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Liquidity
9 Months Ended
Sep. 30, 2014
Liquidity [Abstract]  
Liquidity
Liquidity

The Company's primary sources of liquidity are cash and cash equivalents as well as availability under the 2013 Loan and Security Agreement (refer to Note 9). At September 30, 2014, the Company had $4.1 million in cash and cash equivalents and $4.5 million of working capital and no outstanding debt.

The Company recorded income from continuing operations of $0.1 million during the three month period ended September 30, 2014 and incurred a loss from continuing operations of $4.7 million during the nine month period ended September 30, 2014. The Company’s net cash used in operating activities for the nine month period ended September 30, 2014 was $4.9 million. The Company has managed its liquidity through sales of the Portamedic, Heritage Labs and Hooper Holmes Services business units, the sale of the Basking Ridge, New Jersey property, a series of cost reduction and accounts receivable collection initiatives and availability under the 2013 Loan and Security Agreement.

The Company has historically used availability under the 2013 Loan and Security Agreement to fund operations. The Company did not borrow under the 2013 Loan and Security Agreement during the nine month period ended September 30, 2014. During the nine month period ended September 30, 2013, the Company had net borrowings of $2.6 million. The Company used the proceeds from the sale of Heritage Labs and Hooper Holmes Services as well as the proceeds from the sale of the Basking Ridge real estate to fund capital expenditures and operating expenses associated with the increased screening volume experienced in the second half of the year. The Company experiences a timing difference between the operating expense and cash collection of the associated revenue as Health and Wellness customers generally have longer payment terms.

Transition Initiatives

During the three and nine month periods ended September 30, 2014, the Company incurred $0.2 million and $1.8 million, respectively, of costs, which are recorded in selling, general and administrative expenses in the consolidated statement of operations, in connection with the relocation of its corporate headquarters to Olathe, Kansas, and contributed to the year-to-date loss from continuing operations during 2014. The Company relocated its headquarters to Olathe, Kansas during the first quarter of 2014, where its Health and Wellness facilities are located. Costs incurred during the third quarter of 2014 relate to expenses associated with maintaining the Basking Ridge, New Jersey real estate through the date of sale and ongoing transition of information technology infrastructure.

Under the Alliance Agreement with CRL (refer to Note 1), the Company completed the sale of certain assets of Heritage Labs and Hooper Holmes Services as of August 31, 2014 with a purchase price, after inventory-related price adjustments, of $3.5 million, of which $0.25 million was deposited into an escrow account in accordance with the Alliance Agreement. The remaining purchase price of $0.25 million held in escrow was released to the Company on October 31, 2014 in connection with the separate closing and related sale of certain lab assets retained by the Company. The Company retained certain aspects of its sample kit assembly operations (relating to the Health and Wellness segment) as well as certain other third party kit assembly and all other supply chain fulfillment capabilities, which continue to support Health and Wellness operations and other customers.

On May 13, 2014, the Company entered into an agreement for the sale of the Basking Ridge, New Jersey property for an aggregate purchase price of $3.0 million. On July 18, 2014, the Company and MDMC entered into an amendment to the Purchase and Sale Agreement that provided for the Company to deposit into an escrow account at closing an aggregate of $0.3 million of the purchase price to satisfy amounts paid by MDMC in connection with certain repairs and other expenses identified in the course of the property inspection. The sale closed on August 7, 2014 resulting in cash proceeds of $2.5 million, which is net of customary closing costs and broker fees (refer to Note 1).

Holdback Related to the Sale of Portamedic

On September 30, 2013, the Company completed the sale of Portamedic. Approximately $2.0 million ("Holdback Amount") of the purchase price was held back by the acquirer as security for the Company’s obligations under the agreements between the Company and the acquirer. (Refer to Note 6). The Holdback Amount includes two components of $1.0 million each. During the first quarter of 2014, the Company received $0.7 million as payment for the first Holdback Amount, after certain adjustments. The Company currently anticipates finalization of the second Holdback Amount in the first quarter of 2015. The Company has recorded the remaining receivable related to the second Holdback Amount at the amount it believes will be collected, however there cannot be any assurance that the remaining Holdback Amounts will be collected by the Company.

2013 Loan and Security Agreement
    
The Company maintains the 2013 Loan and Security Agreement with ACF FinCo I LP ("ACF"), the assignee of Keltic Financial Partners II, LP ("Keltic Financial") (refer to Note 9). Borrowings under the 2013 Loan and Security Agreement are to be used for working capital purposes and capital expenditures. The amount available for borrowing may be less than the $10 million under this facility at any given time due to the manner in which the maximum available amount is calculated.  The Company has an available borrowing base subject to reserves established at the lender's discretion of 85% of Eligible Receivables (as defined in the 2013 Loan and Security Agreement) up to $10 million under this facility. Eligible Receivables do not include Heritage Labs receivables, certain Hooper Holmes Services receivables, and other receivables deemed ineligible by the lender. As of September 30, 2014, the lender applied a discretionary reserve of $0.5 million. Available borrowing capacity, net of this discretionary reserve, was $4.3 million based on Eligible Receivables as of September 30, 2014. As of September 30, 2014, there were no borrowings outstanding under the 2013 Loan and Security Agreement.

The Company and ACF entered into an amendment to the 2013 Loan and Security Agreement on July 9, 2014 (refer to Note 9) to modify the financial covenants in an effort to better align such covenants with the Company's operations and strategy going forward. In addition, Eligible Receivables was amended to include up to fifty percent of Unbilled Eligible Receivables (as defined in the 2013 Loan and Security Agreement), which results in an increase in the Company's borrowing capacity. The 2013 Loan and Security Agreement contains various covenants, including financial covenants which require the Company to achieve a minimum EBITDA amount (earnings before interest expense, income taxes, depreciation and amortization) beginning with the twelve months ending March 31, 2015 as the first measurement date. The Company continues to have limitations on the maximum amount of capital expenditures for each fiscal year.

Other Considerations

The Company's Health and Wellness business principally sells through wellness, disease management, benefit brokers and insurance companies (referred to as channel partners) who ultimately have the relationship with the end customer. The Company's current services are often aggregated with other offerings from its channel partners to provide a total solution to the end-user. As such, the Company's success is largely dependent on that of its partners.

The Company's ability to generate cash flow in the future is dependent on realizing the benefits from the consolidation in Kansas and growing the Health and Wellness business as it seeks to streamline operations and improve efficiency through increased revenue and cost reduction initiatives. These and other factors could adversely affect liquidity.

Now that the Company has completed the sale of the Basking Ridge, New Jersey property and Portamedic, Heritage Labs and Hooper Holmes Services business units, it is poised for continued growth of the Health and Wellness operations. The capital raised from these transactions provided the Company with additional capital to invest in the third quarter of 2014 as it focuses on growth supporting Health and Wellness operations through the remainder of 2014 and beyond.

While the Company received $5.1 million in net proceeds during the three month period ended September 30, 2014 from the sale of the Basking Ridge, New Jersey property and sale of Heritage Labs and Hooper Holmes Services business units, the Company had cash outflows of $0.9 million and $0.2 million during the three month period ended September 30, 2014 in connection with discontinued operations and transition costs, respectively. The Company's cash balance was $3.1 million as of June 30, 2014 and $4.1 million as of September 30, 2014.

In August and September, the Company invested $0.4 million in capital expenditures to prepare for screening volume during the second half of 2014. The remaining change in cash for the three month period ended September 30, 2014 is due to the remaining higher fixed cost structure as discussed below and fulfillment and execution of screening events in advance of cash receipts from the Company's customers. To conduct successful screenings the Company must expend cash to deliver equipment and supplies required for the screenings as well as pay its health professionals and site management, which is in advance of the customer invoicing process and ultimate cash receipts for services performed. The Company expects to receive payment for its screenings completed in August and September, two of the higher volume months of the year, in the fourth quarter of 2014.

The Company continues to focus its attention on the long-term strategy and believe it has the necessary assets to make the most of its immediate opportunities while positioning the Company for long-term growth. The Company has transitioned out of the life insurance industry to focus on the Health and Wellness business in connection with the Alliance Agreement with CRL. As a part of the transition, the Company plans to reduce corporate fixed cost structure by evaluating head count, professional fees and other expenses. The Company expects to increase the flexibility of its variable cost structure to improve scalability with changes in screening volumes. Management will also continue to evaluate strategic partnerships, ventures and opportunities that will allow the Company to better leverage its capabilities while maintaining a smaller corporate footprint.

Based on the Company's anticipated level of future revenues and gross profits, anticipated cost reduction initiatives and existing cash and cash equivalents and borrowing capacity, the Company believes it has sufficient funds to meet its cash needs to fund operation expenses and capital expenditures for the twelve months following September 30, 2014.