4.	Reverse Merger

On January 27, 2016 AHC completed the reverse merger with AEON, an expanding clinical laboratory based in Gainesville, GA. The transaction was structured as a tax-free exchange, with the former AEON members receiving shares of common stock of AHC at the closing, and potential further issuances of common stock tied primarily to the earnings of AEON during the five calendar years ending December 2019. The AEON members received an aggregate of 19.9% (958,030 shares) of the common stock of AHC effective at the closing and will receive an additional 5% (240,711 shares) of the outstanding common stock of the Company, as defined, upon approval of the merger transaction by the shareholders of the Company. The shareholders of the Company approved the merger on July 13, 2016, and the Company authorized the issuance of the shares on September 14, 2016. The AEON members can also earn additional shares of common stock to increase their aggregate holdings to up to 90% of the outstanding stock of AHC, as defined, based upon meeting the benchmark targets in the merger agreement, including delivering $16,000,000 in EBITDA for the calendar year ended 2015 which was achieved (1,155,414 shares approved and 0 shares issued), and $100,000,000 in aggregate EBITDA for the calendar years 2016 through 2019. These additional shares issued to the former AEON members will be treated as dividends. In connection with the completion of the merger, Hanif A. (“Sonny”) Roshan, founder of AEON, became Chairman of the Company and Richard Hersperger, the CEO of AEON, became CEO of the Company and both hold seats on the Board of Directors. The former AEON members will have the right to elect one director for each 10% of the outstanding shares of the Company’s common stock they hold as a group. Accordingly, the transaction was accounted for as a reverse acquisition under the provisions of ASC 805-40 Business Combinations – Reverse Acquisitions, with AEON becoming the acquirer for accounting purposes and AHC becoming the accounting acquiree. It was determined that AEON was the accounting acquirer as a result of the control over the Board of Directors of the combined company by the former AEON members, the senior management positions in the combined company held by former AEON management, and AEON’s size in comparison to AHC.

The effective consideration transferred is determined based upon the amount of shares that AEON would have had to issue to AHC shareholders in order to provide the same ownership ratios as previously discussed. The fair value of the consideration effectively transferred by AEON should be based on the most reliable measure. In this case, the quoted market price of AHC shares provide a more reliable basis for measuring the consideration effectively transferred than the estimated fair value of the shares of AEON. The fair value of AHC common stock is based upon the closing stock price on January 27, 2016, the effective date of the merger, of $4.71 per share.

The effective consideration transferred was $36,800,000 and is comprised of the following:

Fair value of AHV common shares	(A)	$	22,675,000
Preferred stock outstanding	(B)		3,047,000
Stock options vested and outstanding	(C)		1,296,000
Warrants vested and outstanding	(C)		9,782,000

Consideration effectively transferred		$	36,800,000

(A)

Based upon 4,814,226 AHC common shares outstanding at a fair value of $4.71 per share, which was the closing price of AHC common shares on the effective date of the merger.

(B)

Represents 28,000 shares of Series B and 605,000 shares of Series D preferred stock as converted into 646,933 common shares with a fair value of $4.71 per share, which was the closing price of AHC common shares on the effective date of the merger.

(C)

Represents outstanding and vested AHC stock options and warrants acquired in connection with the reverse merger. The fair value of these stock options and warrants was determined using the Black Scholes model, with the following assumptions:

	Options			Warrants
Number of shares		559,595			3,479,896
Weighted average exercise price	$	4.46		$	5.24
Volatility		85.10	%		85.10	%
Risk-free interest rate		1.63	%		1.63	%
Expected dividend rate		0	%		0	%
Expected life (years)		4			4.16
Stock Price	$	4.71		$	4.71

The fair value of the assets acquired and liabilities assumed were based on management estimates. Based upon the preliminary purchase price allocation, the following table summarizes the estimated provisional fair value of the assets acquired and liabilities assumed at the date of acquisition:

Cash and cash equivalents	$	30,000
Restricted cash		121,000
Accounts receivable		174,000
Inventory		360,000
Prepaid expenses and other current assets		464,000
Property and equipment		189,000
Trade names and licensed technology		2,344,000
Deferred tax assets		38,804,000
Total assets acquired at fair value		42,486,000

Accounts payable and accrued expenses		3,860,000
Notes payable		4,078,000
Warrant liability		1,066,000
Total liabilities assumed		9,004,000

Net assets acquired		33,482,000
Goodwill		3,318,000
Total purchase consideration	$	36,800,000

The purchase price exceeded the fair value of the net assets acquired by approximately $3,318,000, which was recorded as goodwill and assigned to our Web-Based Software segment.

In connection with the reverse merger, the Company incurred approximately $323,000 and $974,000 for related transaction costs for the three and nine months ended March 31, 2016, included in selling, general and administrative expenses in the accompanying statements of operations.

The following unaudited pro forma results for the three and nine month periods ended March 31, 2016 and 2015 summarizes the consolidated results of operations of the Company, assuming the reverse merger had occurred on July 1, 2014 and after giving effect to the reverse acquisition adjustments, including amortization of tangible and intangible assets acquired in the transaction:

	(in thousands)
	Three months ended
	(As Restated, See Note 2)
	March 31, 2016		March 31, 2015
Net revenues	$	5,623	$	5,571
Net loss	$	(2,356)	$	(458)

	(in thousands)
	Nine months ended
	(As Restated, See Note 2)
	March 31, 2016		March 31, 2015

Net revenues	$	29,018	$	20,995
Net (loss) income	$	(4,082)	$	296