8-K/A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K/A

(Amendment No. 2)

Current Report

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report: December 17, 2015

Date of earliest event reported: April 17, 2015

Hooper Holmes, Inc.

(Exact Name of registrant as specified in its charter)

New York	1-9972	22-1659359
(State or other jurisdiction of incorporation)	(Commission File Number)	(I.R.S. Employer Identification No.)

560 N. Rogers Road, Olathe, KS 66062

(Address, including zip code, of principal executive offices)

(913) 764-1045

(Registrant’s telephone number including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o  Soliciting Material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Explanatory Note

On April 21, 2015, Hooper Holmes, Inc. (the "Company") filed a Current Report on Form 8-K (the "Original Form 8-K") reporting under Item 2.01 that on April 17, 2015, the Company and certain of its subsidiaries entered into and consummated an Asset Purchase Agreement (the "Purchase Agreement") to acquire the assets and certain liabilities representing the health and wellness business of Accountable Health Solutions, Inc. ("AHS") from Accountable Health, Inc. (the "Seller" or "AHI").  Subsequently, an amended Form 8-K/A (the “Amended Form 8-K) was filed on May 21, 2015, which included the historical audited financial statements of the business acquired and the unaudited pro forma financial information as of and for the year ended December 31, 2014, required by Items 9.01(a) and 9.01(b) of Form 8-K that were excluded from the Original Form 8-K in reliance on the instructions to such items. 

This Form 8-K/A amends the Original Form 8-K and the Amended Form 8-K to update the historical unaudited financial statements of the business acquired for the period specified in Rule 3-05(b) of Regulation S-X and the unaudited pro forma statement of operations for the three months ended March 31, 2015, and the unaudited pro forma balance sheet of the Company as of March 31, 2015, pursuant to Article 11 of Regulation S-X.  This amendment should be read in conjunction with the Original Form 8-K and the Amended Form 8-K.

Item 9.01 Financial Statements and Exhibits

a)    Financial Statements of Business Acquired

The unaudited consolidated financial statements of the Seller as of March 31, 2015 and December 31, 2014, and for the three months ended March 31, 2015 and 2014, are filed as Exhibit 99.1 to this current report on Form 8-K/A and are incorporated herein by reference.

b)    Pro Forma Financial Information

The unaudited pro forma financial information as of March 31, 2015, and for the three months ended March 31, 2015, is filed as Exhibit 99.2 to this current report on Form 8-K/A.

d)    Exhibits

Exhibit No.Description

99.1 Unaudited consolidated financial statements of Accountable Health, Inc. as of March 31, 2015 and December 31, 2014, and for the three months ended March 31, 2015 and 2014

99.2 Unaudited pro forma financial information as of March 31, 2015, and for the three months ended March 31, 2015

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date: December 17, 2015	HOOPER HOLMES, INC.
	By:	/s/ Steven R. Balthazor
		Steven R. Balthazor
		Chief Financial Officer

EXHIBIT INDEX

Exhibit No.Description

99.1 Unaudited consolidated financial statements of Accountable Health, Inc. as of March 31, 2015 and December 31, 2014, and for the three months ended March 31, 2015 and 2014

99.2 Unaudited pro forma financial information as of March 31, 2015 and for the three months ended March 31, 2015

EX-99.1

Exhibit 99.1

Consolidated Financial Statements

Accountable Health, Inc.

March 31, 2015

1

Accountable Health, Inc.

Contents

Consolidated Financial Statements

Consolidated Balance Sheets    3

Consolidated Statements of Operations    4

Consolidated Statement of Cash Flows    5

Notes to the Consolidated Financial Statements    6–13

2

Accountable Health, Inc.
Unaudited Consolidated Balance Sheet
		March 31, 2015		December 31, 2014
Assets
Current Assets
Cash and cash equivalents	$	994	$	1,426
Receivables from clients, net		1,032		1,347
Inventory		1,682		1,654
Prepaid expenses		41		234
Other current assets		198		256
Total Current Assets		3,947		4,917
Non-Current Assets
Restricted cash		1,079		1,077
Property and equipment, net		2,552		2,674
Intangible assets		4,718		5,081
Goodwill		3,872		3,872
Other long term investments		513		513
Total Assets	$	16,681	$	18,134
Liabilities and Stockholders’ Equity
Current Liabilities
Accounts payable	$	466	$	827
Accrued expenses		518		433
Deferred revenue		232		271
Accrued salaries and related benefits		614		688
Total Current Liabilities		1,830		2,219
Non-Current Liabilities
Deferred tax liabilities		1,783		1,976
Deferred rent		1,219		1,235
Total Liabilities		4,832		5,430
Commitments and Contingencies		—		—
Shareholders’ Equity
Preferred shares - $.01 par value, 1,100,000
shares issued and authorized		11		11
Common shares, Voting - $.01 par value, 1,100,000
shares issued and 3,000,000 authorized		11		11
Additional paid-in capital		26,937		26,937
Retained deficit		(15,110)		(14,255)
Total Shareholders’ Equity		11,849		12,704
Total Liabilities and Shareholders’ Equity	$	16,681	$	18,134

3

Accountable Health, Inc.
Unaudited Consolidated Statement of Operations
Three Month Period ended March 31,		2015		2014
Revenues
Service revenue	$	2,788	$	3,577
Total Revenues		2,788		3,577
Operating Expenses
Salaries and benefits		1,819		2,604
Transition services agreement		58		280
External screening and coaching costs		350		1,045
Commissions and broker fees		109		173
Facilities costs		226		324
Depreciation and amortization		521		619
Other sales, general and administrative		755		1,311
Total Operating Expenses		3,838		6,356
Loss from Operations		(1,050)		(2,779)
Interest Income		1		1
Loss Before Income Taxes		(1,049)		(2,778)
Income Tax Benefit		194		—
Net Loss	$	(855)	$	(2,778)

4

Accountable Health, Inc.
Unaudited Consolidated Statement of Cash Flows
Three Month Period Ended March 31,		2015		2014
Cash Flows from Operating Activities
Net loss	$	(855)	$	(2,778)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Depreciation and amortization		521		619
Allowance for doubtful accounts, net		—		—
Deferred tax benefit		(194)		—
Changes in assets and liabilities:
Receivables from clients		315		(180)
Inventory		(28)		32
Other assets		252		(25)
Accounts payable		(360)		1,047
Accrued salaries and related benefits		(74)		(986)
Deferred revenue		(39)		316
Deferred rent		(16)		253
Restricted cash held in certificate of deposit		(2)		—
Other accrued liabilities		85		(60)
Net Cash Used in Operating Activities		(395)		(1,762)
Cash Flows from Investing Activities
Acquisition of property and equipment		(36)		(722)
Purchase of investments		—		—
Net Cash Used in Investing Activities		(36)		(722)
Cash Flows from Financing Activities
Equity contributions		—		2,000
Net Cash Provided by Financing Activities		—		2,000
Net Increase in Cash and Cash Equivalents		(431)		(484)
Cash and Cash Equivalents, beginning of period		1,425		4,105
Cash and Cash Equivalents, end of period	$	994	$	3,621

5

Accountable Health, Inc.

Notes to Consolidated Financial Statements—Continued

For the three months ended March 31, 2015 and the year ended December 31, 2014

NOTE A—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations

Accountable Health, Inc. (the Company), invests in and acquires technology-enabled healthcare service companies that increase efficiencies, improve quality and reduce costs in the delivery of healthcare. The Company is headquartered in the state of Maryland and operates in various states throughout the United States. The Company began operations in January 2013.

New trends in the U.S. healthcare market are transforming the landscape and the way healthcare is delivered. From the new federal Patient Protection and Affordable Care Act, to changes in demographics, to new technologies, medical services and pharmaceuticals, opportunities abound for companies to deliver innovative solutions to the healthcare industry. With varying investment options, Accountable Health is an ideal partner to build these visionary companies into market-leading enterprises.

In July 2013, The Principal Financial Group® (“PFG”) contributed 100% of the equity of the Principal Wellness Company (“PWC”) as part of a larger investment in the Company. PWC was subsequently rebranded to Accountable Health Solutions (“AHS”). AHS collaborates with its clients to design effective and participant friendly health and wellness solutions tailored to meet client needs and to integrate health and wellness into the workplace culture. AHS’ goal is to help the healthy population stay healthy, while delivering programs and interventions to help the high-risk population improve their health. AHS’ programs are supported by effective member engagement strategies, measurable results and ongoing consultation to ensure the long-term success of wellness initiatives.

Basis of Presentation

The accompanying financial statements have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America (“US GAAP”). Outlined below are those policies considered particularly significant.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.

Revenue Recognition

The Company recognizes revenue from services provided to its clients, consisting primarily of self-funded employer groups. These services fall into one of three groups: Year Round Wellness; Screening Services and Health Coaching. The Company recognizes revenue from Screening and Health Coaching services as services are provided to their clients and bills for these services one month in arrears. Revenue from Year Round Wellness services are recognized on a per-month, per participant basis as services are provided and are billed during the month in which services are rendered.

Revenue is accrued for services that have been provided and not yet billed. The Company also records any billings in excess of revenue recognized as deferred revenue until all of the revenue recognition criteria have been met.

6

Accountable Health, Inc.

Notes to Consolidated Financial Statements—Continued

For the three months ended March 31, 2015 and the year ended December 31, 2014

NOTE A—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES—Continued

Receivables from Clients, Unbilled Services and Allowances

The Company records its client receivables and unbilled services at their face amounts less allowances. On a periodic basis, the Company evaluates its receivables and establishes allowances based on the specific identification of expected uncollectible receivables. Unbilled services are not evaluated with receivables as they are consistently billed within one month. As of March 31, 2015 and December 31, 2014 the total allowance recorded for receivables from clients was $51 and $51, respectively. The allowance reflects the Company’s best estimate of collectability risks on outstanding receivable. Payment terms for services vary by contract, but generally payment for services is contractually due within 30 days.

The Company determines its allowance by considering a number of factors, including the length of time trade accounts receivable are past due, each customer’s payment history, and the customer’s current ability to pay its obligation to the Company. The Company writes off receivables from clients when they become uncollectible.

Fair Value of Financial Instruments

The carrying amounts of cash and cash equivalents, accounts receivable, and accounts payable approximate fair value because of the short term maturity of these items.

Concentrations of Credit Risk

The Company’s financial instruments, consisting primarily of cash and cash equivalents, client receivables and unbilled services, are exposed to concentrations of credit risk. The Company places its cash and cash equivalents with highly-rated financial institutions, limits the amount of credit exposure with any one financial institution and conducts ongoing evaluation of the credit worthiness of the financial institutions with which it does business. Client receivables are concentrated with employer groups and are dispersed across a large number of clients. At March 31, 2015, two clients constituted receivable balances of 17% and 13%, respectively. At December 31, 2014, two clients constituted receivable balances of 25% and 15%, respectively.

Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Substantially all of the Company’s bank deposits are insured by the Federal Deposit Insurance Corporation (“FDIC”). During the normal course of business, the Company’s cash deposits may exceed the federally insured limit. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk on cash and cash equivalents.

Restricted Cash

Pursuant to its lease agreement for the Rockville office space, the Company is required to maintain a security deposit in the amount of $1.1 million. The Company maintains this security deposit via a letter of credit which is collateralized with a Certificate of Deposit in the same amount. Under the terms of the lease agreement, the required security deposit will be reduced by one-third at the end of the second, third, and fourth lease year, subject to a minimum security deposit equal to one month’s base rent. As of March 31, 2015 and December 31, 2014 there have been no amounts drawn on the letter of credit.

7

Accountable Health, Inc.

Notes to Consolidated Financial Statements—Continued

For the three months ended March 31, 2015 and the year ended December 31, 2014

NOTE A—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES—Continued

Inventory

The Company’s inventory consists of diabetic and biometric screening supplies. Inventories are stated at the lower of cost and net realizable value. The Company uses the FIFO method.

Property and Equipment

Property and equipment is stated at cost, net of accumulated depreciation and amortization, and consists primarily of leasehold improvements and furniture and equipment. Depreciation is computed on a straight-line basis over the assets estimated service lives ranging from three to five years. Leasehold improvements are amortized over the lives of the respective leases or the service lives of the improvements, whichever are shorter, using the straight-line method.

Other Long Term Investments

The Company holds a 3.29% interest in CareCam at March 31, 2015 and December 31, 2014. The health care technology company creates a strong interface between the patient and provider to drive appropriate care, compliance, and outcomes. The Company accounts for this investment under the cost method and determined that there was no permanent change in the investment value as of and March 31, 2015 and December 31, 2014.

Deferred Rent

The Company recognizes lease expense on its operating leases using the straight-line method over the life of the leases. Deferred rent consists of rent abatements and rent escalations which are considered in the determination of straight-line rent expense for operating leases. Lease incentives are recorded as a deferred credit and recognized as a reduction to rent expense on a straight-line basis over the lease term.

Income Taxes

Income taxes are provided for the tax effects of transactions reported in the financial statements and consist of taxes currently due plus or minus deferred taxes. Deferred tax liabilities and assets are determined based on the difference between the financial statement and tax basis of assets and liabilities, using current tax rates. The difference between the financial statement and the tax basis of assets and liabilities is primarily caused by differences in depreciation, intangible assets, recognizing income for tax purposes that is deferred for financial reporting and recognizing certain compensation and other expenses for financial reporting that are deferred for income tax purposes. The deferred tax assets and liabilities represent the estimated future tax consequences of those differences.

The Company recognizes the financial statement benefit of an income tax position only after determining that the relevant taxing authority would more likely than not sustain the position following an audit. For tax positions meeting the more likely than not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant taxing authority. The Company applies the uncertain tax position guidance to all tax positions in the tax returns filed, as well as any un-filed tax positions. The Company has chosen to treat interest and penalties related to unrecognized tax benefits as income tax expense and as an increase to the income tax liability. There were no uncertain tax benefits recorded at March 31, 2015 and December 31, 2014.

8

Accountable Health, Inc.

Notes to Consolidated Financial Statements—Continued

For the three months ended March 31, 2015 and the year ended December 31, 2014

NOTE A—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES—Continued

Income Taxes—Continued

As of March 31, 2015, tax years subject to examination include 2014 through 2012 for the Company and 2010 through 2013 for PWC.

The Company is subject to income taxes in certain state and local jurisdictions. Tax regulations within each jurisdiction are subject to the interpretation of the related tax laws and regulations and require significant judgment to apply.

Long-Lived Assets

Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or group of assets may not be fully recoverable. These events or changes in circumstances may include a significant deterioration of operating results, changes in business plans, or changes in anticipated future cash flows. If an impairment indicator is present, the Company evaluates recoverability by a comparison of the carrying amount of the assets to future undiscounted net cash flows expected to be generated by the assets. If the assets are impaired, the impairment recognized is measured by the amount by which the carrying amount exceeds the fair value of the assets. Fair value is generally determined by estimates of future cash flows. An impairment of $1,887 was recorded for the year ended December 31, 2014 due to the termination of several large clients and the resulting expected decline in expected cash flow from those relationships.

Goodwill

Goodwill and the corresponding deferred tax liability resulted from the excess of the fair value of contributed intangible assets received from PFG in connection with the contribution of PWC. The amortization of the customer portal and customer relationships is not deductible for income tax purposes.

The Company performs an annual goodwill impairment review. For the purposes of performing this review, the Company has concluded that it has one reporting unit. The Company opted to perform a two- step assessment to test if goodwill was impaired. The Company considered and evaluated each of the three traditional approaches to value: the income approach, the market approach, and the asset approach. The Company relied on the income approach to value given the small size of the Company relative to publicly-traded guideline companies. However, the Company also performed a market approach based on the multiple of earnings before interest, taxes, depreciation, and amortization (“EBITDA”) paid to acquire AHS in 2013. The analysis yielded a higher value than the income approach analysis.

Given the threshold nature of the Step 1 goodwill impairment test, the Company elected to rely on the lower income approach value to be conservative. The Company employed the discounted cash flow method within the income approach. In this method, the present values of cash flows reasonably expected to be produced from its operations were summed to produce an estimate of the Company’s business enterprise value on a marketable-control basis. The income approach analysis resulted in an estimated value for the equity in excess of the carrying amount. Therefore, Management asserted that no impairment exists.

9

Accountable Health, Inc.

Notes to Consolidated Financial Statements—Continued

For the three months ended March 31, 2015 and the year ended December 31, 2014

NOTE A—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES—Continued

Using Estimates in Preparing Financial Statements

In preparing financial statements in conformity with accounting principles generally accepted in the United States of America, management is required to make estimates and assumptions affecting the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenue and expenses during the reporting period. Actual results could differ from those estimates.

In the ordinary course of accounting for estimates such as the allowance for doubtful accounts, the Company makes changes in estimates as appropriate, and as it becomes aware of circumstances surrounding those estimates. Such changes and refinements in estimation methodologies are reflected in reported results of operations in the period in which the changes are made and, if material, their effects are disclosed in the notes to the financial statements.

NOTE B—STOCK APPRECIATION RIGHTS

The Company created a Stock Appreciation Rights (“SARs”) Plan, which grants eligible employees units equivalent to one share of common stock in the Company. The SARs Plan is administered in accordance with Section 409A of the Internal Revenue Code of 1986. Each grant accrues over a five-year period and SARs units do not represent equity in the Company.

The awarded SAR’s are not eligible for payout until the Company undergoes a sale of substantially all of its assets; the sale of 50% of the issued and outstanding common shares; or a merger transaction whereby the Company is merged into a surviving company, provided all other service provisions have been satisfied. As such, compensation expense has not been recognized on any grants to date as management has concluded that it is not probable that the aforementioned performance criteria will be met.

The Company granted 50,000 SAR’s in 2014 and zero in the three months ending March, 31 2015. In 2014, 20,000 SAR’s were forfeited. In the three months ended March 31, 2015, zero were forfeited.

10

Accountable Health, Inc.

Notes to Consolidated Financial Statements—Continued

For the three months ended March 31, 2015 and the year ended December 31, 2014

NOTE C—INTANGIBLE ASSETS

Intangible assets consist of the following at March 31, 2015 and December 31, 2014:

		2015			2014
Customer portal	5 year life	$	4,116	$		4,116
Customer relationships	5 year life		3,951			5,838
			8,067			9,954
Less: accumulated amortization			(3,349)			(2,986)
Less: impairment of intangibles			-			(1,887)
		$	4,718	$		5,081
Estimated future amortization expense:
2015				$		1,452
2016				$		1,452
2017				$		1,452
2018				$		725

As a result of the book-tax basis differences generated on the date of contribution and the amortization not being deductible for tax purposes, the Company recorded $3,872 of goodwill and a corresponding deferred tax liability. Amortization of these definite lived intangibles will cause a deferred tax benefit that fully reduces the deferred tax liability over the amortization term.

NOTE D—EMPLOYEE BENEFIT PLAN

The Company maintains a defined contribution plan covering all employees meeting certain eligibility requirements. The plan allows eligible employees to defer a percentage of their compensation as contributions, subject to statutory limitations. The Company matches employee contributions at the rate of 100% for the first $1, and then at a percentage determined at the sole discretion of the Company up to maximum of $4. The Company match is vested ratably over a five-year period based on years of service. Contribution expense for the three months ended March 31, 2015 and 2014 were approximately $90 and $112, respectively.

11

Accountable Health, Inc.

Notes to Consolidated Financial Statements—Continued

For the three months ended March 31, 2015 and the year ended December 31, 2014

NOTE E—COMMITMENTS

Rental Space and Equipment Leases

The Company lease office space for its headquarters in Rockville, MD and satellite offices in Des Moines, IA and Indianapolis, IN which expire in January 2024, August 2018, and April 2018, respectively.

Total rent expense for all operating leases amounted to approximately $175 and $220 for the three months ended March 31, 2015 and 2014, respectively. Future minimum lease payments for non-cancelable operating leases for each of the years ending December 31 are as follows:

Year ended December 31,
2015	$	805
2016		845
2017		852
2018		689
2019		487
Thereafter		2,131
	$	5,809

NOTE F—RELATED-PARTY TRANSACTIONS

The Company provides Wellness services to PFG, one of its primary shareholders. The contract governing these services was in existence on the date the Company acquired Accountable Health Solutions. During three months ended March 31, 2015 and 2014, the Company recognized approximately $41 and $45, respectively in revenue from services provided to PFG.

In conjunction with PFG’s contribution of the AHS business to the Company, AHS and the Company entered into a 24 month Transition Services Agreement with PFG. Under the terms of the agreement, PFG will provide information technology, call center and other back office support services to AHS for a period of up to 24 months. AHS may discontinue any and all services with PFG at any time. In the three month ended March 31, 2015 and 2014, the Company incurred $58 and $280, respectively in expense related to this agreement.

NOTE G—INCOME TAXES

12

Accountable Health, Inc.

Notes to Consolidated Financial Statements—Continued

For the three months ended March 31, 2015 and the year ended December 31, 2014

The difference between income tax expense derived by applying the statutory tax rates to the current year's net loss and the actual tax expense recorded is due to the Company providing a full valuation allowance against deferred tax assets for current and accumulated net operating losses.

As of March 31, 2015 and December 31, 2014, the Company had federal net operating loss carryforwards of $10,100, with which to offset the Company's future taxable income.

The net operating loss carryforwards will expire starting 2033 if not utilized.

NOTE H—SUBSEQUENT EVENTS

On April 17, 2015, Accountable Health, Inc. sold the wellness business assets of Accountable Health Solutions, Inc. to Hooper Holmes, Inc. for $4.0 million cash and 6.5 million shares of Hooper Holmes unregistered common stock (NYSE: HH). As part of the transaction, Accountable Health Solutions, Inc. changed its name to Health Improvement Connections, Inc. Certain assets and liabilities related to chronic care management business was retained by Accountable Health, Inc.  In the transaction, Accountable Health, Inc. will provide certain transitions service to Hooper Holmes, Inc. 

Since the large majority of the wellness business was sold, the Company anticipates the sale will have a material impact on the revenues and financial statements for 2015 and future years.

13

EX-99.2

Exhibit 99.2

HOOPER HOLMES, INC.

UNAUDITED PRO FORMA FINANCIAL INFORMATION

On April 17, 2015, Hooper Holmes, Inc. (the "Company") entered into and consummated an Asset Purchase Agreement (the "Purchase Agreement") among the Company and certain of its subsidiaries, Accountable Health Solutions, Inc. ("AHS") and Accountable Health, Inc. (the "Seller" or "AHI"). Pursuant to the Purchase Agreement, the Company has acquired substantially all the operations, assets and certain liabilities representing the health and wellness business of AHI for approximately $7 million, $4 million in cash and 6,500,000 shares of the Company’s common stock, $0.04 par value,subject to a working capital adjustment as described in the Purchase Agreement (the "Acquisition"). There were 5,576,087 shares of Common Stock delivered to the Seller at closing and 326,087 shares of Common Stock were held back for the working capital adjustment, which were subsequently released on October 9, 2015, and 597,826 shares of Common Stock were held back for indemnification purposes.

The following unaudited pro forma balance sheet as of March 31, 2015, and the unaudited pro forma statement of operations for the three months ended March 31, 2015, is based on the historical financial statements of the Company and AHI after giving effect to the Acquisition, and after applying the assumptions, reclassifications and adjustments described in the accompanying notes. The pro forma financial information also gives effect to the term loan and issuance of shares of the Company's common stock.

The unaudited pro forma balance sheet gives pro forma effect to the Acquisition as if it had occurred on December 31, 2014. The unaudited pro forma statement of operations gives effect to the Acquisition as if it had occurred on January 1, 2014. The unaudited pro forma financial information is for illustrative and informational purposes only and should not be considered indicative of the results that would have been achieved had the transactions been consummated on the dates or for the periods indicated. The unaudited financial information do not purport to represent consolidated balance sheet data or consolidated statement of operations data or other financial data as of any future date or any future period.

The Acquisition has been accounted for as a business combination. The estimated purchase price has been allocated on a preliminary basis to tangible and intangible assets acquired and liabilities assumed. The allocation of the purchase price is preliminary and based on valuations derived from estimated fair value assessments and assumptions used by management and is subject to changes as additional information becomes available. The Company is still evaluating any income tax implications related to the Acquisition.

The unaudited pro forma financial information should be read in conjunction with the Company's historical consolidated financial statements and notes included in the Company's Report on Form 10-Q for the three months ended March 31, 2015, the AHI historical consolidated financial statements and notes for the three months ended March 31, 2015, which are included as Exhibit 99.1 to this Form 8-K/A, as well as with the unaudited pro forma financial information for the year ended December 31, 2014, included in the Company’s Current Report on Form 8-K/A filed on May 21, 2015.  

Hooper Holmes Inc.

Unaudited Pro Forma Balance Sheet

As of March 31, 2015

(in thousands)

	Historical						As of March 31, 2015
	As of						Assets and Liabilities Excluded from Acquisition (A)			Pro Forma Adjustments for Acquisition (B)			Pro Forma Adjustments to Allocate Purchase Price (C)			HHI Pro Forma Post-AHS Acquisition
	March 31, 2015
	Hooper Holmes			AHI
Assets
Cash and cash equivalents	$	1,387		$	994		$	(994	)	$	1,000		—			$	2,387
Accounts receivable	4,869			1,032			(206		)	—			—			5,695
Inventories	696			1,682			(1,624		)	—			—			754
Other current assets	274			239			(188		)	—			—			325
Total current assets	7,226			3,947			(3,012		)	1,000			—			9,161
Property, plant and equipment, net	2,974			2,552			(2,274		)	—			—			3,252
Intangible assets and other	491			6,310			(1,079		)	726			850			7,298
Goodwill	—			3,872			—			—			(3,215		)	657
Total assets	$	10,691		$	16,681		$	(6,365	)	$	1,726		$	(2,365	)	$	20,368
Liabilities and Stockholders' Equity
Accounts payable	1,962			466			(105		)	1,521			—			3,844
Accrued expenses	4,305			1,364			(924		)	—			—			4,745
Total current liabilities	6,267			1,830			(1,029		)	1,521			—			8,589
Long-term debt	—			—			—			2,344			—			2,344
Other long-term liabilities	1,084			3,002			(1,783		)	—			(1,219		)	1,084
Stockholders' Equity:
Common stock	2,835			22			—			260			(22		)	3,095
Additional paid-in capital	150,837			26,937			—			5,396			(26,937		)	156,233
Accumulated (deficit) earnings	(150,261		)	(15,110		)	—			(645		)	15,110			(150,906		)
	3,411			11,849			—			5,011			(11,849		)	8,422
Less: Treasury stock	(71		)	—			—			—			—			(71		)
Total stockholders' equity	3,340			11,849			—			5,011			(11,849		)	8,351
Total liabilities and stockholders' equity	$	10,691		$	16,681		$	(2,812	)	$	8,876		$	(13,068	)	$	20,368

See accompanying Notes to Unaudited Pro Forma Financial Information.

Hooper Holmes Inc.

Unaudited Pro Forma Statement of Operations

	For the three months ended March 31, 2015
	Historical Hooper Holmes			Historical AHI			AHS Adjustments (D)			Pro Forma AHS				Acquisition Pro Forma Adjustments (E)			HH Pro Forma Post-AHS Acquisition
Revenues	$	5,681		$	2,788		$	(349	)	$	2,439			$	—		$	8,120
Cost of operations	4,949			704			—			704				614			6,267
Gross profit	732			2,084			(349		)	1,735				(614		)	1,853
Selling, general and administrative	2,747			3,134			(242		)	2,892			(D)	(658		)	4,981
Gain on sale of real estate	—			—			—			—				—			—
Impairment	—			—			—			—				—			—
Restructuring charges	—			—			—			—				—			—
Total operating expenses	2,747			3,134			(242		)	2,892				(658		)	4,981
Operating loss from continuing operations	(2,015		)	(1,050		)	(107		)	(1,157		)		44			(3,128		)
Other (expense) income	(83		)	1			—			1				(475		)	(557		)
Loss from continuing operations before income taxes	(2,098		)	(1,049		)	(107		)	(1,156		)		(431		)	(3,685		)
Income tax expense (benefit)	5			(194		)	—			(194		)		194			5
Loss from continuing operations	(2,103		)	(855		)	(107		)	(962		)		(625		)	(3,690		)
Discontinued operations:
Loss from discontinued operations, net of tax	(4		)	—			—			—				—			(4		)
Gain on sale of subsidiaries, net of adjustments	—			—			—			—				—			—
(Loss) income from discontinued operations	(4		)	—			—			—				—			(4		)
Net loss	$	(2,107	)	$	(855	)	$	(107	)	$	(962	)		$	(625	)	$	(3,694	)
Basic and diluted loss per share	$	(0.03	)														$	(0.05	)
Basic weighted average shares outstanding	70,866,603													6,500,000			77,366,603
Diluted weighted average shares outstanding	70,866,603													6,500,000			77,366,603

See accompanying Notes to Unaudited Pro Forma Financial Information.

Hooper Holmes, Inc.

Notes to Unaudited Pro Forma Financial Information

(dollars in thousands, except per share data)

1. Purchase Price

On April 17, 2015, Hooper Holmes, Inc. (the "Company") entered into and consummated an Asset Purchase Agreement (the "Purchase Agreement") among the Company, and certain of its subsidiaries, Accountable Health Solutions, Inc. ("AHS") and Accountable Health, Inc. (the "Seller" or "AHI"). Pursuant to the Purchase Agreement, the Company has effectively acquired the assets and certain liabilities representing the health and wellness business of the Seller (the "Acquisition") for approximately $7.0 million, $4.0 million in cash and 6,500,000 shares of the Company’s common stock, $0.04 par value.

In order to fund the Acquisition, the Company entered into and consummated a Credit Agreement (the "Credit Agreement") with SWK Funding LLC as the agent ("Agent"), and the lenders (including SWK Funding LLC) party thereto from time to time (the "Lenders"). The Credit Agreement provides the Company with a $5.0 million term loan (the "Term Loan"). Refer to Note 3 for additional discussion regarding the Credit Agreement. The Company also issued 6,500,000 shares of the Company’s common stock, $0.04 par value,subject to working capital adjustments. The purchase price is subject to certain post-closing adjustments for working capital and indemnification purposes, as specified in the Purchase Agreement.

The sources of funds used in connection with the Acquisition (reflected in the Unaudited Pro Forma Balance Sheet) are as follows:

Proceeds from Term Loan	$	4,000
Issuance of common stock	3,000
Preliminary purchase price	$	7,000
Transaction costs	1,521
Total	8,521

The Company incurred transaction costs of $1.5 million in connection with the Acquisition, which include investment banking, legal and accounting fees, and other external costs directly related to the transaction (Refer to Note 4).

2. Preliminary Allocation of Purchase Price

The Acquisition will be treated as a purchase in accordance with Accounting Standards Codification (ASC) 805, Business Combinations, which requires allocation of the purchase price to the estimated fair values of the assets acquired and liabilities assumed in the transaction. The allocation of purchase price is based on management’s judgment after evaluating several factors, including a preliminary valuation assessment. The allocation of purchase price is preliminary and subject to changes, which could be significant, as the valuation of tangible and intangible assets are finalized, working capital adjustments are finalized, and additional information becomes available.

The Company purchased substantially all of the operations and assets of AHI. Assets and operations not included in the Acquisition relate to the diabetes program product line, which is a start-up operation with nominal revenue. The assets excluded consist primarily of cash and restricted cash and diabetes inventory as well as leasehold improvements utilized in connection with a leased facility that was not assumed by the Company.

The preliminary allocation of purchase price (reflected in the Unaudited Pro Forma Balance Sheet) is as follows:

Accounts receivable	$	876
Inventory and other current assets	132
Fixed assets	274
Customer portal (existing technologies)	4,151
Customer relationships	1,930
Goodwill	657
Accounts payable	(764		)
Accrued expenses	(256		)
Preliminary Purchase Price	$	7,000

Intangible Assets

Intangible assets acquired include existing technology in the form of a customer-facing wellness portal and customer relationships. The estimated useful life for the wellness portal and customer relationships is expected to be 4 years and 8 years, respectively. Amortization is expected to be recorded on a straight-line basis over the estimated useful life of the asset.

3. Financing Activities

2015 Credit Agreement

In order to fund the Acquisition, the Company entered into and consummated a Credit Agreement with SWK Funding LLC. The Credit Agreement provides the Company with a $5.0 million Term Loan. The proceeds of the Term Loan were used to fund the Acquisition described in Note 1 and to finance transaction costs. The Company paid SWK Funding LLC an origination fee of $0.1 million. The Loan is due and payable on April 17, 2018. The Company is also required to make quarterly revenue-based payments in an amount equal to eight and one-half percent (8.5%) of yearly aggregate revenue up to and including $20 million; seven percent (7%) of yearly aggregate revenue greater than $20 million up to and including $30 million; and five percent (5%) of yearly aggregate revenue greater than $30 million. The revenue-based payment will first be applied to fees and interest, and any excess to the principal of the Term Loan. Revenue-based payments commence in February 2016, and the maximum aggregate revenue-based payment is capped at $600,000 per quarter.

In addition, on April 17, 2015, in connection with the execution of the Credit Agreement, the Company issued SWK Funding, LLC a warrant (the "Warrant") to purchase 8,152,174 shares of the Company’s common stock. The Warrant is exercisable after October 17, 2015, and up to and including April 17, 2022, at an exercise price of $0.46 per share. The Warrant is exercisable on a cashless basis. The exercise price of the Warrant is subject to customary adjustment provisions for stock splits, stock dividends, recapitalizations and the like. The Warrant grants the holder certain piggyback registration rights. The Warrant was considered equity classified, and as such, the Company allocated the proceeds from the Term Loan to the Warrant using the Relative Fair Value Method. The fair value of the Warrant of $2.7 million was recorded as debt discount, which is being recognized as interest expense over the term of the Credit Agreement using the effective interest method. The Company valued the Warrant using the Black-Scholes pricing model using volatility of 85.0%, a risk-free rate of 1.4%, dividend rate of zero and term of 7 years, which is consistent with the exercise period of the Warrant and is a Level 3 valuation technique.

Further, pursuant to the Credit Agreement, if the 2013 Loan and Security Agreement is not repaid in full and terminated, and all liens securing the 2013 Loan and Security Agreement are not released, on or prior to February 28, 2016, the Company has agreed to issue an additional warrant to SWK Funding LLC to purchase common stock valued at $1.25 million, with an exercise price of one cent over the closing price on February 28, 2016. The additional warrant will become exercisable six months after issuance, remain exercisable for 7 years and have customary anti-dilution protection similar to the Warrants. The Company considered whether the issuance of this additional warrant was a “credit sensitive payment”, as the issuance of the additional warrant is contingent upon the repayment of debt (the 2013 Loan and Security Agreement). However, as the repayment date specified in the Term Loan is prior to the maturity date of the 2013 Loan and Security Agreement and therefore this is an incentive feature, rather than a reflection of the Company’s creditworthiness, the Company did not think it was appropriate to consider this feature credit related. Therefore, the feature is not clearly and closely related to the debt host. The Company determined that the additional warrant feature does not contain an explicit limit on the number of warrants to be delivered for settlement. As the Company is required

to deliver a number of additional warrants that will satisfy the fixed monetary amount of $1.25 million, the number of warrants (and underlying shares) to be delivered cannot be determined. Therefore, the additional warrant feature is considered an embedded derivative.

As the issuance of the additional warrant is contingent, the evaluation of the likelihood of the occurrence of the contingency was considered in determining the fair value of the embedded derivative. As the Company does believe that the contingency (i.e. not repaying in full and terminating the 2013 Loan and Security Agreement by February 28, 2016) is likely to occur, the value of the embedded derivative was recognized on the financial statements. Consequently, the value of the Term Loan was reduced by the fair value of the additional warrant. The Company determined the value of the additional warrant was $0.9 million as of the Acquisition date. The Company valued the additional warrant using the Black-Scholes pricing model using volatility of 85.0%, a risk-free rate of 1.4%, dividend rate of zero and term of 7 years, which is consistent with the exercise period of the additional warrant. The value of the embedded derivative will continue to be evaluated every reporting period through February 28, 2016.

Issuance of Common Shares

The Company also issued 6,500,000 shares of the Company’s common stock, $0.04 par value,subject to working capital adjustments. The purchase price is subject to certain post-closing adjustments for working capital and indemnification purposes, as specified in the Purchase Agreement. The Company delivered 5,576,087 shares of common stock to AHI at closing and 923,913 shares of common stock were retained (the "Holdback Shares") for the working capital adjustment and for indemnification purposes, of which 326,087 shares held back for the working capital adjustment were subsequently released on October 9, 2015. AHI shall be the record holder of the Holdback Shares, and shall be entitled to vote those shares, but shall not otherwise be entitled to sell or transfer those shares unless and until they are released and delivered to AHI. Any Holdback Shares not released and delivered to AHI shall be retained by and transferred to the Company, with the Company becoming the holder of record of such shares.

4. Transaction Costs

The Company incurred transaction costs of $1.5 million in connection with the Acquisition, which include investment banking, legal and accounting fees, and other external costs directly related to the transaction. Included in transaction costs are approximately $0.9 million of deferred financing costs which will be deferred and recognized over the term of the Credit Agreement through April 17, 2018, or three years. Annual amortization of deferred financing costs is calculated using the effective interest method and is reflected as a component of other expense in the Unaudited Pro Forma Statement of Operations.

5. Reclassifications

Certain reclassification adjustments are reflected in the Unaudited Pro Forma Statement of Operations in order to conform the presentation of AHI historical amounts on a consistent basis with the Company's historical presentation. The AHI historical financial statements do not separately present cost of operations and selling, general and administrative ("SG&A") expenses. The Company has reclassified costs directly associated with providing services as a component of cost of operations, primarily external screening costs, salaries and benefits associated with providing coaching services and costs associated with the customer portal. Refer to Note 6 below for the details of reclassifications in Section (E).

6. Pro Forma Adjustments

The Company has recorded pro forma adjustments which are included in the Unaudited Pro Forma Balance Sheet and Unaudited Pro Forma Statement of Operations as follows:

(A)    The Company purchased substantially all of the operations and assets of AHI. Assets and operations not included in the Acquisition relate to the diabetes program product line, which is a start-up operation with nominal revenue. The assets excluded consist primarily of cash and restricted cash and diabetes inventory as well as leasehold improvements utilized in connection with a leased facility that was not assumed by the Company. Such assets are identified separately in the Unaudited Pro Forma Balance Sheet as 'Assets and Liabilities Excluded from Acquisition'.

The following table summarizes the assets and liabilities excluded from the Acquisition:

Cash	$	994
Accounts receivable	206
Inventory - diabetes program	1,624
Other current assets	188
Property	2,274
Restricted cash and investments	1,079
Accounts payable and accrued expenses	(1,029		)
Deferred tax liabilities	(1,783		)
Total	$	3,553

Cash of $1.0 million and restricted cash and investments of $1.1 million were excluded from the Acquisition. The diabetes program product line had inventory of $1.6 million as of March 31, 2015, which was excluded from the Acquisition. Property of $2.3 million represents leasehold improvements and computer equipment located at a leased facility that was not assumed by the Company. Accounts payable and accrued expenses excluded from the Acquisition relate to payables for the diabetes program product line and salaries and benefits for individuals that were excluded from the Acquisition. Deferred tax liabilities of $1.8 million were not a part of the Acquisition as the transaction was an asset purchase and the corporate tax structure remained with AHI.

(B)    The pro forma adjustments for the purchase represent the sources of funding for the Acquisition. The Company used proceeds from the Credit Agreement for the $4 million cash consideration. The remaining consideration of $3 million was funded through the issuance of shares of the Company's common stock.

In connection with the Credit Agreement, the Company issued a Warrant to SWK Funding LLC with a fair value of $2.7 million. The Company has determined that the Warrant will be classified as equity. As the Warrant was issued in connection with the Term Loan, the proceeds will be allocated based on relative fair value to each of the Term Loan and Warrant, resulting in a discount associated with the Term Loan which will be recognized as interest expense over the term of the Credit Agreement using the effective interest method.

The following table summarizes the net impact to cash for the proceeds of the Credit Agreement, debt assumed (Term Loan less the fair value of the Warrant), issuance of common shares, the impact to additional paid-in capital for the issuance of shares and fair value of the Warrant, and transaction costs as of the origination date:

Credit Agreement	$	5,000
Cash consideration	(4,000		)
Net proceeds from Credit Agreement	$	1,000
Estimated fair value of Term Loan	$	5,000
Debt discount associated with Warrant	(2,656		)
Derivative liability with additional warrant feature	$	(908	)
Net debt recorded with Acquisition	$	1,436
Common Stock (6,500,000 shares at $0.04 par)	$	260
Additional paid-in capital: issuance of shares	$	2,740
Additional paid-in capital: fair value of Warrant	2,656
Net increase to APIC with Acquisition	$	5,396
Transaction costs expensed at time of Acquisition	$	645
Deferred financing costs	876
Total transaction costs	$	1,521

(C)    The pro forma adjustments to allocate the preliminary purchase price represent the fair value adjustments to the assets and liabilities acquired. Refer to Note 2 for the estimated useful life of the intangible assets acquired in connection with the Acquisition.

	Historical Amounts		Fair Value		Increase (Decrease)
Wellness portal	$	2,881	$	4,151	$	1,270
Customer relationships	2,200		1,930		270
Goodwill	3,872		657		(3,215		)
Deferred rent	1,219		—		(1,219		)
Stockholders' equity (1)	11,849		—		(11,849		)
(1) Elimination of historical AHI stockholders' equity.

The following table summarizes the impact of the fair value adjustments to depreciation and amortization for the three months ended March 31, 2015, in the Unaudited Pro Forma Statement of Operations. The pro forma depreciation and amortization expense is calculated using the preliminary fair value allocated to the assets noted below to determine the annual expense. Refer to Note 2 for the preliminary fair value estimates and estimated useful lives. The net decrease in depreciation and amortization expense is reflected as a pro forma adjustment in the Unaudited Pro Forma Statement of Operations as a component of SG&A.

	Three months ended March 31, 2015
	Historical Expense		Pro Forma Expense		(Decrease) Increase in Expense
Wellness portal	$	205	$	260	$	55
Customer relationships	157		60		(97		)
Goodwill	—		—		—
Property	25		23		(2		)
	$	387	$	343	$	(44	)

(D)    The classification of pro forma adjustments in the Unaudited Pro Forma Statement of Operations include activity excluded from the Acquisition for the three months ended March 31, 2015. Revenue and SG&A costs of $0.3 million and $0.2 million, respectively, excluded from the Acquisition are related to the start-up activity for the diabetes program product line, which was excluded from the transaction.

(E)    The AHI historical financial statements did not separately present Cost of Operations (COS) and SG&A on the statements of operations, and thus have been re-classified here to conform with the Company’s historical financial presentation. The reclassification to COGS of $0.6 million for the three months ended March 31, 2015, represents the amortization expense of the wellness portal of $0.2 million, which is directly associated with providing services for this product line, with the remaining $0.4 million related to salaries and benefits associated with providing services.

Acquisition pro forma adjustments include interest expense and amortization of deferred financing costs associated with the Credit Agreement. The Company did not include a tax impact to the pro forma adjustments to the statement of operations. The Company's effective tax rate is zero due to the valuation allowance recorded on its net deferred tax assets attributable to tax deductible intangible assets and note operating loss carryforwards. The Company believes it is not more likely than not that it will realize the tax benefits of its deferred tax assets.