prior to the Effective Date, the Company, from time to time, issued stock options or stock awards to employees, directors, consultants, and other service providers under its

2002

Long-Term Incentive Plan (“LTIP”) or

2013

Equity Incentive Plan (“EIP” and, together with the LTIP, the “Incentive Plans”). In some cases, it had issued compensatory warrants to service providers outside the Incentive Plans (see Note

– Equity and Stock-Based Compensation

All outstanding stock options were cancelled as of the Effective Date. In

July 2016,

the Board of Directors approved, and in

August 2016

it amended, the Company

’s

2016

Omnibus Incentive Compensation Plan (the

“2016

Omnibus Plan”). As of

November 21, 2016,

the Majority Stockholders executed a written consent adopting and approving the

2016

Omnibus Plan, as amended and restated, which provides for the Company to grant equity and cash incentive awards to officers, directors and employees of, and consultants to, the Company and its subsidiaries. During

three

and the

six

months periods ended

June 30, 2017,

the Board of Directors granted options to purchase

15,000

shares and

37,500

shares, respectively, of New Common Stock to certain of the Company’s management, employees and directors.

stock options were granted during the

three

and

six

month periods ended

June 30, 2016.

The fair value of employee stock options is measured at the date of grant. Expected volatilities for the

2016

Omnibus Plan options are based on the equally weighted average historical volatility from

five

comparable public companies with an expected term consistent with ours. Expected years until exercise represents the period of time that options are expected to be outstanding. Under the Incentive Plans, expected volatilities were based on historical volatility of the Company

’s stock, and Company data was utilized to estimate option exercises and employee terminations within the valuation model. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant. The Company estimated that the dividend rate on its common stock will be zero. The assumptions used are summarized in the following table:

	Successor				Successor
	Six Months ended June 30 , 2017				Year ended December 31, 2016
Risk free rate		2.0	-	2.1%		1.8	-	2.0%
Weighted average expected years until exercise		5.1	-	6.0		4.8	-	6.0
Expected stock volatility			83%				83%
Dividend yield			-				-

Stock-based compensation for awards granted to non-employees is periodically re-measured as the underlying awards vest. The Company recognizes an expense for such awards throughout the performance period as the services are provided by the non-employees, based on the fair value of these options and warrants at each reporting period. The fair value of stock options and compensatory warrants issued to service providers utilizes the same methodology with the exception of the expected term. For awards to non-employees, the Company estimates that the options or warrants will be held for the full term.

The Company adopted new accounting guidance on

January 1, 2017

related to stock-based compensation arrangements. Under the new guidance, excess tax benefits and tax deficiencies related to stock-based compensation awards are recognized as income tax expenses or benefits in the income statement, and excess tax benefits are classified along with other income tax cash flows in the operating activities section of the condensed consolidated statement of cash flows. Additionally, the Company elected to account for forfeitures of stock-based awards as they occur, as opposed to estimating those prior to their occurrence. The adoption of this new guidance did

not

have a material impact on the Company's condensed consolidated financial statements in any period.

Income Tax, Policy [Policy Text Block]

Income Taxes

The Company accounts for income taxes using the asset and liability method. Under the asset and liability method, current income tax expense or benefit is the amount of income taxes expected to be payable or refundable for the current year. A deferred income tax asset or liability is recognized for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and tax credits and loss carryforwards. 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. Tax rate changes are reflected in income during the period such changes are enacted. All of our tax years remain subject to examination by the tax authorities.

The Company

’s policy for recording interest and penalties associated with audits is to record such items as a component of income before taxes. There were

such items in

2017

and

2016.

Earnings Per Share, Policy [Policy Text Block]

Basic and Diluted Earnings (Loss) per Share

Basic earnings (loss) per share is computed by dividing net income (loss) available to common shareholders by the weighted average number of shares of common stock outstanding (including contingently issuable shares when the contingencies have been resolved) during the period.

For periods of net loss, diluted loss per share is calculated similarly to basic loss per share because the impact of all dilutive potential common shares is anti-dilutive. For periods of net income, and when the effects are

not

anti-dilutive, diluted earnings per share is computed by dividing net income available to common shareholders by the weighted-average number of shares outstanding (including contingently issuable shares when the contingencies have been resolved) plus the impact of all potential dilutive common shares, consisting primarily of common stock options and stock purchase warrants using the treasury stock method, and convertible debt using the if-converted method.

All of the Company

’s outstanding stock options and warrants were considered anti-dilutive for the

three

and

six

months ended

June 30, 2017.

For the periods from

January 1, 2016

through

May 4, 2016

and

April 1, 2016

through

May 4, 2016,

all of the Company’s outstanding stock options and warrants were out of the money and considered anti-dilutive, while the Company’s convertible debt was dilutive during those periods. The total number of anti-dilutive shares underlying common stock options, and warrants exercisable for common stock, which have been excluded from the computation of diluted earnings (loss) per share for the

three

and

six

months ended

June 30, 2017,

was

1,228,750

shares underlying outstanding common stock options and

6,180,000

shares underlying stock purchase warrants; for the period from

May 5, 2016

through

June 30, 2016,

6,180,000

shares underlying stock purchase warrants outstanding; for the period from

January 1, 2016

through

May 4, 2016

and

April 1, 2016

through

May 4, 2016;

9,173,119

shares underlying outstanding common stock options and

113,629,178

shares underlying stock purchase warrants outstanding

Earnings (loss) per share are calculated for basic and diluted earnings per share as follows:

	Successor			Successor			Predecessor
	Three Months ended June 30, 2017			Period from May 5, 2016 through June 30, 2016			Period from April 1, 2016 through May 5, 2016

Numerator for net income (loss) for basic and diluted income (loss) per share	$	(3,912,061	)	$	(1,294,843	)	$	33,044,694

Denominator for basic income (loss) per share weighted average outstanding common shares		9,927,112			9,793,630			125,951,100
Dilutive effect of convertible debt		-			-			67,307,692

Denominator for diluted income (loss) per share weighted average outstanding common shares		9,927,112			9,793,630			193,258,792


Basic and diluted earnings (loss) per share
Basic	$	(0.39	)	$	(0.13	)	$	0.26
Diluted	$	(0.39	)	$	(0.13	)	$	0.17

	Successor			Successor			Predecessor
	Six Months ended June 30, 2017			Period from May 5, 2016 through June 30, 2016			Period from January 1, 2016 through May 5, 2016

Net income (loss)	$	(5,604,661	)	$	(1,294,843	)	$	28,173,934
Net income allocated to participating securities		-			-			-
Numerator for basic income (loss) per share		(5,604,661	)		(1,294,843	)		28,173,934
Numerator adjustments for potential dilutive securities		-			-			172,546
Numerator for diluted income (loss) per share	$	(5,604,661	)	$	(1,294,843	)	$	28,346,480


Denominator for basic income (loss) per share weighted average outstanding common shares		9,927,112			9,793,630			125,951,100
Dilutive effect of convertible debt		-			-			67,307,692
Denominator for diluted income (loss) per share		9,927,112			9,793,630			193,258,792

Basic and diluted earnings (loss) per share
Basic	$	(0.56	)	$	(0.13	)	$	0.22
Diluted	$	(0.56	)	$	(0.13	)	$	0.15

New Accounting Pronouncements, Policy [Policy Text Block]

Recently Adopted Accounting Pronouncements

July 2015,

the FASB issued guidance for the accounting for inventory. The main provisions are that an entity should measure inventory within the scope of this update at the lower of cost and net realizable value, except when inventory is measured using LIFO or the retail inventory method. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. In addition, the Board has amended some of the other guidance in Topic

330

to more clearly articulate the requirements for the measurement and disclosure of inventory. The amendments in this update for public business entities are effective for fiscal years beginning after

December 15, 2016,

including interim periods within those fiscal years. The amendments in this update should be applied prospectively with earlier application permitted as of the beginning of an interim or annual reporting period. We adopted this pronouncement effective

January 1, 2017;

the adoption did

not

have a material impact to our condensed consolidated financial statements.

November 2015,

the FASB issued accounting guidance to simplify the presentation of deferred taxes. Previously, U.S. GAAP required an entity to separate deferred income tax liabilities and assets into current and noncurrent amounts. Under this guidance, deferred tax liabilities and assets will be classified as noncurrent amounts. The standard is effective for reporting periods beginning after

December 15, 2016.

We adopted this pronouncement effective

January 1, 2017;

the adoption did

not

have a material impact to our condensed consolidated financial statements.

March 2016,

the FASB issued guidance simplifying the accounting for, and financial statement disclosure of, stock-based compensation awards. Under the guidance, all excess tax benefits and tax deficiencies related to stock-based compensation awards are to be recognized as income tax expenses or benefits in the income statement, and excess tax benefits should be classified along with other income tax cash flows in the operating activities section of the statement of cash flows. Under the guidance, companies can also elect to either estimate the number of awards that are expected to vest, or account for forfeitures as they occur. In addition, the guidance amends some of the other stock-based compensation awards guidance to more clearly articulate the requirements and cash flow presentation for withholding shares for tax-withholding purposes. The guidance is effective for reporting periods beginning after

December 15, 2016,

and early adoption is permitted, though all amendments of the guidance must be adopted in the same period.

The adoption of certain amendments of the guidance must be applied prospectively, and adoption of the remaining amendments must be applied either on a modified retrospective basis or retrospectively to all periods presented. We adopted this pronouncement effective

January 1, 2017;

the adoption did

not

have a material impact to our condensed consolidated financial statements.

January 2017,

the FASB issued guidance intended to simplify the subsequent measurement of goodwill by eliminating Step

from the goodwill impairment test. Under the existing guidance, in computing the implied fair value of goodwill under Step

an entity is required to perform procedures to determine the fair value at the impairment testing date of its assets and liabilities (including unrecognized assets and liabilities), following the procedure that would be required in determining the fair value of assets acquired and liabilities assumed in a business combination. Under the new guidance, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit

’s fair value; however, the loss recognized should

not

exceed the total amount of goodwill allocated to that reporting unit. Additionally, an entity should consider income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable. The guidance also eliminates the requirements for any reporting unit with a

zero

or negative carrying amount to perform a qualitative assessment and, if it fails that qualitative test, to perform Step

of the goodwill impairment test. An entity is required to adopt the new guidance on a prospective basis. The new guidance is effective for the Company for its annual or any interim goodwill impairment tests for fiscal years beginning after

December 15, 2021.

Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after

January 1, 2017.

We adopted this pronouncement effective

January 1, 2017;

the adoption did

not

have a material impact to our condensed consolidated financial statements upon adoption since goodwill was

not

considered impaired with the adoption of Accounting Standards Update

2017

04.

However, when we performed our interim goodwill impairment test, comparing the fair value of our

one

reporting unit with its carrying amount as of

June 30, 2017,

the carrying amount exceeded our reporting unit's fair value by approximately

$2.8

million. As a result we recognized a non-cash goodwill impairment charge of approximately

$2.1

million to write-down goodwill to its estimated fair value of

zero

as of

June 30, 2017.

Unadopted Accounting Pronouncements

May 2014,

the FASB issued guidance for revenue recognition for contracts, superseding the previous revenue recognition requirements, along with most existing industry-specific guidance. The guidance requires an entity to review contracts in

five

steps:

) identify the contract,

) identify performance obligations,

) determine the transaction price,

) allocate the transaction price, and

) recognize revenue. The new standard will result in enhanced disclosures regarding the nature, amount, timing, and uncertainty of revenue arising from contracts with customers. In

August 2015,

the FASB issued guidance approving a

one

-year deferral, making the standard effective for reporting periods beginning after

December 15, 2017,

with early adoption permitted only for reporting periods beginning after

December 15, 2016.

March 2016,

the FASB issued guidance to clarify the implementation guidance on principal versus agent considerations for reporting revenue gross rather than net, with the same deferred effective date. In

April 2016,

the FASB issued guidance to clarify the implementation guidance on identifying performance obligations and the accounting for licenses of intellectual property, with the same deferred effective date. In

May 2016,

the FASB issued guidance rescinding SEC paragraphs related to revenue recognition, pursuant to

two

SEC Staff Announcements at the

March 3, 2016

Emerging Issues Task Force meeting. In

May 2016,

the FASB also issued guidance to clarify the implementation guidance on assessing collectability, presentation of sales tax, noncash consideration, and contracts and contract modifications at transition, with the same effective date. We are currently evaluating the impact, if any, that this guidance will have on our condensed consolidated financial statements.

February 2016,

the FASB issued guidance for accounting for leases. The guidance requires lessees to recognize assets and liabilities related to long-term leases on the balance sheet, and expands disclosure requirements regarding leasing arrangements. The guidance is effective for reporting periods beginning after

December 15, 2018,

and early adoption is permitted. The guidance must be adopted on a modified retrospective basis, and provides for certain practical expedients. We are currently evaluating the impact, if any, that this guidance will have on our condensed consolidated financial statements.

June 2016,

the FASB issued guidance with respect to measuring credit losses on financial instruments, including trade receivables. The guidance eliminates the probable initial recognition threshold that was previously required prior to recognizing a credit loss on financial instruments. The credit loss estimate can now reflect an entity's current estimate of all future expected credit losses. Under the previous guidance, an entity only considered past events and current conditions. The guidance is effective for fiscal years beginning after

December 15, 2019.

Early adoption is permitted for fiscal years beginning after

December 15, 2018.

We are currently evaluating the impact, if any, that the adoption of this guidance will have on our condensed consolidated financial statements.

August 2016,

the FASB issued guidance on the classification of certain cash receipts and cash payments in the statement of cash flows, including those related to debt prepayment or debt extinguishment costs, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, proceeds from the settlement of corporate-owned life insurance, and distributions received from equity method investees. The guidance is effective for fiscal years beginning after

December 15, 2017.

Early adoption is permitted. The guidance must be adopted on a retrospective basis and must be applied to all periods presented, but

may

be applied prospectively if retrospective application would be impracticable. We are currently evaluating the impact, if any, that the adoption of this guidance will have on our condensed consolidated statements of cash flows.

November 2016,

the FASB issued guidance to reduce diversity in practice that exists in the classification and presentation of changes in restricted cash on the statement of cash flows. The revised guidance requires that amounts generally described as restricted cash and restricted cash equivalents be included in cash and cash equivalents when reconciling the beginning of period and end of period total amounts shown on the statement of cash flows. The guidance is effective for the fiscal years beginning after

December 15, 2017.

Early adoption is permitted. The guidance must be adopted on a retrospective basis. We are currently evaluating the impact, if any, that the adoption of this guidance will have on our condensed consolidated financial statements.

January 2017,

the FASB issued guidance clarifying 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 guidance provides a screen to determine when an integrated set of assets and activities is

not

a business, provides a framework to assist entities in evaluating whether both an input and substantive process are present, and narrows the definition of the term output. The guidance is for the Company for fiscal years beginning after

December 15, 2018.

The guidance must be adopted on a prospective basis. We are currently evaluating the impact, if any, that the adoption of this guidance will have on our condensed consolidated financial statements.

May 2017,

the FASB issued guidance clarifying

about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic

718.

An entity should account for the effects of a modification unless specified conditions are met. The current disclosure requirements in Topic

718

apply regardless of whether an entity is required to apply modification accounting under the amendments in this Update. The amendments in this Update are effective for all entities for annual periods, and interim periods within those annual periods, beginning after

December 15, 2017.

Early adoption is permitted, including adoption in any interim period, for (

) public business entities for reporting periods for which financial statements have

not

yet been issued and (

) all other entities for reporting periods for which financial statements have

not

yet been made available for issuance. The amendments in this Update should be applied prospectively to an award modified on or after the adoption date. We are currently evaluating the impact, if any, that the adoption of this guidance will have on our condensed consolidated financial statements.

We have evaluated all other issued and unadopted Accounting Standards Updates and believe the adoption of these standards will

not

have a material impact on our results of operations, financial position, or cash flows.