UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
________________
FORM 10-Q
________________
☒ | QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. |
For the quarterly period ended March 31, 2016
OR
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. |
Commission File Number: 001-33094
________________
American CareSource Holdings, Inc.
(Exact name of Registrant as specified in its charter)
________________
Delaware | 20-0428568 |
(State or other jurisdiction of incorporation or organization) |
(IRS Employer Identification No.) |
55 Ivan Allen Jr. Blvd., Suite 510
Atlanta, Georgia 30308
(Address of principal executive offices)
(404) 465-1000
(Registrant’s telephone number)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class | Name of Each Exchange on Which Registered |
Common Stock, par value $.01 per share | The NASDAQ Capital Market |
Securities registered pursuant to Section 12(g) of the Act:
None
________________
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 ☐
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 ☐ No ☒
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 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 | ☐ (Do not check if a smaller reporting company) | Smaller reporting company | ☒ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes☐ No☒
As of May 13, 2016, there were 16,597,150 outstanding shares of common stock of the registrant.
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CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS
This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. These statements can be identified by forward-looking words such as “may,” “will,” “seek,” “would,” “could,” “should,” “expect,” “intend,” “anticipate,” “believe,” “estimate” and “continue” or similar words and include statements regarding our strategy and growth plans, future operations, future financial position, prospects, expectations and future development or contain other “forward-looking” information.
Such forward-looking statements are based on current information, assumptions and belief of management, and are not guarantees of future performance. Substantial risks and uncertainties could cause actual results or future events to differ materially from those indicated by such forward-looking statements, including, but not limited to:
· | our ability to continue as a going concern if we do not obtain additional financing; |
· | our ability to attract and maintain patients, clients and providers and achieve our financial results; |
· | our ability to raise additional capital to meet our liquidity needs; |
· | changes in national healthcare policy, federal and state regulation, including without limitation the impact of the Patient Protection and Affordable Care Act, the Health Care and Education Reconciliation Act and Medical Loss Ratio regulations; |
· | our ability to complete the disposition of our ancillary network business to HealthSmart; |
· | our ability to regain and maintain compliance with NASDAQ Continued Listing Rules; |
· | general economic conditions, including economic downturns and increases in unemployment; |
· | our ability to successfully implement our growth strategy for the urgent and primary care business; |
· | our ability to develop, identify, acquire and integrate target urgent and primary care centers; |
· | increased competition in the urgent and primary care market; |
· | our ability to recruit and retain qualified physicians and other healthcare professionals; |
· | reduction in reimbursement rates from governmental and commercial payors; |
· | lower than anticipated demand for services; |
· | HealthSmart’s ability to manage our ancillary network business; |
· | changes in the business decisions by significant ancillary network clients; |
· | increased competition in our ancillary network business from major carriers; |
· | increased competition from cost containment vendors and solutions; |
· | implementation and performance difficulties; and |
· | other risk factors described in our “Risk Factors” section included in this report or in our Annual Report on Form 10-K for the year ended December 31, 2015. |
The preceding list is not intended to be an exhaustive list of all
of the risks and uncertainties that could cause our actual results or future events to differ materially from those expressed or
implied by our forward-looking statements. Our actual results or future events could differ materially from those anticipated in
the forward-looking statements for many reasons, including the reasons described in our “Risk Factors” section included
in this report or in our Annual Report on Form 10-K for the year ended December 31, 2015. Given these uncertainties, you should
not place undue reliance on our forward-looking statements, and we cannot assure you that the forward-looking statements in this
report will prove to be accurate. Except as required by law, we undertake no obligation to update publicly any forward-looking
statements for any reason after the date of this report, to conform these statements to actual results, or to changes in our expectations.
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TABLE OF CONTENTS
AMERICAN CARESOURCE HOLDINGS, INC.
FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 2016
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AMERICAN CARESOURCE HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
(amounts in thousands, except per share data)
March 31, 2016 (Unaudited) | December 31, 2015 (Audited) | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 1,050 | $ | 2,629 | ||||
Accounts receivable, net | 1,775 | 1,498 | ||||||
Prepaid expenses and other current assets | 428 | 391 | ||||||
Assets held for sale | 2,166 | 2,644 | ||||||
Total current assets | 5,419 | 7,162 | ||||||
Property and equipment, net | 4,928 | 4,859 | ||||||
Other assets: | ||||||||
Deferred loan fees, net | 684 | 1,154 | ||||||
Other non-current assets | 118 | 104 | ||||||
Intangible assets, net | 1,828 | 1,885 | ||||||
Goodwill | 5,921 | 5,921 | ||||||
Total other assets | 8,551 | 9,064 | ||||||
Total assets | $ | 18,898 | $ | 21,085 | ||||
LIABILITIES AND STOCKHOLDERS' (DEFICIT) | ||||||||
Current liabilities: | ||||||||
Lines of credit | $ | 11,800 | $ | 11,100 | ||||
Accounts payable | 1,477 | 1,609 | ||||||
Accrued liabilities | 1,330 | 1,907 | ||||||
Current portion of promissory notes and notes payable | 184 | 210 | ||||||
Capital lease obligations, current portion | 138 | 134 | ||||||
Liabilities held for sale | 5,127 | 5,435 | ||||||
Total current liabilities | 20,056 | 20,395 | ||||||
Long-term liabilities: | ||||||||
Promissory notes and notes payable | 522 | 522 | ||||||
Capital lease obligations | 1,595 | 1,630 | ||||||
Other long-term liabilities | 345 | 344 | ||||||
Total long term liabilities | 2,462 | 2,496 | ||||||
Total liabilities | 22,518 | 22,891 | ||||||
Stockholders' (deficit): | ||||||||
Preferred stock, $0.01 par value; 9,999 shares authorized | - | - | ||||||
Series A convertible preferred stock; .87 shares authorized; .75 shares issued and outstanding in March 31, 2016 and December 31, 2015 | 664 | 664 | ||||||
Common stock, $0.01 par value; 40,000 shares authorized; 16,608 and 16,597 shares issued and outstanding at March 31, 2016 and December 31, 2015, respectively | 166 | 165 | ||||||
Additional paid-in capital | 32,565 | 32,535 | ||||||
Accumulated (deficit) | (36,879 | ) | (35,170 | ) | ||||
Stockholders' (deficit) of American CareSource Holdings, Inc. | (3,484 | ) | (1,806 | ) | ||||
Equity of non-controlling interest | (135 | ) | - | |||||
Total stockholders' (deficit) | (3,620 | ) | (1,806 | ) | ||||
Total liabilities and stockholders' (deficit) | $ | 18,898 | $ | 21,085 |
The accompanying notes are an integral part of these unaudited financial statements.
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AMERICAN CARESOURCE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(amounts in thousands, except per share data)
Three Months Ended March 31, | ||||||||
2016 | 2015 | |||||||
Net revenues: | ||||||||
Urgent and primary care | $ | 4,412 | $ | 2,672 | ||||
Service agreement | 594 | - | ||||||
Total net revenues | 5,006 | 2,672 | ||||||
Operating expenses: | ||||||||
Salaries, wages, contract medical professional fees and related expenses | 4,006 | 3,072 | ||||||
Facility expenses | 525 | 362 | ||||||
Medical supplies | 210 | 224 | ||||||
Other operating expenses | 1,603 | 2,052 | ||||||
Depreciation and amortization | 222 | 166 | ||||||
Total operating expenses | 6,566 | 5,876 | ||||||
Operating (loss) | (1,560 | ) | (3,204 | ) | ||||
Interest expense: | ||||||||
Interest expense | 107 | 83 | ||||||
Deferred loan fees amortization, net of loss on warrant liability | 470 | 369 | ||||||
Total other expense and interest expense | 577 | 452 | ||||||
(Loss) from continuing operations before taxes | (2,137 | ) | (3,656 | ) | ||||
Income tax expense | 6 | 6 | ||||||
Net (loss) from continuing operations | (2,143 | ) | (3,662 | ) | ||||
Income/(loss) from discontinued operations | 299 | (15 | ) | |||||
Net (loss) | (1,844 | ) | (3,677 | ) | ||||
Net (loss) attributable to non-controlling interests | (135 | ) | - | |||||
Net (loss) attributable to American CareSource Holdings, Inc. | $ | (1,709 | ) | $ | (3,677 | ) | ||
Basic net (loss) per common share, continuing operations | $ | (0.11 | ) | $ | (0.54 | ) | ||
Diluted net (loss) per common share, continuing operations | $ | (0.11 | ) | $ | (0.55 | ) | ||
Basic net income per common share, discontinued operations | $ | 0.02 | $ | 0.00 | ||||
Diluted net income per common share, discontinued operations | $ | 0.02 | $ | 0.00 | ||||
Basic weighted-average common shares outstanding | 16,603 | 6,772 | ||||||
Diluted weighted-average common shares outstanding | 16,603 | 6,852 |
The accompanying notes are an integral part of these unaudited financial statements.
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AMERICAN CARESOURCE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' (DEFICIT)
(Unaudited)
(amounts in thousands, except shares of Series A Convertible Preferred Stock)
Series A Convertible Preferred Stock | Common Stock | Additional Paid-In | ACSH Accumulated | Non-controlling Interest Accumulated | Total Stockholders' | |||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Capital | (Deficit) | (Deficit) | (Deficit) | |||||||||||||||||||||||||
Balance at December 31, 2015 | 750 | $ | 664 | 16,597 | $ | 165 | $ | 32,535 | $ | (35,170 | ) | 0 | $ | (1,806 | ) | |||||||||||||||||
Net (loss) | - | - | - | - | - | (1,709 | ) | (135 | ) | (1,844 | ) | |||||||||||||||||||||
Stock-based compensation expense | - | - | - | - | 30 | - | 30 | |||||||||||||||||||||||||
Issuance of common stock upon conversion of restricted stock | - | - | 11 | 1 | - | - | - | |||||||||||||||||||||||||
Balance at March 31, 2016 | 750 | $ | 664 | 16,608 | $ | 166 | $ | 32,565 | $ | (36,879 | ) | $ | (135 | ) | $ | (3,620 | ) |
The accompanying notes are an integral part of these unaudited financial statements.
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AMERICAN CARESOURCE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(amounts in thousands)
Three Months Ended March 31, | ||||||||
2016 | 2015 | |||||||
Cash flows from operating activities: | ||||||||
Net (loss) | $ | (1,844 | ) | $ | (3,677 | ) | ||
Adjustments to reconcile net (loss) to net cash (used in) operating activities: | ||||||||
Non-cash stock-based compensation expense | 30 | 147 | ||||||
Depreciation and amortization | 222 | 291 | ||||||
Deferred loan fees amortization, net of loss on warrant liability | 470 | 369 | ||||||
Change in deferred rent | 1 | 69 | ||||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | (277 | ) | (51 | ) | ||||
Prepaid expenses and other current assets | (37 | ) | (110 | ) | ||||
Accounts payable | 226 | (207 | ) | |||||
Accrued liabilities | (577 | ) | 163 | |||||
Assets held for sale | 478 | (204 | ) | |||||
Liabilities held for sale | (308 | ) | 422 | |||||
Net cash (used in) operating activities | (1,616 | ) | (2,788 | ) | ||||
Cash flows from investing activities: | ||||||||
Net change in other non-current assets | (14 | ) | 8 | |||||
Additions to property and equipment | (234 | ) | (90 | ) | ||||
Net cash (used in) investing activities | (248 | ) | (82 | ) | ||||
Cash flows from financing activities: | ||||||||
Proceeds from borrowings under line of credit | 700 | 2,284 | ||||||
Principal payments on capital lease obligations | (31 | ) | (27 | ) | ||||
Principal payments on long-term debt | (26 | ) | (63 | ) | ||||
Payment of deferred offering costs | (358 | ) | (22 | ) | ||||
Net cash provided by financing activities | 285 | 2,172 | ||||||
Net (decrease) in cash and cash equivalents | (1,579 | ) | (698 | ) | ||||
Cash and cash equivalents at beginning of period | 2,629 | 1,020 | ||||||
Cash and cash equivalents at end of period | $ | 1,050 | $ | 322 | ||||
Supplemental cash flow information: | ||||||||
Cash paid for interest | $ | 106 | $ | 74 | ||||
Supplemental non-cash operating and financing activity: | ||||||||
Offering costs, deferred and unpaid | $ | - | $ | 7 | ||||
Offering costs, unpaid | $ | 100 | $ | - | ||||
Reclassified property and equipment from prepaid expenses | $ | - | $ | 51 |
The accompanying notes are an integral part of these unaudited financial statements.
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AMERICAN CARESOURCE HOLDINGS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(tables in thousands, except per share data)
1. General
Basis of Presentation
The accompanying unaudited consolidated financial statements of American CareSource Holdings, Inc. and its subsidiaries have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information, with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X of the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and notes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, these statements include all adjustments necessary to present a fair statement of our consolidated results of operations, financial position and cash flows. Operating results for any interim period are not necessarily indicative of the results that may be expected for the full year. Preparation of the Company’s financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts in the financial statements and notes. Actual results could differ from those estimates. This Quarterly Report on Form 10-Q should be read in conjunction with the Company’s consolidated financial statements and notes included in its Annual Report on Form 10-K for the fiscal year ended December 31, 2015. References herein to "the Company," "we," "us," or "our" refer to American CareSource Holdings, Inc. and its subsidiaries.
Significant Accounting Policies
Goodwill resulted from our acquisition of urgent and primary care businesses during the years ended December 31, 2015 and 2014. In accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 805, Business Combinations, the purchase method of accounting requires that the excess of the purchase price paid over the estimated fair value of identifiable tangible and intangible net assets of acquired businesses be recorded as goodwill. In accordance with ASC 350, Intangibles – Goodwill and Other, we are required to test goodwill for impairment annually or when indications of impairment occur. We perform our annual goodwill impairment test for our reporting units as of October 1, using a discounted cash flow method. In the interim, we review goodwill for impairment whenever events or circumstances indicate that the carrying amount might not be recoverable. We do not believe any event or circumstance in the first quarter of 2016 warranted an impairment review of goodwill.
Variable Interest Entities ("VIEs") – We consolidate VIEs when we are the “primary beneficiary” of the VIE. The primary beneficiary is the party that has (i) the power to direct the activities that most significantly impact the VIE’s economic performance and (ii) through its interests in the VIE, the obligation to absorb losses or the right to receive benefits from the VIE that could be significant to the VIE.
We have determined that Medac Health Services, P.A. (“Medac”) is a VIE and that we are the primary beneficiary. The financial results of Medac, our consolidated VIE, have been included in our operations since December 15, 2015, the date we closed the acquisition of certain assets from Medac (“the Medac Asset Acquisition”). Refer to Note 4 – Acquisitions and Variable Interest Entity.
For additional Significant Accounting Policies, refer to our Annual Report on Form 10-K for the fiscal year ended December 31, 2015.
Recent Accounting Pronouncements
In March 2016, the FASB issued ASU 2016-09 “Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting.” This standard requires the recognition of the income tax effects of awards in the income statement when the awards vest or are settled, thus eliminating additional paid in capital pools. The guidance also allows for the employer to repurchase more of an employee’s shares for tax withholding purposes without triggering liability accounting. In addition, the guidance allows for a policy election to account for forfeitures as they occur rather than on an estimated basis. The guidance is effective in 2017 with early adoption permitted. The Company is currently evaluating the impact of this guidance on its consolidated financial statements and the timing of adoption.
2. Description of Business
The Company engages in two lines of business: our urgent and primary care business, which we operate under the tradenames GoNow Doctors and Medac, and our ancillary network business. These lines of business are supported by a shared services function.
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On November 2, 2015, we commenced efforts to sell our legacy ancillary network business to our largest client and manager of the business, HealthSmart Preferred Care II, L.P. (“HealthSmart”) in order to continue our focus on our urgent and primary care business. Assuming we reach mutually agreeable terms with HealthSmart, we anticipate closing the transaction in 2016. Accordingly, we have concluded that the ancillary network business qualifies as discontinued operations and financial results for the ancillary network business are presented as discontinued operations in our consolidated statements of operations, and the related asset and liability accounts are presented on our unaudited consolidated balance sheets as held for sale as of March 31, 2016. Amounts previously reported have been reclassified, as necessary, to conform to this presentation to allow for meaningful comparison of continuing operations. Refer to Note 5 – Discontinued Operations.
In May 2014, we announced our entry into the urgent and primary care market. During the remainder of 2014, through our wholly-owned subsidiaries, we consummated five transactions resulting in our acquisition of ten urgent and primary care centers, located in Georgia (3), Florida (2), Alabama (3), and Virginia (2). In December 2015, we completed a key acquisition of urgent care assets comprising four sites in North Carolina. In January 2016, we closed one of our Georgia sites and on April 1, 2016, we sold the two Virginia centers.
Our healthcare centers offer a wide array of services for non-life-threatening medical conditions. We strive to improve access to quality medical care by offering extended hours and weekend service primarily on a walk-in basis. Our centers offer a broad range of medical services that generally fall within the urgent care, primary care, family care, and occupational medicine classifications. Specifically, we offer non-life-threatening, out-patient medical care for the treatment of acute, episodic, and some chronic medical conditions. When hospitalization or specialty care is needed, referrals to appropriate providers are made.
Patients typically visit our centers on a walk-in basis when their condition is not severe enough to warrant an emergency visit or when treatment by their primary care provider is inconvenient. We also attempt to capture follow-up, preventative and general primary care business after walk-in visits. The services provided at our centers include, but are not limited to, the following:
· | routine treatment of general medical problems, including colds, flu, ear infections, hypertension, asthma, pneumonia, urinary tract infections, and other conditions typically treated by primary care providers; |
· | treatment of injuries, such as simple fractures, dislocations, sprains, bruises, and cuts; |
· | minor, non-emergent surgical procedures, including suturing of lacerations and removal of foreign bodies; |
· | diagnostic tests, such as x-rays, electrocardiograms, complete blood counts, and urinalyses; and |
· | occupational and industrial medical services, including drug testing, workers' compensation cases, and pre-employment physical examinations. |
Our centers are typically equipped with digital x-ray machines, electrocardiograph machines and basic laboratory equipment, and are generally staffed with a combination of licensed physicians, nurse practitioners, physician assistants, medical support staff, and administrative support staff. Our medical support staff includes licensed nurses, certified medical assistants, laboratory technicians, and registered radiographic technologists.
3. Liquidity and Earnings (Loss) Per Share
Liquidity and Capital Resources
As of March 31, 2016, we had cash and cash equivalents of $1.1 million and a working capital deficit of $14.6 million. As of December 31, 2015, we had cash and cash equivalents of $2.6 million and a working capital deficit of $13.2 million.
Our cash needs have been funded historically from loan proceeds and equity offerings. We entered into two lines of credit in 2014. Maximum borrowings under these lines of credit is $12,000,000. As of March 31, 2016, we had no additional credit available to us under our lines of credit. Furthermore, both lines of credit are scheduled to mature in 2016 at which time the full outstanding principal balance of $11,800,000 will become due and payable. Substantially all of the borrowings under the lines of credit were used to finance acquisition activity, to fund losses, and $200,000, which is not currently available to us, was used to secure a bond required to obtain a state license for our ancillary network business. Although we intend to extend the maturity dates of the two lines of credit and raise additional capital through the incurrence of additional debt or sale of equity or assets during 2016, there is no assurance that we will be successful in completing such actions.
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If we are unable to obtain extensions on our lines of credit or if we are unable to raise additional funds, we will not have sufficient cash on hand to meet our cash requirements over the next 12 months. These uncertainties raise substantial doubt about our ability to continue as a going concern. Our consolidated financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern.
Earnings (Loss) Per Share
Basic earnings (loss) per share is computed using a two-class participating securities method. Losses have been allocated to the preferred stock, on an as-converted basis, without preference to the common stock because the dividend and liquidation rights of the preferred and common stock are equivalent on an as-converted basis. Diluted earnings (loss) per share is computed similar to basic earnings per share except for adjustments for dilutive potential common shares outstanding during the period using the treasury stock method. We computed earnings (loss) per share for both continuing and discontinued operations for the periods ended March 31, 2016, and March 31, 2015.
Basic net (loss) and diluted net (loss) per share data were computed as follows (in thousands except per share amounts):
Three Months Ended | ||||||||
March 31, 2016 | March 31, 2015 | |||||||
Numerator: | ||||||||
(Loss) from continuing operations | (2,143 | ) | (3,662 | ) | ||||
Plus loss from non-controlling interests | 135 | - | ||||||
Plus loss allocated to preferred stock | 122 | - | ||||||
(Loss) from continuing operations, common stock for basic earnings per share | (1,886 | ) | (3,662 | ) | ||||
Less gain on change in fair value of warrant liability | - | 140 | ||||||
(Loss) from continuing operations, common stock for diluted earnings per share | (1,886 | ) | (3,802 | ) | ||||
Income/(loss) from discontinued operations | 299 | (15 | ) | |||||
Denominator: | ||||||||
Weighted-average basic common shares outstanding | 16,603 | 6,772 | ||||||
Assumed conversion of dilutive securities: | ||||||||
Common stock purchase warrants | - | 80 | ||||||
Denominator for dilutive earnings per share - adjusted weighted-average shares | 16,603 | 6,852 | ||||||
Basic net (loss) per share, continuing operations | $ | (0.11 | ) | $ | (0.54 | ) | ||
Diluted net (loss) per share, continuing operations | $ | (0.11 | ) | $ | (0.55 | ) | ||
Basic net income per share, discontinued operations | $ | 0.02 | $ | 0.00 | ||||
Diluted net income per share, discontinued operations | $ | 0.02 | $ | 0.00 |
The following table summarizes potentially dilutive shares outstanding as of March 31, 2016 and March 31, 2015, which were excluded from the calculation due to being anti-dilutive (in thousands):
2016 | 2015 | |||||||
Common stock purchase warrants | 11,107 | 822 | ||||||
Stock options | 1,644 | 1,334 | ||||||
Restricted stock units | - | 89 | ||||||
Restricted stock | 50 | - |
4. Acquisitions and Variable Interest Entity
On December 15, 2015, ACSH Medical Management, LLC (“ACSH Management”), a wholly-owned subsidiary of the Company, purchased from Medac and its shareholders, substantially all the assets used in the operation of its four urgent care centers in the greater Wilmington, North Carolina area for $4,370,000 in cash, the assumption of $768,000 in liabilities and a $560,000 note payable. Medac remains an urgent care operating entity, owned by a single physician, with which ACSH Management has entered into various agreements. ACSH Management has entered into a $1.0 million secured line of credit for the benefit of Medac to fund certain of Medac’s operating losses and to cover costs necessary to expand the Medac brand in North Carolina.
ACSH Management has the power to direct certain of Medac’s significant activities and has the right to receive benefits from Medac that are significant to Medac. We have determined, therefore, that Medac is a VIE and that ACSH Management is the primary beneficiary. Consequently, we have consolidated Medac and its financial results since the date we closed the Medac Asset Acquisition.
The following table provides the balance sheets of Medac (in thousands):
March 31, 2016 | December 31, 2015 | |||||||
(Unaudited) | (Audited) | |||||||
Current assets | $ | 1,066 | $ | 779 | ||||
Current liabilities | 1,201 | 759 | ||||||
Stockholder's equity | (135 | ) | 20 | |||||
Total liabilities & stockholder's equity | $ | 1,066 | $ | 779 |
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The following table provides certain pro forma financial information for the Company as if the acquisition of Medac had occurred on January 1, 2015.
Three Months Ended March 31, | ||||||||
(in thousands, except per share amounts) | 2016 | 2015 | ||||||
Net revenue | ||||||||
Urgent and primary care | $ | 4,412 | $ | 4,672 | ||||
Service agreement | 594 | 429 | ||||||
Total net revenue | 5,006 | 5,101 | ||||||
(Loss) from continuing operations before taxes | $ | (2,137 | ) | $ | (3,325 | ) | ||
Basic net (loss) per common share | $ | (0.11 | ) | $ | (0.49 | ) | ||
Diluted net (loss) per common share | $ | (0.11 | ) | $ | (0.51 | ) |
In January 2016, we closed one of our Georgia clinics. This clinic produced net revenue of approximately $5,000 and $236,000 for the three-month periods ending March 31, 2016 and 2015, respectively.
5. Discontinued Operations
We are presenting our ancillary network business as discontinued operations in our consolidated statement of operations and the related asset and liability accounts are presented as held for sale. To allow for meaningful comparison of continuing operations, amounts previously reported have been reclassified, as necessary, to conform to this presentation.
The ancillary network business offers cost containment strategies, primarily through the utilization of a comprehensive national network of ancillary healthcare service providers. Services are marketed to a number of healthcare companies including third-party administrators, insurance companies, large self-funded organizations, various employer groups, and preferred provider organizations. Since October 1, 2014, HealthSmart has managed our ancillary network business under a management services agreement.
Major classes of assets and liabilities of the ancillary network business held for sale are as follows (in thousands):
March 31, 2016 | December 31, 2015 | |||||||
(Unaudited) | (Audited) | |||||||
Accounts receivable | $ | 1,111 | $ | 1,589 | ||||
Prepaid expenses and other current assets | 43 | 43 | ||||||
Deferred income taxes | 18 | 18 | ||||||
Total current assets held for sale | 1,172 | 1,650 | ||||||
Property and equipment, net | 588 | 588 | ||||||
Intangible assets, net | 406 | 406 | ||||||
Total other assets held for sale | 994 | 994 | ||||||
Total assets held for sale | $ | 2,166 | $ | 2,644 | ||||
Due to service providers | $ | 1,388 | $ | 3,225 | ||||
Due to HealthSmart | 3,739 | 2,210 | ||||||
Total current liabilities held for sale | 5,127 | 5,435 | ||||||
Total liabilities held for sale | $ | 5,127 | $ | 5,435 |
Summary results of operations for the ancillary network business were as follows (in thousands):
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Three Months Ended March 31, | ||||||||
2016 | 2015 | |||||||
Net revenues | $ | 4,695 | $ | 5,743 | ||||
Operating expenses: | ||||||||
Provider payments | 3,256 | 4,331 | ||||||
Administrative fees | 324 | 330 | ||||||
Other operating costs | 816 | 972 | ||||||
Depreciation and amortization | - | 125 | ||||||
Total operating expenses | 4,396 | 5,758 | ||||||
Income/(loss) from discontinued operations | $ | 299 | $ | (15 | ) |
We recognize revenue on the services we provide, which include (i) providing payor clients with a comprehensive network of ancillary healthcare providers; (ii) providing claims management, reporting, processing and payment services; (iii) providing network/need analysis to assess the benefits to payor clients of adding additional/different service providers to the client-specific provider networks; and (iv) providing credentialing of network service providers for inclusion in the client payor-specific provider networks. Revenue is recognized when services are delivered, which occurs after processed claims are billed to the payor clients and collections are reasonably assured. We estimate revenues and costs of revenues using average historical collection rates and average historical margins earned on claims. Revenues are adjusted periodically to reflect actual cash collections so that revenues recognized accurately reflect cash collected.
We record a provision for refunds based on an estimate of historical refund amounts. Refunds are paid to payors for overpayment on claims, claims paid in error, and claims paid for non-covered services. In some instances, we will recoup payments made to the ancillary service provider if the claim has been fully resolved. The evaluation is performed periodically and is based on historical data. We present revenue net of the provision for refunds on the consolidated statement of operations.
After careful evaluation of the key gross and net revenue recognition indicators, we have concluded that our circumstances are most consistent with those key indicators that support gross revenue reporting, since we are fulfilling the services of a principal versus an agent.
Payments to providers is the largest component of our cost of revenues and it consists of payments for ancillary care services in accordance with contracts negotiated with providers for specific ancillary services, separately from contracts negotiated with our clients.
6. Revenue Recognition and Accounts Receivable
In our urgent and primary care business, we have agreements with governmental and other third-party payors that provide for payments to us based on contractual adjustments to our established rates. Net revenue is reported at the time service is rendered at the estimated net realizable amounts, after giving effect to estimated contractual adjustments, payments from patients, third-party payors and others, and an estimate for bad debts.
Contractual adjustments are accrued on an estimated basis in the period the related services are rendered and adjusted in future periods as final settlements are determined. We grant credit without collateral to our patients, who consist primarily of local residents insured by third-party payors. A summary of the basis of reimbursement with major third-party payors is as follows:
· | Commercial and HMO – We have entered into agreements with certain commercial insurance carriers, health maintenance organizations, and preferred provider organizations. Billing methodologies under these agreements include discounts from established charges and prospectively determined rates. |
· | Medicare – Services rendered to Medicare program beneficiaries are recorded at prospectively determined rates. These rates vary according to a patient classification system that is based on clinical, diagnostic, and other factors. |
In establishing our allowance for bad debts, we consider historical collection experience, the aging of the account, payor classification and patient payment patterns. We adjust this allowance prospectively.
We collect payment from our uninsured patients at the time of service.
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With our recent acquisition of certain assets of Medac, we are recognizing service agreement revenue. Medac leases certain employees and provides administrative services to a local emergency medical business under a management services agreement in exchange for a fee. Revenue related to the agreement is recorded during the period when the services are completed.
Below is a summary of accounts receivable as of March 31, 2016 and December 31, 2015, and revenues for the three month periods ended March 31, 2016 and 2015, respectively, for our urgent and primary care business.
March 31, 2016 | December 31, 2015 | |||||||
(in thousands) | (Unaudited) | (Audited) | ||||||
Accounts receivable, trade | $ | 3,394 | $ | 3,236 | ||||
Accounts receivable, other | 100 | - | ||||||
Less: | ||||||||
Estimated allowance for contractual adjustments and uncollectible amounts | (1,719 | ) | (1,738 | ) | ||||
Accounts receivable, net | $ | 1,775 | $ | 1,498 |
Three Months Ended March 31, | ||||||||
(in thousands) | 2016 | 2015 | ||||||
Gross revenue | $ | 8,419 | $ | 5,786 | ||||
Less: | ||||||||
Provision for contractual adjustments and estimated uncollectible amounts | (3,413 | ) | (3,114 | ) | ||||
Net revenue | $ | 5,006 | $ | 2,672 |
7. Capital and Operating Lease Obligations
The following reflects the scheduled, minimum required payments under our lease agreements in effect at March 31, 2016 (in thousands):
Capital Leases | Operating Leases | Total | ||||||||||
2016 (remaining 9 months) | $ | 224 | $ | 915 | $ | 1,139 | ||||||
2017 | 288 | 1,001 | 1,289 | |||||||||
2018 | 276 | 926 | 1,202 | |||||||||
2019 | 273 | 812 | 1,085 | |||||||||
2020 | 286 | 727 | 1,013 | |||||||||
Thereafter | 2,612 | 4,074 | 6,686 | |||||||||
Total minimum lease payments | 3,959 | $ | 8,455 | $ | 12,414 | |||||||
Less amount representing interest | (2,226 | ) | ||||||||||
Present value of net minimum obligations | 1,733 | |||||||||||
Less current obligation under capital lease | 138 | |||||||||||
Long-term obligation under capital lease | $ | 1,595 |
8. Lines of Credit, Promissory Notes, and Notes Payable
Below is a summary of our short-term and long-term debt obligations.
Lines of Credit
As of March 31, 2016, we had outstanding borrowings of $11,800,000 under our two credit agreements, with a weighted-average interest rate of 2.18%. Amounts outstanding under these credit agreements were recorded as a current liability on our consolidated balance sheet as of March 31, 2016, since both credit agreements mature in 2016. Substantially all of the borrowings under the credit agreements were used to finance acquisition activity, fund losses, and $200,000, which is not currently available to be borrowed by us, was used to secure a bond required to obtain a state license for our ancillary network business. The obligations under the credit agreements are secured by all the assets of the Company and its subsidiaries, and include ordinary and customary covenants related to, among other things, additional debt, further encumbrances, sales of assets, and investments and lending.
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Borrowings under the credit agreements are also secured by guarantees provided by certain officers and directors of the Company, among others. We issued the guarantors warrants to purchase an aggregate of 2,060,000 shares of our common stock in consideration of their guaranteeing such indebtedness.
Promissory Notes and Notes Payable
In 2015, as part of the Medac Asset Acquisition, the Company issued a promissory note to the seller for $560,000. The fair value of the note was subsequently adjusted for reporting purposes to $522,000. The promissory note accrues interest at 5% per annum and matures on June 15, 2017. Other acquisition notes of approximately $184,000 remain outstanding at March 31, 2016, mature in 2016 and bear interest at 5%.
The following is a summary of all Company debt as of March 31, 2016 (in thousands):
Revolving line of credit | $ | 11,800 | ||
Promissory notes, related to acquisitions | 706 | |||
Total debt | 12,506 | |||
Less current maturities | 11,984 | |||
Long-term debt | $ | 522 |
9. Intangible Assets
Identifiable intangible assets acquired in the urgent and primary care transactions are comprised of relationships with patients and contracts that drive patient volume (and therefore revenue) to our centers. Identifiable intangible assets and related accumulated amortization consist of the following as of the dates presented (in thousands):
March 31, 2016 | December 31, 2015 | |||||||
(Unaudited) | (Audited) | |||||||
Gross carrying amount of urgent and primary care intangibles: | ||||||||
Patient relationships and contracts | $ | 2,074 | $ | 2,074 | ||||
Accumulated amortization | (246 | ) | (189 | ) | ||||
Total intangibles, net | $ | 1,828 | $ | 1,885 |
Total amortization expense related to intangibles was approximately $57,000 and $81,000 during the three months ended March 31, 2016 and 2015, respectively. We amortize patient relationships and contracts using the straight-line method over their estimated useful lives between five and ten years.
Estimated future amortization expense relating to intangibles is as follows (in thousands):
Years ending December 31, | Urgent and Primary Care | |||
2016 (9 months remaining) | $ | 172 | ||
2017 | 229 | |||
2018 | 229 | |||
2019 | 202 | |||
2020 | 167 | |||
Thereafter | 829 | |||
Total | $ | 1,828 |
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10. Warrants
Warrants to purchase 13,167,396 shares and 1,782,222 shares of our common stock were outstanding as of March 31, 2016 and March 31, 2015, respectively. Warrants to purchase 11,085,174 shares of common stock were issued in the 2015 Offering. Warrants to purchase 2,060,000 shares of common stock were issued in 2014 and 2015 to the guarantors of our lines of credit. The remaining warrants to purchase 22,222 shares of common stock expire on February 1, 2017 and have an exercise price of $1.50 per share. The weighted average price of the outstanding warrants to purchase an aggregate of 13,167,397 of our common stock at March 31, 2016 was $0.85.
11. Segment Reporting
As of March 31, 2016, we operated two segments, urgent and primary care and ancillary network. We evaluate segment performance based on several factors, the primary financial measure of which is operating income. We define segment income as income before interest expense, gain or loss on disposal of assets, income taxes, depreciation expense, non-cash amortization of intangible assets, intangible asset impairment, non-cash stock-based compensation expense, shared service expenses, severance charges and any other non-recurring costs. Shared services primarily consists of compensation costs for our executive management team, corporate headquarters costs, certain transactional costs, support services such as finance and accounting, human resources, legal, marketing and information technology and general administration.
The following tables set forth a comparison of operations for the following periods presented for our segments and shared services (certain prior year amounts have been reclassified for comparability purposes).
Consolidated statements of operations by segment for the respective three month periods ended March 31 are as follows (in thousands):
March 31, 2016 | March 31, 2015 | |||||||||||||||||||||||||||||||
Urgent and Primary Care | Ancillary Network* | Shared Services | Total | Urgent and Primary Care | Ancillary Network* | Shared Services | Total | |||||||||||||||||||||||||
Net revenues | $ | 5,006 | $ | 4,695 | $ | - | $ | 9,701 | $ | 2,672 | $ | 5,743 | $ | - | $ | 8,415 | ||||||||||||||||
Total segment operating income (loss) | 62 | 299 | (1,285 | ) | (924 | ) | (450 | ) | 93 | (2,011 | ) | (2,368 | ) | |||||||||||||||||||
Additional Segment Disclosures: | ||||||||||||||||||||||||||||||||
Interest expense | 46 | - | 61 | 107 | 55 | - | 28 | 83 | ||||||||||||||||||||||||
Deferred loan fees amortization, net of loss on warrant liability | 353 | - | 117 | 470 | 277 | - | 92 | 369 | ||||||||||||||||||||||||
Depreciation and amortization expense | 194 | - | 28 | 222 | 149 | 125 | 17 | 291 | ||||||||||||||||||||||||
Income tax expense | - | 6 | - | 6 | - | 6 | - | 6 | ||||||||||||||||||||||||
Total asset expenditures | 54 | - | 180 | 234 | - | - | 90 | 90 |
* Presented as discontinued operations in statement of operations.
The following provides a reconciliation of reportable segment operating income (loss) to the Company’s consolidated totals (in thousands):
Three Months Ended March 31, | ||||||||
2016 | 2015 | |||||||
Total segment operating (loss) | $ | (924 | ) | $ | (2,368 | ) | ||
Less: | ||||||||
Severance charges | 11 | - | ||||||
Depreciation and amortization expense | 222 | 291 | ||||||
Non-cash stock-based compensation expense | 30 | 147 | ||||||
Non-recurring professional fees | 74 | 413 | ||||||
Operating loss, including discontinued operations | (1,261 | ) | (3,219 | ) | ||||
Interest expense | 107 | 83 | ||||||
Deferred loan fees amortization, net of loss on warrant liability | 470 | 369 | ||||||
Loss before income taxes | $ | (1,838 | ) | $ | (3,671 | ) |
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Segment assets include accounts receivable, prepaid expenses and other current assets, property and equipment, and intangibles. Shared services assets consist of cash and cash equivalents, prepaid insurance, deferred income taxes and property and equipment primarily related to information technology assets. Consolidated assets, by segment and shared services, as of the periods presented are as follows:
Urgent and Primary Care | Ancillary Network* | Shared Services | Consolidated | |||||||||||||
March 31, 2016 | $ | 14,799 | $ | 2,166 | $ | 1,933 | $ | 18,898 | ||||||||
December 31, 2015 | 14,920 | 2,644 | 3,521 | 21,085 |
* Presented as discontinued operations in balance sheets.
12. Subsequent Events
On April 1, 2016, we exited the Virginia urgent and primary care market by consummating the sale of our two Virginia subsidiaries to UrgeMedical Group, Inc. For the period ended March 31, 2016 and March 31 2015, our Virginia subsidiaries reported net revenues of approximately $254,000 and $275,000, respectively, and net operating loss of approximately $(151,000) and $(132,000), respectively.
The sales price for the Virginia subsidiaries was $610,000, $50,000 of which was paid in cash at closing and the balance by delivery of two promissory notes. The first promissory note has an initial principal balance of $160,000 and interest accrues on the outstanding balance at 1.5% per annum. The note is payable in two installments, the first installment of $50,000 is due within 90 days after closing and the second installment of $110,000 is due within 150 days after closing. If, however, UrgeMedical pays $150,000 plus all accrued interest within 90 days, the entire note will be deemed satisfied in full.
The second promissory note has an initial principal balance of $400,000 and interest accrues on the outstanding balance at 5.0% per annum. Interest-only payments are due each month beginning July 1, 2016. Principal is due in three equal installments of $133,333 on the first, second and third anniversaries of the closing date.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of our financial condition and results of operations should be read together with our financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q. This discussion and analysis contains forward-looking statements that are based upon current expectations and involve risks, assumptions and uncertainties. You should review the “Risk Factors” section of this Quarterly Report on Form 10-Q for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements described in the following discussion and analysis.
Overview
We engage in two lines of business: our urgent and primary care business, which we operate under the tradenames GoNow Doctors and Medac, and our legacy ancillary network business. These lines of business are supported through a shared services function.
On November 2, 2015 we commenced efforts to sell our legacy ancillary network business to our largest client and manager of the business, HealthSmart, in order to continue our focus on our urgent and primary care business. Assuming we reach mutually agreeable terms with HealthSmart, we anticipate closing the transaction in 2016. Accordingly, we have concluded that the ancillary network business qualifies as discontinued operations and financial results for the ancillary network business are presented as discontinued operations in our consolidated statements of operations, and the related asset and liability accounts are presented on our consolidated balance sheets as held for sale as of March 31, 2016 and December 31, 2015. Amounts previously reported have been reclassified, as necessary, to conform to this presentation to allow for meaningful comparison of continuing operations.
Our Urgent and Primary Care Business
In May 2014, we announced our entry into the urgent and primary care market. During the remainder of 2014, through our wholly-owned subsidiaries, we consummated five transactions resulting in our acquisition of ten urgent and primary care centers, located in Georgia (3), Florida (2), Alabama (3), and Virginia (2). In December 2015, we completed a key asset acquisition with a four-site urgent care operator in North Carolina. In January 2016, we closed one of our Georgia centers and in April 2016, we sold the two Virginia centers.
Our healthcare centers offer a wide array of services for non-life-threatening medical conditions. We strive to improve access to quality medical care by offering extended hours and weekend service primarily on a walk-in basis. Our centers offer a broad range of medical services that generally fall within the urgent care, primary care, family care, and occupational medicine classifications. Specifically, we offer non-life-threatening, out-patient medical care for the treatment of acute, episodic, and some chronic medical conditions. When hospitalization or specialty care is needed, referrals to appropriate providers are made.
Patients typically visit our centers on a walk-in basis when their condition is not severe enough to warrant an emergency visit, when they do not have a relationship with a primary care provider, or when treatment by their primary care provider is inconvenient. We also attempt to capture follow-up, preventative and general primary care business after walk-in visits. The services provided at our centers include, but are not limited to, the following:
· | routine treatment of general medical problems, including colds, flu, ear infections, hypertension, asthma, pneumonia, urinary tract infections, and other conditions typically treated by primary care providers, |
· | treatment of injuries, such as simple fractures, dislocations, sprains, bruises, and cuts; |
· | minor, non-emergent surgical procedures, including suturing of lacerations and removal of foreign bodies; |
· | diagnostic tests, such as x-rays, electrocardiograms, complete blood counts, and urinalyses; and |
· | occupational and industrial medical services, including drug testing, workers’ compensation cases, and pre-employment physical examinations. |
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Our centers generally are equipped with digital x-ray machines, electrocardiograph machines and basic laboratory equipment, and are generally staffed with a combination of licensed physicians, nurse practitioners, physician assistants, medical support staff, and administrative support staff. Our medical support staff includes licensed nurses, certified medical assistants, laboratory technicians, and registered radiographic technologists.
Our patient volume, and therefore our revenue, is sensitive to seasonal fluctuations in urgent and primary care activity. Typically, winter months see a higher occurrence of influenza, bronchitis, pneumonia and similar illnesses; however, the timing and severity of these outbreaks can vary dramatically. Additionally, as consumers shift towards high deductible insurance plans, they are responsible for a greater percentage of their bill, particularly in the early months of the year before other healthcare spending has occurred. Our inability to collect the full patient liability portion of the bill at the time of service may lead to an increase in bad debt expense during that period. Our quarterly operating results may fluctuate significantly in the future depending on these and other factors.
In keeping with our retail approach to the business, in the fourth quarter of 2015, we initiated a rebranding campaign with our new tradename, GoNow Doctors. We believe our new name and logo will enable us to effectively market our services in our existing and target communities. We intend to use this name in all states except North Carolina. The trade name acquired in our December 2015 transaction, Medac, has been the trusted brand for urgent care services in the Wilmington, North Carolina market for over 30 years. As a result, we will retain the Medac name and will continue use of the name throughout our North Carolina expansion. We believe our new logo and tradenames will enable us to effectively market our services in our existing and target communities.
We intend to grow our urgent and primary care business by developing and acquiring new centers in strategic areas located in the eastern and southeastern United States, by expanding our service offerings in our existing centers, by increasing the volume of patients treated in our centers through advertising and other efforts, and by improving overall operating efficiency in our centers.
Disposition of our Virginia Centers
On April 1, 2016, we exited the Virginia urgent and primary care market by consummating the sale of our two Virginia subsidiaries to UrgeMedical Group, Inc. For the period ended March 31, 2016 and March 31 2015, our Virginia subsidiaries reported net revenues of approximately $254,000 and $275,000, respectively, and net operating loss of approximately $(151,000) and $(132,000), respectively.
The sales price for the Virginia subsidiaries was $610,000, $50,000 of which was paid in cash at closing and the balance by delivery of two promissory notes. The first promissory note has an initial principal balance of $160,000 and interest accrues on the outstanding balance at 1.5% per annum. The note is payable in two installments, the first installment of $50,000 is due within 90 days after closing and the second installment of $110,000 is due within 150 days after closing. If, however, UrgeMedical pays $150,000 plus all accrued interest within 90 days, the entire note will be deemed satisfied in full.
The second promissory note has an initial principal balance of $400,000 and interest accrues on the outstanding balance at 5.0% per annum. Interest-only payments are due each month beginning July 1, 2016. Principal is due in three equal installments of $133,333 on the first, second and third anniversaries of the effective date of the closing date.
Our Legacy Business
We concluded that our legacy ancillary network business qualifies as discontinued operations. Accordingly, the financial results from the ancillary network business for the three months ended March 31, 2016 and 2015 are presented as discontinued operations in our consolidated statements of operations, and the related asset and liability accounts are presented as held for sale as of March 31, 2016 and 2015. Amounts previously reported have been reclassified, as necessary, to conform to this presentation to allow for meaningful comparison of continuing operations.
Our ancillary network business offers cost containment strategies to our payor clients, primarily through the utilization of a comprehensive national network of ancillary healthcare service providers. This service is marketed to a number of healthcare companies including TPAs, insurance companies, large self-funded organizations, various employer groups and PPOs. We are able to lower the payors’ ancillary care costs through our network of high quality, cost effective providers that we have under contract at more favorable terms than the payors can generally obtain on their own. Payors route healthcare claims to us after service is performed by participant providers in our network. We process those claims and charge the payor according to an agreed upon, contractual rate. Upon processing the claim, we are paid directly by the payor or the insurer for the service. We then pay the medical service provider according to a separately negotiated contractual rate. We assume the risk of generating positive margin, which is calculated as the difference between the payment we receive for the service from the payor and the amount we are obligated to pay the service provider.
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On October 1, 2014, we entered into a management services agreement with HealthSmart. Under the management services agreement, HealthSmart manages the operation of our ancillary network business, subject to the supervision of a five-person oversight committee comprised of three members selected by us and two members selected by HealthSmart. As a result of this arrangement, we no longer employ the workforce of our ancillary network business. Under the management services agreement, HealthSmart operates our ancillary network business for a management fee equal to the sum of (a) 35% of the net profit derived from operation of our ancillary network business, plus (b) 120% of all direct and documented operating expenses and liabilities actually paid during such calendar month by HealthSmart in connection with providing its management services. For purposes of the fee calculation, the term “net profit” means gross ancillary network business revenue, less the sum of (x) the provider payments and administrative fees and (y) 120% of all direct and documented operating expenses and liabilities actually paid during such calendar month by HealthSmart in connection with providing its management services. Any remaining net profit accrues to us on a monthly basis, which we recognize as service agreement revenue. During the term of the agreement, HealthSmart is responsible for the payment of all expenses incurred in providing the management services with respect to our ancillary network business, including personnel salaries and benefits, the cost of supplies and equipment, and rent. The initial term of the management services agreement was three years, and it will terminate upon the consummation of the disposition of the ancillary network business.
Results of Operations
Three Months Ended March 31, 2016 Compared to Three Months Ended March 31, 2015
The following table sets forth a comparison of consolidated statements of operations by our business segments and shared services for the respective three months ended March 31, 2016 and 2015.
March 31, 2016 | March 31, 2015 | Change | ||||||||||||||||||||||||||||||||||||||
Urgent and Primary Care | Ancillary Network* | Shared Services | Total | Urgent and Primary Care | Ancillary Network* | Shared Services | Total | $ | % | |||||||||||||||||||||||||||||||
Urgent and primary care net revenues | $ | 4,412 | $ | 4,695 | $ | - | $ | 9,107 | $ | 2,672 | $ | 5,743 | $ | - | $ | 8,415 | $ | 692 | 8 | % | ||||||||||||||||||||
Service revenue | 594 | 594 | - | - | 594 | |||||||||||||||||||||||||||||||||||
Total revenue | 5,006 | 9,701 | 2,672 | 8,415 | 1,286 | 15 | % | |||||||||||||||||||||||||||||||||
Operating expenses: | ||||||||||||||||||||||||||||||||||||||||
Ancillary network provider payments | - | 3,256 | - | 3,256 | - | 4,331 | - | 4,331 | (1,075 | ) | -25 | % | ||||||||||||||||||||||||||||
Ancillary network administrative fees | - | 324 | - | 324 | - | 330 | - | 330 | (6 | ) | -2 | % | ||||||||||||||||||||||||||||
Ancillary network other operating costs | - | 816 | - | 816 | - | 972 | - | 972 | (156 | ) | -16 | % | ||||||||||||||||||||||||||||
Salaries, wages, contract medical professional fees and related expenses | 3,537 | - | 469 | 4,006 | 2,170 | - | 902 | 3,072 | 934 | 30 | % | |||||||||||||||||||||||||||||
Facility expenses | 441 | - | 84 | 525 | 252 | - | 110 | 362 | 163 | 45 | % | |||||||||||||||||||||||||||||
Medical supplies | 210 | - | - | 210 | 224 | - | - | 224 | (14 | ) | -6 | % | ||||||||||||||||||||||||||||
Other operating expenses | 756 | - | 847 | 1,603 | 476 | - | 1,576 | 2,052 | (449 | ) | -22 | % | ||||||||||||||||||||||||||||
Depreciation and amortization | 194 | - | 28 | 222 | 149 | 125 | 17 | 291 | (69 | ) | -24 | % | ||||||||||||||||||||||||||||
Total operating expenses | $ | 5,138 | $ | 4,396 | $ | 1,428 | $ | 10,962 | $ | 3,271 | $ | 5,758 | $ | 2,605 | $ | 11,634 | $ | (672 | ) | -6 | % | |||||||||||||||||||
Operating income (loss), including discontinued operations | $ | (132 | ) | $ | 299 | $ | (1,428 | ) | $ | (1,261 | ) | $ | (599 | ) | $ | (15 | ) | $ | (2,605 | ) | $ | (3,219 | ) | $ | 1,958 | -61 | % | |||||||||||||
Interest expense: | ||||||||||||||||||||||||||||||||||||||||
Interest expense | 107 | 83 | 24 | 29 | % | |||||||||||||||||||||||||||||||||||
Loss on warrant liability, net of deferred loan fee amortization | 470 | 369 | 101 | 27 | % | |||||||||||||||||||||||||||||||||||
Total other expense and interest expense | 577 | 452 | 125 | 1 | ||||||||||||||||||||||||||||||||||||
Loss before income taxes, including income (loss) on discontinued operations | $ | (1,838 | ) | $ | (3,671 | ) | $ | 1,833 | -50 | % |
* Presented as a discontinued operations in statement of operations.
Our Urgent and Primary Care Business
Our urgent and primary care business segment reported operating income before depreciation of $62,000 and an operating loss before depreciation of $(450,000), respectively, for the three months ended March 31, 2016 and 2015, an increase of $512,000 over the prior year period. We entered the urgent and primary care business in May 2014 and we currently own or operate 11 urgent and primary care centers in the east and southeastern United States. The following factors, among several others, contributed to our segment operating income in the three months ended March 31, 2016:
· | the execution of our strategic plan by our new executive management team; | |
· | full-quarter inclusion of Medac results; | |
· | improvements to revenue cycle; | |
· | implementation of several cost reduction measures; and | |
· | closure of one of our underperforming centers |
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Net Revenues
Net revenues are recognized at the time services are rendered at the estimated net realizable amounts from patients, third-party payors and others, after reduction for estimated contractual adjustments pursuant to agreements with third-party payors and an estimate for bad debts. Our urgent and primary care business net revenues increased $2.3 million, or 87% over the prior year period. For the three months ended March 31, 2016, we experienced, in the aggregate, approximately 40,600 patient visits, which resulted in an average of 33 patient visits per day per center and the average reimbursement per patient visit excluding service revenue was approximately $109. For the three months ended March 31, 2015, we experienced, in the aggregate, approximately 23,000 patient visits, which resulted in an average of 29 patient visits per day per center and the average reimbursement per patient visit was approximately $116. We believe our patient volume figures, and therefore our revenue, will improve at our centers as we continue our marketing and advertising efforts in our target markets. Contributing to this projected increase will be the expansion of our occupational medicine service line (on-the-job injuries, pre-employment drug screens, pre-employment physicals), which we intend to grow through our direct marketing efforts. We also expect to see improvements in our total revenue as a result of certain efficiency measures we intend to take with respect to our billing and coding practices
We also anticipate further increases to net revenue as we continue to improve our billing, collection, and all other aspects of our revenue cycle process.
Salaries, Wages, Contract Medical Professional Fees and Related Expenses
Salaries, wages, contract medical professional fees and related expenses are the most significant operating expense components of our urgent and primary care business and consist of compensation and benefits to our clinical providers and staff at our centers. We employ a staffing model at each center that generally includes at least one board-certified physician, one or more physician assistants or nurse practitioners, nurses or medical assistants and a front office staff member on-site at all times. Salaries, wages, contract medical professional fees and related expenses for the three months ended March 31, 2016 increased $1.4 million, or 63.0%, over the prior year period. The increase is largely attributable to the addition of the four Medac centers.
For the three months ended March 31, 2016 and 2015, salaries, wages, contract medical professional fees and related expenses were 70.7% and 81.2%, respectively, of our urgent and primary care business net revenues. The reduction was the result of, among other things, a decreased usage of temporary and other higher-cost medical providers. Temporary medical providers are generally between 25% and 40% more expensive than our typical, full-time providers. We intend to continue to focus on recruiting and retaining talented physicians and mid-level providers, which we believe will further reduce our clinic staffing costs.
Facility Expenses
Facility expenses consist of our urgent and primary care centers’ rent, property tax, insurance, utilities, telephone, and internet expenses. Facility expenses for the three months ended March 31, 2016 increased $189,000, or 75.0%, over the prior year period. For the three months ended March 31, 2016 and 2015, facility expenses were 8.8% and 9.4%, respectively, of our urgent and primary care business net revenues. The increase in expenses was due to our operation of the four additional Medac facilities during the three months ended March 31, 2016 as compared to the three months ended March 31, 2015.
Medical Supplies
Medical supplies consist of medical, pharmaceutical, and laboratory supplies used at our centers. Medical supplies expense in the first quarter of 2016 decreased $14,000, or 6.2%, from the prior period. For the three months ended March 31, 2016 and 2015, medical supplies expenses were 4.2% and 8.4%, respectively, of our urgent and primary care business net revenues. The decrease in expenses was due to more efficient management, our 2015 consolidation of medical supplies vendors, and entry into a group purchasing relationship to gain access to certain preferential pricing terms for certain supply and service items. We believe we will continue to benefit from these actions as we expand our urgent and primary care business.
Other Operating Expenses
Other operating expenses (including electronic medical records, computer systems and maintenance and support) primarily consist of radiology and laboratory fees, premiums paid for medical malpractice and other insurance, marketing, information technology, non-medical professional fees, including accounting and legal, merchant fees, equipment rental and amounts paid to our third-party revenue cycle manager to bill and collect our urgent and primary care revenue. Other operating expenses increased $280,000, or 58.8%, over the prior year period. The increase was due to our operation of more facilities during the three months ended March 31, 2016 than during the three months ended March 31, 2015. For the three months ended March 31, 2016 and 2015, other operating expenses were 15.1% and 17.8% , respectively, of our urgent and primary care business net revenues.
Depreciation and Amortization
Depreciation and amortization primarily consists of depreciation and amortization related to our medical property and equipment. Depreciation and amortization in the first three months of 2016 increased $45,000, or 30.2%, over the prior year period. The increase was due to our operation of more facilities during the three months ended March 31, 2016 than during the three months ended March 31, 2015. For the three months ended March 31, 2016 and 2015, depreciation and amortization expenses were 3.9% and 5.6%, respectively, of our urgent and primary care business net revenues.
Ancillary Network Business
Since October 1, 2014, HealthSmart has managed our ancillary network business under the management agreement discussed above. We experienced deterioration in our ancillary network business segment beginning in 2015 due to continuing changes in the healthcare marketplace. We reported operating income of $299,000 for the three months ended March 31, 2016 compared to $(15,000) for the three months ended March 31, 2015. This increase of $314,000 is due to a 6% reduction in provider margin partially offset by a 1.2% increase in management fees.
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As discussed above, we concluded that this line of business qualifies as discontinued operations as of March 31, 2016. Accordingly, financial results for the ancillary network business are presented as discontinued operations in our consolidated statements of operations, and the related asset and liability accounts are presented as held for sale as of March 31, 2016. Amounts previously reported have been reclassified, as necessary, to conform to this presentation to allow for meaningful comparison of continuing operations.
Shared Services
Shared services include the common costs related to both the urgent and primary care and ancillary network lines of business such as the salaries of our executive management team whose time is allocable across both business segments. The following functions are also included in shared services: finance and accounting, human resources, legal, marketing, information technology, and general administration.
As of March 31, 2016, shared services employed 10 full-time employees compared to 18 at March 31, 2015. Shared services expenses totaled $1.4 million and $2.6 million, respectively, for the three months ended March 31, 2016 and 2015, a decrease of $1.2 million, or 45.2%. The decrease was primarily due to significant reduction in corporate staff and professional fees.
Liquidity and Capital Resources
We had negative working capital of $14.6 million at March 31, 2016 compared to negative working capital of $13.2 million at December 31, 2015. The decrease in working capital was primarily due to a $1.6 million decrease in cash used to fund first quarter losses. We expect to incur additional operating losses until we acquire or develop sufficient centers to generate positive operating income.
Our financial statements have been prepared on a going concern basis, which contemplates the recoverability of assets and satisfaction of liabilities in the normal course of business. Based on the information herein, there is a substantial doubt as to the Company’s ability to continue as a going concern. We hope to raise additional capital in 2016 to fund anticipated future operating losses, to satisfy our debt obligations as they become due and to facilitate the expansion of our urgent and primary care business; however, there are no assurances we will be able to secure this capital at terms acceptable to us or at all. We may raise such capital through the sale of assets or through one or more public or private equity offerings, debt financings, borrowings or a combination thereof. If we raise funds through the incurrence of additional debt or the issuance of debt securities, the lenders or purchasers of debt securities may require security that is senior to the rights of our common stockholders. In addition, our incurrence of additional debt could result in the imposition of covenants that restrict our operations or limit our ability to achieve our business objectives. The issuance of any new equity securities will likely dilute the interest of our current stockholders. In light of our historical performance, additional capital may not be available when needed on acceptable terms, or at all. If adequate funds are not available, we will need to, among other things, curb our expansion plans, which would have a material adverse impact on our business prospects and results of operations. In addition, we may be required to reduce our operations, including further reductions in headcount, and sell assets. However, we may be unable to sell assets or undertake other actions to meet our operational needs. As a result, we may be unable to pay our ordinary expenses, including our debt service, on a timely basis. The table below reconciles the loss before income taxes to the net increase in cash for the three months ended March 31, 2016:
Loss before income taxes | $ | (1,838 | ) | |
Borrowings under line of credit | 700 | |||
Depreciation and amortization | 222 | |||
Non-cash stock-based compensation expense | 30 | |||
Payment of deferred offering costs | (358 | ) | ||
Other | (335 | ) | ||
Decrease in cash | $ | (1,579 | ) |
Our cash and cash equivalents balance was approximately $1.0 million as of March 31, 2016, as compared to $2.6 million as of December 31, 2015. We had borrowing capacity under existing lines of credit of $0.0 and $700,000, respectively, at March 31, 2016 and December 31, 2015. We expect to extend the maturity of our lines of credit; however, there are no assurances that we will be successful in doing so. At May 13, 2016 we had cash available to us of approximately $478,000 but no capacity to borrow under our lines of credit. We raised equity capital, net of offering costs, of $6.2 million during the year ended December 31, 2015. We have not raised equity capital in 2016.
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On December 9, 2015, we consummated a registered firm commitment underwritten public offering and sale (the “2015 Offering”) of (i) 9,642,857 Class A Units, with each Class A Unit consisting of one share of our common stock, par value $0.01 per share (the “Common Stock”) and one immediately exercisable five-year warrant to purchase one share of Common Stock with a warrant exercise price of $0.875 (collectively, the “Class A Units”), (ii) 750 Class B Units, with each Class B Unit consisting of one share of the our Series A Convertible Preferred Stock with a stated value of $1,000 and convertible into 1,429 shares of the Company’s Common Stock and five-year warrants to purchase 1,429 shares of Common Stock, with a warrant exercise price of $0.875 per share (collectively, the “Class B Units” and, together with the Class A Units, the “Securities”) and (iii) immediately exercisable five-year warrants to purchase 370,567 shares of Common Stock with a warrant exercise price of $0.875 per share, sold pursuant to an option we granted to the underwriter, Aegis Capital Corp. (“Aegis”), to purchase additional Securities to cover overallotments. The Securities issued in the 2015 Offering were sold pursuant to an underwriting agreement with Aegis. We received proceeds of $6,221,364, net of all underwriting discounts, commissions and certain reimbursements, pursuant to the underwriting agreement, after legal, accounting and other costs of $1,278,636.
We have two credit agreements with Wells Fargo. On July 30, 2014, we entered into a $5,000,000 revolving line of credit and on December 4, 2014, we entered into a second credit agreement for a $6,000,000 revolving line of credit, which was increased to $7,000,000 on August 12, 2015. Our obligations to repay advances under the credit agreements are evidenced by revolving line of credit notes, each with a fluctuating interest rate per annum of 1.75% above daily one month LIBOR, as in effect from time to time. The July 30, 2014 credit agreement matures on June 1, 2016, and the December 4, 2014 agreement matures on October 1, 2016. The obligations under the credit agreements are secured by all the assets of the Company and its subsidiaries. The credit agreements include ordinary and customary covenants related to, among other things, additional debt, further encumbrances, sales of assets, and investments and lending. As of March 31, 2016, the weighted-average interest rate on these borrowings was approximately 2.18%.
Borrowings under the credit agreements are also secured by guarantees provided by certain officers and directors of the Company, among others. On July 30, 2014, we issued to the guarantors of the July 2014 obligations warrants to purchase an aggregate of 800,000 shares of our common stock in consideration of their guaranteeing such indebtedness. The July 2014 warrants vested immediately and are exercisable any time prior to their expiration on October 30, 2019 at an exercise price of $3.15 per share. In addition, on December 4, 2014, we issued to the guarantors of the December 2014 obligations warrants to purchase an aggregate of 960,000 shares of our common stock in consideration of their guaranteeing such indebtedness. The December 2014 warrants vested immediately and are exercisable any time prior to their expiration on December 4, 2019 at an exercise price of $2.71 per share. In connection with the $1,000,000 increase in the line of credit under the December 2014 credit agreement, on August 12, 2015, we issued warrants to the guarantors to purchase an additional 300,000 shares of our common stock in consideration of their guaranteeing such indebtedness. The August 2015 warrants vested immediately and are exercisable at any time prior to their expiration on August 12, 2020 at an exercise price of $1.70 per share.
The exercise prices of the July 2014 warrants, the December 2014 warrants, and one of the August 2015 warrants under which 50,010 shares are purchasable, were adjusted downward to $1.46 per share, the closing price of our common stock on August 28, 2015. The adjustment resulted from our issuing restricted stock to our directors pursuant to our director compensation plan at a price per share less than the exercise price of such warrants. The exercise prices of all such warrants were further adjusted to $0.70 per share, the public offering price of the Class A Units in our 2015 Offering. The remaining, unadjusted August 2015 warrants, under which 249,990 shares are purchasable, were issued to Company directors (Messrs. Pappajohn and Oman). Therefore, any adjustments to such warrants require stockholder approval. We intend to seek such approval at our 2016 annual meeting of stockholders, and if approved, the exercise price of the remaining August 2015 warrants will be adjusted similarly to $0.70 per share.
Holders of warrants representing substantially all of the shares issuable under the July 2014 warrants have waived any adjustment in the number of shares that could be purchased pursuant to their warrants as a result of the change in the exercise price. Furthermore, with the exception of the potential adjustment to the remaining August 2015 warrants held by Messrs. Pappajohn and Oman, all of the warrant holders have waived any further adjustments to the exercise price of the outstanding warrants.
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On December 15, 2015, our wholly-owned subsidiary, ACSH Management, purchased from Medac and its shareholders, substantially all the assets used in the operations of its four urgent care centers for $4,370,000 in cash, the assumption of $768,000 in liabilities and a $560,000 note payable that accrues interest at five percent (5%) that matures on June 15, 2017. Medac remains an urgent care operating entity, owned by a single physician, with which ACSH Management has entered into various agreements. ACSH Management has the power to direct certain of Medac’s significant activities and has the right to receive benefits from Medac that are significant to Medac. We have determined, therefore, that Medac is a VIE and that ACSH Management is the primary beneficiary. Consequently, we have consolidated Medac and its financial results since the date we closed the Medac Asset Acquisition. ACSH Management has entered into a $1.0 million secured line of credit for the benefit of Medac to fund certain of Medac’s operating losses and to cover costs necessary to expand the Medac brand in North Carolina.
At March 31, 2016, $185,000 was due under promissory notes issued to the sellers in the transactions entered into during the year ended December 31, 2014 to acquire primary and urgent are centers. The notes accrue interest at an annual rate of five percent (5%).
A summary of all acquisition notes issued prior to the Medac Asset Acquisition is as follows:
· | ACSH Urgent Care of Georgia, LLC, or ACSH Georgia, issued a promissory note in the principal amount of $500,000 to CorrectMed, LLC and other sellers. The note provided for simple interest at a fixed rate of 5% per annum, matured on May 8, 2015 and the full amount due thereunder has been paid. |
· | ACSH Urgent Care of Florida, LLC issued three promissory notes in the aggregate principal amount of $700,000 to Bay Walk-In Clinic, Inc. One promissory note in the principal amount of $200,000 bears simple interest at a fixed rate of 5% per annum and is payable in two installments: $110,000 on August 29, 2015 and $105,000 on August 29, 2016. On October 21, 2015, as a result of certain working capital adjustments, the seller accepted $91,000 in full satisfaction of the note. The second promissory note also in the principal amount of $200,000 bears simple interest at a fixed rate of 5% per annum and is payable in 24 equal monthly installments of $8,776.51 each, beginning on September 30, 2014. We received notification on August 17, 2015 that the third promissory note in the principal amount of $300,000 was cancelled due to the death of the note’s holder. As a result of the cancellation, we recorded a one-time gain of $289,000 in the third quarter of 2015. |
· | ACSH Urgent Care Holdings, LLC issued a promissory note in the principal amount of $150,000 to Jason Junkins, M.D. The note is guaranteed by American CareSource Holdings, Inc. and is payable in two equal principal installments of $75,000, plus accrued interest at the rate of 5% per annum, on the first and second annual anniversaries of the closing date, September 12, 2014. The first principle installment was timely paid in 2015. |
· | ACSH Georgia issued a promissory note in the amount of $100,000 to Han C. Phan, M.D. and Thinh D. Nguyen, M.D. The note matured on the one-year anniversary of the closing date, October 31, 2014 and was satisfied in full in 2015. |
· | ACSH Urgent Care of Virginia, LLC issued a promissory note in the principal amount of $50,000 to Stat Medical Care, P.C. (d/b/a Fair Lakes Urgent Care Center) and William and Teresa Medical Care, Inc. (d/b/a Virginia Gateway Urgent Care Center). The note bears simple interest at a fixed rate of 5% per annum, matured on December 31, 2015, and is subject to a working capital adjustment as set forth in the applicable purchase agreement. The note remained outstanding as of March 31, 2016. |
Nasdaq Listing
Our common stock is listed on The NASDAQ Capital Market, and we are therefore subject to its continued listing requirements, including requirements with respect to the market value of publicly-held shares, minimum bid price per share, and minimum stockholder's equity, among others, and requirements relating to board and committee independence. If we fail to satisfy one or more of the requirements, we may be delisted from The NASDAQ Capital Market.
On May 21, 2015, we received a letter from NASDAQ indicating that as of March 31, 2015, our reported stockholders’ equity of $407,000 did not meet the $2.5 million minimum required to maintain continued listing, as set forth in NASDAQ Listing Rule 5550(b)(1). The letter further stated that as of May 20, 2015 we did not meet either of the alternatives of market value of listed securities or net income from continuing operations.
Under NASDAQ rules, we submitted a plan to NASDAQ to regain compliance, which NASDAQ accepted, granting us until November 17, 2015 to evidence compliance. However, because we did not raise equity capital as we anticipated, we did not evidence compliance with NASDAQ Listing Rule 5550(b)(1) by November 17, 2015. On November 18, 2015, we received a letter from NASDAQ stating that we had not regained compliance with the continued listing requirements of The NASDAQ Capital Market. As a result, NASDAQ determined that our common stock would be delisted from The NASDAQ Capital Market effective November 30, 2015. We appealed that determination which stayed the delisting of our common stock until the appeal was heard on January 14, 2016 by the NASDAQ Hearings Panel. Following the hearing, the NASDAQ Hearings Panel continued our listing through May 16, 2016 in order to allow us to meet the $2.5 million minimum stockholders’ equity requirement for continued listing on The NASDAQ Capital Market.
On January 8, 2016, we received a deficiency letter from NASDAQ indicating that as of January 8, 2016, our common stock failed to maintain a minimum bid price of $1.00 per share for 30 consecutive days in violation of NASDAQ Listing Rule 5550(a)(2). The notification had no immediate effect on the listing of our common stock on The NASDAQ Capital Market and our common stock is continuing to trade on The NASDAQ Capital Market. Under NASDAQ rules, we were granted a 180-day period within which to regain compliance.
We do not believe that we will meet the $2.5 million minimum stockholders’ equity requirement for continued listing on The NASDAQ Capital Market by May 16, 2016. Consequently, we expect that NASDAQ will deem us not to be in compliance with their listing standards and terminate the listing of our common stock on The NASDAQ Capital Market.
If we are delisted from The NASDAQ Capital Market, we expect to list our common stock on the OTCQB Venture Market, operated by OTC Markets Group Inc. We have applied to trade our common stock on the OTCQB, and expect trading would begin on the trading day immediately following the day NASDAQ effects a delisting of our common stock. Our common stock would trade on the OTCQB under its current trading symbol "GNOW." This transition to the OTCQB would not affect our business operations. We will continue to file periodic and other required reports with the Securities and Exchange Commission under applicable federal securities laws.
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Delisting from The NASDAQ Capital Market may adversely affect our ability to raise additional financing through the public or private sale of equity securities, may significantly affect the ability of investors to trade our securities and may negatively affect the value and liquidity of our common stock. Delisting also could have other negative results, including the potential loss of employee confidence, the loss of institutional investor interest and the potential loss of business development opportunities. We could also face significant adverse consequences including, among others:
· | a limited availability of market quotations for our securities; |
· | a determination that our common stock is a “penny stock” which will require brokers trading in our common stock to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for our securities; |
· | a limited amount of news and little or no analyst coverage for us; and |
· | a decreased ability to issue additional securities (including pursuant to short-form registration statements on Form S-3) or obtain additional financing in the future. |
Critical Accounting Policies and Estimates
There have been no material changes to our critical accounting policies and estimates from the information provided in our Annual Report on Form 10-K for the year ended December 31, 2015.
Item 3. Quantitative And Qualitative Disclosures About Market Risk.
Pursuant to permissive authority under Rule 305 of Regulation S-K, we have omitted Quantitative and Qualitative Disclosures About Market Risk.
Item 4. Controls And Procedures.
Evaluation of Disclosure Controls and Procedures
Management, with the participation of our Chief Executive Officer (“CEO”) and interim Chief Financial Officer, (“CFO”) who has been serving, and is continuing to serve as our Corporate Controller, carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act). Based on this evaluation, our principal executive officer and principal financial officer concluded that, as of the end of the period covered in this report, our disclosure controls and procedures along with the related internal controls over financial reporting were effective to provide reasonable assurance that the information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in Securities and Exchange Commission rules and forms, and is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting during the three months ended March 31, 2016 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
The Company is not currently party to any legal proceedings.
There have been no material changes to the risk factors disclosed in Part I, Item 1A, of our Annual Report on Form 10-K for the year ended December 31, 2015.
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Pursuant to the requirements of the Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Atlanta, State of Georgia, on May 16, 2016.
AMERICAN CARESOURCE HOLDINGS, INC. | ||||
Date: | May 16, 2016 | By: | /s/ Adam S. Winger | |
Adam S. Winger | ||||
President and Chief Executive Officer (Principal Executive Officer) |
Date: | May 16, 2016 | By: | /s/ Robert Frye | |
Robert Frye | ||||
Interim Chief Financial Officer and Controller (Principal Financial Officer and Principal Accounting Officer) |
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Exhibit Number | Description | |
3.2 | Amended and Restated Bylaws of American CareSource Holdings, Inc. | |
10.1 | Equity Purchase Agreement, dated effective as of April 1, 2016, by and among ACSH Urgent Care Holdings, LLC, ACSH Primary Care Holdings, LLC, Urgemedical Group, Inc., and Payam Herischi. | |
10.2 | Promissory Note A, dated as of April 1, 2016, by Urgemedical Group, Inc. in favor of ACSH Urgent Care Holdings, LLC and ACSH Primary Care Holdings, LLC. | |
10.3 | Promissory Note B, dated as of April 1, 2016, by Urgemedical Group, Inc. in favor of ACSH Urgent Care Holdings, LLC and ACSH Primary Care Holdings, LLC. | |
31.1 | Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
31.2 | Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
32.1 | Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
32.2 | Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
101 | The following financial statements and footnotes from the American CareSource Holdings, Inc. Quarterly Report on Form 10-Q for the quarter ended March 31, 2016 formatted in Extensible Business Reporting Language (XBRL): (i) Consolidated Statements of Operations; (ii) Consolidated Balance Sheets; (iii) Consolidated Statement of Stockholders' Equity; (iv) Consolidated Statements of Cash Flows; and (v) the Notes to Unaudited Consolidated Financial Statements. |
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Exhibit 3.2
AMENDED AND RESTATED
BYLAWS
OF
AMERICAN CARESOURCE HOLDINGS, INC.
(a Delaware corporation)
(As last amended on May 3, 2016)
ARTICLE I
STOCKHOLDERS
1. CERTIFICATES REPRESENTING STOCK. Certificates representing stock in the corporation shall be signed by, or in the name of, the corporation by the Chairperson or Vice-Chairperson of the Board of Directors, if any, or by the President or a Vice-President and by the Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary of the corporation. Any or all the signatures on any such certificate may be a facsimile. In case any officer, transfer agent, or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent, or registrar before such certificate is issued, it may be issued by the corporation with the same effect as if such person were such officer, transfer agent, or registrar at the date of issue.
Whenever the corporation shall be authorized to issue more than one class of stock or more than one series of any class of stock, and whenever the corporation shall issue any shares of its stock as partly paid stock, the certificates representing shares of any such class or series or of any such partly paid stock shall set forth thereon the statements prescribed by the General Corporation Law. Any restrictions on the transfer or registration of transfer of any shares of stock of any class or series shall be noted conspicuously on the certificate representing such shares.
The corporation may issue a new certificate of stock or uncertificated shares in place of any certificate theretofore issued by it, alleged to have been lost, stolen, or destroyed, and the Board of Directors may require the owner of the lost, stolen, or destroyed certificate, or such owner's legal representative, to give the corporation a bond sufficient to indemnify the corporation against any claim that may be made against it on account of the alleged loss, theft, or destruction of any such certificate or the issuance of any such new certificate or uncertificated shares.
2. UNCERTIFICATED SHARES. Subject to any conditions imposed by the General Corporation Law, the Board of Directors of the corporation may provide by resolution or resolutions that some or all of any or all classes or series of the stock of the corporation shall be uncertificated shares. Within a reasonable time after the issuance or transfer of any uncertificated shares, the corporation shall send to the registered owner thereof any written notice prescribed by the General Corporation Law.
3. FRACTIONAL SHARE INTERESTS. The corporation may, but shall not be required to, issue fractions of a share. If the corporation does not issue fractions of a share, it shall (1) arrange for the disposition of fractional interests by those entitled thereto, (2) pay in cash the fair value of fractions of a share as of the time when those entitled to receive such fractions are determined, or (3) issue scrip or warrants in registered form (either represented by a certificate or uncertificated) or bearer form (represented by a certificate) which shall entitle the holder to receive a full share upon the surrender of such scrip or warrants aggregating a full share. A certificate for a fractional share or an uncertificated fractional share shall, but scrip or warrants shall not unless otherwise provided therein, entitle the holder to exercise voting rights, to receive dividends thereon, and to participate in any of the assets of the corporation in the event of liquidation. The Board of Directors may cause scrip or warrants to be issued subject to the conditions that they shall become void if not exchanged for certificates representing the full shares or uncertificated full shares before a specified date, or subject to the conditions that the shares for which scrip or warrants are exchangeable may be sold by the corporation and the proceeds thereof distributed to the holders of scrip or warrants, or subject to any other conditions which the Board of Directors may impose.
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4. STOCK TRANSFERS. Upon compliance with provisions restricting the transfer or registration of transfer of shares of stock, if any, transfers or registration of transfers of shares of stock of the corporation shall be made only on the stock ledger of the corporation by the registered holder thereof, or by the registered holder's attorney thereunto authorized by power of attorney duly executed and filed with the Secretary of the corporation or with a transfer agent or a registrar, if any, and, in the case of shares represented by certificates, on surrender of the certificate or certificates for such shares of stock properly endorsed and the payment of all taxes due thereon.
5. RECORD DATE FOR STOCKHOLDERS. In order that the corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which record date shall not be more than sixty nor less than ten days before the date of such meeting. If no record date is fixed by the Board of Directors, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. In order that the corporation may determine the stockholders entitled to consent to corporate action in writing without a meeting, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which date shall not be more than ten days after the date upon which the resolution fixing the record date is adopted by the Board of Directors. If no record date has been fixed by the Board of Directors, the record date for determining the stockholders entitled to consent to corporate action in writing without a meeting, when no prior action by the Board of Directors is required by the General Corporation Law, shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the corporation by delivery to its principal place of business or an officer or agent of the corporation having custody of the book in which proceedings of meetings of stockholders are recorded. If no record date has been fixed by the Board of Directors and prior action by the Board of Directors is required by the General Corporation Law, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting shall be at the close of business on the day on which the Board of Directors adopts the resolution taking such prior action. In order that the corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights or the stockholders entitled to exercise any rights in respect of any change, conversion, or exchange of stock, or for the purpose of any other lawful action, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted, and which record date shall be not more than sixty days prior to such action. If no record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto.
6. MEANING OF CERTAIN TERMS. As used herein in respect of the right to notice of a meeting of stockholders or a waiver thereof or to participate or vote thereat or to consent or dissent in writing in lieu of a meeting, as the case may be, the term "share" or "shares" or "share of stock" or "shares of stock" or "stockholder" or "stockholders" refers to an outstanding share or shares of stock and to a holder or holders of record of outstanding shares of stock when the corporation is authorized to issue only one class of shares of stock, and said reference is also intended to include any outstanding share or shares of stock and any holder or holders of record of outstanding shares of stock of any class upon which or upon whom the certificate of incorporation confers such rights where there are two or more classes or series of shares of stock or upon which or upon whom the General Corporation Law confers such rights notwithstanding that the certificate of incorporation may provide for more than one class or series of shares of stock, one or more of which are limited or denied such rights thereunder; provided, however, that no such right shall vest in the event of an increase or a decrease in the authorized number of shares of stock of any class or series which is otherwise denied voting rights under the provisions of the certificate of incorporation, except as any provision of law may otherwise require.
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7. STOCKHOLDER MEETINGS.
(a) TIME. The annual meeting of the stockholders shall be held on such date and at such time as may be specified by resolution of the board of directors. At such annual meeting, directors shall be elected and any other proper business may be transacted. Special meetings shall be held on the date and at the time fixed by the directors.
(b) PLACE. Annual meetings and special meetings may be held at such place, either within or without the State of Delaware, as the directors may, from time to time, fix. Whenever the directors shall fail to fix such place, the meeting shall be held at the registered office of the corporation in the State of Delaware. The board of directors may also, in its sole discretion, determine that the meeting shall not be held at any place, but may instead be held solely by means of remote communication as authorized by Section 211(a)(2) of the Delaware General Corporation Law. If a meeting by remote communication is authorized by the board of directors in its sole discretion, and subject to guidelines and procedures as the board of directors may adopt, stockholders and proxyholders not physically present at a meeting of stockholders may, by means of remote communication participate in a meeting of stockholders and be deemed present in person and vote at a meeting of stockholders whether such meeting is to be held at a designated place or solely by means of remote communication, provided that (a) the corporation shall implement reasonable measures to verify that each person deemed present and permitted to vote at the meeting by means of remote communication is a stockholder or proxyholder, (b) the corporation shall implement reasonable measures to provide such stockholders and proxyholders a reasonable opportunity to participate in the meeting and to vote on matters submitted to the stockholders, including an opportunity to read or hear the proceedings of the meeting substantially concurrently with such proceedings, and (c) if any stockholder or proxyholder votes or takes other action at the meeting by means of remote communication, a record of such vote or other action shall be maintained by the corporation.
(c) CALL. Annual meetings and special meetings may be called by the directors or by any officer instructed by the directors to call the meeting.
(d) NOTICE OR WAIVER OF NOTICE. Written notice of all meetings shall be given, which shall state the place, if any, date, and hour of the meeting, the means of remote communication, if any, by which stockholders and proxyholders may be deemed to be present in person and vote at such meeting, and in the case of a special meeting, the purpose or purposes for which the meeting is called. The notice of an annual meeting shall state that the meeting is called for the election of directors and for the transaction of other business which may properly come before the meeting, and shall (if any other action which could be taken at a special meeting is to be taken at such annual meeting) state the purpose or purposes. The notice of any meeting shall also include, or be accompanied by, any additional statements, information, or documents prescribed by the General Corporation Law. Except as otherwise provided by the General Corporation Law, the written notice of any meeting shall be given not less than ten days nor more than sixty days before the date of the meeting to each stockholder entitled to vote at such meeting. If mailed, notice is given when deposited in the United States mail, postage prepaid, directed to the stockholder at such stockholder's address as it appears on the records of the corporation. If a meeting is adjourned to another time or place, notice need not be given of the adjourned meeting if the time, place, if any, thereof, and the means of remote communications, if any, by which stockholders and proxyholders may be deemed to be present in person and vote at such adjourned meeting are announced at the meeting at which the adjournment is taken. At the adjourned meeting the corporation may transact any business which might have been transacted at the original meeting. If the adjournment is for more than 30 days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. Whenever notice is required to be given under the Delaware General Corporation Law, certificate of incorporation or bylaws, a written waiver signed by the person entitled to notice, or a waiver by electronic transmission by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a stockholder at a meeting of stockholders shall constitute a waiver of notice of such meeting, except when the stockholder attends the meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders need be specified in any written waiver of notice or any waiver by electronic transmission unless so required by the certificate of incorporation or these bylaws.
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(e) STOCKHOLDER LIST. The officer who has charge of the stock ledger of the corporation shall prepare and make, at least ten days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting for a period of at least ten days prior to the meeting on a reasonably accessible electronic network, provided that the information required to gain access to such list is provided with the notice of the meeting or during ordinary business hours at the principal place of business of the corporation. In the event that the corporation determines to make the list available on an electronic network, the corporation may take reasonable steps to ensure that such information is available only to stockholders of the corporation. If the meeting is to be held at a place, then the list shall be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. If the meeting is to be held solely by means of remote communication, then the list shall also be open to the examination of any stockholder during the whole time of the meeting on a reasonably accessible electronic network, and the information required to access such list shall be provided with the notice of the meeting. The stock ledger shall be the only evidence as to who are the stockholders entitled to examine the stock ledger, the list required by this section or the books of the corporation, or to vote in person or by proxy at any meeting of stockholders.
(f) CONDUCT OF MEETING. Meetings of the stockholders shall be presided over by one of the following officers in the order of seniority and if present and acting - the Chairperson of the Board, if any, the Vice-Chairperson of the Board, if any, the President, a Vice-President, or, if none of the foregoing is in office and present and acting, by a chairperson to be chosen by the stockholders. The Secretary of the corporation, or in such Secretary's absence, an Assistant Secretary, shall act as secretary of every meeting, but if neither the Secretary nor an Assistant Secretary is present the chairperson of the meeting shall appoint a secretary of the meeting.
(g) PROXY REPRESENTATION. Each stockholder entitled to vote at a meeting of stockholders or to express consent or dissent to corporate action in writing without a meeting may authorize another person or persons to act for such stockholder by proxy, but no such proxy shall be voted or acted upon after 3 years from its date, unless the proxy provides for a longer period. A stockholder may execute a writing authorizing another person or persons to act for such stockholder as proxy. Execution may be accomplished by the stockholder or such stockholder's authorized officer, director, employee or agent signing such writing or causing such person's signature to be affixed to such writing by any reasonable means including, but not limited to, by facsimile signature. A stockholder may also authorize another person or persons to act for such stockholder as proxy by transmitting or authorizing the transmission of a telegram, cablegram, or other means of electronic transmission to the person who will be the holder of the proxy or to a proxy solicitation firm, proxy support service organization or like agent duly authorized by the person who will be the holder of the proxy to receive such transmission, provided that any such telegram, cablegram or other means of electronic transmission must either set forth or be submitted with information from which it can be determined that the telegram, cablegram or other electronic transmission was authorized by the stockholder. If it is determined that such telegrams, cablegrams or other electronic transmissions are valid, the inspectors or, if there are no inspectors, such other persons making the determination shall specify the information upon which they relied. Any copy, facsimile telecommunication or other reliable reproduction of the writing or transmission created pursuant to Section 212(c) of the Delaware General Corporation Law may be substituted or used in lieu of the original writing or transmission for any and all purposes for which the original writing or transmission could be used, provided that such copy, facsimile telecommunication or other reproduction shall be a complete reproduction of the entire original writing or transmission. A duly executed proxy shall be irrevocable if it states that it is irrevocable and, if, and only as long as, it is coupled with an interest sufficient in law to support an irrevocable power. A proxy may be made irrevocable regardless of whether the interest with which it is coupled is an interest in the stock itself or an interest in the corporation generally.
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(h) INSPECTORS. The directors, in advance of any meeting, may, but need not, appoint one or more inspectors of election to act at the meeting or any adjournment thereof. If an inspector or inspectors are not appointed, the person presiding at the meeting may, but need not, appoint one or more inspectors. In case any person who may be appointed as an inspector fails to appear or act, the vacancy may be filled by appointment made by the directors in advance of the meeting or at the meeting by the person presiding thereat. Each inspector, if any, before entering upon the discharge of duties of inspector, shall take and sign an oath faithfully to execute the duties of inspector at such meeting with strict impartiality and according to the best of such inspector's ability. The inspectors, if any, shall determine the number of shares of stock outstanding and the voting power of each, the shares of stock represented at the meeting, the existence of a quorum, the validity and effect of proxies, and shall receive votes, ballots, or consents, hear and determine all challenges and questions arising in connection with the right to vote, count and tabulate all votes, ballots, or consents, determine the result, and do such acts as are proper to conduct the election or vote with fairness to all stockholders. On request of the person presiding at the meeting, the inspector or inspectors, if any, shall make a report in writing of any challenge, question, or matter determined by such inspector or inspectors and execute a certificate of any fact found by such inspector or inspectors. Except as may otherwise be required by subsection (e) of Section 231 of the General Corporation Law, the provisions of that Section shall not apply to the corporation.
(i) QUORUM. The holders of a majority of the outstanding shares of stock shall constitute a quorum at a meeting of stockholders for the transaction of any business. The stockholders present may adjourn the meeting despite the absence of a quorum.
(j) VOTING. Each share of stock shall entitle the holder thereof to one vote. Directors shall be elected by a plurality of the votes of the shares present in person or represented by proxy at the meeting and entitled to vote on the election of directors. Any other action shall be authorized by a majority of the votes cast except where the General Corporation Law prescribes a different percentage of votes and/or a different exercise of voting power, and except as may be otherwise prescribed by the provisions of the certificate of incorporation and these Bylaws. In the election of directors, and for any other action, voting need not be by ballot.
8. STOCKHOLDER ACTION WITHOUT MEETINGS. Except as any provision of the General Corporation Law may otherwise require, any action required by the General Corporation Law to be taken at any annual or special meeting of stockholders, or any action which may be taken at any annual or special meeting of stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. A telegram, cablegram or other electronic transmission consenting to an action to be taken and transmitted by a stockholder or proxyholder, or by a person or persons authorized to act for a stockholder or proxyholder, shall be deemed to be written, signed and dated for the purposes of this section, provided that any such telegram, cablegram or other electronic transmission sets forth or is delivered with information from which the corporation can determine that the telegram, cablegram or other electronic transmission was transmitted by the stockholder or proxyholder or by a person or persons authorized to act for the stockholder or proxyholder and the date on which such stockholder or proxyholder or authorized person or persons transmitted such telegram, cablegram or electronic transmission. The date on which such telegram, cablegram or electronic transmission is transmitted shall be deemed to be the date on which such consent was signed. No consent given by telegram, cablegram or other electronic transmission shall be deemed to have been delivered until such consent is reproduced in paper form and until such paper shall be delivered to the corporation by delivery to its principal place of business or an officer or agent of the corporation having custody of the book in which the proceedings of meetings of stockholders are recorded, to the extent and in the manner provided by resolution of the board of directors of the corporation.. Any copy, facsimile or other reliable reproduction of a consent in writing may be substituted or used in lieu of the original writing for any and all purposes for which the original writing could be used, provided that such copy, facsimile or other reproduction shall be a complete reproduction of the entire original writing. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing. Action taken pursuant to this paragraph shall be subject to the provisions of Section 228 of the General Corporation Law.
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ARTICLE II
DIRECTORS
1. FUNCTIONS AND DEFINITION. The business and affairs of the corporation shall be managed by or under the direction of the Board of Directors of the corporation. The Board of Directors shall have the authority to fix the compensation of the members thereof. The use of the phrase "whole board" herein refers to the total number of directors which the corporation would have if there were no vacancies.
2. QUALIFICATIONS AND NUMBER. A director need not be a stockholder, a citizen of the United States, or a resident of the State of Delaware. The initial Board of Directors shall consist of one or more persons. Thereafter the number of directors constituting the whole board shall be at least one. Subject to the foregoing limitation and except for the first Board of Directors, such number may be fixed from time to time by action of the stockholders or of the directors, or, if the number is not fixed, the number shall be at least one. The number of directors may be increased or decreased by action of the stockholders or of the directors.
3. ELECTION AND TERM. The first Board of Directors, unless the members thereof shall have been named in the certificate of incorporation, shall be elected by the incorporator or incorporators and shall hold office until the first annual meeting of stockholders and until their successors are elected and qualified or until their earlier resignation or removal. Any director may resign at any time upon notice given in writing or by electronic transmission to the corporation. Thereafter, directors who are elected at an annual meeting of stockholders, and directors who are elected in the interim to fill vacancies and newly created directorships, shall hold office until the next annual meeting of stockholders and until their successors are elected and qualified or until their earlier resignation or removal. Except as the General Corporation Law may otherwise require, in the interim between annual meetings of stockholders or of special meetings of stockholders called for the election of directors and/or for the removal of one or more directors and for the filling of any vacancy in that connection, newly created directorships and any vacancies in the Board of Directors, including unfilled vacancies resulting from the removal of directors for cause or without cause, may be filled by the vote of a majority of the remaining directors then in office, although less than a quorum, or by the sole remaining director.
4. MEETINGS.
(a) TIME. Meetings shall be held at such time as the Board shall fix, except that the first meeting of a newly elected Board shall be held as soon after its election as the directors may conveniently assemble.
(b) PLACE. Meetings shall be held at such place within or without the State of Delaware as shall be fixed by the Board.
(c) CALL. No call shall be required for regular meetings for which the time and place have been fixed. Special meetings may be called by or at the direction of the Chairperson of the Board, if any, the Vice-Chairperson of the Board, if any, of the President, or of a majority of the directors in office.
(d) NOTICE OR ACTUAL OR CONSTRUCTIVE WAIVER. No notice shall be required for regular meetings for which the time and place have been fixed. Written, oral, or any other mode of notice of the time and place shall be given for special meetings in sufficient time for the convenient assembly of the directors thereat. Whenever notice is required to be given under the Delaware General Corporation Law, certificate of incorporation or bylaws, a written waiver signed by the person entitled to notice, or a waiver by electronic transmission by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of any such person at a meeting shall constitute a waiver of notice of such meeting, except when such person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the directors need be specified in any written waiver of notice.
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(e) QUORUM AND ACTION. A majority of the whole Board shall constitute a quorum except when a vacancy or vacancies prevents such majority, whereupon a majority of the directors in office shall constitute a quorum, provided, that such majority shall constitute at least one-third of the whole Board. A majority of the directors present, whether or not a quorum is present, may adjourn a meeting to another time and place. Except as herein otherwise provided, and except as otherwise provided by the General Corporation Law, the vote of the majority of the directors present at a meeting at which a quorum is present shall be the act of the Board. The quorum and voting provisions herein stated shall not be construed as conflicting with any provisions of the General Corporation Law and these Bylaws which govern a meeting of directors held to fill vacancies and newly created directorships in the Board or action of disinterested directors.
Any member or members of the Board of Directors or of any committee designated by the Board, may participate in a meeting of the Board, or any such committee, as the case may be, by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other.
(f) CHAIRPERSON OF THE MEETING. The Chairperson of the Board, if any and if present and acting, shall preside at all meetings. Otherwise, the Vice-Chairperson of the Board, if any and if present and acting, or the President, if present and acting, or any other director chosen by the Board, shall preside.
5. REMOVAL OF DIRECTORS. Except as may otherwise be provided by the General Corporation Law, any director or the entire Board of Directors may be removed, with or without cause, by the holders of a majority of the shares then entitled to vote at an election of directors.
6. COMMITTEES. The Board of Directors may designate one or more committees, each committee to consist of one or more of the directors of the corporation. The Board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of any member of any such committee or committees, the member or members thereof present at any meeting and not disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent provided in the resolution of the Board, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the corporation with the exception of any power or authority the delegation of which is prohibited by Section 141 of the General Corporation Law, and may authorize the seal of the corporation to be affixed to all papers which may require it.
7. WRITTEN ACTION. Any action required or permitted to be taken at any meeting of the Board of Directors or any committee thereof may be taken without a meeting if all members of the Board or committee, as the case may be, consent thereto in writing or electronic transmission, and the writing or writings or electronic transmission or transmissions are filed with the minutes of proceedings of the Board or committee. Such filing shall be in paper form if the minutes are maintained in paper form and shall be in electronic form if the minutes are maintained in electronic form.
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ARTICLE III
OFFICERS
The officers of the corporation shall consist of a President, a Secretary, a Treasurer, and, if deemed necessary, expedient, or desirable by the Board of Directors, a Chairperson of the Board, a Vice-Chairperson of the Board, an Executive Vice-President, one or more other Vice-Presidents, one or more Assistant Secretaries, one or more Assistant Treasurers, and such other officers with such titles as the resolution of the Board of Directors choosing them shall designate. Except as may otherwise be provided in the resolution of the Board of Directors choosing such officer, no officer other than the Chairperson or Vice-Chairperson of the Board, if any, need be a director. Any number of offices may be held by the same person, as the directors may determine.
Unless otherwise provided in the resolution choosing such officer, each officer shall be chosen for a term which shall continue until the meeting of the Board of Directors following the next annual meeting of stockholders and until such officer's successor shall have been chosen and qualified.
All officers of the corporation shall have such authority and perform such duties in the management and operation of the corporation as shall be prescribed in the resolutions of the Board of Directors designating and choosing such officers and prescribing their authority and duties, and shall have such additional authority and duties as are incident to their office except to the extent that such resolutions may be inconsistent therewith. The Secretary or an Assistant Secretary of the corporation shall record all of the proceedings of all meetings and actions in writing of stockholders, directors, and committees of directors, and shall exercise such additional authority and perform such additional duties as the Board shall assign to such Secretary or Assistant Secretary. Any officer may be removed, with or without cause, by the Board of Directors. Any vacancy in any office may be filled by the Board of Directors.
ARTICLE IV
CORPORATE SEAL
The corporate seal shall be in such form as the Board of Directors shall prescribe.
ARTICLE V
FISCAL YEAR
The fiscal year of the corporation shall be fixed, and shall be subject to change, by the Board of Directors.
ARTICLE VI
CONTROL OVER BYLAWS
Subject to the provisions of the certificate of incorporation and the provisions of the General Corporation Law, the power to amend, alter, or repeal these Bylaws and to adopt new Bylaws may be exercised by the Board of Directors or by the stockholders.
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I HEREBY CERTIFY that the foregoing is a full, true, and correct copy of the Bylaws of American Caresource Holdings, Inc., a Delaware corporation, as in effect on the date hereof.
Dated: April ___, 2016
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By: |
__________________________________ |
Name: | ||
Title: Secretary |
(SEAL)
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Exhibit 10.1
EQUITY PURCHASE AGREEMENT
THIS EQUITY PURCHASE AGREEMENT (this “Agreement”) is effective as of April 1, 2016 (the “Effective Date”) by and among ACSH URGENT CARE HOLDINGS, LLC, a Delaware limited liability company (“Urgent Holdings”), ASCH PRIMARY CARE HOLDINGS, LLC, a Delaware limited liability company (“Primary Holdings” and together with Urgent Holdings, collectively, “Sellers”), URGEMEDICAL GROUP INC., a Virginia corporation (“Buyer”), and PAYAM HERISCHI (“Guarantor”).
A. Urgent Holdings owns 100% of the issued and outstanding membership interests in ACSH Urgent Care of Virginia, LLC, a Virginia limited liability company (“Urgent LLC”) and Primary Holdings owns 100% of the issued and outstanding membership interests in ACSH Primary Care of Virginia, LLC, a Virginia limited liability company (“Primary LLC” and together with Urgent LLC, collectively, the “LLCs”).
B. Guarantor owns 100% of the issued and outstanding shares of stock of Buyer.
C. The LLCs engage in the urgent care medical business (the “Business”) at clinics located at 7516 Iron Bar Lane, Gainesville, Virginia 20155 and 12713 Shoppes Lane Fairfax, Virginia 22033.
D. Sellers desire to sell to Buyer, and Buyer desires to purchase, all of the issued and outstanding membership interests in the LLCs (the “Equity Interests”) on the terms and subject to the conditions described in this Agreement.
E. This Agreement and any other agreement, instrument or certificate executed and delivered in connection with the transactions contemplated by this Agreement (the “Transactions”) are referred to herein as the “Transaction Documents.”
NOW, THEREFORE, in consideration of the premises and mutual promises made herein, and in consideration of the representations, warranties and covenants contained herein, the parties agree as follows:
Article
1
SALE AND PURCHASE
1.1 Agreement to Sell and Purchase. In consideration of the mutual covenants and promises contained in this Agreement, Sellers hereby sell to Buyer and Buyer hereby purchases from Sellers, the Equity Interests for the Purchase Price (as defined in Section 1.2 below), and upon the other terms and conditions set forth herein.
1.2 Consideration; Method of Payment. The aggregate consideration for the sale and assignment of the Equity Interests, subject to any adjustments described herein, is $610,000 (the “Purchase Price”). The Purchase Price shall be paid as follows immediately upon execution of this Agreement (the “Closing”):
(a) Buyer shall transfer, in escrow, $50,000 by wire transfer of immediately available funds to the client trust account of Buyer’s transaction attorney with the sole instruction and condition that such attorney disburse the $50,000 to an account designated by Sellers immediately upon Sellers’ delivery of evidence confirming the opening of the bank account described in Section 4.3(b);
(b) Buyer shall pay $160,000 by delivery of a promissory note substantially in the form attached hereto as Exhibit A (“Note A”). Interest shall accrue on the outstanding principal balance of Note A at a rate of 1.5% per annum, and payments of principal and interest shall be made as follows: (i) on the 90th day after the Effective Date, $50,000 plus all accrued interest shall be due and payable; and (ii) on the 150th day after the Effective Date, $110,000 plus all accrued but unpaid interest shall be due and payable. Notwithstanding the foregoing, if Buyer satisfies the entire outstanding balance of principal and interest within 90 days after the Effective Date, the principal balance of Note A as of the Effective Date shall be reduced from $160,000 to $150,000; and
(c) Buyer shall pay $400,000 by delivery of a promissory note substantially in the form attached hereto as Exhibit B (“Note B” and together with Note A, collectively, the “Notes”). Interest shall accrue on the outstanding principal balance of Note B at a rate of 5.0% per annum, and payments of principal and interest shall be made as follows: (i) Buyer will make no payments until July 1, 2016, at which time all interest accrued as of such date will be due and payable; (ii) Buyer will make interest-only payments on the first day of each calendar month after July 1, 2016 until Note B is satisfied in full, and (iii) the principal balance of Note B will be satisfied in three equal installments of $133,333.33 on the first, second, and third anniversaries of the Effective Date.
1.3 Security. To secure Buyer’s timely payment and performance under the Notes, (a) Buyer shall execute and deliver a pledge agreement in favor of the Sellers in substantially the form attached hereto as Exhibit C (the “Pledge Agreement”), pursuant to which, Buyer shall pledge the Equity Interests, and (b) Guarantor shall execute and deliver a personal guaranty in favor of Sellers in substantially the form attached hereto as Exhibit D (the “Guaranty”). Sellers may, at any time prior to the cancellation of the Notes, file and record any appropriate documents to perfect the rights granted to Sellers in the Pledge Agreement and Guaranty, including a UCC-1 financing statement or any other document, and may attach to such filing a description of Sellers’ collateral including the Equity Interests pledged by Buyer to the Pledge Agreement, without Buyer’s or Guarantor’s signature where authorized by law.
1.4 Closing. Closing shall be deemed to have occurred and to be effective as between the parties as of 12:01 a.m., eastern time, on the Effective Date, and all events occurring at Closing shall be deemed to occur simultaneously.
1.5 Sellers' Closing Deliveries. At Closing, Sellers shall deliver, or cause to be delivered, to Buyer:
(a) the Notes, duly executed by Sellers;
(b) the Pledge Agreement, duly executed by Sellers;
(c) the Guaranty, duly executed by Sellers;
(d) a duly executed assignment separate from certificate transferring the Equity Interests to Buyer in substantially the form attached as Exhibit E;
(e) satisfactory evidence of termination of any contracts between the LLCs and their Affiliates for any service provided by any such Affiliates;
(f) satisfactory evidence of the resignation of all officers and governing boards of LLCs; and
(g) such other documents as required in this Agreement, or as Buyer may reasonably request, to consummate and give effect to the Transactions.
1.6 Buyer Closing Deliveries. At Closing, Buyer and Guarantor, as applicable, shall deliver to Sellers:
(h) the wire transfer of $50,000;
(i) the Notes, duly executed by the Buyer;
(j) the Pledge Agreement, duly executed by the Buyer;
(k) the Guaranty, duly executed by the Guarantor;
(l) such other documents as required in this Agreement or as Sellers may reasonably request to accomplish the transactions contemplated by this Agreement or to evidence Buyer’s compliance with the covenants and agreements contained in this Agreement.
Article
2
REPRESENTATIONS AND WARRANTIES OF SELLERs
Sellers, jointly and severally, make the following representations and warranties to Buyer:
2.1 Organization; Qualification. The LLCs are limited liability companies duly organized, validly existing and in good standing under the laws of the State of Virginia.
2.2 Ownership of Business. The LLCs acquired the Business on December 31, 2014, pursuant to an Asset Purchase Agreement dated as of December 22, 201, by and among Stat Medical Care, P.C., William and Teresa Medical Care, Inc., Charles I. Okorie, MD, and Urgent LLC. Notwithstanding anything herein to the contrary, Sellers’ representation and warranties in this Agreement and all other Transaction Documents shall be limited in all respects to the period beginning January 1, 2015.
2.3 Authority and Status of Equity Interests. Sellers own, of record and beneficially, the Equity Interests, and the Equity Interests are validly issued, fully paid, non-assessable and except as set forth in Schedule 2.3, are free and clear of all liens and encumbrances. Except for the Equity Interest owned by Sellers, the LLCs have no equity issued or outstanding membership interests or other outstanding equity (including equity interests held in treasury). Sellers have delivered or made available to Buyer copies of the LLCs’ Articles of Organization, Operating Agreements, and other organizational documents currently in effect.
2.4 Execution, Binding Effect, Authority. This Agreement has been duly and validly executed and delivered by Sellers and constitutes, and the other Transaction Documents upon execution and delivery by the applicable Sellers will constitute (assuming, in each case, the due and valid authorization, execution and delivery thereof by the other party thereto), legal, valid and binding obligations of Sellers, as applicable, enforceable against such parties in accordance with their respective terms except as such enforceability may be limited by applicable law.
2.5 Financial Condition. Schedule 2.5 contains consolidated, unaudited financial statements of the LLCs consisting of the balance sheet of the Business as of December 31, 2015 and the related income statements for the period ending December 31, 2015 (collectively, the “Financial Statements”). To the knowledge of Sellers, the Financial Statements fairly present in all material respects, in accordance with generally accepted accounting principles, applied on a consistent basis, the financial position of the LLCs as of the respective dates thereof and the results of operations of the Business for the respective periods therein.
2.6 Liabilities. Except for trade payables arising in the ordinary course of business and unused employee paid time off; there are no known or unknown, absolute or contingent liabilities outstanding, under which either of the LLCs owes in excess of than $5,000.
2.7 Litigation. There is no action, lawsuit, administrative proceeding, condemnation, arbitration, investigation or other proceeding pending against either the Business or the LLCs at law or in equity, before any court, administrative or arbitrative panel, or governmental or regulatory agency or authority.
2.8 Environmental Matters. To the knowledge of Sellers, no action or omission by or on behalf of any of Sellers has resulted in the LLCs’ noncompliance with any applicable statute, law, rule, regulation or binding governmental determination relating to environmental, health and safety matters (including, without limitation, those relating to toxic or hazardous substances), including, without limitation, the Clean Air Act, the Clean Water Act, the Solid Waste Management Act (as amended by the Resource Conservation and Recovery Act), the Comprehensive Environmental Response, Compensation and Liability Act (as amended by the Superfund Amendments and Preauthorization Act), the Emergency Planning and Community Right-to-Know Act, the Toxic Substances Control Act and the Occupational Safety and Health Act. To the knowledge of Sellers, no conditions or circumstances exist with respect to the LLCs or the Business that could give rise to any remedial action under, or impose any liability on Sellers with respect to, any statute, law, rule, regulation or binding governmental determination regarding any environmental, health or safety matters.
2.9 Absence of Changes. Since the date of the most recent Financial Statements, the Business has been operated in the ordinary course, consistent with past practice, and Sellers have not caused the LLCs to:
(a) Mortgage, pledge or subject to any lien, charge or other encumbrance any of the material assets or the equity of any of the LLCs;
(b) Except for normal annual increases consistent as to timing and amount with past practice, grant, pay, or promise to pay any bonus or increase in the salary or rate of pay of any employee of the LLCs;
(c) Issued any shares, membership interests or other securities, profit-sharing interest or voting interest in the LLCs, or any agreements, warrants or options to purchase or acquire any equity interest in the LLCs; or
(d) Experience, and Sellers do not reasonably expect the LLCs to experience, any damage, destruction, or non-operating loss (whether or not covered by insurance) that has or may have, individually or in the aggregate, a material adverse effect on Buyer’s ability to operate the Business.
2.10 Taxes. The LLCs were treated by Sellers as disregarded entities for federal tax purposes, and each of Sellers has timely filed all tax returns required to be filed from the date of their formation and has timely made all payments of taxes, including any interest, penalty or addition thereto, (whether or not reflected on any such tax return) with respect to income taxes, real and personal property taxes, sales taxes, use taxes, employment taxes, excise taxes and all other taxes due and payable on or before the Effective Date. Neither LLC has any outstanding tax liability, except for taxes attributable to the portion of the tax year immediately preceding the Effective Date which is not yet due and payable.
2.11 Brokers. Except for ProMed Financial, Inc., no broker, finder or investment banker is entitled to any brokerage, finder's or other fee or commission in connection with the Transactions.
2.12 Knowledge. Certain of the representations contained in this Agreement reference the “knowledge” of Sellers. For purposes of this Agreement, “knowledge” shall mean the actual knowledge of each of the Sellers.
2.13 No Misrepresentations. The representations and warranties made by Sellers in this Article 2 are true, complete and correct in all respects as of the Effective Date.
Article
3
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer and Guarantor (collectively, “Buyer Parties”), jointly and severally, make the following representations and warranties to Sellers:
3.1 Authority. Buyer Parties have all requisite power and authority to execute, deliver and perform their obligations under each of the applicable Transaction Documents and to consummate the Transactions, and the consummation of the Transactions by Buyer Parties will not violate any applicable law, regulation or the terms of any contract. The execution and delivery of, and performance under, the Transaction Documents and the consummation of the Transactions have been duly authorized by Buyer Parties, and no other action, approval or consent on the part of Buyer Parties or any third party is necessary to consummate the Transactions or execute, deliver or perform under the Transaction Documents.
3.2 Execution and Binding Effect. This Agreement has been duly and validly executed and delivered by Buyer Parties and constitutes, and upon execution and delivery by Buyer Parties, as applicable, of the other Transaction Documents will constitute (assuming, in each case, the due and valid authorization, execution and delivery thereof by the other party thereto), legal, valid and binding obligations of Buyer Parties, as applicable, enforceable against the applicable Buyer Parties in accordance with their respective terms except as such enforceability may be limited by applicable law.
3.3 Brokers. No broker, finder or investment banker is entitled to any brokerage, finder's or other fee or commission in connection with the transactions contemplated by this Agreement or any other Transaction Document based upon arrangements made by or on behalf of Buyer Parties.
3.4 No Misrepresentations. The representations and warranties made by Buyer Parties in this Article 3 are true, complete and correct in all respects as of the Effective Date.
Article
4
COVENANTS
4.1 Access to Information. Buyer and Sellers acknowledge and covenant that Buyer and Buyer’s directors, officers, employees, consultants, financial advisors, counsel, accountants (“Representatives”) promised to be given access to inspect the properties, assets, centers, books and records, contracts and other documents and data related to the LLCs and the Business as specified in Exhibit F.
4.2 Contract Liabilities. If the essential terms of a written contract for goods or services (which terms do not include those addressing breach, default or other known or unknown contingent matters) obligate the LLCs to pay an amount in excess of $5,000 for goods purchased or services rendered prior to Closing; then Sellers shall pay the amount by which the payment obligation exceeds $5,000.
4.3 Post-Closing Transition. Buyer and Sellers shall cooperate in good faith to transition the Business as promptly as possible, but in any event, within 90 days after Closing (the “Transition Period”). In connection with the Closing, the parties covenant as follows:
(a) Insurance. To the extent permissible under the terms of the professional liability insurance policy maintained by the Company at Closing, Sellers shall extend coverage under such policy to the LLCs for acts of professional malpractice occurring prior to Closing. Buyer represents and warrants that as of Closing, it has adequate insurance to operate the Business in a manner consistent with past practices.
(b) Bank Account. As promptly as possible after Closing, Sellers shall open a new checking account with Wells Fargo Bank (the “Transition Account”) for use by Buyer during the Transition Period. Sellers shall own the Transition Account, but shall instruct the bank as follows with respect to the Transition Account: (i) to name Guarantor as an authorized signatory on the Transition Account such that Guarantor may sweep funds, write checks out of, and take any and all other action with respect to the Transition Account, and (ii) to transfer all funds to the Transition Account that are deposited in the lockbox after April 1 12:01 am, which lockbox is maintained by Sellers for services rendered by or on behalf of the LLCs. Buyer shall reimburse Sellers for all costs incurred by Sellers in maintaining such lockbox after Closing within five days of notice by Sellers.
(c) General Support Services. Except as may be limited or modified in this Agreement, during the Transition Period, Sellers shall render or cause to be rendered to the LLCs the support services, which are provided by Sellers or its Affiliates prior to Closing and which are essential to the uninterrupted operation of the Business including, providing access to and use of electronic health records platform, hosting and sorting electronic medical records, and performing billing and collecting clinical services rendered at the Centers.
(d) Intellectual Property. Within 60 days after Closing, Buyer shall discontinue its and the LLCs’ use of all of trademarks, tradenames, and any other intellectual property of Sellers and their Affiliates (the “Proprietary Property”). Neither Buyer nor the LLCs shall have any right, title or interest in or to such Proprietary Property, and such parties shall take no action to create or reproduce any materials using any of the Proprietary Property. To the extent the LLCs own, through creation or otherwise, any right or interest in any of the Proprietary Property, each LLC hereby transfers and assigns such rights and interests to the Sellers.
(e) Checklist. Buyer and Seller shall use good faith efforts to promptly, but in any event before the expiration of the Transition Period, address the issues listed on the checklist attached hereto as Exhibit F.
(f) Payroll. Sellers, on behalf of Buyer and the LLCs, shall satisfy the accrued but unpaid (i) payroll obligations for employees of the LLCs on April 8, 2016 for the period ending April 2, 2016, and (ii) obligations to clinical independent contractors of the LLCs on or before April 6, 2016 for the period ending March 31, 2016. Buyer shall process and pay all employee payroll and contractor payments thereafter without contribution by Sellers.
4.4 Public Announcement. Neither Sellers nor Buyer shall make, or permit any agent or Affiliate to make, any public statements, filings, including any press release or public statement with respect to the Transactions, this Agreement or the other Transaction Documents without the prior written consent of the other (which consent will not be unreasonably withheld or delayed), except where the failure to make such public statements, filings or press releases would result in such party’s noncompliance with applicable securities laws or the rules of any nationally recognized stock exchange. For purpose of this Agreement, the term “Affiliate” shall have the meaning set forth in Rule 12b-2 of the regulations promulgated under the Securities Exchange Act of 1934.
4.5 Payment of Expenses. Unless agreed upon in writing by the parties, each party shall bear its own expenses (including legal and accounting) incurred in connection with the Transactions.
4.6 Noncompetition. Urgent LLC and Buyer are parties to a Confidentiality and Mutual Nondislclosure Agreement dated February 26, 2016. By execution of this Agreement, Sellers and Guarantor join in such agreement as if named as a party therein.
4.7 Further Assurances. Each party to this Agreement, from and after Closing, upon the reasonable request of any other party hereto and without further consideration, shall (a) execute and deliver to the requesting party such documents and further assurances and (b) take such other actions (without cost to the requesting party) in order to carry out the purposes and intentions of this Agreement and the other Transaction Documents.
Article
5
INDEMNIFICATION
5.1 Survival. The representations and warranties in this Agreement shall survive Closing and shall remain in full force and effect, and any claims relating to such representations or warranties must be asserted, if at all, in writing within, 12 months after the Effective Date.
5.2 Indemnification by Sellers. Subject to the limitations set forth in this Article 5, Sellers shall jointly and severally indemnify and defend Buyer and its Affiliates (collectively, the “Buyer Indemnified Parties”) against, and shall hold each of them harmless from and against, and shall pay and reimburse each of them for, any and all liabilities, losses, damages, claims, actions, suits, demands, causes of action, costs, expenses, interest, awards, judgments and penalties of any nature whatsoever (including, without limitation, reasonable legal costs and expenses) (“Losses”), arising or resulting from: (a) any inaccuracy in or breach of any representation or warranty by Sellers contained in this Agreement or in any other Transaction Document; or (b) the breach of any covenant or agreement by Sellers in this Agreement or in any other Transaction Document or the failure to perform any obligation to be performed by Sellers in this Agreement or in any other Transaction Document.
5.3 Indemnification by Buyer. Subject to the limitations set forth in this Article 5, Buyer shall indemnify and defend Sellers and their Affiliates (collectively, the “Seller Indemnified Parties”) against, and shall hold each of them harmless from and against, and shall pay and reimburse each of them for, any and all Losses arising or resulting from: (a) any inaccuracy in or breach of any representation or warranty by Buyer contained in this Agreement or in any other Transaction Document; or (b) the breach of any covenant or agreement by Buyer in this Agreement or in any other Transaction Document or the failure to perform any obligation to be performed by Buyer in this Agreement or in any other Transaction Document.
5.4 Limitation of Liability. The maximum aggregate liability of Sellers to all Buyer Indemnified Parties, and of Buyer to all Seller Indemnified Parties, for Losses to which such parties are entitled to seek indemnification under this Agreement shall be an amount equal to $150,000. Buyer Indemnified Parties shall not make a claim against Sellers, and Seller Indemnified Parties shall not make a claim against Buyer, for Losses under this Agreement unless and until the aggregate amount of the Losses incurred by Buyer Indemnified Parties or Seller Indemnified Parties, as the case may be, exceeds $35,000, in which event the applicable indemnified parties may claim indemnification for all Losses incurred by such Buyer Indemnified Parties in excess of $35,000.
5.5 Prior Knowledge. Neither party shall be liable to the other with respect to any Losses arising out of matters within the knowledge of such other party.
5.6 Exclusive Remedy. Buyer shall have no right to offset or credit against any amounts due to Sellers under the Notes or from any other source for claims for Losses under this Article 5. The indemnification provisions in this Article 5 will be the sole and exclusive remedy and recourse for all Losses incurred as a result of the breach of the representations and warranties made in this Article 5.
5.7 Notice; Indemnification Procedures.
(a) Any party to this Agreement seeking indemnification under this Article 5 shall give the party from whom indemnification is being sought notice of any matter which such indemnified party has determined to give rise to or to potentially give rise to a right of indemnification under this Agreement as soon as practicable after the party entitled to indemnification becomes aware of any fact, condition or event that may give rise to Losses for which indemnification may be sought under this Article 5; provided, however, that no delay on the part of the indemnified party in notifying the indemnifying party shall relieve the indemnifying party from any obligation hereunder unless (and then solely to the extent) the indemnifying party thereby is materially prejudiced by such delay. Notwithstanding anything to the contrary, the parties shall only be obligated for those Losses to which the indemnified party has given the indemnifying party written notice thereof prior to the expiration of the applicable survival period, if any, set forth in Section 5.1.
(b) The liability of an indemnifying party under this Article 5 with respect to Losses arising out of claims of any third party that are subject to indemnification in this Article 5 (“Third Party Claims”) shall be governed by and contingent on the following additional terms and conditions:
(i) if any third party notifies any indemnified party with respect to a Third Party Claim, then the indemnified party shall give the indemnifying party notice of such Third Party Claim within 20 days of the receipt by the indemnified party of such notice; provided, however, that no delay on the part of the indemnified party in notifying the indemnifying party shall relieve the indemnifying party from any indemnification obligation hereunder unless (and then solely to the extent) the indemnifying party thereby is materially prejudiced by such delay.
(ii) The indemnifying party will have the right to assume and control the defense of the Third Party Claim in a diligent manner at its expense and with counsel of the indemnifying party’s choice (subject to the reasonable satisfaction of the indemnified party), so long as the indemnifying party gives notice of its intention to do so to the indemnified party within 30 days of the receipt of notice of such Third Party Claim from the indemnified party.
(iii) If the indemnifying party assumes the defense of a Third Party Claim, (A) the indemnified party may retain separate co-counsel at its sole cost and expense and participate in the defense of the Third Party Claim, and (B) the indemnifying party will not consent to the entry of any judgment or enter into any settlement with respect to the Third Party Claim without the written consent of the indemnified party, unless such judgment or settlement (x) includes an unconditional written release by the claimant or plaintiff of the indemnified party from all liability in respect of such Third Party Claim, and (y) does not impose equitable remedies or material obligations on the indemnified party other than financial obligations for which such indemnified party will be indemnified hereunder. No Third Party Claim which is being defended in good faith by the indemnifying party in accordance with the terms of this Agreement shall be settled by the indemnified party, nor shall the indemnified party consent to the entry of any judgment with respect thereto, without the written consent of the indemnifying party.
(iv) In the event that the indemnifying party does not assume the defense of a Third Party Claim, (A) the indemnified party may defend against, and consent to the entry of any judgment or enter into any settlement with respect to, the Third Party Claim in any manner it reasonably and in good faith may deem appropriate (and the indemnified party need not consult with, or obtain any consent from, the indemnifying party in connection therewith), (B) the indemnifying party will reimburse the indemnified party promptly and periodically for the reasonable costs of defending against the Third Party Claim (including reasonable attorneys’ fees and expenses), and (C) the indemnifying party will remain responsible for any Losses the indemnified party may suffer arising out of or resulting from the Third Party Claim to the fullest extent provided under this Article 5.
(v) Each of the indemnifying party and the indemnified party shall cooperate with the other in the defense of a Third Party Claim and make available all witnesses, pertinent records, materials and information in such party’s possession or under such party’s control relating to such Third Party Claim as is reasonably requested by the other party.
5.8 Tax Treatment of Indemnification. All indemnification obligations satisfied under this Agreement shall be treated by the parties as an adjustment to the purchase price for federal and state tax purposes, unless otherwise required by law.
Article
6
MISCELLANEOUS
6.1 Waiver. No failure to exercise, and no delay in exercising, any right, remedy, power or privilege under this Agreement by any party shall operate as a waiver of such right, remedy, power or privilege, nor shall any single or partial exercise of any right, remedy, power or privilege under this Agreement preclude any other or further exercise of such right, remedy, power or privilege. Any waiver under this Agreement must be in writing, signed by the waiving party.
6.2 Severability. If any term or provision of this Agreement or any other Transaction Document is determined to be invalid, illegal or unenforceable by any court, agency or tribunal of competent jurisdiction, such invalidity, illegality or unenforceability shall not affect any other term or provision of this Agreement or any other Transaction Document or invalidate or render unenforceable such term or provision in any other jurisdiction. In connection with the foregoing sentence, unless expressly provided otherwise in this Agreement or the applicable Transaction Document, the parties shall negotiate in good faith to modify this Agreement or such other Transaction Document so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the Transactions be consummated as originally contemplated to the greatest extent possible.
6.3 Amendment; Assignment. This Agreement may not be amended except by an instrument in writing signed by Buyer and Sellers. This Agreement and all provisions hereof shall be binding upon and inure to the benefit of, and be enforceable by, the parties hereto and their respective successors and permitted assigns, but neither this Agreement nor any of the rights, interests or obligations herein shall be assigned by any party hereto without the prior written consent of the other party. Notwithstanding anything in this Agreement to the contrary, expressed or implied, this Agreement is not intended to confer any rights or remedies on any person other than the parties and their respective successors and permitted assigns.
6.4 Entire Agreement. Except as otherwise provided in this Agreement, this Agreement and the other Transaction Documents set forth the entire understanding of the parties with respect to the subject matter hereof and thereof and this Agreement and the other Transaction Documents supersedes all prior agreements. No party is relying upon any statement or representation of any other party except as expressly set forth herein and each party is relying on its own judgment in connection with the execution of this Agreement and the consummation of the Transactions.
6.5 Notices. All notices, claims, certificates, requests, demands and other communications pursuant to the terms of this Agreement or any other Transaction Document shall be in writing and shall be deemed to have been duly given to Buyer or to Sellers, as the case may be, (a) when delivered, if delivered by hand; (b) one business day after transmitted, if transmitted by a nationally-recognized overnight courier service, (c) when sent by facsimile, if sent by facsimile transmission which is confirmed; or (d) three business days after mailing, if mailed by registered or certified mail, postage prepaid, return receipt requested, and in each case to the parties at the following addresses (or at such other address for a party as shall be specified in a notice given in accordance with this Section 6.5):
If to Sellers: | GoNow Doctors |
55 Ivan Allen Jr. Blvd. Suite 510 | |
Atlanta, GA 30308 | |
Attn: Adam S. Winger, President & CEO | |
If to Buyer: | Urgemedical Group, Inc. |
4158 Dale Blvd | |
Woodbridge, VA, 22193 | |
Attn: Payam Herischi, President |
6.6 Governing Law. This Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of Virginia without regard to its provisions concerning conflicts or choice of law.
6.7 Dispute Resolution. In the event of any controversy, dispute or disagreement arising out of or relating to any of the Transactions or Transaction Documents, or the breach hereof, the parties shall negotiate in good faith for 30 days to resolve the matter. If no resolution is reached after the expiration of said 30-day period then, either party may submit the matter to binding arbitration, which shall be conducted in accordance with the procedures specified in this Section 6.7. Any such submission made shall be to a single arbitrator pursuant to the Rules and Procedures for Arbitration (the "Rules") of the American Health Lawyers Association Alternative Dispute Resolution Service (the “Service”). The arbitrator (the “Arbitrator”) shall be selected by the Service and the parties hereby waive any right under the Rules to participate in the selection process. The parties shall engage in limited discovery for an abbreviated time period, the reasonable parameters of which shall be set by the Arbitrator, with input from the parties, taking into consideration the nature and complexity of the matters in dispute. The award of the Arbitrator shall be binding and conclusive upon the parties and judgment upon the award rendered by the Arbitrator may be entered by any court of competent jurisdiction. Each party shall bear their own costs, one half of the costs of the Arbitrator shall be borne by the Buyer and the other half shall be borne by the Sellers, pro rata, based on the amount of the Purchase Price received by Sellers. The place of the arbitration shall be determined by the Arbitrator.
6.8 Costs of Enforcement. If Buyer or any Sellers file suit or other action to enforce the terms of this Agreement or to obtain performance as required in this Agreement, then the prevailing party in any such suit or action will be entitled to recover all reasonable costs, including reasonable attorneys’ fees and costs, from the non-prevailing party as part of any judgment in such suit or action. The term “prevailing party” will mean the party in whose favor final judgment after appeal (if any) is rendered with respect to the claims asserted in the complaint.
6.9 Schedules and Exhibits; Usage. All Schedules and Exhibits attached hereto are hereby incorporated in this Agreement as if set forth in full herein and, unless otherwise defined therein, all terms used in any Schedule or Exhibit shall have the meanings assigned to such terms in this Agreement. The words “include,” “includes” and “including” shall be deemed to be followed by the phrase “without limitation.” The words “hereof,” “herein” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. Unless otherwise expressly provided herein, any agreement, instrument or statute defined or referred to herein or in any agreement or instrument that is referred to herein means such agreement, instrument or statute as from time to time may be amended, modified or supplemented, including (in the case of agreements or instruments) by waiver or consent and (in the case of statutes) by succession of comparable successor statutes and references to all attachments thereto and instruments incorporated therein.
6.10 Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Counterparts may be delivered via facsimile, electronic mail (including .pdf) or other transmission method and any counterpart so delivered shall be deemed to have been duly and validly delivered and shall be valid and effective for all purposes.
6.11 No Requirement To Refer. Notwithstanding anything contained herein, nothing in this Agreement shall be construed to induce, encourage, solicit or reimburse the referral of any patients or business, including any patients or business funded in whole or part by federal or state government programs (i.e., Medicare, Medicaid, TRICARE, etc.) or to limit the freedom of any patient of Sellers, Buyer or any of their Affiliates to choose the hospital, healthcare facility or physician from whom such patient will receive medical services. The parties acknowledge that there is no requirement under this Agreement or any other agreement between the parties that Sellers or any of their Affiliates refer patients or business to Buyer, any medical practice, walk-in clinic or urgent care clinic managed by Buyer or its Affiliates. No payment made under this Agreement will be in return for the referral of patients or business, including those paid in whole or part by federal or state government programs. The parties acknowledge that none of the benefits granted Sellers are conditioned on any requirement that any such person make referrals to, be in a position to make or influence referrals to, or otherwise generate business for Buyer, any medical practice, walk-in clinic or urgent care clinic managed by Buyer or any of their Affiliates.
6.12 Fair Value. Buyer and Sellers acknowledge that the terms of this Agreement have been negotiated at arms’ length and that the Purchase Price constitutes fair value for the Equity Interests.
[Signature page follows]
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by Sellers and the duly authorized representative of Buyer as of the Effective Date.
BUYER: | |||
URGEMEDICAL GROUP INC., a Virginia corporation | |||
By: | /s/ Payam Herischi | ||
Name: Payam Herischi | |||
Title: President | |||
GUARANTOR: | |||
Sign: | /s/ Payam Herischi | ||
Print: Payam Herischi | |||
SELLERS: | |||
ASCH URGENT CARE HOLDINGS, LLC and ASCH PRIMARY CARE HOLDINGS, LLC, each a Delaware limited liability company | |||
By: | /s/ Adam S. Winger | ||
Name: Adam S. Winger | |||
Title: President |
Schedule 2.3
Liens and Encumbrances
That certain lien of Wells Fargo Bank, NA, which Sellers will cause to be released promptly after Closing.
Schedule 2.3
Financial Statements
See attached.
Exhibit 10.2
PROMISSORY NOTE A
FOR VALUE RECEIVED, URGEMEDICAL GROUP INC., a Virginia corporation ("Buyer"), as of April 1, 2016 (the “Effective Date”), promises to pay to the order of ACSH URGENT CARE HOLDINGS, LLC and ACSH PRIMARY CARE HOLDINGS, LLC, each a Delaware limited liability company (collectively, "Sellers"), c/o American Caresource Holdings, Inc., Attention: Adam S. Winger, President and Chief Executive Officer, at 55 Ivan Allen Jr. Blvd., Suite 510, Atlanta, Georgia 30308, or at such alternate address as Sellers may provide Buyer in writing, from time to time, the principal sum of ONE HUNDRED SIXTY THOUSAND and NO/100 DOLLARS ($160,000.00), with interest accruing on the unpaid balance of such principal sum from the date hereof, at the rate per annum and on the additional terms and subject to the conditions described herein.
This Promissory Note is made pursuant to that certain Equity Purchase Agreement, dated April 1, 2016 by and among Sellers, Buyer and Payam Herischi (the "Guarantor").
1. Accrual of Interest. The unpaid principal balance of this Promissory Note (the “Note”) shall bear simple interest at a fixed interest rate of 1.5% per annum (the “Interest Rate”). The Interest Rate will be computed on the basis of the actual number of days elapsed over an assumed year of 360 days, meaning that the interest accrued for each day will be computed by multiplying the Interest Rate applicable on that day by the unpaid principal balance on that day and dividing the result by 360. Notwithstanding any provision herein to the contrary, in no event shall the Interest Rate exceed the rate allowable under any applicable statute or law. If the Interest Rate is determined to exceed the rate allowable under any applicable statute or law, the Interest Rate shall be the maximum allowed by any such statute or law.
2. Payments of Principal and Interest. Subject to Section 3 below, payments of principal and interest shall be made as follows:
(a) On the 90th day following the Effective Date, $50,000 plus all accrued interest shall be due and payable; and
(b) On the 150th day following the Effective Date, the entire outstanding principal balance, plus all unpaid interest accrued shall be due and payable.
3. Discount for Early Payment. Notwithstanding anything to contrary contained herein, if, prior to the 90th day following the Effective Date, Buyer pays principal of $150,000, plus all accrued but unpaid interest through the date of such payment, this Note shall be deemed to be satisfied in full.
4. Guarantees and Security. The indebtedness evidenced by this Note are guaranteed and secured by and pursuant to the terms and conditions of (i) that certain Pledge Agreement, dated as of the Effective Date, by and between Sellers and Buyer and (ii) that certain Guaranty, dated as of the Effective Date, by and between Sellers and Guarantor (collectively, the "Security Documents"). All of the terms and provisions of the Security Documents are incorporated herein by reference.
5. Late Payment Penalty. Upon the failure of Buyer to pay in full any installment due hereunder within five days of the due date for such installment, a late payment penalty of One Hundred Dollars ($100) (the "Late Payment Amount") shall immediately be charged to Buyer and Buyer shall pay the Late Payment Amount to Sellers within ten days of the original due date of such installment. The imposition of the Late Payment Amount shall be in addition to any other rights and remedies of Seller under this Note upon the occurrence of any other Event of Default (as defined in Section 6).
6. Events of Default. Buyer shall be deemed in default under the terms of this Note upon the occurrence of any of the following events (each, an "Event of Default"):
(a) The failure of Buyer to pay any installment of principal, interest or any other amount due under this Note within 10 days of the date such payment is due;
(b) The occurrence of an "Event of Default" under Promissory Note B, as such term is defined in that certain Promissory Note B, dated as of the Effective date, by and between Sellers and Buyer;
(c) Buyer (i) admits in writing its inability to pay its debts as they mature; (ii) makes a general assignment for the benefit of creditors; (iii) is adjudicated bankrupt or insolvent; or (iv) files a voluntary petition in bankruptcy or a petition or an answer seeking reorganization, or an arrangement with creditors, or to take advantage of any insolvency law or an answer admitting the material allegations of a petition filed against it in any bankruptcy, reorganization or insolvency proceeding, or action shall be taken by Buyer for the purpose of effecting any of the foregoing;
(d) An order, judgment or decree is entered, with or without the application, approval or consent of Buyer, by any court of competent jurisdiction, approving a petition seeking reorganization of Buyer or of all or a substantial part of its assets, and such order, judgment or decree continues unstayed and in effect for any period of consecutive days; or
(e) If any action is voted or taken for (i) the voluntary dissolution or liquidation of Buyer or of all or substantially all of its assets, (ii) the consolidation, merger or other combination of Buyer with or into any other corporation, firm, partnership or other entity; or (iii) the sale of all or a substantial portion of the assets of Buyer.
7. Acceleration. Upon the occurrence of an Event of Default, the entire unpaid indebtedness of this Note, including, without limitation, all principal then outstanding together with accrued interest on such principal, shall, at the option of Seller immediately become due and payable without notice.
8. Covenants. Buyer (a) upon an Event of Default, shall pay all costs and expenses (including reasonable attorneys’ fees and expenses) incurred by Sellers in collecting or attempting to collect under this Note; (b) waives demand, presentment, protest, notice of protest, suit and all other requirements necessary to hold Buyer liable hereunder; and (d) agrees that time of payment may be extended or renewal note taken or other indulgence granted without notice of or consent to such action, without release of liability as to Buyer.
2
9. Non-Waiver. No delay on the part of Sellers, or the holder hereof, in exercising any power or right hereunder shall operate as a waiver thereof nor shall any single or partial exercise of any power or right hereunder preclude other or further exercises thereof or the exercise of any other power or right. All rights and remedies of the holder hereof shall be cumulative and may be exercised consecutively or concurrently.
10. Optional Prepayment. Buyer shall have the privilege to prepay all or any portion of the principal amount hereof, at any time, without premium or penalty. Any partial prepayment of principal shall be applied to the principal installments last falling due hereunder and shall not defer payment of installments next due and payable as originally provided herein.
11. Modification. Sellers, or the holder hereof, shall not be deemed to have modified, terminated, discharged or waived any of the rights hereunder unless such modification, termination, discharge or waiver be in writing and signed by such Seller or holder.
12. Governing Law. This Note shall be governed by and construed in accordance with the laws of the State of Virginia without regard to its conflicts-of-law principles.
[Signature page follows]
3
IN WITNESS WHEREOF, the undersigned has executed this Promissory Note A on the Effective Date.
BUYER: | ||
URGEMEDICAL GROUP INC., a Virginia corporation | ||
By: | ||
Name: | Payam Herischi | |
Title: | President | |
SELLERS: | ||
ACSH URGENT CARE HOLDINGS, LLC ACSH PRIMARY CARE HOLDINGS, LLC, each a Delaware limited liability company | ||
By: | ||
Name: | Adam S. Winger | |
Title: | President and Chief Executive Officer |
4
Exhibit 10.3
PROMISSORY NOTE B
FOR VALUE RECEIVED, URGEMEDICAL GROUP INC., a Virginia corporation ("Buyer"), as of April 1, 2016 (the “Effective Date”), promises to pay to the order of ACSH URGENT CARE HOLDINGS, LLC and ACSH PRIMARY CARE HOLDINGS, LLC, each a Delaware limited liability company (collectively, "Sellers"), c/o American Caresource Holdings, Inc., Attention: Adam S. Winger, President and Chief Executive Officer, at 55 Ivan Allen Jr. Blvd., Suite 510, Atlanta, Georgia 30308, or at such alternate address as Sellers may provide Buyer in writing, from time to time, the principal sum of FOUR HUNDRED THOUSAND and NO/100 DOLLARS ($400,000.00), with interest accruing on the unpaid balance of such principal sum from the date hereof, at the rate per annum and on the additional terms and subject to the conditions described herein.
This Promissory Note is made pursuant to that certain Equity Purchase Agreement, dated April 1, 2016, by and among Sellers, Buyer and Payam Herischi (the "Guarantor").
1. Accrual of Interest. The unpaid principal balance of this Promissory Note (the “Note”) shall bear simple interest at a fixed interest rate of 5% per annum (the “Interest Rate”). The Interest Rate will be computed on the basis of the actual number of days elapsed over an assumed year of 360 days, meaning that the interest accrued for each day will be computed by multiplying the Interest Rate applicable on that day by the unpaid principal balance on that day and dividing the result by 360. Notwithstanding any provision herein to the contrary, in no event shall the Interest Rate exceed the rate allowable under any applicable statute or law. If the Interest Rate is determined to exceed the rate allowable under any applicable statute or law, the Interest Rate shall be the maximum allowed by any such statute or law.
2. Payments of Principal and Interest. No payments of principal or interest shall be due and payable until July 1, 2016, at which time payments of principal and interest shall be made as follows:
(a) Payment of Interest. On July 1, 2016, Buyer shall pay all accrued but unpaid interest through such date. Beginning August 1, 2016, Buyer shall make interest-only payments on the first day of each month until this Note is satisfied in full; and
(b) Payment of Principal. The principal shall be repaid in three equal installments of $133,333.33, with each such installment due and payable on the first, second and third anniversaries of the Effective Date.
3. Guarantees and Security. The indebtedness evidenced by this Note are guaranteed and secured by and pursuant to the terms and conditions of (i) that certain Pledge Agreement, dated as of the Effective Date, by and between Sellers and Buyer and (ii) that certain Guaranty, dated as of the Effective Date, by and between Sellers and Guarantor (collectively, the "Security Documents"). All of the terms and provisions of the Security Documents are incorporated herein by reference.
4. Late Payment Penalty. Upon the failure of Buyer to pay in full any installment due hereunder within five days of the due date for such installment, a late payment penalty of One Hundred Dollars ($100) (the "Late Payment Amount") shall immediately be charged to Buyer and Buyer shall pay the Late Payment Amount to Sellers within ten days of the original due date of such installment. The imposition of the Late Payment Amount shall be in addition to any other rights and remedies of Seller under this Note upon the occurrence of any other Event of Default (as defined in Section 5).
5. Events of Default. Buyer shall be deemed in default under the terms of this Note upon the occurrence of any of the following events (each, an "Event of Default"):
(a) The failure of Buyer to pay any installment of principal, interest or any other amount due under this Note within 10 days of the date such payment is due;
(b) The occurrence of an "Event of Default" under Promissory Note A as such term is defined in that certain Promissory Note A, dated as of the Effective date, by and between Sellers and Buyer;
(c) Buyer (i) admits in writing its inability to pay its debts as they mature; (ii) makes a general assignment for the benefit of creditors; (iii) is adjudicated bankrupt or insolvent; or (iv) files a voluntary petition in bankruptcy or a petition or an answer seeking reorganization, or an arrangement with creditors, or to take advantage of any insolvency law or an answer admitting the material allegations of a petition filed against it in any bankruptcy, reorganization or insolvency proceeding, or action shall be taken by Buyer for the purpose of effecting any of the foregoing;
(d) An order, judgment or decree is entered, with or without the application, approval or consent of Buyer, by any court of competent jurisdiction, approving a petition seeking reorganization of Buyer or of all or a substantial part of its assets, and such order, judgment or decree continues unstayed and in effect for any period of consecutive days; or
(e) If any action is voted or taken for (i) the voluntary dissolution or liquidation of Buyer or of all or substantially all of its assets, (ii) the consolidation, merger or other combination of Buyer with or into any other corporation, firm, partnership or other entity; or (iii) the sale of all or a substantial portion of the assets of Buyer.
6. Acceleration. Upon the occurrence of an Event of Default, the entire unpaid indebtedness of this Note, including, without limitation, all principal then outstanding together with accrued interest on such principal, shall, at the option of Seller, immediately become due and payable without notice.
7. Covenants. Buyer (a) upon an Event of Default, shall pay all costs and expenses (including reasonable attorneys’ fees and expenses) incurred by Seller in collecting or attempting to collect under this Note; (b) waives demand, presentment, protest, notice of protest, suit and all other requirements necessary to hold Buyer liable hereunder; and (d) agrees that time of payment may be extended or renewal note taken or other indulgence granted without notice of or consent to such action, without release of liability as to Buyer.
8. Non-Waiver. No delay on the part of Sellers, or the holder hereof, in exercising any power or right hereunder shall operate as a waiver thereof nor shall any single or partial exercise of any power or right hereunder preclude other or further exercises thereof or the exercise of any other power or right. All rights and remedies of the holder hereof shall be cumulative and may be exercised consecutively or concurrently.
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9. Optional Prepayment. Buyer shall have the privilege to prepay all or any portion of the principal amount hereof, at any time, without premium or penalty. Any partial prepayment of principal shall be applied to the principal installments last falling due hereunder and shall not defer payment of installments next due and payable as originally provided herein.
10. Modification. Sellers, or the holder hereof, shall not be deemed to have modified, terminated, discharged or waived any of the rights hereunder unless such modification, termination, discharge or waiver be in writing and signed by such Seller or holder.
11. Governing Law. This Note shall be governed by and construed in accordance with the laws of the State of Virginia without regard to its conflicts-of-law principles.
[Signature page follows]
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IN WITNESS WHEREOF, the undersigned has executed this Promissory Note B on the Effective Date.
BUYER: | ||||
URGEMEDICAL GROUP INC., a Virginia corporation | ||||
By: | ||||
Name: | Payam Herischi | |||
Title: | President | |||
SELLERS: | ||||
ACSH URGENT CARE HOLDINGS, LLC ACSH PRIMARY CARE HOLDINGS, LLC, each a Delaware limited liability company | ||||
By: | ||||
Name: Adam S. Winger | ||||
Title: President and Chief Executive Officer |
4
Exhibit 31.1
Certification of Principal Executive Officer
Pursuant to Exchange Act Rule 13a-14(a)/15d-14(a)
as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Adam S. Winger, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of American CareSource Holdings, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: May 16, 2016
/s/ Adam S. Winger
Name: Adam S. Winger
Title: President and Chief Executive Officer
Exhibit 31.2
Certification of Principal Financial Officer
Pursuant to Exchange Act Rule 13a-14(a)/15d-14(a)
as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Robert Frye, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of American CareSource Holdings, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: May 16, 2016
/s/ Robert Frye
Name: Robert Frye
Title: Interim Chief Financial Officer and Controller
Exhibit 32.1
Certification of Principal Executive Officer
Pursuant to 18 U.S.C. Section 1350
as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, I, Adam S. Winger, the President and Chief Executive Officer of American CareSource Holdings, Inc. (the "Company"), hereby certify, that, to my knowledge:
1. The Quarterly Report on Form 10-Q for the quarter ended March 31, 2016 (the "Report") of the Company fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: May 16, 2016
/s/ Adam S. Winger
Name: Adam S. Winger
Title: President and Chief Executive Officer
Exhibit 32.2
Certification of Principal Financial Officer
Pursuant to 18 U.S.C. Section 1350
as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, I, Robert Frye, the Interim Chief Financial Officer and Controller of American CareSource Holdings, Inc. (the "Company"), hereby certify, that, to my knowledge:
1. The Quarterly Report on Form 10-Q for the quarter ended March 31, 2016 (the "Report") of the Company fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: May 16, 2016
/s/ Robert Frye
Name: Robert Frye
Title: Interim Chief Financial Officer and Controller
Document And Entity Information - shares |
3 Months Ended | |
---|---|---|
Mar. 31, 2016 |
May. 13, 2016 |
|
Entity Registrant Name | American CareSource Holdings, Inc. | |
Entity Central Index Key | 0001316645 | |
Trading Symbol | gnow | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Smaller Reporting Company | |
Entity Current Reporting Status | Yes | |
Entity Voluntary Filers | No | |
Entity Well-known Seasoned Issuer | No | |
Entity Common Stock, Shares Outstanding (in shares) | 16,597,150 | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2016 | |
Document Fiscal Year Focus | 2016 | |
Document Fiscal Period Focus | Q1 | |
Amendment Flag | false |
Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) - $ / shares |
Mar. 31, 2016 |
Dec. 31, 2015 |
---|---|---|
Series A Preferred Stock [Member] | ||
Preferred stock, authorized (in shares) | 870 | 870 |
Preferred stock, issued (in shares) | 750 | 750 |
Preferred stock, outstanding (in shares) | 750 | 750 |
Preferred stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Preferred stock, authorized (in shares) | 9,999,000 | 9,999,000 |
Common stock par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized (in shares) | 40,000,000 | 40,000,000 |
Common stock, shares issued (in shares) | 16,608,000 | 16,597,000 |
Common stock, shares outstanding (in shares) | 16,608,000 | 16,597,000 |
Consolidated Statements of Stockholders' Equity (Deficit) (Unaudited) - 3 months ended Mar. 31, 2016 - USD ($) shares in Thousands |
Preferred Stock [Member] |
Common Stock [Member] |
Additional Paid-in Capital [Member] |
Retained Earnings [Member] |
Noncontrolling Interest [Member] |
Total |
---|---|---|---|---|---|---|
Balance at December 31, 2015 (in shares) at Dec. 31, 2015 | 750 | 16,597 | ||||
Balance at December 31, 2015 at Dec. 31, 2015 | $ 664,000 | $ 165,000 | $ 32,535,000 | $ (35,170,000) | $ 0 | $ (1,806,000) |
Net (loss) | (1,709,000) | (135,000) | (1,844,000) | |||
Stock-based compensation expense | 30,000 | 30,000 | ||||
Issuance of common stock upon conversion of restricted stock (in shares) | 11 | |||||
Issuance of common stock upon conversion of restricted stock | $ 1,000 | |||||
Balance at March 31, 2016 (in shares) at Mar. 31, 2016 | 750 | 16,608 | ||||
Balance at March 31, 2016 at Mar. 31, 2016 | $ 664,000 | $ 166,000 | $ 32,565,000 | $ (36,879,000) | $ (135,000) | $ (3,620,000) |
Note 1 - General |
3 Months Ended |
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Mar. 31, 2016 | |
Notes to Financial Statements | |
Basis of Presentation and Significant Accounting Policies [Text Block] | 1. General Basis of Presentation The accompanying unaudited consolidated financial statements of American CareSource Holdings, Inc. and its subsidiaries have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information, with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X of the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and notes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, these statements include all adjustments necessary to present a fair statement of our consolidated results of operations, financial position and cash flows. Operating results for any interim period are not necessarily indicative of the results that may be expected for the full year. Preparation of the Company’s financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts in the financial statements and notes. Actual results could differ from those estimates. This Quarterly Report on Form 10-Q should be read in conjunction with the Company’s consolidated financial statements and notes included in its Annual Report on Form 10-K for the fiscal year ended December 31, 2015. References herein to "the Company," "we," "us," or "our" refer to American CareSource Holdings, Inc. and its subsidiaries. Significant Accounting Policies Goodwill resulted from our acquisition of urgent and primary care businesses during the years ended December 31, 2015 and 2014. In accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 805, Business Combinations , the purchase method of accounting requires that the excess of the purchase price paid over the estimated fair value of identifiable tangible and intangible net assets of acquired businesses be recorded as goodwill. In accordance with ASC 350, Intangibles – Goodwill and Other , we are required to test goodwill for impairment annually or when indications of impairment occur. We perform our annual goodwill impairment test for our reporting units as of October 1, using a discounted cash flow method. In the interim, we review goodwill for impairment whenever events or circumstances indicate that the carrying amount might not be recoverable. We do not believe any event or circumstance in the first quarter of 2016 warranted an impairment review of goodwill.Variable Interest Entities ("VIEs") – We consolidate VIEs when we are the “primary beneficiary” of the VIE. The primary beneficiary is the party that has (i) the power to direct the activities that most significantly impact the VIE’s economic performance and (ii) through its interests in the VIE, the obligation to absorb losses or the right to receive benefits from the VIE that could be significant to the VIE.We have determined that Medac Health Services, P.A. (“Medac”) is a VIE and that we are the primary beneficiary. The financial results of Medac, our consolidated VIE, have been included in our operations since December 15, 2015, the date we closed the acquisition of certain assets from Medac (“the Medac Asset Acquisition”). Refer to Note 4 – Acquisitions and Variable Interest Entity. For additional Significant Accounting Policies, refer to our Annual Report on Form 10-K for the fiscal year ended December 31, 2015. Recent Accounting Pronouncements In March 2016, the FASB issued ASU 2016-09 “Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting.” This standard requires the recognition of the income tax effects of awards in the income statement when the awards vest or are settled, thus eliminating additional paid in capital pools. The guidance also allows for the employer to repurchase more of an employee’s shares for tax withholding purposes without triggering liability accounting. In addition, the guidance allows for a policy election to account for forfeitures as they occur rather than on an estimated basis. The guidance is effective in 2017 with early adoption permitted. The Company is currently evaluating the impact of this guidance on its consolidated financial statements and the timing of adoption. |
Note 2 - Description of Business |
3 Months Ended | |||||||||||||||
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Mar. 31, 2016 | ||||||||||||||||
Notes to Financial Statements | ||||||||||||||||
Business Description and Basis of Presentation [Text Block] | 2. Description of Business The Company engages in two lines of business: our urgent and primary care business, which we operate under the tradenames GoNow Doctors and Medac, and our ancillary network business. These lines of business are supported by a shared services function. On November 2, 2015, we commenced efforts to sell our legacy ancillary network business to our largest client and manager of the business, HealthSmart Preferred Care II, L.P. (“HealthSmart”) in order to continue our focus on our urgent and primary care business. Assuming we reach mutually agreeable terms with HealthSmart, we anticipate closing the transaction in 2016. Accordingly, we have concluded that the ancillary network business qualifies as discontinued operations and financial results for the ancillary network business are presented as discontinued operations in our consolidated statements of operations, and the related asset and liability accounts are presented on our unaudited consolidated balance sheets as held for sale as of March 31, 2016. Amounts previously reported have been reclassified, as necessary, to conform to this presentation to allow for meaningful comparison of continuing operations. Refer to Note 5 – Discontinued Operations. In May 2014, we announced our entry into the urgent and primary care market. During the remainder of 2014, through our wholly-owned subsidiaries, we consummated five transactions resulting in our acquisition of ten urgent and primary care centers, located in Georgia (3), Florida (2), Alabama (3), and Virginia (2). In December 2015, we completed a key acquisition of urgent care assets comprising four sites in North Carolina. In January 2016, we closed one of our Georgia sites and on April 1, 2016, we sold the two Virginia centers. Our healthcare centers offer a wide array of services for non-life-threatening medical conditions. We strive to improve access to quality medical care by offering extended hours and weekend service primarily on a walk-in basis. Our centers offer a broad range of medical services that generally fall within the urgent care, primary care, family care, and occupational medicine classifications. Specifically, we offer non-life-threatening, out-patient medical care for the treatment of acute, episodic, and some chronic medical conditions. When hospitalization or specialty care is needed, referrals to appropriate providers are made. Patients typically visit our centers on a walk-in basis when their condition is not severe enough to warrant an emergency visit or when treatment by their primary care provider is inconvenient. We also attempt to capture follow-up, preventative and general primary care business after walk-in visits. The services provided at our centers include, but are not limited to, the following:
Our centers are typically equipped with digital x-ray machines, electrocardiograph machines and basic laboratory equipment, and are generally staffed with a combination of licensed physicians, nurse practitioners, physician assistants, medical support staff, and administrative support staff. Our medical support staff includes licensed nurses, certified medical assistants, laboratory technicians, and registered radiographic technologists. |
Note 3 - Liquidity and Earnings (Loss) Per Share |
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Notes to Financial Statements | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Liquidity and Earnings (Loss) Per Share [Text Block] | 3. Liquidity and Earnings (Loss) Per Share Liquidity and Capital Resources As of March 31, 2016, we had cash and cash equivalents of $1.1 million and a working capital deficit of $14.6 million. As of December 31, 2015, we had cash and cash equivalents of $2.6 million and a working capital deficit of $13.2 million. Our cash needs have been funded historically from loan proceeds and equity offerings. We entered into two lines of credit in 2014. Maximum borrowings under these lines of credit is $12,000,000. As of March 31, 2016, we had no additional credit available to us under our lines of credit. Furthermore, both lines of credit are scheduled to mature in 2016 at which time the full outstanding principal balance of $11,800,000 will become due and payable. Substantially all of the borrowings under the lines of credit were used to finance acquisition activity, to fund losses, and $200,000, which is not currently available to us, was used to secure a bond required to obtain a state license for our ancillary network business. Although we intend to extend the maturity dates of the two lines of credit and raise additional capital through the incurrence of additional debt or sale of equity or assets during 2016, there is no assurance that we will be successful in completing such actions. If we are unable to obtain extensions on our lines of credit or if we are unable to raise additional funds, we will not have sufficient cash on hand to meet our cash requirements over the next 12 months. These uncertainties raise substantial doubt about our ability to continue as a going concern. Our consolidated financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern. Earnings (Loss) Per Share Basic earnings (loss) per share is computed using a two-class participating securities method. Losses have been allocated to the preferred stock, on an as-converted basis, without preference to the common stock because the dividend and liquidation rights of the preferred and common stock are equivalent on an as-converted basis. Diluted earnings (loss) per share is computed similar to basic earnings per share except for adjustments for dilutive potential common shares outstanding during the period using the treasury stock method. We computed earnings (loss) per share for both continuing and discontinued operations for the periods ended March 31, 2016, and March 31, 2015. Basic net (loss) and diluted net (loss) per share data were computed as follows (in thousands except per share amounts):
The following table summarizes potentially dilutive shares outstanding as of March 31, 2016 and March 31, 2015, which were excluded from the calculation due to being anti-dilutive (in thousands):
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Note 4 - Acquisitions and Variable Interest Entity |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Notes to Financial Statements | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business Combination Disclosure [Text Block] | 4. Acquisitions and Variable Interest Entity On December 15, 2015, ACSH Medical Management, LLC (“ACSH Management”), a wholly-owned subsidiary of the Company, purchased from Medac and its shareholders, substantially all the assets used in the operation of its four urgent care centers in the greater Wilmington, North Carolina area for $4,370,000 in cash, the assumption of $768,000 in liabilities and a $560,000 note payable. Medac remains an urgent care operating entity, owned by a single physician, with which ACSH Management has entered into various agreements. ACSH Management has entered into a $1.0 million secured line of credit for the benefit of Medac to fund certain of Medac’s operating losses and to cover costs necessary to expand the Medac brand in North Carolina. ACSH Management has the power to direct certain of Medac’s significant activities and has the right to receive benefits from Medac that are significant to Medac. We have determined, therefore, that Medac is a VIE and that ACSH Management is the primary beneficiary. Consequently, we have consolidated Medac and its financial results since the date we closed the Medac Asset Acquisition. The following table provides the balance sheets of Medac (in thousands):
The following table provides certain pro forma financial information for the Company as if the acquisition of Medac had occurred on January 1, 2015.
In January 2016, we closed one of our Georgia clinics. This clinic produced net revenue of approximately $5,000 and $236,000 for the three-month periods ending March 31, 2016 and 2015, respectively. |
Note 5 - Discontinued Operations |
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Disposal Groups, Including Discontinued Operations, Disclosure [Text Block] | 5. Discontinued Operations We are presenting our ancillary network business as discontinued operations in our consolidated statement of operations and the related asset and liability accounts are presented as held for sale. To allow for meaningful comparison of continuing operations, amounts previously reported have been reclassified, as necessary, to conform to this presentation. The ancillary network business offers cost containment strategies, primarily through the utilization of a comprehensive national network of ancillary healthcare service providers. Services are marketed to a number of healthcare companies including third-party administrators, insurance companies, large self-funded organizations, various employer groups, and preferred provider organizations. Since October 1, 2014, HealthSmart has managed our ancillary network business under a management services agreement. Major classes of assets and liabilities of the ancillary network business held for sale are as follows (in thousands):
Summary results of operations for the ancillary network business were as follows (in thousands):
We recognize revenue on the services we provide, which include (i) providing payor clients with a comprehensive network of ancillary healthcare providers; (ii) providing claims management, reporting, processing and payment services; (iii) providing network/need analysis to assess the benefits to payor clients of adding additional/different service providers to the client-specific provider networks; and (iv) providing credentialing of network service providers for inclusion in the client payor-specific provider networks. Revenue is recognized when services are delivered, which occurs after processed claims are billed to the payor clients and collections are reasonably assured. We estimate revenues and costs of revenues using average historical collection rates and average historical margins earned on claims. Revenues are adjusted periodically to reflect actual cash collections so that revenues recognized accurately reflect cash collected. We record a provision for refunds based on an estimate of historical refund amounts. Refunds are paid to payors for overpayment on claims, claims paid in error, and claims paid for non-covered services. In some instances, we will recoup payments made to the ancillary service provider if the claim has been fully resolved. The evaluation is performed periodically and is based on historical data. We present revenue net of the provision for refunds on the consolidated statement of operations. After careful evaluation of the key gross and net revenue recognition indicators, we have concluded that our circumstances are most consistent with those key indicators that support gross revenue reporting, since we are fulfilling the services of a principal versus an agent. Payments to providers is the largest component of our cost of revenues and it consists of payments for ancillary care services in accordance with contracts negotiated with providers for specific ancillary services, separately from contracts negotiated with our clients. |
Note 6 - Revenue Recognition and Accounts Receivable |
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Revenue Recognition, Accounts Receivable and Concentration of Credit Risk [Text Block] | 6. Revenue Recognition and Accounts Receivable In our urgent and primary care business, we have agreements with governmental and other third-party payors that provide for payments to us based on contractual adjustments to our established rates. Net revenue is reported at the time service is rendered at the estimated net realizable amounts, after giving effect to estimated contractual adjustments, payments from patients, third-party payors and others, and an estimate for bad debts. Contractual adjustments are accrued on an estimated basis in the period the related services are rendered and adjusted in future periods as final settlements are determined. We grant credit without collateral to our patients, who consist primarily of local residents insured by third-party payors. A summary of the basis of reimbursement with major third-party payors is as follows:
In establishing our allowance for bad debts, we consider historical collection experience, the aging of the account, payor classification and patient payment patterns. We adjust this allowance prospectively. We collect payment from our uninsured patients at the time of service. With our recent acquisition of certain assets of Medac, we are recognizing service agreement revenue. Medac leases certain employees and provides administrative services to a local emergency medical business under a management services agreement in exchange for a fee. Revenue related to the agreement is recorded during the period when the services are completed. Below is a summary of accounts receivable as of March 31, 2016 and December 31, 2015, and revenues for the three month periods ended March 31, 2016 and 2015, respectively, for our urgent and primary care business.
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Note 7 - Capital and Operating Lease Obligations |
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Leases of Lessee Disclosure [Text Block] | 7. Capital and Operating Lease Obligations The following reflects the scheduled, minimum required payments under our lease agreements in effect at March 31, 2016 (in thousands):
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Note 8 - Lines of Credit, Promissory Notes, and Notes Payable |
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Debt Disclosure [Text Block] | 8. Lines of Credit, Promissory Notes, and Notes Payable Below is a summary of our short-term and long-term debt obligations. Lines of Credit As of March 31, 2016, we had outstanding borrowings of $11,800,000 under our two credit agreements, with a weighted-average interest rate of 2.18%. Amounts outstanding under these credit agreements were recorded as a current liability on our consolidated balance sheet as of March 31, 2016, since both credit agreements mature in 2016. Substantially all of the borrowings under the credit agreements were used to finance acquisition activity, fund losses, and $200,000, which is not currently available to be borrowed by us, was used to secure a bond required to obtain a state license for our ancillary network business. The obligations under the credit agreements are secured by all the assets of the Company and its subsidiaries, and include ordinary and customary covenants related to, among other things, additional debt, further encumbrances, sales of assets, and investments and lending. Borrowings under the credit agreements are also secured by guarantees provided by certain officers and directors of the Company, among others. We issued the guarantors warrants to purchase an aggregate of 2,060,000 shares of our common stock in consideration of their guaranteeing such indebtedness. Promissory Notes and Notes Payable In 2015, as part of the Medac Asset Acquisition, the Company issued a promissory note to the seller for $560,000. The fair value of the note was subsequently adjusted for reporting purposes to $522,000. The promissory note accrues interest at 5% per annum and matures on June 15, 2017. Other acquisition notes of approximately $184,000 remain outstanding at March 31, 2016, mature in 2016 and bear interest at 5%. The following is a summary of all Company debt as of March 31, 2016 (in thousands):
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Note 9 - Intangible Assets and Impairment |
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Goodwill and Intangible Assets Disclosure [Text Block] | 9. Intangible Assets Identifiable intangible assets acquired in the urgent and primary care transactions are comprised of relationships with patients and contracts that drive patient volume (and therefore revenue) to our centers. Identifiable intangible assets and related accumulated amortization consist of the following as of the dates presented (in thousands):
Total amortization expense related to intangibles was approximately $57,000 and $81,000 during the three months ended March 31, 2016 and 2015, respectively. We amortize patient relationships and contracts using the straight-line method over their estimated useful lives between five and ten years. Estimated future amortization expense relating to intangibles is as follows (in thousands):
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Note 10 - Warrants |
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Notes to Financial Statements | |
Warrants [Text Block] | 10. Warrants Warrants to purchase 13,167,396 shares and 1,782,222 shares of our common stock were outstanding as of March 31, 2016 and March 31, 2015, respectively. Warrants to purchase 11,085,174 shares of common stock were issued in the 2015 Offering. Warrants to purchase 2,060,000 shares of common stock were issued in 2014 and 2015 to the guarantors of our lines of credit. The remaining warrants to purchase 22,222 shares of common stock expire on February 1, 2017 and have an exercise price of $1.50 per share. The weighted average price of the outstanding warrants to purchase an aggregate of 13,167,397 of our common stock at March 31, 2016 was $0.85. |
Note 11 - Segment Reporting |
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Segment Reporting Disclosure [Text Block] | 11. Segment Reporting As of March 31, 2016, we operated two segments, urgent and primary care and ancillary network. We evaluate segment performance based on several factors, the primary financial measure of which is operating income. We define segment income as income before interest expense, gain or loss on disposal of assets, income taxes, depreciation expense, non-cash amortization of intangible assets, intangible asset impairment, non-cash stock-based compensation expense, shared service expenses, severance charges and any other non-recurring costs. Shared services primarily consists of compensation costs for our executive management team, corporate headquarters costs, certain transactional costs, support services such as finance and accounting, human resources, legal, marketing and information technology and general administration. The following tables set forth a comparison of operations for the following periods presented for our segments and shared services (certain prior year amounts have been reclassified for comparability purposes). Consolidated statements of operations by segment for the respective three month periods ended March 31 are as follows (in thousands):
* Presented as discontinued operations in statement of operations. The following provides a reconciliation of reportable segment operating income (loss) to the Company’s consolidated totals (in thousands):
Segment assets include accounts receivable, prepaid expenses and other current assets, property and equipment, and intangibles. Shared services assets consist of cash and cash equivalents, prepaid insurance, deferred income taxes and property and equipment primarily related to information technology assets. Consolidated assets, by segment and shared services, as of the periods presented are as follows:
* Presented as discontinued operations in balance sheets. |
Note 12 - Subsequent Events |
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Notes to Financial Statements | |
Subsequent Events [Text Block] | 12. Subsequent Events On April 1, 2016, we exited the Virginia urgent and primary care market by consummating the sale of our two Virginia subsidiaries to UrgeMedical Group, Inc. For the period ended March 31, 2016 and March 31 2015, our Virginia subsidiaries reported net revenues of approximately $254,000 and $275,000, respectively, and net operating loss of approximately $(151,000) and $(132,000), respectively. The sales price for the Virginia subsidiaries was $610,000, $50,000 of which was paid in cash at closing and the balance by delivery of two promissory notes. The first promissory note has an initial principal balance of $160,000 and interest accrues on the outstanding balance at 1.5% per annum. The note is payable in two installments, the first installment of $50,000 is due within 90 days after closing and the second installment of $110,000 is due within 150 days after closing. If, however, UrgeMedical pays $150,000 plus all accrued interest within 90 days, the entire note will be deemed satisfied in full. The second promissory note has an initial principal balance of $400,000 and interest accrues on the outstanding balance at 5.0% per annum. Interest-only payments are due each month beginning July 1, 2016. Principal is due in three equal installments of $133,333 on the first, second and third anniversaries of the closing date. |
Significant Accounting Policies (Policies) |
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Accounting Policies [Abstract] | |
Basis of Accounting, Policy [Policy Text Block] | Basis of Presentation The accompanying unaudited consolidated financial statements of American CareSource Holdings, Inc. and its subsidiaries have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information, with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X of the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and notes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, these statements include all adjustments necessary to present a fair statement of our consolidated results of operations, financial position and cash flows. Operating results for any interim period are not necessarily indicative of the results that may be expected for the full year. Preparation of the Company’s financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts in the financial statements and notes. Actual results could differ from those estimates. This Quarterly Report on Form 10-Q should be read in conjunction with the Company’s consolidated financial statements and notes included in its Annual Report on Form 10-K for the fiscal year ended December 31, 2015. References herein to "the Company," "we," "us," or "our" refer to American CareSource Holdings, Inc. and its subsidiaries. |
Goodwill and Intangible Assets, Goodwill, Policy [Policy Text Block] | Goodwill resulted from our acquisition of urgent and primary care businesses during the years ended December 31, 2015 and 2014. In accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 805, Business Combinations , the purchase method of accounting requires that the excess of the purchase price paid over the estimated fair value of identifiable tangible and intangible net assets of acquired businesses be recorded as goodwill. In accordance with ASC 350, Intangibles – Goodwill and Other , we are required to test goodwill for impairment annually or when indications of impairment occur. We perform our annual goodwill impairment test for our reporting units as of October 1, using a discounted cash flow method. In the interim, we review goodwill for impairment whenever events or circumstances indicate that the carrying amount might not be recoverable. We do not believe any event or circumstance in the first quarter of 2016 warranted an impairment review of goodwill. |
Consolidation, Variable Interest Entity, Policy [Policy Text Block] | Variable Interest Entities ("VIEs") – We consolidate VIEs when we are the “primary beneficiary” of the VIE. The primary beneficiary is the party that has (i) the power to direct the activities that most significantly impact the VIE’s economic performance and (ii) through its interests in the VIE, the obligation to absorb losses or the right to receive benefits from the VIE that could be significant to the VIE.We have determined that Medac Health Services, P.A. (“Medac”) is a VIE and that we are the primary beneficiary. The financial results of Medac, our consolidated VIE, have been included in our operations since December 15, 2015, the date we closed the acquisition of certain assets from Medac (“the Medac Asset Acquisition”). Refer to Note 4 – Acquisitions and Variable Interest Entity. For additional Significant Accounting Policies, refer to our Annual Report on Form 10-K for the fiscal year ended December 31, 2015. |
New Accounting Pronouncements, Policy [Policy Text Block] | Recent Accounting Pronouncements In March 2016, the FASB issued ASU 2016-09 “Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting.” This standard requires the recognition of the income tax effects of awards in the income statement when the awards vest or are settled, thus eliminating additional paid in capital pools. The guidance also allows for the employer to repurchase more of an employee’s shares for tax withholding purposes without triggering liability accounting. In addition, the guidance allows for a policy election to account for forfeitures as they occur rather than on an estimated basis. The guidance is effective in 2017 with early adoption permitted. The Company is currently evaluating the impact of this guidance on its consolidated financial statements and the timing of adoption. |
Note 3 - Liquidity and Earnings (Loss) Per Share (Tables) |
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Schedule of Earnings Per Share, Basic and Diluted [Table Text Block] |
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Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share [Table Text Block] |
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Note 4 - Acquisitions and Variable Interest Entity (Tables) |
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Business Acquisition, Pro Forma Information [Table Text Block] |
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Note 5 - Discontinued Operations (Tables) |
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Disposal Groups, Including Discontinued Operations [Table Text Block] |
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Result of Operations for Ancillary Network Business [Table Text Block] |
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Note 6 - Revenue Recognition and Accounts Receivable (Tables) |
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Schedule of Accounts, Notes, Loans and Financing Receivable [Table Text Block] |
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Schedule of Revenue Sources, Health Care Organization [Table Text Block] |
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Note 7 - Capital and Operating Lease Obligations (Tables) |
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Schedule of Future Minimum Lease Payments for Capital Leases [Table Text Block] |
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Note 8 - Lines of Credit, Promissory Notes, and Notes Payable (Tables) |
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Notes Tables | ||||||||||||||||||||||||||
Schedule of Debt [Table Text Block] |
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Note 9 - Intangible Assets and Impairment (Tables) |
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Schedule of Finite-Lived Intangible Assets [Table Text Block] |
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Schedule of Finite-Lived Intangible Assets, Future Amortization Expense [Table Text Block] |
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Note 11 - Segment Reporting (Tables) |
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Schedule of Segment Reporting Information, by Segment [Table Text Block] |
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Reconciliation of Revenue from Segments to Consolidated [Table Text Block] |
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Reconciliation of Assets from Segment to Consolidated [Table Text Block] |
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Note 2 - Description of Business (Details Textual) |
1 Months Ended | 3 Months Ended | 8 Months Ended | ||
---|---|---|---|---|---|
Apr. 01, 2016 |
Jan. 31, 2016 |
Dec. 31, 2015 |
Mar. 31, 2016 |
Dec. 31, 2014 |
|
Georgia [Member] | |||||
Number of Businesses Closed | 1 | ||||
Number of Businesses Acquired | 3 | ||||
Florida [Member] | |||||
Number of Businesses Acquired | 2 | ||||
Alabama [Member] | |||||
Number of Businesses Acquired | 3 | ||||
Virginia [Member] | Subsequent Event [Member] | Two Virginia Subsidiaries [Member] | |||||
Number of Subsidiaries Sold | 2 | ||||
Virginia [Member] | |||||
Number of Businesses Acquired | 2 | ||||
North Carolina [Member] | |||||
Number of Businesses Acquired | 4 | ||||
Number of Businesses Closed | 1 | ||||
Number of Businesses Acquired | 10 |
Note 3 - Liquidity and Earnings (Loss) Per Share (Details Textual) |
3 Months Ended | |||
---|---|---|---|---|
Mar. 31, 2016
USD ($)
|
Dec. 31, 2015
USD ($)
|
Mar. 31, 2015
USD ($)
|
Dec. 31, 2014
USD ($)
|
|
Revolving Credit Facility [Member] | Wells Fargo [Member] | ||||
Line of Credit Facility, Maximum Borrowing Capacity | $ 12,000,000 | |||
Line of Credit Facility, Remaining Borrowing Capacity | 0 | |||
Line of Credit, Current | 11,800,000 | |||
Proceeds from Line of Credit Used to Secure Bond | $ 200,000 | |||
Number of Lines of Credit | 2 | |||
Cash and Cash Equivalents, at Carrying Value | $ 1,050,000 | $ 2,629,000 | $ 322,000 | $ 1,020,000 |
Working Capital | (14,600,000) | (13,200,000) | ||
Line of Credit, Current | $ 11,800,000 | $ 11,100,000 |
Note 3 - Potentially Dilutive Adjustments to Weighted Average Number of Common Shares (Details) - shares shares in Thousands |
3 Months Ended | 12 Months Ended |
---|---|---|
Mar. 31, 2016 |
Dec. 31, 2015 |
|
Warrant [Member] | ||
Antidilutive securities (in shares) | 11,107 | 822 |
Employee Stock Option [Member] | ||
Antidilutive securities (in shares) | 1,644 | 1,334 |
Restricted Stock Units (RSUs) [Member] | ||
Antidilutive securities (in shares) | 89 | |
Restricted Stock [Member] | ||
Antidilutive securities (in shares) | 50 |
Note 4 - Acquisitions and Variable Interest Entity (Details Textual) |
1 Months Ended | 3 Months Ended | 8 Months Ended | 12 Months Ended | |
---|---|---|---|---|---|
Jan. 31, 2016 |
Mar. 31, 2016
USD ($)
|
Mar. 31, 2015
USD ($)
|
Dec. 31, 2014 |
Dec. 31, 2015
USD ($)
|
|
Medac Health Services [Member] | |||||
Number of Businesses Acquired | 4 | ||||
Payments to Acquire Businesses, Gross | $ 4,370,000 | ||||
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Liabilities | 768,000 | ||||
Business Combination, Consideration Transferred, Liabilities Incurred | $ 560,000 | ||||
Georgia Clinic [Member] | |||||
Disposal Group, Including Discontinued Operation, Revenue | $ 5,000 | $ 236,000 | |||
Number of Businesses Acquired | 10 | ||||
Number of Businesses Closed | 1 | ||||
Disposal Group, Including Discontinued Operation, Revenue | $ 4,695,000 | $ 5,743,000 |
Note 4 - Balance Sheets of Medac (Details) - Variable Interest Entity, Primary Beneficiary [Member] - Medac Health Services [Member] - USD ($) $ in Thousands |
Mar. 31, 2016 |
Dec. 31, 2015 |
---|---|---|
Current assets | $ 1,066 | $ 779 |
Current liabilities | 1,201 | 759 |
Stockholder's equity | (135) | 20 |
Total liabilities & stockholder's equity | $ 1,066 | $ 779 |
Note 4 - Pro Forma Financial Information for the Company (Details) - Medac Health Services [Member] - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2016 |
Mar. 31, 2015 |
|
Urgent and Primary Care [Member] | ||
Net revenues | $ 4,412 | $ 4,672 |
Service Agreement [Member] | ||
Net revenues | 594 | 429 |
Net revenues | 5,006 | 5,101 |
(Loss) from continuing operations before taxes | $ (2,137) | $ (3,325) |
Basic net (loss) per common share (in dollars per share) | $ (0.11) | $ (0.49) |
Diluted net (loss) per common share (in dollars per share) | $ (0.11) | $ (0.51) |
Note 5 - Major Classes of Assets and Liabilities of the Ancillary Network Business Held for Sale (Details) - USD ($) |
Mar. 31, 2016 |
Dec. 31, 2015 |
Mar. 31, 2015 |
---|---|---|---|
Due to Ancillary Network Service Providers [Member] | |||
Due to affiliate | $ 1,388,000 | $ 3,225,000 | |
Due to Healthsmart [Member] | |||
Due to affiliate | 3,739,000 | 2,210,000 | |
Accounts receivable | 1,111,000 | 1,589,000 | |
Prepaid expenses and other current assets | 43,000 | 43,000 | |
Deferred income taxes | 18,000 | 18,000 | |
Total current assets held for sale | 1,172,000 | 1,650,000 | |
Property and equipment, net | 588,000 | 588,000 | |
Intangible assets, net | 406,000 | 406,000 | |
Total other assets held for sale | 994,000 | 994,000 | |
Total assets held for sale | 2,166,000 | $ 2,644,000 | 2,644,000 |
Total current liabilities held for sale | 5,127,000 | $ 5,435,000 | 5,435,000 |
Total liabilities held for sale | $ 5,127,000 | $ 5,435,000 |
Note 5 - Results of Operations for the Ancillary Network Business (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2016 |
Mar. 31, 2015 |
|
Disposal Group, Including Discontinued Operation, Revenue | $ 4,695 | $ 5,743 |
Provider payments | 3,256 | 4,331 |
Administrative fees | 324 | 330 |
Other operating costs | $ 816 | 972 |
Depreciation and amortization | 125 | |
Total operating expenses | $ 4,396 | 5,758 |
Income/(loss) from discontinued operations | $ 299 | $ (15) |
Note 6 - Accounts Receivable from Urgent and Primary Care (Details) - Urgent and Primary Care [Member] - USD ($) $ in Thousands |
Mar. 31, 2016 |
Dec. 31, 2015 |
---|---|---|
Trade Accounts Receivable [Member] | ||
Accounts receivable | $ 3,394 | $ 3,236 |
Other Accounts Receivable [Member] | ||
Accounts receivable | 100 | |
Estimated allowance for contractual adjustments and uncollectible amounts | (1,719) | $ (1,738) |
Accounts receivable, net | $ 1,775 | $ 1,498 |
Note 6 - Revenue from Urgent and Primary Care (Details) - USD ($) $ in Thousands |
3 Months Ended | 12 Months Ended | |
---|---|---|---|
Mar. 31, 2016 |
Mar. 31, 2015 |
Dec. 31, 2015 |
|
Urgent and Primary Care [Member] | |||
Gross revenue | $ 8,419 | $ 5,786 | |
Provision for contractual adjustments and estimated uncollectible amounts | (3,413) | (3,114) | |
Net revenue | 5,006 | $ 2,672 | |
Net revenue | $ 5,006 | $ 2,672 |
Note 7 - Future Required Payments under Lease Agreements (Details) - USD ($) |
Mar. 31, 2016 |
Dec. 31, 2015 |
---|---|---|
2016 (remaining 9 months) | $ 224,000 | |
2016 (remaining 9 months) | 915,000 | |
2016 (remaining 9 months) | 1,139,000 | |
2017 | 288,000 | |
2017 | 1,001,000 | |
2017 | 1,289,000 | |
2018 | 276,000 | |
2018 | 926,000 | |
2018 | 1,202,000 | |
2019 | 273,000 | |
2019 | 812,000 | |
2019 | 1,085,000 | |
2020 | 286,000 | |
2020 | 727,000 | |
2020 | 1,013,000 | |
Thereafter | 2,612,000 | |
Thereafter | 4,074,000 | |
Thereafter | 6,686,000 | |
Total minimum lease payments | 3,959,000 | |
Total minimum lease payments | 8,455,000 | |
Total minimum lease payments | 12,414,000 | |
Less amount representing interest | (2,226,000) | |
Present value of net minimum obligations | 1,733,000 | |
Less current obligation under capital lease | 138,000 | $ 134,000 |
Long-term obligation under capital lease | $ 1,595,000 | $ 1,630,000 |
Note 8 - Lines of Credit, Promissory Notes, and Notes Payable (Details Textual) - USD ($) |
3 Months Ended | 12 Months Ended |
---|---|---|
Mar. 31, 2016 |
Dec. 31, 2015 |
|
Revolving Credit Facility [Member] | Wells Fargo [Member] | ||
Long-term Line of Credit | $ 11,800,000 | |
Debt, Weighted Average Interest Rate | 2.18% | |
Proceeds from Line of Credit Used to Secure Bond | $ 200,000 | |
March 31, 2016 Warrants [Member] | ||
Class of Warrant or Right Issued During Period | 2,060,000 | |
Medac Asset Acquisiton [Member] | ||
Business Combination, Consideration Transferred, Liabilities Incurred | $ 522,000 | $ 560,000 |
Debt Instrument, Interest Rate During Period | 5.00% | |
Other Acquisitions [Member] | ||
Debt, Long-term and Short-term, Combined Amount | $ 184,000 | |
Debt Instrument, Interest Rate, Stated Percentage | 5.00% | |
Debt, Long-term and Short-term, Combined Amount | $ 12,506,000 |
Note 8 - Summary of All Debt (Details) $ in Thousands |
Mar. 31, 2016
USD ($)
|
---|---|
Revolving Line of Credit [Member] | |
Debt, Long-term and Short-term, Combined Amount | $ 11,800 |
Promissory Notes Related to Acquistion [Member] | |
Debt, Long-term and Short-term, Combined Amount | 706 |
Debt, Long-term and Short-term, Combined Amount | 12,506 |
Less current maturities | 11,984 |
Long-term debt | $ 522 |
Note 9 - Intangible Assets and Impairment (Details Textual) - USD ($) |
3 Months Ended | 12 Months Ended | |
---|---|---|---|
Mar. 31, 2016 |
Mar. 31, 2015 |
Dec. 31, 2015 |
|
Patient Base [Member] | Minimum [Member] | |||
Finite-Lived Intangible Asset, Useful Life | 5 years | ||
Amortization of Intangible Assets | $ 57,000 | $ 81,000 |
Note 9 - Other Intangible Assets and Related Accumulated Amortization (Details) - USD ($) $ in Thousands |
Mar. 31, 2016 |
Dec. 31, 2015 |
---|---|---|
Urgent and Primary Care [Member] | Patient Relationships and Contracts [Member] | ||
Finite-lived intangible assets, gross | $ 2,074 | $ 2,074 |
Urgent and Primary Care [Member] | ||
Accumulated amortization | (246) | (189) |
Finite-lived intangible assets, net | 1,828 | |
Finite-lived intangible assets, net | $ 1,828 | $ 1,885 |
Note 9 - Finite-lived Intangible Assets Future Amortization Expense (Details) - USD ($) $ in Thousands |
Mar. 31, 2016 |
Dec. 31, 2015 |
---|---|---|
Urgent and Primary Care [Member] | ||
2016 (9 months remaining) | $ 172 | |
2017 | 229 | |
2018 | 229 | |
2019 | 202 | |
2020 | 167 | |
Thereafter | 829 | |
Total | 1,828 | |
Total | $ 1,828 | $ 1,885 |
Note 11 - Segment Reporting (Details Textual) |
3 Months Ended |
---|---|
Mar. 31, 2016 | |
Number of Operating Segments | 2 |
Note 11 - Reconciliation of Reportable Segment Operating Income (Loss) (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2016 |
Mar. 31, 2015 |
|
Operating Segments [Member] | ||
Total segment operating income (loss) | $ (924) | $ (2,368) |
Interest expense | 107 | 83 |
Deferred loan fees amortization, net of loss on warrant liability | 470 | 369 |
Total segment operating income (loss) | (1,560) | $ (3,204) |
Severance charges | 11 | |
Depreciation and amortization expense | 222 | $ 291 |
Non-cash stock-based compensation expense | 30 | 147 |
Non-recurring professional fees | 74 | 413 |
Operating loss, including discontinued operations | (1,261) | (3,219) |
Interest expense | 107 | 83 |
Deferred loan fees amortization, net of loss on warrant liability | 470 | 369 |
Loss before income taxes | $ (1,838) | $ (3,671) |
Note 11 - Consolidating Assets, by Segment and Shared Services (Details) - USD ($) |
Mar. 31, 2016 |
Dec. 31, 2015 |
---|---|---|
Urgent and Primary Care [Member] | Operating Segments [Member] | ||
Assets | $ 14,799,000 | $ 14,920,000 |
Ancillary Network [Member] | Operating Segments [Member] | ||
Assets | 2,166,000 | 2,644,000 |
Shared Services [Member] | Operating Segments [Member] | ||
Assets | 1,933,000 | 3,521,000 |
Operating Segments [Member] | ||
Assets | 18,898,000 | 21,085,000 |
Assets | $ 18,898,000 | $ 21,085,000 |
Note 12 - Subsequent Events (Details Textual) |
3 Months Ended | ||
---|---|---|---|
Apr. 01, 2016
USD ($)
|
Mar. 31, 2016
USD ($)
|
Mar. 31, 2015
USD ($)
|
|
Virginia [Member] | Subsequent Event [Member] | Two Virginia Subsidiaries [Member] | |||
Number of Subsidiaries Sold | 2 | ||
Subsequent Event [Member] | Two Virginia Subsidiaries [Member] | Promissory Note Receivable One [Member] | |||
Promissory Notes ReceivableFaceAmount | $ 160,000 | ||
Note Receivable Interest Rate | 1.50% | ||
Number of Installments | 2 | ||
Note Receivable Installment One Due In 90 Days | $ 50,000 | ||
Note Receivable Installment Two Due in 150 Days | 110,000 | ||
Note Receivable Minimum Repayment Amount Due in 90 Days | 150,000 | ||
Subsequent Event [Member] | Two Virginia Subsidiaries [Member] | Promissory Note Receivable Two [Member] | |||
Promissory Notes ReceivableFaceAmount | $ 400,000 | ||
Note Receivable Interest Rate | 5.00% | ||
Number of Installments | 3 | ||
Note receivable Installment | $ 133,333 | ||
Subsequent Event [Member] | Two Virginia Subsidiaries [Member] | |||
Disposal Group, Including Discontinued Operation, Consideration | 610,000 | ||
Proceeds from Divestiture of Businesses | $ 50,000 | ||
Number of Promissory Notes Receivable | 2 | ||
Two Virginia Subsidiaries [Member] | |||
Disposal Group, Including Discontinued Operation, Revenue | $ 254,000 | $ 275,000 | |
Disposal Group, Including Discontinued Operation, Operating Income (Loss) | 151,000 | 132,000 | |
Disposal Group, Including Discontinued Operation, Revenue | $ 4,695,000 | $ 5,743,000 |
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