10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-K

(Mark One)

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2013

or

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from  to  

Commission File Number: 333-173039

HEALTH REVENUE ASSURANCE HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

Nevada	99-0363866
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

8551 W. Sunrise Boulevard, Unit 304

Plantation, Florida 33322

(Address of principal executive offices) (Zip Code)

(954) 472-2340

(Registrant’s telephone number, including area code)

Securities Registered Pursuant to Section 12(b) of the Act:

None

Securities Registered Pursuant to Section 12(g) of the Act:

None

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

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

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 x   No o

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 shorter period that the registrant was required to submit and post such files). Yes x    No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of the chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. £

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

Large Accelerated Filer	o		Accelerated Filer	o
Non-Accelerated Filer	o	(Do not check if a smaller reporting company)	Smaller Reporting Company	x

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

The aggregate market value of the voting and non-voting common stock held by non-affiliates of the registrant computed by reference to the price at which the common stock was last sold on the OTC Bulletin Board on the last business day of the registrant’s most recently completed second fiscal quarter (June 30, 2013) was $15,989,850.

As of April 10, 2014, 54,752,294 shares of our common stock, par value $0.001, were outstanding.

TABLE OF CONTENTS

		Page
PART I
Item 1.	Business	1
Item 1A.	Risk Factors	5
Item 1B.	Unresolved Staff Comments	16
Item 2.	Properties	16
Item 3.	Legal Proceedings	16
Item 4.	Mine Safety Disclosures	16
PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	17
Item 6.	Selected Financial Data	17
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	25
Item 8.	Financial Statements and Supplementary Data	F-1
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	26
Item 9A.	Controls and Procedures	26
Item 9B.	Other Information	27
PART III
Item 10.	Directors, Executive Officers and Corporate Governance	30
Item 11.	Executive Compensation	32
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	36
Item 13.	Certain Relationships and Related Transactions, and Director Independence	38
Item 14.	Principal Accounting Fees and Services	39
PART IV
Item 15.	Exhibits, Financial Statement Schedules	40
	Signatures	41
	Index to Exhibits	F-1
	Certifications

i

PART I

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K contains "forward-looking statements", within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that reflect our current estimates, expectations and projections about our future results, performance, prospects and opportunities. Forward-looking statements include, without limitation, statements about our market opportunities, our business and growth strategies, our projected revenue and expense levels, possible future consolidated results of operations, the adequacy of our available cash resources, our financing plans, our competitive position and the effects of competition and the projected growth of the industries in which we operate, as well as the following statements:

· that we believe we are employing people that are highly motivated personnel with strong character, above average competence and leadership traits;

· that we believe with our approach, our customers benefit from integrated service offerings that enhances their revenue integrity;

· that we believe we help our customers achieve their business objectives and patient care objectives;

· that we expect to encounter additional competitors;

· that we may not accurately anticipate the application of laws and regulations, or that we may not comply such laws or regulations;

· that we can raise the appropriate funds needed to support our business plan and develop an operating company which is cash flow positive;

· that our growth strategy might be hindered, which could materially affect our business and limit our ability to increase revenues, if our key employees were to leave us;

· that we may need to hire additional financial reporting, internal controls and other finance staff or consultants in order to develop and implement appropriate internal controls and reporting procedures;

· that we plan to grow, in part, by capitalizing on perceived market opportunities to provide our services to new customers;

· that if third parties fail to deliver their commitments on time or at all, our ability to perform may be adversely affected, which could have a material adverse effect on our business, revenue, profitability or cash flow;

· that we may not achieve our objectives through our strategic alliances;

· that we do not believe that we have infringed or are infringing on any proprietary rights of third parties;

· that we believe that we have all rights necessary to use the data that is incorporated into our training programs and our services;

· that we do not anticipate paying any cash dividends on our common stock in the foreseeable future;

· that we plan to retain future earnings to finance growth;

· that if we are unable to raise additional capital as and when we need it, our financial condition and results of operations may be materially and adversely affected;

· that we believe the impacts to the ICD-10 delay will have minimal impacts on our near term coding staffing and consulting services and will not affect our ability to acquire long term coding outsourcing service contracts;

· that we believe our reserves are adequate;

· that we no longer intend to market or sell internally developed software on a stand alone basis;

· that we believe we may be in default under the solvency provisions and certain non-financial default provisions under the factoring agreement; and

· that we believe we may be in default of certain non-financial covenants under the term loan.

This Annual Report on Form 10-K also contains forward-looking statements attributed to third parties relating to their estimates regarding the size of the future market for products and systems such as our products and systems, and the assumptions underlying such estimates. Forward-looking statements include all statements that are not historical facts and can be identified by forward-looking statements such as “may,” “might,” “should,” “could,” “will,” “intends,” “estimates,” “predicts,” “projects,” “potential,” “continue,” “believes,” “anticipates,” “plans,” “expects” and similar expressions. Forward-looking statements are only predictions based on our current expectations and projections, or those of third parties, about future events and involve risks and uncertainties.

ii

Although we believe that the expectations reflected in the forward-looking statements contained in this Annual Report on Form 10-K are based upon reasonable assumptions, no assurance can be given that such expectations will be attained or that any deviations will not be material. In light of these risks, uncertainties and assumptions, the forward-looking statements, events and circumstances discussed in this Annual Report on Form 10-K may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements. Important factors that could cause our actual results, level of performance or achievements to differ materially from those expressed or forecasted in, or implied by, the forward-looking statements we make in this Annual Report on Form 10-K are discussed under “Item 1A. Risk Factors,” “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation” and elsewhere in this Annual Report on Form 10-K and include:

· our ability to continue as a going concern;

· our ability to comply with the Sarbanes-Oxley Act;

· our ability to grow and the willingness of new customers to outsource their coding work to us;

· the loss of any of our large customers;

· our ability to accurately estimate the costs of the services and the timing of the completion of the projects;

· our ability to perform on contracts on which we partner with third parties if third parties fail to successfully or timely deliver their commitments;

· our failure to compete successfully in the highly competitive markets in which operate;

· our increased costs related to the increasing complex regulatory environments;

· our ability to collect our receivables;

· our ability to enhance our service offerings and to bring those services to market;

· the delay by the Department of Health and Human Services in initiating the implementation of the ICD-10 system;

· our ability to offer new and valuable services and to remain competitive;

· our ability to generate revenues if potential clients take a long time to evaluate our services;

· our successful implementation of our services;

· our ability to maintain our strategic alliances or enter into new alliances;

· our failure to comply with federal and state laws governing submission of false or fraudulent claims to government healthcare programs and financial relationships among healthcare providers;

· our ability to comply with the various covenants contained in our bank financing documents;

· the increased costs of operation and exposure to civil and criminal statutes as a result of Federal and state privacy and security laws; and

· our status as an “Emerging Growth Company” under the Jobs Act of 2012.

You should not place undue reliance on any forward-looking statements. In addition, past financial or operating performance is not necessarily a reliable indicator of future performance, and you should not use our historical performance to anticipate future results or future period trends. Except as otherwise required by federal securities laws, we disclaim any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement contained in this Annual Report on Form 10-K to reflect any change in our expectations or any change in events, conditions or circumstances on which any such statement is based. All forward-looking statements attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by the cautionary statements included in this Annual Report on Form 10-K.

CERTAIN TERMS USED IN THIS REPORT

As used in this report, the terms “Company,” “we,” “us” and “our” refer to Health Revenue Assurance Holdings, Inc., a Nevada corporation, and its wholly-owned subsidiary, Health Revenue Assurance Associates, Inc., a Maryland corporation (“HRAA”).

iii

Item 1. Business

Corporate History

The Company is a provider of revenue cycle services to a broad range of healthcare providers. We offer our customers integrated solutions designed around their specific business needs, including revenue cycle data analysis, contract and outsourced coding, billing, coding and compliance audits, coding education, coding consulting, physician coding services and ICD-10 education and transition services. With this approach, our customers benefit from integrated service offerings that we believe enhances their revenue integrity. As a result, we believe we help our customers achieve their business objectives and patient care objectives.

Health Revenue Assurance Holdings, Inc., formerly known as Anvex International, Inc., was formed as a Nevada corporation on December 13, 2010.

On February 10, 2012, the Company entered into an Agreement and Plan of Merger and Reorganization (the “Merger Agreement”) with Health Revenue Acquisition Corp., a Nevada corporation and its wholly-owned subsidiary (“Acquisition Sub”), and HRAA, pursuant to which Acquisition Sub was merged with and into HRAA, and HRAA, as the surviving corporation, became a wholly-owned subsidiary of the Company (the “Merger”). Before the entry into the Merger Agreement, no material relationship existed between the Company and the Acquisition Sub or HRAA.

Prior to the closing of the Merger, the Company transferred all of its operating assets and liabilities to Anvex Split Corp., a Nevada corporation (the “Split-Off Subsidiary”), and contemporaneously with the closing of the Merger, the Company sold all of the outstanding capital stock of the Split-Off Subsidiary to Anna Vechera, its former sole officer, director and stockholder (the “Split-Off Buyer”). In connection with the sale, an aggregate of 3,500,000 shares of the Company’s common stock held by the Split-Off Buyer were surrendered and cancelled without further consideration.

Pursuant to the terms and conditions of the Merger Agreement, and upon the consummation of the Merger:

● Each share of HRAA’s common stock issued and outstanding immediately prior to the closing of the Merger was converted into the right to receive 1,271.111 shares of the Company’s common stock. An aggregate of 1,271,111 shares of the Company’s common stock were issued to the holders of HRAA’s common stock. Immediately prior to the Merger, HRAA had no outstanding securities other than shares of its common stock.

● Anna Vechera resigned as the Company’s sole officer and director, and simultaneously with the Merger, a new board of directors and new officers were appointed. The Company’s new board of directors consisted of Robert Rubinowitz, Andrea Clark and Keith Siddel, previously the directors of HRAA. In addition, immediately following the Merger, Andrea Clark was appointed as the Company’s President and Chief Executive Officer, Robert Rubinowitz was appointed as the Company’s Chief Operating Officer, Secretary and Treasurer and Keith Siddel was appointed as the Company’s Chief Marketing Officer. Andrea Clark, Robert Rubinowitz and Keith Siddel no longer hold these positions.

On April 13, 2012, the Company changed its name from Anvex International, Inc. to Health Revenue Assurance Holdings, Inc.

On April 13, 2012, the board of directors authorized a 12.98-for-1 split of the Company’s common stock to stockholders of record as of April 13, 2012 (the “Stock Split”). The shares resulting from the Stock Split were issued on April 26, 2012. All share and per share amounts for all periods presented have been retroactively adjusted to reflect the Stock Split.

Private Placement Offering

Concurrently with the closing of the Merger and in contemplation of the Merger, we sold 2,676,255 shares of our common stock, $0.001 par value, for gross proceeds of $663,908, at a purchase price of $0.25 per share (the “Purchase Price”), in a private placement offering (the “Offering”). The Offering was subject to a minimum offering amount of $470,000 (the “Minimum Offering Amount”) and a maximum offering amount of $1,500,000 (the “Maximum Offering Amount”). We agreed to file a registration statement on Form S-1 registering the resale under the Securities Act of all shares sold in the Offering within 60 days after the Maximum Offering Amount was sold.

On April 12, 2012, we closed the Offering by selling an additional $349,000 at the purchase price of $0.25 and issuing 1,394,909 shares of common stock. The total raised in the Offering was $1,012,908.

In addition, as part of the Offering, (i) holders of certain convertible notes of HRAA in an aggregate principal amount of $313,908, which principal amount were included in computing the Minimum Offering Amount, automatically converted into an aggregate of 1,265,381 shares of our common stock at a conversion price of $0.25 per share which is equal to the Purchase Price, and (ii) holders of certain senior secured bridge loan promissory notes of HRAA in the aggregate principal amount of $250,000 automatically converted into an aggregate of 1,343,749 shares of our common stock at a conversion price of $0.19 per share which is equal to a discount of 25% to the Purchase Price.

1

Overview

The Company is a provider of revenue cycle services to a broad range of healthcare providers. We offer our customers integrated solutions designed around their specific business needs, including revenue cycle data analysis, contract and outsourced coding; billing, coding and compliance audits, coding education, coding consulting, physician coding services and ICD-10 education and transition services. With this approach, our customers benefit from integrated service offerings that we believe enhances their revenue integrity. As a result, we believe we help our customers achieve their business objectives and patient care objectives.

Our Services

We provide the following categories of services to our customers either on a standalone basis or bundled within a comprehensive solution. Depending on a customer’s needs, we offer a mix of the following services as part of our solutions:

● Coding services

● Coding consulting services

● Education services

Coding Services

Coding services can be performed under short term or multi-year contracts in which we assume operational responsibility for various aspects of our customers’ coding operations, including departmental or physician specialty coding, staff augmentation, or full outsource of a hospital or physician group coding operation. In the outsource contracts we typically hire part or all of the customer’s coding staff that supported these functions prior to the transition of services. We then apply our coding expertise and operating methodologies and utilize technology to increase the efficiency of the operations, which usually results in increased coding quality at a lower cost.

Coding Consulting Services

Coding consulting services are typically performed under short term contracts in which we conduct billing and coding audits. In connection with such audits, we  collect and analyze the clients’ clinical documentation, the coding applied, reimbursements and provide recommendations for improvement.

· Billing and Coding Audits – We apply proven audit techniques to the review of medical records and revenue cycle operations.  We assess all components of the medical record to include operative reports, nurses’ & doctors’ notes, records, and other ancillary tests and orders.  Our methodology enhances our ability to identify procedures and diagnoses that may not be documented by the medical staff.  The information derived these reviews enables our customers to analyze medical staff documentation and review the coding accuracy that drives reimbursements and contributes to resource utilization.  In addition, the results provide a baseline for follow-on assessments enabling continuous improvement and customized coding and compliance training for departmental staff.  

· Consulting – Our consultants assist our customers keep pace with industry and regulatory changes, including consulting in health information management and revenue integrity.

Education Services

We offer various training and educational solutions to our customers including on-site training, coding boot camps, workshops, video training, and on demand webinars.

2

Our Contracts

Our contracts include services priced using a variety of pricing mechanisms. In determining how to price our services, we consider the delivery, credit and pricing risk of a business relationship.  Depending on a customer’s business requirements and the pricing structure of the contract, the amount of profit generated from a contract can vary significantly during a contract’s term. Fixed- or unit-priced contracts, or an outsourcing services contract will typically produce less profit at the beginning of the contract with significantly more profit being generated as efficiencies are realized later in the term. Time and materials contracts are where our billings are based on measurements such as hours, days or months and an agreed upon rate. In some cases, the rate the customer pays for a unit of time can vary over the term of contract, which may result in the customer realizing immediate savings at the beginning of a contract.

Our Significant Customers

Sales to four (4) hospital customers represented approximately 60% of our revenues for the year ended December 31, 2013.  We have direct relationships with the individual hospitals and the health systems.

Hospital Customer A	42.0%
Hospital Customer B	6.0%
Hospital Customer C	6.0%
Hospital Customer D	6.0%
Total	60.0%

Sales to thirteen (13) hospitals were approximately 89% of our revenues for the year ended December 31, 2012.

Five and four vendors represented approximately 56% and 67% of our outstanding accounts payable balance as of December 31, 2013 and December 31, 2012, respectively.

Four and one customers represented approximately 64% and 62% of our accounts receivable as of December 31, 2013 and December 31, 2012, respectively.

Our People

The markets for medical coding and billing personnel and consulting professionals are intensely competitive. A key part of our business strategy is the hiring, training, and retaining of highly motivated personnel with strong character, above average competence and leadership traits. We believe that employing people with such traits is — and will continue to be — an integral factor in differentiating us from our competitors in the revenue cycle industry. In seeking such employees, we screen candidates for employment through a rigorous interview process, skills testing and other profiling to ensure both a cultural/role fit and demonstrable skills. We continue to mature our various compensation programs to remain competitive for talented people resources.

Competition

We operate in an extremely competitive market, and the resources required to meet our customers’ needs changes with their competitive and regulatory landscape. In each of our service lines we frequently compete with companies that have greater financial resources; more sales, and marketing capacity; and larger customer bases than we do. Because many of the factors on which we compete, as discussed below, are outside of our control, we cannot be sure that we will be successful in the markets in which we compete. If we fail to compete successfully, our business, financial condition, and results of operations will be materially and adversely affected.

Competitors

We compete with a number of different revenue cycle service providers depending upon the region, and/or market we are addressing. Some of our competitors include: Precyse Solutions, LLC., KForce, Inc., VersoGenics, Inc. (d/b/a Comforce), Trust Healthcare Consulting Services, LLC, Parallon Business Solutions, Conifer Health Solutions, Inc., Kiwi Technologies, Inc., The Advisory Board Company, DocuCoders, LLC, Reimbursement Management Consultants, Inc., Optum, Inc., MedAssets Inc., Healthcare Cost Solutions, Inc., and Aviacode Incorporated. As we enter new markets or new service lines in the healthcare revenue cycle, we expect to encounter additional competitors. We also frequently compete with our customers’ own internal revenue cycle capability, which may constitute a fixed cost for our customer.

How We Compete

We compete on the basis of a number of factors, including the attractiveness and focused professional services that we offer, pricing, brand recognition, utilization of technology, industry expertise, and quality and reliability of service. Our consulting practice also competes on our tools, process methodologies and our past successes in executing assignments. For hospitals and physician groups, we frequently compete in an environment of declining budgets and reimbursements, which creates pressure to lower our prices. In addition, the market for coding services is affected by an undersupply of coding talent, which results in upward cost pressure on our services. All of these factors may increase pricing and profit pressure on us.

3

Marketing

We utilize the following sales and marketing methods to reach our target markets:

Direct Sales – We sell direct to targeted hospitals and physician groups with a focus on small hospital systems, independent community hospitals and medium to large physician groups.

Local, Federal and State Industry Associations – We actively participate in several medical association events and our subject matter experts are published and/or speak at their events.

Trade Shows and Conferences – We exhibit at select trade shows and industry conferences across the United States, which provide access to clients, prospects and aid our talent recruitment.

Internet Marketing & E-commerce Strategy – We utilize Internet marketing methods to increase the brand name by search engine optimization, mining and partner links.

Public Relations and Branding –We actively communicate our brand and position on matters important to our business through press releases and our website.

Subsidiaries

Following the Merger, HRAA became our wholly-owned subsidiary.

Dream Reachers, LLC, a Florida limited liability company (“Dream Reachers”), owns an office utilized by the Company for employees and training and is the borrower on a loan related to that office. Dream Reachers does not engage in the real estate rental business. Its office is occupied by the Company at no cost and the Company pays the related mortgage’s principal and interest, taxes and maintenance. Dream Reachers is a wholly-owned subsidiary of the Company.

Regulatory Matters/Compliance

The healthcare industry is highly regulated and is subject to changing political, legislative, regulatory and other influences. Existing and new federal and state laws and regulations affecting the healthcare industry could create unexpected liabilities for us, could cause us or our clients to incur additional costs and could restrict our or our client’s operations. Many healthcare laws are complex and their application to us, our clients or the specific services and relationships we have with our clients are not always clear. In particular, many existing healthcare laws and regulations, when enacted, did not anticipate the comprehensive products and revenue cycle management solutions that we provide, and these laws and regulations may be applied to our products and services in ways that we do not anticipate. Our failure to accurately anticipate the application of these laws and regulations, or our other failure to comply, could create liability for us, result in adverse publicity and negatively affect our business. See Part I, Item 1A. “Risk Factors” for more information regarding the impact of government regulation on the Company.

Intellectual Property

APC AuditPro™ is our registered trademark. This Annual Report on Form 10-K contains trademarks and trade names of other organizations and corporations.

Research and Development

For the calendar year ended December 31, 2013 and December 31, 2012, the Company spent $0 and $64,386, respectively, on research and development expenses. None of these costs were borne directly by customers. There was no cost associated with compliance of environmental laws. Cumulative software development costs previously capitalized were charged to operations as an impairment expense in an amount totaling $946,931 as of September 30, 2013.

Employees

As of April 8, 2014, we had 109 employees, of these employees, 94 were full-time employees. None of these employees are represented by collective bargaining agreements and the Company considers it relations with its employees to be good.

Corporation Information

Our principal executive offices are located at 8551 West Sunrise Boulevard, Unit 304, Plantation, FL 33322. Our telephone number is (954) 472-2340 and our fax number is (954) 370-0157. Our website is www.healthrevenue.com.

4

Other Information

News and information about us and our wholly-owned subsidiary is available on and/or may be accessed through our website, www.healthrevenue.com. In addition to news and other information about us, we have provided access through this site to our filings with the Securities and Exchange Commission (“SEC”) as soon as reasonably practicable after we file or furnish them electronically. Information on our website does not constitute part of and is not incorporated by reference into this Annual Report on Form 10-K or any other report we file or furnish with the SEC. You may also read and copy any document that we file at the public reference facilities of the SEC in Washington, D.C. You may call the SEC at 1-800-SEC-0330 for further information on the public reference rooms. Our SEC filings are also available to the public from the SEC’s website at http://www.sec.gov.

Item 1A. Risk Factors

RISK FACTORS

The following risks and the risks described elsewhere in this Annual Report on Form 10-K, including the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” could materially affect our business, prospects, financial condition, operating results and cash flows. If any these risks materialize, the trading price of our common stock could decline, and you may lose all or part of your investment.

Risks Related to Our Business

We believe that there is substantial doubt about our ability to continue as a going concern.

Our future success is dependent upon our ability to achieve profitable operations and generate cash from operating activities, and upon additional financing. Management believes they can raise the appropriate funds needed to support their business plan and develop an operating company which is cash flow positive. We have not been able to generate sufficient cash from operating activities to fund its ongoing operations. There is no guarantee that we will be able to generate enough revenue and/or raise capital to support our operations. These factors raise substantial doubt about our ability to continue as a going concern.

Key employees are essential to expanding our business.

Tim Lankes, our chief executive officer, Evan McKeown, our chief financial officer and chief administrative officer, Denise Williams, our senior vice president of revenue integrity services, and Todd Willis, our senior vice president of coding business unit are essential to our ability to continue to grow and expand our business. They have established relationships within the industry in which we operate. If they were to leave us, our growth strategy might be hindered, which could materially affect our business and limit our ability to increase revenue.

If we are unable to establish appropriate internal financial reporting controls and procedures, it could cause us to fail to meet our reporting obligations, result in the restatement of our financial statements, harm our operating results, subject us to regulatory scrutiny and sanction, cause investors to lose confidence in our reported financial information and have a negative effect on the market price for shares of our common stock.

Effective internal controls are necessary for us to provide reliable financial reports and to effectively prevent fraud. We currently do not maintain a system of internal control over financial reporting, which is defined as a process designed by, or under the supervision of, our principal executive officer and principal financial officer, or persons performing similar functions, and effected by our board of directors, management and other personnel, 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.

As a public company, we have significant requirements for financial reporting and internal controls. We are required to implement, document and test internal control procedures in order to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act of 2002, which requires annual management assessments of the effectiveness of our internal controls over financial reporting. The process of designing and implementing effective internal controls is a continuous effort that requires us to anticipate and react to changes in our business and the economic and regulatory environments and to expend significant resources to maintain a system of internal controls that is adequate to satisfy our reporting obligations as a public company.

We cannot assure you that we will, in the future, be able to successfully implement proper internal control over financial reporting. We cannot assure you that the measures we will take to implement in any area of financial reporting in need of internal controls will be successful or that we will implement and maintain adequate controls over our financial processes and reporting in the future as we continue our growth. If we are unable to establish appropriate internal financial reporting controls and procedures, it could cause us to fail to meet our reporting obligations, result in the restatement of our financial statements, harm our operating results, subject us to regulatory scrutiny and sanction, cause investors to lose confidence in our reported financial information and have a negative effect on the market price for shares of our common stock.

In order to improve our internal controls and procedures we began to take steps to address and improve these matters. As of the date of this Annual Report, we have hired an internal control consultant to assist in the design, implementation, and test of adequate controls. We have made pivotal progress to mitigate internal control weaknesses; however, we must still complete the process of design-specific control procedures and test their effectiveness, and maintaining sufficient personnel to implement these tasks before we can report that this weakness has been fully remediated.

5

Lack of experience as officers of publicly-traded companies of our management team may hinder our ability to comply with Sarbanes-Oxley Act.

It may be time consuming, difficult and costly for us to develop and implement the internal controls and reporting procedures required by the Sarbanes-Oxley Act. We may need to hire additional financial reporting, internal controls and other finance staff or consultants in order to develop and implement appropriate internal controls and reporting procedures.

Our growth is dependent on the willingness of new customers to outsource their coding work to us.

We plan to grow, in part, by capitalizing on perceived market opportunities to provide our services to new customers. These new customers must be willing to outsource functions which may otherwise have been performed within their organizations. Many customers may prefer to remain with their current provider or keep their coding in-house rather than outsource such services to us. Also, as the maintenance of accurate medical records is a critical element of a healthcare provider’s ability to deliver quality care to its patients and to receive proper and timely reimbursement for the services it renders, potential customers may be reluctant to outsource or change providers of such an important function.

Our largest customers account for a substantial portion of our revenue and profits, and the loss of any of these customers could result in decreased revenue and profits.

Our 4 largest customers accounted for 60% of our revenue for 2013. Generally, we may lose a customer as a result of a merger or acquisition, contract expiration, the selection of another provider of revenue cycle services, business failure or bankruptcy, or our performance. Our staffing and outsourcing contracts typically require us to maintain specified performance levels with respect to the services that we deliver to our customer, with the result that if we fail to perform at the specified levels, we may be required to pay or credit the customer with amounts specified in the contract. In the event of significant failures to deliver the services at the specified levels, a number of these contracts provide that the customer has the right to terminate the agreement. In addition, some of these contracts provide the customer the right to terminate the contract at the customer’s convenience. The customer’s right to terminate for convenience typically requires the customer to pay us a fee. We may not retain long-term relationships or secure renewals of short-term relationships with our large customers in the future.

If we fail to comply with the various covenants contained in our bank financing documents, we may be in default thereunder, which could limit our ability to fund our operations.

As of December 31, 2013, we had borrowed approximately $859,000 under that certain term loan, factoring agreement and mortgage. If we default on any of the financial or operating covenants in any of our agreements evidencing such indebtedness and are unable to obtain an amendment or waiver, the lenders could cause all amounts outstanding under these agreements to be due and payable immediately and, if secured, proceed to foreclose on the collateral securing the indebtedness. Our assets or cash flow may not be sufficient to repay fully the borrowings under our different forms of indebtedness, either upon maturity or if accelerated upon an event of default. A default or potential acceleration could impact our ability to attract and retain customers and could negatively impact trade credit availability and terms, which could have a material adverse effect on our business, financial condition or results of operations.

Profitability of our contracts may be materially, adversely affected if we do not accurately estimate the costs of services and the timing of the completion of projects.

The services that we provide, and projects we undertake, pursuant to our contracts are sometimes complex. Our success in accurately estimating the costs of services and the timing of the completion of projects and other initiatives to be provided pursuant to our contracts is critical to our ability to price our contracts for long-term profitability. While these estimates reflect our best judgment regarding preexisting costs, efficiencies that we will be able to deliver, and resources that will be required for implementation and performance, any increased or unexpected costs, delays or failures to achieve anticipated cost reductions could materially, adversely affect the profitability of these contracts.

Our ability to perform on contracts on which we partner with third parties may be materially and adversely affected if these third parties fail to successfully or timely deliver their commitments.

Our engagements often require that our services incorporate or coordinate with the services, software or systems of other vendors and service providers. Our ability to deliver our commitments may depend on the delivery by these vendors and service providers of their commitments. If these third parties fail to deliver their commitments on time or at all, our ability to perform may be adversely affected, which could have a material adverse effect on our business, revenue, profitability or cash flow. In addition, in some cases, we may be responsible for the performance of other vendors or service providers delivering software, systems or other requirements for our services.

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Our contracts generally contain provisions that could allow customers to terminate the contracts and sometimes contain provisions that enable the customer to require changes in pricing, decreasing our revenue and profits and potentially damaging our business reputation.

Our contracts with customers generally permit termination in the event our performance is not consistent with service levels specified in those contracts. The ability of our customers to terminate contracts creates an uncertain revenue and profit stream. If customers are not satisfied with our level of performance, our reputation in the industry may suffer, which may also adversely affect our ability to market our services to other customers.

If we fail to compete successfully in the highly competitive markets in which we operate, our business, financial condition, and results of operations will be materially and adversely affected.

We operate in an extremely competitive market, and the resources required to meet our customers’ needs changes with market and regulatory changes. In all of our service lines, we frequently compete with companies that have greater financial resources; sales, and marketing capacity; and larger customer bases than we do. Because many of the factors on which we compete are outside of our control, we cannot be sure that we will be successful in the markets in which we compete. If we fail to compete successfully, our business, financial condition, and results of operations will be materially and adversely affected.

Increasingly complex regulatory environments may increase our costs.

Our customers are subject to complex and constantly changing regulatory environments. These regulatory environments change and in ways that cannot be predicted. For example, our customers in the hospital sector have been made subject to increasingly complex and pervasive privacy laws and regulations as well as changes to code sets used by our coders and consultants. These regulations may increase our potential liabilities if our services contribute to a failure by our customers to comply with the regulatory regime and may increase the cost to comply as regulatory requirements increase or change.

If we are unable to collect our receivables, our results of operations and cash flows could be adversely affected.

Our business depends on our ability to successfully obtain payment from our clients of the amounts they owe us for work performed. We evaluate the financial condition of our clients and usually bill and collect on relatively short cycles. We maintain allowances against receivables, but actual losses on client balances could differ from those that we currently anticipate and as a result we might need to adjust our allowances. There is no guarantee that we will accurately assess the creditworthiness of our clients. In addition, timely collection of client balancesdepends on our ability to complete our contractual commitments and bill and collect our contracted revenues. If we are unable to meet our contractual requirements, we might experience delays in collection of and/or be unable to collect our client balances, and if this occurs, our results of operations and cash flows could be adversely affected.

Technology innovations in the markets that we serve may create alternatives to our products and result in reduced sales.

Technology innovations to which our current and potential customers might have access could reduce or eliminate their need for our services. A new or other disruptive technology that reduces or eliminates the use of one or more of our services could negatively impact the need for our services. Our failure to develop, introduce or enhance our services able to compete with new technologies in a timely manner could have an adverse effect on our business, results of operation and financial condition.

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Our growth objectives are largely dependent on the timing and market acceptance of our new service offerings, including our ability to continually enhance our service offerings and to bring those services to market.

Our ability to continually enhance our service offerings and bring those services to market may be adversely affected by difficulties or delays in service implementation, such as the inability to identify viable new services, or gain market acceptance of new services. There are no guarantees that new services will prove to be commercially successful.

The Department of Health and Human Services has announced a delay in initiating the implementation of the ICD-10 system.

In January 2009, the United States Department of Health and Human Services (“HHS”) published a final rule which mandated a change in medical coding in United States health care settings from the current system, International Classification of Diseases, 9th Edition, Clinical Modification (“ICD-9-CM”), to the International Classification of Diseases, 10th Edition, Clinical Modification/Procedure Coding System (“ICD-10-CM/PCS”). Compliance with this ruling was to be achieved by October 1, 2013. The new, mandated version expands the number of codes from 24,000 to 155,000, making it more precise and descriptive and more accurately describing the diagnoses and inpatient procedures of care delivered. The transition to ICD-10-CM/PCS requires significant business and systems changes throughout the health care industry and impacts both business and clinical processes.

On April 9, 2012, as published in the Federal Register, citing concerns about the ability of provider groups to meet the looming compliance deadline to adopt ICD-10-CM/PCS, HHS announced a proposed rule, which would delay the implementation date to October 1, 2014. Interested parties had the ability to comment during a period ending 30 days after the date of the announcement. On August 27, 2012 HHS Secretary Kathleen Sebelius announced the release of a rule that made final a one-year proposed delay—from October 1, 2013 to October 1, 2014 — in the compliance date for the industry's transition to ICD-10 codes.  On April 1, 2014, the President signed into law legislation delaying the implementation date of ICD-10-CM/PCS until at least October 1, 2015.

If we are not able to offer new and valuable services, we may not remain competitive and our revenue and results of operations may suffer.

Our success depends on providing services that healthcare providers use to improve financial performance. Our competitors are constantly developing products and services that may become more efficient or appealing to our clients. Our services may become obsolete in light of rapidly evolving industry standards, technology and client needs, including changing regulations and provider reimbursement policies, such as the transition from fee-for-service reimbursement models to value-based payment, bundled payment and episodic care models. Additionally, some healthcare information technology providers have begun to incorporate enhanced revenue cycle management analytical tools and services into their core product and service offerings used by healthcare providers. These developments may adversely impact the demand for our services. We must invest appropriately proportional to our revenue in order to enhance our existing services, maintain or improve our service capability, competence and breadth; and introduce new high-quality services that clients and potential clients will want.

We may experience significant delays in generating, or an inability to generate, revenues if potential clients take a long time to evaluate our products and services.

Our strategy is to market our strategic outsource services directly to small and medium size healthcare providers, such as small health systems and acute care hospitals; and to increase the breadth of our services utilized by existing clients. The evaluation process is often lengthy and involves significant business risk and business case evaluation and commitment of personnel by these organizations. The use of our services may also be delayed due to an inability or reluctance to change or modify existing procedures or outsource existing functions done internally. Additionally, healthcare providers’ resources may be focused on other mission critical initiatives which could delay their evaluation of our services. If we are unable to sell additional services to existing clients, or enter into and maintain favorable relationships with other similar size healthcare providers, our revenue could grow at a slower rate or even decrease.

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Unsuccessful implementation of our products and services with our clients may harm our future financial success.

Some of our new-client engagements are complex and require lengthy and significant work to implement our services. Each client’s situation may be different, and unanticipated difficulties and delays may arise as a result of failure by us or by the client to meet respective implementation responsibilities. If the client implementation process is not executed successfully or if execution is delayed, our relationships with some of our clients, and our results of operations may be adversely impacted. In addition, cancellation of any implementation of our services after it has begun may involve the loss to us of time, effort and resources invested in the cancelled implementation as well as lost opportunity for acquiring other clients over that same period of time. These factors may contribute to substantial fluctuations in our quarterly operating results.

If our services fail to provide accurate information, or if any other element of our services is associated with incorrect, inaccurate or faulty coding, billing, or claims submissions to Medicare or any other third-party payor, we could be liable to clients or the government which could adversely affect our business.

Our services and content were developed based on the laws, regulations and third-party payor rules in existence at the time such content was developed. If we interpret those laws, regulations or rules incorrectly; the laws, regulations or rules materially change at any point after the content was developed; we fail to provide up-to-date, accurate information; or our services are otherwise associated with incorrect, inaccurate or faulty coding, billing or claims submissions, then clients could assert claims against us or the government or qui tam relators on behalf of the government could assert claims against us under the Federal False Claims Act or similar state laws. The assertion of such claims and ensuing litigation, regardless of its outcome, could result in substantial costs to us, divert management’s attention from operations, damage our reputation and decrease market acceptance of our services. We attempt to limit by contract our liability to clients for damages. We cannot, however, limit liability the government could seek to impose on us under the False Claims Act. Further, the allocations of responsibility and limitations of liability set forth in our contracts may not be enforceable or otherwise protect us from liability for damages.

If we are unable to establish and maintain healthcare strategic alliances, we may be unable to grow our current base business.

Our business strategy includes entering into strategic alliances and affiliations with leading healthcare service and information technology providers. We work closely with our strategic partners to either expand our penetration in certain areas of the revenue cycle operations for hospitals and physician groups, or expand our market capabilities. We may not achieve our objectives through these alliances. Many of these companies have multiple relationships and they may not regard us as significant to their business. These companies may pursue relationships with our competitors or develop or acquire products and services that compete with our products and services. In addition, in many cases, these companies may terminate their relationships with us with little or no notice. If existing alliances are terminated or we are unable to enter into alliances with leading healthcare service and information technology providers, we may be unable to maintain or increase our market presence.

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If we are alleged to have infringed on the rights of others, we could incur unanticipated costs and be prevented from providing our products and services.

We could be subject to intellectual property infringement claims as the number of our competitors grows and our applications’ content overlaps with competitor products. While we do not believe that we have infringed or are infringing on any proprietary rights of third parties, we cannot assure you that infringement claims will not be asserted against us or that those claims will be unsuccessful. Any intellectual property rights claim against us or our clients, with or without merit, could be expensive to litigate, cause us to incur substantial costs and divert management resources and attention in defending the claim. Furthermore, a party making a claim against us could secure a judgment awarding substantial damages, as well as injunctive or other equitable relief that could effectively block our ability to provide products or services. In addition, we cannot assure you that licenses for any intellectual property of third parties that might be required for our products or services will be available on commercially reasonable terms, or at all. As a result, we may also be required to develop alternative non-infringing technology, which could require significant effort and expense.

In addition, a number of our contracts with our clients contain indemnity provisions whereby we indemnify them against certain losses that may arise from third-party claims that are brought in connection with the use of our services.

Our exposure to risks associated with the use of intellectual property may be increased as a result of acquisitions, as we have limited visibility into the development process with respect to such technology or the care taken to safeguard against infringement risks. In addition, third parties may make infringement and similar or related claims after we have acquired technology that had not been asserted prior to our acquisition.

Our sources of data might restrict our use of or refuse to license data, which could adversely impact our ability to provide certain products or services.

Some of the data that we may use from time to time  may either be purchased or licensed from third parties or may be obtained from our clients for specific client engagements. We may also obtain a portion of the data that we use from public records. We believe that we have all rights necessary to use the data that is incorporated into our training programs and our services. However, in the future, data providers could withdraw their data from us if there is a competitive reason to do so; if legislation is passed restricting the use of the data; or if judicial interpretations are issued restricting use of the data that we currently use in our training programs and services. Further, we cannot assure you that our licenses for information will allow us to use that information for all potential or contemplated uses. If a substantial number of data providers were to withdraw their data, our ability to provide training and services to our clients could be materially adversely impacted.

Risks Related to Regulatory Matters/Compliance

The healthcare industry is highly regulated. Any material changes in the political, economic or regulatory healthcare environment that affect the purchasing practices and operations of healthcare organizations, or that lead to consolidation in the healthcare industry, could require us to modify our services or reduce the funds available to providers to purchase our products and services.

Our business, financial condition and results of operations depend upon conditions affecting the healthcare industry generally and hospitals and health systems particularly. Our ability to grow will depend upon the economic environment of the healthcare industry generally as well as our ability to increase the number of programs and services that we sell to our clients. The healthcare industry is highly regulated and is subject to changing political, economic and regulatory influences. Factors such as changes in reimbursement policies for healthcare expenses; consolidation in the healthcare industry; regulation; litigation; and general economic conditions affect the purchasing practices, operations and the financial health of healthcare organizations.

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In March 2010, President Obama signed into law the Patient Protection and Affordable Care Act, amended by the Health Care and Education and Reconciliation Act of 2010 (collectively, the “Affordable Care Act”). The Affordable Care Act is a sweeping measure designed to expand access to affordable health insurance, control health care spending, and improve health care quality. The law includes provisions to tie Medicare provider reimbursement to health care quality and incentives; mandatory compliance programs; enhanced transparency disclosure requirements; increased funding and initiatives to address fraud and abuse; and incentives to state Medicaid programs to promote community-based care as an alternative to institutional long-term care services. In addition, the law provides for the establishment of a national voluntary pilot program to bundle Medicare payments for hospital and post-acute services, which could lead to changes in the delivery of health care services. Likewise, many states have adopted or are considering changes in health care policies in part due to state budgetary shortfalls. While many of the provisions of the Affordable Care Act have begun to be implemented, we do not know what long-term effect the federal Affordable Care Act or other future changes to federal or state laws may have on our business.

The Budget Control Act of 2011, as amended by the American Taxpayer Relief Act of 2012 and the Bipartisan Budget Act of 2013, established a budget process known as sequestration that imposes across-the-board federal spending cuts (with certain exceptions) to meet budget targets. Under this process, a two percent reduction to Medicare provider and plan payments has been in effect since April 1, 2013, and this reduction will continue through 2023 unless additional Congressional action is taken to achieve alternative budget savings or otherwise modify the terms of sequestration. There can be no assurances that reimbursement reductions under sequestration or alternative federal or state budgetary actions will not have an adverse impact on our clients and in turn our business.

If our clients who operate as not-for profit entities lose their tax-exempt status, those clients would suffer significant adverse tax consequences which, in turn, could adversely impact their ability to purchase products or services from us.

State tax authorities have challenged the tax-exempt status of hospitals and other healthcare facilities claiming such status on the basis that they are operating as charitable and/or religious organizations. The outcome of these cases has been mixed with some facilities retaining their tax-exempt status while others have been denied the ability to continue operating as not-for profit, tax-exempt entities under state law. In addition, many states have removed sales tax exemptions previously available to not-for-profit entities, and both the internal revenue service (“IRS”) and the United States Congress are investigating the practices of not-for profit hospitals. The Affordable Care Act added new requirements for hospitals operating as charitable organizations, which the IRS is in the process of implementing through regulations. Those facilities denied tax exemptions could be subject to the imposition of tax penalties and assessments which could have a material adverse impact on their cash flow, financial strength and possibly ongoing viability. If the tax exempt status of any of our clients is revoked or compromised by new legislation, regulation, or interpretation of existing legislation or regulation, that client’s financial health could be adversely affected, which could adversely impact our sales and revenue.

If we fail to comply with federal and state laws governing submission of false or fraudulent claims to government healthcare programs and financial relationships among healthcare providers, we may be subject to civil and criminal penalties or loss of eligibility to participate in government healthcare programs.

We are subject to federal and state laws and regulations designed to protect patients, governmental healthcare programs, and private health plans from fraudulent and abusive activities. These laws include anti-kickback restrictions and laws prohibiting the submission of false or fraudulent claims. These laws are complex and their application to our specific products, services and relationships may not be clear and may be applied to our business in ways that we do not anticipate. Federal and state regulatory and law enforcement authorities have recently increased enforcement activities with respect to Medicare and Medicaid fraud and abuse regulations and other reimbursement laws and rules. From time to time participants in the healthcare industry have received inquiries or subpoenas to produce documents in connection with such activities. We could be required to expend significant time and resources to comply with these requests, and the attention of our management team could be diverted to these efforts. Furthermore, if we are found to be in violation of any federal or state fraud and abuse laws, we could be subject to civil and criminal penalties, and we could be excluded from participating in federal and state healthcare programs such as Medicare and Medicaid. The occurrence of any of these events could significantly harm our business and financial condition.

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Provisions in Title XI of the Social Security Act, commonly referred to as the federal Anti-Kickback Statute, prohibit the knowing and willful offer, payment, solicitation or receipt of remuneration, directly or indirectly, in return for the referral of patients or arranging for the referral of patients, or in return for the recommendation, arrangement, purchase, lease or order of items or services that are covered, in whole or in part, by a federal healthcare program such as Medicare or Medicaid. The definition of “remuneration” has been broadly interpreted to include anything of value such as gifts, discounts, rebates, waiver of payments or providing anything at less than its fair market value. Many states have adopted similar prohibitions against kickbacks and other practices that are intended to induce referrals which are applicable to all patients regardless of whether the patient is covered under a governmental health program or private health plan. We attempt to scrutinize our business relationships and activities to comply with the federal anti-kickback statute and similar laws; and we attempt to structure our arrangements in a manner that is consistent with the requirements of applicable safe harbors to these laws. We cannot assure you, however, that our arrangements will be protected by such safe harbors or that such increased enforcement activities will not directly or indirectly have an adverse effect on our business financial condition or results of operations. Any determination by a state or federal agency that any of our activities or those of our vendors or clients violate any of these laws could subject us to civil or criminal penalties; could require us to change or terminate some portions of or operations or business, or could disqualify us from providing services to healthcare providers doing business with government programs; and, thus could have an adverse effect on our business.

Our business, particularly our provision of contract billing and coding services, is also subject to numerous federal and state laws that forbid the submission or “causing the submission” of false or fraudulent information or the failure to disclose information in connection with the submission and payment of claims for reimbursement to Medicare, Medicaid, federal healthcare programs or private health plans. These laws and regulations may change rapidly, and it is frequently unclear how they apply to our business. Errors created by our products or services that relate to entry, formatting, preparation or transmission of claim or cost report information may be determined or alleged to be in violation of these laws and regulations. Any failure of our products or services to comply with these laws and regulations could result in substantial civil or criminal liability; could adversely affect demand for our services; could invalidate all or portions of some of our client contracts; could require us to change or terminate some portions of our business; could require us to refund portions of our services fees; could cause us to be disqualified from serving clients doing business with government payors; and could have an adverse effect on our business.

Federal and state privacy and security laws may increase the costs of operation and expose us to civil and criminal sanctions.

We must comply with extensive federal and state requirements regarding the use, disclosure, retention and security of patient healthcare information. The Health Insurance Portability and Accountability Act of 1996 and its implementing regulations, as amended by the regulations promulgated pursuant to the HITECH Act, which we refer to collectively as HIPAA, contain substantial restrictions and requirements with respect to the use and disclosure of individuals’ protected health information. These restrictions and requirements are set forth in the HIPAA Privacy, Security and Breach Notification Rules. The HIPAA Privacy Rule prohibits a covered entity from using or disclosing an individual’s protected health information unless the use or disclosure is subject to the terms of a business associate agreement; is authorized by the individual; or is specifically required or permitted under the Privacy Rule. The Privacy Rule imposes a complex set of requirements on covered entities for complying with this basic standard. Under the HIPAA Security Rule, covered entities must establish administrative, physical and technical safeguards to protect the confidentiality, integrity and availability of electronic protected health information created, received, maintained or transmitted by them or by others on their behalf. The Breach Notification Rule requires covered entities to report breaches of unsecured protected health information to affected individuals, the Secretary of HHS, and, in some circumstances, the media.

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Our healthcare provider clients that engage in HIPAA-defined standard electronic transactions, and our own business operations as a healthcare clearinghouse, are directly subject to the HIPAA Privacy, Security and Breach Notification Rules governing “covered entities.” Additionally, because some of our clients are covered entities who disclose protected health information to us so that we may use that information to provide certain consulting or other services to those clients, we are a “business associate” of those clients. In these cases, in order to provide clients with services that involve the use or disclosure of protected health information, the HIPAA Privacy and Security Rules require us to enter into business associate agreements with our clients. Such agreements must, among other things, provide adequate written assurances:

· as to how we will use and disclose the protected health information;

· that we will implement reasonable administrative, physical and technical safeguards to protect such information from misuse;

· that we will enter into agreements with our subcontractors that create, receive, maintain or transmit the information on our behalf that impose the same restrictions and conditions that apply to us with respect to such information;

· that we will report breaches of unsecured protected health information, security incidents and other inappropriate uses or disclosures of the information; and

· that we will assist the covered entity with certain of its duties under the Privacy Rule.

On January 25, 2013, the Office for Civil Rights of HHS published a major final rule modifying the HIPAA Privacy, Security, Breach Notification and Enforcement Rules, including revisions and changes made pursuant to the HITECH Act. Among other things, this rule expanded the security and certain privacy requirements for business associates that create, receive, maintain or transmit protected health information for or on behalf of covered entities, increased penalties for noncompliance, and strengthened requirements for reporting of breaches of unsecured protected health information. The rule also made business associates and their subcontractors directly liable for civil monetary penalties for impermissible uses and disclosures of protected health information. The rule went into effect March 23, 2013, and as a covered entity and business associate we were, with limited exceptions, required to comply with the applicable requirements of this final rule by September 23, 2013.

Any failure or perceived failure of our products or services to meet HIPAA standards and related regulatory requirements could expose us to certain notification, penalty and/or enforcement risks and could adversely affect demand for our products and services, and force us to expend significant capital, research and development and other resources to modify our products or services to address the privacy and security requirements of our clients and HIPAA.

In addition to our obligations under HIPAA, most states have enacted patient confidentiality laws that protect against the disclosure of confidential medical information, and many states have adopted or are considering adopting further legislation in this area, including privacy safeguards, security standards, and data security breach notification requirements. These state laws, if more stringent than HIPAA requirements, are not preempted by the federal requirements, and we are required to comply with them as well.

We are unable to predict what changes to HIPAA or other federal or state laws or regulations might be made in the future or how those changes could affect our business or the associated costs of compliance. For example, the federal Office of the National Coordinator for Health Information Technology (“ONCHIT”), created in 2004, through an Executive Order, and legislatively mandated in the Health Information Technology for Economic and Clinical Health Act (HITECH Act) of 2009, is coordinating the development of national standards for creating an interoperable health information technology infrastructure based on the widespread adoption of EHRs in the healthcare sector. Several organizations, selected as ONCHIT-Authorized Testing and Certification Bodies for EHR certification, test and certify that EHR products are compliant with the standards, implementation specifications, and certification criteria adopted by the U.S. Department of Health and Human Services. Certified EHR technologies are eligible to be used for the CMS EHR Incentive Programs. Eligible providers may use EHR technology that is certified to 2011 edition certification criteria, 2014 edition certification criteria, or a combination of 2011 and 2014 edition certification criteria. We are yet unable to predict what, if any, impact the development and ongoing refinement of such standards and related ONCHIT activities will have on our products, services or compliance costs.

Failure by us to comply with any of the federal and state standards regarding patient privacy, identity theft prevention and detection, and data security may subject us to penalties, including civil monetary penalties and in some circumstances, criminal penalties. In addition, such failure may injure our reputation and adversely affect our ability to retain clients and attract new clients.

HIPAA and its implementing regulations also mandate format, data content and provider identifier standards that must be used in certain electronic transactions, such as claims, payment advice and eligibility inquiries. Although our systems are fully capable of transmitting transactions that comply with these requirements, some payers and healthcare clearinghouses with which we conduct business may interpret HIPAA transaction requirements differently than we do or may require us to use legacy formats or include legacy identifiers as they make the transition to full compliance. In cases where payers or healthcare clearinghouses require conformity with their interpretations or require us to accommodate legacy transactions or identifiers as a condition of successful transactions, we attempt to comply with their requirements, but may be subject to enforcement actions as a result.

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Risks Related to Our Securities

The market price of our common stock may be volatile.

The market price of our common stock has been and will likely continue to be highly volatile, as is the stock market in general, and the market for OTC Bulletin Board quoted stocks in particular. Some of the factors that may materially affect the market price of our common stock are beyond our control, such as changes in financial estimates by industry and securities analysts, conditions or trends in the industry in which we operate or sales of our common stock. These factors may materially adversely affect the market price of our common stock, regardless of our performance. In addition, the public stock markets have experienced extreme price and trading volume volatility. This volatility has significantly affected the market prices of securities of many companies for reasons frequently unrelated to the operating performance of the specific companies. These broad market fluctuations may adversely affect the market price of our common stock.

Because we were engaged in a reverse merger, it may not be able to attract the attention of major brokerage firms.

Additional risks may exist since we were engaged in a “reverse merger.” Securities analysts of brokerage firms may not provide coverage of the Company since there is little incentive to brokerage firms to recommend the purchase of the common stock. No assurance can be given that brokerage firms will want to conduct any secondary offerings on behalf of the Company in the future.

Our common stock will be considered a “penny stock” which may be subject to restrictions on marketability, so you may not be able to sell your shares.

If our common stock becomes tradable in the secondary market, we will be subject to the penny stock rules adopted by the SEC that require brokers to provide extensive disclosure to their customers prior to executing trades in penny stocks. These disclosure requirements may cause a reduction in the trading activity of our common stock, which in all likelihood would make it difficult for our stockholders to sell their securities.

Penny stocks generally are equity securities with a price of less than $5.00 (other than securities registered on certain national securities exchanges or quoted on the NASDAQ system). Penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document that provides information about penny stocks and the risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction, and monthly account statements showing the market value of each penny stock held in the customer’s account. The broker-dealer must also make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. These requirements may have the effect of reducing the level of trading activity, if any, in the secondary market for a security that becomes subject to the penny stock rules. The additional burdens imposed upon broker-dealers by such requirements may discourage broker-dealers from effecting transactions in our securities, which could severely limit the market price and liquidity of our securities. These requirements may restrict the ability of broker-dealers to sell our common stock and may affect your ability to resell our common stock.

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The market for penny stocks has experienced numerous frauds and abuses which could adversely impact investors in our stock.

OTCBB securities are frequent targets of fraud or market manipulation, both because of their generally low prices and because OTCBB reporting requirements are less stringent than those of the listed stock exchanges.

Patterns of fraud and abuse include:

● Control of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer;

● Manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases;

● “Boiler room” practices involving high pressure sales tactics and unrealistic price projections by inexperienced sales persons;

● Excessive and undisclosed bid-ask differentials and markups by selling broker-dealers; and

● Wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level, along with the inevitable collapse of those prices with consequent investor losses.

Our management is aware of the abuses that have occurred historically in the penny stock market.

We have not paid dividends in the past and do not expect to pay dividends in the future, and any return on investment may be limited to the value of our stock.

We have never paid any cash dividends on our common stock and do not anticipate paying any cash dividends on our common stock in the foreseeable future and any return on investment may be limited to the value of our common stock. We plan to retain any future earning to finance growth.

We are an “Emerging Growth Company,” and any decision on our part to comply only with curtained reduced disclosure requirements applicable to “Emerging Growth Company” could make our common stock less attractive to investors.

We are an “emerging growth company,” as defined in the JOBS Act, and, for as long as we continue to be an “emerging growth company,” we may choose to take advantage of exemptions from various reporting requirements applicable to other public companies but not to “emerging growth companies,” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. We could be an “emerging growth company” for up to five years, or until the earliest of (i) the last day of the first fiscal year in which our annual gross revenues exceed $1 billion, (ii) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of our common stock that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter, or (iii) the date on which we have issued more than $1 billion in non-convertible debt during the preceding three year period.

In addition, Section 107 of the JOBS Act also provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to opt in to the extended transition period for complying with the revised accounting standards.

Because we have elected to defer compliance with new or revised accounting standards, our financial statement disclosure may not be comparable to similar companies.

We have elected to use the extended transition period for complying with new or revised accounting standards under Section 102(b)(1) of the JOBS Act. This allows us to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies. As a result of our election, our consolidated financial statements may not be comparable to companies that comply with public company effective dates.

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Our status as an “Emerging Growth Company” under the JOBS Act of 2012 may make it more difficult to raise capital as and when we need it.

Because of the exemptions from various reporting requirements provided to us as an “emerging growth company” and because we will have an extended transition period for complying with new or revised financial accounting standards, we may be less attractive to investors and it may be difficult for us to raise additional capital as and when we need it. Investors may be unable to compare our business with other companies in our industry if they believe that our financial accounting is not as transparent as other companies in our industry. If we are unable to raise additional capital as and when we need it, our financial condition and results of operations may be materially and adversely affected.

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

The Company’s corporate headquarters is located at 8551 West Sunrise Boulevard, Unit 304, Plantation, Florida 33322, and is owned by the Company's subsidiary, Dream Reachers. There is a mortgage on the property in the original principal amount of $192,500.

The Company also currently leases 3,293 square feet of office space located at 8551 West Sunrise Boulevard, Unit 305, Plantation, Florida 33322, pursuant to a commercial lease agreement dated September 1, 2011. This property is located adjacent to the Company's corporate headquarters and is used by the Company for employees and training. The lease term is one year with five successive one-year renewal options. The Company is required to enter into a new lease with the landlord for each renewal term. On September 1, 2013, the lease was renewed for one year with a fixed payment of approximately $5,800 per month.

Item 3. Legal Proceedings

From time to time, we become involved in legal proceedings arising in the ordinary course of our business. We are not presently involved in any pending legal proceedings, the outcome of which, if determined adversely to us, would have a material adverse effect on our business, operating results or financial condition.

Item 4. Mine Safety Disclosures

Not applicable.

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PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Price Range of Common Stock

Our common stock has been quoted on the OTC Bulletin Board since July 2012 under the symbol “HRAA”. On April 11, 2014, the last reported bid price of our common stock was $0.15 per share. The following table presents the high and low sales price for our common stock for the periods indicated:

	Fiscal 2014
	High		Low
First Quarter (January 1 - March 31)	$	0.29	$	0.18
Second Quarter (April 1 through April 11)	$	0.20	$	0.15
	Fiscal 2013
	High		Low
First Quarter (January 1 - March 31)	$	0.52	$	0.25
Second Quarter (April 1 - June 30)	$	0.62	$	0.25
Third Quarter (July 1 - September 30)	$	0.52	$	0.20
Fourth Quarter (October 1 - December 31)	$	0.30	$	0.11

	Fiscal 2012
	High		Low
Third Quarter (July 12 - September 30)	$	0.40	$	0.15
Fourth Quarter (October 1 - December 31)	$	0.35	$	0.10

Stockholders

The approximate number of holders of record of our common stock as of April 10, 2014 was 400 including those brokerage firms and/or clearing houses holding shares of common stock for their clientele (with each such brokerage house and/or clearing house being considered as one holder). As of April 10, 2014, we had 54,752,294 shares of common stock outstanding.

Dividends

We have never declared or paid dividends on our common stock. We do not intend to declare dividends in the foreseeable future because we anticipate that we will reinvest any future earnings into the development and growth of our business. Any decision as to the future payment of dividends will depend on our results of operations and financial position and such other factors, as our board of directors in its discretion deems relevant.

Equity Compensation Plan Information

See Part III, Item 12, under the heading, “Securities Authorized for Issuance Under Equity Compensation Plans” for information on compensation plans under which our equity securities are authorized for issuance.

Item 6. Selected Financial Data

Not required for smaller reporting companies.

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of the results of operations and financial condition of the Company for the fiscal years ended December 31, 2013 and 2012 should be read in conjunction with the Company’s financial statements, and the notes to those financial statements that are included elsewhere in this Annual Report.

Overview

The Company is a provider of revenue cycle services to a broad range of healthcare providers. We offer our customers integrated solutions designed around their specific business needs, including revenue cycle data analysis, contract and outsourced codings, billing, coding and compliance audits, coding education, coding consulting, physician coding services and ICD-10 education and transition services. With this approach, our customers benefit from integrated service offerings that we believe enhances their revenue integrity. As a result, we believe we help our customers achieve their business objectives and patient care objectives.

On February 10, 2012, the Company entered into the Merger Agreement with Acquisition Sub and HRAA, pursuant to which Acquisition Sub was merged with and into HRAA, and HRAA, as the surviving corporation, became a wholly-owned subsidiary of the Company. Before the entry into the Merger Agreement, no material relationship existed between the Company and the Acquisition Sub or HRAA.

Prior to the closing of the Merger, the Company transferred all of its operating assets and liabilities to the Split-Off Subsidiary, and contemporaneously with the closing of the Merger, the Company sold all of the outstanding capital stock of the Split-Off Subsidiary to the Split-Off Buyer. In connection with the sale, an aggregate of 3,500,000 shares of the Company’s common stock held by the Split-Off Buyer were surrendered and cancelled without further consideration.

Pursuant to the terms and conditions of the Merger Agreement, and upon the consummation of the Merger:

● Each share of HRAA’s common stock issued and outstanding immediately prior to the closing of the Merger was converted into the right to receive 1,271.111 shares of the Company’s common stock. An aggregate of 1,271,111 shares of the Company’s common stock were issued to the holders of HRAA’s common stock. Immediately prior to the Merger, HRAA had no outstanding securities other than shares of its common stock.

● Anna Vechera resigned as the Company’s sole officer and director, and simultaneously with the Merger, a new board of directors and new officers were appointed. The Company’s new board of directors consisted of Robert Rubinowitz, Andrea Clark and Keith Siddel, previously the directors of HRAA. In addition, immediately following the Merger, Andrea Clark was appointed as the Company’s President and Chief Executive Officer, Robert Rubinowitz was appointed as the Company’s Chief Operating Officer, Secretary and Treasurer and Keith Siddel was appointed as the Company’s Chief Marketing Officer. Andrea Clark, Robert Rubinowitz and Keith Siddel no longer hold these positions.

On April 13, 2012, the Company changed its name from Anvex International, Inc. to Health Revenue Assurance Holdings, Inc.

On April 13, 2012, the board of directors authorized the Stock Split. The shares resulting from the Stock Split were issued on April 26, 2012. All share and per share amounts for all periods presented have been retroactively adjusted to reflect the Stock Split.

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Recent Developments

Certain significant items or events must be considered to better understand differences in our results of operations from period to period. We believe that the following items have had a material impact on our results of operations for the periods discussed below or may have a material impact on our results of operations in future periods.

ICD-10 Transition

In the short term, the main focus of our business will be with respect to the ICD-10 coding transition. In that regard, our potential clients are all hospitals and medical providers, which currently maintain coding personnel in some form that are primarily responsible for seeking reimbursement for patients’ procedures. The current system in place that drives the appropriate medical codes from hospitals/medical facilities to insurance companies is called ICD-9, which was implemented over 30 years ago.

In January 2009, the United States Department of Health and Human Services (“HHS”) published a final rule which mandated a change in medical coding in United States health care settings from the current system, International Classification of Diseases, 9th Edition, Clinical Modification (“ICD-9-CM”), to the International Classification of Diseases, 10th Edition, Clinical Modification/Procedure Coding System (“ICD-10-CM/PCS”). Compliance with this ruling was to be achieved by October 1, 2013. The new, mandated version expands the number of codes from 24,000 to 155,000, making it more precise and descriptive and more accurately describing the diagnoses and inpatient procedures of care delivered. The transition to ICD-10-CM/PCS requires significant business and systems changes throughout the health care industry and impacts both business and clinical processes.

On April 9, 2012, as published in the Federal Register, citing concerns about the ability of provider groups to meet the looming compliance deadline to adopt ICD-10-CM/PCS, HHS announced a proposed rule, which would delay the implementation date to October 1, 2014. Interested parties had the ability to comment during a period ending 30 days after the date of the announcement. On August 27, 2012 HHS Secretary Kathleen Sebelius announced the release of a rule that made final a one-year proposed delay—from October 1, 2013 to October 1, 2014 — in the compliance date for the industry's transition to ICD-10 codes.  On April 1, 2014, the President signed into law legislation delaying the implementation date of ICD-10-CM/PCS until at least October 1, 2015.

We believe the impacts to the ICD-10 delay will have minimal impacts on our near term coding staffing and consulting services and do not affect our ability to acquire long term coding outsourcing service contracts.

Securities Purchase Agreement

On November 12, 2013, the Company entered into a Securities Purchase Agreement (the “Securities Purchase Agreement”) with certain investors named therein (each a “Purchaser” and, collectively, the “Purchasers”) for an aggregate of $5,400,000. Pursuant to the Securities Purchase Agreement, the Company issued the following to the Purchasers: (i) 13,500,000 shares of its Series A 8% Redeemable Convertible Preferred Stock (the “Series A Preferred Stock”) and (ii) 5-year warrants (the “Warrants”) to purchase an aggregate of 27,000,000 shares of common stock for an exercise price of $0.30 per share. The Series A Preferred Stock is convertible into common stock on a 2 for 1 basis and is redeemable by the Company, at the option of the investor, 48 months from November 12, 2013 at the stated value of $0.30 per share or a total of $5,400,000 plus accumulated but unpaid dividends, whether declared or not. The Company also issued 1,890,000 warrants as a fee to the placement agent at an exercise price of $0.30 per share.

In connection with the Securities Purchase Agreement, the Company entered into a registration rights agreement  with the Purchasers, pursuant to which the Company agreed to register all of the shares of common stock underlying the Series A Preferred Stock and the shares of common stock underlying the Warrants on a registration statement on Form S-1 (the “Registration Statement”) to be filed with the SEC within 30 calendar days following the Closing Date (the “Filing Deadline”) and to use its best efforts to cause the Registration Statement to be declared effective under the Securities Act within 90 calendar days following the Filing Deadline. The Registration Statement was filed on December 11, 2013, as amended December 20, 2013 and declared effective on December 24, 2013.

Separation Agreement with Robert Rubinowitz

On April 14, 2014, the Company entered into a separation agreement with Robert Rubinowitz, its President, Chief Operating Officer, Secretary, Treasurer and director, which provides for the termination of Mr. Rubinowitz's employment and his resignation as an officer and director of the Company, and the termination of that certain Employment Agreement dated October 1, 2013, as amended on November 12, 2013, between the Company and Mr. Rubinowitz. See Part II, “Item 9B, Other Information,” included elsewhere in this Form 10-K.

Resignation of Directors

Directors Mitchell D. Kaye and David Kroin resigned from the board of directors on April 2, 2014 and April 4, 2014, respectively. See Part II, “Item 9B, Other Information,” included elsewhere in this Form 10-K.

Appointment of Tim Lankes as Director

On April 12, 2014, Tim Lankes, the Company's chief executive officer was appointed to the board of directors of the Company. See Part II, "Item 9B, Other Information," included elsewhere in this Form 10-K.

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Year ended December 31, 2013 compared to the year ended December 31, 2012

Results of Operations

The following table presents a summary of operating information for the year ended December 31, 2013 and 2012:

	For the years ended
	December 31, 2013			December 31, 2012			Increase/ (Decrease) $			Increase/ (Decrease) %
Revenue	$	7,099,514		$	5,806,848		$	1,292,666			22.26	%
Revenue – Related Party		211,239			-			211,239			100.00	%
Total Revenue		7,310,753			5,806,848			1,503,905			25.90	%
Costs of Revenues		4,061,644			2,830,008			1,231,636			43.52	%
Gross profit		3,249,109			2,976,840			272,269			9.15	%
Selling and administrative expenses		7,016,533			3,853,820			3,162,713			82.07	%
Research and development expenses		-			64,386			(64,386	)		(100.00	)%
Asset impairment		946,931			-			946,931			100.00	%
Depreciation and amortization		83,900			50,765			33,135			65.27	%
Total operating expenses		8,047,364			3,968,971			4,078,393			102.76	%
Operating income (loss)		(4,798,255	)		(992,131	)		(3,806,124	)		383.63	%
Other expense, net		(674,985	)		(465,339	)		(209,646	)		45.05	%
Net Income (loss)	$	(5,473,240	)	$	(1,457,470	)	$	(4,015,770	)		275.53	%
Cumulative preferred stock dividend		(60,000	)		-			(60,000	)		100	%
Deemed dividend for beneficial conversion feature of preferred stock		(2,634,185	)		-			(2,634,185	)		100	%
Net Income (loss) available to common stockholders		(8,167,425	)		(1,457,470	)		(6,709,955	)		460	%

Revenue:

Revenue increased by $1,503,905 or approximately 26%, from $5,806,848 for the year ended December 31, 2012 to $7,310,753 for the year ended December 31, 2013. The increase was due primarily to increased revenue generated as a result of the growing business development and marketing efforts by the Company.

Cost of Revenues:

Cost of revenues increased by $1,231,636 or approximately 44%, from $2,830,008 for the year ended December 31, 2012 to $4,061,644 for the year ended December 31, 2013. The increase was due primarily to additional personnel and related training costs associated with the build-up of the Company’s audit and coding service provider personnel required to service the anticipated increase in service contracts in future periods.

Gross profit:

Gross profit increased by $272,269, or approximately 9%, from $2,976,840 for the year ended December 31, 2012 to $3,249,109 for the year ended December 31, 2013. The increase in gross profit was primarily attributable to increase in business experienced during the year.

Selling and Administrative Expenses:

Selling and administrative expenses were $7,016,533 for the year ended December 31, 2013, an increase of $3,162,713 or approximately 82%, from $3,853,820 for the year ended December 31, 2012. The change in the 2013 period compared to the 2012 period was primarily due to:

● Personnel costs have increased by approximately $1,895,000 or 91%, from approximately $2,075,000 for the year ended December 31, 2012 to approximately $3,970,000 for the year ended December 31, 2013. The increase is due primarily to increased compensation and related expenses associated with the build-up of the Company’s management, sales and administrative staff in anticipation of growth in business volume.

● Travel/business development has decreased by approximately $97,000 or approximately 23%, from approximately $429,000 for the year ended December 31, 2012 to approximately $332,000 for the year ended December 31, 2013.

● Professional fees have increased from approximately $395,000 for the year ended December 31, 2012 to approximately $1,218,000 for the year ended December 31, 2013, an increase of $823,000, or approximately 208%. This increase is attributable to legal, audit, consulting, investor and public relations, and accounting services provided in connection with expenses associated with financial reporting matters.

● The remainder of the increase in selling and administrative expenses is related to costs associated to the Company’s business development such as marketing, communications, trade shows and seminars.

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Research and Development Expenses:

We had no research and development expenses for the year ended December 31, 2013, a decrease of $64,386 or 100%, for the year ended December 31, 2012. The decrease is due to a significant reduction in the technology department personnel and information technology research projects. The Company lacked the available financial resources to invest in research and development.

Asset Impairment:

At the end of September 2013, the Company re-evaluated the capitalized research and development costs associated with the Visualizer software suite of multiple offerings and the OMC (Outsourced Medical Coding) Initiater after an evaluation based in part on the lack of cash flow and customer demand in ICD Visualizer after the general acceptance release date of July 15, 2013. In addition, the Company also considered its going concern risk and cash liquidity concerns that restrain the ability to make capital investments in research and development to complete existing products in the pipeline as the available cash is needed to fund normal operating expenses. As a result of this evaluation, the Company recorded a loss of $946,931 for that is presented as a line item entitled “asset impairment” on the consolidated statement of operations. The Company will continue to use the Visualizer suite of functionality as internally developed software to generate customized reports for revenue integrity auditing and compliance services but the Company no longer intends to market or sell internally developed software on a stand alone basis.

Depreciation and Amortization Expenses:

Depreciation and amortization expenses were approximately $84,000 for the year ended December 31, 2013, an increase of approximately $33,000, or 65%, from approximately $51,000 for the year ended December 31, 2012. The increase was primarily due to depreciation costs associated with the Company’s purchases for office furniture and computers necessary to support the increase in personnel.

Other Expenses, net:

Total other expenses, net of other income and gains were $674,985 and $465,339 for the years ended December 31, 2013 and December 31, 2012, respectively. The 2013 amount includes a gain of $365,255 from the change in fair value of warrant liability, $33,364 from the gain on extinguishment of debt relating to a put premium, $146,624 loss on extinguishment of debt, other income of $67 and interest expense of $927,047 while the 2012 amount is primarily interest expense.

Interest expense increased approximately $462,000, from approximately $465,000 for the year ended December 31, 2012. The increase is due to the factoring fees experienced during the year along with interest on finance charges, outstanding debt obligations and amortization of debt discounts.

Net Income (loss) and net income (loss) available to common stockholders:

As a result of the above factors, a net loss of approximately $5,473,240 was recognized for the year ended December 31, 2013 as compared to net loss of approximately $1,457,470 for the year ended December 31, 2012, an increase of approximately $4,015,770 or approximately 276%. The increase in net loss is outlined above. However, the net loss available to common stockholders was $8,167,425 as a result of $60,000 in undeclared Series A preferred stock dividends and a $2,634,185 deemed dividend relating to the value of the beneficial conversion feature on the Series A preferred stock.

Non-GAAP – Financial Measures

The following discussion and analysis includes both financial measures in accordance with GAAP, as well as a non-GAAP financial measure. Generally, a non-GAAP financial measure is a numerical measure of a company’s performance, financial position or cash flows that either excludes or includes amounts that are not normally included or excluded in the most directly comparable measure calculated and presented in accordance with GAAP. Non-GAAP financial measures should be viewed as supplemental to, and should not be considered as alternatives to net income, operating income, and cash flow from operating activities, liquidity or any other financial measures. They may not be indicative of the historical operating results of the Company nor is it intended to be predictive of potential future results. Investors should not consider non-GAAP financial measures in isolation or as substitutes for performance measures calculated in accordance with GAAP.

We believe that both management and stockholders benefit from referring to the following non-GAAP financial measure in planning, forecasting and analyzing future periods. Our management uses this non-GAAP financial measure in evaluating its financial and operational decision-making and as a means to evaluate period-to-period comparison. Our management uses and relies on the following non-GAAP financial measure:

Adjusted EBITDA from continuing operations

Our management believes Adjusted earnings before interest tax depreciation and amortization (EBITDA) from continuing operations is an important measure of our operating performance because it allows management, investors and analysts to evaluate and assess our core operating results from period to period after removing the impact of items of a non-operational nature that affect comparability. Our management recognizes that Adjusted EBITDA from continuing operations, like EBITDA from continuing operations, has inherent limitations because of the excluded items.

We have included a reconciliation of our non-GAAP financial measures to the most comparable financial measure calculated in accordance with GAAP. We believe that providing the non-GAAP financial measure, together with the reconciliation to GAAP, helps investors make comparisons between the Company and other companies. In making any comparisons to other companies, investors need to be aware that companies use different non-GAAP measure to evaluate their financial performance. Investors should pay close attention to the specific definition being used and to the reconciliation between such measure and the corresponding GAAP measure provided by each company under applicable SEC rules.

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The Company defines Adjusted EBITDA from continuing operations as earnings (or loss) before interest expense, income taxes, depreciation and amortization, asset impairment, loss on early extinguishment of debt, and non-cash stock-based compensation. The Company excludes stock-based compensation because it is non-cash in nature. The following table presents a reconciliation of Adjusted EBITDA from continuing operations to Net Income (loss) from continuing operations allocable to common stockholders, a GAAP financial measure:

	For the year ended
	December 31,			December 31,
	2013			2012
Net loss	$	(5,473,240	)	$	(1,457,470	)
Interest expense		927,047			465,349
Asset Impairment		946,931			-
Loss on early extinguishment of debt		146,624			-
Depreciation and amortization		148,037			50,765
Share based compensation expense		639,328			-
Gain on put premium extinguishment of debt		(33,364	)		-
Change in fair value of warrant liability		(365,255	)		-
Adjusted EBITDA (loss) from operations	$	(3,063,892	)	$	(941,356	)

Liquidity and Capital Resources

The Company’s principal sources of liquidity include proceeds from long-term debt and private placement of its shares. Overall, for the year ended December 31, 2013, the Company generated a net $6,287,000 from its financing activities primarily associated with the debt and equity financing. Such proceeds, coupled with its beginning cash balances, were utilized by the Company to fund its negative cash flow from operating activities in the amount of $3,365,005 and investment in capitalized software, property and equipment of approximately $762,439.

As of December 31, 2013, the Company had cash balances of approximately $3,053,485 as compared to approximately $893,458 as of December 31, 2012, an increase of approximately $2,160,027 or 242%.

Net cash used in operating activities was $3,365,005 for the year ended December 31, 2013. This compared to net cash used by operating activities of $1,699,466 for the year ended December 31, 2012. The increase of $1,665,539 was used to fund a net loss of $8,167,425 reduced by non-cash depreciation and amortization of $148,037, software impairment of $946,931, loss on early extinguishment of debt of $146,624 stock based compensation expense of $173,827, amortization of prepaid shares issued for services of $465,501, accretion of premium on debt $33,364, amortization of debt discount of $556,028, cumulative preferred stock dividend of $60,000, deemed dividend for beneficial conversion feature of preferred stock of $2,634,185, bad debt of $26,116, gain from change in fair market value of warrant of $365,255 and changes in operating assets and liabilities totaling ($22,938).

Net cash used in investing activities for the year ended December 31, 2013 was $762,439 compared to $279,918 for the year ended December 31, 2012. The increase is primarily attributable to the development of software.

Net cash provided by financing activities amounted to $6,287,471 for the year ended December 31, 2013, compared to net cash provided in the year ended December 31, 2012 of $2,674,342, representing an increase in net cash flow from financing activities of $3,613,129. This was due to the receipt of net proceeds from the Company’s issuance of stock, equity capital raises, net borrowings from new and existing debt obligations, offset by various debt repayments.

Financing:

The Company and HRAA have the following financing arrangements:

1. The Company entered into a revolving line of credit for $150,000 with Bank of America in December 2008, for its general working capital needs. The line of credit contains certain restrictive covenants including restrictions on granting liens on the Company's assets. The line is also guaranteed by certain officers of the Company, Robert Rubinowitz and Andrea Clark, and was modified on September 19, 2013. The line of credit had a maturity date of December 18, 2009 and was renewed until December 18, 2012. The line of credit was modified on December 18, 2012 so that the loan no longer had an expiration date of December 18, 2012, but instead, a final maturity date of December 18, 2018. The interest rate per year was equal to the bank’s prime rate plus 6.50%. The bank’s prime rate of interest at December 31, 2012 was 3.25%. First payment of approximately $3,200 was paid October 19, 2013.

2. The Company entered into a term loan in March 2009 with Bank of America whose proceeds were used for general working capital. The term loan was personally guaranteed by Robert Rubinowitz and Andrea Clark and contain certain restrictive covenants including restrictions on granting liens on the Company's assets. The term loan matured in five years and incurred interest at the rate of 6.75% per annum. The term loan has been consolidated with an existing line of credit. The balance due as of September 19, 2013, the date of the consolidation was approximately $20,697.

3.

On September 19, 2013, The Company consolidated the term loan with the line of credit. The outstanding balance for the term loan and the line of credit prior to consolidation was $20,697 and $133,334, respectively. The new consolidated term loan is personally guaranteed by Robert Rubinowitz and Andrea Clark and contains restrictive covenants, which among other things, prohibit the Company from granting any security interests or liens on the assets of the Company. Payments of principal and interest are approximately $3,200 per month. The new consolidated term loan matures on September 19, 2017 and incurs interest at a rate per year equal to the bank’s prime rate plus 3.5%. The balance due as of December 31, 2013 for the new consolidated term loan was approximately $142,000. Although the Company is current in its payments on this loan, management believes the Company may be in default of certain non-financial covenants. The bank has not notified the Company of any default.

4.

A mortgage made to Dream Reachers related to certain real estate, which houses the Company’s main office in Plantation, Florida. The loan originated in July 2010 in the amount of $192,500 and matures July 2020, when a balloon principal payment of approximately $129,000 becomes due. The loan is collateralized by the real estate and is personally guaranteed by Robert Rubinowitz. Interest is fixed at 6.625% for the first five years of the loan, and converts to an adjustable rate for the second five years at the Federal funds rate plus 3.25%, as established by the United State Federal Reserve. The balance under this mortgage loan as of December 31, 2013 was approximately $174,600. Monthly payments of principal and interest are approximately $1,500 until July 2015, when the total monthly payment may vary due to the adjustable interest rate provision in the note.

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5. In June 2012, HRAA entered into a one-year factoring agreement with a finance company. The agreement automatically renews annually unless terminated by either party. Under the terms of the agreement, HRAA, at its discretion, assigns the collection rights of its receivables to the finance company in exchange for an advance rate of 85% of face value. The assignments are transacted with recourse only at the option of the finance company in the event of non-payment. HRAA’s obligations under the factoring agreement are secured by substantially all of the assets of HRAA. For the year ended December 31, 2013, HRAA had factored approximately $4,693,000 of receivables and had received cash advances of approximately $4,708,000. Outstanding receivables purchased by the factor as of December 31, 2013 were approximately $638,000 and are included in accounts receivable in the accompanying consolidated balance sheet, and the secured loan due to the lender was approximately $543,000. Factor fees in 2013 were approximately $138,000, and are included in interest expenses. Although the Company is current in its financial obligations under the factoring agreement, management believes the Company may be in default under the solvency provision and certain non-financial default provisions. The Company has not been notified of any default by the factor company.

6. The Company leases certain office equipment under non-cancellable operating lease arrangements. Monthly payments under the lease agreements are approximately $500 as of December 31, 2013.

7. On May 14, 2012, the Company entered into a round of convertible promissory notes totaling $300,000.  The term of each note was 12 months. Interest was computed at 6% based on a 360 day year and was payable on the maturity date, and the conversion rate was $0.10 per share. Interest was due and payable only if the notes were repaid in cash. These notes were converted into common stock at their contractual conversion rate of $0.10 per share on July 15, 2012.

8. During December 2012, January 2013 and February 2013, the Company entered eighteen loan agreements and promissory notes totaling $2,035,000. As of December 31, 2012, the Company had received $815,000. The remainder of $1,220,000 was received in January and February 2013.  Of the eighteen loans, (i) thirteen of the loans are secured by contract accounts receivable of a Company customer which security interest is subordinate to the lender under the factoring agreement, and (ii) one of the loans is secured by the stock of HRAA. As of December 31, 2013, five of the notes had been converted into an aggregate of 1,608,333 shares of the Company's common stock.

The Company’s Merger yielded cash from the sale of common stock that was approximately $600,000 short of the expected amount to be raised in order in order to execute its growth plan for the near future. Since the time of the Merger, the Company has transacted equity capital raises totaling approximately $6,643,000 of additional capital infusion. The Company has continued its build-up of the personnel and business development efforts and has incurred operating losses As a result, the Company possesses a negative working capital of $2,292,754, at December 31, 2013.

Going Concern

The Company’s ability to continue as a going concern is dependent upon its ability to generate cash from operating activities and obtain additional financing to fund its business plan and to support working capital requirements.

However, as of December 31, 2013, the Company had a working capital deficit, stockholders deficit and accumulated deficit and for the year ended December 31, 2013, incurred net losses, and has used net cash in operations. The Company has not been able to generate sufficient cash from operating activities to fund its on-going operations. There is no guarantee that the Company will be able to generate enough revenue and/or raise capital to support its operations. These factors raise substantial doubt about the Company’s ability to continue as a going concern.

On November 12, 2013, the Company entered into a Securities Purchase Agreement for the equity sale of $5.4 million in Series A Preferred Stock and Warrants to purchase shares of the Company’s common stock. The net proceeds to the Company after commissions and professional fees was $4,903,652. The net raise is sufficient to fund on-going operations for the next several months. However, the funding is not sufficient to alleviate the going concern issue.

23

Off-Balance Sheet Arrangements

None.

Critical Accounting Policies

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States requires our management to make assumptions, estimates, and judgments that affect the amounts reported, including the notes thereto, and related disclosures of commitments and contingencies, if any. We have identified certain accounting policies that are significant to the preparation of our consolidated financial statements. These accounting policies are important for an understanding of our financial condition and results of operations. Critical accounting policies are those that are most important to the portrayal of our financial condition and results of operations and require management’s difficult, subjective, or complex judgment, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods. Certain accounting estimates are particularly sensitive because of their significance to financial statements and because of the possibility that future events affecting the estimate may differ significantly from management’s current judgments. We believe the following critical accounting policies involve the most significant estimates and judgments used in the preparation of our consolidated financial statements.

We are an emerging growth company; therefore we have elected to use the extended transition period for complying with new or revised accounting standards under Section 102(b)(2)(B) of the Jumpstart Our Business Startups Act. As a result of this election, our consolidated financial statements may not be comparable to companies that comply with public company effective dates.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, HRAA and Dream Reachers. All significant inter-company transactions and balances are eliminated in consolidation.

Allowance for doubtful accounts

Accounts receivable balances are subject to credit risk. Management has reserved for expected credit losses, sales returns and allowances, and discounts based upon past experience, as well as knowledge of current customer information. The Company believes that its reserves are adequate. It is possible, however, that the accuracy of our estimation process could be impacted by unforeseen circumstances. The Company continuously reviews its reserve balance and refines the estimates to reflect any changes in circumstances.

Software

Costs incurred in connection with the development of software products are accounted for in accordance with the Financial Accounting Standards Board Accounting Standards Codification ("ASC") 985 Costs of Software to Be Sold, Leased or Marketed.” Costs incurred prior to the establishment of technological feasibility are charged to research and development expense. Software development costs are capitalized after a product is determined to be technologically feasible and is in the process of being developed for market and capitalization ceases after the general release of the software. Amortization of capitalized software development costs begins upon initial product shipment after general release. Capitalized software development costs are amortized over the estimated life of the related product (generally thirty-six months) using the straight-line method. The Company evaluates its software assets for impairment whenever events or change in circumstances indicate that the carrying amount of such assets may not be recoverable. Recoverability of software assets to be held and used is measured by a comparison of the carrying amount of the asset to the future net undiscounted cash flows expected to be generated by the asset. If such software assets are considered to be impaired, the impairment to be recognized is the excess of the carrying amount over the fair value of the software asset.

Software maintenance costs are charged to expense as incurred. Expenditures for enhanced functionality are capitalized. The cost of the software and the related accumulated amortization are removed from the accounts upon retirement of the software with any resulting loss being recorded in operations.

Asset Impairment

At the end of September 2013, the Company re-evaluated the capitalized research and development costs for the Visualizer software suite of multiple offerings and the OMC Initiater after an evaluation based in part on the lack of cash flow and customer demand in ICD Visualizer after the general acceptance release date of July 15, 2013. In addition, the Company also considered its going concern opinion and cash liquidity concerns that restrain the ability to make capital investments in research and development to complete existing products in the pipeline as the available cash is needed to fund normal operating expenses. As a result of this evaluation, the Company recorded a loss of $946,931 that is presented as a line item entitled “asset impairment” on the consolidated statement of operations. The Company will continue to use the Visualizer suite of functionality as internally developed software to generate customized reports for revenue integrity auditing and compliance services but the Company no longer intends to market or sell internally developed software on a stand alone basis.

Use of Estimates

Management uses estimates and assumptions in preparing financial statements. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Actual results could differ from those estimates. Significant accounting estimates reflected in the Company’s consolidated financial statements include valuation of accounts receivable, valuation of property and equipment, valuation and amortization period of software, valuation of beneficial conversion features in convertible debt, valuation of equity based instruments issued for other than cash, revenue recognition, and the valuation allowance on deferred tax assets.

24

Revenue Recognition

The Company recognizes medical coding audit services revenue based on the proportional performance method of recognizing revenue.

A portion of the Company’s revenue is generated from medical coding audit services. Auditing revenue is invoiced in accordance with the contract, generally at three benchmark time periods which coincide with when specific, obligatory field work services have been rendered and completed, the value of this portion of the contract price has been predetermined and agreed upon, and the client has received benefit or value in the form of the independent identification of system weaknesses and risk analysis. Further, collectability is reasonably assured due to the existence of a fixed fee contract and the size and financial health of the Company’s clients. Below is a description of the general benchmarks and work phases associated with the Company’s audit services:

● Planning Phase - work commences prior to and as soon as the contract is signed and includes setting the audit scope, scheduling of the job, assignment of audit staff, understanding the client and their systems, determination of sample size and sampling methods to be employed, and other specific items as outlined in the contract. The planning phase includes the determination of deliverables as defined in the contract, generally consisting of a listing of errors, training and a final report. The Company generally invoices and recognizes 50% of the contract value at the completion of the Planning Phase. Although all of the contracts contain a clause making the first 50% of the engagement fee due and non-refundable at this point, the Company does not deem this initial fee to be recognized as deferred revenue under SAB 104 due to the extensive amount of work to be done prior to accepting the contract.

● Field Work Phase – is performed at the client location and generally lasts one week and encompasses actual testing of sample claims preselected in the Planning Phase. The auditor generally preloads the selected claims into the Company’s proprietary software and audits the claim records by reviewing actual medical records. The software assists the auditor in determining proper classifications and allows the auditor to compare the proper classification against what was filed in the submission made by the client to Medicare. Notes and comments are recorded and audit reports are generated. The Company generally invoices and recognizes 40% of the contract value at the completion of the Field Work Phase.

● Reporting Phase – includes a summary of audit findings, exit conference with clients, and any other specific deliverables as determined by the contract. The Company generally invoices and recognizes the remaining 10% of the contract value at the completion of the Reporting Phase.

A portion of the Company’s revenue is derived from consulting and coding services provided. Revenue from these revenue streams is recognized after services are performed based on the quoted and agreed upon fee contained in its contracts.

Arrangements with customers may involve multiple elements including software products, education products, training, software product maintenance, coding services, coding audit services and other consulting services. Training and maintenance on software products will generally occur after the software product sale. Other services may occur before or after the product sales and may not relate to the products. Revenue recognition for multiple element arrangements is as follows:

Each element is accounted for separately when each element has value to the customer on a standalone basis and there is Company specific objective evidence of selling price of each deliverable. For revenue arrangements with multiple deliverables, the Company allocates the total customer arrangement to the separate units of accounting based on their relative selling prices as determined by the price of the items when sold separately. Once the selling price is allocated, the revenue for each element is recognized using the general and specific criteria under GAAP as discussed above for elements sold in non-multiple element arrangements. A delivered item or items that do not qualify as a separate unit of accounting within the arrangement are combined with the other applicable undelivered items within the arrangement. The allocation of arrangement consideration and the recognition of revenue is then determined for those combined deliverables as a single unit of accounting. The Company has historically sold its services with established rates, which it believes is Company specific objective evidence of selling price. For the new software products, management has established selling prices, which qualifies as Company specific objective evidence of selling price.

For our education products sold we have determined to account for the course materials and training components as one unit of accounting.  Accordingly, revenue is recognized for the single unit upon delivery of the training through our online webinars.

On July 15, 2013, the Company issued a general release for one of its products Visualizer. Software sales on a standalone basis will be recognized upon delivery of the software when evidence of the purchase arrangement exists and the price is determinable, and when collectability is reasonably assured. The Company will continue to use the Visualizer suite of functionality as internally developed software to generate customized reports for revenue integrity auditing and compliance services but the Company no longer intends to market or sell internally developed software on a stand alone basis.

Share Based Compensation

Compensation expense for all stock-based employee and director compensation awards granted is based on the grant date fair value estimated in accordance with the provisions of ASC Topic 718, Stock Compensation. The Company recognizes these compensation costs on a straight-line basis over the requisite service period of the award, which is generally the option vesting term. Vesting terms vary based on the individual grant terms.

The Company estimates the fair value of stock-based compensation awards on the date of grant using the Black-Scholes-Merton (“BSM”) option pricing model, which was developed for use in estimating the value of traded options that have no vesting restrictions and are freely transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility. The BSM option-pricing model considers, among other factors, the expected term of the award and the expected volatility of the Company’s stock price. Expected terms are calculated using the Simplified Method, volatility is determined based on the Company's historical stock price trends and the discount rate is based upon treasury rates with instruments of similar expected terms. Warrants granted to non-employees are accounted for in accordance with the measurement and recognition criteria of ASC Topic 505-50, Equity Based Payments to Non-Employees.

Segment Reporting

Financial Accounting Standards Board ASC Topic 280, Segment Reporting (“ASC 280”), establishes standards for the way public business enterprises report information about operating segments. ASC 280 also establishes standards for related disclosures about products and services, geographic areas and major customers. The Company has determined that based on these criteria it only operates one segment, consulting services, as all other services do not meet the minimum threshold for separate reporting of a segment.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Not required for smaller reporting companies.

25

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

	Page
Report of Independent Registered Public Accounting Firm		F-2
Consolidated Balance Sheets		F-3
Consolidated Statements of Operations		F-4
Consolidated Statements of Changes in Stockholder’s Equity (Deficit)		F-5
Consolidated Statements of Cash Flows		F-6
Notes to Consolidated Financial Statements		F-7

F-1

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of:

Health Revenue Assurance Holdings, Inc.

We have audited the accompanying consolidated balance sheets of Health Revenue Assurance Holdings, Inc. and Subsidiaries as of December 31, 2013 and 2012, and the related consolidated statements of operations, changes in stockholders’ equity (deficit) and cash flows for each of the two years in the period ended December 31, 2013.  These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation.  We believe that our audits provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Health Revenue Assurance Holdings, Inc. and Subsidiaries as of December 31, 2013 and 2012, and the consolidated results of its operations and its cash flows for each of the two years in the period ended December 31, 2013 in conformity with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.  As discussed in Note 1 to the consolidated financial statements, the Company has a net loss available to common stockholders and net cash used in operating activities in 2013 of $8,167,425 and $3,365,005, respectively, and has a working capital deficiency, stockholders’ deficiency and  accumulated deficit of $2,292,754, $4,154,247 and $10,752,223, respectively at December 31, 2013. These matters raise substantial doubt about the Company's ability to continue as a going concern. Management’s Plan in regards to these matters is also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ Salberg & Company, P.A.

SALBERG & COMPANY, P.A.

Boca Raton, Florida

April 15, 2014

2295 NW Corporate Blvd., Suite 240 • Boca Raton, FL 33431-7328

Phone: (561) 995-8270 • Toll Free: (866) CPA-8500 • Fax: (561) 995-1920

www.salbergco.com • info@salbergco.com

Member National Association of Certified Valuation Analysts • Registered with the PCAOB

Member CPA Connect with Affiliated Offices Worldwide • Member AICPA Center for Audit Quality

F-2

HEALTH REVENUE ASSURANCE HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
	December 31,			December 31,
	2013			2012
Assets
Cash	$	3,053,485		$	893,458
Accounts receivable		901,918			1,246,814
Accounts receivable - Related Party, net of allowance $16,244 and $0 respectively		25,000			-
Prepaid expenses		1,050,210			3,600
Other current assets		1,676			688
Total Current Assets		5,032,289			2,144,560
Property and Equipment, net		381,847			365,017
Software, net		-			258,933
Other assets		12,665			8,871
Finance costs, net		2,150			2,477
Total Other Assets		14,815			270,281
Total Assets	$	5,428,951		$	2,779,858
Liabilities and Stockholders' Equity (Deficit)
Accounts payable	$	154,324		$	207,741
Due to officers		-			75,000
Accrued expenses		40,373			64,077
Accrued payroll		414,684			412,186
Loan payable to factor		542,530			827,075
Accrued interest		5,850			4,524
Line of credit		44,692			25,000
Capital Leases, current portion		32,768			16,923
Notes payable, current portion, net of discount		380,326			202,557
Long term debt, current portion		44,084			37,513
Settlement Payable		7,000			115,278
Deferred Revenue		209,033			-
Other current liabilities		43,379			-
Warrant derivative fair value		5,406,000			-
Accrued preferred stock dividend payable		-			-
Total Current Liabilities		7,325,043			1,987,874
Capital Leases (net of current portion)		26,108			23,974
Line of credit (net of current portion)		-			125,000
Notes payable (net of current portion), net of discount		31,694			273,751
Long term debt (net of current portion)		272,353			181,457
Total Liabilities		7,655,198			2,592,056
Temporary Equity
Series A 8% redeemable convertible preferred stock (13,500,000 and 0 shares issued and outstanding at December 31, 2013 and 2012, respectively –Redemption value of $5,460,000)		1,928,000			-
Commitments and Contingencies (See Note 10)
Stockholders' Equity (Deficit):
Common stock ($0.001 par value, 500,000,000 shares authorized, 54,752,294 and 39,054,867 shares issued and outstanding at December 31, 2013 and December 31, 2012, respectively)		54,752			39,055
Additional paid-in capital		6,543,224			2,738,545
Subscription receivable		-			(5,000	)
Accumulated deficit		(10,752,223	)		(2,584,798	)
Total Stockholders' Equity (Deficit)		(4,154,247	)		187,802
Total Liabilities and Stockholders' Equity (Deficit)	$	5,428,951		$	2,779,858

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

F-3

HEALTH REVENUE ASSURANCE HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
	For the Year-Ended
	December 31,			December 31,
	2013			2012
Revenue	$	7,099,514		$	5,806,848
Revenue - Related Party		211,239			-
Total Revenue		7,310,753			5,806,848
Cost of Revenues		4,061,644			2,830,008
Gross Profit		3,249,109			2,976,840
Operating Expenses
Selling and administrative expenses (includes stock compensation of $639,328 and $0 in 2013 and 2012, respectively)		7,016,533			3,853,820
Research and development		-			64,386
Asset Impairment		946,931			-
Depreciation and amortization		83,900			50,765
Total Operating Expenses		8,047,364			3,968,971
Operating Loss		(4,798,255	)		(992,131	)
Other Income (Expense)
Other income		67			10
Interest expense		(927,047	)		(465,349	)
Gain on extinguishment of debt for put premium		33,364			-
Gain from change in fair value of warrant liability		365,255			-
Loss on extinguishment of debt		(146,624	)		-
Total Other Income (Expense), net		(674,985	)		(465,339	)
Net Loss		(5,473,240	)		(1,457,470	)
Cumulative preferred stock dividend		(60,000	)		-
Deemed dividend for beneficial conversion feature of preferred stock		(2,634,185	)		-
Net Loss available to common stockholders	$	(8,167,425	)	$	(1,457,470	)
Net Loss Per Share
basic and diluted	$	(0.17	)	$	(0.04	)
Weighted Average Number of Shares Outstanding
basic and diluted		48,385,115			32,730,809

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

F-4

HEALTH REVENUE ASSURANCE HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY (DEFICIT)

FOR THE YEARS ENDED DECEMBER 31, 2013 AND 2012

							Additional									Total
	Common Stock						Paid-in			Subscription			Accumulated			Stockholders'
	Shares			Amount			Capital			Receivable			Deficit			Equity (Deficit)
Balance at December 31, 2011		16,499,021		$	16,499		$	751,010		$	-		$	(1,127,328	)	$	(359,819	)
Recapitalization		13,499,206			13,499			(13,499	)		-			-			-
2011 bridge note converted in 2012 related to reverse merger		1,343,729			1,344			248,656			-			-			250,000
Issuance of common stock for cash		4,352,312			4,352			1,051,742			-			-			1,056,094
Repayment of advances with shares		1,265,381			1,266			312,642			-			-			313,908
Value of Beneficial conversion feature in convertible debt	-		-					300,000			-			-			300,000
Repurchase of shares pursuant to settlement agreement		(3,299,802	)		(3,300	)		(229,200	)		-			-			(232,500	)
Conversion of convertible debt		3,000,000			3,000			297,000			-			-			300,000
Shares issued to lender as fees		2,375,000			2,375			341,125			-			-			343,500
Offering costs		-			-			(325,911	)		-			-			(325,911	)
Subscription receivable		20,000			20			4,980			(5,000	)		-			-
Fractional rounding		26			-			-			-			-			-
Net Loss 2012		-			-			-			-			(1,457,470	)		(1,457,470	)
Balance at December 31, 2012		39,054,867			39,055			2,738,545			(5,000	)		(2,584,798	)		187,802
Conversion of convertible debt		1,608,333			1,608			513,059			-			-			514,667
Issuance of common stock as compensation		462,665			463			158,542			-			-			159,005
Issuance of common stock for cash		3,446,429			3,446			1,234,554			-			-			1,238,000
Deemed dividend for series A preferred stock's beneficial conversion feature		-			-			-			-			(2,634,185	)		(2,634,185	)
Dividends on series A preferred stock		-			-			-			-			(60,000	)		(60,000	)
Public offering costs		-			-			(9,553	)		-			-			(9,553	)
Reclassification of warrant liability		-			-			(101,418	)		-			-			(101,418	)
Receipt of subscription receivable		-			-			-			5,000			-			5,000
Shares issued as loan fees		5,575,000			5,575			673,778			-			-			679,353
Shares issued for services		4,605,000			4,605			1,320,895			-			-			1,325,500
Stock option expense		-			-			14,822			-			-			14,822
Net Loss 2013		-			-			-			-			(5,473,240	)		(5,473,240	)
Balance at December 31, 2013		54,752,294		$	54,752		$	6,543,224		$	-		$	(10,752,223	)	$	(4,154,247	)

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

F-5

HEALTH REVENUE ASSURANCE HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
	For the Year-Ended
	December 31,			December 31,
	2013			2012
Cash flows from Operating Activities:
Net loss available to common stockholders	$	(8,167,425	)	$	(1,457,470	)
Adjustments to reconcile net loss to net cash used in operating activities:
Cumulative series A preferred stock dividend		60,000			-
Deemed dividend for beneficial conversion feature of series A preferred stock		2,634,185			-
Amortization of debt discount		556,028			304,808
Amortization of debt issue costs		327			-
Depreciation expense		83,573			50,765
Amortization of software		64,137			-
Software impairment		946,931			-
Accretion of premium on debt		33,364			-
Bad debt expense		26,116			-
Amortization of prepaid shares issued for services		465,501			-
Stock option expense		14,822			-
Shares issued for services		159,005			-
Loss on early extinguishment of debt		146,624			-
Gain from change in fair market value of warrant derivative liability		(365,255	)		-
Change in operating assets and liabilities:
Accounts receivable		(17,655	)		(1,103,257	)
Other assets		(4,788	)		5,146
Prepaid expenses		(129,038	)		20,912
Accounts payable		(53,417	)		53,783
Accounts payable related party		-			75,000
Settlement accrual		7,000			-
Accrued liabilities		(85,801	)		383,835
Other accrued liabilities		49,229			-
Accrued payroll		2,499			-
Deferred revenue		209,033			(32,988	)
Net Cash used in operating activities		(3,365,005	)		(1,699,466	)
Cash flows from Investing Activities:
Capitalization of internally developed software		(752,135	)		(258,933	)
Purchases of property and equipment		(10,304	)		(20,985	)
Net Cash used in investing activities		(762,439	)		(279,918	)
Cash flows from Financing Activities:
Proceeds from issuance of common stock		1,243,000			730,183
Proceeds from series A 8% redeemable convertible preferred stock issuance		5,400,000			-
Preferred and common stock offering costs		(505,901	)		-
Stockholder loan repayment -related party		(115,000	)		-
Stockholder loan - related party		40,000			-
Payment for repurchase of common stock		-			(94,165	)
Loan proceeds		1,595,000			1,193,908
Loan proceeds from factor, net		26,890			827,075
Repayments of loans		(1,237,145	)		(33,087	)
Repayment of capital lease		(18,015	)		(1,072	)
Settlement payments		(115,278	)		-
Borrowings (repayments) on line of credit, net		(26,080	)		51,500
Net Cash provided by financing activities		6,287,471			2,674,342
Net increase in cash		2,160,027			694,958
Cash at beginning of year		893,458			198,500
Cash at ending of year	$	3,053,485		$	893,458
Supplemental schedule of cash paid during the period for:
Interest	$	376,539		$	36,156
Income Taxes	$	-		$	-
Supplemental schedule of non-cash investing and financing activities:
Issuance of stock to repay debt	$	514,667		$	563,908
Capital lease obligation incurred for use of equipment	$	90,099		$	38,704
Beneficial conversion feature on convertible debt charged to additional paid in capital	$	-		$	300,000
Conversion of $300,000 notes to common stock	$	-		$	300,000
Shares issued as a loan fee	$	679,353		$	343,500
Transfer of accounts payable to notes payable	$	-		$	65,000
Insurance premium finance contract recorded as prepaid asset	$	57,573		$	-
Shares issued for prepaid services	$	1,325,500		$	-
Reclassification of line of credit to note payable	$	133,333		$	-
Constructive dividend	$	2,634,185		$	-
Reclassification of derivative to warrant liability	$	5,771,255		$	-
Debt discount	$	37,500		$	-

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

F-6

HEALTH REVENUE ASSURANCE HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2013 and 2012

1 – NATURE OF BUSINESS AND GOING CONCERN

Overview

Health Revenue Assurance Holdings, Inc. (the “Company”) is a provider of revenue cycle services to a broad range of healthcare providers. We offer our customers integrated solutions designed around their specific business needs, including revenue cycle data analysis, contract and outsourced coding, billing, coding and compliance audits, coding education, coding consulting, physician coding services and ICD-10 education and transition services. With this approach, our customers benefit from integrated service offerings that we believe enhances their revenue integrity. As a result, we believe we help our customers achieve their business objectives and patient care objectives.

Dream Reachers, LLC, owns the Company’s offices and is the borrower on a mortgage loan related to such offices. Dream Reachers, LLC does not engage in real estate rental business. Its offices are occupied by Health Revenue Assurance Associates, Inc. (“HRAA”) at no cost and HRAA pays the related mortgage’s principal and interest, taxes and maintenance. The Company’s subsidiary HRAA is the sole member effective May 2011. Dream Reachers has been treated as a subsidiary for accounting purposes in the Company’s consolidated financial statements for all periods presented. (See Note 2)

On February 10, 2012, HRAA entered into an Agreement and Plan of Merger and Reorganization (the “Merger Agreement”) with Health Revenue Assurance Holdings, Inc. (formerly known as Anvex International, Inc., "HRAH"), a Nevada company, and its wholly-owned subsidiary Health Revenue Acquisition Corporation (“Acquisition Sub”), which was treated for accounting purposes as a reverse recapitalization with HRAA, considered the accounting acquirer. Each share of HRAA's common stock was exchanged for the right to receive approximately 1,271 shares of HRAH’s common stock. Before their entry into the Merger Agreement, no material relationship existed between HRAH and Acquisition Sub or HRAA. (See Note 12)

On April 13, 2012, the Company changed its name from Anvex International, Inc. to Health Revenue Assurance Holdings, Inc.

On April 13, 2012, the Company’s board of directors authorized a 12.98 for 1 split of its common stock to stockholders of record as of April 13, 2012. Shares resulting from the split were issued on April 26, 2012. In connection therewith, the Company transferred $32,747 from additional paid in capital to common stock, representing the par value of additional shares issued. As a result of the stock split, fractional shares were rounded up. All share and per share amounts for all periods presented have been retroactively adjusted to reflect the stock split. (See Note 12)

Going Concern

The Company’s future success is dependent upon its ability to achieve profitable operations and generate cash from operating activities, and upon additional financing, Management believes they can raise the appropriate funds needed to support their business plan and develop an operating company which is cash flow positive.

However, as of December 31, 2013, the Company has a working capital deficiency, stockholders’ deficit and accumulated deficit of $2,292,754, $4,154,247, and $10,752,223, respectively, for the year ended December 31, 2013, incurred net losses available to common stockholders of $8,167,425, and has used net cash in operations of $3,365,005. The Company has not been able to generate sufficient cash from operating activities to fund its on-going operations. There is no guarantee that the Company will be able to generate enough revenue and/or raise capital to support its operations. These factors raise substantial doubt about the Company’s ability to continue as a going concern.

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

As of December 31, 2013, the Company has a cash balance of approximately $3,053,000. The Company is currently addressing the going concern and liquidity issues. The Company expects an increase in cash flow as the result of a growing customer demand for medical billing, consulting, training, and education.

On November 12, 2013, the Company entered into a Securities Purchase Agreement for the sale of $5.4 million in Series A 8% redeemable convertible preferred stock (the “Series A Preferred Stock”) and warrants to purchase shares of the Company’s common stock. The Series A Preferred Stock is convertible into common stock on a 2 for 1 basis and is redeemable by the Company, at the option of the investor, 48 months from November 12, 2013 at the stated value of $0.30 per share or a total of $5,400,000 plus accumulated but unpaid dividends, whether declared or not. The net proceeds to the Company after commissions and professional fees was $4,903,652 and after payment of stockholder loans is $4,322,000. The net raise is sufficient to fund on-going operations for the next several months. However, the funding is not sufficient to alleviate the going concern risk. (See Note 12)

2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Health Revenue Assurance Associates, Inc. and Dream Reachers, LLC. All significant inter-company transactions and balances are eliminated in consolidation.

F-7

HEALTH REVENUE ASSURANCE HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2013 and 2012

Use of Estimates

The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts in the consolidated financial statements. Actual results could differ from those estimates. Significant accounting estimates reflected in the Company’s consolidated financial statements include valuation of accounts receivable, valuation of property and equipment, valuation and amortization period of software, valuation of beneficial conversion features in convertible debt, valuation of derivatives, valuation of equity based instruments issued for other than cash, revenue recognition, and the valuation allowance on deferred tax assets.

Cash

For purposes of the statement of cash flows, the Company considers all highly liquid investments with maturity of three months or less when purchased to be cash equivalents. The Company’s cash balances are maintained at various banks that are insured by the Federal Deposit Insurance Corporation subject to certain limitations.

Accounts Receivable and Factoring

Accounts receivable are stated at the amounts management expects to collect. An allowance for doubtful accounts is recorded using a specific identification method based on a combination of historical experience, aging analysis and information on specific accounts. Account balances are written off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. Management has determined that an allowance in the amount of $16,244 is required as of December 31, 2013. The allowance arises from a website development project contracted with ResumeBear, a related party. The Company accounts for its factoring arrangements as either a sale or a secured financing based on the criteria in ASC 860 "Transfers and Servicing". Estimates of allowances for doubtful accounts are reflected as a recourse obligation, a liability, for factor arrangements treated as a sale with recourse or as a contra asset accounts receivable allowance account for arrangements accounted for as a secured financing.

Property and Equipment

Property and equipment is recorded at cost. Depreciation is computed using the straight-line method over estimated useful asset lives, which range from 5 to 39 years. Repairs and maintenance are expensed, while additions and betterments are capitalized. The cost and related accumulated depreciation of assets sold or retired are eliminated from the accounts and any gains or losses are reflected in earnings.

Leases

We perform a review of newly acquired leases to determine whether a lease should be treated as a capital or operating lease. Capital lease assets are capitalized and depreciated over the term of the initial lease. A liability equal to the present value of the aggregated lease payments is recorded utilizing the stated lease interest rate. If an interest rate is not stated, we will determine an estimated cost of capital and utilize that rate to calculate the present value. If the lease has an increasing rate over time, and (or) is an operating lease, all leasehold incentives, rent holidays, or other incentives will be considered in determining if a deferred rent liability is required. Leasehold incentives are capitalized and depreciated over the initial term of the lease.

Software

Costs incurred in connection with the development of software products are accounted for in accordance with the Financial Accounting Standards Board Accounting Standards Codification ("ASC") 985 Costs of Software to Be Sold, Leased or Marketed.” Costs incurred prior to the establishment of technological feasibility are charged to research and development expense. Software development costs are capitalized after a product is determined to be technologically feasible and is in the process of being developed for market and capitalization ceases after the general release of the software. Amortization of capitalized software development costs begins upon initial product shipment after general release. Capitalized software development costs are amortized over the estimated life of the related product (generally thirty-six months) using the straight-line method. The Company evaluates its software assets for impairment whenever events or change in circumstances indicate that the carrying amount of such assets may not be recoverable. Recoverability of software assets to be held and used is measured by a comparison of the carrying amount of the asset to the future net undiscounted cash flows expected to be generated by the asset. If such software assets are considered to be impaired, the impairment to be recognized is the excess of the carrying amount over the fair value of the software asset.

F-8

HEALTH REVENUE ASSURANCE HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2013 and 2012

Software maintenance costs are charged to expense as incurred. Expenditures for enhanced functionality are capitalized. The cost of the software and the related accumulated amortization are removed from the accounts upon retirement of the software with any resulting loss being recorded in operations. On July 15, 2013 the Company issued a general release for one of its products Visualizer. After the general release, the Company recorded approximately $64,000 in amortization expense in the accompanying consolidated financial statements for the year ended December 31, 2013. On September 30, 2013, the Company impaired the capitalized research and development costs for the Visualizer software suite of multiple offerings and the OMC Initiater after an evaluation based in part on the lack of cash flow and customer demand in ICD Visualizer after the general acceptance release date of July 15, 2013. In addition, the Company’s going concern opinion and cash liquidity concerns restrained the ability to make a capital investment in research and development to complete existing products in the pipeline as the available cash is needed to fund normal operating expenses. The resulting loss of $946,931 is presented as a line item entitled “asset impairment” on the consolidated statement of operations. The Company will continue to use the Visualizer suite of functionality as internally developed software to generate customized reports for revenue integrity auditing and compliance services but the Company no longer intends to market or sell internally developed software on a stand alone basis.

Long-Lived Assets

The Company reviews the carrying value of its long-lived assets whenever events or changes in circumstances indicate that the carrying values may no longer be appropriate. Recoverability of carrying values is assessed by estimating future net cash flows from the assets. Impairment assessment inherently involves judgment as to assumptions about expected future cash flows and the impact of market conditions on those assumptions. Future events and changing market conditions may impact management's assumptions as to sales prices, rental rates, costs, holding periods or other factors that may result in changes in the Company’s estimates of future cash flows. Although management believes the assumptions used in testing for impairment are reasonable, changes in any one of the assumptions could produce a significantly different result.

Fair Value Measurements and Fair Value of Financial Instruments

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants. The Company classifies assets and liabilities recorded at fair value under the fair value hierarchy based upon the observability of inputs used in valuation techniques. Observable inputs (highest level) reflect market data obtained from independent sources, while unobservable inputs (lowest level) reflect internally developed market assumptions. The fair value measurements are classified under the following hierarchy:

● Level 1—Observable inputs that reflect quoted market prices (unadjusted) for identical assets and liabilities in active markets;

● Level 2—Observable inputs, other than quoted market prices, that are either directly or indirectly observable in the marketplace for identical or similar assets and liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets and liabilities; and

● Level 3—Unobservable inputs that are supported by little or no market activity that is significant to the fair value of assets or liabilities.

The estimated fair value of certain financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued expenses are carried at historical cost basis, which approximates their fair values because of the short-term nature of these instruments.

Accounting for Derivatives

The Company evaluates its convertible instruments, options, warrants or other contracts to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for under ASC Topic 815, “Derivatives and Hedging.”  The result of this accounting treatment is that the fair value of the derivative is marked-to-market each balance sheet date and recorded as a liability.  In the event that the fair value is recorded as a liability, the change in fair value is recorded in the statement of operations as other income (expense).  Upon conversion or exercise of a derivative instrument, the instrument is marked to fair value at the conversion date and then that fair value is reclassified to equity.  Equity instruments that are initially classified as equity that become subject to reclassification under ASC Topic 815 are reclassified to liabilities at the fair value of the instrument on the reclassification date.

Revenue Recognition

The Company recognizes medical coding audit services revenue based on the proportional performance method of recognizing revenue.

A portion of the Company’s revenue is generated from medical coding audit services. Auditing revenue is invoiced in accordance with the contract, generally at three benchmark time periods which coincide with when specific, obligatory field work services have been rendered and completed, the value of this portion of the contract price has been predetermined and agreed upon, and the client has received benefit or value in the form of the independent identification of system weaknesses and risk analysis. Further, collectability is reasonably assured due to the existence of a fixed fee contract and the size and financial health of the Company’s clients. Below is a description of the general benchmarks and work phases associated with the Company’s audit services:

● Planning Phase - work commences prior to and as soon as the contract is signed and includes setting the audit scope, scheduling of the job, assignment of audit staff, understanding the client and their systems, determination of sample size and sampling methods to be employed, and other specific items as outlined in the contract. The planning phase includes the determination of deliverables as defined in the contract, generally consisting of a listing of errors, training and a final report. The Company generally invoices and recognizes 50% of the contract value at the completion of the Planning Phase. Although all of the contracts contain a clause making the first 50% of the engagement fee due and non-refundable at this point, the Company does not deem this initial fee to be recognized as deferred revenue under SAB 104 due to the extensive amount of work to be done prior to accepting the contract.

● Field Work Phase – is performed at the client location and generally lasts one week and encompasses actual testing of sample claims preselected in the Planning Phase. The auditor generally preloads the selected claims into the Company’s proprietary software and audits the claim records by reviewing actual medical records. The software assists the auditor in determining proper classifications and allows the auditor to compare the proper classification against what was filed in the submission made by the client to Medicare. Notes and comments are recorded and audit reports are generated. The Company generally invoices and recognizes 40% of the contract value at the completion of the Field Work Phase.

● Reporting Phase – includes a summary of audit findings, exit conference with clients, and any other specific deliverables as determined by the contract. The Company generally invoices and recognizes the remaining 10% of the contract value at the completion of the Reporting Phase.

F-9

HEALTH REVENUE ASSURANCE HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2013 and 2012

A portion of the Company’s revenue is derived from consulting and coding services provided. Revenue from these revenue streams is recognized after services are performed based on the quoted and agreed upon fee contained in its contracts.

Arrangements with customers may involve multiple elements including software products, education products, training, software product maintenance, coding services, coding audit services and other consulting services. Training and maintenance on software products will generally occur after the software product sale. Other services may occur before or after the product sales and may not relate to the products. Revenue recognition for multiple element arrangements is as follows:

Each element is accounted for separately when each element has value to the customer on a standalone basis and there is Company specific objective evidence of selling price of each deliverable. For revenue arrangements with multiple deliverables, the Company allocates the total customer arrangement to the separate units of accounting based on their relative selling prices as determined by the price of the items when sold separately. Once the selling price is allocated, the revenue for each element is recognized using the general and specific criteria under GAAP as discussed above for elements sold in non-multiple element arrangements. A delivered item or items that do not qualify as a separate unit of accounting within the arrangement are combined with the other applicable undelivered items within the arrangement. The allocation of arrangement consideration and the recognition of revenue is then determined for those combined deliverables as a single unit of accounting. The Company has historically sold its services with established rates, which it believes is Company specific objective evidence of selling price. For the new software products, management has established selling prices, which qualifies as Company specific objective evidence of selling price.

For our education products sold we have determined to account for the course materials and training components as one unit of accounting.  Accordingly, revenue is recognized for the single unit upon delivery of the training through our online webinars.

On July 15, 2013, the Company issued a general release for one of its products Visualizer. Software sales on a standalone basis will be recognized upon delivery of the software when evidence of the purchase arrangement exists and the price is determinable, and when collectability is reasonably assured. The Company will continue to use the Visualizer suite of functionality as internally developed software to generate customized reports for revenue integrity auditing and compliance services but the Company no longer intends to market or sell internally developed software on a stand alone basis.

Cost of Revenues

Cost of revenues includes labor costs for services and education development costs. Amortization costs in 2013 of approximately $64,000 were allocated to cost of sales related to software amortization.

Share Based Compensation

Compensation expense for all stock-based employee and director compensation awards granted is based on the grant date fair value estimated in accordance with the provisions of ASC Topic 718, Stock Compensation. The Company recognizes these compensation costs on a straight-line basis over the requisite service period of the award, which is generally the option vesting term. Vesting terms vary based on the individual grant terms.

The Company estimates the fair value of stock-based compensation awards on the date of grant using the Black-Scholes-Merton (“BSM”) option pricing model, which was developed for use in estimating the value of traded options that have no vesting restrictions and are freely transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility. The BSM option-pricing model considers, among other factors, the expected term of the award and the expected volatility of the Company’s stock price. Expected terms are calculated using the Simplified Method, volatility is determined based on the Company's historical stock price trends and the discount rate is based upon treasury rates with instruments of similar expected terms. Warrants granted to non-employees are accounted for in accordance with the measurement and recognition criteria of ASC Topic 505-50, Equity Based Payments to Non-Employees.

Research and Development Costs

In accordance with ASC 730-10, research and development costs are expensed when incurred. Total research and development costs for the years ended December 31, 2013 and 2012 were $0 and $64,386, respectively.

Advertising

The cost of advertising is expensed as incurred. Advertising and marketing expenses amounted to approximately $121,000 and $130,000 for the year ended December 31, 2013 and 2012, respectively and the total is included in selling and administrative expenses.

Income Taxes

The Company’s subsidiary, HRAA, elected to convert from a Subchapter S corporation for Federal income tax purposes to a C corporation effective October 21, 2011. Upon HRAA’s C corporation election, it began to use the asset and liability method to account for income taxes. Under this method, deferred income taxes are determined based on the differences between the tax basis of assets and liabilities and their reported amounts in the consolidated financial statements which will result in taxable or deductible amounts in future years and are measured using the currently enacted tax rates and laws. A valuation allowance is provided to reduce net deferred tax assets to the amount that, based on available evidence, is more likely than not to be realized.

F-10

HEALTH REVENUE ASSURANCE HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2013 and 2012

The Company follows the provisions of ASC 740-10, Accounting for Uncertain Income Tax Positions. When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. In accordance with the guidance of ASC 740-10, the benefit of a tax position is recognized in the financial statementsin the period during which, based on all available evidence, management believes it is more likely than not that the position will besustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset oraggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largestamount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. Theportion of the benefits associated with tax positions taken that exceeds the amount measured as described above should be reflected asa liability for unrecognized tax benefits in the accompanying consolidated balance sheets along with any associated interest and penalties that wouldbe payable to the taxing authorities upon examination.

Earnings Per Share

The Company computes and presents earnings or losses per share in accordance with FASB ASC Topic 260, Earnings per share. Basic earnings or losses per share are computed by dividing net income (loss) attributable to common stockholders by the weighted average number of common shares outstanding. Diluted earnings or loss per share is computed by dividing net income (loss) attributable to common stockholders by the weighted average number of common shares and common stock equivalents outstanding, calculated on the treasury stock method for options and warrants using the average market prices during the period.

As the Company incurred a net loss in all periods presented, all potentially dilutive securities were excluded from the computation of diluted loss per share since the effect of including them is anti-dilutive. Dilutive securities outstanding at December 31, 2013 were 1,000,000 stock options, 29,940,000 warrants, and Series A Preferred Stock convertible into 27,000,000 shares of common stock. No dilutive securities were outstanding in 2012.

Segment Reporting

Financial Accounting Standards Board (“FASB”) ASC Topic 280, Segment Reporting (“ASC 280”), establishes standards for the way public business enterprises report information about operating segments. ASC 280 also establishes standards for related disclosures about products and services, geographic areas and major customers. The Company has determined that based on these criteria it only operates one segment, consulting services, as all other services do not meet the minimum threshold for separate reporting of a segment.

Contingencies

We accrue for contingent obligations, including legal costs and restructuring costs, when the obligation is probable and the amount can be reasonably estimated. As facts concerning contingencies become known we reassess our position and make appropriate adjustments to the consolidated financial statements. Estimates that are particularly sensitive to future changes include those related to tax, legal, and other regulatory matters that are subject to change as events evolve and additional information becomes available. Total legal settlement accrued costs for the year ended December 31, 2013 was $7,000. (See Note 10)

Recent Accounting Pronouncements

We have implemented all new accounting standards that are in effect and that may impact our consolidated financial statements and do not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on our consolidated financial position or results of operations.

3 - ACCOUNTS RECEIVABLE

Accounts receivable at December 31, 2013 and December 31, 2012 was as follows:

	December 31,			December 31,
	2013			2012
Accounts receivable	$	901,918		$	1,246,814
Accounts receivable –Related party		41,244			-
Allowance for doubtful accounts		(16,244	)		-
Total	$	926,918		$	1,246,814

We had $26,116 and $0 in bad debt expense on trade accounts receivable for years ended December 31, 2013 and 2012, respectively.

4 - PROPERTY AND EQUIPMENT

Property and equipment consists of the following:

	December 31,
	2013			2012
Building and improvements	$	227,603		$	227,603
Furniture		119,810			119,810
Computers and Equipment		260,872			160,469
		608,285			507,882
Less - Accumulated depreciation		(226,438	)		(142,865	)
Total	$	381,847		$	365,017

Depreciation expense for the years ended December 31, 2013 and 2012 was approximately $84,000 and $51,000, respectively.

F-11

HEALTH REVENUE ASSURANCE HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2013 and 2012

5 – RESEARCH AND DEVELOPMENT AND SOFTWARE

In early 2012, the Company started developing the Visualizer suite. This business intelligence product is designed to meet the emerging need for healthcare analytics. Customer data is infused into the suite, and the Company uses this data in its consulting services to develop pre-defined analytics targeted to address healthcare’s emerging concerns and needs.

The Company’s Visualizer suite offers our consultants a range of functionality. Visualizer also assists healthcare leaders with their need to understand the impacts of the transition to ICD-10 including work flow, productivity, process changes and documentation and reimbursement risks. The application helps to visualize the reimbursement and operational effects of transitioning organizations to ICD-10 and identify where to focus education and documentation issues. It enables clients to develop a custom work plan to mitigate risks from the highest areas of exposure to the least.

At September 30, 2013, the Company had accumulated a total of $1,011,068 in capitalized costs related to the development of the Visualizer suite and the other functionality which was included as software on the accompanying consolidated balance sheet. As of September 30, 2013, we had amortized $64,137 of the capitalized software after the general release on July 15, 2013 for the Visualizer project.

At the end of September 2013, the Company re-evaluated the capitalized research and development costs for the Visualizer software suite. The evaluation was based in part on the lack of cash flow and customer demand in ICD Visualizer after its general acceptance release date of July 15, 2013. In addition, the Company also considered its going concern risk and cash liquidity concerns that restrain the ability to make capital investments in research and development to complete existing products in the pipeline as the available cash is needed to fund normal operating expenses. As a result of this evaluation, the Company recorded a loss of $946,931 that is presented as a line item entitled “asset impairment” on the consolidated statement of operations. The Company will continue to use the Visualizer suite of functionality as internally developed software to generate customized reports for revenue integrity auditing and compliance services but the Company no longer intends to market or sell internally developed software on a stand alone basis.

Amortization expense for software, for the years ended December 31, 2013 and 2012 was $64,137 and $0, respectively. Software consisted of the following at December 31, 2013 and December 31, 2012:

	December 31, 2013			December 31, 2012
Software	$	1,011,068		$	258,933
Accumulated amortization		(64,137	)		-
Asset Impairment		(946,931	)		-
Software, net	$	-		$	258,933

6 – LINES OF CREDIT

Bank

The Company has a $150,000 revolving line of credit with a bank (the “Line of Credit”), effective in December 2008, for its general working capital needs. The line contains certain restrictive covenants including restrictions on granting liens on the Company's assets. The line is also guaranteed by certain officers of the Company. The line of credit matured on December 18, 2009 and was renewed and was due on December 18, 2012. The revolving line was modified on December 18, 2012 so that the loan no longer has an expiration date of December 18, 2012, but instead, a final maturity date of December 18, 2018. The interest rate per year is equal to the bank’s prime rate plus 6.50%. The bank’s prime rate of interest at December 31, 2012 was 3.25%. The balance due at December 31, 2012 was $150,000 with $25,000 reflected as a current portion.

On September 19, 2013, the Company converted the Line of Credit to a term note. The Company consolidated the Line of Credit and an existing bank term loan into a consolidated term loan with a monthly payment in the amount of $3,209 with a new maturity date of September 19, 2017. At the time of the conversion the line of credit had an outstanding balance in the amount of $133,334. (See Note 7)

Dell

The Company maintains a Dell Business Credit line of up to $50,000. Interest rates vary under the line based on difference types of payment plans. The balance due under the line as of December 31, 2013 and 2012 was $44,692 and $25,000, respectively, which is included in line of credit, current portion in the accompanying consolidated financial statements.

F-12

HEALTH REVENUE ASSURANCE HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2013 and 2012

7 – LONG TERM DEBT AND NOTES PAYABLE

Long Term Debt:

Long Term debt consisted of the following:

	December 31, 2013			December 31, 2012
Bank term loan	$	141,857		$	38,897
Mortgage loan		174,580			180,073
		316,437			218,970
Less current portion		(44,084	)		(37,513	)
Total long term portion	$	272,353		$	181,457

On October 21, 2011, the Company entered into a bridge loan agreement (the “Bridge Loan”) in the amount of $250,000 with a third party lender.  The primary purpose was to repay an initial bridge loan and to pay for certain professional fees in connection with the Merger. The Bridge Loan incurred interest at the rate of 12% per annum which was due only in the event the Merger did not materialize. Upon the closing of the Merger, all interest accrued but not paid was deemed cancelled and paid in full and the entire principal amount of the note was automatically converted into an aggregate of 1,343,749 shares of common stock at a conversion price of $0.19 per share which is equal to a discount of 25% of to the purchase price. The loan was converted to stock in February 2012 (See Note 12).

In March 2009, HRAA entered into a term loan with Bank of America which proceeds were used for general working capital needs (the “Term Loan”).  The Term Loan was established as a result of a conversion of a revolving line of credit.  The Term Loan is personally guaranteed by Robert Rubinowitz and Andrea Clark and contains certain restrictive covenants including restrictions on granting liens on the Company's assets. The Term Loan matured in five years and incurred interest at the rate of 6.75% per annum.  The balance due as of December 31, 2012 was approximately $39,000 and is allocated to current and long-term debt line items on the consolidated balance sheet.

On September 19, 2013, HRAA consolidated the above March 2009 Term Loan with the Line of Credit. (See Note 6) The outstanding balance for the Term Loan and the Line of Credit prior to consolidation was $20,697 and $133,334, respectively. The new consolidated term loan is personally guaranteed by Robert Rubinowitz and Andrea Clark and contains restrictive covenants, which among other things, prohibit the Company from granting any security interests or liens on the assets of the Company. Payments of principal and interest are approximately $3,200 per month. The new consolidated term loan matures on September 19, 2017 and incurs interest at a rate per year equal to the bank’s prime rate plus 3.5%. The balance due as of December 31, 2013 for the new consolidated term loan was approximately $142,000 and is included in the accompanying consolidated balance sheet.

The Company has a mortgage related to certain real estate, which houses the Company’s main offices in Plantation, Florida. The loan originated July 2010 in the amount of $192,500 and matures July 2020, when a balloon principal payment of approximately $129,000 becomes due. The loan is collateralized by the real estate and is personally guaranteed by Robert Rubinowitz, a stockholder of the Company. Interest is fixed at 6.625% for the first five years of the loan, and converts to an adjustable rate for the second five years at the Federal Funds Rate plus 3.25%, as established by the United State Federal Reserve. The balance under this mortgage loan as of December 31, 2013 and 2012 was approximately $175,000 and $180,000, respectively and is allocated to the current and long term debt line items in the accompanying consolidated balance sheet. Monthly payments for principal and interest are approximately $1,500 until July 2015, when the total monthly payment may vary due to the adjustable interest rate provision in the note.

Although the Company is current in its payments on these loans, management believes the Company may be in default of certain non-financial covenants. The banks have not notified the Company of any default.

Notes payable:

In December 2012, the Company entered into loan agreements with various investors and issued promissory notes upon receipt of $815,000. The loan agreements have an interest rate of 12% per annum. Principal and interest is payable over 26 months. Additionally, in connection with the financing, the Company issued 2,375,000 shares of common stock to the lenders as loan fees. The fair value per share of $0.28 (based on recent cash sales prices) was used to compute the relative fair value of the shares in accordance with ASC 470-20 which totaled $343,500 which was recorded as a debt discount with a credit to additional paid-in-capital and such discount is being amortized over the term of the loans. The unamortized discount was $114,958 and $338,692 as of December 31, 2013 and 2012, respectively.

In January and February 2013, the Company entered into loan agreements and promissory notes with various investors upon receipt of $1,220,000. The loan agreements have an interest rate of 12% per annum. Principal and interest is payable over 26 months. Additionally, in connection with the financing, the Company issued 5,575,000 shares of common stock to the lenders as loan fees (See Note 12). The fair value per share of $0.28 (based on recent cash sales prices) was used to compute the relative fair value of the shares in accordance with ASC 470-20 which totaled approximately $679,500 which was recorded as a debt discount with a credit to additional paid-in-capital and such discount is being amortized over the term of the loans. The unamortized discount was $350,522 as of December 31, 2013 and the Company recorded $5,850 in accrued interest.

Of the eighteen above-referenced loans, (i) thirteen of the loans are secured by contract accounts receivable of a Company customer which security interest is subordinate to the lender under the factoring agreement, and (ii) one of the loans is secured by the stock of HRAA.

The Company began paying principal and interest on the above-mentioned notes in early 2013 in accordance with the payment terms. In August 2013, the Company converted $402,083 in investor promissory notes for five (5) individuals into one million six hundred eight thousand three hundred and thirty three (1,608,333) shares of common stock at a conversion price of $0.25 per share.  As a result of the conversion the Company expensed $128,452 of the unamortized discount as interest. Additionally, the Company recorded a loss on conversion of $112,584 as a result of issuing stock at a discount from fair market value.

F-13

HEALTH REVENUE ASSURANCE HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2013 and 2012

Notes payable consisted of the following:

	December 31, 2013			December 31, 2012
Principal amount of notes payable	$	877,500		$	815,000
Unamortized discount		(465,480	)		(338,692	)
Notes payable, net of discount		412,020			476,308
Less current portion		(380,326	)		(202,557	)
Total Long term portion	$	31,694		$	273,751

As of December 31, 2013, principal payments required on long-term debt and notes payable over the next five years and thereafter are as follows:

2014	$	786,584
2015		179,084
2016		44,084
2017		31,248
2018		5,576
Thereafter		147,361
Total	$	1,193,937

8 – FACTORING AGREEMENT

In June 2012, the Company entered into a one-year factoring agreement with a finance company. The agreement automatically renews annually unless terminated by either party. Under the terms of the agreement, the Company, at its discretion, assigns the collection rights of its receivables to the finance company in exchange for an advance rate of 85% of face value. The assignments are transacted with recourse only at the option of the finance company in the event of non-payment. The Company's obligations under the factoring agreement are secured by substantially all assets of the Company. In accordance with ASC 860 "Transfers and Servicing" regarding transfers of receivables with recourse, this factoring arrangement is accounted for as a secured financing. For the year ended December 31, 2013 and 2012, the Company had factored approximately $4,693,000 and $3,850,000, respectively, of receivables and had received cash advances of approximately $4,708,000 and $3,272,000, respectively. Outstanding receivables purchased by the factor as of December 31, 2013 and 2012 were approximately $638,000 and $950,000, respectively, and are included in accounts receivable in the accompanying consolidated balance sheet, and the secured loan due to the lender was approximately $543,000 and $827,000 at December 31, 2013 and 2012, respectively. Factor fees were approximately $138,000 and $119,000 for the year ended December 2013 and 2012, respectively, and are included in interest expenses. (See Note 3)

Although the Company is current in its financial obligations under this factoring agreement, management believes the Company may be in default under the solvency provision and certain non-financial default provisions. The Company has not been notified of any default by the factor company.

9 – CONVERTIBLE PROMISSORY NOTES AND FAIR VALUE MEASUREMENTS

In December 2011, the Company received a deposit of $170,000.  This deposit was an advance on three convertible promissory notes totaling approximately $314,000 signed on February 2, 2012, automatically convertible into future securities sold at 100% of the sale price and non-interest bearing.  These loans qualify as stock settled debt under ASC 480 with a fixed monetary amount of $314,000.  These loans were to mature in August 2012 but were converted into common stock in February 2012.  (See Note 12)

In May 2012, the Company received $300,000 related to five convertible notes. The term of each note was 12 months. Interest was computed at 6% based on a 360 day year and is payable on the maturity date, and the conversion rate was $0.10 per share. Interest was due and payable only if the notes were repaid in cash. These notes were converted to common stock at their contractual conversion rate of $0.10 per share on July 15, 2012. (See Note 12) At the note origination date, the Company recorded a debt discount for the beneficial conversion feature value related to the above referenced convertible note in the amount of $300,000, which is based on the intrinsic value between the fair market value of the Company’s stock and the conversion price. The discount is being amortized to interest expense over the term of the note. In accordance with ASC 470-20-40, upon conversion, the remaining unamortized portion of the beneficial conversion feature value was expensed.

On October 7, 2013, the Company entered into a one-year original issue discount (OID) convertible promissory note with warrants in the amount of $280,000 with Tonaquint, Inc., a Utah corporation (“Tonaquint”). The purchase price for this note and the warrants was $250,000. The Company had the option to repay this note at any time on or before the date that is sixty (60) days from October 7, 2013. The Company recorded a debt discount for the OID of $25,000 and expensed $5,000. The debt was treated as stock settled debt where a put premium of $120,000 was to be recorded over the six-month period to the first conversion date. Tonaquint had the right at any time after the date that is six (6) months from the effective date, at its election, to convert all or any part of the outstanding balance of the note into shares of fully paid and non-assessable common stock of the company based upon a formula that is seventy (70%) percent of the average of the two (2) lowest intra-day trade prices in the fifteen (15) trading days immediately preceding the conversion (the “Conversion Formula”). Tonaquint was granted the right to purchase at any time on or after October 7, 2013 until the date which is the last calendar day of the month in which the fifth anniversary of the “issue date” occurs, 350,000 fully paid and non-assessable shares of the Company’s common stock, par value $.001 per share, as such number may be the adjusted from time to time pursuant to the full ratchet price protection terms and conditions of the warrant. The initial “exercise price” is $0.40 per share of common stock. On November 12, 2013, the note was paid in full with financing received in connection with the sale and issuance of Series A Preferred Stock and warrants pursuant to the Securities Purchase Agreement, dated November 12, 2013, between the Company and the investors named therein. (See Note 12) As mentioned above, the Company issued 350,000 free standing and detachable warrants related to the note. The Company accounted for these warrants issued in accordance with the  GAAP accounting guidance under ASC 815 applicable to derivative instruments, which requires every derivative instrument within its scope to be recorded on the balance sheet as either an asset or liability measured at its fair value, with changes in fair value recognized in earnings. Based on this guidance, the Company determined that the Company's warrants do not meet the criteria for classification as equity due to the price protection provisions. Accordingly, the Company classified the warrants as current liabilities. The warrants are subject to re-measurement at each balance sheet date, with any change in fair value recognized as a component of other income (expense), net in the statements of operations. We will estimate the fair value of these warrants at the respective balance sheet dates, based on the estimated market value of the underlying common stock at the valuation measurement date, the remaining contractual term of the warrant, risk-free interest rates and expected dividends on and expected volatility of the price of the underlying common stock. (See below for December 31, 2013 valuations). As a result of the November 12, 2013 financing and the full ratchet protection, the exercise price of the warrants was reduced to $0.20 per share and 350,000 additional warrants were issued to Tonaquint.

F-14

HEALTH REVENUE ASSURANCE HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2013 and 2012

On October 17, 2013, the Company entered into a one-year OID convertible promissory note in the amount of $142,500 with Tonaquint. The purchase price for this note and the warrant was $125,000. The Company had the option to repay this note at any time on or before the date that is sixty (60) days from October 17, 2013. The Company recorded a debt discount for the OID of $12,500 and expensed $5,000. The debt was treated as stock settled debt where a put premium of $61,071 was to be recorded over the six-month period to the first conversion date. Tonaquint had the right at any time after the date that is six (6) months from the effective date, at its election, to convert all or any part of the outstanding balance of the note into shares of fully paid and non-assessable common stock of the Company based upon the Conversion Formula. Tonaquint was granted the right to purchase at any time on or after October 17, 2013 until the date which is the last calendar day of the month in which the fifth anniversary of the “issue date” occurs, 175,000 fully paid and non-assessable shares of the Company’s common stock, as such number may be the adjusted from time to time pursuant to the full ratchet price protection terms and conditions of the warrant. The initial “exercise price” is $0.40 per share of common stock. On November 12, 2013, the note was paid in full with financing received in connection with the sale and issuance of Series A Preferred Stock and warrants pursuant to the Securities Purchase Agreement, dated November 12, 2013, between the Company and the investors named therein. (See Note 12) As mentioned above, the Company issued 175,000 free standing and detachable warrants related to the  note. The Company accounted for these warrants issued in accordance with the US GAAP accounting guidance under ASC 815 applicable to derivative instruments, which requires every derivative instrument within its scope to be recorded on the balance sheet as either an asset or liability measured at its fair value, with changes in fair value recognized in earnings. Based on this guidance, the Company determined that the Company's warrants do not meet the criteria for classification as equity due to the price protection provisions. Accordingly, the Company classified the warrants as current liabilities. The warrants are subject to re-measurement at each balance sheet date, with any change in fair value recognized as a component of other income (expense), net in the statements of operations. We will estimate the fair value of these warrants at the respective balance sheet dates, based on the estimated market value of the underlying common stock at the valuation measurement date, the remaining contractual term of the warrant, risk-free interest rates and expected dividends on and expected volatility of the price of the underlying common stock. (See below for December 31, 2013 valuations) As a result of the November 12, 2013 financing and the full ratchet anti-dilution provision, the exercise price of the warrants was reduced to $0.20 per share and 175,000 additional warrants were issued to Tonaquint.

At the time the above two notes were paid off, the Company had accreted $33,364 of the put premium and according recognized a gain on extinguishment of $33,364 relating to this put premium. Further, as only $3,459 of the discount was amortized, the Company recorded a loss on early debt extinguishment of $34,041.

Fair Value Measurements – Derivative liability:

The accounting guidance for fair value measurements provides a framework for measuring fair value and requires expanded disclosures regarding fair value measurements.  Fair value is defined as the price that would be received for an asset or the exit price that would be paid to transfer a liability in the principal or most advantageous market in an orderly transaction between market participants on the measurement date.  The accounting guidance established a fair value hierarchy which requires an entity to maximize the use of observable inputs, where available.  This hierarchy prioritizes the inputs into three broad levels as follows.  Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities.  Level 2 inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument.  Level 3 inputs are unobservable inputs based on the Company’s own assumptions used to measure assets and liabilities at fair value.  An asset or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.

Assets and liabilities measured at fair value on a recurring and non-recurring basis consisted of the following at December 31, 2013:

	Carrying Value at December 31,		Fair Value Measurements at December 31, 2013
	2013		(Level 1)		(Level 2)		(Level 3)
Warrant derivative liability (29,940,000 warrants - See Note 12)	$	5,406,000	$	-	$	-	$	5,406,000

The following is a summary of activity of Level 3 liabilities for the period ended December 31, 2013:

Balance at December 31, 2012	$	-
Reclassification of warrant liability		5,771,255
Change in fair value		(365,255	)
Balance December 31, 2013	$	5,406,000

Changes in fair value of the warrant derivative liability is included in other income (expense) in the accompanying consolidated statements of operations.

The Company estimates the fair value of the warrant liability utilizing the Binomial Lattice model, which is dependent upon several variables such as the expected term (based on contractual term), expected volatility of our stock price over the expected term (based on historical volatility), expected risk-free interest rate over the expected term, and the expected dividend yield rate over the expected term. The Company also used the Black-Scholes pricing model as a comparison to the Binomial Lattice method and the results were similar.  The Company believes this valuation methodology is appropriate for estimating the fair value of the warrant derivative liability.  The following table summarizes the assumptions the Company utilized to estimate the fair value of the embedded conversion option at December 31, 2013:

Assumptions	December 31, 2013
Expected term		1.0
Expected Volatility		116	%
Risk free rate		1.2	%
Dividend Yield		0.00	%

There were no changes in the valuation techniques during 2013.  

F-15

HEALTH REVENUE ASSURANCE HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2013 and 2012

10 – COMMITMENTS AND CONTINGENCIES

Commitments

Leases:

Until August 2012, the Company leased certain office equipment under non-cancelable operating lease arrangements.  Monthly payments under the lease agreements were approximately $600 per month. The lease expired in August 2012. In September 2012, the Company started a non-cancellable operating lease for office equipment. The lease term is 5 years. Lease payments during the five years are approximately $560 per month.

On September 1, 2011, the Company entered into a commercial lease agreement for additional office space. The lease term is one year with five successive one-year renewal options. Starting September 1, 2013, the lease has been renewed for one year with a fixed payment of approximately $5,800 per month.

Future minimum lease payments under these leases are as follows:

Years Ending December 31:

2014	$	53,246
2015		6,720
2016		6,720
2017		5,040
Thereafter		-
Total	$	71,726

Capital Leases:

HRAA leases its property and equipment from Dell Financial Services L.L.C. under several capital leases. The economic substance of the leases is that the Company is financing the acquisition of the assets through the lease and accordingly, it is recorded in the Company’s assets and liabilities.

The following is an analysis of the leased assets included in property and equipment:

	December 31, 2013			December 31, 2012
Equipment	$	79,210		$	41,969
Less accumulated depreciation		(33,607	)		(5,926	)
Total	$	45,603		$	36,043

The lease agreements contain  bargain purchase options at the end of the lease terms. The total amount due at December 31, 2013 is $58,876 of which $32,768 is included in short term liabilities.

The following is a schedule by years of future minimum payments required under the lease together with their present value as of December 31, 2013:

Year Ending December 31:
2014	$	32,768
2015		22,527
2016		3,581

Total minimum lease payments		58,876
Less amount representing interest		(9,087	)
Present value of minimum lease payments	$	49,789

Amortization of assets held under capital leases is included with depreciation expense and is approximately $24,200 and $9,400 for the years ended as of December 31, 2013 and 2012, respectively.

Settlement Agreements:

On May 8, 2012, the Company terminated the employment of its Chief Marketing Officer (“CMO”) and subsequently amended its complaint to enforce certain non-competition clauses contained in the employment agreement. The Company sought a declaration of its obligations to pay severance under the terms of its then-existing employment agreement with the CMO.

On July 9, 2012, the Company and the former CMO entered into a settlement agreement to resolve two pending lawsuits arising out of the termination of his employment agreement. The lawsuit was initiated by the Company against the former CMO in the United States District Court for the Southern District of Florida. In addition, the former CMO sued the Company in the United States District Court of the District of Colorado.

F-16

HEALTH REVENUE ASSURANCE HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2013 and 2012

Pursuant to the settlement agreement, the former CMO agreed to abolish all claims and lawsuits against the Company and its CEO and COO and resigned any and all positions which he had or presently may have had with the Company. As part of the settlement agreement, the Company agreed to make eleven (11) payments totaling $232,500 pursuant to the terms of his prior employment agreement. Additionally, the CMO agreed to transfer his 3,299,802 shares to an officer of the Company in 2012. These payments commenced July 2012 and the final payment in the amount of $23,056 was disbursed on July 29, 2013. In addition, the Company has agreed to abolish all claims and lawsuits against the former CMO. The settlement agreement has a seven (7) day grace period for payments to the former CMO, after which time, he may seek court intervention to enforce the payments. Robert Rubinowitz, the former chief operating officer and Andrea Clark, the chief visionary officer, have personally guaranteed the payments of the settlement agreement. As a result of the settlement agreement, both parties dismissed their respective filings and have agreed to not enter any more lawsuits concerning the scope of this matter.

On March 14, 2013, the Company and its former regional sales manager entered into a settlement agreement to resolve one pending lawsuits arising out of the termination of his employment. The lawsuit was initiated by the former regional sales manager against the Company in the United States District Court for the city of Denver, Colorado. Pursuant to the settlement agreement, the former regional sales manager agreed to abolish all claims and lawsuits against the Company. As part of the settlement agreement, the Company agreed to make a payment totaling $11,000 pursuant to the terms of the settlement agreement and general release of all claims executed by both parties. As of December 31, 2013 the Company had accrued $7,000 for settlement payable.

Employment Agreements:

On October 2, 2013 the Company entered into employment agreements with four (4) of its officers and directors. The employment agreements provide for severance benefits, change in control provisions, accrued but unpaid wages and bonuses, accrued but unpaid vacation time, incentive awards, equity and stock options, and other benefits. These four (4) employment agreements were amended on November 12, 2013. As of December 31, 2013, no performance bonuses have been earned. The Company owed Andrea Clark, its former chief executive officer, $75,000 pursuant to the Merger Agreement, which was accrued in the accompanying consolidated financial statements as due to Ms. Clark through September 30, 2013. The balance due to Ms. Clark was formalized in a promissory note in November 1, 2013. In addition, the Company owed Mr. Rubinowitz, its former president, $40,000 pursuant to a promissory note, dated November 1, 2013, for funds advanced in September 2013. On November 12, 2013, the promissory notes to Ms. Clark and Mr. Rubinowitz were paid in full with financing received in connection with the sale and issuance of Series A Preferred Stock and warrants to purchase shares of the Company’s common stock pursuant to the Securities Purchase Agreement, dated November 12, 2013, between the Company and the investors named therein.

Contingencies

From time to time, the Company is involved in litigation matters relating to claims arising from the ordinary course of business. While the results of such claims and legal actions cannot be predicted with certainty, the Company’s management does not believe that there are claims or actions, pending or threatened against the Company, the ultimate disposition of which would have a material adverse effect on our business, results of operations, financial condition or cash flows.

On March 26, 2014, the Company notified Dean Boyer, its chief technology officer, that the Company was terminating his employment with the Company as well as that certain employment agreement with the Company dated October 1, 2013, as amended on November 13, 2013, effective March 31, 2014. On March 28, 2014, the Company received a letter from Mr. Boyer’s counsel demanding payment of $421,062.53 as severance in connection with the termination of Mr. Boyer’s employment agreement. On April 7, 2014, the Company received an additional letter from Mr. Boyer’s counsel demanding an additional $13,370.21 for accrued but unused vacation pay. The Company intends to dispute the amounts claimed to be owed to Mr. Boyer.

11 – STOCK OPTIONS AND WARRANTS

Share Based Compensation

The Company is in the process of establishing a non-qualified stock option plan. In advance of the actual establishment of the plan the Company has granted a total of one million (1,000,000) stock options to an officer. The grant date is that which an employer and its employee reach a mutual understanding of the key terms and conditions of a share-based payment arrangement. This is the date on which the employer becomes contingently obligated to issue equity instruments or transfer assets to the employee who renders the requisite service. The Company is obligated for this grant as adoption of a stock option plan and board approval is considered a mere formality.

Stock Options

During the year ended December 31, 2013, the Company recorded pre-tax compensation expense of $14,822 related to the Company’s 1,000,000 options as discussed above. As of December 31, 2013, there was approximately $206,300 of unrecognized compensation expense related to stock options, which will be recognized over the weighted-average remaining requisite service period of 1.9 years. There were no exercises of stock options for the year ended December 31, 2013.

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model. The 1,000,000 options were valued at $221,121. The estimated value of stock options granted during the year ended December 31, 2013 was $0.22 per share, using the following assumptions:

	2013
Dividend yield (1)		0.0	%
Expected volatility (2)		116	%
5 Year Bond interest rate (3)		1.20	%
Expected life (4)		6.0

(1) Represents cash dividends paid as a percentage of the share price on the date of grant.

(2) Based on historical volatility of the Company’s common stock over the expected life of the options.

(3) Represents the U.S. Treasury rates over maturity periods matching the expected term of the options at the time of grant.

(4) The period of time that options granted is expected to be outstanding based upon the simplified method.

F-17

HEALTH REVENUE ASSURANCE HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2013 and 2012

The following table summarizes stock option activity for the year ended December 31, 2013:

Options	Shares		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term	Aggregate Intrinsic Value ($000)
Outstanding at January 1, 2013		-		-
Granted		1,000,000		0.26	*	$	-
Exercised		-		-
Forfeited or expired		-		-
Outstanding at December 31, 2013		1,000,000	$	0.26	*	$	-
Exercisable at December 31, 2013		-		-	-		-

The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the difference between the Company’s closing stock price on the last trading day of the fourth quarter of 2013 and the exercise price, multiplied by the number of in-the-money options).

* These 1,000,000 options were granted without a specified expiration term.

Warrants

2013

In connection with the promissory notes issued to Tonaquint on October 7, 2013 and October 17, 2013, the Company issued 350,000 and 175,000 warrants, respectively. (See Note 9)  As a result of the Series A Preferred Stock and warrant sale on November 12, 2013, the exercise price of both the 350,000 warrants and 175,000 warrants was reduced to $0.20 per share and an additional 525,000 warrants were issued to Tonaquint pursuant to full ratchet anti-dilution provisions.

On November 12, 2013 and in connection with the Series A Preferred Stock offering, the Company issued 27,000,000 warrants to investors and 1,890,000 warrants were issued as a fee to the placement agent all at an exercise price of $0.30 per share. (See Note 12)

Warrant activity for the year ended December 31, 2013 is as follows:

	Number of Warrants		Weighted Average Exercise Price
Outstanding at December 31, 2012		-	$	-
Granted		29,415,000		0.30
Anti-dilution issuance		525,000		0.20
Exercised		-		-
Forfeited		-		-
Expired		-		-
Outstanding at December 31, 2013		29,940,000	$	0.30
Exercisable at December 31, 2013		29,940,000	$	0.30
Aggregate intrinsic value			$	52,500

All warrants were issued with an exercise term of 5 years.

Warrants outstanding have a weighted average remaining contractual life of 4.87 years as of December 31, 2013. 

12 – STOCKHOLDER’S EQUITY (DEFICIT)

Recapitalization and Deemed Common Stock Issuance

On February 10, 2012, the Company entered into the Merger Agreement with HRAA and Acquisition Sub which was treated for accounting purposes as a reverse recapitalization with HRAA considered the accounting acquirer since the stockholders of HRAA obtained voting and management control of the Company.   Each share of HRAA's common stock was exchanged for the right to receive approximately 1,271 shares of HRAH’s common stock. Before entry into the Merger Agreement, no material relationship existed between HRAH or Acquisition Sub and HRAA.  As part of the recapitalization, the Company is deemed to have issued 13,499,226 shares of common stock, which represents the shares of common stock outstanding in HRAH just prior to the Merger.  There were no recorded assets or liabilities in the Company just prior to the Merger.  All share and per share amounts for all periods presented have been retroactively adjusted to reflect the recapitalization.

Forward Stock Split

On April 13, 2012, the Company’s board of directors authorized a 12.98 for 1 split of its common stock to stockholders of record as of April 13, 2012. Shares resulting from the split were issued on April 26, 2012. In connection therewith, the Company transferred $32,747 from additional paid in capital to common stock, representing the par value of additional shares issued. As a result of the stock split, fractional shares were rounded up. All share and per share amounts for all periods presented have been retroactively adjusted to reflect the stock split.

F-18

HEALTH REVENUE ASSURANCE HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2013 and 2012

Capitalization Changes

On October 8, 2013, the Company amended its articles of incorporation with the Nevada Secretary of State by increasing the number of authorized shares of common stock from 75,000,000 to 500,000,000. This amendment has been retroactively disclosed on the balance sheet.

On October 17, 2013, the Company amended its articles of incorporation with the Nevada Secretary of State to authorize 25,000,000 shares of blank check preferred stock with the authority of the Board to determine the designations, rights, preferences, privileges, limitations and restrictions.(See temporary equity below)

Common Stock

2012:

On February 10, 2012, upon closing of the Merger Agreement, a $250,000 convertible bridge loan was automatically converted into an aggregate of 1,343,749 shares of common stock at the contractual conversion price of $0.19 per share.

On February 10, 2012, concurrently with the closing of the reverse merger, the Company sold 1,410,874 shares of the Company’s common stock for gross proceeds of $350,000 at a purchase price of $0.25 per share in a private placement offering.

On February 10, 2012 concurrently with the closing of the reverse merger, convertible promissory notes totaling $313,908 obtained on February 2, 2012 were converted into 1,265,381 shares of common stock or $0.25 per share based on the contractual conversion rate.

In April 2012, the Company sold 1,394,909 shares of common stock for approximately $349,000 at a price per share of $0.25.

In May 2012, the Company recorded $300,000 to additional paid-in capital for the beneficial conversion value of convertible debt (See Note 9).

In July 2012, pursuant to a settlement agreement (See Note 10), the Company agreed to pay $232,500 and 3,299,802 common shares were returned to the Company.  The Company charged equity for the $232,500 in accordance with the settlement provisions of ASC 718 “Stock Compensation”.

In July 2012, in connection with the settlement agreement discussed in Note 10, upon return of the 3,299,802 shares to the transfer agent, the shares were simultaneously reissued to delegees of Andrea Clark, however, such shares were unvested and subsequently cancelled as a null and void issuance.

On July 15, 2012, the holders of the five convertible notes issued by the Company in May 2012 exercised their rights under the agreement and converted $300,000 into 3,000,000 shares of common stock at the contractual conversion rate of $0.10 per share. 

In August 2012, the Company sold 77,743 shares of common stock for $22,000 at a price per share of $0.28.

During the period from October 2012 through December 2012, the Company sold 1,468,786 shares of common stock for $335,600 at prices per share between $0.20 and $0.28.

In December 2012, the Company issued 2,375,000 shares of common stock in connection with a financing transaction as more fully described in Note 6.

During 2012, the Company incurred approximately $326,000 in offering costs that were charged to additional paid-in capital.

2013:

On January 15, 2013, the Company sold 46,429 shares of common stock for $13,000 at a price per share of $0.28.

On January 31, 2013, the Company issued 50,266 shares of common stock as compensation to an employee for services rendered through March 31, 2013. The shares were valued at $0.49 per share based on the quoted trading price per share or $24,630, which was expensed.

In February 2013, the Company issued 5,575,000 shares of common stock in connection with a financing transaction as more fully described in Note 7.

In March 2013, the Company entered into a one-year agreement with a consultant for 230,000 vested shares and cash consideration. The shares were valued on the agreement date, which was the measurement date at $0.35, based on the quoted trading price, and the $80,500 was recorded as a prepaid asset and is being expensed over the term of the contract. The shares were issued on April 1, 2013 to the consultant.

On April 1, 2013, the Company issued an aggregate of 54,847 shares of common stock as compensation to two employees for services rendered through March 31, 2013. The shares were valued at $0.40 per share based on recent cash sales by the Company or $21,939, which was expensed.

On May 19, 2013, the Company sold 625,000 shares of common stock for $250,000 at a price per share of $0.40.

On May 24, 2013, the Company sold 125,000 shares of common stock for $50,000 at a price of $0.40 per share.

F-19

HEALTH REVENUE ASSURANCE HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2013 and 2012

On June 21, 2013, the Company sold 750,000 shares of common stock for $300,000 at a price per share of $0.40.

On June 27, 2013, the Company entered into a financial advisor and agent placement agreement whereby the Company had the option to pay in cash or issue 100,000 shares of common stock. The shares were valued on the agreement date, which was the measurement date at $0.51 per share based on the quoted trading price, and the $51,000 is being expensed over the term of the contract. The Company issued the shares in September 2013.

On July 8, 2013, the Company sold 500,000 shares of common stock for $200,000 at a price per share $0.40.

On August 7, 2013, the Company sold 500,000 shares of common stock for $200,000 at a price per share $0.40.

On August 21, 2013, the Company sold 100,000 shares of common stock for $25,000 at a price per share of $0.25.

On August 27, 2013, the Company issued 400,000 shares of common stock for $100,000 at a price per share of $0.25.

On August 30, 2013, the Company issued 400,000 shares of common stock for $100,000 at a price per share of $0.25 per share.

On August 22, 2013 and August 28, 2013, the Company converted $402,083 in unsecured  promissory notes for five (5) individuals into one million six hundred eight thousand three hundred and thirty three (1,608,333) shares of common stock at a conversion price of $0.25 per share. The shares of common stock were valued at $514,666 based on the quoted trading price of $0.32 and accordingly, the Company recorded a loss on conversion of $112,583.

In September 2013, the Company issued 95,052 shares of common stock as compensation to three employees for services rendered through June 30, 2013. The shares were valued at $0.48 per share based on the quoted trading price per share or $45,625, which was expensed.

On September 6, 2013, the Company entered into a three-year agreement with a company to provide consulting and recruiting services. Upon execution of the agreement, the Company issued 50,000 shares of common stock valued at $0.30 per share based on the quoted trading price, in consideration of their services to be rendered for the first year of the agreement. The $15,000 is being expensed over 12 months.

On September 9, 2013, the Company entered into a one year consulting agreement with a stockholder, Mr. Michael Ciprianni, to provide certain consulting services related to the Company’s business in exchange for four million one hundred twenty five thousand (4,125,000) shares of common stock in consideration of the services to be rendered. The shares were valued on the agreement date, which was the measurement date at $0.28 per share based on the quoted trading price, and the $1,155,000 is being expensed over the term of the contract.

On September 30, 2013, the Company issued 187,500 shares of common stock as compensation to two employees for services rendered through September 30, 2013. The shares were valued at $0.23 per share based on the quoted trading price per share or $43,125, which was expensed.

On October 9, 2013, the Company issued 100,000 shares of common stock as compensation to a consultant to provide services. The shares were valued at $0.24 per share based on the quoted trading price per share or $24,000, which was recorded as prepaid and is being expensed over the term of the agreement, which is six (6) months.

On December 31, 2013, in accordance with a 2012 employment agreement, the Company issued 75,000 shares of common stock as compensation to an employee for services rendered through December 31, 2013. The shares were valued at $0.25 per share based on the quoted trading price per share or $18,750, which was expensed.

Temporary Equity - Preferred Stock

On November 12, 2013, the Company entered into a Securities Purchase Agreement for the sale of Series A 8% Redeemable Convertible Preferred Stock (“Series A stock”) and warrants to purchase shares of the Company’s common stock. The Company sold 13,500,000 of Series A stock and warrants to purchase 27,000,000 shares of the Company’s common stock for gross proceeds of $5,400,000. The net proceeds to the Company after offering costs is $4,903,652. The Series A stock is convertible into common stock on a 2 for 1 basis and is redeemable by the Company, at the option of the investor, 48 months from November 12, 2013 at the stated value of $0.40 per share or a total of $5,400,000 plus accumulated but unpaid dividends, whether declared or not. Due to the redemption feature the Series A Stock is reflected as temporary equity at December 31, 2013 as follows:

Series A sale price	$	5,400,000
Less: Reclassification of warrant fair value to liability		(5,669,837	)
Offering costs		(496,348	)
Plus: Deemed dividend		2,634,185
Series A dividends		60,000
	$	1,928,000

The Company also issued warrants to purchase 1,890,000 shares of common stock to a placement agent. (See Note 11).

The Company recorded a beneficial conversion value for the preferred stock of approximately $2.6 million as an immediate charge to accumulated deficit as it is considered a constructive dividend to Series A preferred stockholders. As part of this equity financing transaction, the Company issued 27,000,000 five-year warrants  (See Note 11) with immediate vesting rights to convert into common shares at an initial exercise price of $0.30 per share under price protection provisions. The warrants also contain cashless exercise provisions. Due to price protection provisions in the warrants, the Company will account for these warrants issued in accordance with the US GAAP accounting guidance under ASC 815 applicable to derivative instruments, which requires every derivative instrument within its scope to be recorded on the balance sheet as either an asset or liability measured at its fair value, with changes in fair value recognized in earnings. (See Notes 9 and 11)

In connection with the Securities Purchase Agreement, the Company entered into a registration rights agreement  with the Purchasers, pursuant to which the Company agreed to register all of the shares of common stock underlying the Series A Preferred Stock and the shares of common stock underlying the Warrants on a registration statement on Form S-1 (the “Registration Statement”) to be filed with the SEC within 30 calendar days following the Closing Date (the “Filing Deadline”) and to use its best efforts to cause the Registration Statement to be declared effective under the Securities Act within 90 calendar days following the Filing Deadline. The Registration Statement was filed on December 11, 2013, as amended December 20, 2013 and declared effective on December 24, 2013.

F-20

HEALTH REVENUE ASSURANCE HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2013 and 2012

13 – CONCENTRATIONS

Sales to four (4) hospital customers represented approximately 60% of our revenues for the year ended December 31, 2013.  We have direct relationships with the individual hospitals and the health systems.

Hospital Customer A	42.0	%
Hospital Customer B	6.0	%
Hospital Customer C	6.0	%
Hospital Customer D	6.0	%
Total	60.0	%

Sales to thirteen (13) hospitals were approximately 89% of our revenues for the year ended December 31, 2012.

Five and four vendors represented approximately 56% and 67% of our outstanding accounts payable balance as of December 31, 2013 and December 31, 2012, respectively.

Four and one customers represented approximately 64% and 62% of our accounts receivable as of December 31, 2013 and December 31, 2012, respectively.

14 – INCOME TAXES

The Company’s subsidiary, HRAA, elected to convert from a Subchapter S corporation for Federal income tax purposes to a C corporation effective October 21, 2011. Accordingly, HRAA’s income or losses are passed through to the stockholders of HRAA for the period January 1 to October 21, 2011. The Company will absorb the tax effects of any income or losses subsequent to the date of conversion to a C corporation and in future years.

The Company has incurred aggregate cumulative net operating losses of approximately $4,209,000 for C corporation income tax purposes through December 31, 2013. The net operating loss carries forward for income taxes, purposes and may be available to reduce future years’ taxable income. These carry forwards will expire, if not utilized, starting in 2031 through 2033. Management believes that the realization of the benefits from these losses appears not more likely than not due to the Company’s limited operating history and continuing losses for income tax purposes. Accordingly, the Company has provided a 100% valuation allowance on the deferred tax asset to reduce the asset to zero. Management will review this valuation allowance periodically and make adjustments as warranted.

The Company’s income tax expense (benefit) differs from the “expected” tax expense for Federal income tax purposes computed by applying a Federal corporate tax rate of 34% to loss before income taxes as follows:

	Year ended			Year ended
	December 31, 2013			December 31, 2012
U.S. Federal "expected" income tax	$	(1,860,902	)	$	(495,540	)
State income tax		(198,679	)		(52,906	)
Non-deductible beneficial conversion interest		-			102,000
Stock compensation		252,366			24,769
Change in fair value of warrant liability		(124,187	)		-
Loss on extinguishment of debt		49,852			-
Other		23,585			-
Change in valuation allowance		1,857,964			421,677
Total provision for income taxes	$	-		$	-

The tax effects of temporary differences that give rise to significant portions of deferred tax assets and liabilities at December 31, 2013 and 2012 are as follows:

	2013			2012
Deferred tax assets:
Net operating loss carry forward	$	1,593,719		$	586,600
Stock options		5,578			-
Accrued salary and other		-			35,821
Accrual to cash timing difference		859,735			-
Total gross deferred tax assets		2,459,032			622,421
Deferred tax liabilities:
Depreciation		(9,890	)		(31,244	)
Total gross deferred tax liabilities		(9,890	)		(31,244	)
Less valuation allowance		(2,449,142	)		(591,177	)
Net deferred tax assets	$	-		$	-

A deferred tax asset of approximately $169,500 results from the C corporation taxable losses totaling $434,509 from the period October 22, 2011 through December 31, 2011. The valuation allowance at December 31, 2012 was $591,177. The increase during 2013 was $1,857,964.

F-21

HEALTH REVENUE ASSURANCE HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2013 and 2012

The Company believes its tax positions are all highly certain of being upheld upon examination. As such, the Company has not recorded a liability for unrecognized tax benefits. As of December 31, 2013, tax years 2013, 2012 and 2011 remain open for Internal Revenue Service audit. The Company has received no notice of audit from the Internal Revenue Service for any of the open tax years.

The Company follows the provisions of ASC 740-10, Accounting for Uncertain Income Tax Positions. When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. In accordance with the guidance of ASC 740-10, the benefit of a tax position is recognized in the financial statementsin the period during which, based on all available evidence, management believes it is more likely than not that the position will besustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset oraggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largestamount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. Theportion of the benefits associated with tax positions taken that exceeds the amount measured as described above should be reflected asa liability for unrecognized tax benefits in the accompanying consolidated balance sheets along with any associated interest and penalties that wouldbe payable to the taxing authorities upon examination.

15 – RELATED PARTY TRANSACTIONS

The Company owed Andrea Clark $75,000. The balance due to Ms. Clark was formalized in a promissory note dated November 1, 2013. The Company also owed Robert Rubinowitz $40,000 pursuant to a promissory note dated November 1, 2013 for funds advanced in September 2013. On November 12, 2013 the promissory notes to Ms. Clark and Mr. Rubinowitz were paid in full from the net proceeds of the Securities Purchase Agreement, dated November 12, 2013, among the Company and the investors named therein.

In March 2013, the Company entered into a contract with ResumeBear, Inc. (“ResumeBear”), a related party, to provide website development services in the amount of $302,764. Mr. Peter Russo, a member of the Company’s board of directors, is the chief executive officer and a director of ResumeBear. Mr. Michael Brainard, a member of the Company’s board of directors, is also a director of ResumeBear. Revenues recorded from ResumeBear were $211,239 for the year ended December 31, 2013. In January 2014, the Company wrote-off approximately $108,000 of the account receivable with ResumeBear which is reflected in the December 31, 2013 consolidated financial statements as an allowance of $16,244 and a reduction of revenue of approximately $92,000. Due to cost overruns and product delivery issues relating primarly to a third party subcontractor, the Company estimates the total loss on this contract is approximately $108,000 through December 31, 2013 and another $88,000 through the date of this report.

16 – SUBSEQUENT EVENTS

Separation Agreement with Robert Rubinowitz

On April 14, 2014, the Company entered into a separation agreement (the “Separation Agreement”) with Robert Rubinowitz, its President, Chief Operating Officer, Secretary, Treasurer and director, which provides for the termination of Mr. Rubinowitz's employment and his resignation as an officer and director of the Company, and the termination of that certain Employment Agreement dated October 1, 2013, as amended on November 12, 2013, between the Company and Mr. Rubinowitz (the “Employment Agreement”).  The Separation Agreement provides that Mr. Rubinowitz will receive (i) $175,000 to be paid in equal increments of $3,365.39 on each of May 2, 2014, May 16, 2014, May 30, 2014, June 14, 2014 and June 27, 2014 and thereafter equal increments of $7,532.05 with the last payment date being April 17, 2015, (ii) $23,557.70 in accrued and unpaid base salary, bonus and vacation earned through April 11, 2014 payable in equal installments of $1,121.80 beginning on July 11, 2014, and (iii) $6,730.77 in accrued salary, in each case, less all applicable deductions and withholdings, from the Company in full and final satisfaction of the amounts due to Mr. Rubinowitz pursuant to the terms of the Employment Agreement.

The Separation Agreement also requires the Company to use commercially reasonable efforts to have Mr. Rubinowitz and Andrea Clark removed as a guarantors under certain of the Company's debt obligations.  The Company also agreed to pay an early termination fee for the early return of Mr. Rubinowitz's leased vehicle.  The Company further agreed to file a Registration Statement with the SEC to register the resale of Mr. Rubinowitz's outstanding common stock as of the date of Separation Agreement.

The foregoing description of the Separation Agreement does not purport to be complete and is qualified in its entirety by reference to the complete text of the Separation Agreement, a copy of which is attached as Exhibit 10.22 to this Annual Report on Form 10-K.

Termination of Named Executive Officers

On March 26, 2014, the Company notified Dean Boyer, its chief technology officer, that the Company was terminating his employment with the Company as well as that certain employment agreement with the Company dated October 1, 2013, as amended on November 13, 2013, effective March 31, 2014. On March 28, 2014, the Company received a letter from Mr. Boyer’s counsel demanding payment of $421,062.53 as severance in connection with the termination of Mr. Boyer’s employment agreement. On April 7, 2014, the Company received an additional letter from Mr. Boyer’s counsel demanding an additional $13,370.21 for accrued but unused vacation pay.

On April 15, 2014, the Company notified Joseph Brophy, its senior vice president of operations, that the Company was terminating his employment with the Company as well as that certain letter agreement, dated December 5, 2012, both effective April 25, 2014.

F-22

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act that are designed to ensure that information required to be disclosed in our reports filed or submitted to the SEC under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms, and that information is accumulated and communicated to management, including the principal executive and financial officer as appropriate, to allow timely decisions regarding required disclosures. Our principal executive officer and principal financial officer evaluated the effectiveness of disclosure controls and procedures as of December 31, 2013, pursuant to Rule 13a-15(b) under the Exchange Act. Based on that evaluation, our principal executive officer and principal financial officer concluded that, as of the end of the period covered by this report, the Company’s disclosure controls and procedures were not effective to ensure that information required to be included in our periodic SEC filings is recorded, processed, summarized, and reported within the time periods specified in the SEC rules and forms. We have concluded that our disclosure controls and procedures are not effective.

We lack internal controls and procedures due in part to the Company’s lack of sufficient personnel with expertise in the area of SEC reporting, generally accepted accounting principles (GAAP) and tax accounting procedures, as well as our lack of sufficient financial resources to implement the policies and controls required pursuant to the Exchange act. At this time, we also have insufficient segregation of duties among our accounting personnel. We began to take steps to address these matters and have hired an internal control specialist to assist in the design, implementation, and test of adequate controls.

Management’s Report on Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. Internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15(d)-15(f)) includes those policies and procedures that: (a) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (b) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles in the United States of America, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (c) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the consolidated financial statements.

Internal control over reporting, because of its inherent limitations, may not prevent or detect misstatements. Projections of any evaluation of effectiveness for future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

As of December 31, 2013, management carried out an assessment of the effectiveness of our internal control over financial reporting based on the framework in “Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on its evaluation, our management concluded that our internal control over financial reporting was not effective as of December 31, 2013.

As of December 31, 2013, management identified certain matters that constituted a material weakness in our internal controls over financial reporting. Specifically, we lack internal controls and procedures due in part to the Company’s lack of sufficient personnel with expertise in the area of SEC, generally accepted accounting principles (GAAP) and tax accounting procedures. We began to take steps to address these matters as we have hired an internal control consultant to assist in the design, implementation, and test of adequate controls.

We have made pivotal progress to mitigate internal control weaknesses; however, we must still complete the process of design-specific control procedures and test their effectiveness, and maintaining sufficient personnel to implement these tasks before we can report that this weakness has been fully remediated.

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

Changes in Internal Control over Financial Reporting

As described above, we reviewed our internal controls over financial reporting and there were no changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Rule 13a-15 under the Exchange Act that occurred during the fourth quarter of our last fiscal year and have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

26

Item 9B. Other Information

On March 19, 2014, the Company received a notice from one of its significant customers, Baptist Memorial Health Care Corporation, that it does not intend to renew its services agreement with the Company.  As such, the services agreement will terminate on September 30, 2014. The customer and the Company are in discussions to realign the customer's current contract obligations of ICD-10 staffing commitments to other services under new terms and pricing structures.

Resignation of Directors

On April 2, 2014, Mitchell D. Kaye, a member of our board of directors, resigned. On April 4, 2014, David Kroin, a member of our board of directors, resigned.

Separation Agreement with Robert Rubinowitz

On April 14, 2014, the Company entered into a separation agreement (the “Separation Agreement”) with Robert Rubinowitz, its President, Chief Operating Officer, Secretary, Treasurer and director, which provides for the termination of Mr. Rubinowitz's employment and his resignation as an officer and director of the Company, and the termination of that certain Employment Agreement dated October 1, 2013, as amended on November 12, 2013, between the Company and Mr. Rubinowitz (the “Employment Agreement”).  The Separation Agreement provides that Mr. Rubinowitz will receive (i) $175,000 to be paid in equal increments of $3,365.39 on each of May 2, 2014, May 16, 2014, May 30, 2014, June 14, 2014 and June 27, 2014 and thereafter equal increments of $7,532.05 with the last payment date being April 17, 2015, (ii) $23,557.70 in accrued and unpaid base salary, bonus and vacation earned through April 11, 2014 payable in equal installments of $1,121.80 beginning on July 11, 2014, and (iii) $6,730.77 in accrued salary, in each case, less all applicable deductions and withholdings, from the Company in full and final satisfaction of the amounts due to Mr. Rubinowitz pursuant to the terms of the Employment Agreement.

The Separation Agreement also requires the Company to use commercially reasonable efforts to have Mr. Rubinowitz and Andrea Clark removed as a guarantors under certain of the Company's debt obligations.  The Company also agreed to pay an early termination fee for the early return of Mr. Rubinowitz's leased vehicle.  The Company further agreed to file a Registration Statement with the SEC to register the resale of Mr. Rubinowitz's outstanding common stock as of the date of Separation Agreement.

The foregoing description of the Separation Agreement does not purport to be complete and is qualified in its entirety by reference to the complete text of the Separation Agreement, a copy of which is attached as Exhibit 10.22 to this Annual Report on Form 10-K.

Dean Boyer Termination

On March 26, 2014, the Company notified Dean Boyer, its chief technology officer, that the Company was terminating his employment with the Company as well as that certain employment agreement with the Company dated October 1, 2013, as amended on November 13, 2013, effective March 31, 2014.  On March 28, 2014, the Company received a letter from Mr. Boyer’s counsel demanding payment of $421,062.53 as severance in connection with the termination of Mr. Boyer’s employment agreement. On April 7, 2014, the Company received an additional letter from Mr. Boyer’s counsel demanding an additional $13,370.21 for accrued but unused vacation pay. The Company intends to dispute the amount claimed to be owed to Mr. Boyer.

Appointment of  Tim Lankes as Director

On April 12, 2014, the board of directors appointed Tim Lankes, the Company's chief executive officer, as a director. Certain biographical information is provided about Mr. Lankes in Item 10 below, and his employment agreement is summarized under "Employment Agreements" in Item 11 below.

Amendment to Bylaws

On and effective April 14, 2014, the Company's board of directors amended and restated the Company’s Bylaws. The following is a summary of changes effected by adoption of the Second Amended and Restated Bylaws. The following description of the Second Amended and Restated Bylaws does not purport to be complete and is qualified in its entirety by reference to the Second Amended and Restated Bylaws filed as Exhibit 3.2 to this Annual Report on Form 10-K.

Joseph Brophy Termination

On April 15, 2014, the Company notified Joseph Brophy, its senior vice president of operations, that the Company was terminating his employment with the Company as well as that certain letter agreement, dated December 5, 2012, both effective April 25, 2014.

27

GENERAL

In addition to the amendments described below, the Second Amended and Restated Bylaws include certain changes to (1) clarify language, (2) comply with or confirm to Nevada law and (3) make various technical corrections and non-substantive changes. The Second Amended and Restated Bylaws are referred to herein as the amended Bylaws.

ARTICLE I. STOCKHOLDERS.

Procedures for Calling and Holding Special Stockholders Meetings. The amended Bylaws provide that only the Chairman of the Board of Directors, the President, or a majority of the Board of Directors may call a special meeting of the stockholders.

Annual Meetings of Stockholders.  The amended Bylaws provide that the annual meeting of stockholders will be held at the date and time set by the Board of Directors.  Nevada law provides, however, that if an annual meeting is not held (or directors are not elected by written consent) within eighteen months after the last annual meeting of the stockholders (or election of directors by written consent), a stockholder may petition a Nevada court to require such a meeting.

Matters that May be Brought Before a Meeting of Stockholders.  The amended Bylaws limit the matters that may be brought before a special meeting to those specified in the notice of the meeting and, with respect to annual meetings of stockholders, to those that are: (a) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors (or any duly authorized committee thereof), (b) otherwise properly brought before the annual meeting by or at the direction of the Board of Directors (or any duly authorized committee thereof), or (c) otherwise properly brought before the annual meeting by any stockholder of the Company (i) who is a stockholder of record on the date of the giving of the notice and on the record date for the determination of stockholders entitled to notice of and to vote at such annual meeting and who complies with certain notice procedures set forth in the amended Bylaws.  The notice procedures are detailed and require, among other things, disclosure by the stockholder of any interest in the matter being presented and the stockholder's direct, indirect or potential interest in the Company by way of stock ownership, right to acquire stock or through derivatives, such as swap, option or short interests.

Nomination of Directors. The amended Bylaws provide that directors may be nominated either by the Board or by a stockholder.  To nominate a director, a stockholder must meet certain requirements substantially similar to those required to bring a matter before a meeting of the stockholders, including record date requirements and advance, written notice requirements.

Action by Stockholders.  The amended Bylaws continue to provide that action by the stockholders may be either taken at a meeting of the stockholders at which a quorum is present or by the written consent of stockholders holding a majority of the voting power of the Company's issued and outstanding capital stock.

28

ARTICLE II. BOARD OF DIRECTORS

Committees.  The amended Bylaws continue to provide that the Board of Directors may delegate authority to committees of the Board, but the authority of such a committee may not extend to: (i) adopting an agreement of merger or consolidation under Sections 92A.005 to 92A.270, inclusive, of the Nevada Revised Statutes, (ii) approving the sale, lease or exchange of all of the Company's property and assets under Section 78.565 of the Nevada Revised Statutes, (iii) amending the Articles of Incorporation of the Corporation, (iv) recommending to the stockholders a dissolution of the Corporation or a revocation of a dissolution, or (v) declaring a dividend.

Removal of Directors.  The amended Bylaws provide that it requires a 2/3 majority of the shares of the Company's stock entitled to vote to remove a member of the Board of Directors, with or without cause.  By contrast, the prior bylaws required only a majority of such shares to remove a director.  The prior provision was, however, inconsistent with Nevada law, which requires the 2/3 majority included in the amended Bylaws.

Changes in Capital Structure.  The prior Bylaws included a provision indicating that the Board of Directors had the authority to change the Company's capital structure.  This provision has been eliminated in the amended Bylaws.

ARTICLE VI.  AMENDMENTS

Authority to Amend the Bylaws.  The amended Bylaws grant exclusive authority to the Board of Directors to amend the Bylaws.

29

PART III

Item 10. Directors, Executive Officers and Corporate Governance

Directors and Executive Officers

Set forth below are the names, ages and other biographical information of our directors and executive officers as of April 15, 2014:

Name	Age	Position
Tim Lankes	54	Chief Executive Officer and Director
Andrea Clark	53	Chief Visionary Officer and Chairman of the Board
Evan McKeown	55	Chief Financial Officer and Chief Administrative Officer
Peter Russo	57	Director
Michael Brainard	44	Director
Joseph Brophy	61	Senior Vice President of Operations

The following is a description of the business experience of each of our executive officers and directors:

Tim Lankes, 54, Chief Executive Officer and Director

Mr. Lankes has served as our chief executive officer since February 2014 and as our director since April 2014. From May 2011 until December 2013, Mr. Lankes served as vice president and chief operating officer for Parallon Technology Solutions, an IT outsourcing and consulting subsidiary of Hospital Corporation of America. He previously served as chief operating officer of Christ Presbyterian Church and Academy from July 2009 until August 2011. Prior to that Mr. Lankes held several senior leadership positions at Perot Systems Corporation, over a 15 year tenure, including managing Perot's International Healthcare Division and culminated in his leading their Ambulatory IT and Revenue Cycle Services Division. Mr. Lankes has over 30 years of military and business leadership experience including successful transformations, startup operations and creating sustained growth in healthcare services and consulting. Mr. Lankes holds a B.A. degree in Management from Abilene Christian University and a Master’s of Business Administration from the University of Tennessee. He has served our country with honor as a First Lieutenant in the U.S. Army's Field Artillery and as a Field Artillery Captain in the Tennessee and Minnesota Army National Guard. Mr. Lankes was nominated to the board of directors because of his leadership and consulting experience with profit and non-profit organizations including strategic planning, business development and start-up operations.

Andrea Clark, 53, Chairman of the Board of Directors and Chief Visionary Officer

Ms. Clark has served as chairman of our board of directors since the Merger in February 2012 and previously served as our chief executive officer from February 2012 until February 2014 when she was appointed our chief visionary officer. Prior to the Merger, Ms. Clark served as chief executive officer of HRAA since she founded the company in 2001. Ms. Clark is a health information management expert, having working with hospitals, information systems, outpatient coding, operational and compliance training expertise, including hospital-based and free-standing day surgery sites, emergency room, hospital based clinics and ancillary diagnostic service areas for the last twenty-five years. Ms. Clark received her BS in Health Information Sciences from the University of Wisconsin. She is also certified by the American Health Information Management Association as a Registered Health Information Administrator (RHIA) and by the American Academy of Professional Coders as a Certified Coding Specialist (CCS) and as a Certified Procedural Coder-Hospital (CPCH). Ms. Clark was nominated to the board of directors because of her experience as a healthcare industry luminary, author and speaker with more than 30 years of experience affording the company in-depth prospective, insight and forethought regarding the healthcare revenue cycle, as well as being the founder of HRAA.  

30

Evan McKeown, 55, Chief Financial Officer and Chief Administrative Officer

Mr. McKeown has served as our chief financial officer since April 2013 and as our chief administrative officer since February 28, 2014. Prior to joining the Company, Mr. McKeown served as chief financial officer Perry Baromedical, a regulated medical device manufacturer and world leader in the manufacture, installation and service of FDA approved Hyperbaric Oxygen Chambers, from December 2011 until May 2012.  From March 2009 to December  2011, Mr. Keown was an independent consultant providing tax, consulting and business advisory services. Mr. McKeown also served as chief financial officer and controller of National Healing Corporation, a leader in providing comprehensive outpatient wound care centers and wound and disease management solutions for hospitals, from November 2007 to February 2009. During his tenure at National Healing Corporation, Mr. McKeown gained relevant experience with healthcare coding and hospital contract negotiations. Prior to that, Mr. McKeown was the senior vice president, chief financial officer and chief accounting officer for Applied Digital Solutions, a former publicly traded company that provided radio frequency identification and security technology for various consumer and commercial applications. Mr. McKeown also served as a Tax Manager for Ernst & Young and was a senior accountant with Coopers & Lybrand. Mr. McKeown received his B.S. in Business Administration from the University of Maine and is licensed as a Certified Public Accountant in the State of Maine.

Peter Russo, 57, Director

Mr. Russo has served as our director since August 2013. Mr. Russo currently serves as chief executive officer and director of Resume Bear Holdings Corp. a startup online job search technology company, since January 2014 and August 2013, respectively. Previous to that Mr. Russo served as chief financial officer and treasurer of magicJack VocalTec Ltd., a publicly traded company listed on the NASDAQ under the symbol “CALL,” from July 2010 to May 2013 and also served as its principal accounting officer. Prior to his appointment as chief financial officer of magicJack VocalTec Ltd., Mr. Russo served as chief financial officer of YMax Corp from May 2005 to July 2010. Prior to joining YMax, from 1996-1999, Mr. Russo was a consultant and served as chief financial officer of Group Long Distance, Inc. (“GLD”), a publicly traded reseller of local and long distance services, that was previously listed on the NASDAQ under the symbol “GLDI.”  Prior to joining GLD, Mr. Russo was the Executive Vice President of the State Bank of South Australia. Mr. Russo currently serves on the Advisory Board of Ocho Gaming, LLC. Ocho Gaming is a premiere operator and provider of online gaming in the Latin American market. Mr. Russo, along with his wife, is co-founder of FriendlyBands LLC a maker of craft and bracelet products. Mr. Russo holds a B.B.A. degree from Pace University in New York.  Mr. Russo was nominated to the board of directors because of his past experience as chief financial officer of other publicly traded companies and his knowledge to effectively participate as a board member.

Michael Brainard, 44, Director

Mr. Brainard has served as our director since September 2013. Mr. Brainard is currently chief executive officer of Brainard Strategy Inc. since 2005. Mr Brainard has served as a director of ResumeBear Holdings Corp. since August 2013 and previously served as its chief executive officer from August 2013 until January 2014. Mr Brainard is also the chief executive officer and a director of ResumeBear, Inc. since July 2012. Mr. Brainard brings over 20 years of experience to the board of directors as a management consultant, senior executive, executive coach, manager, entrepreneur, and researcher. As a management consultant, Mr. Brainard has designed and conducted process re-engineering and re-structuring, organizational assessments, leadership development initiatives, performance management systems, change management processes, and a variety of strategic planning initiatives. Additionally Mr. Brainard has worked as a post-acquisition internal and external integration leader. Mr. Brainard has provided strategy and consulting services to companies such as Scripps, AMN Healthcare, AccentCare, Memorialcare, and Patient Safe Solutions. He holds a B.A. in Psychology from the University of Delaware, a M.S. in Industrial Psychology from Alliant International University and a Ph.D. in Industrial Psychology from Alliant International University. Mr. Brainard was nominated to the board of directors due to his 20 years of strategy consulting experience, much of which is in the healthcare space.

Joseph Brophy, 61, Senior Vice President of Operations

Mr. Brophy has served as our senior vice president of operations since January 2013. As Senior Vice President of Operations, Mr. Brophy is responsible for overseeing all day-to-day operations of HRAA’s products and services, including technology and analytics solutions, coding, education, auditing, consulting and ICD-10 transition solutions, to ensure the very best customer experience. Previous to that Mr. Brophy served as the Director of Healthcare Sales-East Coast for Axway Inc. from June 2006 until January 2013. Mr. Brophy is a seasoned executive in the healthcare technology sector and understands the necessities of HRAA’s core customer segment. Mr. Brophy is a vital component of our team as we continue to deliver products and services that safeguard our customers and partners. Mr. Brophy brings over 25 years of healthcare operations, technology, consulting, business and sales expertise to HRAA. He has held roles as a hospital COO, Consultant, Director of Business Development and Regional Sales Executive. Mr. Brophy holds a Master of Arts, Administration from Rider University and a Bachelor of Arts from Saint Francis University.

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Section 16(a) Beneficial Ownership Compliance

As of the date of this report, we are not subject to Section 16(a) of the Securities Exchange Act of 1934.

Corporate Governance

The board of directors has not adopted corporate governance principles. Currently, the Company’s Chief Visionary Officer also holds the position of Chairman of the board of directors. In the future, however, the board of directors may reconsider whether its Chief Visionary Officer should also serve as the board of directors Chairman.

Audit Committee and Financial Expert

We do not have a standing audit committee of the board of directors. Management has determined not to establish an audit committee at present because of our limited resources and limited operating activities do not warrant the formation of an audit committee or the expense of doing so. We do not have a financial expert serving on the board of directors.

Compensation Committee and Nominating Committee

We currently do not have a compensation committee or a nominating committee. Determining compensation for our officers and directors is done by our board of directors.

Code of Conduct and Corporate Ethics Policy

Our board of directors has approved, and we have adopted, a Code of Conduct and Corporate Ethics Policy (the "Code of Conduct"), which applies to all of our directors, officers and employees. Our board of directors has also approved, and we have adopted, a Code of Ethics for Senior Financial Officers (the "Code of Ethics for SFO"), which applies to our Directors, Senior Financial Officers and management team in contact with key financial data. The Code of Conduct and the Code of Ethics for SFO are available free of charge upon written request to Health Revenue Assurance Holdings, Inc., 8551 West Sunrise Boulevard, Unit 304, Plantation, Florida 33322, Attention: Chief Financial Officer.

Indemnification Agreements

In November 2013, in connection with the appointments of David Kroin and Mitchell Kaye as directors, the Company entered into indemnification agreements with certain of its officers and directors, which indemnify such officers and directors from proceedings related to the fact that he or she was/is a director or officer or arising while he or she was/is serving as a director or officer.

Item 11. Executive Compensation

Summary Compensation Table

The following table presents information concerning compensation for each of our named executive officers for services in all capacities during our fiscal 2013 and 2012 years:

Name and Principal Position	Year	Salary ($)		Bonus ($)		Stock Awards ($)		Option Awards ($)		Non-equity Incentive Plan Compensation ($)		All Other Compensation ($)			Total ($)
Andrea Clark	2013	$	178,365		–	–		–			–	$	10,312	(2)	$	188,677
Chief Executive Officer (1)	2012	$	175,000		–	–		–			–	$	12,000	(3)	$	187,000
Robert Rubinowitz	2013	$	178,365									$	12,187	(5)		190,552
President, Chief Operating Officer and Chief Financial Officer(4)	2012	$	175,000									$	12,000	(3)	$	187,000
Evan McKeown,	2013	$	106,154		–	–		221,121	(7)		–		–		$	327,275
Chief Financial Officer and Chief Administrative Officer (6)	2012		–		–	–		–			–		–			–
Dean Boyer	2013	$	203,846		–	–		–			–		–		$	203,846
Chief Technical Officer (8)	2012	$	135,115		–	–		–			–		–		$	135,115
Joseph Brophy	2013	$	164,904		–	62,130	(10)(11)	–			–		--		$	227,034
SVP of Operations (9)	2012		–		–	–		–			–		–			–
Michael Gallagher	2013	$	150,000		–	73,125	(13)(14)	–			–		--		$	223,225
Chief Medical Information Officer (12)	2012		–		–	–		–			–		–			–

(1)	On February 26, 2014, Ms. Clark resigned as chief executive officer and was appointed chief visionary officer. On February 26, 2014, Mr. Tim Lankes was appointed chief executive officer of the Company.
(2)	This amount includes $10,312 for a car allowance.

(3) This amount includes $12,000 for a car allowance.  

(4)	Mr. Rubinowitz served as chief financial officer through April 22, 2013. Mr. Rubinowitz resigned as president on April 14, 2014.
(5)	This amount includes $12,187 for a car allowance.
(6)	Mr. Evan McKeown was appointed as chief financial officer of the Company on April 22, 2013 and as Chief Administrative Officer on February 28, 2014.

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(7)	Represents the aggregate grant date fair value, computed in accordance with FASB ASC Topic 718, of 1,000,000 shares of our common stock.
(8)	Mr. Boyer’s employment with the Company was terminated effective March 31, 2014.
(9)	Mr. Brophy's employment was terminated on April 15, 2014, effective April 25, 2014.
(10)	Represents the aggregate grant date fair value, computed in accordance with FASB ASC Topic 718, of 245,851 shares of our common stock.
(11)	This amount includes $62,130 for restricted stock grants.
(12)	Mr. Gallagher resigned as chief medical information officer and chief medical officer in February 2014.
(13)	Represents the aggregate grant date fair value, computed in accordance with FASB ASC Topic 718, of 206,504 shares of our common stock.
(14)	This amount includes $73,125 for restricted stock grants.

Narrative Disclosure to Summary Compensation Table and Additional Narrative Disclosure

Employment Agreements

We have entered into employment agreements with our officers.

Employment Agreement with Tim Lankes

On February 26, 2014, the Company entered into an employment agreement with Tim Lankes (the “Lankes Agreement”), pursuant to his appointment as the Company’s Chief Executive Officer. Pursuant to the Lankes Agreement, Mr. Lankes will receive an annual base compensation of $240,000 (the “Base Salary”). In addition to his Base Salary, Mr. Lankes is eligible to receive a performance bonus for each completed fiscal year equal to 50% of his base salary (the “Target Bonus”), which may be greater or less than the Target Bonus, as determined by the board of directors. Additionally, Mr. Lankes shall be granted options (the “Options”) to acquire a number of shares of the Company’s common stock equal to 2.5% of the total number of shares of the Company’s common stock outstanding as of the date of the appointment on a fully diluted basis, to vest in annual equal installments over four years. The Options shall vest immediately upon a change of control of the Company, as defined in the Lankes Agreement. Mr. Lankes shall also receive a restricted stock unit grant (the “Performance Vesting Grant”) of the Company’s common stock equal to 2.5% of the total number of shares of the Company’s common stock outstanding, to vest based on attaining certain enterprise values detailed in the Lankes Agreement. The Lankes Agreement also provides for incentive awards, as well as a benefit package, including medical, disability, insurance, 401(k) and other equity programs. The Lankes Agreement will end on the earlier of (i) Mr. Lankes' death or mental or physical disability or incapacity, (ii) Mr. Lankes' resignation, or (iii) termination by the Company at any time with or without cause. The Lankes Agreement may be terminated by the Company for cause. Should the Company terminate the agreement without cause, Mr. Lankes is entitled to receive one times his Base Salary at the time of termination. Should the Lankes Agreement be terminated by the Company for cause or if Mr. Lankes resigns for any reason other than good reason, as defined in the Lankes Agreement, Mr. Lankes is entitled to receive his Base Salary through the date of termination and payment for any accrued but unused vacation time, and shall not be entitled to any other salary, bonus, compensation, or benefits.

Employment Agreement with Andrea Clark

On October 2, 2013, the Company entered into an employment agreement with Andrea Clark and amended such agreement on November 12, 2013 (the “Clark Agreement”). Pursuant to the Clark Agreement, Ms. Clark will receive annual base compensation of $175,000, which may be increased but not decreased from time to time as determined by the board of directors of the Company. The Clark Agreement also provides for incentive awards, as well as a benefit package, including medical, disability, insurance, 401(k) and other equity programs. The term of the Clark Agreement is three (3) years and shall automatically be renewed for successive three (3) year terms thereafter, unless otherwise notified in writing ninety (90) days prior to the termination of the agreement. The Clark Agreement may be terminated by the Company for cause. Should the Company terminate the agreement without cause, Ms. Clark is entitled to receive two times her base salary at the time of termination; a pro-rata bonus payment on any bonus or incentive plan; any earned but unpaid base salary, and accrued but unpaid vacation time. Should the Clark Agreement be terminated by Ms. Clark two years after the effective date, Ms. Clark shall be entitled to receive: any earned but unpaid base salary and bonus compensation; any earned but unpaid vacation time; a pro-rata bonus or incentive plan award; and, at Ms. Clark’s election, either (i) registered shares of the Company’s common stock equal to 100% of her base salary at the time of resignation, or (ii) fully vested and cashless exercisable discounted stock options. In the event there is: (1) a change of control of the Company; and (2) Ms. Clark is terminated within six months following such change of control, Ms. Clark shall be entitled to receive any earned but unpaid base salary, any earned but unpaid bonus compensation, two times her base salary as of the date of the change of control, two times the average bonus paid to Ms. Clark over the three previous calendar years, and accrued but unpaid vacation time. Should the Clark Agreement be terminated in the event of death or disability of Ms. Clark, Ms. Clark or her estate, shall be entitled to receive two times her base salary immediately prior to termination, a pro-rata bonus payment on any bonus or incentive plan; earned but unpaid base salary and earned but unpaid bonus compensation, and accrued but unpaid vacation time.

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Employment Agreement with Evan McKeown

On October 2, 2013, the Company entered into employment agreement with Evan McKeown and amended such agreement on November 12, 2013 (the “McKeown Agreement”).

Pursuant to the McKeown Agreement, Mr. McKeown will receive annual base compensation of $180,000, which may be increased but not decreased from time to time as determined by the board of directors of the Company. The McKeown Agreement also provides for incentive awards, as well as a benefit package, including medical, disability, insurance, 401(k) and other equity programs. The term of the McKeown Agreement is two (2) years and shall automatically be renewed for successive two (2) year terms thereafter, unless otherwise notified in writing ninety (90) days prior to the termination of the agreement. The McKeown Agreement may be terminated by the Company for cause. Should the Company terminate the agreement without cause, Mr. McKeown is entitled to receive: (1) two times his base salary at the time of termination if terminated within six months of execution of the McKeown Addendum, and one time base salary if terminated after six months of execution of the McKeown Addendum; (2) a pro-rata bonus payment on any bonus or incentive plan; and (3) any earned but unpaid base salary, and accrued but unpaid vacation time. In the event there is: (1) a change of control of the Company; and (2) Mr. McKeown is terminated within six months following such change of control, Mr. McKeown shall be entitled to receive any earned but unpaid base salary, any earned but unpaid bonus compensation, two times his base salary as of the date of the change of control, two times the average bonus paid to Mr. McKeown over the three previous calendar years, and accrued but unpaid vacation time. Should the McKeown Agreement be terminated in the event of death or disability of Mr. McKeown, Mr. McKeown or his estate, shall be entitled to receive the greater of the base salary owed immediately prior to termination or one year’s base salary, a pro-rata bonus payment on any bonus or incentive plan; earned but unpaid base salary and earned but unpaid bonus compensation, and accrued but unpaid vacation time.

Additionally, Mr. McKeown was granted options to purchase 1,000,000 shares of the Company’s common stock (the “ Options ”) at a per share exercise price of the fair market value per share of the Company’s common stock at the time of execution. The Options shall vest after two years or upon termination of Mr. McKeown for any reason, whichever happens sooner.

Employment Agreement with Robert Rubinowitz

On October 2, 2013, the Company entered into an employment agreement with Robert Rubinowitz and amended such agreement on November 12, 2013 (the “Rubinowitz Agreement”). On April 14, 2014, the Company entered in a separation agreement with Mr. Rubinowitz which is described elsewhere in this Annual Report on Form 10-K. 

Pursuant to the Rubinowitz Agreement, Mr. Rubinowitz will receive annual base compensation of $175,000, which may be increased but not decreased from time to time as determined by the Board of Directors of the Company. The Rubinowitz Agreement also provides for incentive awards, as well as a benefit package, including medical, disability, insurance, 401(k) and other equity programs. The term of the Rubinowitz Agreement is three (3) years and shall automatically be renewed for successive three (3) year terms thereafter, unless otherwise notified in writing ninety (90) days prior to the termination of the agreement. The Rubinowitz Agreement may be terminated by the Company for cause. Should the Company terminate the agreement without cause, Mr. Rubinowitz is entitled to receive two times his base salary at the time of termination; a pro-rata bonus payment on any bonus or incentive plan; any earned but unpaid base salary, and accrued but unpaid vacation time. Should the Rubinowitz Agreement be terminated by Mr. Rubinowitz two years after the effective date, Mr. Rubinowitz shall be entitled to receive: any earned but unpaid base salary and bonus compensation; any earned but unpaid vacation time; a pro-rata bonus or incentive plan award; and, at Mr. Rubinowitz ’s election, either (i) registered shares of the Company’s common stock equal to 100% of his base salary at the time of resignation, or (ii) fully vested and cashless exercisable discounted stock options. In the event there is: (1) a change of control of the Company; and (2) Mr. Rubinowitz is terminated within six months following such change of control, Mr. Rubinowitz shall be entitled to receive any earned but unpaid base salary, any earned but unpaid bonus compensation, two times his base salary as of the date of the change of control, two times the average bonus paid to Mr. Rubinowitz over the three previous calendar years, and accrued but unpaid vacation time. Should the Rubinowitz Agreement be terminated in the event of death or disability of Mr. Rubinowitz, Mr. Rubinowitz or his estate, shall be entitled to receive two times his base salary immediately prior to termination, a pro-rata bonus payment on any bonus or incentive plan; earned but unpaid base salary and earned but unpaid bonus compensation, and accrued but unpaid vacation time.

Employment Agreement with Dean Boyer

On October 2, 2013, the Company entered into employment agreement with Dean Boyer and amended such agreement on November 12, 2013 (the “Boyer Agreement”). On March 26, 2014, the Company notified Dean Boyer, its chief technology officer, that the Company was terminating his employment with the Company as well as that certain employment agreement with the Company dated October 1, 2013, as amended on November 13, 2013, effective March 31, 2014. 

Pursuant to the Boyer Agreement, Mr. Boyer will receive annual base compensation of $200,000, which may be increased but not decreased from time to time as determined by the board of directors of the Company. The Boyer Agreement also provides for incentive awards, as well as a benefit package, including medical, disability, insurance, 401(k) and other equity programs. The term of the Boyer Agreement is two (2) years and shall automatically be renewed for successive two (2) year terms thereafter, unless otherwise notified in writing ninety (90) days prior to the termination of the agreement. The Boyer Agreement may be terminated by the Company for cause. Should the Company terminate the agreement without cause, Mr. Boyer is entitled to receive one times his base salary at the time of termination; a pro-rata bonus payment on any bonus or incentive plan; any earned but unpaid base salary, and accrued but unpaid vacation time. In the event there is: (1) a change of control of the Company; and (2) Mr. Boyer is terminated within six months following such change of control, Mr. Boyer shall be entitled to receive any earned but unpaid base salary, any earned but unpaid bonus compensation, two times his base salary as of the date of the change of control, two times the average bonus paid to Mr. Boyer over the two previous calendar years, and accrued but unpaid vacation time. Should the Boyer Agreement be terminated in the event of death or disability of Mr. Boyer, Mr. Boyer or his estate, shall be entitled to receive the greater of the base salary owed immediately prior to termination or one year’s base salary, a pro-rata bonus payment on any bonus or incentive plan; earned but unpaid base salary and earned but unpaid bonus compensation, and accrued but unpaid vacation time.

Letter Agreement with Joseph Brophy

On December 17, 2012, HRAA entered into a letter agreement with Mr. Joseph Brophy to serve as senior vice president (the “Brophy Letter Agreement”). Pursuant to the Brophy Letter Agreement, Mr. Brophy will receive a base salary of $175,000. Mr. Brophy is entitled to receive a quarterly disbursement of stock based on the following formula: (i) $18,750 divided by (ii) the market value of the Company’s common stock at the time of the disbursement. In addition, Mr. Brophy is entitled to 5,000 stock options each time HRAA’s margin performance is improved by a minimum of 1% over the previous quarter. The options vest over a four year period. Mr. Brophy is also entitled to receive a cash bonus of $5,000 each time HRAA’s revenues cross a $2,000,000 threshold while maintaining or improving profit margin. Mr. Brophy's employment was terminated on April 15, 2014, effective April 25, 2014.

Letter Agreement with Dr. Michael Gallagher

On December 5, 2012, HRAA entered into a letter agreement with Dr. Michael Gallagher to serve as chief medical information officer (the “Gallagher Letter Agreement”). Pursuant to the Gallagher Letter Agreement, Dr. Gallagher received a base salary of $200,000. Dr. Gallagher was entitled to receive a quarterly disbursement of stock based on the following formula: (i) $24,375 divided by (ii) the market value of the Company’s stock at the time of the disbursement. Dr. Gallagher was also entitled to 10,000 stock options each time a new Company product was announced. In addition, Dr. Gallagher was entitled to a cash bonus of $5,000 each time a product crossed a threshold of $2,000,000. Dr. Gallagher resigned as chief medical information officer in February 2014.

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Outstanding Equity Awards At Fiscal Year-End

As of March 31, 2014, Mr. McKeown was granted options to purchase 1,000,000 shares of the Company’s common stock at a per share exercise price of the fair market value per share of the Company’s common stock at the time of execution of the amended employment agreement.

The following table provides information as of December 31, 2013 regarding unexercised stock options and restricted stock outstanding held by:

Outstanding Equity Awards as Of December 31, 2013
	Option Awards									Stock Awards
Name	Number of Securities Underlying Unexercised Options (#) Exercisable		Number of Securities Underlying Unexercised Options(#) Unexercisable			Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#)	Option Exercise Price ($)		Option Expiration Date	Number of Shares or Units of Stock That Have Not Vested (#)	Market Value of Shares or Units of Stock That Have Not Vested ($)	Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)	Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)
Evan McKeown		—		1,000,000	(1)	—		0.26	(2)	—	—	—		—
Joseph Brophy		—		—		—		—		—	—	—		—
Michael Gallagher		—		—		—		—		—	—	—		—

(1) The options fully vest on November 12, 2015.

(2) There is no expiration date with respect to the options.

Board of Directors

The number of directors of the Company is such number as determined by the board of directors. All directors hold office until the next annual meeting of stockholders and until their successors have been duly elected and qualified, or until their earlier death, resignation or removal. Officers are elected by a majority of our board of directors.

Our directors are reimbursed for expenses incurred by them in connection with attending board meetings, but they do not receive any other compensation for serving on the board.

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Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Securities Authorized For Issuance Under Equity Compensation Plans

There are no securities authorized for issuance under an equity compensation arrangement, other than 1,000,000 of stock options to an officer.

The following table presents information regarding options and rights outstanding under our compensation arrangements as of December 31, 2013:

Plan Category(1)	(a) Number of securities to be issued upon exercise of outstanding options, warrants and rights		(b) Weighted- average exercise price per share of outstanding options, warrants and rights		(c) Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
Equity compensation plans approved by security holders
Equity compensation plans not approved by security holders		1,000,000	$	0.26		0
Total		1,000,000	$	0.26		0

Security Ownership Of Certain Beneficial Owners And Management

The following table sets forth information regarding the beneficial ownership of shares of our common stock as of April 11, 2014 by:

● Each of our directors;

● Each of our named executive officers;

● All of our directors and executive officers as a group; and

● Each person known by us to beneficially own more than 5% of our outstanding common stock.

Beneficial ownership is determined in accordance with the rules and regulations of the SEC and includes voting and investment power with respect to the securities. In computing the number of shares beneficially owned by a person and the percentage ownership of that person, shares of common stock subject to options or warrants held by that person that are currently exercisable or exercisable within 60 days of April 11, 2014 are deemed outstanding. Such shares, however, are not deemed outstanding for purposes of computing the percentage ownership of any other person. To our knowledge, except as indicated in the footnotes to this table and subject to community property laws where applicable, the persons named in the table have sole voting and investment power with respect to all shares of our common stock shown opposite such person’s name. The percentage of beneficial ownership is based on 54,752,294 shares of our common stock outstanding as of April 11, 2014. Unless otherwise noted below, the address of the persons and entities listed in the table is c/o Health Revenue Assurance Holdings, Inc., 8551 West Sunrise Boulevard, Unit 304, Plantation, Florida 33332.

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Name and Address of Beneficial Owner	Amount and Nature of Beneficial Ownership		Percentage of Common Stock Outstanding
Tim Lankes		0		0	%
Andrea Clark**†		6,599,604		12.05	%
Evan McKeown		0		0	%
Peter Russo(1)		0		0	%
Michael Brainard		11,000		*	%
Robert Rubinowitz**†		6,599,617		12.05	%
Joseph Brophy		245,851		*	%
Directors and executive officers as a group (7 people)		13,456,072		24.58	%
5% Stockholders
Andrea Clark**		6,599,604		12.05	%
Robert Rubinowitz**†		6,599,617		12.05	%
Great Point Partners, LLC (2)		5,467,017		9.985	%

*   Less than 1%

**  Andrea Clark and Robert Rubinowitz are husband and wife.

 †  On November 12, 2013, Andrea Clark, Robert Rubinowitz and Dean Boyer each executed a voting agreement in connection with the Securities Purchase Agreement, dated November 12, 2013, among the Company and the investors named therein whereby the individuals agreed to vote their shares in favor of the investor's two nominees to the Company's board of directors.

***To the Company’s knowledge, based on the combined total of the transfer agent stock report dated March 28, 2014 and Non Objective Beneficial Ownership report dated January 6, 2014.

(1)

Does not include 50,000 shares owned by Mr. Russo’s wife, Elizabeth Russo. Mr. Russo disclaims beneficial ownership of shares, except to the extent of this pecuniary interest therein.

(2)

Great Point Partners, LLC (“Great Point”) is the investment manager of each of Biomedical Value Fund, L.P. (“BVF”), Biomedical Offshore Value Fund, Ltd. (“BOVF”), Biomedical Institutional Value Fund, L.P. (“BIVF”), Class D Series of GEF-PS, L.P. (“GEF-PS”), WS Investments II, LLC (“WS”) and David J. Morrison (“Morrison” and collectively, the “Great Point Stockholders”), and has the power to vote or dispose of the shares listed above. Each of Dr. Jeffrey R. Jay, M.D. (“Dr. Jay”), as senior managing member of Great Point, and Mr. David Kroin (“Mr. Kroin”), as special managing member of Great Point, has voting and investment power with respect to the shares owned by each of the Great Point Stockholders. Each of Great Point, Dr. Jay and Mr. Kroin disclaims beneficial ownership of such shares except to the extent of their respective pecuniary interest therein. The address for the Great Point Stockholders is 165 Mason Street, 3rd Floor, Greenwich, CT 06830. BVF shares include shares of common stock underlying (i) 5,764,412 shares of Series A Preferred Stock and (ii) Warrants to purchase 11,528,824 shares of common stock presently exercisable by BVF. The 5,764,412 shares of Series A Preferred Stock carry voting rights equivalent to 11,528,824 shares of common stock. BOVF shares include shares of common stock underlying (i) 3,322,730 shares of Series A Preferred Stock and (ii) Warrants to purchase 6,645,460 shares of common stock presently exercisable by BOVF. The 3,322,730 shares of Series A Preferred Stock carry voting rights equivalent to 6,645,460 shares of common stock. BIVF shares include shares of common stock underlying (i) 1,505,231 shares of Series A Preferred Stock and (ii) Warrants to purchase 3,010,462 shares of common stock presently exercisable by BIVF. The 1,505,231 shares of Series A Preferred Stock carry voting rights equivalent to 3,010,462 shares of common stock. GEF-PS shares include shares of common stock underlying (i) 2,455,766 shares of Series A Preferred Stock and (ii) Warrants to purchase 4,911,532 shares of common stock presently exercisable by GEF-PS. The 2,455,766 shares of Series A Preferred Stock carry voting rights equivalent to 4,911,532 shares of common stock. WS shares include shares of common stock underlying (i) 353,630 shares of Series A Preferred Stock and (ii) Warrants to purchase 707,260 shares of common stock presently exercisable by WS. The 353,630 shares of Series A Preferred Stock carry voting rights equivalent to 707,260 shares of common stock. Morrison shares include (i) 98,231 shares of Series A Preferred Stock and (ii) Warrants to purchase 196,462 shares of common stock presently exercisable by Morrison. The 98,231 shares of Series A Preferred Stock carry voting rights equivalent to 196,462 shares of common stock. The Great Point Stockholders are prohibited form engaging or participating in any actions or plans that relate to or would result in, among other things, acquiring additional securities of us, alone or together with any other person, which would result in them collectively beneficially owning or controlling, or being deemed to beneficially own or control, more than 9.985% of our total outstanding common stock or other voting securities. For purposes of calculating the percent of class, we have assumed that there were a total of 54,752,294  shares of our common stock outstanding such that 5,467,017 shares beneficially owned would represent approximately 9.985% of the outstanding common stock after such issuance. The 9.985% ownership limitation does not prevent the Great Point Stockholders from selling some of their holdings and then receiving additional shares. In this way, the Great Point Stockholders could sell more than the 9.985% ownership limitation while never holding more than this limit.

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Item 13. Certain Relationships and Related Transactions, and Director Independence

Certain Related Party Transactions

Mr. Michael Brainard and Mr. Peter Russo were elected to the board of directors of the Company on August 8, 2013. Mr. Brainard is the chief executive officer and a director of ResumeBear, Inc. (“ResumeBear”), a company with which HRAA has a sales contract worth approximately $300,000, pursuant to which HRAA provides website development services to ResumeBear. Mr. Russo is the chief executive officer and director of ResumeBear Holdings Corp. In December 2013, ResumeBear Holdings Corp. purchased all of the assets of ResumeBear. In January 2014, HRAA wrote-off approximately $108,000 of the receivables with ResumeBear. Due to cost overruns and product delivery issues relating primarily to a third party subcontractor, the Company estimates the total loss on this contract is approximately $108,000 through December 31, 2013 and another $88,000 through the date of this report.

On January 7, 2013, the Company entered into a one year consulting agreement with Mrs. Vanessa Ciprianni to provide certain consulting services to the Company’s business in exchange for $10,000 per month. Mrs. Ciprianni is the wife of Mr. Michael Ciprianni, a beneficial owner of more than 5% of the Company’s common stock. On January 1, 2014, the consulting agreement was terminated. As of a transfer agent stock report dated March 8, 2014, Mr. Ciprianni ceased to be the beneficial owner of 5% of the Company's common stock.

On September 9, 2013, the Company entered into a one year consulting agreement with Mr. Michael Ciprianni, a beneficial owner of more than 5% of the Company’s common stock, to provide certain consulting services related to the Company’s business in exchange for four million one hundred twenty five thousand (4,125,000) shares of common stock equal to a fair market value of $1,155,000 in consideration of the services to be rendered. As of a transfer agent stock report dated March 8, 2014, Mr. Ciprianni ceased to be the beneficial owner of 5% of the Company's common stock.

The Company owed Andrea Clark $75,000. The balance due to Ms. Clark was formalized in a promissory note dated November 1, 2013. The Company also owed its Robert Rubinowitz $40,000 pursuant to a promissory note dated November 1, 2013 for funds advanced in September 2013. On November 12, 2013, the promissory notes to Ms. Clark and Mr. Rubinowitz were paid in full from the net proceeds of the Securities Purchase Agreement, dated November 12, 2013, between the Company and certain investors named therein.

Other than those listed above, there have been no material transactions, series of similar transactions or currently proposed transactions in which we or our subsidiaries was or is to be a party, in which the amount involved exceeded the lesser of $120,000 or 1% of the average of our total assets at year end for the last two completed fiscal years and in which any director or executive officer or any security holder who is known to us to own of record or beneficially more than 5% of our common stock, or any member of the immediate family or sharing the household (other than a tenant or employee) of any of the foregoing persons, had a direct or indirect material interest.

Independence Of The Board Of Directors

Our board of directors consists of four (4) members. Because our common stock is not currently listed on a national securities exchange, we have used the definition of “independence” of The NASDAQ Stock Market to make this determination. NASDAQ Listing Rule 5605(a)(2) provides that an “independent director” is a person other than an officer or employee of the company or any other individual having a relationship which, in the opinion of the Company’s board of directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.

Our common stock is listed on the OTC Bulletin Board. For a director to be “independent” under these standards, the board of directors must affirmatively determine that the director has no material relationship with us, either directly or as a partner, stockholder, or officer of an organization that has a relationship with us. Applying corporate governance standards, and all other applicable laws, rules and regulations, the board of directors has determined that none of our directors are independent. This does not constitute an independent board of directors.

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Item 14. Principal Accounting Fees and Services

During the year ended December 31, 2013, we were billed or expect to be billed by our independent registered public accounting firm the following fees:

	2013		2012
Audit Fees (1)	$	75,200	$	32,500
Audit-Related Fees (2)		21,200		-
Tax Fees (3)		-		-
All Other Fees (4)		-		-
Total	$	96,400	$	32,500

(1)	Audit fees principally include those for services related to the annual audit and interim reviews of the consolidated financial statements.
(2)	Audit-related fees principally include assurance and related services that were reasonably related to the performance of our independent registered public accounting firm’s assurance and review of the financial statements and not reported under the caption “Audit Fees.”
(3)	Tax fees principally include services for federal, state and international tax compliance, tax planning and tax consultation, but excluding tax services rendered in connection with the audit.
(4)	Our independent registered public accounting firm did not perform any services for us other than those described above.

Audit Committee’s Pre-Approval Policies and Procedures

The Company does not have an audit committee.

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Item 15. Exhibits, Financial Statement Schedules

The exhibits required to be filed as part of this Annual Report on Form 10-K are listed in the Exhibit Index attached hereto and are incorporated herein by reference.

EXHIBIT NUMBER	DESCRIPTION
2.1	Agreement and Plan of Merger and Reorganization, dated February 10, 2012, among Health Revenue Assurance Holdings, Inc., f/k/a Anvex International, Inc., Health Revenue Acquisition Corp. and Health Revenue Assurance Associates, Inc.(1)
2.2	Articles of Merger filed with the State of Nevada on February 10, 2012(1)
2.3	Articles of Merger filed with the State of Maryland on February 10, 2012(1)
3.1	Amended and Restated Articles of Incorporation*
3.2	Second Amended and Restated Bylaws*

4.1	Form of Common Stock Purchase Warrant issued to the Purchasers and Placement Agent in connection with  the Securities Purchase Agreement, dated November 12, 2013 (6)
4.2	Form of Warrant issued to Tonaquint*
10.2	Split-Off Agreement, dated February 10, 2012, among Health Revenue Assurance Holdings, Inc., f/k/a Anvex International, Inc., Anvex Split Corp. and Anna Vechera (1)
10.3	General Release Agreement, dated February 10, 2012, among Health Revenue Assurance Holdings, Inc., f/k/a Anvex International, Inc., Anvex Split Corp. and Anna Vechera (1)
10.5	Form of 6% Convertible Note (2)
10.6	Form of 2012/2013 Loan Agreement and Promissory Note (3)
10.7	Consulting Agreement, dated September 9, 2013,  between Michael Ciprianni and Health Revenue Assurance Associates, Inc. (4)
10.8†	Employment Agreement between the Company and Andrea Clark, effective October 2, 2013 (5)
10.9†	Addendum to Employment Agreement between the Company and Andrea Clark, effective November 12, 2013 (6)
10.10†	Employment Agreement between the Company and Robert Rubinowitz, effective October 2, 2013 (5)
10.11†	Addendum to Employment Agreement between the Company and Robert Rubinowitz, effective November 12, 2013 (6)
10.12†	Employment Agreement between the Company and Evan McKeown, effective October 2, 2013 (5)
10.13†	Addendum to Employment Agreement between the Company and Evan McKeown, effective November 12, 2013 (6)
10.14	Employment Agreement between the Company and Dean Boyer, effective October 2, 2013 (5)
10.15†	Addendum to Employment Agreement between the Company and Dean Boyer, effective November 12, 2013 (6)
10.16	Securities Purchase Agreement, dated November 12, 2013, among the Company and the investors named therein (6)
10.17	Form of Registration Rights Agreement (6)
10.18†	Form of Indemnification Agreement (6)
10.19	Form of Voting Agreement*
10.20†	Employment Agreement, dated February 26, 2014, between the Company and Tim Lankes(7)
10.21	Agreement for Purchase of Accounts, dated June 7, 2012, between Health Revenue Assurance Associates, Inc. and Aerofund Financial, Inc.*
10.22	Letter Agreement, dated April 14, 2014, between the Company and Robert Rubinowitz*
10.23†	Letter Agreement, dated December 5, 2012, between Health Revenue Assurance Associates, Inc. and Dr. Michael Gallagher*
10.24†	Letter Agreement, dated December 17, 2012, between Health Revenue Assurance Associates, Inc. and Joseph Brophy*
10.25	Form of Promissory Note issued to Tonaquint*
10.26	ResumeBear Website Development Project Plan, dated March 17, 2013, between Health Revenue Assurance Associates, Inc. and ResumeBear, Inc.*
21.1	List of Subsidiaries.*
31.1	Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of the Sarbanes - Oxley Act of 2002.*
31.2	Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of the Sarbanes - Oxley Act of 2002.*
32.1	Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes - Oxley Act of 2002.**

101.INS	XBRL Instance Document**
101.SCH	XBRL Taxonomy Extension Schema Document**
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document**
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document**
101.LAB	XBRL Taxonomy Extension Label Linkbase Document**
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document**

(1)	Filed as an exhibit to our Current Report on Form 8-K, filed with the SEC on February 13, 2012.
(2)	Filed as an exhibit to our Registration Statement on Form S-1, filed with the SEC on September 10, 2012.
(3)	Filed as an exhibit to our Current Report on Form 8-K filed with the SEC on February 20, 2013.
(4)	Filed as an exhibit to our Current Report on Form 8-K filed with the SEC on September 12, 2013.
(5)	Filed as an exhibit to our Current Report on Form 8-K filed with the SEC on October 8, 2013.
(6)	Filed as an exhibit to our Current Report on Form 8-K filed with the SEC on November 18, 2013.
(7)	Filed as an exhibit to our Current Report on Form 8-K filed with the SEC on March 5, 2014.

† Management contract or compensatory plan.

* Filed herewith. 

** Furnished herewith. XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

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SIGNATURES

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

Health Revenue Assurance Holdings, Inc.
By:	/s/ Tim Lankes
	Chief Executive Officer
Date:  April 15, 2014

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

SIGNATURE	TITLE	DATE
/s/ Tim Lankes	Chief Executive Officer	April 15, 2014
Tim Lankes	(Duly Authorized and Principal Executive Officer) and Director
/s/ Evan McKeown	Chief Financial Officer	April 15, 2014
Evan McKeown	(Duly Authorized, Principal Financial Officer and Principal Accounting Officer)

/s/ Andrea Clark	Director	April 15, 2014
Andrea Clark
/s/ Peter Russo	Director	April 15, 2014
Peter Russo
/s/ Michael Brainard	Director	April 15, 2014
Michael Brainard

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EX-3.1

Exhibit 3.1

IN WITNESS WHEROF, the undersigned has executed this Certificate of Designation as of November 12, 2013.

/s/ Robert Rubinowitz
Name:	Robert Rubinowitz
Title:	President

EX-3.2

Exhibit 3.2

SECOND AMENDED AND RESTATED BYLAWS

OF

HEALTH REVENUE ASSURANCE HOLDINGS, INC.

ARTICLE I

STOCKHOLDERS

Section 1. Annual Meeting. The annual meeting of Health Revenue Assurance Holdings, Inc. (the “Corporation”), shall be held at such date and time as shall be determined by the board of directors of the Corporation (the “Board of Directors”).

Section 2. Special Meetings. Unless otherwise required by law, special meetings of the stockholders of the Corporation may be called only by the Chairman of the Board of Directors, the President, or a majority of the Board of Directors. The ability of the stockholders to call a special meeting of stockholders is hereby specifically denied.  Business transacted at all special meetings of the stockholders of the Corporation shall be confined to the purpose or purposes stated in the notice of the meeting.

Section 3. Place of Meeting. Every meeting of the stockholders, whether an annual or a special meeting, shall be held at the principal office of the Corporation or at such other place as may be selected by the Board of Directors.

Section 4. Notice of Meetings. Written notice of the place, date and time of any stockholders' meeting, whether annual or special, and the purpose or purposes for which the meeting is called shall be given to each stockholder entitled to vote thereat, by mailing the same to the stockholder at the address of the stockholder that appears upon the records of the Corporation not less than 10 nor more than 60 days prior to the date of such meeting. Any meeting of the stockholders may be adjourned from time to time by the presiding officer at the meeting to reconvene at the same or some other place, and notice need not be given of any such adjourned meeting if the time and 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 thirty (30) days, or if after the adjournment a new record date is fixed for the adjourned meeting, notice of the adjourned meeting in accordance with the requirements of this Section 4 shall be given to each stockholder of record entitled to notice of and to vote at the meeting.

Section 5.Voting Power of Stockholders. Each stockholder entitled to vote at any meeting of the stockholders may vote either in person or by proxy filed with the Secretary of the Corporation at or before such meeting. A stockholder may authorize another person or persons to act for such stockholder as proxy at any such meeting and in any manner permitted under applicable Nevada law. Unless a higher vote is required by applicable law, the Corporation's Articles of Incorporation (the “Articles of Incorporation”) or these Bylaws, if a quorum is present, action by the stockholders on a matter other than the election of directors is approved if the number of votes cast in favor of the action exceeds the number of votes case in opposition to the action.

Section 6. Quorum. Unless otherwise required by applicable law, the Articles of Incorporation or these Bylaws, a majority of the voting power of the issued and outstanding stock of the Corporation entitled to vote, including the voting power that is represented in person or by proxy, regardless of whether any such proxy has authority to vote on all matters, shall constitute a quorum for the transaction of business at any annual or special meeting of the stockholders duly and properly called. A quorum, once established, shall not be broken by the withdrawal of enough votes to leave less than a quorum. If, however, such quorum of stockholders shall not be present or represented at any meeting of the stockholders, the presiding officer at the meeting shall have power to adjourn the meeting from time to time, in the manner provided in Section 4 hereof, until the requisite number of stockholders shall be present. At any subsequently reconvened meeting at which the requisite number of shares shall be represented, any business may be transacted which might have been transacted at the meeting as originally noticed.

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Section 7. Inspector of Election. The Corporation shall, in advance of any meeting of stockholders, appoint one or more inspectors to act at the meeting and make a written report thereof.  The Corporation may designate one or more persons as alternate inspectors to replace any inspector who fails to act.  If no inspector or alternate is able to act at a meeting of stockholders, the presiding officer shall appoint one or more inspectors to act at the meeting.  Any inspector may, but need not, be an officer, employee or agent of the Corporation.  Each inspector, before entering upon the discharge of his or her duties, shall take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to the best of his or her ability.

Section 8. Record Date. The directors may fix in advance a date, which shall be not less than 10 nor more than 60 days before the date of any meeting of stockholders or the date for the payment of any dividend or the making of any distribution to stockholders or the last day on which the dissent of stockholders may be effectively expressed for any purpose, as the record date for determining the stockholders having the right to notice of, and to vote at, such meeting and any adjournment thereof or the right to receive such dividend or distribution or the right to give such dissent.

Section 9.Nature of Business at Meetings of Stockholders. No business (other than nominations for election to the Board of Directors, which must comply with the provisions of Section 10 of this Article I) may be transacted at an annual meeting of stockholders, other than business that is either (a) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors (or any duly authorized committee thereof), (b) otherwise properly brought before the annual meeting by or at the direction of the Board of Directors (or any duly authorized committee thereof), or (c) otherwise properly brought before the annual meeting by any stockholder of the Corporation (i) who is a stockholder of record on the date of the giving of the notice provided for in this Section 9 of this Article I and on the record date for the determination of stockholders entitled to notice of and to vote at such annual meeting and (ii) who complies with the notice procedures set forth in this Section 9 of this Article I.

In addition to any other applicable requirements, for business to be properly brought before an annual meeting by a stockholder, such stockholder must have given timely notice thereof in proper written form to the Secretary of the Corporation.

To be timely, a stockholder's notice to the Secretary of the Corporation must be delivered to or be mailed and received at the principal executive offices of the Corporation not less than ninety (90) days nor more than one hundred twenty (120) days prior to the anniversary date of the immediately preceding annual meeting of stockholders; provided, however, that in the event that the annual meeting is called for a date that is not within twenty-five (25) days before or after such anniversary date, notice by the stockholder in order to be timely must be so received not later than the close of business on the tenth (10th) day following the day on which such notice of the date of the annual meeting was mailed or such public disclosure of the date of the annual meeting was made, whichever first occurs. In no event shall the adjournment or postponement of an annual meeting, or the public announcement of such an adjournment or postponement, commence a new time period (or extend any time period) for the giving of a stockholder's notice as described above.

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To be in proper written form, a stockholder's notice to the Secretary of the Corporation must set forth the following information: (a) as to each matter such stockholder proposes to bring before the annual meeting, a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, and (b) as to the stockholder giving notice and the beneficial owner, if any, on whose behalf the proposal is being made, (i) the name and address of such person, (ii) (A) the class or series and number of all shares of stock of the Corporation which are owned beneficially or of record by such person and any affiliates or associates of such person, (B) the name of each nominee holder of shares of all stock of the Corporation owned beneficially but not of record by such person or any affiliates or associates of such person, and the number of such shares of stock of the Corporation held by each such nominee holder, (C) whether and the extent to which any derivative instrument, swap, option, warrant, short interest, hedge or profit interest or other transaction has been entered into by or on behalf of such person, or any affiliates or associates of such person, with respect to stock of the Corporation, and (D) whether and the extent to which any other transaction, agreement, arrangement or understanding (including any short position or any borrowing or lending of shares of stock of the Corporation) has been made by or on behalf of such person, or any affiliates or associates of such person, the effect or intent of any of the foregoing being to mitigate loss to, or to manage risk or benefit of stock price changes for, such person, or any affiliates or associates of such person, or to increase or decrease the voting power or pecuniary or economic interest of such person, or any affiliates or associates of such person, with respect to stock of the Corporation; (iii) a description of all agreements, arrangements, or understandings (whether written or oral) between or among such person, or any affiliates or associates of such person, and any other person or persons (including their names) in connection with the proposal of such business and any material interest of such person or any affiliates or associates of such person, in such business, including any anticipated benefit therefrom to such person, or any affiliates or associates of such person, (iv) a representation that the stockholder giving notice intends to appear in person or by proxy at the annual meeting to bring such business before the meeting; and (v) if applicable, any other information relating to such person that would be required to be disclosed in a proxy statement or other filing required to be made in connection with the solicitation of proxies by such person with respect to the proposed business to be brought by such person before the annual meeting pursuant to Section 14 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the rules and regulations promulgated thereunder.

A stockholder providing notice of business proposed to be brought before an annual meeting shall further update and supplement such notice, if necessary, so that the information provided or required to be provided in such notice pursuant to this Section 9 of this Article I shall be true and correct as of the record date for determining the stockholders entitled to receive notice of the annual meeting and such update and supplement shall be delivered to or be mailed and received by the Secretary of the Corporation at the principal executive offices of the Corporation not later than five (5) business days after the record date for determining the stockholders entitled to receive notice of the annual meeting.

No business shall be conducted at the annual meeting of stockholders except business brought before the annual meeting in accordance with the procedures set forth in this Section 9 of this Article I; provided, however, that, once business has been properly brought before the annual meeting in accordance with such procedures, nothing in this Section 9 of this Article I shall be deemed to preclude discussion by any stockholder of any such business. If the Chairman of an annual meeting determines that business was not properly brought before the annual meeting in accordance with the foregoing procedures, the Chairman shall declare to the meeting that the business was not properly brought before the meeting and such business shall not be transacted.

Nothing contained in this Section 9 of this Article I shall be deemed to affect any rights of stockholders to request inclusion of proposals in the Corporation's proxy statement pursuant to Rule 14a-8 under the Exchange Act (or any successor provision of law).

Section 10. Nomination of Directors. Only persons who are nominated in accordance with the following procedures shall be eligible for election as directors of the Corporation, except as may be otherwise provided in the Articles of Incorporation with respect to the right of holders of preferred stock of the Corporation to nominate and elect a specified number of directors in certain circumstances. Nominations of persons for election to the Board of Directors may be made at any annual meeting of stockholders, or at any special meeting of stockholders called for the purpose of electing directors, (a) by or at the direction of the Board of Directors (or any duly authorized committee thereof) or (b) by any stockholder of the Corporation (i) who is a stockholder of record on the date of the giving of the notice provided for in this Section 10 of this Article I and on the record date for the determination of stockholders entitled to notice of and to vote at such annual meeting or special meeting and (ii) who complies with the notice procedures set forth in this Section 10 of this Article I.

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In addition to any other applicable requirements, for a nomination to be made by a stockholder, such stockholder must have given timely notice thereof in proper written form to the Secretary of the Corporation.

To be timely, a stockholder's notice to the Secretary of the Corporation must be delivered to or be mailed and received at the principal executive offices of the Corporation (a) in the case of an annual meeting, not less than ninety (90) days nor more than one hundred twenty (120) days prior to the anniversary date of the immediately preceding annual meeting of stockholders; provided, however, that in the event that the annual meeting is called for a date that is not within twenty-five (25) days before or after such anniversary date, notice by the stockholder in order to be timely must be so received not later than the close of business on the tenth (10th) day following the day on which such notice of the date of the annual meeting was mailed or such public disclosure of the date of the annual meeting was made, whichever first occurs; and (b) in the case of a special meeting of stockholders called for the purpose of electing directors, not later than the close of business on the tenth (10th) day following the day on which notice of the date of the special meeting was mailed or public disclosure of the date of the special meeting was made, whichever first occurs. In no event shall the adjournment or postponement of an annual meeting or a special meeting called for the purpose of electing directors, or the public announcement of such an adjournment or postponement, commence a new time period (or extend any time period) for the giving of a stockholder's notice as described above.

To be in proper written form, a stockholder's notice to the Secretary of the Corporation must set forth the following information: (a) as to each person whom the stockholder proposes to nominate for election as a director (i) the name, age, business address and residence address of such person, (ii) the principal occupation or employment of such person, (iii) (A) the class or series and number of all shares of stock of the Corporation which are owned beneficially or of record by such person and any affiliates or associates of such person, (B) the name of each nominee holder of shares of all stock of the Corporation owned beneficially but not of record by such person or any affiliates or associates of such person, and the number of such shares of stock of the Corporation held by each such nominee holder, (C) whether and the extent to which any derivative instrument, swap, option, warrant, short interest, hedge or profit interest or other transaction has been entered into by or on behalf of such person, or any affiliates or associates of such person, with respect to stock of the Corporation, and (D) whether and the extent to which any other transaction, agreement, arrangement or understanding (including any short position or any borrowing or lending of shares of stock of the Corporation) has been made by or on behalf of such person, or any affiliates or associates of such person, the effect or intent of any of the foregoing being to mitigate loss to, or to manage risk or benefit of stock price changes for, such person, or any affiliates or associates of such person, or to increase or decrease the voting power or pecuniary or economic interest of such person, or any affiliates or associates of such person, with respect to stock of the Corporation; and (iv) if applicable, any other information relating to such person that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors pursuant to Section 14 of the Exchange Act, and the rules and regulations promulgated thereunder; and (b) as to the stockholder giving the notice, and the beneficial owner, if any, on whose behalf the nomination is being made, (i) the name and record address of such person; (ii) (A) the class or series and number of all shares of stock of the Corporation which are owned beneficially or of record by such person and any affiliates or associates of such person, (B) the name of each nominee holder of shares of the Corporation owned beneficially but not of record by such person or any affiliates or associates of such person, and the number of shares of stock of the Corporation held by each such nominee holder, (C) whether and the extent to which any derivative instrument, swap, option, warrant, short interest, hedge or profit interest or other transaction has been entered into by or on behalf of such person, or any affiliates or associates of such person, with respect to stock of the Corporation, and (D) whether and the extent to which any other transaction, agreement, arrangement or understanding (including any short position or any borrowing or lending of shares of stock of the Corporation) has been made by or on behalf of such person, or any affiliates or associates of such person, the effect or intent of any of the foregoing being to mitigate loss to, or to manage risk or benefit of stock price changes for, such person, or any affiliates or associates of such person, or to increase or decrease the voting power or pecuniary or economic interest of such person, or any affiliates or associates of such person, with respect to stock of the Corporation; (iii) a description of all agreements, arrangements, or understandings (whether written or oral) between such person, or any affiliates or associates of such person, and any proposed nominee or any other person or persons (including their names) pursuant to which the nomination(s) are being made by such person, and any material interest of such person, or any affiliates or associates of such person, in such nomination, including any anticipated benefit therefrom to such person, or any affiliates or associates of such person; (iv) a representation that the stockholder giving notice intends to appear in person or by proxy at the annual meeting or special meeting to nominate the persons named in its notice; and (v) if applicable, any other information relating to such person that would be required to be disclosed in a proxy statement or other filings required to be made in connection with the solicitation of proxies for election of directors pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder. Such notice must be accompanied by a written consent of each proposed nominee to being named as a nominee and to serve as a director if elected.

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A stockholder providing notice of any nomination proposed to be made at an annual meeting or special meeting shall further update and supplement such notice, if necessary, so that the information provided or required to be provided in such notice pursuant to this Section 10 of this Article I shall be true and correct as of the record date for determining the stockholders entitled to receive notice of the annual meeting or special meeting, and such update and supplement shall be delivered to or be mailed and received by the Secretary of the Corporation at the principal executive offices of the Corporation not later than five (5) business days after the record date for determining the stockholders entitled to receive notice of such annual meeting or special meeting.

No person shall be eligible for election as a director of the Corporation unless nominated in accordance with the procedures set forth in this Section 10 of this Article I. If the Chairman of the meeting determines that a nomination was not made in accordance with the foregoing procedures, the Chairman shall declare to the meeting that the nomination was defective and such defective nomination shall be disregarded.

Section 11. Stockholder Action. Any action required or permitted to be taken by the stockholders of the Corporation must be effected at a duly called annual or special meeting of stockholders of the Corporation or by the written consent of stockholders entitled to exercise a majority (or such other proportion as the specific action may require) of the voting power of the issued and outstanding shares of the Corporation's capital stock.

ARTICLE II

DIRECTORS

Section 1. Powers. The Board of Directors shall manage and control the business and affairs of the Corporation.

Section 2. Number. The Board of Directors shall consist of not less than one person, and the exact number of directors constituting the Board of Directors shall be fixed from time to time by resolution adopted by a majority of the Board of Directors then in office.

Section 3.[Intentionally Deleted].

Section 4. Term. Each member of the Board of Directors shall hold office until such director's successor shall have been duly elected and qualified or until they have resigned or are removed from office or their office is otherwise vacated.

Section 5. Place of Meetings. Meetings of the Board of Directors, whether annual or special, may be held either within or outside the State of Nevada.

Section 6. Annual Meetings. Unless otherwise determined by the Chairman of the Board and noticed to the Board, the Board of Directors shall meet each year immediately after the annual meeting of the stockholders, at the same place as the meeting of the stockholders for the purpose of organization, election of officers and consideration of any other business that may properly be brought before the meeting. No notice of any kind to either old or new Board members for this annual meeting shall be necessary.

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Section 7. Other Meetings. Other regular meetings may be held at such times as may be determined from time to time by the Board of Directors. Special meetings of the Board of Directors may be called by the Chairman of the Board or the President and Chief Executive Officer and shall be called by the Secretary on the written request of a majority of the Board of Directors then in office. Notice of special meetings setting forth the time and place of such meeting shall be given to each director then in office through the following means: personally or telephonically, by electronic mail, facsimile or by other means of written communication at least 24 hours before the meeting. Notice of a meeting need not be given to any director who attends the meeting without protesting, prior to the conclusion thereof, the lack of notice.

Section 8. Voting. Any action required to be taken shall be authorized by a majority of the directors present at any meeting at which a quorum is present.

Section 9. Quorum. At all meetings of the Board of Directors, a majority of the Board of Directors then in office shall be necessary and sufficient to constitute a quorum for the transaction of business, but if, at any meeting, less than a quorum shall be present, a majority of those present may adjourn the meeting from time to time.

Section 10. Chairman of the Board. The Chairman of the Board shall be a director and shall preside at all meetings of the Board of Directors and of the stockholders at which the Chairman shall be present. The Chairman shall designate a director or officer to preside at any such meeting where the Chairman is absent. The Chairman of the Board shall have such other duties as the Board of Directors shall determine from time to time.

Section 11. Compensation of Directors. Board members who are not salaried officers of the Corporation shall receive such compensation as shall be fixed from time to time by resolution of the Board of Directors; and, in addition, the directors who are not salaried officers of the Corporation shall be entitled to reimbursement of the expenses properly incurred by them in attending and returning from meetings of the Board, any committee appointed by the Board, general meetings of the Corporation, or in connection with the business of the Corporation or their duties as directors generally.

Section 12. Resignation of Directors. Any director may resign at any time upon written notice to the Corporation. Such resignation shall take effect at the time specified therein, and if no time be specified, at the time of its receipt by the Chairman of the Board, the President and Chief Executive Officer or the Secretary. The acceptance of a resignation shall not be necessary to make it effective, unless so specified therein.

Section 13. Removal. Any director or one or more of the incumbent directors may be removed from office by vote of stockholders representing not less than two-thirds of the voting power of the issued and outstanding stock of the Corporation entitled to vote.

Section 14.Increase in Number of Directors and Vacancies. Subject to the terms of any one or more classes or series of Preferred Stock, any vacancy on the Board of Directors that results from an increase in the number of directors shallbe filled by the vote of a majority of the Board of Directors then in office, provided that a quorum is present, and any other vacancy occurring on the Board of Directors may be filled by the vote of a majority of the Board of Directors then in office, even if less than a quorum, or by a sole remaining director. Any director of any class elected to fill a vacancy resulting from an increase in the number of directors of such class shall hold office for a term that shall coincide with the remaining term of that class. Any director elected to fill a vacancy not resulting from an increase in the number of directors shall have the same remaining term as that of his or her predecessor.

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Section 15. Action Without a Meeting. 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 Board members or members of such committee, as the case may be, consent in writing to the adoption of a resolution authorizing the action. Such resolutions and the written consents thereto by the Board or committee members shall be filed with the minutes of the proceedings of the Board or such committee as the case may be.

Section 16. Committees. The Board of Directors may designate one or more committees and may delegate any of its powers to such committee. Each committee shall consist of one or more of the directors of the Corporation. Each member of a committee must meet the requirements for membership, if any, imposed by applicable law and the rules and regulations of any securities exchange on which the securities of the Corporation are listed for trading. The Board of Directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of any such committee. Subject to the rules and regulations of any securities exchange on which the securities of the Corporation are listed for trading, in the absence or disqualification of a member of a committee, and in the absence of a designation by the Board of Directors of an alternate member to replace the absent or disqualified member, 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 qualified member of the Board of Directors to act at the meeting in the place of any absent or disqualified member. Any committee, to the extent permitted by law and provided in the resolution establishing such committee, 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, and may authorize the seal of the Corporation to be affixed to all papers which may require it, but no such committee shall have the power or authority of the Board of Directors in reference to (i) adopting an agreement of merger or consolidation under Sections 92A.005 to 92A.270, inclusive, of the Nevada Revised Statutes, (ii) approving the sale, lease or exchange of all of the Corporation's property and assets under Section 78.565 of the Nevada Revised Statutes, (iii) amending the Articles of Incorporation of the Corporation, (iv) recommending to the stockholders a dissolution of the Corporation or a revocation of a dissolution, or (v) declaring a dividend. Each committee shall keep regular minutes and report to the Board of Directors when required. Notwithstanding anything to the contrary contained in this Article II, the resolution of the Board of Directors establishing any committee of the Board of Directors and/or the charter of any such committee may establish requirements or procedures relating to the governance and/or operation of such committee that are different from, or in addition to, those set forth in these Bylaws and, to the extent that there is any inconsistency between these Bylaws and any such resolution or charter, the terms of such resolution or charter shall be controlling. Except as otherwise provided in this Section 16, the meetings and proceedings of any committee shall be governed by the provisions of these Bylaws regulating the meetings and proceedings of the Board of Directors, so far as the same are applicable and are not superseded by directions imposed by the Board of Directors.

Section 17. Participation by Telephone. Any one or more Board members or members of any committee thereof may participate in a meeting of the Board or such committee by means of a conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other at the same time. Participation by such means shall constitute presence in person at a meeting.

ARTICLE III

OFFICERS

Section 1. Officers. The Board of Directors shall select and appoint the Chairman of the Board, the President and Chief Executive Officer, the Treasurer, the Secretary and any other officers as it deems advisable from time to time. The Board of Directors shall vote on the appointment of any and all such officers at the regular meeting of the Board held after each annual meeting of the stockholders. Each officer shall have such authority and perform such duties as may be prescribed from time to time by the Board of Directors, or, in the event of its failure so to prescribe, by the President and Chief Executive Officer. The Chairman of the Board shall be chosen from among the directors and other officers may, but need not, be directors. One person may hold more than one office, except that no one person shall hold simultaneously (i) the offices of (A) President and Chief Executive Officer and (B) Secretary; or (ii) the offices of (A) Chairman of the Board and (B) Secretary.

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Section 2. President and Chief Executive Officer. The President and Chief Executive Officer shall, subject only to the direction and control of the Board of Directors, have responsibility for the general management of the business affairs and property of the Corporation, and of its several officers, and shall have such duties and responsibilities and shall report to such persons as the Board of Directors shall determine from time to time.

Section 3. Secretary. The Secretary shall keep the minutes of all meetings of the Board of Directors and its committees and the minutes of all meetings of the Corporation in books provided for that purpose and the Secretary shall attend to the giving or serving of all notices of the Corporation. The Secretary may sign with the President and Chief Executive Officer, or a Vice President, in the name of the Corporation, all contracts authorized by the Board of Directors or by any committee of the Board of Directors, and, when so ordered by the Board of Directors or such committee, the Secretary shall affix the seal of the Corporation thereto. The Secretary shall have charge of such books and papers as the Board of Directors shall direct, all of which shall at all reasonable times be open to the examination of any director, upon request at the office of the Corporation during business hours; and shall in general perform all the duties incident to the office of the Secretary, subject to the control of the Board of Directors, the Chairman of the Board, and the President and Chief Executive Officer.

Section 4. Treasurer. The Treasurer shall keep the financial accounts of the Corporation and shall deposit all monies and other valuable effects in the name and to the credit of the Corporation. The Treasurer shall disburse the funds of the Corporation as may be designated by the Board of Directors and shall render to the Board of Directors and the President and Chief Executive Officer whenever they may require it, an account of his or her transactions as Treasurer and of the financial condition of the Corporation.

Section 5. Compensation of Officers. The officers of the Corporation shall be entitled to receive such compensation for their services as may from time to time be determined, or pursuant to authority granted, by the Board of Directors.

Section 6. Removal of Officers. Any officer of the Corporation may be removed from office, with or without cause, by a vote of a majority of the directors then in office. The removal of an officer shall be without prejudice to his or her contract rights, if any. Election or appointment of an officer shall not of itself create contract rights.

Section 7. Resignation. Any officer of the Corporation may resign at any time. Such resignation shall be in writing and shall take effect at the time specified therein, and if no time be specified, at the time of its receipt by the Secretary. The acceptance of a resignation shall not be necessary in order to make it effective, unless so specified therein. The resignation of an officer shall be without prejudice to the contract rights of the Corporation, if any.

Section 8. Filling of Vacancies. A vacancy in any office shall be filled by, or pursuant to authority granted by, the Board of Directors.

ARTICLE IV

MISCELLANEOUS PROVISIONS

Section 1. Fiscal Year. The fiscal year of the Corporation shall begin on the first day of January and terminate on the thirty-first day of December in each year.

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Section 2. Contracts, Checks, Drafts. The Board of Directors may authorize any officer or officers, agent or agents, in the name of and on behalf of the Corporation to enter into any contract or execute or deliver any instrument. All checks, drafts or other orders for the payment of money, notes or other evidences of indebtedness issued in the name of the Corporation, shall be signed by such officer or officers, agent or agents of the Corporation, and in such manner as shall be designated from time to time by resolution of the Board of Directors.

Section 3. Deposits. All funds of the Corporation shall be deposited from time to time to the credit of the Corporation in such bank or banks, trust companies or other depositories as the Board of Directors may select, and, for the purpose of such deposit, checks, drafts, warrants and other orders for the payment of money which are payable to the order of the Corporation, may be endorsed for deposit, assigned and delivered by any officer of the Corporation, or by such agents of the Corporation as the Board of Directors, the Chairman of the Board, or the President and Chief Executive Officer, may authorize for that purpose.

Section 4. Manner of Giving Notice. Notice by mail shall be deemed to have been given at the time a written notice is deposited in the United States mail, postage prepaid, subject to any prior periods called for herein. Any other written notice shall be deemed to have been given at the time it is personally delivered to the recipient or is delivered to a common carrier for transmission, or actually transmitted by the person giving the notice by electronic means, to the recipient. Oral notice shall be deemed to have been given at the time it is communicated, in person or by telephone or wireless device, to the recipient or to a person at the office of the recipient who the person giving the notice has reason to believe will promptly communicate it to the intended recipient. Any stockholder of the Corporation, director, officer, or Board committee member may waive any notice required to be given under these Bylaws. Whenever in the Corporation's Articles of Incorporation or these Bylaws notice is required or permitted to be given by mail, the affidavit or other sworn certificate of the person who mailed such notice, filed with the Secretary of the Corporation, shall constitute conclusive evidence that such notice has been given and mailed.

Section 5. Construction. These Bylaws are to be construed to be consistent with applicable law, and if such construction is not possible then the invalidity of a Bylaw or a portion thereof shall not affect the validity of the remainder of the Bylaws, which shall remain in full force and effect.

Section 6. Certificate of Stock. The shares of the Corporation shall be represented by certificates; provided, however, the Board of Directors may provide by resolution or resolutions that some or all of any or all classes or series of the Corporation’s stock shall be uncertificated shares. All certificates of stock of the Corporation shall be numbered and shall be entered in the books of the Corporation as they are issued. They shall exhibit the holder's name and number of shares and shall be signed by at least two of the Chairman, President, Chief Executive Officer, Treasurer or Secretary. Any or all of the signatures on the certificate may be a facsimile.

Section 7. Transfers of Stock. Transfers of stock shall be made on the books of the Corporation only by the record holder of such stock, or by attorney lawfully constituted in writing, and, in the case of stock represented by a certificate, upon surrender of the certificate.

ARTICLE V

INDEMNIFICATION OF OFFICERS AND DIRECTORS

AGAINST LIABILITIES AND EXPENSES

Section 1. Definitions. For the purposes of this Article (other than sections 7, 10 and 11 hereof), "agent" means any person who is or was a director or officer of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee or agent of another foreign or domestic company, partnership, joint venture, trust or other enterprise, or was a director or officer of a foreign or domestic company which was a predecessor company of the Corporation or of another enterprise at the request of the predecessor company. For the purposes of this Article, "proceeding" means any threatened, pending, or completed action or proceeding, whether civil, criminal, administrative or investigative; and "expenses" include, without limitation, attorneys' fees and any expenses of establishing a right to indemnification under Sections 4 or 5(b) of Article V.

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Section 2. Indemnification in Actions by Third Parties. The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any proceeding (other than an action by or in the right of the Corporation to procure a judgment in its favor) by reason of the fact that the person is or was an agent of the Corporation, against expenses, judgments, fines, settlements, and other amounts actually and reasonably incurred in connection with the proceeding, to the fullest extent permitted or authorized by applicable law, if that person (i) is not liable pursuant to NRS 78.138, or (ii) acted in good faith and in a manner which that person reasonably believed to be in or not opposed to the best interests of the Corporation, and, in the case of a criminal proceeding, had no reasonable cause to believe the conduct of the person was unlawful. The termination of any proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent shall not, of itself, create a presumption that the person is liable pursuant to NRS 78.138 or did not act in good faith and in a manner which the person reasonably believed to be in or not opposed to the best interests of the Corporation, or that the person had reasonable cause to believe that the person's conduct was unlawful.

Section 3. Indemnification in Actions by or in the Right of the Corporation. The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending, or completed action by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that the person is or was an agent of the Corporation, against expenses actually and reasonably incurred by that person in connection with the defense or settlement of the action, to the fullest extent permitted or authorized by applicable law, if the person (i) is not liable pursuant to NRS 78.138, or (ii) acted in good faith and in a manner which that person reasonably believed to be in or not opposed to the best interests of the Corporation. No indemnification shall be made under this Section 3 for any claim, issue or matter as to which such a person has been adjudged by a court of competent jurisdiction, after exhaustion of all appeals therefrom, to be liable to the Corporation or for amounts paid in settlement to the Corporation, unless and only to the extent that the court in which the action or suit was brought or other court of competent jurisdiction determines upon application that in view of all of the circumstances of the case, the person is fairly and reasonably entitled to indemnity for such expenses as the court deems proper.

Section 4. Indemnification Against Expenses. To the extent that an agent of the Corporation has been successful on the merits in defense of any proceedings referred to in Sections 2 or 3 of Article V or in defense of any claim, issue or matter therein, the agent shall be indemnified against expenses actually and reasonably incurred by the agent in connection therewith.

Section 5. Required Determinations. Except as provided in Section 4 or 6 of Article V, any indemnification under Article V shall be made by the Corporation only if authorized in the specific case, upon a determination that indemnification of the agent is proper in the circumstances because the agent has met the applicable standard of conduct set forth in Sections 2 or 3 of Article V by:

(a) A majority vote of a quorum consisting of directors who are not parties of such proceeding;

(b) The court in which the proceeding is or was pending upon application made by the Corporation or the agent or the attorney or other person rendering services in connection with the defense, whether or not the application by the agent, attorney, or other person is opposed by the Corporation;

(c) The stockholders;

(d) Independent legal counsel in a written opinion, if a majority vote of a quorum consisting of directors who were not parties to the action, suit or proceeding so orders; or

(e) Independent legal counsel in a written opinion, if a quorum consisting of directors who were not parties to the action, suit or proceeding cannot be obtained.

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Section 6. Advance of Expenses. Expenses of agents incurred in defending a civil or criminal action, suit or proceeding shall be paid by the Corporation as they are incurred and in advance of the final disposition of the action, suit or proceeding, upon receipt of an undertaking by or on behalf of the agent to repay the amount if it is ultimately determined by a court of competent jurisdiction that he or she is not entitled to be indemnified by the Corporation. This provision does not affect any rights to advancement of expenses to which Corporation personnel other than directors may be entitled under contract or otherwise by law.

Section 7. Other Indemnification. The indemnification authorized by Article V shall not be deemed exclusive of any additional rights to indemnification for breach of duty to the Corporation and its stockholders while acting in the capacity of a director or officer of the Corporation to the extent the additional rights to indemnification are authorized in Sections 78.138, 78.7502, and 78.751 of the Nevada Revised Statutes or any other applicable law. The indemnification provided by this section for acts, omissions, or transactions while acting in the capacity of, or while serving as, a director or officer of the Corporation but not involving breach of duty to the Corporation and its stockholders shall not be deemed exclusive of any other rights to which those seeking indemnification may be entitled under any bylaw, agreement, vote of the stockholders or disinterested directors, or otherwise to the extent the additional rights to indemnification are authorized in the Corporation's Articles of Incorporation. An article provision authorizing the indemnification in excess of that permitted by Chapter 78 of the Nevada Revised Statutes or to the fullest extent permissible under Nevada law or the substantial equivalent thereof shall be construed to be a provision for additional indemnification for breach of duty to the Corporation and its stockholders. The rights to indemnity hereunder shall continue as to a person who has ceased to be a director, officer, employee, or agent and shall inure to the benefit of the heirs, executors, and administrators of the person. Nothing contained in Article V shall affect any right to indemnification to which persons other than the directors and officers may be entitled by contract or otherwise.

Section 8. Forms of Indemnification Not Permitted. No indemnification or advance shall be made under Article V, except as provided in Section 4 or Section 5(b), in circumstances where it appears:

(a) That it would be inconsistent with a provision of the Articles of Incorporation, these Bylaws, or an agreement in effect at the time of the accrual of the alleged cause of action asserted in the proceeding in which the expenses were incurred or other amounts were paid, which prohibits or otherwise limits indemnification; or

(b) That it would be inconsistent with any condition expressly imposed by a court in approving a settlement.

Section 9. Insurance. The Corporation shall have power to purchase and maintain insurance on behalf of any agent or other employee of the Corporation against any liability asserted against or incurred by the agent in that capacity or arising out of the agent's status as such whether or not the Corporation would have the power to indemnify the agent against that liability under the provisions of Article V.

Section 10. Amendment to General Corporation Law. The Corporation may also indemnify its directors, officers, employees, and agents under other or additional circumstances and in other or additional amounts in accordance with amendments to the Nevada Revised Statutes as enacted from time to time.

Section 11. Indemnification of Employees and Agents. The Corporation may, to the extent authorized from time to time by the Board of Directors, provide rights to indemnification and to the advancement of expenses to employees and agents of the Corporation similar to those conferred in this Article V to directors and officers of the Corporation.

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ARTICLE VI

AMENDMENTS

Section 1. Amendments. The Board of Directors shall have the exclusive authority to adopt, make, repeal, alter, amend or rescind these Bylaws by the affirmative vote of a majority of the Board of Directors then in office.

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EX-4.2

Exhibit 4.2

THIS WARRANT AND THE COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS WARRANT AND THE COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS WARRANT UNDER SUCH ACT AND ANY APPLICABLE STATE SECURITIES LAW OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO HEALTH REVENUE ASSURANCE HOLDINGS, INC. THAT SUCH REGISTRATION IS NOT REQUIRED.

HEALTH REVENUE ASSURANCE HOLDINGS, INC.

WARRANT TO PURCHASE SHARES OF COMMON STOCK

1.              Issuance. In consideration of good and valuable consideration as set forth in the Purchase Agreement (defined below), including without limitation the Purchase Price (as defined in the Purchase Agreement), the receipt and sufficiency of which are hereby acknowledged by Health Revenue Assurance Holdings, Inc., a Nevada corporation (the "Company"); Tonaquint, Inc., a Utah corporation, its successors and/or registered assigns (the "Holder"), is hereby granted the right to purchase at any time on or after the Issue Date (as defined below) until the date which is the last calendar day of the month in which the fifth anniversary of the Issue Date occurs (the "Expiration Date"), [_____] fully paid and nonassessable shares (the "Warrant Shares") of the Company's common stock, par value $0.001 per share (the "Common Stock"), as such number may be adjusted from time to time pursuant to the terms and conditions of this Warrant to Purchase Shares of Common Stock (this "Warrant"). This Warrant is being issued pursuant to the terms of that certain Securities Purchase Agreement dated October [__], 2013, to which the Company and the Holder are parties (as the same may be amended from time to time, the "Purchase Agreement").

Unless otherwise indicated herein, capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Purchase Agreement.

This Warrant was originally issued to the Holder on October [__], 2013 (the "Issue Date").

2.             Exercise of Warrant.

2.1.           General.

(a)           This Warrant is exercisable in whole or in part at any time and from time to time commencing on the Issue Date and ending on the Expiration Date. Such exercise shall be effectuated by submitting to the Company (either by delivery to the Company or by email or facsimile transmission) a completed and duly executed Notice of Exercise substantially in the form attached to this Warrant as Exhibit A (the "Notice of Exercise"). The date such Notice of Exercise is either faxed, emailed or delivered to the Company shall be the "Exercise Date," provided that, if such exercise represents the full exercise of the outstanding balance of the Warrant, the Holder shall tender this Warrant to the Company within five (5) Trading Days thereafter, but only if the Warrant Shares to be delivered pursuant to the Notice of Exercise have been delivered to the Holder as of such date. The Notice of Exercise shall be executed by the Holder and shall indicate (i) the number of Delivery Shares (as defined below) to be issued pursuant to such exercise, and (ii) if applicable (as provided below), whether the exercise is a cashless exercise.

For purposes of this Warrant, the term "Trading Day" means any day during which the principal market on which the Common Stock is traded (the "Principal Market") shall be open for business.

(b)           Notwithstanding any other provision contained herein or in any other Transaction Document to the contrary, at any time prior to the Expiration Date, the Holder may elect a "cashless" exercise of this Warrant for any Warrant Shares whereby the Holder shall be entitled to receive a number of shares of Common Stock equal to (i) the excess of the Current Market Value (as defined below) over the aggregate Exercise Price of the Exercise Shares (as defined below), divided by (ii) the Adjusted Price of the Common Stock (as defined below).

For the purposes of this Warrant, the following terms shall have the following meanings:

"Adjusted Price of the Common Stock" shall mean the lower of (i) the lowest Conversion Price of any Conversion under the Note, and (ii) the Exercise Price, without regard to whether the Note remains outstanding or has been fully repaid, cancelled or otherwise retired, on any relevant Exercise Date.

"Current Market Value" shall mean an amount equal to the Market Price of the Common Stock (as defined below), multiplied by the number of Exercise Shares specified in the applicable Notice of Exercise.

"Closing Price" shall mean the 4:00 P.M. last sale price of the Common Stock on the Principal Market on the relevant Trading Day(s), as reported by Bloomberg LP (or if that service is not then reporting the relevant information regarding the Common Stock, a comparable reporting service of national reputation selected by the Holder and reasonably acceptable to the Company) ("Bloomberg") for the relevant date.

"Delivery Shares" means those shares of Common Stock issuable and deliverable upon the exercise of this Warrant.

"Exercise Price" shall mean $0.40 per share of Common Stock, as the same may be adjusted from time to time pursuant to the terms and conditions of this Warrant.

"Exercise Shares" shall mean those Warrant Shares subject to an exercise of the Warrant by the Holder.

"Market Price of the Common Stock" shall mean the higher of: (i) the Closing Price of the Common Stock on the Issue Date; and (ii) the VWAP (as defined below) of the Common Stock for the Trading Day that is two (2) Trading Days prior to the Exercise Date.

"Note" shall have the meaning set forth in the Purchase Agreement.

"Transaction Documents" or "Transaction Document" shall have the meaning set forth in the Purchase Agreement.

"VWAP" shall mean the volume-weighted average price of the Common Stock on the Principal Market for a particular Trading Day or set of Trading Days, as the case may be, as reported by Bloomberg.

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(c)            If the Notice of Exercise form elects a "cash" exercise (or if the cashless exercise referred to in the immediately preceding subsection (b) is not available in accordance with the terms hereof), the Exercise Price per share of Common Stock for the Delivery Shares shall be payable, at the election of the Holder, in cash or by certified or official bank check or by wire transfer in accordance with instructions provided by the Company at the request of the Holder.

(d)           Upon the appropriate payment to the Company, if any, of the Exercise Price for the Delivery Shares, together with the surrender of this Warrant (if required), the Company shall promptly, but in no case later than the date that is three (3) Trading Days following the date the Exercise Price is paid to the Company (or with respect to a "cashless exercise," the date that is three (3) Trading Days following the Exercise Date), deliver or cause the Company's Transfer Agent to deliver the applicable Delivery Shares electronically via the Deposit/Withdrawal at Custodian ("DWAC") system to the account designated by the Holder on the Notice of Exercise. If for any reason the Company is not able to so deliver the Delivery Shares via the DWAC system, notwithstanding its best efforts to do so, such shall constitute a breach of this Warrant (and thus an Event of Default under the Note), and the Company shall instead, on or before the applicable date set forth above in this subsection, issue and deliver to the Holder or its broker (as designated in the Notice of Exercise), via reputable overnight courier, a certificate, registered in the name of the Holder or its designee, representing the applicable number of Delivery Shares. For the avoidance of doubt, the Company has not met its obligation to deliver Delivery Shares within the required timeframe set forth above unless Holder or its broker, as applicable, has actually received the Delivery Shares (whether electronically or in certificated form) no later than the close of business on the latest possible delivery date pursuant to the terms set forth above.

(e)            If Delivery Shares are delivered later than as required under subsection (d) immediately above, the Company agrees to pay, in addition to all other remedies available to the Holder in the Transaction Documents, a late charge equal to the greater of (i) $2,000.00 and (ii) 2% of the product of (1) the sum of the number of shares of Common Stock not issued to the Holder on a timely basis and to which the Holder is entitled multiplied by (2) the Closing Sale Price (as defined in the Note) of the Common Stock on the Trading Day immediately preceding the last possible date which the Company could have issued such shares of Common Stock to the Holder without violating this Warrant, per Trading Day until such Delivery Shares are delivered. The Company shall pay any late charges incurred under this subsection in immediately available funds upon demand; provided, however, that, at the option of the Holder (without notice to the Company), such amount owed may be added to the principal amount of the Note. Furthermore, in addition to any other remedies which may be available to the Holder, in the event that the Company fails for any reason to effect delivery of the Delivery Shares as required under subsection (d) immediately above, the Holder may revoke all or part of the relevant Warrant exercise by delivery of a notice to such effect to the Company, whereupon the Company and the Holder shall each be restored to their respective positions immediately prior to the exercise of the relevant portion of this Warrant, except that the late charge described above shall be payable through the date notice of revocation or rescission is given to the Company.

(f)            The Holder shall be deemed to be the holder of the Delivery Shares issuable to it in accordance with the provisions of this Section 2.1 on the Exercise Date.

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2.2.           Ownership Limitation. Notwithstanding anything to the contrary contained in this Warrant or the other Transaction Documents, if at any time the Holder shall or would be issued shares of Common Stock under any of the Transaction Documents, but such issuance would cause the Holder (together with its Affiliates) to own a number of shares exceeding 4.99% of the number of shares of Common Stock outstanding on such date (the "Maximum Percentage"), the Company must not issue to the Holder shares of the Common Stock which would exceed the Maximum Percentage. The shares of Common Stock issuable to the Holder that would cause the Maximum Percentage to be exceeded are referred to herein as the "Ownership Limitation Shares". The Company will reserve the Ownership Limitation Shares for the exclusive benefit of the Holder. From time to time, the Holder may notify the Company in writing of the number of the Ownership Limitation Shares that may be issued to the Holder without causing the Holder to exceed the Maximum Percentage. Upon receipt of such notice, the Company shall be unconditionally obligated to immediately issue such designated shares to the Holder, with a corresponding reduction in the number of the Ownership Limitation Shares. Notwithstanding the forgoing, the term "4.99%" above shall be replaced with "9.99%" at such time as the Market Capitalization of the Common Stock is less than $5,000,000.00. Notwithstanding any other provision contained herein, if the term "4.99%" is replaced with "9.99%" pursuant to the preceding sentence, such change to "9.99%" shall be permanent. For purposes of this Agreement, the term "Market Capitalization of the Common Stock" shall mean the product equal to (A) the average VWAP (as defined in the Note) of the Common Stock for the immediately preceding fifteen (15) Trading Days, multiplied by (B) the aggregate number of outstanding shares of Common Stock as reported on the Company's most recently filed Form 10-Q or Form 10-K. By written notice to the Company, the Holder may increase, decrease or waive the Maximum Percentage as to itself but any such waiver will not be effective until the 61st day after delivery thereof. The foregoing 61-day notice requirement is enforceable, unconditional and non-waivable and shall apply to all Affiliates and assigns of the Holder.

3.             Mutilation or Loss of Warrant. Upon receipt by the Company of evidence satisfactory to it of the loss, theft, destruction or mutilation of this Warrant, and (in the case of loss, theft or destruction) receipt of reasonably satisfactory indemnification, and (in the case of mutilation) upon surrender and cancellation of this Warrant, the Company will execute and deliver to the Holder a new Warrant of like tenor and date and any such lost, stolen, destroyed or mutilated Warrant shall thereupon become void.

4.             Rights of the Holder. The Holder shall not, by virtue of this Warrant alone, be entitled to any rights of a stockholder in the Company, either at law or in equity, and the rights of the Holder with respect to or arising under this Warrant are limited to those expressed in this Warrant and are not enforceable against the Company except to the extent set forth herein.

5.             Protection Against Dilution and Other Adjustments.

5.1.          Capital Adjustments. If the Company shall at any time prior to the expiration of this Warrant subdivide the Common Stock, by split-up or stock split, or otherwise, or combine its Common Stock, or issue additional shares of its Common Stock as a dividend, the number of Warrant Shares issuable upon the exercise of this Warrant shall forthwith be automatically increased proportionately in the case of a subdivision, split or stock dividend, or proportionately decreased in the case of a combination. Appropriate adjustments shall also be made to the Exercise Price, Conversion Price (in the event of a cashless exercise), and other applicable amounts, but the aggregate purchase price payable for the total number of Warrant Shares purchasable under this Warrant (as adjusted) shall remain the same. Any adjustment under this Section 5.1 shall become effective automatically at the close of business on the date the subdivision or combination becomes effective, or as of the record date of such dividend, or in the event that no record date is fixed, upon the making of such dividend.

5.2.          Reclassification, Reorganization and Consolidation. In case of any reclassification, capital reorganization, or change in the capital stock of the Company (other than as a result of a subdivision, combination, or stock dividend provided for in Section 5.1 above), then the Company shall make appropriate provision so that the Holder shall have the right at any time prior to the expiration of this Warrant to purchase, at a total price equal to that payable upon the exercise of this Warrant, the kind and amount of shares of stock and other securities and property receivable in connection with such reclassification, reorganization, or change by a holder of the same number of shares of Common Stock as were purchasable by the Holder immediately prior to such reclassification, reorganization, or change. In any such case appropriate provisions shall be made with respect to the rights and interest of the Holder so that the provisions hereof shall thereafter be applicable with respect to any shares of stock or other securities and property deliverable upon exercise hereof, and appropriate adjustments shall be made to the purchase price per Warrant Share payable hereunder, provided the aggregate purchase price shall remain the same.

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5.3.          Subsequent Equity Sales. If the Company or any subsidiary thereof, as applicable, at any time and from time to time while this Warrant is outstanding, shall sell or grant any option to purchase, or sell or grant any right to reprice, or otherwise dispose of or issue (or announce any offer, sale, grant or any option to purchase or other disposition of) any Common Stock (including any Common Stock issued under the Note, whether upon any type of conversion or any Deemed Issuance (as defined in the Note)), preferred shares convertible into Common Stock, or debt, warrants, options or other instruments or securities which are convertible into or exercisable for shares of Common Stock (together herein referred to as "Equity Securities"), at an effective price per share less than the Exercise Price (such lower price, the "Base Share Price" and such issuance collectively, a "Dilutive Issuance") (if the holder of the Common Stock or Equity Securities so issued shall at any time, whether by operation of purchase price adjustments, reset provisions, floating conversion, exercise or exchange prices or otherwise, or due to warrants, options, or rights per share which are issued in connection with such issuance, be entitled to receive shares of Common Stock at an effective price per share that is less than the Exercise Price, such issuance shall be deemed to have occurred for less than the Exercise Price on such date of the Dilutive Issuance), then (a) the Exercise Price shall be reduced and only reduced to equal the Base Share Price, and (b) the number of Warrant Shares issuable upon the exercise of this Warrant shall be increased to an amount equal to the number of Warrant Shares the Holder could purchase hereunder for an aggregate Exercise Price, as reduced pursuant to subsection (a) above, equal to the aggregate Exercise Price payable immediately prior to such reduction in Exercise Price. Such adjustments shall be made whenever such Common Stock or Equity Securities are issued. The Company shall notify the Holder, in writing, no later than the Trading Day following the issuance of any Common Stock or Equity Securities subject to this Section 5.3, indicating therein the applicable issuance price, or applicable reset price, exchange price, conversion price, or other pricing terms (such notice, the "Dilutive Issuance Notice"). For purposes of clarification, whether or not the Company provides a Dilutive Issuance Notice pursuant to this Section 5.3, upon the occurrence of any Dilutive Issuance, after the date of such Dilutive Issuance the Holder is entitled to receive the increased number of Warrant Shares provided for in subsection (b) above at an Exercise Price equal to the Base Share Price regardless of whether the Holder accurately refers to the Base Share Price in the Notice of Exercise. Additionally, following the occurrence of a Dilutive Issuance, all references in this Warrant to "Warrant Shares" shall be a reference to the Warrant Shares as increased pursuant to subsection (b) above, and all references in this Warrant to "Exercise Price" shall be a reference to the Exercise Price as reduced pursuant to subsection (a) above, as the same may occur from time to time hereunder.

5.4.          Notice of Adjustment. Without limiting any other provision contained herein, when any adjustment is required to be made in the number or kind of shares purchasable upon exercise of this Warrant, or in the Exercise Price, pursuant to the terms hereof, the Company shall promptly notify the Holder of such event and of the number of Warrant Shares or other securities or property thereafter purchasable upon exercise of this Warrant.

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5.5.           Exceptions to Adjustment. Notwithstanding the provisions of Sections 5.3 and 5.4, no adjustment to the Exercise Price shall be effected as a result of an Excepted Issuance. "Excepted Issuances" shall mean, collectively, (a) the Company's issuance of securities in connection with strategic license agreements and other partnering arrangements so long as any such issuances are not for the purpose of raising capital and in which holders of such securities or debt are not at any time granted registration rights, and (b) the Company's issuance of Common Stock or the issuance or grant of options to purchase Common Stock to employees, directors, officers and consultants, authorized by the Company's board of directors pursuant to plans or agreements which are authorized, constituted or in effect as of the Issue Date.

6.             Certificate as to Adjustments. In each case of any adjustment or readjustment in the shares of Common Stock issuable on the exercise of this Warrant, the Company at its expense will promptly cause its Chief Financial Officer or other appropriate designee to compute such adjustment or readjustment in accordance with the terms of this Warrant and prepare a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based, including a statement of (a) the consideration received or receivable by the Company for any additional shares of Common Stock issued or sold or deemed to have been issued or sold, (b) the number of shares of Common Stock outstanding or deemed to be outstanding, and (c) the Exercise Price and the number of shares of Common Stock to be received upon exercise of this Warrant, in effect immediately prior to such adjustment or readjustment and as adjusted or readjusted as provided in this Warrant. The Company will forthwith mail a copy of each such certificate to the Holder and any Warrant Agent (as defined below) appointed pursuant to Section 8 hereof. Nothing in this Section 6 shall be deemed to limit any other provision contained herein.

7.             Transfer to Comply with the Securities Act. This Warrant, and the Warrant Shares, have not been registered under the 1933 Act. None of the Warrant Shares may be sold, transferred, pledged or hypothecated without (a) an effective registration statement under the 1933 Act relating to such security or (b) an opinion of counsel reasonably satisfactory to the Company that registration is not required under the 1933 Act; provided, however, that the foregoing restrictions on transfer shall not apply to the transfer of any security to an affiliate of the Holder. Until such time as registration has occurred under the 1933 Act, each certificate for this Warrant and any Warrant Shares shall contain a legend, in form and substance satisfactory to counsel for the Company, setting forth the restrictions on transfer contained in this Section 7. Any such transfer shall be accompanied by a transferor assignment substantially in the form attached to this Warrant as Exhibit B (the "Transferor Assignment"), executed by the transferor and the transferee and submitted to the Company. Upon receipt of the duly executed Transferor Assignment, the Company shall register the transferee thereon as the new Holder on the books and records of the Company and such transferee shall be deemed a "registered holder" or "registered assign" for all purposes hereunder, and shall have all the rights of the Holder.

8.             Warrant Agent. The Company may, by written notice to the Holder, appoint an agent (a "Warrant Agent") for the purpose of issuing shares of Common Stock on the exercise of this Warrant pursuant hereto, exchanging this Warrant pursuant hereto, and replacing this Warrant pursuant hereto, or any of the foregoing, and thereafter any such issuance, exchange or replacement, as the case may be, shall be made at such office by such Warrant Agent.

9.             Transfer on the Company's Books. Until this Warrant is transferred on the books of the Company, the Company may treat the Holder as the absolute owner hereof for all purposes, notwithstanding any notice to the contrary.

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10.           Notices. Any notice required or permitted hereunder shall be given in the manner provided in the subsection titled "Notices" in the Purchase Agreement, the terms of which are incorporated herein by reference.

11.           Supplements and Amendments; Whole Agreement. This Warrant may be amended or supplemented only by an instrument in writing signed by the parties hereto. This Warrant, together with the Purchase Agreement and all the other Transaction Documents, taken together, contain the full understanding of the parties hereto with respect to the subject matter hereof and thereof and there are no representations, warranties, agreements or understandings with respect to the subject matter hereof and thereof other than as expressly contained herein and therein.

12.           Descriptive Headings. Descriptive headings of the sections of this Warrant are inserted for convenience only and shall not control or affect the meaning or construction of any of the provisions hereof.

[Remainder of page intentionally left blank]

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IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed by an officer thereunto duly authorized as of the Issue Date.

COMPANY:

Health Revenue Assurance Holdings, Inc.

By:

Printed Name: 

Title:

[Signature page to Warrant]

HEALTH REVENUE ASSURANCE HOLDINGS, INC.

SECRETARY'S CERTIFICATE

I, [___], hereby certify that I am the duly elected, qualified and acting Secretary of Health Revenue Assurance Holdings, Inc., a Nevada corporation (the "Company"), and am authorized to execute this Secretary's Certificate (this "Certificate") on behalf of the Company. This Certificate is delivered in connection with (i) that certain $[___] Convertible Promissory Note issued by the Company to Tonaquint, Inc., a Utah corporation ("Tonaquint"), on [___] (the "Note"), and (ii) that certain Warrant to Purchase Shares of Common Stock issued by the Company to Tonaquint, on [___] (the "Warrant").

Solely in my capacity as Secretary, I certify that Schedule 1 attached hereto is a true, accurate and complete copy of all of the resolutions adopted by the Board of Directors of the Company (the "Resolutions") approving and authorizing the execution, delivery and performance of the Note, the Warrant, and related documents to which the Company is a party on the date hereof, and the transactions contemplated thereby. Such Resolutions have not been amended, rescinded or modified since their adoption and remain in effect as of the date hereof.

IN WITNESS WHEREOF, I have made this Secretary's Certificate effective as of [___].

Health Revenue Assurance Holdings, Inc.

Printed Name:  

Title: Secretary

EX-10.19

Exhibit 10.19

VOTING AGREEMENT

This VOTING AGREEMENT (this “Agreement”), dated as of [___], is between Health Revenue Assurance Holdings, Inc., a Nevada corporation (the “Company”), and the person executing this agreement as “Stockholder” on the signature page below (the “Stockholder”).

A. The Company intends to enter into a Securities Purchase Agreement (the “Purchase Agreement”) providing for the purchase of shares of convertible preferred stock of the Company and warrants (the “Transaction”) by certain funds and accounts managed by Great Point Partners, LLC (“GPP”), upon the terms to be set forth in the Purchase Agreement;

B. Pursuant to Section 4.13 of the Purchase Agreement, GPP has certain rights to nominate directors to the Board of Directors of the Company (the “Board”);

C. Stockholder is the beneficial or record owner of the number of shares of common stock of the Company set forth opposite the Stockholder’s name on Schedule A  (together with any shares of common stock and any other voting securities of the Company that the Stockholder acquires beneficial ownership of after the date of this Agreement, the “Owned Shares”);

D. The Stockholder is in favor of the Transaction; and

E.  As an inducement to the Company to expend the significant time and cost to negotiate, finalize, and enter into the Purchase Agreement and consummate the transactions contemplated thereby, which will inure to the benefit of the Company and, thereby, the Stockholder, the Company has requested that the Stockholder agree, and the Stockholder has agreed, to enter into this Agreement.

The parties agree as follows:

1.             Representations of Stockholder. Stockholder represents and warrants to the Company that:

(a) Stockholder owns beneficially all of the Owned Shares free and clear of all liens and other encumbrances. Except pursuant hereto, there are no options, warrants or other rights, agreements, arrangements or commitments of any character to which Stockholder is a party relating to the pledge, disposition or voting of any of the Owned Shares and there are no voting trusts or voting agreements with respect to the Owned Shares.

(b) Stockholder does not beneficially own any shares of common stock of the Company other than (i) the Owned Shares and (ii) any options, warrants or other rights to acquire any additional shares of common stock of the Company or any security exercisable for or convertible into shares of common stock of the Company, set forth on the signature page of this Agreement (collectively, “Options”).

(c) Stockholder has full power and authority and legal capacity to enter into, execute and deliver this Agreement and to perform fully Stockholder’s obligations hereunder.

2.              Agreement to Vote. So long as this Agreement is in effect, the Stockholder shall, (A) at any meeting of the stockholders of the Company called for the purpose of electing directors, (i) appear, either in person or by proxy, to cause Stockholder’s Owned Shares to be counted as present for purposes of calculating a quorum, and (ii) vote, either in person or by proxy, all of Stockholder’s Owned Shares in favor of electing GPP’s nominees to the Board (to the extent GPP is entitled to nominate such directors pursuant to Section 4.13 of the Purchase Agreement) and to otherwise give effect to the provisions of Section 4.13 of the Purchase Agreement, and (B) with respect to any consent of the stockholders of the Company relating to the appointment of directors, consent to the appointment of GPP’s nominees to the Board (to the extent GPP is entitled to nominate such directors pursuant to Section 4.13 of the Purchase Agreement) and to otherwise give effect to the provisions of Section 4.13 of the Purchase Agreement.

3.              No Voting Trusts or Other Arrangement. Stockholder shall not deposit any of the Owned Shares in a voting trust, grant any proxies with respect to the Owned Shares or subject any of the Owned Shares to any arrangement with respect to the voting of the Owned Shares other than agreements entered into with the Company.

4.              Transfer and Encumbrance. Stockholder shall not, directly or indirectly, transfer, sell, offer, exchange, assign, pledge or otherwise dispose of or encumber (“Transfer”) any of the Owned Shares or enter into any contract, option or other agreement with respect to, or consent to, a Transfer of, any of the Owned Shares or Stockholder’s voting or economic interest therein; provided, however, the Stockholder may transfer up to twenty (20%) percent of any of the Owned Shares, determined based on the number of Owned Shares as of the date hereof. Any attempted Transfer of the Owned Shares or any interest therein in violation of this Section 4 shall be null and void. This Section 4 shall not prohibit a Transfer of the Owned Shares by Stockholder to any member of Stockholder’s immediate family, or to a trust for the benefit of Stockholder or any member of Stockholder’s immediate family, or upon the death of Stockholder; provided, that a Transfer referred to in this sentence shall be permitted only if, as a precondition to such Transfer, the transferee agrees in a writing, reasonably satisfactory in form and substance to the Company, to be bound by all of the terms of this Agreement.

5.              Additional Shares. Stockholder agrees that all shares of common stock of the Company that Stockholder purchases, acquires the right to vote or otherwise acquires beneficial ownership (as defined in Rule 13d-3 under the Exchange Act, but excluding shares of common stock of the Company underlying unexercised Options) of after the execution of this Agreement shall be subject to the terms of this Agreement and shall constitute Owned Shares for all purposes of this Agreement.

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6.              Stockholder Acknowledgment; Specific Performance. The Stockholder acknowledges that the Company is negotiating the terms and conditions of the Purchase Agreement and the transactions contemplated therein in reliance upon the Stockholder’s execution and delivery of this Agreement. The Stockholder acknowledges and agrees that the Company will suffer irreparable harm from a breach by the Stockholder of its covenants or agreements contained in this Agreement. In the event of an alleged or threatened breach by the Stockholder of any of the provisions of this Agreement, the Company shall, in addition to all other rights and remedies existing in its favor, be entitled to specific performance and/or injunctive or other equitable relief in order to enforce or prevent any violations of the provisions hereof.

7.              Termination. The obligations of the Stockholder under this Agreement shall continue until the earlier to occur of (a) the first meeting of stockholders following the date hereof at which directors are elected, and (b) a sale of the Company.

8.              Counterparts; Facsimile. This Agreement may be executed in one or more counterparts and delivered by facsimile or other similar electronic means, each of which shall constitute an original and which together shall be considered one and the same agreement.

9.             Assignment. Neither party shall assign this Agreement without the prior written consent of the other party. This Agreement shall be binding upon, inure to the benefit of and be enforceable by the parties and their respective successors, heirs, executors, administrators and permitted assigns. Any assignment of this Agreement in contravention of this Section 9 shall be void.

10.            Governing Law. This Agreement shall be governed and construed in accordance with the laws of the State of Nevada.

11.            No Agreement as Director or Officer. Stockholder makes no agreement or understanding in this Agreement in Stockholder's capacity as a director or officer of the Company or any of its subsidiaries (if Stockholder holds such office), and nothing in this Agreement: (a) will limit or affect any actions or omissions taken by Stockholder in Stockholder's capacity as such a director or officer and no such actions or omissions shall be a breach of this Agreement or (b) will be construed to prohibit, limit or restrict Stockholder from exercising Stockholder's fiduciary duties as an officer or director to the Company.

The parties are signing this Agreement as of the date first written above.

HEALTH REVENUE ASSURANCE HOLDINGS, INC.

By:

Name:  

Title:

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STOCKHOLDER:

Printed Name:  

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Schedule A

Number of Owned Shares:

[___] shares of common stock.

Description of any options or other rights to purchase voting securities of the Company:

EX-10.21

Exhibit 10.21

AGREEMENT FOR PURCHASE OF ACCOUNTS

THIS AGREEMENT is made on June 7, 2012 by and between Health Revenue Assurance Associates, Inc. (a Maryland Corporation) having its principal place of business at 8551 West Sunrise Blvd., Suite 304, City of Plantation, County of Broward, State of Florida, 33322 (hereinafter referred to as "Seller") and AEROFUND FINANCIAL, INC., having an established place of business at 6910 Santa Teresa Boulevard, San Jose, California 95119 (hereinafter referred to as "Purchaser").

1. PURCHASE OF ACCOUNTS. Seller for and in consideration of the sums set forth in the annexed Exhibit A (such Exhibit A as the same may be supplemented or added to from time to time being hereinafter called "Exhibit A") and in annexed Exhibit B, and other good and valuable consideration, receipt of which is acknowledged, does hereby sell to Purchaser, its successors and assigns, all of Seller's right, title and interest in and to Seller's accounts receivable set forth in Exhibit A, or subsequently purchased, which is made a part hereof, and all monies due or which may become due upon such accounts receivable (hereafter "Accounts"). Seller authorizes Purchaser to insert the Exhibit A required account information whenever accounts are subsequently purchased. Exhibit A may be sent by FAX, mail or hand delivered to Purchaser, and this Agreement and Exhibits A and B hereto shall govern all subsequently purchased accounts. Purchaser is not obligated to buy any account from Seller. Purchaser may exercise its sole discretion in approving the credit of each account debtor before buying any account. Purchaser shall have, with respect to the Accounts, all the rights and remedies of any unpaid seller under the Uniform Commercial Code and other applicable law, including the rights of replevin, claim and delivery, reclamation, and stoppage in transit.

2. AUTHORITY OF PURCHASER. Seller hereby acknowledges and agrees that Purchaser, and its successors and assigns, shall have the irrevocable authority (a) to sell, set over, pledge, compromise, or discharge the whole, or any part, of such accounts; (b) to ask, demand, collect, receive, sue, and give releases for the monies due, or which may become due, upon such accounts receivable and to compromise, prosecute, or defend any action, claim, case, or proceeding relating to accounts purchased by Purchaser, including the filing of a claim or the voting for or against a plan in any bankruptcy case, all in Purchaser's name or Seller's name, as Purchaser may choose; (c) to prepare, file, and sign Seller's name on any notice of lien, claim of mechanic's lien, assignment or satisfaction of lien or mechanic's lien or similar document; (d) at any tin 0, whether or not Seller is in default hereunder, to notify all account debtors to pay Purchaser directly; (e) to receive, open, and dispose of all mail addressed to Seller for the purpose of collecting accounts and shall be appointed as limited agent with no fiduciary responsibility to execute Seller's name on any post office change of address form; (f) to endorse Seller's name on any checks or other forms of payment on accounts assigned to Purchaser; (g) to charge any reserve accounts held by Purchaser in the name of Seller for miscellaneous expenses incurred by Purchaser related to administration of this Agreement and the transactions hereunder, including but not limited to wire fees, FedEx fees, collection costs and legal fees, or for any other charges or fees payable under this Agreement and (h) to do all acts and things necessary or proper, in furtherance of any such purposes.

3. REPRESENTATIONS, WARRANTIES AND COVENANTS. To induce Purchaser to render its services available to Seller, and with full knowledge that the truth and accuracy of the following are being relied upon by the Purchaser in the purchase and remittance for the accounts receivable acceptable to Purchaser, the Seller represents, warrants, covenants and agrees that:

a. Seller is properly licensed and authorized to operate the business of coding services for hospitals under the trade name(s) n/a.; and Seller's trade name(s) has(ve) been properly filed and published as required by applicable law. Seller has fulfilled all the federal, state and local requirements of law in properly registering itself to do business at all addresses in which it is located.

b.	The Seller is the absolute owner of each account receivable set forth in Exhibit A and has full legal right to make said sale thereof;
c.	The correct amount of each receivable is as set forth in Exhibit A and is not in dispute;
d.	The payment of each account receivable is not contingent upon the fulfillment of any obligation or contract, past or future, and any and all obligations required of the Seller have been fulfilled as of the date of this Agreement;
e.	Each account receivable set forth in Exhibit A is based on an actual sale and delivery of goods and/or services actually rendered, is presently due and owing to Seller, is not in default, has not been previously sold, assigned, transferred, or pledged, and is free of any encumbrance or lien;
f.	There are no defenses, offsets, or counterclaims against any of the accounts receivable, and no agreement has been made under which the account debtor may claim any deduction or discount, except as otherwise stated in any of the accounts receivable set forth in Exhibit A;
g.	Each account receivable set forth in Exhibit A shall be the property of the Purchaser and shall be collected directly by Purchaser, but if for any reason it should be paid to Seller, Seller shall promptly notify Purchaser of such payment, shall hold any checks, drafts, or monies so received in trust for the benefit of Purchaser, and shall promptly endorse, transfer and deliver the same to Purchaser;
h.	Purchaser shall have the right of endorsement, and also the right to require endorsement by Seller, on all payments received by Purchaser on Seller's account;
i.	The Seller and, to Seller's best knowledge, each account debtor set forth in Exhibit A is, are, and shall remain solvent as that term is defined in the Federal Bankruptcy Code;
j.	Each account debtor named in Exhibit A will not object to the payment for, or the quality or the quantity of, the subject matter of the account receivable and is liable for the amount set forth in Exhibit A;
k.	Each account debtor set forth in Exhibit A shall be promptly notified after acceptance by Purchaser that the account receivable has been transferred to and is payable to Purchaser;
1	The Seller's place of business and the place where the records concerning all accounts receivable herein referred to are kept is the one set forth at the beginning of this Agreement, and Seller will promptly advise Purchaser in writing if such place of business or record keeping is changed or a new place of business or record keeping is added;
m.	All accounts receivable forwarded to Purchaser and acceptable to Purchaser after the date hereof, shall comply with each and every one of the foregoing representations, warranties, covenants and agreements referred to above in this Paragraph 3;
n.	Seller will not assign, transfer, sell, or grant any lien or security interest in accounts to any other party, without Purchaser's prior written consent;
o.	Seller will, upon sale to Purchaser, make proper entries on its books and records disclosing the absolute sale of said accounts to Purchaser;

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P.	There are no proceedings or investigations, pending or threatened, against Seller before any court, regulatory body, administrative agency, or other tribunal or government instrumentality; and
q.	Each account identified in Exhibit A has been created in accordance with and complied with applicable law.

4. ADJUSTMENTS, CHARGE BACKS, AND INDEMNIFICATION. In the event of a breach of any of the representations, warranties, and covenants set forth in Paragraph 3, including a dispute between the Seller and any account debtor set forth in Exhibit A, Seller shall promptly advise Purchaser and shall, subject to the Purchaser's approval, adjust such disputes and advise Purchaser of adjustment. Purchaser shall have the right at any time to charge back to Seller's account the amount of any allowance, return or account receivable, full or partial payment of which is delayed or refused by an asserted counterclaim, defense or offset by an account debtor, or by reason of an account debtor's insolvency or financial inability to pay, and any expenses and legal fees incurred by Purchaser in any attempt to collect any disputed account, together with fees pursuant to Exhibits A and B from the date of purchase of the account in dispute, whether such dispute is valid or invalid.

5. SECURITY INTEREST. In order to secure Seller's now existing or hereafter arising obligations to Purchaser under Paragraph 3, 4, 10 and 11 hereof, and the legal fees and expenses set forth in Paragraph 8 hereof, Seller hereby grants to Purchaser a continuing lien upon and security interest in Seller's now existing or hereafter arising rights and interest in the following (the "Collateral"): All accounts, accounts receivables, contract rights, instruments, documents, chattel paper, general intangibles, (including but not limited to trademarks, trade names, patents, copyrights and all other forms of intellectual property, and tax refunds), returned and repossessed goods and all rights as a seller of goods; all collateral securing any of the foregoing; all deposit accounts, special and general, whether on deposit with Secured Party or others; all inventory wherever located; all present and future claims against any supplier of any of the foregoing, including claims for defective goods or over payments to or under shipments by supplier; all proceeds arising from the lease or rental of any of the foregoing; INVENTORY RETURNED BY SELLER TO ITS SUPPLIERS SHALL REMAIN SUBJECT TO PURCHASER'S INTEREST; all equipment and fixtures; NONE OF WHICH THE seller IS AUTHORZED TO SELL, LEASE OR OTHERWISE DISPOSE OF WITHOUT THE WRITTEN CONSENT OF SECURED PARTY. all warranty and other claims against any vendor or lessor of any of the foregoing; all cash and non-cash proceeds of any of the foregoing, in whatever form (including proceeds in the form of inventory, equipment or any other form of personal property), including proceeds of proceeds; and all investment property. Seller is not authorized to sell, transfer or otherwise convey any Collateral, except for the sale of finished inventory held for sale in the Seller's usual course of business, without Purchaser's consent. Seller agrees to sign such financing statements, in a form satisfactory to Purchaser, which Purchaser may at any time desire to file in order to protect or perfect Purchaser's security interest.

6. DEFAULT. An event of default shall be deemed to have occurred, and (without implying any obligation of Purchaser to buy accounts) Purchaser may cease buying accounts and may immediately exercise its rights and remedies with respect to the Collateral as a secured party under this Agreement, the Uniform Commercial Code, and applicable law, upon the happening of one or more of the following:

a.	Seller shall fail to make any payments required to be made to Purchaser under this Agreement including, without limitation, any payments required to be made in accordance with Paragraph 10; when due;
b.	Seller breaches any term or condition of this Agreement.
c.	Seller shall commence any voluntary case under the Federal Bankruptcy Code, or shall make an assignment of the benefit of creditors, or shall consent to the appointment of a receiver or custodian for a substantial portion of its assets;
d.	An involuntary case under the Federal Bankruptcy Code is filed against Seller;

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e.	Seller shall become insolvent in that its debts are greater than the fair value of its assets, or Seller is generally not paying its debts as they become due;
f.	Any involuntary lien, levy, garnishment, attachment or the like is issued against or attached to the accounts purchased by Purchaser or the Collateral, and the same is not released within ten (10) days;
g.	Any representation or warranty made by Seller in this Agreement or pursuant to this Agreement proves to have been false or misleading when made;
h.	Any guarantor of Seller's obligations to Purchaser hereunder fails to perform or observe any of its obligations to Purchaser or notifies Purchaser of an intention to rescind, modify, terminate or revoke any guaranty, or any such guaranty ceases to be in full force and effect for any reason whatsoever; and
i.	Purchaser's security interest in any Collateral or other security for Seller's obligations becomes impaired for any reason.

7. PAYMENT. Upon acceptance by Purchaser of Exhibit A and purchase by Purchaser of the accounts described thereon, Purchaser agrees to pay Seller the amount set forth as the "ADVANCE" on Exhibit A. Purchaser further agrees, upon collection in full of the Accounts to pay over any unearned fees held by Purchaser to Seller less any deductions, discounts, indemnifications, and/or known or anticipated charge backs provided for in Paragraphs 3 or 4, less any repurchase obligations under Paragraph 10, less any others costs or fees incurred under this Agreement, including but not limited to fees identified in Paragraph 8 of this Agreement and in Paragraphs 3, 4, and 5 of Exhibit B. Any such credits shall be calculated and paid, in accordance with the reserve release schedule on Exhibit B, at the end of each month of this Agreement.

8. ATTORNEYS' FEES. The Seller will pay any and all legal expenses and reasonable attorneys' fees that Purchaser incurs (a) in negotiating, preparing, or administering this Agreement and any documents prepared in connection herewith; or (b) in any way arising out of this Agreement; or (c) in enforcing this Agreement against Seller or protecting or enforcing its security interest in the Collateral or any other right granted by Seller to Purchaser or arising under applicable law, whether or not suit is brought; or (d) in collecting accounts for which there has been a breach of any of the warranties, representations, or covenants set forth in Paragraphs 3, 4, or 10, or a partial or total failure or delay in payment by the account debtor for any reason, including insolvency, bankruptcy, or financial inability to pay; or (e) in the representation of Purchaser in connection with any bankruptcy case or insolvency proceeding involving Seller, the Collateral, any account debtor, or any accounts purchased by Purchaser.

9. SEVERABILITY AND CHOICE OF LAW. In the event that any provision of this Agreement is deemed invalid by reason of the operation of any law, or by reason of any interpretation placed on any law by the courts, this Agreement will be construed as not containing such provision and the remainder of the Agreement shall remain in full force and effect. This Agreement has been transmitted by Seller to Purchaser at Purchaser's office in the State of California and has been executed and accepted by Purchaser in the State of California. This Agreement shall be governed by and interpreted in accordance with the laws of the State of California.

10.           REPURCHASE AND RECOURSE. Seller further agrees that if any account or portion thereof is not paid by the account debtor within ninety (90) days of the date of account (as identified on an invoice or otherwise) for any reason, including the account debtor's insolvency or financial inability to pay, Seller shall, upon demand by Purchaser, repay to Purchaser any amount paid by Purchaser to Seller in consideration for the sale of said account, plus the Purchaser's earned fee in accordance with Exhibit B. Purchaser can apply any contingency and fee refunds due to Seller under Exhibit B and Paragraph 7 to Seller's obligations under this paragraph. Purchaser's security interest in the Collateral will secure Seller's obligations under this paragraph.

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11.           NO LIEN TERMINATION WITHOUT RELEASE. In recognition of Purchaser's right to have all its attorneys' fees and other expenses incurred in connection with this Agreement secured by its Collateral, not withstanding payment in full of all obligations by Seller, Purchaser shall not be required to record any terminations or satisfactions of any of its liens on the Collateral unless and until Seller and all guarantors of Seller's obligations to Purchaser have executed and delivered to Purchaser releases in the form of Exhibit "C" of all claims, known and unknown which exist as of the date thereof. Seller understands that this provision constitutes a waiver of its rights under Section 9-513 of the Uniform Commercial Code.

12.           VENUE. The parties agree that any suit, action or proceeding arising out of the subject matter hereof, or the interpretation, performance or breach of this Agreement, shall, if Purchaser so elects, be instituted in the United States District Court for the Northern District of California or any court of the State of California located in San Jose, California (the "Acceptable Forums"). Each party agrees that the Acceptable Forums are convenient to it, and each party irrevocably submits to the jurisdiction of the Acceptable Forums and waives any and all objections to jurisdiction or venue that it may have under the laws of the State of California or otherwise in those courts in any such suit, action or proceeding. Should such proceeding be initiated in any other forum, Seller waives any right to oppose any motion or application made by Purchaser as a consequence of such proceeding having been commenced in a forum other than an Acceptable Forum.

13.           TERM AND TERMINATION. The term of this Agreement shall be one (1) year from the date hereof, and from year to year thereafter, unless terminated in writing by Purchaser or Seller no later than thirty (30) days and no earlier than sixty (60) days prior to each anniversary date. Any termination of this Agreement shall not affect the security interest granted hereby or the warranties, covenants, or obligations of Seller hereunder, and this Agreement shall continue to be effective until all transactions entered into and obligations incurred hereunder have been completed and satisfied in full.

14.          WAIVER OF JURY TRIAL. SELLER WAIVES ANY RIGHT TO A JURY TRIAL IN ANY ACTION HEREUNDER OR ARISING OUT OF PURHASER'S TRANSACTIONS WITH SELLER, TO THE EXTENT AUTHORIZED BY LAW.

15.           MODIFICATIONS. This Agreement cannot be modified orally. No modification of this Agreement shall be effective for any purpose unless it is in writing and executed by an officer of Purchaser authorized to do so. All prior agreements, understandings, representations and negotiations, if any, are merged into this Agreement.

IN WITNESS WHEREOF, the Seller has executed this Agreement on the day and year above written and the Purchaser has noted its acceptance by its authorized representative.

Accepted San Jose, California on 06-11-12:

AEROFUND FINANCIAL		SELLER: Health Revenue Assurance Associates, Inc.
By:	/s/ Janet Godard	By:	/s/ Robert Rubinowitz
	(Authorized Signature)		(Authorized Signature)
	Janet Godard, EVP/Sales/Mrktg		Robert Rubinowitz, President
			(Print Name and Title)

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Rebate and Retention Schedule

Exhibit "B"

CLIENT: Health Revenue Assurance Associates, Inc. DATE: June 7, 2012

1. ADVANCE RATE. PURCHASER shall advance 85% of the net face amount of purchased / accounts, as stated on an invoice or otherwise, and shall retain 15% of the net face amount in fee escrow for payment of fees by Seller for Purchaser's services, as those fees are more further described below.

2.FEE. Purchaser shall collect a fee for its services based upon the number of days between the purchase date of a purchased account and the date that is one business day after the date payment is received on the purchased account by Purchaser. The fee shall be calculated based upon the following schedule:

One point eighty five percent (1.85%) for the first thirty (30) days and an additional point thirty two percent (.32%) every five (5) days thereafter.

3.RESERVE RELEASE: Reserves shall be paid on the first and fifteenth of the month.

4.BREACH OF WARRANTY. All purchased accounts that remain unpaid after 30 days due to Seller's breach of contractual representation, warranty, or covenant, shall accrue additional fees at the rate of 1.0% for every 15 days until paid.

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Rebate and Retention Schedule

Exhibit "B" (continued)

5.         SPECIAL FEES:

a."Misdirected Payment Fee" - Seller shall pay to Purchaser on demand a fee of fifteen percent (15%) of the amount of any payment on account of an account purchased hereunder which has been received by Seller and not delivered in kind to Purchaser within 3 business days following the date of receipt by Seller.

b."Prime Adjustment Fee" - The rates quoted herein are designed to be as competitive as possible given current financial conditions. Therefore an additional fee equal to the Prime Rate minus 3.25% shall be charged against the purchased account disclosed on the collection report and reserve report at time of collection. For purposes of this agreement the Prime Rate shall be the same as reflected in The Wall Street Journal (Western Edition). (waived)

c."Missing Notation Fee" - Seller shall pay to Purchaser on demand a fee of fifteen percent (15%) of the face amount of any invoice evidencing a purchased account that is sent by Seller to an account debtor which does not contain a notification that the account has been assigned to and payment thereunder is to be made only to Purchaser. Enforced only if the payment has been received by the seller and not delivered in kind to purchaser within 3 business days following the date of receipt by Seller.

6.         SET UP CHARGE. There will be a one-time set up charge of $450.00, due at the signing of the contract.

7.         MAXIMUM FACILITY. The maximum facility shall be the maximum amount of accounts purchased by Purchaser and unpaid by the account debtor(s) at any given time. The Maximum Facility shall not exceed one million dollars ($1,000,000.00).

8.         EARLY TERMINATION. Seller shall pay Purchaser a penalty of one half of one percent (.50%) of the maximum facility amount for each month left in the term of the contract if Seller terminates this Agreement prior to the expiration of the term as defined in paragraph 13 of the AGREEMENT FOR PURCHASE OF ACCOUNTS. If after a 6 month period, Seller is able to obtain a traditional bank line of credit with an FDIC Insured Bank, Seller may terminate the remainder of the agreement with Purchaser with no termination fee so long as Purchaser is given a written 60 day notice.

Accepted San Jose, California on 06/11/12

AEROFUND FINANCIAL		SELLER: Health Revenue Assurance Associates, Inc.
By:	/s/ Janet Godard	By:	/s/ Robert Rubinowitz
	(Authorized Signature)		(Authorized Signature)
	Janet Godard, EVP/Sales/Mrktg		Robert Rubinowitz, President
			(Print Name and Title)

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EX-10.22

Exhibit 10.22

April 14, 2014

Mr. Robert Rubinowitz

11050 Canary Island Court

Plantation, FL 33322

Dear Robert:

This letter confirms our understanding and agreement with respect to your termination by Health Revenue Assurance Holdings, Inc., a Nevada corporation (the “Company” and, together with its subsidiaries, the “Company Group”).  This letter sets forth the rights and obligations of the Company Group and you in respect of such termination, as follows:

1.             Termination of Employment; Transition Services.  Effective as of 11:59 a.m. Eastern Time on April 14, 2014 (the “Termination Date”), your employment with the Company Group and any affiliate of the Company Group shall terminate.  In addition, to the extent you are a director, officer, or agent for service of process of the Company Group or any affiliate of the Company Group, you hereby resign from such positions effective as of the Termination Date.  You do not claim nor shall you claim any further right to employment by the Company Group.  For the avoidance of doubt, as of the Termination Date you are not otherwise authorized to represent or act in the capacity of an employee or officer of the Company Group.

2.             Termination Payments and Other Benefits.

(a)           Severance Payments.  As consideration for entering into this letter and subject to paragraph 9(b), if you do not revoke this letter in accordance with paragraph 9(f), you shall be entitled to receive from the Company Group, subject to your continued compliance with paragraph 3, $175,000 to be paid in equal increments of $3,365.39 on each of May 2, 2014, May 16, 2014, May 30, 2014, June 14, 2014 and June 27, 2014 and thereafter equal increments of $7,532.05 with the last payment date being April 17, 2015 (the “Severance Period”), which payments shall begin on May 2, 2014, with payments made on the Company Group’s regular payroll cycle. Any failure by the Company Group to make the payments as contemplated under this Section 2(a) when due that is not cured by the Company Group within five (5) business days of receiving notice of such failure, shall render all remaining amounts due under this Section due and payable immediately.

(b)           Accrued Obligations.  The Company Group shall pay or provide to you  an aggregate amount of $23,557.70 payable in equal installments of $1,121.80 in respect of your accrued and unpaid base salary, bonus and vacation earned through April 11, 2014.  Payments shall begin on July 11, 2014 and shall be made on the Company Group’s regular payroll cycle. Additionally, the Company Group shall pay you $6,730.77 which represents two weeks of accrued salary on April 18, 2014.

3.             Termination of Employment Agreement.  Effective as of the Termination Date, the Company Group and you hereby agree that the Employment Agreement, dated as of October 1, 2013, by and between you and the Company Group, as amended by the Addendum dated November 12, 2013 (the “Employment Agreement”), will thereby be terminated in all respects and will no longer be enforceable or in effect.  You hereby acknowledge and agree that, except as expressly set forth herein or as required by law, you will not be entitled to or make a claim for any other compensation or benefits from the Company Group or any affiliate of any member of the Company Group, including, without limitation, any severance, bonus or termination payments or benefits under the Employment Agreement or otherwise, and you hereby agree that, except as expressly set forth herein or as required by law, you will have no further interest, rights or benefits arising out of or in connection with the Employment Agreement as of the Termination Date.

4.             General Release.

(a)           Release of Claims by You.  You, on behalf of yourself and your family, agents, representatives, heirs, executors, trustees, administrators, attorneys, successors and assigns (the “Releasors”), hereby irrevocably and unconditionally release, settle, cancel, acquit and discharge, waive any and all rights that he, she or it may have against, and covenant not to sue, the Company Group and each of their respective subsidiaries, affiliates, successors and assigns, and each of their respective predecessors, stockholders, partners, members, directors, managers, officers, employees, agents or other representatives, and employee benefit plans of the Company Group (including current and former trustees and administrators of these plans) (collectively, the “Releasees”) from any and all claims, contractual or otherwise, demands, costs, rights, causes of action, charges, debts, liens, promises, obligations, complaints, losses, damages and all liability of whatever kind and nature, whether known or unknown from the beginning of time up to and including the time of signing this letter, or that otherwise may exist or may arise in respect of your employment or separation from employment with the Company Group, or is in any way connected with or related to any Company Group compensatory or benefit plan, program, policy or arrangement; provided, that such released claims shall not include any claims or covenants outlined in this letter. Thus, for the purpose of implementing a full and complete release and discharge of the Releasees, you expressly acknowledges that this letter is intended to include in its effect, without limitation, all released claims that you do not know or suspect to exist in your favor at the time of execution hereof, and that this letter contemplates the extinguishment of any released claims.

(b)           Release of Claims by the Company.  The Company Group and its successors and assigns (the “Company Releasors”) hereby irrevocably and unconditionally release, settle, cancel, acquit and discharge, waive any and all rights that he, she or it may have against, and covenant not to sue you, your family, agents, representatives, heirs, executors, trustees, administrators, attorneys, successors and assigns (collectively, the “Company Releasees”) from any and all claims, contractual or otherwise, demands, costs, rights, causes of action, charges, debts, liens, promises, obligations, complaints, losses, damages and all liability of whatever kind and nature, whether known or unknown from the beginning of time up to and including the time of signing this letter, or that otherwise may exist or may arise in respect of or related to your employment with the Company Group; provided, that such released claims shall not include any claims to enforce this letter. Thus, for the purpose of implementing a full and complete release and discharge of the Company Releasees, the Company Group expressly acknowledges that this letter is intended to include in its effect, without limitation, all released claims that the Company Group does not know or suspect to exist in the Company Group’s favor at the time of execution hereof, and that this letter contemplates the extinguishment of any released claims.  Notwithstanding the foregoing provisions of this Section 4(b), nothing in this Section 4(b) purports to release, waive or otherwise apply to any claims which the Company Group may have that either (i) arise from your acts or omissions of intentional misconduct, fraud or criminal conduct as a service provider of the Company, or (ii) arise from claims made against any member of the Company Group by third parties based on your intentional misconduct, fraud or criminal conduct as a service provider of the Company.  Nothing contained in this letter shall affect the rights of you and the Company under that certain Indemnification Agreement between the Company and you dated November 8, 2013.

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(c)           Covenant Not to Sue.  The Releasors and the Company Releasors agree not to bring any action, suit or proceeding whatsoever (including the initiation of governmental proceedings or investigations of any type) against the other for any matter or circumstance released hereunder.  Further, the Releasors and the Company Releasors agree not to encourage any other person or suggest to any other person that he, she or it institute any legal action against the Releasees, on the one hand, and the Company Releasors, on the other hand.  Notwithstanding the foregoing, this release is not intended to interfere with your right to file a charge with the Equal Employment Opportunity Commission in connection with any claim you believe you may have against the Company Group.  The Releasors and the Company Group hereby agree to waive the right to any relief (monetary or otherwise) in any action, suit or proceeding brought in violation of this letter.

(d)           Extent of Release.  This release is valid whether any claim arises under any federal, state or local statute (including, without limitation, Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1991, the Age Discrimination in Employment Act of 1967 (“ADEA”), the Equal Pay Act, the Americans with Disabilities Act of 1990, the Employee Retirement Income Security Act of 1974, the Fair Labor Standards Act, the Family and Medical Leave Act, the Florida Civil Rights Act, and all other statutes regulating the terms and conditions of your employment), regulation or ordinance, under the common law or in equity (including any claims in tort or under contract for wrongful discharge or otherwise), or under any policy, agreement, understanding or promise, written or oral, formal or informal, between the Company Group or any affiliate of a member of the Company Group, and yourself.

5.             Confidentiality of this Letter; Return of Company Group Property.  You will keep confidential and will not release or divulge, either orally or in writing to any person, except as may be required by law or regulation or by order of any court, this letter or any provision hereof or any information with respect thereto; provided, that nothing contained herein will prohibit you from disclosing the terms of this letter to your spouse, attorneys, accountants, financial advisors or members of your immediate family.  Additionally, you agree that on or before April 14, 2014, you will return to the Company Group all records, files, equipment, desk or file keys, office keys, cell phones, credit cards, computer programs or disks, or other Company Group property which is in your possession. On or about May 30, 2014, the Company shall return to you the keys to the mailbox located at 10097 Cleary Blvd., #513 Plantation, FL 33324, which is in your personal name.  In connection with such return, from and after such date, you covenant and agree that you will deliver, within one business day of its delivery to such mailbox, to the Company any and all mail delivered to such mailbox that is addressed to any member of the Company Group (regardless of whether you are also an addressee).

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6.             Loan Guarantees.  The Company Group shall use its commercially reasonable efforts to have you and your spouse removed as a guarantor of any of the Company Group’s outstanding debt obligations as described on Schedule A. The Company Group hereby agrees to indemnify your for any expenses, liability or loss including attorneys’ fees, judgments, amounts paid in settlement, any interest or other charges imposed on you in connection with these outstanding debt obligations.  Pursuant to the terms of that certain Florida Motor Vehicle Lease Agreement, dated January 10, 2013, between you and Plantation Ford, the Company agrees to pay directly to Ford Motor Credit Company the early termination fee of $11,634 for the termination of your 2013 Ford Flex lease, and you agree to return the 2013 Ford Flex to Plantation Ford on or before April 14, 2014.  That certain Sublease Agreement, dated January 31, 2013, between the Company and you shall be deemed terminated as of the Termination Date.

7.             Stock.   The Company shall use commercially reasonable efforts to file a Registration Statement on Form S-1 (the “Registration Statement”) within sixty (60) days of the date this letter is fully executed by both parties registering the resale of your currently outstanding shares of common stock of the Company consisting of an aggregate of 6,599,617  shares.   The Company shall use commercially reasonable efforts to have the Registration Statement declared effective by the Securities and Exchange Commission (the “SEC”) within sixty (60) days of the filing the Registration Statement with the SEC.  The Company agrees to use its commercially reasonable efforts to respond to any non-financial SEC comments within ten (10) business days of the Company’s receipt of same and to request effectiveness promptly after receiving notice that the SEC has no further comments to the Registration Statement.  The Company agrees to hold an annual meeting of stockholders within twelve (12) months of the date of this letter is fully executed by both parties.

8.             Consideration; Legal Advice, Reliance. The consideration provided hereunder by the Company Group is not required under the Company Group’s standard policies, and you know of no other circumstances other than your agreeing to the terms of this letter that would require the Company Group to provide such consideration.  You represent and acknowledge that (a) you have been given adequate time (at least twenty-one (21) days) to consider this letter (which, by signing this letter prior to the expiration of such period, you have expressly agreed to waive) and have been advised to discuss all aspects of this letter with your private attorney, (b) you have carefully read and fully understand all the provisions of this letter, (c) you have voluntarily entered into this letter, without duress or coercion and (d) you have not heretofore assigned or transferred or purported to assign or transfer, to any person or entity, any of the claims described in paragraph 4, any portion thereof or any interest therein.  You understand that if you request additional time to review the terms of this letter, a reasonable extension of time will be granted.

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9.             General Provisions.

(a)           Third Party Beneficiaries.  All Releasees under this letter who are not signatories to this letter shall be deemed to be third party beneficiaries of this letter to the same extent as if they were signatories hereto.

(b)           Withholding.  The Company Group shall withhold from any amounts payable under this letter such federal, state and local taxes as may be required or permitted to be withheld pursuant to any applicable law or regulation.

(c)           Entire Agreement.  This letter constitutes the sole and complete understanding of you and the Company Group with respect to the subject matter hereof.  You and the Company Group represent to each other that in executing this letter, you and the Company Group do not rely and have not relied upon any representation or statement not set forth herein made by any other person with regard to the subject matter, basis or effect of this letter.

(d)           Amendment; Waiver; Successors.  No amendment, modification or alteration of the terms and provisions of this letter shall be binding unless the same shall be in writing and duly executed by you and the Company Group.  No waiver of any of the provisions of this letter shall be deemed to or shall constitute a waiver of any other provision hereof.  No delay on the part of any party hereto in exercising any right, power or privilege hereunder shall operate as a waiver thereof.  This letter shall be binding upon the parties hereto and their respective successors, trustees, administrators, transferees and assigns.

(e)           Governing Law; Severability; Blue Pencil.  This letter will be governed by the laws of the State of Florida, without regard to its conflict of laws rules.  In the event that any one or more of the provisions of this letter is held to be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions will not in any way be affected or impaired thereby.  You and the Company Group agree that the covenants contained in paragraph 3 are reasonable covenants under the circumstances, and further agree that if, in the opinion of any court of competent jurisdiction such covenants are not reasonable in any respect, such court shall have the right, power and authority to excise or modify such provision or provisions of these covenants as to the court shall appear not reasonable and enforce the remainder of these covenants as so amended.

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(f)            Revocation.  Pursuant to the protections afforded to you under the Older Workers Benefits Protection Act, you may revoke your waiver of any claim under the ADEA within seven (7) days after the date on which this letter is signed by both parties.  You understand that such waiver of any ADEA claims is not binding or enforceable until such seven (7) day period has expired.  Any such revocation must be made in a signed letter executed by you and received by the Company Group at the following address no later than 5:00 p.m., Florida time, on the seventh day after you have executed this letter:  Health Revenue Assurance Holdings, Inc., 8551 W. Sunrise Boulevard, Suite 304, Plantation, Florida 33322, Attention:  Chief Executive Officer. With the exception of your waiver of ADEA claims, which is subject to a seven (7) day revocation period, this letter agreement will be effective upon execution by both parties.  In the event that you revoke your waiver of any ADEA claims, the remainder of this letter agreement, including the remainder of the release contained in Section 4 of this letter agreement, shall remain in effect.

(g)           Counterparts.  This letter may be executed in counterparts, each of which shall for all purposes be deemed to be an original, and all of which shall constitute the same instrument.  The parties hereto agree to accept a signed facsimile (or “PDF”) copy of this letter as a fully binding original.

*           *           *           *           *

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If this letter correctly sets forth your understanding of our agreement with respect to the foregoing matters, please so indicate by signing below on the line provided for your signature.

Very truly yours,
Health Revenue Assurance Holdings, Inc
By:	/s/ Tim Lankes
	Name: Tim Lankes
	Title:   CEO

Acknowledged and agreed

as of the first date written above:

/s/ Robert Rubinowitz

Robert Rubinowitz

[Signature Page to Separation Letter]

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Schedule A

Bank of America Term Loan with a maturity date of September 19, 2017.

Mortgage on the Company’s main offices in Plantation, Florida.

8

EX-10.23

Exhibit 10.23

12/5/2012

· · ·

Dean Boyer

Health Revenue Assurance Associates, Inc.

8551 W. Sunrise Boulevard, Suite 304

Plantation, FL 33322

Dr. Michael Gallagher

526 Merritt Ave.

Oakland, CA 94610

Mike@GallagherMD.com

Dear Mike,

HRAA would like to extend you the following offer for full time employment as a Chief Medical Information Officer. This offer is contingent upon satisfactory results of a background check and the execution of an employment agreement. It is our privilege to have you as part of our team. Your anticipated start date is January 14, 2013.

Responsibilities:

As Chief Medical Information Officer you will report to Dean Boyer, HRAA's Chief Technology Officer and will be responsible for managing all P&L as it relates to product development. HRAA currently has five products under development; ICD Visualizer™, HC AuditPro™, Re-admit Visualizer™, Medical Home (name TBD) and HIM Visualizer™. Several other products are on the drawing board and need to be brought in development over the next 12 months. As CMIO you primary objective is to drive product revenue to 55% of HRAA total revenue over the next 24 months.

Additional responsibilities are as follows:

· Participate in HRAA's Strategic Planning

· Oversee HRAA's Revenue Integrity Governance and Policy development as applicable

· Run the Product Management Department including budgeting and P&L.

· Direct and coordinate all product development and deployment with the Director of Product Development and the Director of IT Consulting.

· Coordinate product marketing, sales and pricing with Sales and Marketing Departments

· Coordinate Stakeholder engagement in all product releases

· Capacity Building

Health Revenue Assurance Associates, Inc.

8551 West Sunrise Blvd Suite 304 Plantation, FL 33322

Phone: (954) 472-2340       Fax: (954) 370-0157

www.healthrevenue.com

· Informatics education and platform development

· Data mining and quality reporting

· Education, Training and curriculum design

· Travel to support sales opportunities and promotions (Note: Travel will be limited to 35%, travel in excess of 35% will be commenced at your request in support of your goals and responsibilities)

Compensation:

Michael your compensation will be comprised of 4 components: a base salary, a quarterly stock disbursement, performance based stock options and performance base cash bonuses.

Base Salary:

Michael your base salary is $200,000 paid on an interval of two weeks resulting in 26 payments per year.

Quarterly Stock Disbursement:

Michael, as a supplement to your base salary you will receive quarterly disbursement of stock based on the following formula: (($18,750 X 1.3)/ Market Value of HRAA Common Stock (at time of Disbursement) = No. of Shares).

Performance Stock Options:

Each time a product is announced as being generally available (GA) you will be grated 10,000 stock, options. Currently there are five products scheduled to be GA in 2013 which provides you the ability to receive 50,000 stock options that will vest over a 4 year period.

Performance based Cash Options:

Each time a product crosses a $2M threshold you will receive a cash bonus of $5,000. Currently there are five products in progress that have the potential of generating a minimum of $2M each. That would result in a cash bonus of $25,000 in 2013. However, if you achieve your goal of generating 55% of HRAA revenue through products sales that would mean that you would receive $35,000 in cash bonuses.

Benefits:

Michael your benefits are as follows:

· 24 Month Assurance/Change in Control Benefit.

· Home Office support — laptop, softphone plus headset, printer, cell phone, HRAA approved software.

· Health Insurance — Waived at your request.

· Travel — priority boarding for travel on non-status airlines, name plate hotels (if available), standard Per Diem. (Note: this is all managed by you as part of your P&L). You are entitled to one fixed non-travel day per week.

· Vacation — Start with 4 weeks with an additional 1 week for every two years of employment until a max of 6 weeks is reached at 5 years.

· CME 5 days per year.

Health Revenue Assurance Associates, Inc.

8551 West Sunrise Blvd Suite 304 Plantation, FL 33322

Phone: (954) 472-2340       Fax: (954) 370-0157

www.healthrevenue.com

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· Professional Fees and Credentialing Fees will be reimbursed for fees that are applicable to your role as CMIO at HRAA.

· All other benefits are outlined in the attached HRAA Handbook and are applicable to the laws governing the state of California.

Mike we are very excited to have you be a Member of the team HRAA.

Accented by:	/s/ Michael Gallagher	Date:            12/18/2012
Please Print Name	Michael Gallagher

Sincerely,

Dean Boyer

Chief Technology Officer

Health Revenue Assurance Associates, Inc.

Health Revenue Assurance Associates, Inc.

8551 West Sunrise Blvd Suite 304 Plantation, FL 33322

Phone: (954) 472-2340       Fax: (954) 370-0157

www.healthrevenue.com

3

EX-10.24

Exhibit 10.24

12/17/2012

●●●

Robert Rubinowitz

Health Revenue Assurance Associates, Inc.

8551 W. Sunrise Boulevard, Suite 304

Plantation, FL 33322

Mr. Joseph Brophy

85447 Sagaponack Drive

Fernandina Beach, Florida 32034

(609) 760-5747

jbroh654@comcast.net

Dear Joe,

HRAA would like to extend you the following offer for full time employment as a Senior Vice President of Operations. This offer is contingent upon satisfactory results of a background check and the execution of an employment agreement. It is our privilege to have you as part of our team. Your anticipated start date is January 14, 2013.

Responsibilities:

As Senior Vice President you will report to Robert Rubinowitz, HRAA's President and Chief Operating Officer and will be responsible for managing all P&L as it relates to operations. As Sr. Vice President of Operation you will be responsible for the day to operations of consulting, coding, quality, information technology as it relates to customer interactions and performance. HRAA has seven streams of revenue Revenue Integrity Consulting, Contract Coding, Outsourced Coding, Training, Product Sales, IT Consulting and Product Support. The Operations Department will be responsible for the oversight of these seven revenue streams to insure HRAA's own revenue integrity and profitability. This involves contract management, operation reviews of assignments and performance analysis of statement of works. As Sr. Vice President of Operations your primary objective is to drive HRAA's net margin above 25% of total revenue over the next 24 months.

Additional responsibilities are as follows:

· Participate in HRAA's Strategic Planning

· Oversee HRAA's Revenue Integrity Governance and Policy development as applicable

· Run the Operation Department including budgeting and P&L.

Health Revenue Assurance Associates, Inc.

8551 West Sunrise Blvd Suite 304 Plantation, FL 33322

Phone: (954) 472-2340       Fax: (954) 370-0157

www.healthrevenue.com

· Direct and coordinate all contracts with John Anderson, Vice President of Sales, Denise Williams, Sr. Vice President of Revenue Integrity and Joe Toeniskoetter, Director of IT Consulting.

· Coordinate performance improvement plans with the Revenue Integrity Department, Coding Group, and IT Department.

· Coordinate Stakeholder engagement in all approved contracts

· Capacity Building

· Coordinate the development and improvement of all internal systems as it applies to time management, contract performance, and operational measurements.

Compensation:

Joe your compensation will be comprised of 4 components: a base salary, a quarterly stock disbursement, performance based stock options and performance base cash bonuses.

Base Salary:

Joe, your base salary is $175,000 paid on an interval of two weeks resulting in 26 payments per year.

Quarterly Stock Disbursement:

Joe, as a supplement to your base salary you will receive quarterly disbursement of stock based on the following formula: (($18,750 X 1)/Market Value of HRAA Common Stock (at time of Disbursement) = No. of Shares). The first disbursement will be on or before January 31, 2013.

Performance Stock Options:

Each time HRAA margin performance is improved by a minimum of 1% over the previous quarter you will be granted 5,000 stock options these options will vest over a 4 year period. You are also eligible for additional stock options based on activity that your department performs that result in a measurable revenue growth. These options are awarded at the discretion of HRAA's President.

Performance based cash options:

Each time HRAA's revenues crosses a $2M threshold starting from zero while maintaining or improving profit margin you will receive  a cash bonus of $5,000.

Health Revenue Assurance Associates, Inc.

8551 West Sunrise Blvd Suite 304 Plantation, FL 33322

Phone: (954) 472-2340       Fax: (954) 370-0157

www.healthrevenue.com

2

Benefits:

Joe your benefits are as follows:

· Home Office support — laptop, softphone plus headset, printer, cell phone, HRAA approved software.

· Health Insurance

· Vacation — Start with 3 weeks with an additional 1 week for every two years of employment until a max of 6 weeks is reached at 5 years.

· All other benefits are outlined in the attached HRAA Handbook and are applicable to the laws governing the state of Florida.

Joe we are very excited to have you be a Member of the team HRAA.

Accepted by:	/s/ Joseph G. Brophy	Date:     12/21/12
Please Print Name	Joseph G. Brophy

Sincerely,

/s/ Robert Rubinowitz                                  

Robert Rubinowitz

President

Health Revenue Assurance Associates, Inc.

Health Revenue Assurance Associates, Inc.

8551 West Sunrise Blvd Suite 304 Plantation, FL 33322

Phone: (954) 472-2340       Fax: (954) 370-0157

www.healthrevenue.com

3

EX-10.25

Exhibit 10.25

CONVERTIBLE PROMISSORY NOTE

Effective Date: October [], 2013  U.S. $[__]

FOR VALUE RECEIVED, HEALTH REVENUE ASSURANCE HOLDINGS, INC., a Nevada corporation ("Borrower"), promises to pay to TONAQUINT, INC., a Utah corporation, or its successors or assigns ("Lender"), $[] and any interest, fees, charges and penalties in accordance with the terms set forth herein. This Convertible Promissory Note (this "Note") is issued and made effective as of October [], 2013 (the "Effective Date"). For purposes hereof, the "Outstanding Balance" of this Note means the Purchase Price (as defined below), as reduced or increased, as the case may be, pursuant to the terms hereof for redemption, conversion or otherwise, plus any original issue discount ("OID"), accrued but unpaid interest, collection and enforcements costs, and any other fees or charges (including without limitation late charges) incurred under this Note. This Note is issued pursuant to that certain Securities Purchase Agreement dated October [], 2013, as the same may be amended from time to time (the "Purchase Agreement"), by and between Borrower and Lender.

The purchase price for this Note and the Warrant (as defined in the Purchase Agreement) is $[] (the "Purchase Price") payable by wire transfer. The initial Outstanding Balance of this Note shall include the Purchase Price, a $[] OID, and $[] to cover Lender's legal fees, accounting costs, due diligence, monitoring and other transaction costs incurred in connection with the purchase and sale of this Note. Borrower agrees that the Master Promissory Note is fully paid for as of the Effective Date. The maturity date for this Note (the "Maturity Date") shall be the date that is one year from the Effective Date.

Subject to the adjustments described in this paragraph, the conversion price for this Note shall be 70% (the "Conversion Factor") of the average of the two (2) lowest intra-day trade prices in the fifteen (15) trading days immediately preceding the Conversion (as defined below) (the "Conversion Price"). If at any time after the Effective Date, Borrower is not DWAC Eligible (as defined below), then the Conversion Factor will automatically be reduced by 5% for all future Conversions under this Note. If at any time after the Effective Date, Borrower is not DTC Eligible (as defined below), then the Conversion Factor will automatically be reduced by an additional 5% for all future Conversions under this Note; provided that the maximum reduction of the Conversion Factor may not exceed 10%. For example, the first time Borrower is not DWAC Eligible, the Conversion Factor for all future Conversions thereafter will be reduced from 60% to 55%. If following such event, the first time the Company is not DTC Eligible, the Conversion Factor for all future Conversions will be reduced from 55% to 50%. "DTC" means the Depository Trust Company. "DTC/FAST Program" means the DTC's Fast Automated Securities Transfer Program. "DWAC" means Deposit Withdrawal at Custodian as defined by the DTC. "DWAC Eligible" means that (i) the Common Stock is eligible at the DTC for full services pursuant to DTC's operational arrangements, including without limitation transfer through DTC's DWAC system, (ii) the Borrower has been approved (without revocation) by the DTC's underwriting department, and (iii) the Borrower's transfer agent is approved as an agent in the DTC/FAST Program, (iv) the Conversion Shares are otherwise eligible for delivery via DWAC; and (v) the Borrower's transfer agent does not have a policy prohibiting or limiting delivery of the Conversion Shares via DWAC. "DTC Eligible" means, with respect to the Common Stock, that such Common Stock is eligible to be deposited in certificate form at the DTC, cleared and converted into electronic shares by the DTC and held in the name of the clearing firm servicing Lender's brokerage firm for the benefit of Lender.

1.Interest. Borrower may repay this Note at any time on or before the date that is 60 days from the Effective Date (the "Prepayment Opportunity Date"). If Borrower repays this Note on or before the Prepayment Opportunity Date. (i) the interest rate shall be ZERO PERCENT (0%), and (ii) the Note will be deemed paid in full and retired. If Borrower does not repay the entire Outstanding Balance on or before the Prepayment Opportunity Date, a one-time interest charge of 12% (the "Interest Charge") shall be applied to the Outstanding Balance. Any interest payable is in addition to the OID. The OID remains payable regardless of the time and manner of payment by Borrower. Following the Prepayment Opportunity Date, so long as no Event of Default (as defined below) shall have occurred, Borrower may, in its sole and absolute discretion and upon giving Lender not less than five (5) Trading Days written notice (a "Prepayment Notice"), pay in cash all or any portion of the Outstanding Balance at any time prior to the Maturity Date; provided that in the event the Company elects to prepay all or any portion of the Outstanding Balance, it shall pay to the Holder 112% of the portion of the Outstanding Balance the Company elects to prepay.

2.Conversion. Lender has the right at any time after the date that is six (6) months from the Effective Date, at its election, to convert (each instance of conversion is referred to herein as a "Conversion") all or any part of the Outstanding Balance of this Note into shares ("Conversion Shares") of fully paid and non-assessable common stock of Borrower ("Common Stock") as per the following conversion formula: the number of Conversion Shares equals the Conversion amount divided by the Conversion Price. Conversion notices (each, a "Conversion Notice") under this Note may be effectively delivered to Borrower by any method of Lender's choice (including but not limited to facsimile, email, mail, overnight courier, or personal delivery), and all Conversions shall be cashless and not require further payment from Lender. If no objection is delivered from Borrower to Lender regarding any variable or calculation of the Conversion Notice within 24 hours of delivery of the Conversion Notice, Borrower shall have been thereafter deemed to have irrevocably confirmed and irrevocably ratified such Conversion Notice and waived any objection thereto. Borrower shall deliver the Conversion Shares from any Conversion to Lender within three (3) business days of Lender's delivery of the Conversion Notice to Borrower.

3.Conversion Delays. If Borrower fails to deliver Conversion Shares in accordance with the timeframes stated in Section 2, Lender, at any time prior to selling all of those Conversion Shares, may rescind in whole or in part that particular Conversion attributable to the unsold Conversion Shares, with a corresponding increase to the Outstanding Balance (any returned Conversion amount will tack back to the Effective Date). In addition, for each Conversion, in the event that Conversion Shares are not delivered by the fourth business day (inclusive of the day of the Conversion), a penalty of $2,000 per day will be assessed for each day after the third business day (inclusive of the day of the Conversion) until Conversion Share delivery is made; and such penalty will be added to the Outstanding Balance (under Lender's and Borrower's expectations that any penalty amounts will tack back to the Effective Date).

4.Default. The following are events of default under this Note (each an "Event of Default"): (i) Borrower shall fail to pay any principal under this Note when due and payable hereunder; or (ii) Borrower shall fail to deliver any Conversion Shares in accordance with the terms hereof; or (iii) Borrower shall fail to pay any interest or any other amount under this Note when due and payable (or payable by Conversion) hereunder; or (iv) a receiver, trustee or other similar official shall be appointed over Borrower or a material part of its assets and such appointment shall remain uncontested for twenty (20) days or shall not be dismissed or discharged within sixty (60) days; or (v) Borrower shall become insolvent or generally fails to pay, or admits in writing its inability to pay, its debts as they become due, subject to applicable grace periods, if any; or (vi) Borrower shall make a general assignment for the benefit of creditors; or (vii) Borrower shall file a petition for relief under any bankruptcy, insolvency or similar law (domestic or foreign); or (viii) an involuntary proceeding shall be commenced or filed against Borrower; or (ix) Borrower, at any time after the Effective Date, is not DWAC Eligible; or (x) Borrower shall become delinquent in its filing requirements as a fully-reporting issuer registered with the SEC; or (xi) Borrower shall fail to observe or perform any covenant, obligation, condition or agreement of Borrower contained herein, including without limitation all covenants to timely file all required quarterly and annual reports and any other filings related to Rule 144; or (xii) any representation, warranty or other statement made or furnished by or on behalf of Borrower to Lender herein or in connection with the issuance of this Note shall be false, incorrect, incomplete or misleading in any material respect when made or furnished or becomes false thereafter.

2

5.Remedies. In the event of any default under this Note, Lender may at any time thereafter accelerate this Note by written notice to Borrower, with the Outstanding Balance becoming immediately due and payable in cash at the Mandatory Default Amount (as defined hereafter). Notwithstanding the foregoing, upon the occurrence of any event of default described in clauses (iv), (v), (vi), (vii) or (viii) of Section 4, the Outstanding Balance as of the date of acceleration shall become immediately and automatically due and payable in cash at the Mandatory Default Amount, without any written notice required by Lender. The "Mandatory Default Amount" means the greater of (i) the Outstanding Balance divided by the Conversion Price on the date the Mandatory Default Amount is either demanded or paid in full, whichever has a lower Conversion Price, multiplied by the VWAP on the date the Mandatory Default Amount is either demanded or paid in full, whichever has a higher VWAP, or (ii) 125% multiplied by the Outstanding Balance. Commencing five (5) days after the occurrence of any event of default that results in the eventual acceleration of this Note, interest shall accrue on the Outstanding Balance at an interest rate equal to the lesser of 22% per annum or the maximum rate permitted under applicable law. In connection with such acceleration described herein, Lender need not provide, and Borrower hereby waives, any presentment, demand, protest or other notice of any kind, and Lender may immediately and without expiration of any grace period enforce any and all of its rights and remedies hereunder and all other remedies available to it under applicable law. Such acceleration may be rescinded and annulled by Lender at any time prior to payment hereunder and Lender shall have all rights as a holder of this Note until such time, if any, as Lender receives full payment pursuant to this Section 5. No such rescission or annulment shall affect any subsequent event of default or impair any right consequent thereon. Nothing herein shall limit Lender's right to pursue any other remedies available to it at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to Borrower's failure to timely deliver certificates representing Conversion Shares upon Conversion of this Note as required pursuant to the terms hereof.

6.No Offset. Borrower acknowledges that this Note is an unconditional, valid, binding and enforceable obligation of Borrower not subject to offset, deduction or counterclaim of any kind. Borrower hereby waives any rights of offset it now has or may have hereafter against Lender, its successors and assigns, and agrees to make the payments or conversions called for herein in accordance with the terms of this Note.

7.Ownership Limited to 9.99% of Common Stock Outstanding. Notwithstanding anything to the •contrary contained herein (except as set forth below in this Section), this Note shall not be convertible by Lender, and Borrower shall not effect any conversion of this Note or otherwise issue any shares of Common Stock pursuant to Section 2 hereof, to the extent (but only to the extent) that Lender together with any of its affiliates would beneficially own in excess of 9.99% (the "Maximum Percentage") of the Common Stock outstanding. To the extent the foregoing limitation applies, the determination of whether this Note shall be convertible (vis-a-vis other convertible, exercisable or exchangeable securities owned by Lender or any of its affiliates) and of which such securities shall be convertible, exercisable or exchangeable (as among all such securities owned by Lender and its affiliates) shall, subject to such Maximum Percentage limitation, be determined on the basis of the first submission to Borrower for conversion, exercise or exchange (as the case may be). No prior inability to convert this Note, or to issue shares of Common Stock, pursuant to this Section shall have any effect on the applicability of the provisions of this Section with respect to any subsequent determination of convertibility. For purposes of this Section, beneficial ownership and all determinations and calculations (including, without limitation, with respect to calculations of percentage ownership) shall be determined in accordance with Section 13(e) of the 1934 Act (as defined below) and the rules and regulations promulgated thereunder. The provisions of this Section shall be implemented in a manner otherwise than in strict conformity with the terms of this Section to correct this Section (or any portion hereof) which may be defective or inconsistent with the intended Maximum Percentage beneficial ownership limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such Maximum Percentage limitation. The limitations contained in this Section shall apply to a successor holder of this Note and shall be unconditional, irrevocable and non-waivable. For any reason at any time, upon the written or oral request of Lender, Borrower shall within one (1) business day confirm orally and in writing to Lender the number of shares of Common Stock then outstanding, including by virtue of any prior conversion or exercise of convertible or exercisable securities into Common Stock, including, without limitation, pursuant to this Note.

8.           Opinion of Counsel. In the event that an opinion of counsel is needed for any matter related to this Note, Lender has the right to have any such opinion provided by its counsel. Lender also has the right to have any such opinion provided by Borrower's counsel.

(REMAINDER OF PAGE INTENTIONALLY LEFT BLANK)

3

IN WITNESS WHEREOF, Borrower has caused this Note to be duly executed as of the Effective Date set out above.

BORROWER:

HEALTH REVENUE ASSURANCE HOLDINGS, INC.

By:

Name: Robert Rubinowitz

Title: President

ACKNOWLEDGED, ACCEPTED AND AGREED:

LENDER:

TONAQUINT, INC.

By:
	John M. Fife, President

4

TONAQUINT, INC.

303 EAST WACKER DRIVE, SUITE 1200

CHICAGO, ILLINOIS 60601

Date: 

Health Revenue Assurance Holdings, Inc.

8551 W. Sunrise Boulevard, Suite 304

Plantation, Florida 33322 Attn: Andrea Clark, CEO

CONVERSION NOTICE

The above-captioned Lender hereby gives notice to Health Revenue Assurance Holdings, Inc., a Nevada corporation (the "Company"), pursuant to that certain Convertible Promissory Note made by the Company in favor of the Lender on October 7, 2013, as applicable (the "Note"), that the Lender elects to convert the portion of the Outstanding Balance of the Note into fully paid and non-assessable shares of Common Stock of the Company as of the date of conversion specified below. Such conversion shall be based on the Conversion Price set forth below. In the event of a conflict between this Conversion Notice and the Note, the Note shall govern, or, in the alternative, at the election of the Lender in its sole discretion, the Lender may provide a new form of Conversion Notice to conform to the Note.

A.          Date of conversion: 

B.           Conversion #:  

C.           Conversion Amount:  

D.          Average trade price:  (average of the two (2) lowest intra-day trade prices in the fifteen (15) trading days as per Exhibit A)

E.           Conversion Factor:   (70%, as may be adjusted per the Note)

F.           Conversion Price:   (D multiplied by E)

G.           Conversion Shares:   (C divided by F)

H.           Remaining Outstanding Balance of Note:   *

*      Subject to adjustments for corrections, defaults, and other adjustments permitted by the Transaction Documents.

Please transfer the Conversion Shares electronically (via DWAC) to the following account:

Broker:	Address:
DTC#:
Account #:
Account Name:

To the extent the Conversion Shares are not able to be delivered to the Lender electronically via the DWAC system, please reduce the Conversion Factor by five percent (5%), and deliver all such certificated shares to Lender via reputable overnight courier after receipt of this Conversion Notice (by facsimile transmission or otherwise) to:

Sincerely,
TONAQU1NT, INC.
By:
	John M. Fife, President

5

EX-10.26

Exhibit 10.26

EX-21.1

Exhibit 21.1

Subsidiaries

Subsidiary	Jurisdiction of Incorporation
Health Revenue Assurance Associates, Inc.	Maryland
Dream Reachers, LLC	Florida

EX-31.1

Exhibit 31.1

Certification of Chief Executive Officer

I, Tim Lankes, certify that:

1. I have reviewed this annual report on Form 10-K of Health Revenue Assurance 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 most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) 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: April 15, 2014	By:	/s/ Tim Lankes
	Name:	Tim Lankes
	Title:	Chief Executive Officer

EX-31.2

Exhibit 31.2

Certification of Chief Financial Officer

I, Evan McKeown, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Health Revenue Assurance 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 most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) 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: April 15, 2014	By:	/s/ Evan McKeown
	Name:	Evan McKeown
	Title:	Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER AND

PRINCIPAL FINANCIAL OFFICER

PURSUANT TO 18 U. S. C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Health Revenue Assurance Holdings, Inc. (the “Company”) on Form 10-K for the period ended December 31, 2013 (the “Report”), I, Tim Lankes, Chief Executive Officer of the Company, and I, Evan McKeown, Chief Financial Officer of the Company, hereby certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, 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: April 15, 2014	/s/ Tim Lankes
	Tim Lankes
	Chief Executive Officer (Principal Executive Officer)

Date: April 15, 2014	/s/ Evan McKeown
	Evan McKeown
	Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed from within the electronic version of this written statement has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Accounts Receivable (Details Textual) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Accounts Receivable (Textual)
Bad debt expense on trade accounts receivable	$ 26,116

XML

Commitments and Contingencies (Details) (USD $)	Dec. 31, 2013
Schedule of Future minimum lease payments under lease
2014	$ 53,246
2015	6,720
2016	6,720
2017	5,040
Thereafter
Total	$ 71,726

XML

Long Term Debt and Notes Payable (Details Textual) (USD $)

0 Months Ended

1 Months Ended

12 Months Ended

1 Months Ended

0 Months Ended

12 Months Ended

2 Months Ended

12 Months Ended

1 Months Ended

Aug. 30, 2013

Investor

May 31, 2012

Dec. 31, 2013

Dec. 31, 2012

Oct. 17, 2013

Oct. 07, 2013

Jul. 15, 2012

Sep. 19, 2013

Line of Credit [Member]

Oct. 21, 2011

Bridge Loan [Member]

Sep. 19, 2013

Term Loan [Member]

Dec. 31, 2013

Term Loan [Member]

Dec. 31, 2012

Term Loan [Member]

Feb. 28, 2013

Loan Agreements [Member]

Dec. 31, 2012

Loan Agreements [Member]

Dec. 31, 2013

Loan Agreements [Member]

Jul. 31, 2010

Mortgage Loans on Real Estate [Member]

Dec. 31, 2013

Mortgage Loans on Real Estate [Member]

Dec. 31, 2012

Mortgage Loans on Real Estate [Member]

Long Term Debt and Notes Payable (Textual)

Payments of principal and interest (Monthly)

$ 3,200

$ 1,500

Maturity period of term loan

5 years

Term loan, maturity date

Sep. 19, 2017

Jul. 31, 2020

Loan principal amount

877,500

815,000

250,000

1,220,000

815,000

Debt interest rate

12.00%

6.75%

12.00%

12.00%

Loan, balances due

133,334

20,697

142,000

39,000

192,500

175,000

180,000

Loan interest rate terms

6% based on a 360 day year

The new consolidated term loan matures on September 19, 2017 and incurs interest at a rate per year equal to the bank’s prime rate plus 3.5%.

Interest is fixed at 6.625% for the first five years of the loan, and converts to an adjustable rate for the second five years at the Federal Funds Rate plus 3.25%, as established by the United State Federal Reserve.

Conversion of convertible debt, shares

(1,608,333)

1,343,749

Conversion of convertible debt amount

402,083

300,000

Conversion price

$ 0.25

$ 0.10

$ 0.10

$ 0.19

Conversion price, description

Conversion price of $0.19 per share which is equal to a discount of 25% of to the Purchase Price.

Number Of Investors

5

Shares issued as a loan fee

679,353

343,500

679,500

343,500

Stock issued to lenders in lieu of loan fees

5,575,000

2,375,000

Fair value of stock

$ 0.28

$ 0.28

Principal and interest payable period

26 months

26 months

Unamortized discount

128,452

12,500

25,000

350,522

338,692

114,958

Accrued interest

5,850

4,524

Balloon principal payment

129,000

Loss on conversion of issuing stock at a discount from fair market value

$ 112,584

XML

Subsequent Events (Details) (Subsequent Event [Member], USD $)	0 Months Ended			0 Months Ended
	Apr. 15, 2014	Apr. 07, 2014	Mar. 28, 2014	Apr. 14, 2014 Separation Agreement [Member]
Subsequent Event [Line Items]
Payment to employer loan, description				$175,000 to be paid in equal increments of $3,365.39 on each of May 2, 2014, May 16, 2014, May 30, 2014, June 14, 2014 and June 27, 2014 and thereafter equal increments of $7,532.05 with the last payment date being April 17, 2015
Accrued and unpaid base salary bonus, description				$23,557.70 in accrued and unpaid base salary, bonus and vacation earned through April 11, 2014 payable in equal installments of $1,121.80 beginning on July 11, 2014
Accrued Salary				$ 6,730,770
Letter received from Mr. Boyers counsel			421,062.53
Additional letter received from Mr. Boyers counsel		$ 13,370.21
Employment termination agreement, description	On April 15, 2014, the Company notified Joseph Brophy, its senior vice president of operations, that the Company was terminating his employment with the Company as well as that certain letter agreement, dated December 5, 2012, both effective April 25, 2014.

XML

Commitments and Contingencies (Details 1) (USD $)	Dec. 31, 2013	Dec. 31, 2012
Analysis of the leased assets included in property and equipment
Equipment	$ 79,210	$ 41,969
Less accumulated depreciation	(33,607)	(5,926)
Total	$ 45,603	$ 36,043

XML

Long Term Debt and Notes Payable (Details 1) (USD $)	Dec. 31, 2013	Dec. 31, 2012
Summary of notes payable
Principal amount of notes payable	$ 877,500	$ 815,000
Unamortized discount	(465,480)	(338,692)
Notes payable, net of discount	412,020	476,308
Less current portion	(380,326)	(202,557)
Total long term portion	$ 31,694	$ 273,751

XML

Stockholder's Equity (Deficit) (Tables)

12 Months Ended

Dec. 31, 2013

Stockholder's Equity (Deficit) [Abstract]

Schedule of Temporary equity

Series A sale price	$	5,400,000
Less: Reclassification of warrant fair value to liability		(5,669,897	)
Offering costs		(496,348	)
Plus: Deemed dividend		2,634,185
Series A dividends		60,000
	$	1,928,000

XML

Commitments and Contingencies (Details Textual) (USD $)	0 Months Ended	1 Months Ended						0 Months Ended
	Sep. 01, 2013	Sep. 30, 2012	Jul. 31, 2012 Lawsuit	Sep. 30, 2011	Dec. 31, 2013	Jul. 29, 2013	Dec. 31, 2012	Mar. 14, 2014 Subsequent Event [Member]	Apr. 07, 2014 Subsequent Event [Member]	Mar. 28, 2014 Subsequent Event [Member]	Nov. 01, 2013 President [Member]	Nov. 01, 2013 Chief Executive Officer [Member]
Commitments and Contingencies (Textual)
Lease arrangements periodic payment per month		$ 560	$ 600
Lease arrangement payment paid per month	5,800
Lease expiration term		5 years		1 year
Lease arrangements term, Description				One year with five successive one year renewal options.
Renewed period of lease arrangements	1 year
Increment percentage in lease rent payment on renewal	4.00%
Total minimum lease payments					58,876
Short term liabilities					32,768
Amortization of assets held under capital leases					24,200		9,400
Number of pending lawsuits resolved			2
Lawsuit settlement, amount payable			232,500					11,000
Terms of payment to Siddel for settlement of lawsuits			Eleven (11) payments totaling $232,500 pursuant to the terms of prior employment agreement.
Number of shares agreed to be transferred to company officer			3,299,802
Grace period for due payments under Settlement Agreement			7 days
Settlement Payable					7,000	23,056	115,278
Due to officer as stated in February 2012 merger agreement							75,000					75,000
Promissory notes payable											40,000
Letter received from Mr. Boyers counsel										421,062.53
Additional letter received from Mr. Boyers counsel									$ 13,370.21

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Summary of Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2013

Summary of Significant Accounting Policies [Abstract]

Principles of Consolidation

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Health Revenue Assurance Associates, Inc. and Dream Reachers, LLC. All significant inter-company transactions and balances are eliminated in consolidation.

Use of Estimates

Use of Estimates

The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts in the consolidated financial statements. Actual results could differ from those estimates. Significant accounting estimates reflected in the Company’s consolidated financial statements include valuation of accounts receivable, valuation of property and equipment, valuation and amortization period of software, valuation of beneficial conversion features in convertible debt, valuation of derivatives, valuation of equity based instruments issued for other than cash, revenue recognition, and the valuation allowance on deferred tax assets.

Cash

Cash

For purposes of the statement of cash flows, the Company considers all highly liquid investments with maturity of three months or less when purchased to be cash equivalents. The Company’s cash balances are maintained at various banks that are insured by the Federal Deposit Insurance Corporation subject to certain limitations.

Accounts Receivable and Factoring

Accounts Receivable and Factoring

Accounts receivable are stated at the amounts management expects to collect. An allowance for doubtful accounts is recorded using a specific identification method based on a combination of historical experience, aging analysis and information on specific accounts. Account balances are written off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. Management has determined that an allowance in the amount of $16,244 is required as of December 31, 2013. The allowance arises from a website development project contracted with ResumeBear, a related party. The Company accounts for its factoring arrangements as either a sale or a secured financing based on the criteria in ASC 860 "Transfers and Servicing". Estimates of allowances for doubtful accounts are reflected as a recourse obligation, a liability, for factor arrangements treated as a sale with recourse or as a contra asset accounts receivable allowance account for arrangements accounted for as a secured financing.

Property and Equipment

Property and Equipment

Property and equipment is recorded at cost. Depreciation is computed using the straight-line method over estimated useful asset lives, which range from 5 to 39 years. Repairs and maintenance are expensed, while additions and betterments are capitalized. The cost and related accumulated depreciation of assets sold or retired are eliminated from the accounts and any gains or losses are reflected in earnings.

Leases

Leases

We perform a review of newly acquired leases to determine whether a lease should be treated as a capital or operating lease. Capital lease assets are capitalized and depreciated over the term of the initial lease. A liability equal to the present value of the aggregated lease payments is recorded utilizing the stated lease interest rate. If an interest rate is not stated, we will determine an estimated cost of capital and utilize that rate to calculate the present value. If the lease has an increasing rate over time, and (or) is an operating lease, all leasehold incentives, rent holidays, or other incentives will be considered in determining if a deferred rent liability is required. Leasehold incentives are capitalized and depreciated over the initial term of the lease.

Software

Software

Costs incurred in connection with the development of software products are accounted for in accordance with the Financial Accounting Standards Board Accounting Standards Codification ("ASC") 985 Costs of Software to Be Sold, Leased or Marketed.” Costs incurred prior to the establishment of technological feasibility are charged to research and development expense. Software development costs are capitalized after a product is determined to be technologically feasible and is in the process of being developed for market and capitalization ceases after the general release of the software. Amortization of capitalized software development costs begins upon initial product shipment after general release. Capitalized software development costs are amortized over the estimated life of the related product (generally thirty-six months) using the straight-line method. The Company evaluates its software assets for impairment whenever events or change in circumstances indicate that the carrying amount of such assets may not be recoverable. Recoverability of software assets to be held and used is measured by a comparison of the carrying amount of the asset to the future net undiscounted cash flows expected to be generated by the asset. If such software assets are considered to be impaired, the impairment to be recognized is the excess of the carrying amount over the fair value of the software asset.

Software maintenance costs are charged to expense as incurred. Expenditures for enhanced functionality are capitalized. The cost of the software and the related accumulated amortization are removed from the accounts upon retirement of the software with any resulting loss being recorded in operations. On July 15, 2013 the Company issued a general release for one of its products Visualizer. After the general release, the Company recorded approximately $64,000 in amortization expense in the accompanying consolidated financial statements for the year ended December 31, 2013. On September 30, 2013, the Company impaired the capitalized research and development costs for the Visualizer software suite of multiple offerings and the OMC Initiater after an evaluation based in part on the lack of cash flow and customer demand in ICD Visualizer after the general acceptance release date of July 15, 2013. In addition, the Company’s going concern opinion and cash liquidity concerns restrained the ability to make a capital investment in research and development to complete existing products in the pipeline as the available cash is needed to fund normal operating expenses. The resulting loss of $946,931 is presented as a line item entitled “asset impairment” on the consolidated statement of operations. The Company will continue to use the Visualizer suite of functionality as internally developed software to generate customized reports for revenue integrity auditing and compliance services but the Company no longer intends to market or sell internally developed software on a stand alone basis.

Long-Lived Assets

Long-Lived Assets

The Company reviews the carrying value of its long-lived assets whenever events or changes in circumstances indicate that the carrying values may no longer be appropriate. Recoverability of carrying values is assessed by estimating future net cash flows from the assets. Impairment assessment inherently involves judgment as to assumptions about expected future cash flows and the impact of market conditions on those assumptions. Future events and changing market conditions may impact management's assumptions as to sales prices, rental rates, costs, holding periods or other factors that may result in changes in the Company’s estimates of future cash flows. Although management believes the assumptions used in testing for impairment are reasonable, changes in any one of the assumptions could produce a significantly different result.

Fair Value Measurements and Fair Value of Financial Instruments

Fair Value Measurements and Fair Value of Financial Instruments

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants. The Company classifies assets and liabilities recorded at fair value under the fair value hierarchy based upon the observability of inputs used in valuation techniques. Observable inputs (highest level) reflect market data obtained from independent sources, while unobservable inputs (lowest level) reflect internally developed market assumptions. The fair value measurements are classified under the following hierarchy:

● Level 1—Observable inputs that reflect quoted market prices (unadjusted) for identical assets and liabilities in active markets;

● Level 2—Observable inputs, other than quoted market prices, that are either directly or indirectly observable in the marketplace for identical or similar assets and liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets and liabilities; and

● Level 3—Unobservable inputs that are supported by little or no market activity that is significant to the fair value of assets or liabilities.

The estimated fair value of certain financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued expenses are carried at historical cost basis, which approximates their fair values because of the short-term nature of these instruments.

Accounting for Derivatives

Accounting for Derivatives

The Company evaluates its convertible instruments, options, warrants or other contracts to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for under ASC Topic 815, “Derivatives and Hedging.”  The result of this accounting treatment is that the fair value of the derivative is marked-to-market each balance sheet date and recorded as a liability.  In the event that the fair value is recorded as a liability, the change in fair value is recorded in the statement of operations as other income (expense).  Upon conversion or exercise of a derivative instrument, the instrument is marked to fair value at the conversion date and then that fair value is reclassified to equity.  Equity instruments that are initially classified as equity that become subject to reclassification under ASC Topic 815 are reclassified to liabilities at the fair value of the instrument on the reclassification date.

Revenue Recognition

Revenue Recognition

The Company recognizes medical coding audit services revenue based on the proportional performance method of recognizing revenue.

A portion of the Company’s revenue is generated from medical coding audit services. Auditing revenue is invoiced in accordance with the contract, generally at three benchmark time periods which coincide with when specific, obligatory field work services have been rendered and completed, the value of this portion of the contract price has been predetermined and agreed upon, and the client has received benefit or value in the form of the independent identification of system weaknesses and risk analysis. Further, collectability is reasonably assured due to the existence of a fixed fee contract and the size and financial health of the Company’s clients. Below is a description of the general benchmarks and work phases associated with the Company’s audit services:

● Planning Phase - work commences prior to and as soon as the contract is signed and includes setting the audit scope, scheduling of the job, assignment of audit staff, understanding the client and their systems, determination of sample size and sampling methods to be employed, and other specific items as outlined in the contract. The planning phase includes the determination of deliverables as defined in the contract, generally consisting of a listing of errors, training and a final report. The Company generally invoices and recognizes 50% of the contract value at the completion of the Planning Phase. Although all of the contracts contain a clause making the first 50% of the engagement fee due and non-refundable at this point, the Company does not deem this initial fee to be recognized as deferred revenue under SAB 104 due to the extensive amount of work to be done prior to accepting the contract.

● Field Work Phase – is performed at the client location and generally lasts one week and encompasses actual testing of sample claims preselected in the Planning Phase. The auditor generally preloads the selected claims into the Company’s proprietary software and audits the claim records by reviewing actual medical records. The software assists the auditor in determining proper classifications and allows the auditor to compare the proper classification against what was filed in the submission made by the client to Medicare. Notes and comments are recorded and audit reports are generated. The Company generally invoices and recognizes 40% of the contract value at the completion of the Field Work Phase.

● Reporting Phase – includes a summary of audit findings, exit conference with clients, and any other specific deliverables as determined by the contract. The Company generally invoices and recognizes the remaining 10% of the contract value at the completion of the Reporting Phase.

A portion of the Company’s revenue is derived from consulting and coding services provided. Revenue from these revenue streams is recognized after services are performed based on the quoted and agreed upon fee contained in its contracts.

Arrangements with customers may involve multiple elements including software products, education products, training, software product maintenance, coding services, coding audit services and other consulting services. Training and maintenance on software products will generally occur after the software product sale. Other services may occur before or after the product sales and may not relate to the products. Revenue recognition for multiple element arrangements is as follows:

Each element is accounted for separately when each element has value to the customer on a standalone basis and there is Company specific objective evidence of selling price of each deliverable. For revenue arrangements with multiple deliverables, the Company allocates the total customer arrangement to the separate units of accounting based on their relative selling prices as determined by the price of the items when sold separately. Once the selling price is allocated, the revenue for each element is recognized using the general and specific criteria under GAAP as discussed above for elements sold in non-multiple element arrangements. A delivered item or items that do not qualify as a separate unit of accounting within the arrangement are combined with the other applicable undelivered items within the arrangement. The allocation of arrangement consideration and the recognition of revenue is then determined for those combined deliverables as a single unit of accounting. The Company has historically sold its services with established rates, which it believes is Company specific objective evidence of selling price. For the new software products, management has established selling prices, which qualifies as Company specific objective evidence of selling price.

For our education products sold we have determined to account for the course materials and training components as one unit of accounting.  Accordingly, revenue is recognized for the single unit upon delivery of the training through our online webinars.

On July 15, 2013, the Company issued a general release for one of its products Visualizer. Software sales on a standalone basis will be recognized upon delivery of the software when evidence of the purchase arrangement exists and the price is determinable, and when collectability is reasonably assured. The Company will continue to use the Visualizer suite of functionality as internally developed software to generate customized reports for revenue integrity auditing and compliance services but the Company no longer intends to market or sell internally developed software on a stand alone basis.

Cost of Revenues

Cost of Revenues

Cost of revenues includes labor costs for services and education development costs. Amortization costs in 2013 of approximately $64,000 were allocated to cost of sales related to software amortization.

Share-Based Compensation

Share Based Compensation

Compensation expense for all stock-based employee and director compensation awards granted is based on the grant date fair value estimated in accordance with the provisions of ASC Topic 718, Stock Compensation. The Company recognizes these compensation costs on a straight-line basis over the requisite service period of the award, which is generally the option vesting term. Vesting terms vary based on the individual grant terms.

The Company estimates the fair value of stock-based compensation awards on the date of grant using the Black-Scholes-Merton (“BSM”) option pricing model, which was developed for use in estimating the value of traded options that have no vesting restrictions and are freely transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility. The BSM option-pricing model considers, among other factors, the expected term of the award and the expected volatility of the Company’s stock price. Expected terms are calculated using the Simplified Method, volatility is determined based on the Company's historical stock price trends and the discount rate is based upon treasury rates with instruments of similar expected terms. Warrants granted to non-employees are accounted for in accordance with the measurement and recognition criteria of ASC Topic 505-50, Equity Based Payments to Non-Employees.

Research and Development Costs

Research and Development Costs

In accordance with ASC 730-10, research and development costs are expensed when incurred. Total research and development costs for the years ended December 31, 2013 and 2012 were $0 and $64,386, respectively.

Advertising

Advertising

The cost of advertising is expensed as incurred. Advertising and marketing expenses amounted to approximately $121,000 and $130,000 for the year ended December 31, 2013 and 2012, respectively and the total is included in selling and administrative expenses.

Income Taxes

Income Taxes

The Company’s subsidiary, HRAA, elected to convert from a Subchapter S corporation for Federal income tax purposes to a C corporation effective October 21, 2011. Upon HRAA’s C corporation election, it began to use the asset and liability method to account for income taxes. Under this method, deferred income taxes are determined based on the differences between the tax basis of assets and liabilities and their reported amounts in the consolidated financial statements which will result in taxable or deductible amounts in future years and are measured using the currently enacted tax rates and laws. A valuation allowance is provided to reduce net deferred tax assets to the amount that, based on available evidence, is more likely than not to be realized.

The Company follows the provisions of ASC 740-10, Accounting for Uncertain Income Tax Positions. When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. In accordance with the guidance of ASC 740-10, the benefit of a tax position is recognized in the financial statementsin the period during which, based on all available evidence, management believes it is more likely than not that the position will besustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset oraggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largestamount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. Theportion of the benefits associated with tax positions taken that exceeds the amount measured as described above should be reflected asa liability for unrecognized tax benefits in the accompanying consolidated balance sheets along with any associated interest and penalties that wouldbe payable to the taxing authorities upon examination.

Earnings Per Share

Earnings Per Share

The Company computes and presents earnings or losses per share in accordance with FASB ASC Topic 260, Earnings per share. Basic earnings or losses per share are computed by dividing net income (loss) attributable to common stockholders by the weighted average number of common shares outstanding. Diluted earnings or loss per share is computed by dividing net income (loss) attributable to common stockholders by the weighted average number of common shares and common stock equivalents outstanding, calculated on the treasury stock method for options and warrants using the average market prices during the period.

As the Company incurred a net loss in all periods presented, all potentially dilutive securities were excluded from the computation of diluted loss per share since the effect of including them is anti-dilutive. Dilutive securities outstanding at December 31, 2013 were 1,000,000 stock options, 29,940,000 warrants, and Series A Preferred Stock convertible into 27,000,000 shares of common stock. No dilutive securities were outstanding in 2012.

Segment Reporting

Segment Reporting

Financial Accounting Standards Board (“FASB”) ASC Topic 280, Segment Reporting (“ASC 280”), establishes standards for the way public business enterprises report information about operating segments. ASC 280 also establishes standards for related disclosures about products and services, geographic areas and major customers. The Company has determined that based on these criteria it only operates one segment, consulting services, as all other services do not meet the minimum threshold for separate reporting of a segment.

Contingencies

Contingencies

We accrue for contingent obligations, including legal costs and restructuring costs, when the obligation is probable and the amount can be reasonably estimated. As facts concerning contingencies become known we reassess our position and make appropriate adjustments to the consolidated financial statements. Estimates that are particularly sensitive to future changes include those related to tax, legal, and other regulatory matters that are subject to change as events evolve and additional information becomes available. Total legal settlement accrued costs for the year ended December 31, 2013 was $7,000. (see Note 10)

Recent Accounting Pronouncements

Recent Accounting Pronouncements

We have implemented all new accounting standards that are in effect and that may impact our consolidated financial statements and do not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on our consolidated financial position or results of operations.

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Convertible Promissory Notes and Fair Value Measurements (Details) (USD $)	Dec. 31, 2013	Dec. 31, 2012
Fair Value Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Warrant derivative liability	$ 5,406,000
Fair Value, Inputs, Level 1 [Member]
Fair Value Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Warrant derivative liability
Fair Value, Inputs, Level 2 [Member]
Fair Value Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Warrant derivative liability
Fair Value, Inputs, Level 3 [Member]
Fair Value Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Warrant derivative liability	$ 5,406,000

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Research and Development and Software (Details) (Software [Member], USD $)	Dec. 31, 2013	Dec. 31, 2012
Software [Member]
Schedule of software's
Software	$ 1,011,068	$ 258,933
Accumulated amortization	(64,137)
Asset Impairment	(946,931)
Software, net		$ 258,933

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Summary of Significant Accounting Policies (Details Textual) (USD $)	12 Months Ended
	Dec. 31, 2013 Segment	Dec. 31, 2012	Jul. 29, 2013
Summary of Significant Accounting Policies (Textual)
Allowance for doubtful accounts receivable	$ 16,244
Amortization expense	64,000
Asset impairment	946,931
Percentage of contract value that is recognized at the completion of planning phase	50.00%
Percentage of engagement fee due and non-refundable as per clause	50.00%
Percentage of contract value recognized at completion of field work phase	40.00%
Remaining percentage of contract value that recognize at completion of report phase	10.00%
Research and development		64,386
Advertising and marketing expenses	121,000	130,000
Legal settlement accrued costs	$ 7,000	$ 115,278	$ 23,056
Number of operating segments	1
Series A prefered stock converted into comon stock	27,000,000
Equity Option [Member]
Summary of Significant Accounting Policies (Textual)
Dilutive securities outstanding	1,000,000
Warrant [Member]
Summary of Significant Accounting Policies (Textual)
Dilutive securities outstanding	29,940,000
Minimum [Member]
Summary of Significant Accounting Policies (Textual)
Estimated useful asset lives	5 years
Maximum [Member]
Summary of Significant Accounting Policies (Textual)
Estimated useful asset lives	39 years

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Convertible Promissory Notes and Fair Value Measurements (Details 2)	12 Months Ended
	Dec. 31, 2013
Convertible Promissory Notes and Fair Value Measurements [Abstract]
Expected term	1 year
Expected volatility	116.00%
Risk free rate	1.20%
Dividend Yield	0.00%

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Income Taxes (Details 1) (USD $)	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Deferred tax assets:
Net operating loss carry forward	$ 1,593,719	$ 586,600
Stock options	5,578
Accrued salary and other		35,821
Accrual to cash timing difference	859,735
Total gross deferred tax assets	2,459,032	622,421	169,500
Deferred tax liabilities:
Depreciation	(9,890)	(31,244)
Total gross deferred tax liabilities	(9,890)	(31,244)
Less valuation allowance	(2,449,142)	(591,177)
Net deferred tax assets

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Stock Options and Warrants (Details Textual) (USD $)	0 Months Ended												1 Months Ended		3 Months Ended	12 Months Ended					12 Months Ended	0 Months Ended	12 Months Ended	0 Months Ended
	Oct. 17, 2013	Oct. 07, 2013	Aug. 30, 2013	Aug. 27, 2013	Aug. 21, 2013	Aug. 07, 2013	Jul. 08, 2013	Jun. 21, 2013	May 24, 2013	May 19, 2013	Jan. 15, 2013	Feb. 10, 2012	Aug. 31, 2012	Apr. 30, 2012	Dec. 31, 2012	Dec. 31, 2013		Dec. 31, 2012	Jun. 27, 2013	Jan. 31, 2013	Dec. 31, 2013 Stock Option [Member]	Aug. 07, 2013 Warrant [Member]	Dec. 31, 2013 Warrant [Member]	Nov. 12, 2013 Warrant [Member] Series A Preferred Stock [Member]	Nov. 12, 2013 Exercise Price One [Member] Series A Preferred Stock [Member]	Nov. 12, 2013 Exercise Price Two [Member] Series A Preferred Stock [Member]
Stock Options and Warrants (Textual)
Number of warrants issued in connection to promissory notes	175,000	350,000																				525,000		525,000	350,000	175,000
Number of warrants issued in connection with preferred stock options																								27,000,000
Sale of Stock, Number of Shares Issued in Transaction			400,000	400,000	100,000	500,000	500,000	750,000	125,000	625,000	46,429	1,410,874	77,743	1,394,909	1,468,786						1,000,000
Proceeds from Issuance of Common Stock																$ 1,243,000		$ 730,183			$ 221,121
Sale of Stock, Price Per Share			$ 0.25	$ 0.25	$ 0.25	$ 0.25	$ 0.25	$ 0.40	$ 0.40	$ 0.40	$ 0.28	$ 0.25	$ 0.28	$ 0.25					$ 0.51	$ 0.49	$ 0.22			$ 0.30
Number of Shares, Granted																1,000,000
Share-based Compensation																639,328		0			14,822
Unrecognized compensation expense																					$ 206,300
Weighted-average remaining requisite service period																0 years	[1]				1 year 10 months 24 days
Warrants outstanding have weighted average remaining contractual life																4 years 10 months 13 days							5 years
Warrants iissued as fee to placement agent																								1,890,000
Warrant Exercise Price Reduced																								$ 0.20

[1] * These 1,000,000 options were granted without a specified expiration term.

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Long Term Debt and Notes Payable (Details 2) (USD $)	Dec. 31, 2013	Dec. 31, 2012
Summary of future annual principal payments
2014	$ 786,584
2015	179,084
2016	44,084
2017	31,248
2018	5,576
Thereafter	147,361
Total	$ 316,437	$ 218,970

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Nature of Business and Going Concern

12 Months Ended

Dec. 31, 2013

Nature of Business and Going Concern [Abstract]

NATURE OF BUSINESS AND GOING CONCERN

1 – NATURE OF BUSINESS AND GOING CONCERN

Overview

Health Revenue Assurance Holdings, Inc. (the “Company”) is a provider of revenue cycle services to a broad range of healthcare providers. We offer our customers integrated solutions designed around their specific business needs, including revenue cycle data analysis, contract and outsourced coding, billing, coding and compliance audits, coding education, coding consulting, physician coding services and ICD-10 education and transition services. With this approach, our customers benefit from integrated service offerings that we believe enhances their revenue integrity. As a result, we believe we help our customers achieve their business objectives and patient care objectives.

Dream Reachers, LLC, owns the Company’s offices and is the borrower on a mortgage loan related to such offices. Dream Reachers, LLC does not engage in real estate rental business. Its offices are occupied by Health Revenue Assurance Associates, Inc. (“HRAA”) at no cost and HRAA pays the related mortgage’s principal and interest, taxes and maintenance. The Company’s subsidiary HRAA is the sole member effective May 2011. Dream Reachers has been treated as a subsidiary for accounting purposes in the Company’s consolidated financial statements for all periods presented. (See Note 2)

On February 10, 2012, HRAA entered into an Agreement and Plan of Merger and Reorganization (the “Merger Agreement”) with Health Revenue Assurance Holdings, Inc. (formerly known as Anvex International, Inc., "HRAH"), a Nevada company, and its wholly-owned subsidiary Health Revenue Acquisition Corporation (“Acquisition Sub”), which was treated for accounting purposes as a reverse recapitalization with HRAA, considered the accounting acquirer. Each share of HRAA's common stock was exchanged for the right to receive approximately 1,271 shares of HRAH’s common stock. Before their entry into the Merger Agreement, no material relationship existed between HRAH and Acquisition Sub or HRAA. (See Note 12)

On April 13, 2012, the Company changed its name from Anvex International, Inc. to Health Revenue Assurance Holdings, Inc.

On April 13, 2012, the Company’s board of directors authorized a 12.98 for 1 split of its common stock to stockholders of record as of April 13, 2012. Shares resulting from the split were issued on April 26, 2012. In connection therewith, the Company transferred $32,747 from additional paid in capital to common stock, representing the par value of additional shares issued. As a result of the stock split, fractional shares were rounded up. All share and per share amounts for all periods presented have been retroactively adjusted to reflect the stock split. (See Note 12)

Going Concern

The Company’s future success is dependent upon its ability to achieve profitable operations and generate cash from operating activities, and upon additional financing, Management believes they can raise the appropriate funds needed to support their business plan and develop an operating company which is cash flow positive.

However, as of December 31, 2013, the Company has a working capital deficiency, stockholders’ deficit and accumulated deficit of $2,292,754, $4,154,247, and $10,752,223, respectively, for the year ended December 31, 2013, incurred net losses available to common stockholders of $8,167,425, and has used net cash in operations of $3,365,005. The Company has not been able to generate sufficient cash from operating activities to fund its on-going operations. There is no guarantee that the Company will be able to generate enough revenue and/or raise capital to support its operations. These factors raise substantial doubt about the Company’s ability to continue as a going concern.

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

As of December 31, 2013, the Company has a cash balance of approximately $3,053,000. The Company is currently addressing the going concern and liquidity issues. The Company expects an increase in cash flow as the result of a growing customer demand for medical billing, consulting, training, and education.

On November 12, 2013, the Company entered into a Securities Purchase Agreement for the sale of $5.4 million in Series A 8% redeemable convertible preferred stock (the “Series A Preferred Stock”) and warrants to purchase shares of the Company’s common stock. The Series A Preferred Stock is convertible into common stock on a 2 for 1 basis and is redeemable by the Company, at the option of the investor, 48 months from November 12, 2013 at the stated value of $0.30 per share or a total of $5,400,000 plus accumulated but unpaid dividends, whether declared or not. The net proceeds to the Company after commissions and professional fees was $4,903,652 and after payment of stockholder loans is $4,322,000. The net raise is sufficient to fund on-going operations for the next several months. However, the funding is not sufficient to alleviate the going concern risk. (See Note 12)

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Stockholder's Equity (Deficit) (Details) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Series A sale price	$ 5,460,000	$ 5,460,000
Series A Preferred Stock [Member]
Series A sale price	5,400,000
Less: Reclassification of warrant fair value to liability	(5,669,897)
Offering costs	(496,348)
Plus: Deemed dividend	2,634,185
Series A dividends	60,000
Redemption of temporary equity	$ 1,928,000

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Research and Development and Software (Details Textual) (USD $)	12 Months Ended		3 Months Ended	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Sep. 30, 2013 Software [Member]	Dec. 31, 2012 Software [Member]
Research and Development and Software (Textual)
Accumulated capitalized cost			$ 1,011,068
Software amortization expense			64,137	0
Asset Impairment Charges	$ 946,931		$ 946,931

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Long Term Debt and Notes Payable (Tables)

12 Months Ended

Dec. 31, 2013

Long Term Debt and Notes Payable [Abstract]

Schedule of long term debt

	December 31, 2013			December 31, 2012
Bank term loan	$	141,857		$	38,897
Mortgage loan		174,580			180,073
		316,437			218,970
Less current portion		(44,084	)		(37,513	)
Total long term portion	$	272,353		$	181,457

Schedule of notes payable

	December 31, 2013			December 31, 2012
Principal amount of notes payable	$	877,500		$	815,000
Unamortized discount		(465,480	)		(338,692	)
Notes payable, net of discount		412,020			476,308
Less current portion		(380,326	)		(202,557	)
Total Long term portion	$	31,694		$	273,751

Summary of future annual principal payments

2014	$	786,584
2015		179,084
2016		44,084
2017		31,248
2018		5,576
Thereafter		147,361
Total	$	1,193,937

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Research and Development and Software (Tables)

12 Months Ended

Dec. 31, 2013

Research and Development and Software [Abstract]

Schedule of software's

	December 31, 2013			December 31, 2012
Software	$	1,011,068		$	258,933
Accumulated amortization		(64,137	)		-
Asset Impairment		(946,931	)		-
Software, net	$	-		$	258,933

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Commitments and Contingencies (Details 2) (USD $)	Dec. 31, 2013
Schedule of future minimum payments required under lease
2014	$ 32,768
2015	22,527
2016	3,581
Total minimum lease payments	58,876
Less amount representing interest	(9,087)
Present value of minimum lease payments	$ 49,789

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Lines of Credit (Details) (USD $)			0 Months Ended	12 Months Ended		12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Sep. 19, 2013 Revolving Credit Facility [Member]	Dec. 31, 2013 Revolving Credit Facility [Member]	Dec. 31, 2013 Dell Business Credit Line [Member]	Dec. 31, 2013 Revolving Credit Facility One [Member]
Lines of Credit (Textual)
Line of credit facility, maximum borrowing capacity				$ 150,000	$ 50,000
Line of credit maturity date			Sep. 19, 2017	Dec. 18, 2018		Dec. 18, 2018
Outstanding balance						150,000
Revolving line of credit, periodic payment due amount			3,209
Line of credit	$ 44,692	$ 25,000			$ 44,692	$ 25,000
Rate of interest above prime rate						6.50%
Prime rate of interest						3.25%

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Convertible Promissory Notes and Fair Value Measurements (Tables)

12 Months Ended

Dec. 31, 2013

Convertible Promissory Notes and Fair Value Measurements [Abstract]

Assets and liabilities carried at fair value measured on a recurring and non-recurring basis

	Carrying Value at December 31,		Fair Value Measurements at December 31, 2013
	2013		(Level 1)		(Level 2)		(Level 3)
Warrant derivative liability (29,940,000 warrants - See Note 12)	$	5,406,000	$	-	$	-	$	5,406,000

Summary of activity level three liablities

Balance at December 31, 2012	$	-
Reclassification of warrant liability		5,771,255
Change in fair value		(365,255	)
Balance December 31, 2013	$	5,406,000

Summary of activity liabilities

Assumptions	December 31, 2013
Expected term		1.0
Expected Volatility		116	%
Risk free rate		1.2	%
Dividend Yield		0.00	%

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Commitments and Contingencies (Tables)

12 Months Ended

Dec. 31, 2013

Commitments and Contingencies [Abstract]

Schedule of future minimum lease payments

2014	$	53,246
2015		6,720
2016		6,720
2017		5,040
Thereafter		-
Total	$	71,726

Analysis of the leased assets included in property and equipment

	December 31, 2013			December 31, 2012
Equipment	$	79,210		$	41,969
Less accumulated depreciation		(33,607	)		(5,926	)
Total	$	45,603		$	36,043

Schedule by years of future minimum payments required under the lease

Year Ending December 31:
2014	$	32,768
2015		22,527
2016		3,581

Total minimum lease payments		58,876
Less amount representing interest		(9,087	)
Present value of minimum lease payments	$	49,789

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Condensed Consolidated Statements of Cash Flows (Parenthetical) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Statements of Cash Flows [Abstract]
Amount of debt conversion	$ 300,000	$ 300,000

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Stock Options and Warrants (Tables)

12 Months Ended

Dec. 31, 2013

Stock Options and Warrants [Abstract]

Summary of weighted-average assumptions

	2013
Dividend yield (1)		0.0	%
Expected volatility (2)		116	%
5 Year Bond interest rate (3)		1.20	%
Expected life (4)		6.0

(1) Represents cash dividends paid as a percentage of the share price on the date of grant.

(2) Based on historical volatility of the Company’s common stock over the expected life of the options.

(3) Represents the U.S. Treasury rates over maturity periods matching the expected term of the options at the time of grant.

(4) The period of time that options granted is expected to be outstanding based upon the simplified method.

Summary of stock option activity

Options	Shares		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term	Aggregate Intrinsic Value ($000)
Outstanding at January 1, 2013		-		-
Granted		1,000,000		0.26	*	$	-
Exercised		-		-
Forfeited or expired		-		-
Outstanding at December 31, 2013		1,000,000	$	0.26	*	$	-
Exercisable at December 31, 2013		-		-	-		-

* These 1,000,000 options were granted without a specified expiration term.

Summary of warrants activity

	Number of Warrants		Weighted Average Exercise Price
Outstanding at December 31, 2012		-	$	-
Granted		29,415,000		0.30
Anti-dilution issuance		525,000		0.20
Exercised		-		-
Forfeited		-		-
Expired		-		-
Outstanding at December 31, 2013		29,940,000	$	0.30
Exercisable at December 31, 2013		29,940,000	$	0.30
Aggregate intrinsic value			$	52,500

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Property and Equipment (Details) (USD $)	Dec. 31, 2013	Dec. 31, 2012
Summary of Property and Equipment
Building and improvements	$ 227,603	$ 227,603
Furniture	119,810	119,810
Computers and Equipment	260,872	160,469
Property and Equipment, gross	608,285	507,882
Accumulated depreciation	(226,438)	(142,865)
Total	$ 381,847	$ 365,017

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Convertible Promissory Notes and Fair Value Measurements (Detail Textual) (USD $)	0 Months Ended		1 Months Ended		12 Months Ended				0 Months Ended		12 Months Ended
	Oct. 17, 2013	Oct. 07, 2013	May 31, 2012 ConvertibleNote	Dec. 31, 2011 ConvertibleNote	Dec. 31, 2013	Dec. 31, 2012	Aug. 30, 2013	Jul. 15, 2012	Nov. 12, 2013 Warrant [Member]	Dec. 31, 2013 Warrant [Member]	Dec. 31, 2013 Convertible Debt [Member]	Feb. 10, 2012 Convertible Debt [Member]
ConvertiblePromissoryNotesAnd Fair Value Measurement Textual
Advances on convertible promissory notes			$ 300,000	$ 170,000
Number of convertible notes issued			5	3
Convertible promissory notes				314,000
Sale price of future securities				100% of the sale price and non-interest bearing
Maturity, description			12 months
Interest rate terms			6% based on a 360 day year
Convertible notes conversion price			$ 0.10				$ 0.25	$ 0.10				$ 0.19
Debt discount	12,500	25,000					128,452
Debt expense		5,000
Promissory note	142,500	280,000
Promissory note payment term	The debt was treated as stock settled debt where a put premium of $61,071 was to be recorded over the six-month period to the first conversion date. Tonaquint had the right at any time after the date that is six (6) months from the effective date, at its election, to convert all or any part of the outstanding balance of the note into shares of fully paid and non-assessable common stock of the Company based upon the Conversion Formula. Tonaquint was granted the right to purchase at any time on or after October 17, 2013 until the date which is the last calendar day of the month in which the fifth anniversary of the "issue date" occurs, 175,000 fully paid and non-assessable shares of the Company's common stock, as such number may be the adjusted from time to time pursuant to the full rachet price protection terms and conditions of the warrant. The initial "exercise price" is $0.40 per share of common stock. On November 12, 2013, the note was paid in full with financing received in connection with the sale and issuance of Series A Preferred Stock and warrants pursuant to the Securities Purchase Agreement, dated November 12, 2013, between the Company and the investors named therein. (See Note 12) As mentioned above, the Company issued 175,000 free standing and detachable warrants related to the note.	The Company had the option to repay this note at any time on or before the date that is sixty (60) days from October 7, 2013. The Company recorded a debt discount for the OID of $25,000 and expensed $5,000. The debt was treated as stock settled debt where a put premium of $120,000 was to be recorded over the six-month period to the first conversion date. Tonaquint had the right at any time after the date that is six (6) months from the effective date, at its election, to convert all or any part of the outstanding balance of the note into shares of fully paid and non-assessable common stock of the company based upon a formula that is seventy (70%) percent of the average of the two (2) lowest intra-day trade prices in the fifteen (15) trading days immediately preceding the conversion.
Warrants issued price		250,000
Fully paid and non-assessable shares of the company common stock	175,000	350,000							350,000
Fully paid and non-assessable shares of the company common stock, par value	$ 0.001	$ 0.001
Warrants exercise price		$ 0.40			$ 0.30				$ 0.20
Put premium					33,364
Loss on debt extinguishment					556,028	304,808					3,459
Loss on extinguishment of debt					(146,624)						34,041
Gain on extinguishment of debt for put premium					33,364
Warrant issuance					27,000,000				175,000	29,940,000
Warrants purchase price	$ 125,000

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Consolidated Balance Sheets (USD $)	Dec. 31, 2013	Dec. 31, 2012
Assets
Cash	$ 3,053,485	$ 893,458
Accounts receivable	901,918	1,246,814
Accounts receivable - Related Party, net of allowance $16,244 and $0 respectively	25,000
Prepaid expenses	1,050,210	3,600
Other current assets	1,676	688
Total Current Assets	5,032,289	2,144,560
Property and Equipment, net	381,847	365,017
Software, net		258,933
Other assets	12,665	8,871
Finance costs, net	2,150	2,477
Total Other Assets	14,815	270,281
Total Assets	5,428,951	2,779,858
Liabilities and Stockholders' Equity (Deficit)
Accounts payable	154,324	207,741
Due to officers		75,000
Accrued expenses	40,373	64,077
Accrued payroll	414,684	412,186
Loan payable to factor	542,530	827,075
Accrued interest	5,850	4,524
Line of credit	44,692	25,000
Capital Leases, current portion	32,768	16,923
Notes payable, current portion, net of discount	380,326	202,557
Long term debt, current portion	44,084	37,513
Settlement Payable	7,000	115,278
Deferred Revenue	209,033
Other current liabilities	43,379
Warrant derivative fair value	5,406,000
Accrued preferred stock dividend payable
Total Current Liabilities	7,325,043	1,987,874
Capital Leases (net of current portion)	26,108	23,974
Line of credit (net of current portion)		125,000
Notes payable (net of current portion), net of discount	31,694	273,751
Long term debt (net of current portion)	272,353	181,457
Total Liabilities	7,655,198	2,592,056
Temporary Equity
Commitments and Contingencies (See Note 10)
Stockholders' Equity (Deficit):
Common stock ($0.001 par value, 500,000,000 shares authorized, 54,752,294 and 39,054,867 shares issued and outstanding at December 31, 2013 and December 31, 2012, respectively)	54,752	39,055
Additional paid-in capital	6,543,224	2,738,545
Subscription receivable		(5,000)
Accumulated deficit	(10,752,223)	(2,584,798)
Total Stockholders' Equity (Deficit)	(4,154,247)	187,802
Total Liabilities and Stockholders' Equity (Deficit)	5,428,951	2,779,858
Series A Preferred Stock [Member]
Temporary Equity
Series A 8% redeemable convertible preferred stock (13,500,000 and 0 shares issued and outstanding at December 31, 2013 and 2012, respectively)-Redemption value of $5,460,000)	$ 1,928,000

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Long Term Debt and Notes Payable (Details) (USD $)	Dec. 31, 2013	Dec. 31, 2012
Summary of long term debt
Total	$ 316,437	$ 218,970
Less current portion	(44,084)	(37,513)
Total long term portion	272,353	181,457
Bank term loan [Member]
Summary of long term debt
Total	141,857	38,897
Mortgage loan [Member]
Summary of long term debt
Total	$ 174,580	$ 180,073

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Consolidated Statements of Changes In Stockholder's Equity (Deficit) (USD $)	Total	Common Stock [Member]	Additional Paid-in Capital [Member]	Subscription Receivable [Member]	Accumulated Deficit [Member]
Beginning Balance at Dec. 31, 2011	$ (359,819)	$ 16,499	$ 751,010		$ (1,127,328)
Beginning Balance, Shares at Dec. 31, 2011		16,499,021
Recapitalization		13,499	(13,499)
Recapitalization, Shares		13,499,206
2011 bridge note converted in 2012 related to reverse merger	250,000	1,344	248,656
2011 bridge note converted in 2012 related to reverse merger, Shares		1,343,729
Issuance of common stock for cash	1,056,094	4,352	1,051,742
Issuance of common stock for cash, Shares		4,352,312
Repayment of advances with shares	313,908	1,266	312,642
Repayment of advances with shares, Shares		1,265,381
Value of Beneficial conversion feature in convertible debt	300,000		300,000
Repurchase of shares pursuant to settlement agreement	(232,500)	(3,300)	(229,200)
Repurchase of shares pursuant to settlement agreement, Shares		(3,299,802)
Conversion of convertible debt	300,000	3,000	297,000
Conversion of convertible debt, shares		3,000,000
Shares issued as loan fees	343,500	2,375	341,125
Shares issued as fees, Shares		2,375,000
Offering costs	325,911	0	(325,911)
Receipt of subscription receivable		20	4,980	(5,000)
Receipt of subscription receivable, Shares		20,000
Fractional rounding		26
Issuance of common stock as compensation
Deemed dividend for beneficial conversion feature of series A preferred stock
Dividends on series A preferred stock
Net Loss 2013	(1,457,470)				(1,457,470)
Ending Balance at Dec. 31, 2012	187,802	39,055	2,738,545	(5,000)	(2,584,798)
Ending Balance, Shares at Dec. 31, 2012		39,054,867
Issuance of common stock for cash	1,238,000	3,446	1,234,554
Issuance of common stock for cash, Shares		3,446,429
Value of Beneficial conversion feature in convertible debt	2,600,000
Conversion of convertible debt	514,667	1,608	513,059
Conversion of convertible debt, shares		1,608,333
Shares issued as loan fees	679,353	5,575	673,778
Shares issued as fees, Shares		5,575,000
Receipt of subscription receivable	5,000			5,000
Issuance of common stock as compensation	(159,005)	463	158,542
Issuance of common stock as compensation, Shares		462,665
Deemed dividend for beneficial conversion feature of series A preferred stock	(2,634,185)				(2,634,185)
Dividends on series A preferred stock	60,000				(60,000)
Public offering costs	(9,553)		(9,553)
Reclassification of warrant liability	(101,418)		(101,418)
Shares issued for services	1,325,500	4,605	1,320,895
Shares issued for services, Shares		4,605,000
Stock option expense	14,822		14,822
Net Loss 2013	(5,473,240)				(5,473,240)
Ending Balance at Dec. 31, 2013	$ (4,154,247)	$ 54,752	$ 6,543,224		$ (10,752,223)
Ending Balance, Shares at Dec. 31, 2013		54,752,294

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Stock Options and Warrants (Details 1) (USD $)	12 Months Ended
	Dec. 31, 2013
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding [Roll Forward]
Number of Shares, Outstanding, Beginning balance
Number of Shares, Granted	1,000,000
Number of Shares, Exercised
Number of Shares, Forfeited or expired
Number of Shares, Outstanding, Ending balance	1,000,000
Number of Shares, Exercisable, Ending balance
Weighted Average Exercise Price, Beginning balance
Weighted Average Exercise Price, Granted	$ 0.26
Weighted Average Exercise Price, Exercised
Weighted Average Exercise Price, Forfeited or expired
Weighted Average Exercise Price, Ending balance	$ 0.26
Weighted Average Exercise Price, Exercisable, Ending balance
Weighted-Average Remaining Contractual Term, Granted	0 years	[1]
Weighted-Average Remaining Contractual Term, Ending	0 years	[1]
Aggregate Intrinsic Value, Granted
Aggregate Intrinsic Value, Ending balance
Aggregate Intrinsic Value, Exercisable, Ending balance

[1] * These 1,000,000 options were granted without a specified expiration term.

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Income Taxes (Tables)

12 Months Ended

Dec. 31, 2013

Income Taxes [Abstract]

Summary of income tax expense (benefit)

	Year ended				Year ended
		December 31, 2013				December 31, 2012
U.S. Federal "expected" income tax		$	(1,860,902	)		$	(495,540	)
State income tax			(198,679	)			(52,906	)
Non-deductible beneficial conversion interest			-				102,000
Stock compensation			252,366				24,769
Change in fair value of warrant liability			(124,187	)			-
Loss on extinguishment of debt			49,852				-
Other			23,585				-
Change in valuation allowance			1,857,964				421,677
Total provision for income taxes		$	-			$	-

Summary of deferred tax assets and liabilities

	2013				2012
Deferred tax assets:
Net operating loss carry forward		$	1,593,719			$	586,600
Stock options			5,578				-
Accrued salary and other			-				35,821
Accrual to cash timing difference			859,735				-
Total gross deferred tax assets			2,459,032				622,421
Deferred tax liabilities:
Depreciation			(9,890	)			(31,244	)
Total gross deferred tax liabilities			(9,890	)			(31,244	)
Less valuation allowance			(2,449,142	)			(591,177	)
Net deferred tax assets		$	-			$	-

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Concentrations (Details Textual)	12 Months Ended
	Dec. 31, 2013 Hospital	Dec. 31, 2012 Hospital
Concentrations (Textual)
Number of hospitals	4	13
Concentration risk percentage sales	60.00%	89.00%
Accounts Payable [Member] | Vendor [Member]
Concentrations (Textual)
Number of major vendors	5	4
Concentration risk, percentage	56.00%	67.00%
Accounts Receivable [Member] | Customer [Member]
Concentrations (Textual)
Number of major customer	4	1
Concentration risk, percentage	64.00%	62.00%

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Income Taxes

12 Months Ended

Dec. 31, 2013

Income Taxes [Abstract]

INCOME TAXES

14 – INCOME TAXES

The Company’s subsidiary, HRAA, elected to convert from a Subchapter S corporation for Federal income tax purposes to a C corporation effective October 21, 2011. Accordingly, HRAA’s income or losses are passed through to the stockholders of HRAA for the period January 1 to October 21, 2011. The Company will absorb the tax effects of any income or losses subsequent to the date of conversion to a C corporation and in future years.

The Company has incurred aggregate cumulative net operating losses of approximately $4,209,000 for C corporation income tax purposes through December 31, 2013. The net operating loss carries forward for income taxes, purposes and may be available to reduce future years’ taxable income. These carry forwards will expire, if not utilized, starting in 2031 through 2033. Management believes that the realization of the benefits from these losses appears not more likely than not due to the Company’s limited operating history and continuing losses for income tax purposes. Accordingly, the Company has provided a 100% valuation allowance on the deferred tax asset to reduce the asset to zero. Management will review this valuation allowance periodically and make adjustments as warranted.

The Company’s income tax expense (benefit) differs from the “expected” tax expense for Federal income tax purposes computed by applying a Federal corporate tax rate of 34% to loss before income taxes as follows:

	Year ended			Year ended
	December 31, 2013			December 31, 2012
U.S. Federal "expected" income tax	$	(1,860,902	)	$	(495,540	)
State income tax		(198,679	)		(52,906	)
Non-deductible beneficial conversion interest		-			102,000
Stock compensation		252,366			24,769
Change in fair value of warrant liability		(124,187	)		-
Loss on extinguishment of debt		49,852			-
Other		23,585			-
Change in valuation allowance		1,857,964			421,677
Total provision for income taxes	$	-		$	-

The tax effects of temporary differences that give rise to significant portions of deferred tax assets and liabilities at December 31, 2013 and 2012 are as follows:

 

	2013			2012
Deferred tax assets:
Net operating loss carry forward	$	1,593,719		$	586,600
Stock options		5,578			-
Accrued salary and other		-			35,821
Accrual to cash timing difference		859,735			-
Total gross deferred tax assets		2,459,032			622,421
Deferred tax liabilities:
Depreciation		(9,890	)		(31,244	)
Total gross deferred tax liabilities		(9,890	)		(31,244	)
Less valuation allowance		(2,449,142	)		(591,177	)
Net deferred tax assets	$	-		$	-

A deferred tax asset of approximately $169,500 results from the C corporation taxable losses totaling $434,509 from the period October 22, 2011 through December 31, 2011. The valuation allowance at December 31, 2012 was $591,177. The increase during 2013 was $1,857,964.

The Company believes its tax positions are all highly certain of being upheld upon examination. As such, the Company has not recorded a liability for unrecognized tax benefits. As of December 31, 2013, tax years 2013, 2012 and 2011 remain open for Internal Revenue Service audit. The Company has received no notice of audit from the Internal Revenue Service for any of the open tax years.

The Company follows the provisions of ASC 740-10, Accounting for Uncertain Income Tax Positions. When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. In accordance with the guidance of ASC 740-10, the benefit of a tax position is recognized in the financial statementsin the period during which, based on all available evidence, management believes it is more likely than not that the position will besustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset oraggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largestamount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. Theportion of the benefits associated with tax positions taken that exceeds the amount measured as described above should be reflected asa liability for unrecognized tax benefits in the accompanying consolidated balance sheets along with any associated interest and penalties that wouldbe payable to the taxing authorities upon examination.

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Nature of Business and Going Concern (Details) (USD $)

0 Months Ended

1 Months Ended

12 Months Ended

Nov. 12, 2013

Apr. 30, 2012

Dec. 31, 2013

Dec. 31, 2012

Feb. 10, 2012

Dec. 31, 2011

Nature of Business and Going Concern (Textual)

Shares exchange right on each share pursuant to Merger agreement

1,271

Stock split conversion ratio

2 for 1

12.98 for 1

Amount transferred from additional paid in capital to common stock

$ 32,747

Cash

3,053,485

893,458

Working capital deficiency

2,292,754

Total Stockholders' Equity (Deficit)

(4,154,247)

187,802

(359,819)

Accumulated deficit

(10,752,223)

(2,584,798)

Net Cash (Used) For Operating Activities

(3,365,005)

(1,699,466)

Net Loss available to common stockholders

(8,167,425)

(1,457,470)

Proceeds from issuance of Series A Preferred Stock

5,400,000

Convertible preferred stock, dividend percentage

8.00%

Series A Preferred Stock, conversion ratio

The Series A Preferred Stock is convertible into common stock on a 2 for 1 basis and is redeemable by the Company, at the option of the investor, 48 months from November 12, 2013 at the stated value of $0.30 per share or a total of $5,400,000 plus accumulated but unpaid dividends, whether declared or not.

Series A Preferred Stock, stated value

$ 0.30

Series A Preferred Stock option to investor

48 months

Net proceeds after commissions and professional fees

4,903,652

Net proceeds from issuance of convertible preferred stock after payment of expense

$ 4,322,000

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Subsequent Events

12 Months Ended

Dec. 31, 2013

Subsequent Events

SUBSEQUENT EVENTS

16 – SUBSEQUENT EVENTS

Separation Agreement with Robert Rubinowitz

On April 14, 2014, the Company entered into a separation agreement (the “Separation Agreement”) with Robert Rubinowitz, its President, Chief Operating Officer, Secretary, Treasurer and director, which provides for the termination of Mr. Rubinowitz's employment and his resignation as an officer and director of the Company, and the termination of that certain Employment Agreement dated October 1, 2013, as amended on November 12, 2013, between the Company and Mr. Rubinowitz (the “Employment Agreement”).  The Separation Agreement provides that Mr. Rubinowitz will receive (i) $175,000 to be paid in equal increments of $3,365.39 on each of May 2, 2014, May 16, 2014, May 30, 2014, June 14, 2014 and June 27, 2014 and thereafter equal increments of $7,532.05 with the last payment date being April 17, 2015, (ii) $23,557.70 in accrued and unpaid base salary, bonus and vacation earned through April 11, 2014 payable in equal installments of $1,121.80 beginning on July 11, 2014, and (iii) $6,730.77 in accrued salary, in each case, less all applicable deductions and withholdings, from the Company in full and final satisfaction of the amounts due to Mr. Rubinowitz pursuant to the terms of the Employment Agreement.

The Separation Agreement also requires the Company to use commercially reasonable efforts to have Mr. Rubinowitz and Andrea Clark removed as a guarantors under certain of the Company's debt obligations.  The Company also agreed to pay an early termination fee for the early return of Mr. Rubinowitz's leased vehicle.  The Company further agreed to file a Registration Statement with the SEC to register the resale of Mr. Rubinowitz's outstanding common stock as of the date of Separation Agreement.

The foregoing description of the Separation Agreement does not purport to be complete and is qualified in its entirety by reference to the complete text of the Separation Agreement, a copy of which is attached as Exhibit 10.22 to this Annual Report on Form 10-K.

Termination of Named Executive Officers

On March 26, 2014, the Company notified Dean Boyer, its chief technology officer, that the Company was terminating his employment with the Company as well as that certain employment agreement with the Company dated October 1, 2013, as amended on November 13, 2013, effective March 31, 2014.  On March 28, 2014, the Company received a letter from Mr. Boyer’s counsel demanding payment of $421,062.53 as severance in connection with the termination of Mr. Boyer’s employment agreement. On April 7, 2014, the Company received an additional letter from Mr. Boyer’s counsel demanding an additional $13,370.21 for accrued but unused vacation pay.

On April 15, 2014, the Company notified Joseph Brophy, its senior vice president of operations, that the Company was terminating his employment with the Company as well as that certain letter agreement, dated December 5, 2012, both effective April 25, 2014.

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Income Taxes (Details Textual) (USD $)	3 Months Ended	12 Months Ended
	Dec. 31, 2011	Dec. 31, 2013	Dec. 31, 2012
Income Taxes (Textual)
Net operating losses		$ 4,209,000
Valuation allowance on deferred tax asset		100.00%
Operating loss carryforwards expiration description		Carry forwards will expire, if not utilized, starting in 2031 through 2033
Federal corporate tax rate		34.00%
Total gross deferred tax assets	169,500	2,459,032	622,421
Taxable Income (loss), total	434,509
Valuation allowance		2,449,142	591,177
Increase in valuation allowance		$ 1,857,964

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Condensed Consolidated Statements of Cash Flows (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Cash flows from Operating Activities:
Net loss available to common stockholders	$ (5,473,240)	$ (1,457,470)
Adjustments to reconcile net loss to net cash used in operating activities:
Cumulative series A preferred stock dividend	60,000
Deemed dividend for beneficial conversion feature of series A preferred stock	2,634,185
Amortization of debt discount	556,028	304,808
Amortization of debt issue costs	327
Depreciation expense	83,573	50,765
Amortization of software	64,137
Software impairment	946,931
Accretion of premium on debt	33,364
Bad debt expense	26,116
Amortization of prepaid shares issued for services	465,501
Stock option expense	14,822
Stock issued for services	159,005
Loss on early extinguishment of debt	146,624
Gain from change in fair market value of warrant derivative liability	(365,255)
Change in operating assets and liabilities:
Accounts receivable	(17,655)	(1,103,257)
Other assets	(4,788)	5,146
Prepaid expenses	(129,038)	20,912
Accounts payable	(53,417)	53,783
Accounts payable related party		75,000
Settlement accrual	7,000
Accrued liabilities	(85,801)	383,835
Other accrued liabilities	49,229
Accrued payroll	2,499
Deferred revenue	209,033	(32,988)
Net Cash used in operating activities	(3,365,005)	(1,699,466)
Cash flows from Investing Activities:
Capitalization of internally developed software	(752,135)	(258,933)
Purchases of property and equipment	(10,304)	(20,985)
Net Cash used in investing activities	(762,439)	(279,918)
Cash flows from Financing Activities:
Proceeds from issuance of common stock	1,243,000	730,183
Proceeds from series A 8% convertible preferred stock issuance	5,400,000
Preferred and common stock offering costs	(505,901)
Stockholder loan repayment -related party	(115,000)
Stockholder loan - related party	40,000
Payment for repurchase of common stock		(94,165)
Loan proceeds	1,595,000	1,193,908
Loan proceeds from factor, net	26,890	827,075
Repayments of loans	(1,237,145)	(33,087)
Repayment of capital lease	(18,015)	(1,072)
Settlement payments	(115,278)
Borrowings (Repayments) on line of credit, net	(26,080)	51,500
Net Cash provided by financing activities	6,287,471	2,674,342
Net increase in cash	2,160,027	694,958
Cash at beginning of year	893,458	198,500
Cash at ending of year	3,053,485	893,458
Supplemental schedule of cash paid during the period for:
Interest	376,539	36,156
Income Taxes
Supplemental schedule of non-cash investing and financing activities:
Issuance of stock to repay debt	514,667	563,908
Capital lease obligation incurred for use of equipment	90,099	38,704
Beneficial conversion feature on convertible debt charged to additional paid in capital		300,000
Conversion of $300,000 notes to common stock		300,000
Shares issued as a loan fee	679,353	343,500
Transfer of accounts payable to notes payable		65,000
Insurance premium finance contract recorded as prepaid asset	57,573
Shares issued for prepaid services	1,325,500
Reclassification of line of credit to note payable	133,333
Constructive dividend	2,634,185
Reclassification of derivative to warrant liability	5,771,255
Debt discount	$ 37,500

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Consolidated Balance Sheets (Parenthetical) (USD $)	Dec. 31, 2013	Dec. 31, 2012
Balance Sheets [Abstract]
Allowance for doubtful accounts	$ 16,244
Preferred stock, shares issued	13,500,000	0
Preferred stock, shares outstanding	13,500,000	0
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	500,000,000	500,000,000
Common stock, shares issued	54,752,294	39,054,867
Common Stock, Shares, Outstanding	54,752,294	39,054,867
Temporary equity, redemption value	$ 5,460,000	$ 5,460,000

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Convertible Promissory Notes and Fair Value Measurements

12 Months Ended

Dec. 31, 2013

Convertible Promissory Notes and Fair Value Measurements [Abstract]

CONVERTIBLE PROMISSORY NOTES AND FAIR VALUE MEASUREMENTS

9 – CONVERTIBLE PROMISSORY NOTES AND FAIR VALUE MEASUREMENTS

In December 2011, the Company received a deposit of $170,000.  This deposit was an advance on three convertible promissory notes totaling approximately $314,000 signed on February 2, 2012, automatically convertible into future securities sold at 100% of the sale price and non-interest bearing.  These loans qualify as stock settled debt under ASC 480 with a fixed monetary amount of $314,000.  These loans were to mature in August 2012 but were converted into common stock in February 2012.  (See Note 12)

In May 2012, the Company received $300,000 related to five convertible notes. The term of each note was 12 months. Interest was computed at 6% based on a 360 day year and is payable on the maturity date, and the conversion rate was $0.10 per share. Interest was due and payable only if the notes were repaid in cash. These notes were converted to common stock at their contractual conversion rate of $0.10 per share on July 15, 2012. (See Note 12) At the note origination date, the Company recorded a debt discount for the beneficial conversion feature value related to the above referenced convertible note in the amount of $300,000, which is based on the intrinsic value between the fair market value of the Company’s stock and the conversion price. The discount is being amortized to interest expense over the term of the note. In accordance with ASC 470-20-40, upon conversion, the remaining unamortized portion of the beneficial conversion feature value was expensed.

On October 7, 2013, the Company entered into a one-year original issue discount (OID) convertible promissory note with warrants in the amount of $280,000 with Tonaquint, Inc., a Utah corporation (“Tonaquint”). The purchase price for this note and the warrants was $250,000. The Company had the option to repay this note at any time on or before the date that is sixty (60) days from October 7, 2013. The Company recorded a debt discount for the OID of $25,000 and expensed $5,000. The debt was treated as stock settled debt where a put premium of $120,000 was to be recorded over the six-month period to the first conversion date. Tonaquint had the right at any time after the date that is six (6) months from the effective date, at its election, to convert all or any part of the outstanding balance of the note into shares of fully paid and non-assessable common stock of the company based upon a formula that is seventy (70%) percent of the average of the two (2) lowest intra-day trade prices in the fifteen (15) trading days immediately preceding the conversion (the “Conversion Formula”). Tonaquint was granted the right to purchase at any time on or after October 7, 2013 until the date which is the last calendar day of the month in which the fifth anniversary of the “issue date” occurs, 350,000 fully paid and non-assessable shares of the Company’s common stock, par value $.001 per share, as such number may be the adjusted from time to time pursuant to the full ratchet price protection terms and conditions of the warrant. The initial “exercise price” is $0.40 per share of common stock. On November 12, 2013, the note was paid in full with financing received in connection with the sale and issuance of Series A Preferred Stock and warrants pursuant to the Securities Purchase Agreement, dated November 12, 2013, between the Company and the investors named therein. (See Note 12) As mentioned above, the Company issued 350,000 free standing and detachable warrants related to the note. The Company accounted for these warrants issued in accordance with the  GAAP accounting guidance under ASC 815 applicable to derivative instruments, which requires every derivative instrument within its scope to be recorded on the balance sheet as either an asset or liability measured at its fair value, with changes in fair value recognized in earnings. Based on this guidance, the Company determined that the Company's warrants do not meet the criteria for classification as equity due to the price protection provisions. Accordingly, the Company classified the warrants as current liabilities. The warrants are subject to re-measurement at each balance sheet date, with any change in fair value recognized as a component of other income (expense), net in the statements of operations. We will estimate the fair value of these warrants at the respective balance sheet dates, based on the estimated market value of the underlying common stock at the valuation measurement date, the remaining contractual term of the warrant, risk-free interest rates and expected dividends on and expected volatility of the price of the underlying common stock. (See below for December 31, 2013 valuations). As a result of the November 12, 2013 financing and the full ratchet protection, the exercise price of the warrants was reduced to $0.20 per share and 350,000 additional warrants were issued to Tonaquint.

On October 17, 2013, the Company entered into a one-year OID convertible promissory note in the amount of $142,500 with Tonaquint. The purchase price for this note and the warrant was $125,000. The Company had the option to repay this note at any time on or before the date that is sixty (60) days from October 17, 2013. The Company recorded a debt discount for the OID of $12,500 and expensed $5,000. The debt was treated as stock settled debt where a put premium of $61,071 was to be recorded over the six-month period to the first conversion date. Tonaquint had the right at any time after the date that is six (6) months from the effective date, at its election, to convert all or any part of the outstanding balance of the note into shares of fully paid and non-assessable common stock of the Company based upon the Conversion Formula. Tonaquint was granted the right to purchase at any time on or after October 17, 2013 until the date which is the last calendar day of the month in which the fifth anniversary of the “issue date” occurs, 175,000 fully paid and non-assessable shares of the Company’s common stock, as such number may be the adjusted from time to time pursuant to the full ratchet price protection terms and conditions of the warrant. The initial “exercise price” is $0.40 per share of common stock. On November 12, 2013, the note was paid in full with financing received in connection with the sale and issuance of Series A Preferred Stock and warrants pursuant to the Securities Purchase Agreement, dated November 12, 2013, between the Company and the investors named therein. (See Note 12) As mentioned above, the Company issued 175,000 free standing and detachable warrants related to the  note. The Company accounted for these warrants issued in accordance with the US GAAP accounting guidance under ASC 815 applicable to derivative instruments, which requires every derivative instrument within its scope to be recorded on the balance sheet as either an asset or liability measured at its fair value, with changes in fair value recognized in earnings. Based on this guidance, the Company determined that the Company's warrants do not meet the criteria for classification as equity due to the price protection provisions. Accordingly, the Company classified the warrants as current liabilities. The warrants are subject to re-measurement at each balance sheet date, with any change in fair value recognized as a component of other income (expense), net in the statements of operations. We will estimate the fair value of these warrants at the respective balance sheet dates, based on the estimated market value of the underlying common stock at the valuation measurement date, the remaining contractual term of the warrant, risk-free interest rates and expected dividends on and expected volatility of the price of the underlying common stock. (See below for December 31, 2013 valuations) As a result of the November 12, 2013 financing and the full ratchet anti-dilution provision, the exercise price of the warrants was reduced to $0.20 per share and 175,000 additional warrants were issued to Tonaquint.

At the time the above two notes were paid off, the Company had accreted $33,364 of the put premium and according recognized a gain on extinguishment of $33,364 relating to this put premium. Further, as only $3,459 of the discount was amortized, the Company recorded a loss on early debt extinguishment of $34,041.

Fair Value Measurements – Derivative liability:

The accounting guidance for fair value measurements provides a framework for measuring fair value and requires expanded disclosures regarding fair value measurements.  Fair value is defined as the price that would be received for an asset or the exit price that would be paid to transfer a liability in the principal or most advantageous market in an orderly transaction between market participants on the measurement date.  The accounting guidance established a fair value hierarchy which requires an entity to maximize the use of observable inputs, where available.  This hierarchy prioritizes the inputs into three broad levels as follows.  Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities.  Level 2 inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument.  Level 3 inputs are unobservable inputs based on the Company’s own assumptions used to measure assets and liabilities at fair value.  An asset or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.

Assets and liabilities measured at fair value on a recurring and non-recurring basis consisted of the following at December 31, 2013:

	Carrying Value at December 31,		Fair Value Measurements at December 31, 2013
	2013		(Level 1)		(Level 2)		(Level 3)
Warrant derivative liability (29,940,000 warrants - See Note 12)	$	5,406,000	$	-	$	-	$	5,406,000

The following is a summary of activity of Level 3 liabilities for the period ended December 31, 2013:

Balance at December 31, 2012	$	-
Reclassification of warrant liability		5,771,255
Change in fair value		(365,255	)
Balance December 31, 2013	$	5,406,000

Changes in fair value of the warrant derivative liability is included in other income (expense) in the accompanying consolidated statements of operations.

The Company estimates the fair value of the warrant liability utilizing the Binomial Lattice model, which is dependent upon several variables such as the expected term (based on contractual term), expected volatility of our stock price over the expected term (based on historical volatility), expected risk-free interest rate over the expected term, and the expected dividend yield rate over the expected term. The Company also used the Black-Scholes pricing model as a comparison to the Binomial Lattice method and the results were similar.  The Company believes this valuation methodology is appropriate for estimating the fair value of the warrant derivative liability.  The following table summarizes the assumptions the Company utilized to estimate the fair value of the embedded conversion option at December 31, 2013:

Assumptions	December 31, 2013
Expected term		1.0
Expected Volatility		116	%
Risk free rate		1.2	%
Dividend Yield		0.00	%

There were no changes in the valuation techniques during 2013.

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Document and Entity Information (USD $)	12 Months Ended
	Dec. 31, 2013	Apr. 10, 2014	Jun. 30, 2013
Document and Entity Information [Abstract]
Entity Registrant Name	HEALTH REVENUE ASSURANCE HOLDINGS, INC.
Entity Central Index Key	0001514443
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Document Type	10-K
Document Period End Date	Dec. 31, 2013
Document Fiscal Period Focus	FY
Document Fiscal Year Focus	2013
Entity Filer Category	Smaller Reporting Company
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Public Float			$ 15,989,850
Entity Common Stock, Shares Outstanding		54,752,294

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Commitments and Contingencies

12 Months Ended

Dec. 31, 2013

Commitments and Contingencies [Abstract]

COMMITMENTS AND CONTINGENCIES

10 – COMMITMENTS AND CONTINGENCIES

Commitments

Leases:

Until August 2012, the Company leased certain office equipment under non-cancelable operating lease arrangements.  Monthly payments under the lease agreements were approximately $600 per month. The lease expired in August 2012. In September 2012, the Company started a non-cancellable operating lease for office equipment. The lease term is 5 years. Lease payments during the five years are approximately $560 per month.

On September 1, 2011, the Company entered into a commercial lease agreement for additional office space. The lease term is one year with five successive one-year renewal options. Starting September 1, 2013, the lease has been renewed for one year with a fixed payment of approximately $5,800 per month.

Future minimum lease payments under these leases are as follows:

Years Ending December 31:

2014	$	53,246
2015		6,720
2016		6,720
2017		5,040
Thereafter		-
Total	$	71,726

Capital Leases:

HRAA leases its property and equipment from Dell Financial Services L.L.C. under several capital leases. The economic substance of the leases is that the Company is financing the acquisition of the assets through the lease and accordingly, it is recorded in the Company’s assets and liabilities.

The following is an analysis of the leased assets included in property and equipment:

	December 31, 2013			December 31, 2012
Equipment	$	79,210		$	41,969
Less accumulated depreciation		(33,607	)		(5,926	)
Total	$	45,603		$	36,043

The lease agreements contain  bargain purchase options at the end of the lease terms. The total amount due at December 31, 2013 is $58,876 of which $32,768 is included in short term liabilities.

The following is a schedule by years of future minimum payments required under the lease together with their present value as of December 31, 2013:

Year Ending December 31:
2014	$	32,768
2015		22,527
2016		3,581

Total minimum lease payments		58,876
Less amount representing interest		(9,087	)
Present value of minimum lease payments	$	49,789

Amortization of assets held under capital leases is included with depreciation expense and is approximately $24,200 and $9,400 for the years ended as of December 31, 2013 and 2012, respectively.

Settlement Agreements:

On May 8, 2012, the Company terminated the employment of its Chief Marketing Officer (“CMO”) and subsequently amended its complaint to enforce certain non-competition clauses contained in the employment agreement. The Company sought a declaration of its obligations to pay severance under the terms of its then-existing employment agreement with the CMO.

On July 9, 2012, the Company and the former CMO entered into a settlement agreement to resolve two pending lawsuits arising out of the termination of his employment agreement. The lawsuit was initiated by the Company against the former CMO in the United States District Court for the Southern District of Florida. In addition, the former CMO sued the Company in the United States District Court of the District of Colorado.

Pursuant to the settlement agreement, the former CMO agreed to abolish all claims and lawsuits against the Company and its CEO and COO and resigned any and all positions which he had or presently may have had with the Company. As part of the settlement agreement, the Company agreed to make eleven (11) payments totaling $232,500 pursuant to the terms of his prior employment agreement. Additionally, the CMO agreed to transfer his 3,299,802 shares to an officer of the Company in 2012. These payments commenced July 2012 and the final payment in the amount of $23,056 was disbursed on July 29, 2013. In addition, the Company has agreed to abolish all claims and lawsuits against the former CMO. The settlement agreement has a seven (7) day grace period for payments to the former CMO, after which time, he may seek court intervention to enforce the payments. Robert Rubinowitz, the former chief operating officer and Andrea Clark, the chief visionary officer, have personally guaranteed the payments of the settlement agreement. As a result of the settlement agreement, both parties dismissed their respective filings and have agreed to not enter any more lawsuits concerning the scope of this matter.

On March 14, 2013, the Company and its former regional sales manager entered into a settlement agreement to resolve one pending lawsuits arising out of the termination of his employment. The lawsuit was initiated by the former regional sales manager against the Company in the United States District Court for the city of Denver, Colorado. Pursuant to the settlement agreement, the former regional sales manager agreed to abolish all claims and lawsuits against the Company. As part of the settlement agreement, the Company agreed to make a payment totaling $11,000 pursuant to the terms of the settlement agreement and general release of all claims executed by both parties. As of December 31, 2013 the Company had accrued $7,000 for settlement payable.

Employment Agreements:

On October 2, 2013 the Company entered into employment agreements with four (4) of its officers and directors. The employment agreements provide for severance benefits, change in control provisions, accrued but unpaid wages and bonuses, accrued but unpaid vacation time, incentive awards, equity and stock options, and other benefits. These four (4) employment agreements were amended on November 12, 2013. As of December 31, 2013, no performance bonuses have been earned. The Company owed Andrea Clark, its former chief executive officer, $75,000 pursuant to the Merger Agreement, which was accrued in the accompanying consolidated financial statements as due to Ms. Clark through September 30, 2013. The balance due to Ms. Clark was formalized in a promissory note in November 1, 2013. In addition, the Company owed Mr. Rubinowitz, its former president, $40,000 pursuant to a promissory note, dated November 1, 2013, for funds advanced in September 2013. On November 12, 2013, the promissory notes to Ms. Clark and Mr. Rubinowitz were paid in full with financing received in connection with the sale and issuance of Series A Preferred Stock and warrants to purchase shares of the Company’s common stock pursuant to the Securities Purchase Agreement, dated November 12, 2013, between the Company and the investors named therein.

Contingencies

From time to time, the Company is involved in litigation matters relating to claims arising from the ordinary course of business. While the results of such claims and legal actions cannot be predicted with certainty, the Company’s management does not believe that there are claims or actions, pending or threatened against the Company, the ultimate disposition of which would have a material adverse effect on our business, results of operations, financial condition or cash flows.

On March 26, 2014, the Company notified Dean Boyer, its chief technology officer, that the Company was terminating his employment with the Company as well as that certain employment agreement with the Company dated October 1, 2013, as amended on November 13, 2013, effective March 31, 2014.  On March 28, 2014, the Company received a letter from Mr. Boyer’s counsel demanding payment of $421,062.53 as severance in connection with the termination of Mr. Boyer’s employment agreement. On April 7, 2014, the Company received an additional letter from Mr. Boyer’s counsel demanding an additional $13,370.21 for accrued but unused vacation pay. The Company intends to dispute the amounts claimed to be owed to Mr. Boyer.

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Consolidated Statements of Operations (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Statements of Operations [Abstract]
Revenue	$ 7,099,514	$ 5,806,848
Revenue - Related Party	211,239
Total Revenue	7,310,753	5,806,848
Cost of Revenues	4,061,644	2,830,008
Gross Profit	3,249,109	2,976,840
Operating Expenses
Selling and administrative expenses (includes stock compensation of $639,328 and $0 in 2013 and 2012, respectively)	7,016,533	3,853,820
Research and development		64,386
Asset impairment	946,931
Depreciation and amortization	83,900	50,765
Total Operating Expenses	8,047,364	3,968,971
Operating Loss	(4,798,255)	(992,131)
Other Income (Expense)
Other income	67	10
Interest expense	(927,047)	(465,349)
Gain on extinguishment of debt for put premium	33,364
Gain from change in fair value of warrant liability	365,255
Loss on extinguishment of debt	(146,624)
Total Other Income (Expense), net	(674,985)	(465,339)
Net Loss	(5,473,240)	(1,457,470)
Cumulative series A preferred stock dividend	(60,000)
Deemed dividend for beneficial conversion feature of series A preferred stock	(2,634,185)
Net Loss available to common stockholders	$ (8,167,425)	$ (1,457,470)
Net Loss Per Share
basic and diluted	$ (0.17)	$ (0.04)
Weighted Average Number of Shares Outstanding
basic and diluted	48,385,115	32,730,809

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Property and Equipment

12 Months Ended

Dec. 31, 2013

Property and Equipment [Abstract]

PROPERTY AND EQUIPMENT

4 - PROPERTY AND EQUIPMENT

Property and equipment consists of the following:

	December 31,
	2013			2012
Building and improvements	$	227,603		$	227,603
Furniture		119,810			119,810
Computers and Equipment		260,872			160,469
		608,285			507,882
Accumulated depreciation		(226,438	)		(142,865	)
Total	$	381,847		$	365,017

Depreciation expense for the years ended December 31, 2013 and 2012 was approximately $84,000 and $51,000, respectively.

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Accounts Receivable

12 Months Ended

Dec. 31, 2013

Accounts Receivable [Abstract]

ACCOUNTS RECEIVABLE

3 - ACCOUNTS RECEIVABLE

Accounts receivable at December 31, 2013 and December 31, 2012 was as follows:

	December 31,			December 31,
	2013			2012
Accounts receivable	$	901,918		$	1,246,814
Accounts receivable –Related party		41,244			-
Allowance for doubtful accounts		(16,244	)		-
Total	$	926,918		$	1,246,814

We had $26,116 and $0 in bad debt expense on trade accounts receivable for years ended December 31, 2013 and 2012, respectively.

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Related Party Transactions

12 Months Ended

Dec. 31, 2013

Related Party Transactions [Abstract]

RELATED PARTY TRANSACTIONS

15 – RELATED PARTY TRANSACTIONS

The Company owed Andrea Clark $75,000. The balance due to Ms. Clark was formalized in a promissory note dated November 1, 2013. The Company also owed Robert Rubinowitz $40,000 pursuant to a promissory note dated November 1, 2013 for funds advanced in September 2013. On November 12, 2013 the promissory notes to Ms. Clark and Mr. Rubinowitz were paid in full from the net proceeds of the Securities Purchase Agreement, dated November 12, 2013, among the Company and the investors named therein.

In March 2013, the Company entered into a contract with ResumeBear, Inc. (“ResumeBear”), a related party, to provide website development services in the amount of $302,764. Mr. Peter Russo, a member of the Company’s board of directors, is the chief executive officer and a director of ResumeBear. Mr. Michael Brainard, a member of the Company’s board of directors, is also a director of ResumeBear. Revenues recorded from ResumeBear were $211,239 for the year ended December 31, 2013. In January 2014, the Company wrote-off approximately $108,000 of the account receivable with ResumeBear which is reflected in the December 31, 2013 consolidated financial statements as an allowance of $16,244 and a reduction of revenue of approximately $92,000. Due to cost overruns and product delivery issues relating primarly to a third party subcontractor, the Company estimates the total loss on this contract is approximately $108,000 through December 31, 2013 and another $88,000 through the date of this report.

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Stock Options and Warrants

12 Months Ended

Dec. 31, 2013

Stock Options and Warrants [Abstract]

STOCK OPTIONS AND WARRANTS

11 – STOCK OPTIONS AND WARRANTS

Share Based Compensation

The Company is in the process of establishing a non-qualified stock option plan. In advance of the actual establishment of the plan the Company has granted a total of one million (1,000,000) stock options to an officer. The grant date is that which an employer and its employee reach a mutual understanding of the key terms and conditions of a share-based payment arrangement. This is the date on which the employer becomes contingently obligated to issue equity instruments or transfer assets to the employee who renders the requisite service. The Company is obligated for this grant as adoption of a stock option plan and board approval is considered a mere formality.

Stock Options

During the year ended December 31, 2013, the Company recorded pre-tax compensation expense of $14,822 related to the Company’s 1,000,000 options as discussed above. As of December 31, 2013, there was approximately $206,300 of unrecognized compensation expense related to stock options, which will be recognized over the weighted-average remaining requisite service period of 1.9 years. There were no exercises of stock options for the year ended December 31, 2013.

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model. The 1,000,000 options were valued at $221,121. The estimated value of stock options granted during the year ended December 31, 2013 was $0.22 per share, using the following assumptions:

	2013
Dividend yield (1)		0.0	%
Expected volatility (2)		116	%
5 Year Bond interest rate (3)		1.20	%
Expected life (4)		6.0

(1) Represents cash dividends paid as a percentage of the share price on the date of grant.

(2) Based on historical volatility of the Company’s common stock over the expected life of the options.

(3) Represents the U.S. Treasury rates over maturity periods matching the expected term of the options at the time of grant.

(4) The period of time that options granted is expected to be outstanding based upon the simplified method.

The following table summarizes stock option activity for the year ended December 31, 2013:

Options	Shares		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term	Aggregate Intrinsic Value ($000)
Outstanding at January 1, 2013		-		-
Granted		1,000,000		0.26	*	$	-
Exercised		-		-
Forfeited or expired		-		-
Outstanding at December 31, 2013		1,000,000	$	0.26	*	$	-
Exercisable at December 31, 2013		-		-	-		-

The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the difference between the Company’s closing stock price on the last trading day of the fourth quarter of 2013 and the exercise price, multiplied by the number of in-the-money options).

* These 1,000,000 options were granted without a specified expiration term.

Warrants

2013

In connection with the promissory notes issued to Tonaquint on October 7, 2013 and October 17, 2013, the Company issued 350,000 and 175,000 warrants, respectively. (See Note 9)  As a result of the Series A Preferred Stock and warrant sale on November 12, 2013, the exercise price of both the 350,000 warrants and 175,000 warrants was reduced to $0.20 per share and an additional 525,000 warrants were issued to Tonaquint pursuant to full ratchet anti-dilution provisions.

On November 12, 2013 and in connection with the Series A Preferred Stock offering, the Company issued 27,000,000 warrants to investors and 1,890,000 warrants were issued as a fee to the placement agent all at an exercise price of $0.30 per share. (See Note 12)

Warrant activity for the year ended December 31, 2013 is as follows:

	Number of Warrants		Weighted Average Exercise Price
Outstanding at December 31, 2012		-	$	-
Granted		29,415,000		0.30
Anti-dilution issuance		525,000		0.20
Exercised		-		-
Forfeited		-		-
Expired		-		-
Outstanding at December 31, 2013		29,940,000	$	0.30
Exercisable at December 31, 2013		29,940,000	$	0.30
Aggregate intrinsic value			$	52,500

All warrants were issued with an exercise term of 5 years.

Warrants outstanding have a weighted average remaining contractual life of 4.87 years as of December 31, 2013. 

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Long Term Debt and Notes Payable

12 Months Ended

Dec. 31, 2013

Long Term Debt and Notes Payable [Abstract]

LONG TERM DEBT AND NOTES PAYABLE

7 – LONG TERM DEBT AND NOTES PAYABLE

Long Term Debt:

Long Term debt consisted of the following:

	December 31, 2013			December 31, 2012
Bank term loan	$	141,857		$	38,897
Mortgage loan		174,580			180,073
		316,437			218,970
Less current portion		(44,084	)		(37,513	)
Total long term portion	$	272,353		$	181,457

On October 21, 2011, the Company entered into a bridge loan agreement (the “Bridge Loan”) in the amount of $250,000 with a third party lender.  The primary purpose was to repay an initial bridge loan and to pay for certain professional fees in connection with the Merger. The Bridge Loan incurred interest at the rate of 12% per annum which was due only in the event the Merger did not materialize. Upon the closing of the Merger, all interest accrued but not paid was deemed cancelled and paid in full and the entire principal amount of the note was automatically converted into an aggregate of 1,343,749 shares of common stock at a conversion price of $0.19 per share which is equal to a discount of 25% of to the purchase price. The loan was converted to stock in February 2012 (See Note 12).

In March 2009, HRAA entered into a term loan with Bank of America which proceeds were used for general working capital needs (the “Term Loan”).  The Term Loan was established as a result of a conversion of a revolving line of credit.  The Term Loan is personally guaranteed by Robert Rubinowitz and Andrea Clark and contains certain restrictive covenants including restrictions on granting liens on the Company's assets. The Term Loan matured in five years and incurred interest at the rate of 6.75% per annum.  The balance due as of December 31, 2012 was approximately $39,000 and is allocated to current and long-term debt line items on the consolidated balance sheet.

On September 19, 2013, HRAA consolidated the above March 2009 Term Loan with the Line of Credit. (See Note 6) The outstanding balance for the Term Loan and the Line of Credit prior to consolidation was $20,697 and $133,334, respectively. The new consolidated term loan is personally guaranteed by Robert Rubinowitz and Andrea Clark and contains restrictive covenants, which among other things, prohibit the Company from granting any security interests or liens on the assets of the Company. Payments of principal and interest are approximately $3,200 per month. The new consolidated term loan matures on September 19, 2017 and incurs interest at a rate per year equal to the bank’s prime rate plus 3.5%. The balance due as of December 31, 2013 for the new consolidated term loan was approximately $142,000 and is included in the accompanying consolidated balance sheet.

The Company has a mortgage related to certain real estate, which houses the Company’s main offices in Plantation, Florida. The loan originated July 2010 in the amount of $192,500 and matures July 2020, when a balloon principal payment of approximately $129,000 becomes due. The loan is collateralized by the real estate and is personally guaranteed by Robert Rubinowitz, a stockholder of the Company. Interest is fixed at 6.625% for the first five years of the loan, and converts to an adjustable rate for the second five years at the Federal Funds Rate plus 3.25%, as established by the United State Federal Reserve. The balance under this mortgage loan as of December 31, 2013 and 2012 was approximately $175,000 and $180,000, respectively and is allocated to the current and long term debt line items in the accompanying consolidated balance sheet. Monthly payments for principal and interest are approximately $1,500 until July 2015, when the total monthly payment may vary due to the adjustable interest rate provision in the note.

Although the Company is current in its payments on these loans, management believes the Company may be in default of certain non-financial covenants. The banks have not notified the Company of any default.

Notes payable:

In December 2012, the Company entered into loan agreements with various investors and issued promissory notes upon receipt of $815,000. The loan agreements have an interest rate of 12% per annum. Principal and interest is payable over 26 months. Additionally, in connection with the financing, the Company issued 2,375,000 shares of common stock to the lenders as loan fees. The fair value per share of $0.28 (based on recent cash sales prices) was used to compute the relative fair value of the shares in accordance with ASC 470-20 which totaled $343,500 which was recorded as a debt discount with a credit to additional paid-in-capital and such discount is being amortized over the term of the loans. The unamortized discount was $114,958 and $338,692 as of December 31, 2013 and 2012, respectively.

In January and February 2013, the Company entered into loan agreements and promissory notes with various investors upon receipt of $1,220,000. The loan agreements have an interest rate of 12% per annum. Principal and interest is payable over 26 months. Additionally, in connection with the financing, the Company issued 5,575,000 shares of common stock to the lenders as loan fees (See Note 12). The fair value per share of $0.28 (based on recent cash sales prices) was used to compute the relative fair value of the shares in accordance with ASC 470-20 which totaled approximately $679,500 which was recorded as a debt discount with a credit to additional paid-in-capital and such discount is being amortized over the term of the loans. The unamortized discount was $350,522 as of December 31, 2013 and the Company recorded $5,850 in accrued interest.

Of the eighteen above-referenced loans, (i) thirteen of the loans are secured by contract accounts receivable of a Company customer which security interest is subordinate to the lender under the factoring agreement, and (ii) one of the loans is secured by the stock of HRAA.

The Company began paying principal and interest on the above-mentioned notes in early 2013 in accordance with the payment terms. In August 2013, the Company converted $402,083 in investor promissory notes for five (5) individuals into one million six hundred eight thousand three hundred and thirty three (1,608,333) shares of common stock at a conversion price of $0.25 per share.  As a result of the conversion the Company expensed $128,452 of the unamortized discount as interest. Additionally, the Company recorded a loss on conversion of $112,584 as a result of issuing stock at a discount from fair market value.

Notes payable consisted of the following:

	December 31, 2013			December 31, 2012
Principal amount of notes payable	$	877,500		$	815,000
Unamortized discount		(465,480	)		(338,692	)
Notes payable, net of discount		412,020			476,308
Less current portion		(380,326	)		(202,557	)
Total Long term portion	$	31,694		$	273,751

As of December 31, 2013, principal payments required on long-term debt and notes payable over the next five years and thereafter are as follows:

2014	$	786,584
2015		179,084
2016		44,084
2017		31,248
2018		5,576
Thereafter		147,361
Total	$	1,193,937

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Stock Options and Warrants (Details 2) (USD $)	12 Months Ended
	Dec. 31, 2013
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of Warrants, Outstanding at December 31, 2012
Number of Warrants, Granted	1,000,000
Number of Warrants, Outstanding at December 31, 2013	1,000,000
Weighted Average Exercise Price, Beginning balance
Weighted Average Exercise Price, Granted	$ 0.26
Weighted Average Exercise Price, Exercised
Weighted Average Exercise Price, Forfeited
Weighted Average Exercise Price, Ending balance	$ 0.26
Weighted Average Exercise Price, Exercisable, Ending balance
Warrant [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of Warrants, Outstanding at December 31, 2012
Number of Warrants, Granted	29,415,000
Number of Warrants, Anti-dilution issuance	525,000
Number of Warrants, Exercised
Number of Warrants, Forfeited
Number of Warrants, Expired
Number of Warrants, Outstanding at December 31, 2013	29,940,000
Number of Warrants, Exercisable at December 31, 2013	29,940,000
Weighted Average Exercise Price, Beginning balance
Weighted Average Exercise Price, Granted	$ 0.30
Weighted Average Exercise Price, Anti-dilution issuance	$ 0.20
Weighted Average Exercise Price, Exercised
Weighted Average Exercise Price, Forfeited
Weighted Average Exercise Price, Expired
Weighted Average Exercise Price, Ending balance	$ 0.30
Weighted Average Exercise Price, Exercisable, Ending balance	$ 0.30
Weighted Average Exercise Price, Aggregate intrinsic value	$ 52,500

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Research and Development and Software

12 Months Ended

Dec. 31, 2013

Research and Development and Software [Abstract]

RESEARCH AND DEVELOPMENT AND SOFTWARE

5 – RESEARCH AND DEVELOPMENT AND SOFTWARE

In early 2012, the Company started developing the Visualizer suite. This business intelligence product is designed to meet the emerging need for healthcare analytics. Customer data is infused into the suite, and the Company uses this data in its consulting services to develop pre-defined analytics targeted to address healthcare’s emerging concerns and needs.

The Company’s Visualizer suite offers our consultants a range of functionality. Visualizer, also assists healthcare leaders with their need to understand the impacts of the transition to ICD-10 including work flow, productivity, process changes and documentation and reimbursement risks. The application helps to visualize the reimbursement and operational effects of transitioning organizations to ICD-10 and identify where to focus education and documentation issues. It enables clients to develop a custom work plan to mitigate risks from the highest areas of exposure to the least.

At September 30, 2013, the Company had accumulated a total of $1,011,068 in capitalized costs related to the development of the Visualizer suite and the other functionality which was included as software on the accompanying consolidated balance sheet. As of September 30, 2013, we had amortized $64,137 of the capitalized software after the general release on July 15, 2013 for the Visualizer project.

At the end of September 2013, the Company re-evaluated the capitalized research and development costs for the Visualizer software suite. The evaluation was based in part on the lack of cash flow and customer demand in ICD Visualizer after its general acceptance release date of July 15, 2013. In addition, the Company also considered its going concern risk and cash liquidity concerns that restrain the ability to make capital investments in research and development to complete existing products in the pipeline as the available cash is needed to fund normal operating expenses. As a result of this evaluation, the Company recorded a loss of $946,931 that is presented as a line item entitled “asset impairment” on the consolidated statement of operations. The Company will continue to use the Visualizer suite of functionality as internally developed software to generate customized reports for revenue integrity auditing and compliance services but the Company no longer intends to market or sell internally developed software on a stand alone basis.

Amortization expense for software, for the years ended December 31, 2013 and 2012 was $64,137 and $0, respectively. Software consisted of the following at December 31, 2013 and December 31, 2012:

	December 31, 2013			December 31, 2012
Software	$	1,011,068		$	258,933
Accumulated amortization		(64,137	)		-
Asset Impairment		(946,931	)		-
Software, net	$	-		$	258,933

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Lines of Credit

12 Months Ended

Dec. 31, 2013

Lines of Credit [Abstract]

LINES OF CREDIT

6 – LINES OF CREDIT

Bank

The Company has a $150,000 revolving line of credit with a bank (the “Line of Credit”), effective in December 2008, for its general working capital needs. The line contains certain restrictive covenants including restrictions on granting liens on the Company's assets. The line is also guaranteed by certain officers of the Company. The line of credit matured on December 18, 2009 and was renewed and was due on December 18, 2012. The revolving line was modified on December 18, 2012 so that the loan no longer has an expiration date of December 18, 2012, but instead, a final maturity date of December 18, 2018. The interest rate per year is equal to the bank’s prime rate plus 6.50%. The bank’s prime rate of interest at December 31, 2012 was 3.25%. The balance due at December 31, 2012 was $150,000 with $25,000 reflected as a current portion.

On September 19, 2013, the Company converted the Line of Credit to a term note. The Company consolidated the Line of Credit and an existing bank term loan into a consolidated term loan with a monthly payment in the amount of $3,209 with a new maturity date of September 19, 2017. At the time of the conversion the line of credit had an outstanding balance in the amount of $133,334. (See Note 7)

Dell

The Company maintains a Dell Business Credit line of up to $50,000. Interest rates vary under the line based on difference types of payment plans. The balance due under the line as of December 31, 2013 and 2012 was $44,692 and $25,000, respectively, which is included in line of credit, current portion in the accompanying consolidated financial statements.

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Factoring Agreement

12 Months Ended

Dec. 31, 2013

Factoring Agreement [Abstract]

FACTORING AGREEMENT

8 – FACTORING AGREEMENT

In June 2012, the Company entered into a one-year factoring agreement with a finance company. The agreement automatically renews annually unless terminated by either party. Under the terms of the agreement, the Company, at its discretion, assigns the collection rights of its receivables to the finance company in exchange for an advance rate of 85% of face value. The assignments are transacted with recourse only at the option of the finance company in the event of non-payment. The Company's obligations under the factoring agreement are secured by substantially all assets of the Company. In accordance with ASC 860 "Transfers and Servicing" regarding transfers of receivables with recourse, this factoring arrangement is accounted for as a secured financing. For the year ended December 31, 2013 and 2012, the Company had factored approximately $4,693,000 and $3,850,000, respectively, of receivables and had received cash advances of approximately $4,708,000 and $3,272,000, respectively. Outstanding receivables purchased by the factor as of December 31, 2013 and 2012 were approximately $638,000 and $950,000, respectively, and are included in accounts receivable in the accompanying consolidated balance sheet, and the secured loan due to the lender was approximately $543,000 and $827,000 at December 31, 2013 and 2012, respectively. Factor fees were approximately $138,000 and $119,000 for the year ended December 2013 and 2012, respectively, and are included in interest expenses. (See Note 3)

Although the Company is current in its financial obligations under this factoring agreement, management believes the Company may be in default under the solvency provision and certain non-financial default provisions. The Company has not been notified of any default by the factor company.

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Concentrations (Details)	12 Months Ended
	Dec. 31, 2013
Concentration Risk [Line Items]
Percentage of sales generated by hospitals	60.00%
Hospital Customer A [Member]
Concentration Risk [Line Items]
Percentage of sales generated by hospitals	42.00%
Hospital Customer B [Member]
Concentration Risk [Line Items]
Percentage of sales generated by hospitals	6.00%
Hospital Customer C [Member]
Concentration Risk [Line Items]
Percentage of sales generated by hospitals	6.00%
Hospital Customer D [Member]
Concentration Risk [Line Items]
Percentage of sales generated by hospitals	6.00%

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Income Taxes (Details) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Summary of income tax expense (benefit)
U.S. Federal "expected" income tax	$ (1,860,902)	$ (495,540)
State income tax	(198,679)	(52,906)
Non-deductible beneficial conversion interest		102,000
Stock compensation	252,366	24,769
Change in fair value of warrant liability	(124,187)
Loss on extinguishment of debt	49,852
Other	23,585
Change in valuation allowance	1,857,964	421,677
Total provision for income taxes

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Stockholder's Equity (Deficit) (Details Textual) (USD $)

0 Months Ended

1 Months Ended

3 Months Ended

12 Months Ended

12 Months Ended

1 Months Ended

12 Months Ended

0 Months Ended

0 Months Ended

1 Months Ended

12 Months Ended

1 Months Ended

0 Months Ended

Nov. 12, 2013

Oct. 09, 2013

Oct. 07, 2013

Sep. 06, 2013

Aug. 30, 2013

Investor

Aug. 27, 2013

Aug. 21, 2013

Aug. 07, 2013

Jul. 08, 2013

Jun. 27, 2013

Jun. 21, 2013

May 24, 2013

May 19, 2013

Apr. 01, 2013

Jan. 15, 2013

Apr. 13, 2012

Feb. 10, 2012

Mar. 31, 2013

Jan. 31, 2013

Aug. 31, 2012

May 31, 2012

Apr. 30, 2012

Dec. 31, 2012

Dec. 31, 2013

Dec. 31, 2012

Apr. 10, 2014

Jul. 15, 2012

Dec. 31, 2013

Stock Option [Member]

Feb. 28, 2013

Common Stock [Member]

Dec. 31, 2013

Common Stock [Member]

Dec. 31, 2012

Common Stock [Member]

Feb. 10, 2012

Convertible bridge loan [Member]

Feb. 10, 2012

Convertible Promissory Notes [Member]

Feb. 10, 2012

Health Revenue Assurance Holdings [Member]

Oct. 17, 2013

Articles Of Association [Member]

Oct. 08, 2013

Articles Of Association [Member]

Dec. 31, 2012

Minimum [Member]

Dec. 31, 2012

Maximum [Member]

Aug. 07, 2013

Private Placement [Member]

Jul. 08, 2013

Private Placement [Member]

Nov. 12, 2013

Securities Purchase Agreement [Member]

Nov. 12, 2013

Securities Purchase Agreement [Member]

Convertible Preferred Stock [Member]

Jul. 15, 2012

Settlement Agreement [Member]

Jul. 31, 2012

Settlement Agreement [Member]

Dec. 31, 2013

Employee [Member]

Sep. 30, 2013

Two Employees [Member]

Sep. 30, 2013

Three Employees [Member]

Sep. 09, 2013

Michael Ciprianni [Member]

Stockholders' Equity (Textual)

Common stock shares issued

400,000

400,000

100,000

500,000

500,000

750,000

125,000

625,000

46,429

1,410,874

77,743

1,394,909

1,468,786

1,000,000

13,499,226

Common stock shares issued, value

$ 100,000

$ 100,000

$ 25,000

$ 200,000

$ 200,000

$ 300,000

$ 50,000

$ 250,000

$ 13,000

$ 350,000

$ 22,000

$ 349,000

$ 335,600

Sale price of stock, per share

$ 0.25

$ 0.25

$ 0.25

$ 0.25

$ 0.25

$ 0.51

$ 0.40

$ 0.40

$ 0.40

$ 0.28

$ 0.25

$ 0.49

$ 0.28

$ 0.25

$ 0.26

$ 0.20

$ 0.28

$ 0.40

$ 0.40

Common stock, shares authorized

500,000,000

500,000,000

500,000,000

75,000,000

Increment in shares authorized

500,000,000

Preferred stock, shares authorized

25,000,000

Preferred stock, shares issued

0

13,500,000

0

13,500,000

Securities purchase agreement for the equity sale of convertible preferred stock

5,400,000

5,400,000

Convertible preferred stock, dividend percentage

8.00%

8.00%

Warrant issuance

27,000,000

1,890,000

27,000,000

Warrants exercise price

$ 0.40

$ 0.30

Warrants term

5 years

Net proceeds from issuance of convertible preferred stock after payment of expense

4,322,000

4,903,652

Issuance of common stock as compensation, Shares

462,665

Share-based Compensation

639,328

0

14,822

Term of agreement

3 years

1 year

1 year

Issuance of shares for cash

51,000

80,500

1,238,000

1,056,094

3,446

4,352

400,000

400,000

Issuance of shares for cash, shares

100,000

230,000

3,446,429

4,352,312

1,000,000

1,000,000

Common stock issued for services, shares

100,000

50,000

54,847

50,266

4,605,000

75,000

187,500

95,052

(4,125,000)

Shares issued for prepaid services

24,000

15,000

21,939

24,630

1,325,500

4,605

18,750

43,125

45,625

1,155,000

Share price, per share

$ 0.24

$ 0.30

$ 0.40

$ 0.35

$ 0.22

$ 0.25

$ 0.23

$ 0.48

$ 0.28

Conversion of convertible debt amount

402,083

300,000

250,000

313,908

300,000

Conversion of convertible debt, shares

(1,608,333)

1,343,749

1,265,381

3,000,000

Conversion price

$ 0.25

$ 0.10

$ 0.10

$ 0.19

$ 0.25

$ 0.10

Number of investors

5

Convertible terms of conversion feature

The shares were valued at $514,666 based on the quoted trading price of $0.32 and accordingly, the company recorded a loss on conversion of $112,583.

Unrecognized compensation expense

206,300

Weighted-average remaining requisite service period

0 years

^[1]

1 year 10 months 24 days

Term of agreement over expensed

six (6) months.

Expensed over 12 months.

Shares exchange right on each share pursuant to Merger agreement

1,271

1,271

Common Stock, Shares, Outstanding

39,054,867

54,752,294

39,054,867

Stockholders equity forward stock split

12.98 for 1

Common stocks, including additional paid in capital

32,747

Value of Beneficial conversion feature in convertible debt

300,000

2,600,000

300,000

Repurchase of shares pursuant to settlement agreement

(232,500)

(3,300)

232,500

Repurchase of shares pursuant to settlement agreement, Shares

(3,299,802)

3,299,802

Shares issued as fees, Shares

5,575,000

5,575,000

2,375,000

Payment of financing and stock issuance costs

(325,911)

0

Convertible preferred stock beneficial description

The preferred stock is convertible into Common on a 2 for 1 basis. The Company recorded a beneficial conversion value for the preferred stock of approximately $2.6 million as an immediate charge to accumulated deficit as it is considered a constructive dividend to Series A preferred stockholders.

Offering costs charged to additional paid-in capital

$ 326,000

Common Stock, Par or Stated Value Per Share

$ 0.001

$ 0.001

$ 0.001

[1] * These 1,000,000 options were granted without a specified expiration term.

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Concentrations (Tables)

12 Months Ended

Dec. 31, 2013

Concentrations [Abstract]

Schedule of sales generated by hospitals

Hospital Customer A	42.0	%
Hospital Customer B	6.0	%
Hospital Customer C	6.0	%
Hospital Customer D	6.0	%
Total	60.0	%

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Convertible Promissory Notes and Fair Value Measurements (Details 1) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Convertible Promissory Notes and Fair Value Measurements [Abstract]
Balance at December 31, 2012
Reclassification of warrant liability	(101,418)
Change in fair value	(365,255)
Balance December 31, 2013	$ 5,406,000

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Concentrations

12 Months Ended

Dec. 31, 2013

Concentrations [Abstract]

CONCENTRATIONS

13 – CONCENTRATIONS

Sales to four (4) hospital customers represented approximately 60% of our revenues for the year ended December 31, 2013.  We have direct relationships with the individual hospitals and the health systems.

Hospital Customer A	42.0	%
Hospital Customer B	6.0	%
Hospital Customer C	6.0	%
Hospital Customer D	6.0	%
Total	60.0	%

Sales to thirteen (13) hospitals were approximately 89% of our revenues for the year ended December 31, 2012.

Five and four vendors represented approximately 56% and 67% of our outstanding accounts payable balance as of December 31, 2013 and December 31, 2012, respectively.

Four and one customers represented approximately 64% and 62% of our accounts receivable as of December 31, 2013 and December 31, 2012, respectively.

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Accounts Receivable (Tables)

12 Months Ended

Dec. 31, 2013

Accounts Receivable [Abstract]

Summary of accounts receivable

	December 31,			December 31,
	2013			2012
Accounts receivable	$	901,918		$	1,246,814
Accounts receivable –Related party		41,244			-
Allowance for doubtful accounts		(16,244	)		-
Total	$	926,918		$	1,246,814

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Factoring Agreement (Details) (USD $)	1 Months Ended	12 Months Ended
	Jun. 30, 2012	Dec. 31, 2013	Dec. 31, 2012
Factoring Agreement (Textual)
Period of factoring agreement	1 year
Percentage of total receivable's face value exchanged under factoring agreement	85.00%
Aggregate amount under factoring agreement		$ 4,693,000	$ 3,850,000
Advance received under factoring agreement		4,708,000	3,272,000
Outstanding receivables purchased by factor		638,000	950,000
Loan payable to factor		542,530	827,075
Factor fees		$ 138,000	$ 119,000

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Property and Equipment (Details Textual) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Property and Equipment (Textual)
Depreciation expense	$ 83,900	$ 50,765

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Consolidated Statements of Operations (Parenthetical) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Statements of Operations [Abstract]
Stock compensation included in selling and administrative expenses	$ 639,328	$ 0

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Summary of Significant Accounting Policies

12 Months Ended

Dec. 31, 2013

Summary of Significant Accounting Policies [Abstract]

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Health Revenue Assurance Associates, Inc. and Dream Reachers, LLC. All significant inter-company transactions and balances are eliminated in consolidation.

Use of Estimates

The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts in the consolidated financial statements. Actual results could differ from those estimates. Significant accounting estimates reflected in the Company’s consolidated financial statements include valuation of accounts receivable, valuation of property and equipment, valuation and amortization period of software, valuation of beneficial conversion features in convertible debt, valuation of derivatives, valuation of equity based instruments issued for other than cash, revenue recognition, and the valuation allowance on deferred tax assets.

Cash

For purposes of the statement of cash flows, the Company considers all highly liquid investments with maturity of three months or less when purchased to be cash equivalents. The Company’s cash balances are maintained at various banks that are insured by the Federal Deposit Insurance Corporation subject to certain limitations.

Accounts Receivable and Factoring

Accounts receivable are stated at the amounts management expects to collect. An allowance for doubtful accounts is recorded using a specific identification method based on a combination of historical experience, aging analysis and information on specific accounts. Account balances are written off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. Management has determined that an allowance in the amount of $16,244 is required as of December 31, 2013. The allowance arises from a website development project contracted with ResumeBear, a related party. The Company accounts for its factoring arrangements as either a sale or a secured financing based on the criteria in ASC 860 "Transfers and Servicing". Estimates of allowances for doubtful accounts are reflected as a recourse obligation, a liability, for factor arrangements treated as a sale with recourse or as a contra asset accounts receivable allowance account for arrangements accounted for as a secured financing.

Property and Equipment

Property and equipment is recorded at cost. Depreciation is computed using the straight-line method over estimated useful asset lives, which range from 5 to 39 years. Repairs and maintenance are expensed, while additions and betterments are capitalized. The cost and related accumulated depreciation of assets sold or retired are eliminated from the accounts and any gains or losses are reflected in earnings.

Leases

We perform a review of newly acquired leases to determine whether a lease should be treated as a capital or operating lease. Capital lease assets are capitalized and depreciated over the term of the initial lease. A liability equal to the present value of the aggregated lease payments is recorded utilizing the stated lease interest rate. If an interest rate is not stated, we will determine an estimated cost of capital and utilize that rate to calculate the present value. If the lease has an increasing rate over time, and (or) is an operating lease, all leasehold incentives, rent holidays, or other incentives will be considered in determining if a deferred rent liability is required. Leasehold incentives are capitalized and depreciated over the initial term of the lease.

Software

Costs incurred in connection with the development of software products are accounted for in accordance with the Financial Accounting Standards Board Accounting Standards Codification ("ASC") 985 Costs of Software to Be Sold, Leased or Marketed.” Costs incurred prior to the establishment of technological feasibility are charged to research and development expense. Software development costs are capitalized after a product is determined to be technologically feasible and is in the process of being developed for market and capitalization ceases after the general release of the software. Amortization of capitalized software development costs begins upon initial product shipment after general release. Capitalized software development costs are amortized over the estimated life of the related product (generally thirty-six months) using the straight-line method. The Company evaluates its software assets for impairment whenever events or change in circumstances indicate that the carrying amount of such assets may not be recoverable. Recoverability of software assets to be held and used is measured by a comparison of the carrying amount of the asset to the future net undiscounted cash flows expected to be generated by the asset. If such software assets are considered to be impaired, the impairment to be recognized is the excess of the carrying amount over the fair value of the software asset.

Software maintenance costs are charged to expense as incurred. Expenditures for enhanced functionality are capitalized. The cost of the software and the related accumulated amortization are removed from the accounts upon retirement of the software with any resulting loss being recorded in operations. On July 15, 2013 the Company issued a general release for one of its products Visualizer. After the general release, the Company recorded approximately $64,000 in amortization expense in the accompanying consolidated financial statements for the year ended December 31, 2013. On September 30, 2013, the Company impaired the capitalized research and development costs for the Visualizer software suite of multiple offerings and the OMC Initiater after an evaluation based in part on the lack of cash flow and customer demand in ICD Visualizer after the general acceptance release date of July 15, 2013. In addition, the Company’s going concern opinion and cash liquidity concerns restrained the ability to make a capital investment in research and development to complete existing products in the pipeline as the available cash is needed to fund normal operating expenses. The resulting loss of $946,931 is presented as a line item entitled “asset impairment” on the consolidated statement of operations. The Company will continue to use the Visualizer suite of functionality as internally developed software to generate customized reports for revenue integrity auditing and compliance services but the Company no longer intends to market or sell internally developed software on a stand alone basis.

Long-Lived Assets

The Company reviews the carrying value of its long-lived assets whenever events or changes in circumstances indicate that the carrying values may no longer be appropriate. Recoverability of carrying values is assessed by estimating future net cash flows from the assets. Impairment assessment inherently involves judgment as to assumptions about expected future cash flows and the impact of market conditions on those assumptions. Future events and changing market conditions may impact management's assumptions as to sales prices, rental rates, costs, holding periods or other factors that may result in changes in the Company’s estimates of future cash flows. Although management believes the assumptions used in testing for impairment are reasonable, changes in any one of the assumptions could produce a significantly different result.

Fair Value Measurements and Fair Value of Financial Instruments

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants. The Company classifies assets and liabilities recorded at fair value under the fair value hierarchy based upon the observability of inputs used in valuation techniques. Observable inputs (highest level) reflect market data obtained from independent sources, while unobservable inputs (lowest level) reflect internally developed market assumptions. The fair value measurements are classified under the following hierarchy:

● Level 1—Observable inputs that reflect quoted market prices (unadjusted) for identical assets and liabilities in active markets;

● Level 2—Observable inputs, other than quoted market prices, that are either directly or indirectly observable in the marketplace for identical or similar assets and liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets and liabilities; and

● Level 3—Unobservable inputs that are supported by little or no market activity that is significant to the fair value of assets or liabilities.

The estimated fair value of certain financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued expenses are carried at historical cost basis, which approximates their fair values because of the short-term nature of these instruments.

Accounting for Derivatives

The Company evaluates its convertible instruments, options, warrants or other contracts to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for under ASC Topic 815, “Derivatives and Hedging.”  The result of this accounting treatment is that the fair value of the derivative is marked-to-market each balance sheet date and recorded as a liability.  In the event that the fair value is recorded as a liability, the change in fair value is recorded in the statement of operations as other income (expense).  Upon conversion or exercise of a derivative instrument, the instrument is marked to fair value at the conversion date and then that fair value is reclassified to equity.  Equity instruments that are initially classified as equity that become subject to reclassification under ASC Topic 815 are reclassified to liabilities at the fair value of the instrument on the reclassification date.

Revenue Recognition

The Company recognizes medical coding audit services revenue based on the proportional performance method of recognizing revenue.

A portion of the Company’s revenue is generated from medical coding audit services. Auditing revenue is invoiced in accordance with the contract, generally at three benchmark time periods which coincide with when specific, obligatory field work services have been rendered and completed, the value of this portion of the contract price has been predetermined and agreed upon, and the client has received benefit or value in the form of the independent identification of system weaknesses and risk analysis. Further, collectability is reasonably assured due to the existence of a fixed fee contract and the size and financial health of the Company’s clients. Below is a description of the general benchmarks and work phases associated with the Company’s audit services:

● Planning Phase - work commences prior to and as soon as the contract is signed and includes setting the audit scope, scheduling of the job, assignment of audit staff, understanding the client and their systems, determination of sample size and sampling methods to be employed, and other specific items as outlined in the contract. The planning phase includes the determination of deliverables as defined in the contract, generally consisting of a listing of errors, training and a final report. The Company generally invoices and recognizes 50% of the contract value at the completion of the Planning Phase. Although all of the contracts contain a clause making the first 50% of the engagement fee due and non-refundable at this point, the Company does not deem this initial fee to be recognized as deferred revenue under SAB 104 due to the extensive amount of work to be done prior to accepting the contract.

● Field Work Phase – is performed at the client location and generally lasts one week and encompasses actual testing of sample claims preselected in the Planning Phase. The auditor generally preloads the selected claims into the Company’s proprietary software and audits the claim records by reviewing actual medical records. The software assists the auditor in determining proper classifications and allows the auditor to compare the proper classification against what was filed in the submission made by the client to Medicare. Notes and comments are recorded and audit reports are generated. The Company generally invoices and recognizes 40% of the contract value at the completion of the Field Work Phase.

● Reporting Phase – includes a summary of audit findings, exit conference with clients, and any other specific deliverables as determined by the contract. The Company generally invoices and recognizes the remaining 10% of the contract value at the completion of the Reporting Phase.

A portion of the Company’s revenue is derived from consulting and coding services provided. Revenue from these revenue streams is recognized after services are performed based on the quoted and agreed upon fee contained in its contracts.

Arrangements with customers may involve multiple elements including software products, education products, training, software product maintenance, coding services, coding audit services and other consulting services. Training and maintenance on software products will generally occur after the software product sale. Other services may occur before or after the product sales and may not relate to the products. Revenue recognition for multiple element arrangements is as follows:

Each element is accounted for separately when each element has value to the customer on a standalone basis and there is Company specific objective evidence of selling price of each deliverable. For revenue arrangements with multiple deliverables, the Company allocates the total customer arrangement to the separate units of accounting based on their relative selling prices as determined by the price of the items when sold separately. Once the selling price is allocated, the revenue for each element is recognized using the general and specific criteria under GAAP as discussed above for elements sold in non-multiple element arrangements. A delivered item or items that do not qualify as a separate unit of accounting within the arrangement are combined with the other applicable undelivered items within the arrangement. The allocation of arrangement consideration and the recognition of revenue is then determined for those combined deliverables as a single unit of accounting. The Company has historically sold its services with established rates, which it believes is Company specific objective evidence of selling price. For the new software products, management has established selling prices, which qualifies as Company specific objective evidence of selling price.

For our education products sold we have determined to account for the course materials and training components as one unit of accounting.  Accordingly, revenue is recognized for the single unit upon delivery of the training through our online webinars.

On July 15, 2013, the Company issued a general release for one of its products Visualizer. Software sales on a standalone basis will be recognized upon delivery of the software when evidence of the purchase arrangement exists and the price is determinable, and when collectability is reasonably assured. The Company will continue to use the Visualizer suite of functionality as internally developed software to generate customized reports for revenue integrity auditing and compliance services but the Company no longer intends to market or sell internally developed software on a stand alone basis.

Cost of Revenues

Cost of revenues includes labor costs for services and education development costs. Amortization costs in 2013 of approximately $64,000 were allocated to cost of sales related to software amortization.

Share Based Compensation

Compensation expense for all stock-based employee and director compensation awards granted is based on the grant date fair value estimated in accordance with the provisions of ASC Topic 718, Stock Compensation. The Company recognizes these compensation costs on a straight-line basis over the requisite service period of the award, which is generally the option vesting term. Vesting terms vary based on the individual grant terms.

The Company estimates the fair value of stock-based compensation awards on the date of grant using the Black-Scholes-Merton (“BSM”) option pricing model, which was developed for use in estimating the value of traded options that have no vesting restrictions and are freely transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility. The BSM option-pricing model considers, among other factors, the expected term of the award and the expected volatility of the Company’s stock price. Expected terms are calculated using the Simplified Method, volatility is determined based on the Company's historical stock price trends and the discount rate is based upon treasury rates with instruments of similar expected terms. Warrants granted to non-employees are accounted for in accordance with the measurement and recognition criteria of ASC Topic 505-50, Equity Based Payments to Non-Employees.

Research and Development Costs

In accordance with ASC 730-10, research and development costs are expensed when incurred. Total research and development costs for the years ended December 31, 2013 and 2012 were $0 and $64,386, respectively.

Advertising

The cost of advertising is expensed as incurred. Advertising and marketing expenses amounted to approximately $121,000 and $130,000 for the year ended December 31, 2013 and 2012, respectively and the total is included in selling and administrative expenses.

Income Taxes

The Company’s subsidiary, HRAA, elected to convert from a Subchapter S corporation for Federal income tax purposes to a C corporation effective October 21, 2011. Upon HRAA’s C corporation election, it began to use the asset and liability method to account for income taxes. Under this method, deferred income taxes are determined based on the differences between the tax basis of assets and liabilities and their reported amounts in the consolidated financial statements which will result in taxable or deductible amounts in future years and are measured using the currently enacted tax rates and laws. A valuation allowance is provided to reduce net deferred tax assets to the amount that, based on available evidence, is more likely than not to be realized.

The Company follows the provisions of ASC 740-10, Accounting for Uncertain Income Tax Positions. When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. In accordance with the guidance of ASC 740-10, the benefit of a tax position is recognized in the financial statementsin the period during which, based on all available evidence, management believes it is more likely than not that the position will besustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset oraggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largestamount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. Theportion of the benefits associated with tax positions taken that exceeds the amount measured as described above should be reflected asa liability for unrecognized tax benefits in the accompanying consolidated balance sheets along with any associated interest and penalties that wouldbe payable to the taxing authorities upon examination.

Earnings Per Share

The Company computes and presents earnings or losses per share in accordance with FASB ASC Topic 260, Earnings per share. Basic earnings or losses per share are computed by dividing net income (loss) attributable to common stockholders by the weighted average number of common shares outstanding. Diluted earnings or loss per share is computed by dividing net income (loss) attributable to common stockholders by the weighted average number of common shares and common stock equivalents outstanding, calculated on the treasury stock method for options and warrants using the average market prices during the period.

As the Company incurred a net loss in all periods presented, all potentially dilutive securities were excluded from the computation of diluted loss per share since the effect of including them is anti-dilutive. Dilutive securities outstanding at December 31, 2013 were 1,000,000 stock options, 29,940,000 warrants, and Series A Preferred Stock convertible into 27,000,000 shares of common stock. No dilutive securities were outstanding in 2012.

Segment Reporting

Financial Accounting Standards Board (“FASB”) ASC Topic 280, Segment Reporting (“ASC 280”), establishes standards for the way public business enterprises report information about operating segments. ASC 280 also establishes standards for related disclosures about products and services, geographic areas and major customers. The Company has determined that based on these criteria it only operates one segment, consulting services, as all other services do not meet the minimum threshold for separate reporting of a segment.

Contingencies

We accrue for contingent obligations, including legal costs and restructuring costs, when the obligation is probable and the amount can be reasonably estimated. As facts concerning contingencies become known we reassess our position and make appropriate adjustments to the consolidated financial statements. Estimates that are particularly sensitive to future changes include those related to tax, legal, and other regulatory matters that are subject to change as events evolve and additional information becomes available. Total legal settlement accrued costs for the year ended December 31, 2013 was $7,000. (See Note 10)

Recent Accounting Pronouncements

We have implemented all new accounting standards that are in effect and that may impact our consolidated financial statements and do not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on our consolidated financial position or results of operations.

XML

Stock Options and Warrants (Details)	12 Months Ended
	Dec. 31, 2013
Summary of weighted-average assumptions
Expected volatility	116.00%
5 Year Bond interest rate	1.20%
Expected life	1 year
Employee Stock Option [Member]
Summary of weighted-average assumptions
Dividend yield	0.00%	[1]
Expected volatility	116.00%	[2]
5 Year Bond interest rate	1.20%	[3]
Expected life	6 years	[4]

[1] Represents cash dividends paid as a percentage of the share price on the date of grant.

[2] Based on historical volatility of the Company's common stock over the expected life of the options.

[3] Represents the U.S. Treasury rates over maturity periods matching the expected term of the options at the time of grant.

[4] The period of time that options granted is expected to be outstanding based upon the simplified method.

XML

Related Party Transactions (Detail Textual) (USD $)	12 Months Ended			1 Months Ended	12 Months Ended
	Dec. 31, 2013	Mar. 31, 2013	Dec. 31, 2012	Mar. 31, 2013 Andrea Clark	Dec. 31, 2013 Andrea Clark	Nov. 01, 2013 Andrea Clark	Nov. 01, 2013 Robert Rubinowitz
Related Party Transaction (Textual)
Due to officer as stated in February 2012 merger agreement			$ 75,000			$ 75,000
Promissory notes payable							40,000
Website development services		302,764
Revenues recorded from ResumeBear	211,239
Account receivable with resume bear					108,000
Consolidated financial statements allowance					16,244
Reduction of revenue					92,000
Estimated contract income loss				$ 88,000	$ 108,000

XML

Property and Equipment (Tables)

12 Months Ended

Dec. 31, 2013

Property and Equipment [Abstract]

Summary of property and equipment

	December 31,
	2013			2012
Building and improvements	$	227,603		$	227,603
Furniture		119,810			119,810
Computers and Equipment		260,872			160,469
		608,285			507,882
Accumulated depreciation		(226,438	)		(142,865	)
Total	$	381,847		$	365,017

XML

Accounts Receivable (Details) (USD $)	Dec. 31, 2013	Dec. 31, 2012
Summary of Accounts receivable
Accounts receivable	$ 901,918	$ 1,246,814
Accounts receivable - Related party	25,000
Allowance for doubtful accounts	(16,244)
Total	$ 926,918	$ 1,246,814

XML

Stockholder's Equity (Deficit)

12 Months Ended

Dec. 31, 2013

Stockholder's Equity (Deficit) [Abstract]

STOCHOLDER'S EQUITY (DEFICIT)

12 – STOCKHOLDER’S EQUITY (DEFICIT)

Recapitalization and Deemed Common Stock Issuance

On February 10, 2012, the Company entered into the Merger Agreement with HRAA and Acquisition Sub which was treated for accounting purposes as a reverse recapitalization with HRAA considered the accounting acquirer since the stockholders of HRAA obtained voting and management control of the Company.   Each share of HRAA's common stock was exchanged for the right to receive approximately 1,271 shares of HRAH’s common stock. Before entry into the Merger Agreement, no material relationship existed between HRAH or Acquisition Sub and HRAA.  As part of the recapitalization, the Company is deemed to have issued 13,499,226 shares of common stock, which represents the shares of common stock outstanding in HRAH just prior to the Merger.  There were no recorded assets or liabilities in the Company just prior to the Merger.  All share and per share amounts for all periods presented have been retroactively adjusted to reflect the recapitalization.

Forward Stock Split

On April 13, 2012, the Company’s board of directors authorized a 12.98 for 1 split of its common stock to stockholders of record as of April 13, 2012. Shares resulting from the split were issued on April 26, 2012. In connection therewith, the Company transferred $32,747 from additional paid in capital to common stock, representing the par value of additional shares issued. As a result of the stock split, fractional shares were rounded up. All share and per share amounts for all periods presented have been retroactively adjusted to reflect the stock split.

Capitalization Changes

On October 8, 2013, the Company amended its articles of incorporation with the Nevada Secretary of State by increasing the number of authorized shares of common stock from 75,000,000 to 500,000,000. This amendment has been retroactively disclosed on the balance sheet.

On October 17, 2013, the Company amended its articles of incorporation with the Nevada Secretary of State to authorize 25,000,000 shares of blank check preferred stock with the authority of the Board to determine the designations, rights, preferences, privileges, limitations and restrictions.(See temporary equity below)

Common Stock

2012:

On February 10, 2012, upon closing of the Merger Agreement, a $250,000 convertible bridge loan was automatically converted into an aggregate of 1,343,749 shares of common stock at the contractual conversion price of $0.19 per share.

On February 10, 2012, concurrently with the closing of the reverse merger, the Company sold 1,410,874 shares of the Company’s common stock for gross proceeds of $350,000 at a purchase price of $0.25 per share in a private placement offering.

On February 10, 2012 concurrently with the closing of the reverse merger, convertible promissory notes totaling $313,908 obtained on February 2, 2012 were converted into 1,265,381 shares of common stock or $0.25 per share based on the contractual conversion rate.

In April 2012, the Company sold 1,394,909 shares of common stock for approximately $349,000 at a price per share of $0.25.

In May 2012, the Company recorded $300,000 to additional paid-in capital for the beneficial conversion value of convertible debt (See Note 9).

In July 2012, pursuant to a settlement agreement (See Note 10), the Company agreed to pay $232,500 and 3,299,802 common shares were returned to the Company.  The Company charged equity for the $232,500 in accordance with the settlement provisions of ASC 718 “Stock Compensation”.

In July 2012, in connection with the settlement agreement discussed in Note 10, upon return of the 3,299,802 shares to the transfer agent, the shares were simultaneously reissued to delegees of Andrea Clark, however, such shares were unvested and subsequently cancelled as a null and void issuance.

On July 15, 2012, the holders of the five convertible notes issued by the Company in May 2012 exercised their rights under the agreement and converted $300,000 into 3,000,000 shares of common stock at the contractual conversion rate of $0.10 per share. 

In August 2012, the Company sold 77,743 shares of common stock for $22,000 at a price per share of $0.28.

During the period from October 2012 through December 2012, the Company sold 1,468,786 shares of common stock for $335,600 at prices per share between $0.20 and $0.28.

In December 2012, the Company issued 2,375,000 shares of common stock in connection with a financing transaction as more fully described in Note 6.

During 2012, the Company incurred approximately $326,000 in offering costs that were charged to additional paid-in capital.

2013:

On January 15, 2013, the Company sold 46,429 shares of common stock for $13,000 at a price per share of $0.28.

On January 31, 2013, the Company issued 50,266 shares of common stock as compensation to an employee for services rendered through March 31, 2013. The shares were valued at $0.49 per share based on the quoted trading price per share or $24,630, which was expensed.

In February 2013, the Company issued 5,575,000 shares of common stock in connection with a financing transaction as more fully described in Note 7.

In March 2013, the Company entered into a one-year agreement with a consultant for 230,000 vested shares and cash consideration. The shares were valued on the agreement date, which was the measurement date at $0.35, based on the quoted trading price, and the $80,500 was recorded as a prepaid asset and is being expensed over the term of the contract. The shares were issued on April 1, 2013 to the consultant.

On April 1, 2013, the Company issued an aggregate of 54,847 shares of common stock as compensation to two employees for services rendered through March 31, 2013. The shares were valued at $0.40 per share based on recent cash sales by the Company or $21,939, which was expensed.

On May 19, 2013, the Company sold 625,000 shares of common stock for $250,000 at a price per share of $0.40.

On May 24, 2013, the Company sold 125,000 shares of common stock for $50,000 at a price of $0.40 per share.

On June 21, 2013, the Company sold 750,000 shares of common stock for $300,000 at a price per share of $0.40.

On June 27, 2013, the Company entered into a financial advisor and agent placement agreement whereby the Company had the option to pay in cash or issue 100,000 shares of common stock. The shares were valued on the agreement date, which was the measurement date at $0.51 per share based on the quoted trading price, and the $51,000 is being expensed over the term of the contract. The Company issued the shares in September 2013.

On July 8, 2013, the Company sold 500,000 shares of common stock for $200,000 at a price per share $0.40.

On August 7, 2013, the Company sold 500,000 shares of common stock for $200,000 at a price per share $0.40.

On August 21, 2013, the Company sold 100,000 shares of common stock for $25,000 at a price per share of $0.25.

On August 27, 2013, the Company issued 400,000 shares of common stock for $100,000 at a price per share of $0.25.

On August 30, 2013, the Company issued 400,000 shares of common stock for $100,000 at a price per share of $0.25 per share.

On August 22, 2013 and August 28, 2013, the Company converted $402,083 in unsecured  promissory notes for five (5) individuals into one million six hundred eight thousand three hundred and thirty three (1,608,333) shares of common stock at a conversion price of $0.25 per share. The shares of common stock were valued at $514,666 based on the quoted trading price of $0.32 and accordingly, the Company recorded a loss on conversion of $112,583.

In September 2013, the Company issued 95,052 shares of common stock as compensation to three employees for services rendered through June 30, 2013. The shares were valued at $0.48 per share based on the quoted trading price per share or $45,625, which was expensed.

On September 6, 2013, the Company entered into a three-year agreement with a company to provide consulting and recruiting services. Upon execution of the agreement, the Company issued 50,000 shares of common stock valued at $0.30 per share based on the quoted trading price, in consideration of their services to be rendered for the first year of the agreement. The $15,000 is being expensed over 12 months.

On September 9, 2013, the Company entered into a one year consulting agreement with a stockholder, Mr. Michael Ciprianni, to provide certain consulting services related to the Company’s business in exchange for four million one hundred twenty five thousand (4,125,000) shares of common stock in consideration of the services to be rendered. The shares were valued on the agreement date, which was the measurement date at $0.28 per share based on the quoted trading price, and the $1,155,000 is being expensed over the term of the contract.

On September 30, 2013, the Company issued 187,500 shares of common stock as compensation to two employees for services rendered through September 30, 2013. The shares were valued at $0.23 per share based on the quoted trading price per share or $43,125, which was expensed.

On October 9, 2013, the Company issued 100,000 shares of common stock as compensation to a consultant to provide services. The shares were valued at $0.24 per share based on the quoted trading price per share or $24,000, which was recorded as prepaid and is being expensed over the term of the agreement, which is six (6) months.

On December 31, 2013, in accordance with a 2012 employment agreement, the Company issued 75,000 shares of common stock as compensation to an employee for services rendered through December 31, 2013. The shares were valued at $0.25 per share based on the quoted trading price per share or $18,750, which was expensed.

Temporary Equity - Preferred Stock

On November 12, 2013, the Company entered into a Securities Purchase Agreement for the sale of Series A 8% Redeemable Convertible Preferred Stock (“Series A stock”) and warrants to purchase shares of the Company’s common stock. The Company sold 13,500,000 of Series A stock and warrants to purchase 27,000,000 shares of the Company’s common stock for gross proceeds of $5,400,000. The net proceeds to the Company after offering costs is $4,903,652. The Series A stock is convertible into common stock on a 2 for 1 basis and is redeemable by the Company, at the option of the investor, 48 months from November 12, 2013 at the stated value of $0.40 per share or a total of $5,400,000 plus accumulated but unpaid dividends, whether declared or not. Due to the redemption feature the Series A Stock is reflected as temporary equity at December 31, 2013 as follows:

Series A sale price	$	5,400,000
Less: Reclassification of warrant fair value to liability		(5,669,837	)
Offering costs		(496,348	)
Plus: Deemed dividend		2,634,185
Series A dividends		60,000
	$	1,928,000

The Company also issued warrants to purchase 1,890,000 shares of common stock to a placement agent. (See Note 11).

The Company recorded a beneficial conversion value for the preferred stock of approximately $2.6 million as an immediate charge to accumulated deficit as it is considered a constructive dividend to Series A preferred stockholders. As part of this equity financing transaction, the Company issued 27,000,000 five-year warrants  (See Note 11) with immediate vesting rights to convert into common shares at an initial exercise price of $0.30 per share under price protection provisions. The warrants also contain cashless exercise provisions. Due to price protection provisions in the warrants, the Company will account for these warrants issued in accordance with the US GAAP accounting guidance under ASC 815 applicable to derivative instruments, which requires every derivative instrument within its scope to be recorded on the balance sheet as either an asset or liability measured at its fair value, with changes in fair value recognized in earnings. (See Notes 9 and 11)

In connection with the Securities Purchase Agreement, the Company entered into a registration rights agreement  with the Purchasers, pursuant to which the Company agreed to register all of the shares of common stock underlying the Series A Preferred Stock and the shares of common stock underlying the Warrants on a registration statement on Form S-1 (the “Registration Statement”) to be filed with the SEC within 30 calendar days following the Closing Date (the “Filing Deadline”) and to use its best efforts to cause the Registration Statement to be declared effective under the Securities Act within 90 calendar days following the Filing Deadline. The Registration Statement was filed on December 11, 2013, as amended December 20, 2013 and declared effective on December 24, 2013.