10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended September 30, 2018

☐ 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: 000-20190

AEON GLOBAL HEALTH CORP.

(Exact name of registrant as specified in its charter)

Delaware	14-1673067
(State or other jurisdiction	( I.R.S. Employer
of incorporation or organization)	Identification No.)
2225 Centennial Drive
Gainesville, GA 30504	30504
(Address of principal executive offices)	(zip code)

1-888-661-0225

(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

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

Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ☒	Smaller reporting company ☒
	Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

As of October 25, 2018 there were 7,383,706 shares of common stock, $0.001 par value per share, outstanding.

		Page
PART I FINANCIAL INFORMATION
ITEM 1.	FINANCIAL STATEMENTS
	Condensed Consolidated Balance Sheets at September 30, 2018 (unaudited) and June 30, 2018	2
	Condensed Consolidated Statements of Operations (unaudited)	3
	Condensed Consolidated Statements of Cash Flows (unaudited)	5
	Notes to Unaudited Condensed Consolidated Financial Statements (unaudited)	6
ITEM 2.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	21
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	31
ITEM 4.	CONTROLS AND PROCEDURES	31
PART II OTHER INFORMATION
ITEM 1.	LEGAL PROCEEDINGS	33
ITEM 1A.	RISK FACTORS	33
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	36
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	36
ITEM 4.	MINE SAFETY DISCLOSURES	36
ITEM 5.	OTHER INFORMATION	36
ITEM 6.	EXHIBITS	36
SIGNATURES		37

PART I - FINANCIAL INFORMATION 

ITEM 1. FINANCIAL STATEMENTS

Aeon Global Health Corporation and Subsidiaries

Consolidated Balance Sheets

	September 30,		June 30,
	2018		2018
	(Unaudited)		(Audited)
Assets
Current assets
Cash and cash equivalents	$	569,694	$	723,352
Accounts receivable, net		2,701,110		2,507,304
Inventory, net		407,878		453,129
Prepaid expenses and other current assets		79,405		54,058
Total current assets		3,758,087		3,737,843
Property and equipment, net		1,292,990		1,421,097
Other assets
Deferred tax asset		5,816,315		5,816,315
Total assets	$	10,867,392	$	10,975,255
Liabilities and Shareholders' Equity
Current liabilities
Accounts payable	$	1,644,229	$	1,436,897
Accrued expenses		2,029,564		2,082,591
Accrued commissions		459,211		608,405
Accrued dividends		85,941		984,979
Accrued income taxes payable		515,667		515,667
Accrued interest notes payable		151,527		155,257
Deferred rent		204,452		194,628
Notes payable		1,698,169		3,049,651
Derivative liabilities		815,001		1,323,625
Total current liabilities		7,603,761		10,351,700
Deferred rent		157,498		135,001
Related party notes payable		1,415,449
Deferred Taxes Payable		-
Total liabilities		9,176,708		10,486,701
Commitments and contingencies
Shareholders’ equity
Preferred stock, $.10 par value; 5,000,000 shares authorized, Series D, 605,000 shares and Series E 25,000 shares issued and outstanding at September 30, 2018, and June 30, 2018, respectively		63,000		63,000
Common stock, $.001 par value; 190,000,000 shares authorized, 7,383,706 and 7,249,370 shares issued and outstanding on September 30, 2018, and June 30, 2018 , respectively		25,714		25,579
Additional paid-in capital		46,600,419		45,089,337
(Accumulated deficit) retained earnings		(44,998,449)		(44,689,362	)
Total shareholders’ equity		1,690,684		488,554
Total liabilities and shareholders’ equity	$	10,867,392	$	10,975,255

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

2

Aeon Global Health Corporation and Subsidiaries

Consolidated Statements of Operations

	Three Months
	Ended September 30,
	2018			2017
Net revenues
Fees for services	$	3,537,631		$	3,110,382
Hosted software services		199,009			243,020
Telehealth products and services		4,550			4,650
Total net revenues		3,741,190			3,358,052
Operating expenses
Cost of revenues		1,456,650			1,128,576
Selling, general and administrative		2,176,977			3,072,428
Share based compensation		69,400			68,785
Depreciation and amortization		125,777			222,584
Total operating expenses		3,828,804			4,492,373
Operating loss		(87,614	)		(1,134,321	)
Other (expense) income
Interest		(48,736	)		(27,349	)
Change in fair value of derivative liabilities		50,966			73,291
Other		(128,822)			(38,144	)
		(126,592)			7,798
Loss before provision for income taxes		(214,206)			(1,126,523	)
Provision for income taxes		(9,166	)		-
Net loss	$	(223,372)		$	(1,126,523	)
Less: preferred dividends	$	(85,715	)	$	(84,550	)
Net loss available to common shareholders	$	(309,087)		$	(1,211,073	)
Loss per share:
Basic loss per common share	$	(0.04)		$	(0.17	)
Diluted loss per common share	$	(0.04)		$	(0.17	)
Weighted average number of common shares outstanding
Basic		7,365,723			7,249,370
Diluted		7,365,723			7,249,370

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

3

Aeon Global Healthcare Corporation and Subsidiaries

Consolidated Statements of Shareholders' Equity

	Number				Number				Additional					Total
	of		Preferred		of		Common		Paid-in		Retained			Shareholders’
	Shares		Stock		Shares		Stock		Capital		Earnings			Equity
Balance, June 30, 2018		630,000		63,000		7,249,370		25,579		45,089,337		(44,689,362	)		488,554
Share-based compensation expense										69,400					69,400
Preferred common stock dividends						134,336		135		984,622		(85,715	)		899,042
Related party debt restructuring										457,060					457,060
Net loss												(223,372)			(223,372)
Balance September 30, 2018		630,000	$	63,000		7,383,706	$	25,714	$	46,600,419	$	(44,998,449)		$	1,690,684

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

4

Aeon Global Health Corporation and Subsidiaries

Consolidated Statements of Cash Flows

	Three Months
	Ended September 30,
	(Unaudited)
	2018			2017
Cash Flow from operating activities
Net loss	$	(223,372	)	$	(1,126,523	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities
Change in fair value of derivative liabilities		(50,966	)		(73,291	)
Depreciation and amortization		125,777			222,584
Share based compensation		69,400			68,785
Changes in assets and liabilities
Accounts receivable		(193,806	)		205,469
Inventory		45,251			(29,863	)
Prepaid expenses and other current assets		(25,347	)		(27,378	)
Accounts payable		207,332			(472,295	)
Accrued expenses		62,746			615,322
Accrued commissions		(202,993	)		108,515
Deferred rent		32,320			-
Net cash used in operating activities		(153,658	)		(508,675	)
Cash flows from investing activities
Disposal of fixed assets		-			33
Net cash provided by investing activities		-			33
Net decrease in cash, cash equivalents, and restricted cash		(153,658	)		(508,642	)
Cash, cash equivalents, and restricted cash at beginning of year		723,352			1,242,458
Cash, cash equivalents, and restricted cash at end of period	$	569,694		$	733,816
Reconciliation of cash, cash equivalents and restricted cash to condensed consolidated balance sheets
Cash and cash equivalents	$	569,694		$	733,816
Restricted cash included in restricted bank deposit		-			-
Total cash, cash equivalents and restricted cash	$	569,694		$	733,816
Supplemental disclosure of cash paid for:
Income taxes paid	$	9,224		$	76,316
Non-cash investing and financing activities
Non-cash preferred dividends	$	85,715		$	84,550
Preferred dividends settled in common stock	$	984,622		$	-

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

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1.            Description of Business, Reverse Merger and Liquidity  

Business

AEON Global Health Corp. (“AGHC” or the “Company”) and its subsidiaries primarily provides an array of clinical testing services to health care professionals through its wholly-owned subsidiary, Peachstate Health Management, LLC d/b/a AEON Clinical Laboratories (“AEON”). The Company also continues to provide its legacy secure web-based revenue cycle management applications and telehealth products and services that enable healthcare organizations to increase revenues, improve productivity, reduce costs, coordinate care for patients and enhance related administrative and clinical workflows and compliance with regulatory requirements. Web-based services are delivered as Software as a Service (SaaS) to customers interfacing seamlessly with billing, information and records management systems.

Going Concern

   As of the filing date of this Quarterly Report on Form 10-Q, and after giving effect to the note exchange described in Note 6 of the Notes to Condensed Consolidated Financial Statements, there is outstanding an aggregate principal amount of $3,113,618 of notes, consisting of (i) an aggregate principal amount of $1,698,169 of senior secured convertible notes with a maturity date of March 20, 2020 and (ii) a maximum aggregate principal amount of $2.0 million of senior secured grid notes with an aggregate outstanding principal amount of $1,415,449 at September 30, 2018 with a maturity date of June 30, 2020. In addition, there is outstanding secured note subordinated to the interests of the existing senior lenders with a remaining principal amount of $81,000, which is currently due and payable. We expect existing resources, revenues generated from operations, and proceeds received from other transactions we are considering which would satisfy working capital requirements for at least the next twelve months; however, no assurances can be given that we will be able to generate sufficient cash flow from operations or complete other transactions to satisfy our other obligations. The accompanying condensed consolidated financial statements do not include any adjustments to the recoverability and classification of assets carrying amounts or the amounts and classification of liabilities that might result from the outcome of these uncertainties. Accordingly, the Company needs to raise additional capital and is exploring potential transactions to improve our capital position. Unless we can increase revenues substantially or generate additional capital from other transactions, our current cash resources will only satisfy our working capital needs for a limited period of time.

   The Company's capital requirements have been and will continue to be significant and it is expending significant amounts of capital to develop, promote and market its services. The Company’s available cash and cash equivalents as of September 30, 2018 totaled approximately $570,000 and the Company’s working capital deficit was $3,846,000. Nevertheless, our available cash and cash equivalents as of the filing date of this Quarterly Report on Form 10-Q is approximately $457,000 and our estimated monthly cash requirement is approximately $1,200,000.

   The Company does not have a bank line of credit of other fixed source of capital reserves. We are exploring potential transactions to improve our capital position to ensure we can our financing and working capital requirements. We would expect to raise additional funds through obtaining a credit facility from an institutional lender or undertaking private debt financing. Raising additional funds by issuing equity or convertible debt securities may cause our stockholders to experience substantial dilution in their ownership interests and new investors may have rights superior to the rights of our other stockholders. Raising additional funds through debt financing or preferred stock, if available, may involve covenants that restrict our business activities and options and such additional securities may have powers, designations, preferences or rights senior to our currently outstanding securities. We may also enter into financing transactions which involve the granting of liens on the Company’s assets or which grant preferences of payment from its revenue streams, all of which could adversely impact the Company’s ability to rely on revenue from operations to support ongoing operating costs. Alternatively, we may seek to obtain new financing from existing security holders, which may include reducing the exercise or conversion prices of outstanding securities, or the issuance of additional equity securities. Currently we do not have any definitive agreements with any third parties for such transactions and there can be no assurance that we will be successful in raising additional capital or securing financing when needed or on terms satisfactory to the Company. If we are unable to raise additional capital when required, or on acceptable terms, we will need to reduce costs and operations substantially or potentially suspend operations, any of which would have a material adverse effect on the Company’s business, financial condition and results of operations.

6

Management has concluded that due to the conditions described above, there is substantial doubt about the entity’s ability to continue as a going concern. We have evaluated the significance of the conditions in relation to our ability to meet our obligations and believe that our current cash balance and future cash receipts from revenue will provide sufficient capital to continue operations through fiscal 2019. In addition to our efforts to improve our capital position through commercial operations and/or product partnering opportunities, we are considering capital raising alternatives, including credit lines from external financial sources. We cannot assure you that financing will be available on acceptable terms. If we are not successful in generating or raising additional capital, we will risk defaulting under the terms of our existing loans. Additionally, if additional capital is raised through the sale of equity or convertible debt securities, the issuance of such securities would result in dilution to our existing stockholders. Furthermore, despite our optimism regarding the future of the Company, even if the Company is adequately funded, there is no guarantee that any of our services will perform as hoped or that such services can be successfully commercialized.

2. Summary of Significant Accounting Policies

           The Company's condensed consolidated financial statements have been prepared in accordance with U.S. GAAP and following the requirements of the Securities and Exchange Commission ("SEC") for interim reporting.  As permitted under those rules certain footnotes or other financial information that are normally required by U.S. GAAP can be condensed or omitted.  These interim financial statements have been prepared on the same basis as the Company's annual financial statements and, in the opinion of management, reflect all adjustments, consisting only of normal recurring adjustments, which are necessary for a fair statement of the Company's financial information.  These interim results are not necessarily indicative of the results of be expected for the year ending June 30, 2019 or any other interim period or for any other future year.  These unaudited condensed consolidated financial statements should be read in conjunction with the Company's audited consolidated financial statements and the notes thereto for the year ended June 30, 2018, included in the Company's 2018 Annual Report on Form 10-K filed with the SEC.

The balance sheet as of June 30, 2018 has been derived from audited financial statements at that date but does not include all of the information required by U.S. GAAP for complete financial statements.

Principles of Consolidation

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

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

 The most sensitive accounting estimates affecting the financial statements are revenue recognition, the allowance for doubtful accounts, depreciation of long-lived assets, fair value of intangible assets and goodwill, amortization of intangible assets, income taxes and associated deferrals and valuation allowances, commitments and contingencies and measurement of derivative liabilities.

Accounts Receivable, Net

Accounts receivable represent customer obligations due under normal trade terms, net of allowance for doubtful accounts. The allowance for doubtful accounts reflects our best estimate of probable losses inherent in the accounts receivable balance. We determine the allowance based on known troubled accounts, historical experience and other currently available evidence. The allowance for doubtful accounts was approximately $960,000 and $942,000 as of September 30, 2018 and June 30, 2018, respectively.

Fair Value Measurements

The Company follows Accounting Standards Codification (“ASC”) 820-10, "Fair Value Measurements and Disclosures", of the FASB to measure the fair value of its financial statements and disclosures about fair value of its financial instruments. ASC 820-10 establishes a framework for measuring fair value in accounting principles generally accepted in the United States of America (U.S. GAAP), and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, ASC 820-10 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The three levels of fair value hierarchy defined by ASC 820-10 are described below:

Level 1 -	Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.
Level 2 -	Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.
Level 3 -	Pricing inputs that are generally unobservable input and not corroborated by market data.

7

The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lower priority to unobservable inputs. If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument. The Company's warrant liabilities and certain conversion features underlying the convertible debt are categorized as Level 3.

Concentrations of Credit Risk

The Company maintains its cash in bank deposit accounts which, at times, may exceed federally insured limits. Accounts are guaranteed by the Federal Deposit Insurance Corporation (FDIC) up to certain limits. At September 30, 2018 and June 30, 2018, the Company had approximately $320,000 and $473,000 in excess of FDIC-insured limits. The Company has not experienced any losses in such accounts.

At September 30, 2018, one customer had an accounts receivable balance of approximately $1,116,000. This customer’s accounts receivable balance comprises 31% of gross accounts receivable at September 30, 2018.

Income Taxes

The Company accounts for income taxes under an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the Company’s financial statements or tax returns. In estimating future tax consequences, the Company generally considers all expected future events other than enactments of changes in tax laws or rates. The effect on deferred taxes and liabilities of a change in tax rates will be recognized as income or expense in the period that includes the enactment date. A valuation allowance is established when necessary to reduce deferred tax assets to the amount expected to be realized.

Management considers the likelihood of changes by taxing authorities in its filed income tax returns and recognizes a liability for or discloses potential changes that management believes are more likely than not to occur upon examination by tax authorities. Management has not identified any uncertain tax positions that require recognition or disclosure in the accompanying condensed consolidated financial statements.

Reclassification

Certain prior year amounts have been reclassified to conform to the current year presentation.

 Recent Accounting Pronouncements

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers” (Topic 606). This accounting standard outlines a single comprehensive model to use in accounting for revenue arising from contracts with customers. This standard supersedes existing revenue recognition requirements and eliminates most industry specific guidance from GAAP. The core principal of this revenue recognition standard is to require an entity to recognize as revenue the amount that reflects the consideration to which it expects to be entitled in exchange for goods or services as it transfers control to its customers. The Company has implemented this ASU using the modified retrospective method with immaterial impact. This ASU requires significantly enhanced disclosures as shown in Note 3 of the condensed consolidated financial statements in this Quarterly Report on Form 10-Q. In compliance with this ASU, the Company records uncollectible accounts receivable amounts against revenue instead of bad debt expense.  There were no material reductions in net revenue for the three months ended September 30, 2018.

8

In February 2016, the FASB issued ASU 2016-02, “Leases,” which will require recognition on the balance sheet for the rights and obligations created by leases with terms greater than twelve months.  The new standard is effective for fiscal years and interim periods within those years beginning after December 15, 2018, with early adoption permitted.  The Company plans to adopt this guidance at the beginning of its first quarter of fiscal 2020 and plans to utilize the transition option which does not require application of the guidance to comparative periods in the year of adoption.  While the Company continues to evaluate this standard and the effect on related disclosures, the primary effect of adoption will be recording right-of-use assets and corresponding lease obligations for current operations leases.  The adoption is expected to have a material impact on the Company's consolidated balance sheets, but not on the consolidated statements of income or cash flows.  Additionally, the Company is in the process of reviewing current accounting policies, changes to business processes, systems and controls to support adoption of the new standard, which includes implementing a new lease accounting system.  

In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments,” which clarifies how certain cash receipts and payments are to be presented in the statement of cash flows. The Company adopted this ASU on July 1, 2018 with no impact on its cash flow presentation.

In May 2017, the FASB issued ASU 217-09, “Compensation-Stock Compensation (Topic 718): Scope of Modification Accounting”, which amends the scope of modification accounting for share-based payment arrangements, provides guidance on the types of changes to the terms or conditions or share-based payment awards to which an entity would be required to apply modification accounting. The ASU is effective for annual reporting periods, including interim periods within those annual reporting periods, beginning after December 15, 2017. The Company has adopted this ASU, and it does not expect it to have a material impact on the 2019 fiscal year financial statements.

In July 2017, the FASB issued ASU 2017-11, “Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480) and Derivatives and Hedging (topic 815); Part I. Accounting for Certain Financial Instruments with Down Round Features and Part II. Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception”, which states that when determining whether certain financial instruments should be classified as liabilities or equity instruments, a down round feature no longer precludes equity classification when assessing whether the instrument is indexed to the company’s own stock. As a result, a freestanding equity-linked financial instrument (or embedded conversion option) no longer would be accounted for as a derivative liability at fair value as a result of the existence of a down round feature when it is triggered. That effect is treated as a dividend and as a reduction of income available to common shareholders in basic EPS. The Company continues to evaluate the provisions of this ASU and plans to adopt this ASU effective July 1, 2019.

In December 2017, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 118, which is an application of ASC Topic 740, “Income Taxes”, in the reporting period that includes December 22,2017, the date on which the Tax Cuts and Jobs Act (the “Act”) was signed into law. The Act changes existing United States tax law and includes numerous provisions that will affect business. Staff Accounting Bulletin No. 118 implies that if a reasonable estimate can be made of the Act’s effects on the Company’s financial statements, the reasonable estimate should be reported in the period ending after December 22, 2017. The Company has implemented Staff Accounting Bulletin No. 118 during fiscal year 2018 by revaluing its deferred tax asset for the lower tax rates.

In August 2018, the FASB issued ASU 2018-13. “Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement”, which adds disclosure requirements to Topic 820 for the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. The Company is evaluating the provisions of this ASU and plans to adopt this ASU effective July 1, 2020.

3. Revenue Recognition 

The Company commenced recognizing revenue in accordance with the provisions of ASC 606, Revenue from Contracts with Customers starting July 1, 2018 using the modified retrospective method. Net revenues in the Company’s AEON lab test business accounted for approximately 95% and 93% of the Company’s total net revenues for the three months ended September 30, 2018 and 2017 and are primarily comprised of a high volume of relatively low-dollar transactions. The AEON business, which provides clinical testing services and other services, satisfies its performance obligation and recognizes revenues upon completion of the testing process or when services have been rendered. The Company estimates the amount of consideration it expects to be entitled to receive from customer groups, determined using the portfolio approach, in exchange for providing services. The portfolios determined using the portfolio approach consist of the following groups of customers: healthcare insurers, government payers, client payers and patients. In determining the amount to accrue for a delivered test, the Company considers factors such as payment history, payer coverage, whether there is a reimbursement contract between the payer and the Company, payment as a percentage of agreed upon rate (if applicable), amount paid per test and any current developments of changes that could impact reimbursement.  These estimates require significant judgement by management.  Revenues for hosted software services, telehealth products, and customer support services are recognized when persuasive evidence of an arrangement exists, delivery has occurred, the selling price is fixed and collectability is reasonably assured.  Contracts with customers in the AEON business do not contain significant financing components based on the typical period of time between performance of services and collection of consideration. Net revenues from the telehealth business accounted for approximately 5% and 7% of the Company’s total net revenues for the three months ended September 30, 2018.

The following are descriptions of the AEON business’ portfolios:

Healthcare Insurers

Reimbursements from healthcare insurers are based on negotiated fee-for-service schedules. Revenues consist of amounts billed net of contractual allowances for differences between amounts billed and the estimated consideration the Company expects to receive from such payers, which considers historical denial and collection experience and the terms of the Company’s contractual arrangements. Adjustments to the allowances, based on actual receipts from the commercial payers, are recorded upon settlement.

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Collection of consideration the Company expects to receive is normally a function of providing complete and correct billing information to the healthcare insurers within the various filing deadlines and typically occurs within 30 to 60 days of billing.

Government Payers

Reimbursements from government payers are based on fee-for-services schedules set by government authorities, including traditional Medicare and Medicaid. Revenues consist of amounts billed net of contractual allowances for differences between amounts billed and the estimated consideration the Company expects to receive from such payers, which considers historical denial and collection experience and other factors. Adjustments to the allowances, based on accrual receipts from the government payers, are recorded upon settlement.

Client Payers

Client payers include physicians, hospitals, accountable care organizations, integrated delivery networks, employers and other commercial laboratories and institutions for which services are performed on a wholesale basis and are billed based on negotiated fee schedules. Collection of consideration the Company expects to receive typically occurs within 60 to 90 days of billing.

Patients

Uninsured patients are billed based on established patient fee schedules or fees negotiated with physicians on behalf of their patients. Insured patients (includes coinsurance and deductible responsibilities) are billed based on fees negotiated with healthcare insurers. Collection of billings from patients is subject to credit risk and ability of the patients to pay. Revenues consist of amounts billed net of discounts provided to uninsured patients. Implicit price concessions represent differences between amounts billed and the estimated consideration the Company expects to receive from patients, which considers historical collection experience and other factors including current market conditions. Adjustments to the estimated allowances, based on actual receipts from the patients, are recorded upon settlement.

Telehealth

The Company enters into contracts with customers that may include software license agreements and/or hosting services. The vast majority of revenue derived from these contracts are recognized ratably over the life of the contract.  A minority of such contracts contain a price per transaction, in which case the revenue is recognized in the period when the transaction occurs.

The approximate percentage of net revenue by type of customer was as follows:

	Three Months Ended
	September 30,
	2018
Healthcare Insurers		46.9	%
Government Payers		23.5	%
Client Payers		24.4	%
Patient		0.2	%
Telehealth		5.0	%
Net revenues		100.0	%

4. Inventory

Inventory consists of the following:

	September 30,		June 30,
	2018		2018
Laboratory testing supplies	$	407,878	$	453,129
Total inventory	$	407,878	$	453,129

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5. Income Taxes

The Company's effective tax rate for the three months ended September 30, 2018 and 2017 was 3.4% and 0.0%, respectively. For the three months ended September 30, 2018, the Company calculated income tax expense based upon an annual effective tax rate forecast adjusted for discrete items that specifically relate to the interim period. Changes in tax laws or rates on deferred tax assets and liabilities are recognized as discrete items in the interim period that includes the enactment date. The differences between the effective tax rate and the U.S. federal statutory tax rate of 21% principally resulted from state and local taxes, federal tax rate reductions, changes in the valuation allowance, non-deductible expenses, and discrete items for the interim period.

At September 30, 2018, the Company had a deferred tax asset of approximately $40,699,000. Management has considered the realizability of the deferred tax assets and has concluded that a valuation allowance of approximately $34,883,000 should be recorded, related to net operating loss carryforwards that are not anticipated to be realized for a net deferred tax asset of approximately $5,816,000. Management determined that a valuation allowance was required with respect to the remaining net deferred tax assets. Realization of these assets is primarily dependent on achieving the forecast of future taxable income, as well as prudent and feasible tax planning strategies.

6. Related Party Notes Payable

	September 30, 2018				June 30, 2018
			Interest rate		Note		Interest rate
	Principal		per annum		Payable		per annum
Secured
	$	1,056,875	5% interest paid annually		$	1,056,875	5% interest paid annually
		641,294	5% interest paid annually			641,294	5% interest paid annually
		1,415,449	7.5% interest paid annually			255,417	5% interest paid annually
						591,613	5% interest paid annually
						504,452	5% interest paid annually
Total	$	3,113,618		Total	$	3,049,651

The principal amount listed above is principal only and does not include accrued interest of approximately $49,000 from July 1, 2018 to September 30, 2018.

Fiscal 2018 Exchange Transaction

On March 27, 2018, the Company entered into an agreement with the holders of outstanding senior secured convertible notes (the “Senior Notes”) to amend certain terms of such notes as described below ("Note Amendment Transaction").  Contemporaneously with the Note Amendment Transaction, the Company entered into an agreement with its Chief Executive Officer, who held a separate promissory note in the aggregate principal amount of $500,000, to exchange such note for an additional new senior note (the “Additional Senior Note”) on terms substantially the same as the senior secured convertible notes in the Note Amendment Transaction (the “Note Exchange Transaction").

Note Amendment Transaction

In the Note Amendment Transaction, the holders (the "Senior Holders") of the outstanding principal amount of $2,545,199 of Senior Notes entered into a consent and amendment agreement with the Company (the "Consent Agreement"), pursuant to which the Senior Notes were amended to extend the maturity date for a period of twelve months, to March 20, 2019 and in consideration thereof, the conversion rate of the Senior Notes was reduced to $1.20 per share.  Based on the adjusted conversion price, the principal amount of the Senior Notes was convertible into up to 2,120,999 shares of common stock.  The other material terms and conditions of the Senior Notes were not amended.  Certain holders of the Senior Notes are affiliated with the Company as follows: (1) an aggregate principal amount of $255,417 of Senior Notes are held by Hanif A. Roshan, the Chairman and Chief Executive Officer of the Company and (ii) an aggregate principal amount of $591,613 of Senior Notes are held by Optimum Ventures, LLC, a party affiliated by ownership with the former owners of Peachstate Health Management, LLC, our subsidiary.  Due to the adjustment of the conversion price of the Senior Notes, the exercise price of outstanding warrants to purchase an aggregate of 825,144 shares of common stock has been adjusted from $2.07 to $1.22 per share. Unpaid interest on the Senior Notes as of September 30, 2018 was approximately $202,000, which is not incorporated into the principal balance. Accrued interest on the Senior Note is due on March 20, 2019 or any earlier payment of the Senior Notes.

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Note Exchange Transaction

In connection with the Note Amendment Transaction, on March 27, 2018, the Company entered into a note exchange agreement (the "Note Exchange Agreement") with its Chief Executive Officer, who also held a promissory note in the aggregate principal amount of $500,000, pursuant to which the Company agreed to issue to him, in consideration of the cancellation of such note, the Additional Senior Note in the aggregate principal amount of $504,452, which is equal to the sum of the aggregate principal amount of the original note plus the accrued but unpaid interest thereon.  The closing of the Note Exchange Transaction occurred on March 27, 2018.

The Additional Senior Note is the same, in all material respects, as the Senior Notes described above in the Note Amendment Transaction and was convertible into shares of the Company's Common Stock at an initial conversion price of $1.20.  Based on the initial conversion price, the Additional Senior Note was convertible into up to 420,376 shares of common stock.  As the Additional Senior Note is the same in all material respects as the Senior Notes, the conversion price of the Additional Senior Note may be adjusted upon the occurrence of the same events which would result in an adjustment to the conversion price of the Senior Notes, as described above, including the issuance of securities at a price per share less than the current conversion price.  Similarly, the maturity date, interest rate, events of default, redemption and other terms of the Additional Senior Note are the same as for the Senior Notes.  The Additional Senior Note is on parity with the Senior Notes and, subject to certain exceptions, is senior to other existing and future indebtedness of the Company and, together with the Senior Notes, is secured by a first priority lien on all of the Company's assets to the extent and as provided in the Security Agreement as amended.

In accordance with ASC 470-50, "Debt - Modifications and Extinguishments", the Company's note exchange agreement was tested to determine whether a debt modification or debt extinguishment had occurred. Based on management's review, debt extinguishment accounting applied.  As a result of the debt exchange, the Company recorded $247,539 of non-cash expense resulting from the conversion feature of the convertible debt.  The loss consisted of the resulting derivative liability from the embedded conversion options in the new notes. 

Fiscal 2019 Note Restructuring Transaction

Note Restructuring Transaction

On July 19, 2018, the Company entered into the Settlement and Restructuring Agreement (the “Settlement Agreement”) with Peachstate Health Management, LLC (“AEON”), its wholly-owned subsidiary, and the former members of AEON included in the Agreement (the “Former Members”), including its Chief Executive Officer, Hanif A. Roshan. Pursuant to the Agreement, the parties agreed to among other things, resolve certain disagreements among themselves relating to the interpretation of certain provisions of the Merger Agreement.

 As a condition to the effectiveness of the Settlement Agreement, the parties agreed to restructure the loans previously made to the Company by Mr. Roshan and Optimum Ventures, LLC, (together the “Lenders”) and to exchange the existing Senior Notes held by them for a new senior credit instrument pursuant to which they will provide up to $2.0 million of credit to the Company (the “Note Restructuring Transaction”). In the Note Restructuring Transaction, the Company entered into a note exchange agreement dated July 19, 2018 (the “July Exchange Agreement”), with the Lenders, who collectively held senior secured convertible notes in the aggregate principal amount of $1,351,482 (the “Original Notes”).

Pursuant to the July Exchange Agreement, the Company agreed to issue the Lenders senior secured grid notes in the aggregate principal amount for a maximum of $2.0 million (the “Grid Notes”) in consideration of the cancellation of their Original Notes. The Grid Notes are structured to provide the Company with a credit facility pursuant to which it can borrow, pay, and reborrow any portion of the of the maximum principal amount of credit available under these instruments. The Grid Notes are senior, secured obligations and are not convertible into any equity securities of the company. The Grid Notes bear interest at the rate of 7.5% per annum with interest payable upon maturity or sooner in accordance with the prepayment mechanism of the Grid Notes. The maturity date of the Grid Notes is June 30, 2020.

The Grid Notes are on parity with an outstanding principal amount of $1,698,169 of other Senior Notes (hereinafter, the “Senior Convertible Notes”) and, subject to certain exceptions, are senior to other existing and future indebtedness of the Company and, together with the Senior Convertible Notes, will be secured by a first priority lien on all of the Company’s assets to the extent and as provided in a Security Agreement entered into between the Company, the Lenders and the holders of the Senior Convertible Notes (the “Convertible Note Holders”). The Grid Notes contain customary covenants against incurring additional indebtedness and granting additional liens and contains customary events of default, which terms are substantially the same as the corresponding provisions of the Original Notes. Upon the occurrence of an event of default under the Grid Notes, the Lenders may require the Company to repay all or a portion of the note in cash, at a price equal to 110% of the principal, plus accrued and unpaid interest.

The Grid Notes were issued in consideration of the exchange of (i) an aggregate principal amount of $759,869 of Original Notes held by Mr. Roshan and (ii) an aggregate principal amount of $591,613 of Original Notes held by Optimum Ventures, LLC. The maximum principal amount under the Grid Note issued to Mr. Roshan is $1,100,000 and the maximum principal amount under the Grid Note issued to Optimum is $900,000. Each Grid Note issued also reflects an outstanding principal amount equal to the sum of the aggregate principal amount of the Original Notes held by each Lender, plus the accrued but unpaid interest thereon. The aggregate principal amount of the Grid Notes outstanding as of the closing date of the Note Restructuring Transaction and September 30, 2018 was $1,415,449.  The closing of the Note Restructuring Transaction occurred on July 19, 2018.

In accordance with ASC 470-50, "Debt - Modifications and Extinguishments", the Company's note exchange agreement was tested to determine whether a debt modification or debt extinguishment had occurred. Based on management's review, debt extinguishment accounting applied.  As a result of the debt exchange, the Company recorded zero of non-cash expense resulting from the conversion feature of the convertible debt.  These notes were deemed to be a related party capital transaction and were included in additional paid-in capital at September 30, 2018.

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In connection with the Note Restructuring Transaction, the Company entered into a consent and amendment agreement with the Convertible Note Holders to obtain their consent to the issuance of the Grid Notes. In consideration thereof, the Company and Convertible Note Holders also agree to extend the maturity date of the Senior Convertible Notes for a period of one year to March 20, 2020 and to modify the redemption mechanism of such instruments by increasing the duration of the redemption notice period defined in the Senior Convertible Notes. In addition, the parties entered into an amendment to the Amended and Restated Security Agreement entered into as of March 20, 2017, as previously amended (the “Security Agreement”), to provide that the Grid Notes shall be secured by the collateral defined in such earlier Security Agreement.

7. Equity

Preferred Stock

As of September 30, 2018, there were 25,000 shares of Series E Convertible Preferred Stock outstanding. The shares of Series E Preferred Stock are initially convertible into an aggregate of 187,500 shares of common stock at the initial conversion rate of $4.00 per share. The conversion price of the Series E Preferred Stock will be subject to adjustment solely in the event of stock dividends, combinations, splits, recapitalizations, and similar corporate events and does not provide for general price-based anti-dilution adjustments. Each share of Series E Preferred Stock has a stated value of $30.00 per share and has the following rights and preferences: (i) each holder of the Series E Preferred Stock has the right, at any time, to convert the shares of Series E Preferred Stock into shares of common stock, (ii) the Series E Preferred Stock is redeemable at the Company's option commencing one year after the original issuance date, provided that the Company's common stock is listed on a national securities exchange at such time, and (iii) the Series E Preferred Stock will pay dividends at the rate of 5% per annum in cash. The shares of Series E Preferred Stock were issued in a transaction with the holder of the Company's previously outstanding shares of Series B Preferred Stock to exchange the shares of Series B Preferred Stock for the shares of Series E Preferred Stock. Pursuant to the exchange agreement for the preferred stock, the holder of the shares of Series B Preferred Stock agreed to waive all unpaid dividends that had accrued on the shares of Series B Preferred Stock. At September 30, 2018 the Company has accrued dividends of approximately $9,349 on the Series E Preferred Stock which remain unpaid.

As of September 30, 2018, there are 605,000 shares of Series D Convertible Preferred Stock outstanding. The Series D Preferred Stock can be converted by the holders into an aggregate of 619,154 shares of common stock at an initial conversion rate of $9.77139 per share. The holders of such shares have the right to convert the preferred shares at any time, although the shares received upon conversion may not be offered or sold except pursuant to an effective registration statement or an applicable exemption from the registration requirements of the Securities Act and applicable state securities laws. The Company has the right to repurchase the outstanding Series D Preferred Stock at a redemption price equal to $10.00 per share, plus accrued and unpaid dividends, and to require holders to convert their Series D Preferred Stock beginning in June 2016. Dividends on the Series D Preferred Stock accrue at a rate of 5% per annum and are payable semi-annually in cash or stock at the Company's option. At September 30, 2018, the Company has accrued dividends in the amount of approximately $76,366 on the Series D Preferred Stock, which remain unpaid. 

The Company's preferred stock takes precedence over Common Stock but ranks below debt in the event of liquidation. In addition, the Series D Convertible Preferred Stock ranks above the Series E Convertible Preferred Stock.

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Earnings per Share

FASB ASC Topic 260, Earnings per Share, requires the presentation of basic and diluted earnings per share. Basic earnings per share is calculated based on the weighted-average number of ordinary shares outstanding during the period, while diluted earnings per share is calculated to include any dilutive effects to ordinary shares. For the three months ended September 30, 2018, our ordinary share equivalents consisted of stock options, restricted stock units, convertible debt, preferred stock and warrants.

	Three Months Ended
	September 30,
	2018			2017
Basic earnings (loss) per share
Net loss	$	(223,372)		$	(1,126,523	)
Preferred stock dividends		(85,715	)		(84,550	)
Net loss available to common shareholders after preferred stock dividends	$	(309,087)		$	(1,211,073	)
Weighted average shares used in the computation of basic earnings per share		7,365,723			7,249,370
Loss per share - basic	$	(0.04)		$	(0.17	)
Dilutive earnings (loss) per share
Loss available to common shareholders	$	(309,087)		$	(1,211,073	)
Weighed average shares used in the computation of diluted loss per share		7,365,723			7,249,370
Shares used in the computation of diluted loss per share		7,365,723			7,249,370
Loss per share - diluted	$	(0.04)			(0.17	)

Common Stock Warrants

A schedule of common stock warrant activity for the three months ended September 30, 2018 is as follows:

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Warrant Activity	Number of Shares			Weighted Average Exercise Price per Share		Weighted Average Remaining Contractual Life (Years)		Aggregate Intrinsic Value
Outstanding June 30, 2018		3,458,826		$	3.65		3.41	$	-
Issued		-
Expired		(61,112	)	$	11.69		-	$	-
Outstanding September 30, 2018		3,397,714		$	3.25		3.30	$	-
Exercisable, September 30, 2018		3,397,714		$	3.25		3.47	$	-

Due to the adjustment of the conversion price of the New Senior Notes, the exercise price of outstanding warrants to purchase an aggregate of 825,144 shares of common stock has been adjusted from $2.07 to $1.22 per share.

8. Share-Based Compensation

Stock option activity under the Company's stock option plans for employees and non-executive directors for the three months ended September 30, 2018 is as follows:

Employees Information	Number of Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)
Outstanding June 30, 2018		265,346		$	7.08		6.55
Granted		-			-		-
Expired/Forfeited		(29,167	)		3.39		-
Outstanding September 30, 2018		236,179			7.54		6.13
Exercisable September 30, 2018		139,751		$	11.81		4.21

					Weighted
			Weighted		Average
			Average		Remaining		Aggregate
	Number of		Exercise		Contractual		Intrinsic
Non-Executive Director Information	Options		Price		Life (Years)		Value
Outstanding June 30, 2018		545,059	$	3.08		7.75	$	-
Granted		5,001		0.67		9.93		300
Expired/forfeited		-		-		-
Outstanding and exercisable September 30, 2018		550,060	$	3.04		7.54	$	300

Share based compensation for the three months ended September 30, 2018 and 2017 was approximately $69,400 and $69,000 respectively.

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Restricted stock unit activity under the Company's restricted stock unit plans for employees and non-executive directors for the three months ended September 30, 2018 is as follows:

	Number of RSUs			Weighted Average Grant Date Fair Value
Outstanding June 30, 2018		752,391		$	1.31
Granted		-			-
Expired/Forfeited		(37,000	)		1.19
Outstanding September 30, 2018		715,391		$	1.32

9. Earn-Out Merger Consideration

             Pursuant to the Amended and Restated Agreement and Plan of Merger dated January 26, 2016, as amended on May 31, 2016 and December 2016 (collectively the "The Merger Agreement"), AEON was merged into a newly formed acquisition subsidiary of Aeon Global Health Corp. (the "Aeon Acquisition").  The original Merger Agreement included, among other things, certain earn-out consideration (the “Earn-out”) and the assumption of certain liabilities. The Earn-out required the achievement of certain earnings before interest, taxes, depreciation and amortization (“EBITDA”) levels that were automatically adjusted upon the change of reimbursement rates adopted by the Centers for Medicare and Medicaid Services. Upon achievement of the EBITDA level for the three calendar years ending December 31, 2018 (“2018 Earn-out”), the Former Members would receive additional shares of the Company’s common stock so that the total number of shares of the Company’s common stock issued to the Former Members pursuant to the Merger Agreement would equal 85% of the issued and outstanding shares of the Company’s common stock on a post-issuance and fully-diluted (as defined in the Merger Agreement) basis. In addition, the Merger agreement provided that upon achievement of the EBITDA level for the four calendar years ending December 31,2019 (“2019 Earn-out”), the Former Members would receive additional shares of the Company’s common stock so that the total number of shares of the Company’s common stock issued to them pursuant to the Merger Agreement would equal 90% of the issued and outstanding shares of the Company’s common stock on a post-issuance and fully-diluted (as defined in the Merger Agreement) basis. The Former Members were also granted certain registration rights pursuant to the Merger Agreement (the “Registration Rights”), which remain outstanding. Achievement of the maximum amount of Earn-Out would have resulted in the issuance of over 70,000,000 shares of the Company’s common stock.

Subsequently, in connection with the Merger, the parties expressed differences of opinion on the interpretation of certain provisions of the Merger Agreement, the calculation of the number of shares of common stock issued pursuant to the initial tranches of the Earn-out under the Merger Agreement, and the assumption of income tax liabilities for undistributed income earned by AEON prior to the Merger. The Company has also incurred negative cash flow for the calendar years 2016 and 2017, necessitating the loan of approximately $760,000 by the Company’s Chief Executive Officer in addition to an amount of $591,613, including accrued interest, previously loaned by an entity owned by certain Former Members (collectively the “Loans”), which Loans have been extended on multiple occasions. The Loans were due and payable on March 20, 2019 and are convertible into common stock at $1.20 per share (currently 1,126,235 shares). In addition, the Chief Executive Officer and certain of the Former Members reduced their cash compensation as employees to zero and have been accepting restricted stock units of the Company as sole compensation.

The Company, AEON and the Former Members reached an agreement to resolve these matters and entered into the Settlement Agreement in order to: (i) provide a source of working capital to the Company to sustain operations and reduce the additional dilution which could have been caused by the conversion of the Loans; (ii) remove the uncertainty as to the number of shares which may be issued pursuant to the 2018 and 2019 Earn-outs by replacing percentages with fixed share amounts; (iii) agree that all share calculations for the Earn-outs are to be based on actual shares outstanding rather than on a “Fully-diluted” basis to provide additional certainty and reduce the potential issuances on account of the Merger from approximately 70,000,000 shares of common stock to approximately 1,200,000 shares of common stock; (iv) provide clarity as to the relationship between the 2018 Earn-out and 2019 Earn-out; (v) reduce the maximum percentage ownership of the Former Members; (vi) avoid the expense of a demand registration statement; and (vii) otherwise resolve all outstanding disagreements among the parties arising out of the Merger Agreement.

The parties also resolved all interpretative issues relating to the Merger Agreement and clarified the amount and terms of the Earn-outs as described below.

With respect to 2018 Earn-out, the parties agreed that the 2018 Earn-out, as adjusted according to the Merger Agreement, shall be $21,483,749 of EBITDA for the three calendar years ending December 31, 2018. If the 2018 Earn-out target is achieved, then on October 1, 2019, subject to the completion of the audited financial statements of AEON for the calendar year ending December 31, 2018, the Company shall issue the Former Members a fixed amount of 3,000,000 shares of the Company’s common stock; provided, however, that if AEON does not achieve the 2018 Earn-out target, but achieves EBITDA for the three calendar years ending December 31, 2018 of at least 75% of the 2018 Earn-out target, then on October 1, 2019, subject to the completion of the audited financial statements of AEON for the calendar year ending December 31, 2018, the Company shall issue the Former Members a fixed amount of 2,250,000 shares of the Company’s common stock.

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With respect to the 2019 Earn-out, the parties agreed that the 2019 Earn-out, as adjusted according to the Merger Agreement, shall be $32,600,530 of EBITDA for the four calendar years ending December 31, 2019. If the 2019 Earn-out target is achieved, then within three business days following the completion of the audited financial statements of AEON for the calendar years ending December 31,2019, the Company shall issue the Former Members a fixed amount of 4,000,000 shares of the Company’s common stock. If AEON fails to achieve the 2019 Earn-out target, but achieves EBITDA for the calendar years ending December 31, 2019 of at least 75% of the 2019 Earn-out target, then within three business days following the completion of the audited financial statements of AEON for the calendar year ending December 31, 2019, the Company shall issue the Former Members a fixed amount of 3,000,000 shares of the Company’s common stock.

The parties also agreed that if the 2019 Earn-out target is achieved the Former Members would be entitled to an “earn-out credit” equal to the amount by which such target is exceeded. If AEON did not achieve the 2018 Earn-out target (or the adjusted 2018 Earn-out Target), the earn-out credit would be applied to its EBITDA for the 2018 Earn-out and then the determination of whether the 2018 Earn-out was achieved (at either the full or the 75% level) will be recomputed. If the addition of the earn-out credit results in AEON achieving the 2018 Earn-out (at either level) then several additional shares of common stock shall be issued to the Former Members in accordance with the terms of the Settlement Agreement.

The Company also agreed that in consideration of the restructuring of the consideration due to the Former Members under the Merger Agreement, it shall issue an aggregate of 2,500,000 shares of the Company’s common stock to the Former Members. Such additional shares shall be issued to the Former Members pro rata based on their respective percentage ownership of AEON prior to the Merger and shall be deemed earned and issued on February 28, 2019.

As additional consideration to the Company under the Settlement Agreement, the Former Members agreed: (i) to relinquish all demand registration rights; (ii) that the arrangements set forth in the Settlement Agreement fully resolved any and all claims arising out of the Merger Agreement and the transactions contemplated thereby; and (iii) to a general release of claims as against the Company.

10. Fair Value Measurements and Other Financial Instruments

The carrying amounts of the Company's financial assets and liabilities, such as cash, accounts receivable, inventory, prepaid expenses, and other current assets, accounts payable and accrued expenses approximate their fair values because of the short maturity of these instruments.

In connection with the issuance of a convertible promissory notes as discussed in Note 6, the Company evaluated the note agreement to determine if the agreement contained any embedded components that would qualify the agreement as a derivative. The Company identified certain put features embedded in the convertible note agreement that potentially could result in a settlement in the event of a fundamental transaction, requiring the Company to classify the conversion feature as a derivative liability.  The restructuring of an aggregate principal amount of $1,351,482 of notes payable on July 19, 2018 resulted in the issuance of the Grid Notes described in Note 6 to these consolidated financial statements.  Such Grid Notes do not include a down-round feature.  This elimination of the conversion feature lowered the value of the Company's related party notes payable. 

The Company's Level 3 financial liabilities consist of the derivative conversion features of underlying convertible debt and warrants issued in 2011 to 2015. The Company valued the conversion features using the Black Sholes model prior to the three months ended September 30, 2016 and the Monte Carlo model for all periods thereafter. These models incorporate transaction details such as the Company's stock price, contractual terms maturity, risk free rates and volatility as of the date of issuance and each balance sheet date. The decrease in the value of the conversion feature of the convertible debt and warrants issued was primarily due to the change in the stock price compared with prior years.  The remaining $1,698,169 of notes payable contain conversion features.

The Company utilized the following assumptions in valuing the derivative conversion features:

Exercise Price	$	1.20		-	$	1.22
Risk free interest rate		2.32	%	-		2.93	%
Expected volatility		130	%	-		200	%
Remaining Term (years)		0.47		-		4.82

Fair Value of Financial Assets and Liabilities Measured on a Recurring Basis

The fair value of the Company's financial instruments, using the fair value hierarchy under U.S. GAAP detailed in "Fair Value Measurements" in Note 2, "Summary of Significant Accounting Policies and Recently Issued Accounting Standards," of the Notes to the Condensed Consolidated Financial Statements are included in the tables below.

The Company uses Level 3 of the fair value hierarchy to measure the fair value of the derivative liabilities and revalues its derivative liabilities at every reporting period and recognizes gains and losses in the statement of operations that are attributable to the change in the fair value of the derivative liabilities. Changes in the observable input values would likely cause material changes in the fair value of the Company's Level 3 financial instruments.  The significant unobservable input (probability of a down round event) used in the fair value measurement is the estimation of the likelihood of the occurrence of a change in the contractual terms of the financial instruments.  A significant increase (decrease) in this likelihood or in the volatility assumptions would result in a higher (lower) fair value measurement.

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The following tables provide a summary of the changes in fair value, including net transfers in and/or out, of all financial assets / (liabilities) measured at the fair value on a recurring basis using significant unobservable inputs during the three months ended September 30, 2018.

				Convertible
	Warrants			Notes		Total
Balance - June 30, 2018	$	505,069		$	818,556	$	1,323,625
Change in fair value of derivative liabilities		(64,333	)		(444,291)		(508,624)
Balance - September 30, 2018	$	440,736		$	374,265	$	815,001

	Fair value		Level 1		Level 2		Level 3
June 30, 2018 Derivative liabilities	$	1,323,625	$	-	$	-	$	1,323,625
September 30, 2018 Derivative liabilities	$	815,001	$	-	$	-	$	815,001

Of the $508,624 reduction in the fair value of the derivative liabilities, approximately $457,000 was reclassified to additional paid-in capital in conjunction with the extinguishment of certain related party notes on July 19, 2018.  See Note 6 for further discussion.

For the three months ended September 30, 2018 and 2017, the Company recorded non-cash income of approximately $509,000 and $773,000 for the changes in fair value of the derivative liabilities.

11. Commitments and Contingencies

In the case captioned Medlogic, LLC and Malena F. Badon v. Peachstate Health Management, LLC, et al., now pending in the 15^th Judicial District Court, Lafayette Parish, State of Louisiana, Docket No.: 2015-0151 I, the Company is the defendant in a case where the Plaintiffs, as independent contractors, allege they are owed certain commissions that they purportedly earned while marketing the Company’s products and services. The Company believes the contractors were overpaid and has asserted a counterclaim for reimbursement of such overpayments. The Company intends to vigorously defend the claim and pursue its counterclaim. The parties have completed initial discovery and the matter remains pending. The Company believes the resolution of this matter will not have a material effect on its financial statements.

Prior to the completion of the merger, AT&T provided various communication services and equipment to the Company, including facsimile lines. AT&T has claimed that the Company owes approximately $500,000 to it for such services. The Company continues to negotiate with AT&T to seek a compromise of such amount. To the Company’s knowledge, no proceedings have been commenced regarding this matter, and the Company has accrued the full amount of its potential liabilities on its financial statements as of the fiscal quarter ended September 30, 2018.

Regarding the termination of the Company’s relationship with certain executives, including the former Chief Executive Officer of Authentidate Holding Corp., O’Connell Benjamin, the Company has been reviewing its severance obligations and the vesting of post-termination provisions. The Company believes it has accrued all related severance costs as of September 30, 2018 related to past terminations. Mr. Benjamin commenced an arbitration proceeding before the American Arbitration Association (“AAA”) on or about June 22, 2016 requesting severance compensation of $341,620 and other benefits, including the vesting of certain stock option awards, pursuant to an employment agreement. The parties opted to pursue mediation in their attempt to resolve the matter, and a mediation session was held on October 30, 2017, but no resolution was reached. The Company believes it has valid defenses to Mr. Benjamin’s claims and intends to defend this matter accordingly as the arbitration process ensues.

On Mar 3, 2017, the Company received notice from the Office for Civil Rights (“OCR”) of the U.S. Department of Health and Human Services (“DHHS”) informing the Company that the OCR is conducting a review of the Company’s compliance with applicable Federal Standards related to Privacy of Individually Identifiable Health Insurance Portability and Accountability Act of 1996, as amended (“HIPAA”), and its privacy, security and data breach rules (“HIPAA Rules”). The OCR compliance review covers both the Company’s telehealth business and its clinical laboratory operations. The OCR reviewed the Company’s premises and conducted interviews on Mary 23, 2017 and the Company continues to work on a resolution with the OCR. The OCR may, among other things, require a correct action, issue penalties, or reach a monetary settlement. The Company does not expect a material adverse determination on consolidated financial position, results of operations, and cash flows.

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The Company was the defendant in an action captioned Cogmedix, Inc. v. Authentidate Holding Corp. in the Superior Court of Worcester County, Commonwealth of Massachusetts, Case No.: 1685CV013188. Suit was filed on September 6, 2016, based upon a purchase order dated December 6, 2013, alleging the principal amount of $227,061, and accumulating interest and attorney fees. On February 15, 2018, judgment in the amount of $320,638 was awarded.  The parties entered into a Forbearance Agreement on October 17, 2018, and plaintiff agreed to the Company's tender of 9 monthly installments totaling $149,996 payable through June 2019.

The Company, its Chief Executive Officer, and certain yet identified persons are defendants in a case captioned Carlotta Miraflor v. Peachstate Health Management, LLC d/b/a Aeon Global Health, et al., filed on October 4, 2017 in the United States District Court for the Central District of California, Case No.: 5:17-CV-02046-DSF-SP. Service of the Summons and Compliant was made on January 3, 2018 and an Answer denying liability was timely filed with the Court Clerk. The plaintiff is a principal of a corporate independent contractor which planned to provide marketing services to the Company pursuant to a services agreement. The lawsuit was preceded by a Dismissal and Notice of Rights by the U.S. Equal Employment Opportunity Commission in July 2017, on the basis that the Plaintiff was determined to be a principal of a corporate independent contractor. Notwithstanding this ruling the Plaintiff initiated suit alleging wrongful termination, retaliation, harassment, and other claims. The lawsuit seeks monetary damages for Plaintiff’s alleged loss of earning, emotional distress, punitive damages, and attorney’s fees and costs. The Company believes it has strong defenses to Plaintiff’s allegations and intends to vigorously defend the claim. Management is unable to determine at this time whether this claim will have a material impact on the Company’s financial condition, results of operations, or cash flow.

The Company is the defendant in the case captioned Healthy Practice Solutions, LLC v. Peachstate Health Management, LLC, now pending in State Court of Fulton County, State of Georgia, Civil Action File No.: 18 Ev 000042, where Plaintiff alleges it is owed certain commissions earned while marketing the Company’s products and services. The parties are negotiating the case’s resolution, and the Company believes the resolution of this matter will not have a material effect on its financial statements,

On September 15, 2015, the Company executed an amendment to the lease for its replacement offices in New Jersey. The term of the lease was for six years with annual rentals ranging from approximately $135,000 in the first year to $148,000 in the final year. The lease provided the Company with opportunities for its early termination by the tender of a pre-negotiated amount on the 18^th, 27^th, and 36^th month anniversary dates of the amendment. As part of the lease terms, the Company provided a letter of credit in the approximate amount of $121,000 as security for its lease payments. In July 2017, the Company vacated the premises, and the landlord took possession of both the premises and the aforementioned letter of credit monies in the first quarter of fiscal year 2018. The Company is evaluating its possible lease obligations and considering its alternatives, and, although not guaranteed, expects to be successful.

The Company is also subject to claims and litigation arising in the ordinary course of business. Our management considers that any liability from any reasonably foreseeable disposition of such claims and litigation, individually or in the aggregate, would not have a material adverse effect on our consolidated financial position, results of operations or cash flows.

The Company has entered into various agreements by which we may be obligated to indemnify the other party with respect to certain matters. Generally, these indemnification provisions are included in contracts arising in the normal course of business under which we customarily agree to hold the indemnified party harmless against losses arising from a breach of representations related to such matters as intellectual property rights. Payments by us under such indemnification clauses are generally conditioned on the other party making a claim. Such claims are generally subject to challenge by us and to dispute resolution procedures specified in the contract. Further, our obligations under these arrangements may be limited in terms of time and/or amount and, in some instances, we may have recourse against third parties for certain payments made by us. It is not possible to predict the maximum potential amount of future payments under these indemnification agreements due to the conditional nature of our obligations and the unique facts of each agreement. Historically, we have not made any payments under these agreements that have been material individually or in the aggregate. As of September 30, 2018, we are not aware of any obligations under such indemnification agreements that would require material payments.

12. Related Party Transactions

Except as disclosed herein, the Company has not entered into any material transactions or series of similar transactions with any director, executive officer or any security holder owning 5% or more of common stock since July 1, 2017.

AEON leases its facilities from Centennial Properties of Georgia, LLC under a lease agreement commencing April 2014, as amended January 20, 2016. The lease provides for a term of 12 years expiring March 2026. The lease payments range from $46,500 to a maximum of $60,000. In connection with the lease agreement, as security for its rent and other obligations under the lease, AEON has provided to the landlord a first priority lien and security interest in substantially all its assets. The landlord under the lease is Centennial Properties of Georgia, LLC a Georgia limited liability company. Centennial is owned by Hanif Roshan, Shawn Desai, Pyarali Roy and Sohail Ali, all of whom were AEON members and received common stock in the Company as a result of the AEON Acquisition. Mr. Roshan serves as the Chairman and CEO of the Company. Mr. Desai is the Chief Technology Officer of AEON. Mr. Roy is the Chief Strategy Officer of AEON. Related party rent expense for the three months ending September 2018 and 2017 was approximately $77,000 and $144,000, respectively.

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The Company holds certain related party notes payable to certain shareholders and its Chief Executive Officer, as detailed in Note 6. Interest expense relating to these notes amounted to approximately $49,000 and $32,000, for the three months ended September 30, 2018 and 2017, respectively. The Company restructured the Senior Notes held by Mr. Roshan and Optimum Ventures and exchanges the Senior Notes held by them for senior secured Grid Notes.

The Company entered into a lease agreement with Hanif A. ("Sonny") Roshan (the "landlord") for a residential premises at 5455 Golf View Drive, Braselton, Georgia 30517 for a term of one year beginning on January 1, 2018 and ending on December 31, 2018 for a fixed rent in monthly installments of $7,500 due and payable by the first day of each month. The lease is renewable with a 3% increase in rent for each renewal. The tenant is responsible for utilities and insurance with the landlord responsible for maintenance and taxes on the premises. Rent expense was $22,500 and $22,500 for the three months ended September 30, 2018 and 2017. 

Certain of the Company's affiliates, including members of its senior management and board, as well as their respective family members and other affiliates, have relationships and agreements among themselves as well as with the Company and its affiliates, that create the potential for both real, as well as perceived, conflicts of interest.  These include certain with which the Company does business.  The Company does business with Kemah Palms, an entity that is majority owned by the Company's Chairman and CEO, Hanif Roshan.  AEON generated approximately $10,000 in revenue from Kemah Palms in fiscal 2018.

On September 18, 2018, the Company and its wholly-owned subsidiary, Peachstate Health Management LLC, entered into a shared services agreement with Centennial Properties, LLC, an entity affiliated with the Company’s chief executive officer and which is the owner of the premises in which the Company conducts its operations. Pursuant to this agreement, in consideration of various services and accommodations provided by Centennial Properties, the Company and Peachstate Health Management agreed to provide, or cause to be provided, certain operational and administrative support services to Centennial Properties and certain other related entities. Under this agreement, in no event shall any employee of the Company or Peachstate Health Management be required to devote more than 10% of such employee’s business time per week to the provision of services to Centennial Properties. The shared services agreement has a term of three years.

An entity affiliated with the Company’s Chief Executive Officer extended a personal loan of $500,000 to an entity affiliated with a distributor and business consultant to the Company. The borrower has agreed to repay the loan by assigning a percentage of the net proceeds received by the affiliated distributor as commissions under its distribution agreement. 

13. Segment Information

The Company is operated as two segments: laboratory testing services, and web-based software.  Laboratory testing services includes the testing of an individual's blood, urine or saliva for the presence of drugs or chemicals and the patient's DNA profile. Web-based software provides secure web-based revenue cycle management applications and telehealth products and services that enable healthcare organizations to increase revenues, improve productivity, reduce costs, coordinate care for patients and enhance related administrative and clinical workflows and compliance with regulatory requirements. Management currently runs each segment separately and measures profitability and operational performance based on the financial statements, which are independently maintained.

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Selected financial information related to the Company's segments is presented below:

	Authentidate			AEON			Total
Three Months ended September 30, 2018
Net revenues	$	203,559		$	3,537,631		$	3,741,190
Cost of revenues		39,883			1,416,767			1,456,650
Operating expenses		189,841			3,638,963			3,828,804
Operating income (loss)		13,718			(101,332	)		(87,614	)
Net income (loss)		78,793			(302,165)			(223,372	)
Three months ended September 30, 2017
Net revenues	$	247,670		$	3,110,382		$	3,358,052
Cost of revenues		55,127			1,073,449			1,128,576
Operating expenses		873,385			3,618,988			4,492,373
Operating income (loss)		(628,715	)		(505,606	)		(1,134,321	)
Net income (loss)		(520,947	)		(605,576)			(1,126,523	)
September 30, 2018
Total assets	$	5,967,666			4,899,726		$	10,867,392
June 30, 2018
Total Assets	$	7,532,512		$	3,442,743		$	10,975,255

14.           Subsequent Events

                The Company was the defendant in an action captioned Cogmedix, Inc. v. Authentidate Holding Corp. in the Superior Court of Worcester County, Commonwealth of Massachusetts, Case No.: 1685CV013188. Suit was filed on September 6, 2016, based upon a purchase order dated December 6, 2013, alleging the principal amount of $227,061, and accumulating interest and attorney fees. On February 15, 2018, judgment in the amount of $320,638 was awarded.  The parties entered into a Forbearance Agreement on October 17, 2018, and plaintiff agreed to the Company's tender of 9 monthly installments totaling $149,996 payable through June 2019.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Certain statements in this Quarterly Report on Form 10-Q are "forward looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. When used in this Quarterly Report, words such as "may," "should," "seek," "believe," "expect," "anticipate," "estimate," "project," "intend," "strategy" and similar expressions are intended to identify forward looking statements regarding events, conditions and financial trends that may affect the Company's future plans, operations, business strategies, operating results and financial position. Forward looking statements are subject to a number of known and unknown risks and uncertainties that may cause actual results, trends, performance or achievements of the Company, or industry trends and results, to differ materially from the future results, trends, performance or achievements expressed or implied by such forward looking statements. These risks and uncertainties include:

• Changes in U.S., state, local and third-party payer regulations or policies or other future reforms in the healthcare system (or in the interpretation of current regulations), new insurance or payment systems, including state, regional or private insurance cooperatives (e.g., Health Insurance Exchanges), affecting governmental and third-party coverage or reimbursement for clinical laboratory testing;

• Significant fines, penalties, costs and/or damage to the Company's reputation arising from the failure to comply with U.S. and international privacy and security laws and regulations, including the Health Insurance Portability and Accountability Act of 1996, Health Information Technology for Economic and Clinical Health Act, U.S. state laws and regulations, and laws and regulations of the European Union and other countries;

• Loss or suspension of a license or imposition of a fine or penalties under, or future changes in, or interpretations of, the law or regulations of the Clinical Laboratory Improvement Act of 1967, and the Clinical Laboratory Improvement Amendments of 1988;

• Penalties or loss of license arising from the failure to comply with the U.S. Occupational Safety and Health Administration requirements and the U.S. Needlestick Safety and Prevention Act, or similar laws and regulations of U.S., state, local or international agencies;

• Fines, unanticipated compliance expenditures, suspension of manufacturing, enforcement actions, injunctions, or criminal prosecution arising from failure to maintain compliance with current good manufacturing practice (cGMP) regulations and other applicable requirements of various regulatory agencies;

• Changes in testing guidelines or recommendations by government agencies, medical specialty societies and other authoritative bodies affecting the utilization of laboratory tests;

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• Increased competition, including price competition, competitive bidding and/or changes or reductions to fee schedules and competition from companies that do not comply with existing laws or regulations or otherwise disregard compliance standards in the industry;

• Failure to obtain and retain new customers or a reduction in tests ordered, specimens submitted or services requested by existing customers;

• Customers choosing to insource services that are or could be purchased from the Company;

• Damage or disruption to the Company's facilities;

• Failure to identify, successfully close and effectively integrate and/or manage newly acquired businesses; and

• Adverse results in litigation matters.

These and certain other factors are discussed in this Quarterly Report and from time-to-time in other Company reports filed with the Securities and Exchange Commission (the “SEC”). The Company expressly disclaims any obligation to update or revise any forward-looking statements, whether because of new information, future events or otherwise, except as required by law.

The AEON Acquisition 

On January 27, 2016, AEON was merged into a newly formed acquisition subsidiary of Aeon Global Health Corp. (formerly, Authentidate Holding Corp. (the “Aeon Acquisition”)) pursuant to a definitive Amended and Restated Agreement and Plan of Merger dated January 26, 2016, as amended on May 31, 2016 and December 15, 2016 (collectively the “Merger Agreement”). The merger certificate was filed with the Secretary of State of Georgia on January 27, 2016, and AEON survived the merger as a wholly-owned subsidiary of Aeon Global Health Corp. The closing of the AEON acquisition occurred on January 27, 2016 and the Company filed a Current Report on Form 8-K on February 1, 2016 regarding the AEON Acquisition in accordance with the SEC regulations. In accordance with the Merger Agreement, the members of AEON prior to the effective time of the AEON Acquisition became holders of shares of the Company’s common stock, issuable in tranches as described in below. The acquisition of AEON requires that the Company pay certain Earn-out Payments (as defined and described below) to the former members of AEON upon achievement of certain financial milestones. The Earn-out Payments must be paid in shares of the Company’s common stock. While the Earn-out Payments were initially set forth in the Merger Agreement, in July 2018, the Company, AEON and the former members of AEON (the “Former Members”), entered into a Settlement and Restructuring Agreement (the “Settlement Agreement”), which among other things, resolved certain disagreements among themselves relating to the interpretation of certain provisions of the Merger Agreement, including a number of elements of the Earn-out Payments. With respect to the determination of the Earn-out payments, pursuant to the terms of the Merger Agreement and the relevant provisions of the Settlement Agreement, the following terms apply:

• Following the AEON Acquisition, AEON is operated as a separate entity.

• The former members of AEON prior to the effective time of the AEON Acquisition became holders of shares of common stock issuable in tranches as follows (the payments referred to in (b) through (f) below are hereinafter be referred to as the “Earn-out Payments”):

(a)    At the closing of the AEON Acquisition, the membership interests of AEON were converted into the right to receive such number of validly issued, fully paid and non-assessable shares of our common stock as is equal to 19.9% of the issued and outstanding shares of our common stock (rounded to the nearest whole share) as of the close of business on the business day immediately prior to the closing date of the AEON Acquisition (958,030 shares of our common stock).

(b)    In December 2016, we issued to the former AEON members 240,711 shares of common stock, representing 5% of the issued and outstanding shares of our common stock as of the close of business on the business day immediately prior to the closing date of the AEON Acquisition, following the approval of our shareholders of the Earn-out Payments.

(c)    In December 2016, we issued to the former AEON members 1,155,415 shares of common stock, representing 24% of the issued and outstanding shares of our common stock as of the close of business on the business day immediately prior to the closing date of the AEON Acquisition, due to the determination that AEON achieved at least $16,000,000 in EBITDA for the calendar year ending December 31, 2015.

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(d) Under the Settlement Agreement, in the event AEON achieves EBITDA (as adjusted in accordance with the Merger Agreement) of at least $21,483,749, in the aggregate, for the three calendar years ending December 31, 2018, (the “2018 Target”) then, on October 1, 2019,  subject to the completion of the audited financial statements of AEON for the calendar year ending December 31, 2018, the Company will issue the Former Members a fixed amount of 3,000,000 shares of the Company’s common stock (instead of such number of additional shares such that the total number of shares of the Company’s common stock issuable to the Former Members shall equal 85% of the issued and outstanding shares of the Company’s common stock on a post-issuance and fully diluted (as was defined in the Merger Agreement) basis). However, if the 2018 Target is not achieved, but AEON achieves EBITDA for the three calendar years ending December 31, 2018 of at least 75% of the 2018 Target, then on October 1, 2019, subject to the completion of the audited financial statements of AEON for the calendar year ending December 31, 2018, the Company shall issue the Former Members a fixed amount of 2,250,000 shares of the Company’s common stock.

(e) The Settlement Agreement likewise provides that in the event AEON achieves EBITDA (as adjusted in accordance with the Merger Agreement) of at least $32,600,530, in the aggregate, for the four calendar years ending December 31, 2019 (the “2019 Target”), the Company will issue to the Former Members a fixed amount of 4,000,000 shares of the Company’s common stock (instead of such number of additional shares equal to an additional 5% of the total issued and outstanding shares of the Company on a post-issuance and fully diluted (as was defined in the Merger Agreement) basis; resulting in the Former Members owing 90% of the issued and outstanding shares of the Company). However, if the 2019 Target is not achieved, but AEON achieves EBITDA for the four calendar years ending December 31, 2019 of at least 75% of the 2019 Target, then the Company shall issue the Former Members a fixed amount of 3,000,000 shares of the Company’s common stock. 

(f)    Lastly, the Settlement Agreement states that if the 2019 Target is achieved, the Former Members would be entitled to an “earn-out credit” equal to the amount by which such target is exceeded. If an earn-out credit is available, and AEON did not achieve the 2018 Target (or the adjusted 2018 Target), the earn-out credit would be applied to its EBITDA for the 2018 Target and the determination of whether the 2018 Target was achieved (at either the full or the 75% level) will be recomputed. If the addition of the earn-out credit results in AEON achieving the 2018 Target (at either level) then additional shares of common stock shall be issued to the Former Members in accordance with the Settlement Agreement.

In consideration of the restructuring of the consideration due to the Former Members under the Merger Agreement, the Company agreed to issue an aggregate of 2,500,000 shares of its common stock to the Former Members.  Such additional shares shall be issued to the Former Members pro rata based on their respective percentage ownership of AEON prior to the Merger and shall be deemed earned and issued on February 28, 2019.

Basis of Presentation

On January 27, 2016, AEON completed the transactions contemplated by the Merger Agreement with the Company under which AEON merged with a wholly-owned subsidiary of the Company, operating as a separate entity. The merger was accounted for as a reverse acquisition with AEON treated as the acquirer for accounting purposes. As such, the financial statements of AEON were treated as the historical financial statements of the Company. For the periods prior to the closing of the revers acquisition, the disclosure below relates to the historical business and operations of AEON.

Overview of AEON Business

Prior to the closing of the AEON Acquisition, AEON was a privately-held Georgia limited liability company. Subsequent to the Acquisition, the AEON business constitutes the majority of the combined Company's business.

AEON’s primary business focus is on production of actionable medical information for the provision of value-based medicine. This includes the testing of an individual’s urine or saliva for the presence of drugs or chemicals and the patient’s DNA profile.

AEON’s services are paid through a mix of reimbursement from Medicare, Medicaid and private health insurance along with a direct pay clientele. Currently, the top 50 payers represent over 90% of AEON’s billings with over 55% of these billings representing in-network insurance charges versus an industry average of 43.2%. For the fiscal quarter ended September 30, 2018, one customer accounted for approximately 15% of AEON’s revenue.

AEON supports its national client base from its Gainesville, Georgia headquarters, AEON is focused on technology on technology innovation and efficiency, utilizing state of the art testing equipment and its proprietary methodologies to provide some of the fastest and most reliable test results in the nation. AEON focuses on a service model that emphasizes the importance of the test result for both the medical provider and their patient. By focusing on fast, accurate turnaround of test results and the ability to integrate directly with the electronic medical records of clients, AEON believes it can provide a unique service that larger clinical laboratories cannot match. Because of the emphasis on its service model, AEON believes it is ideally positioned to be a preferred lab provider for personalized medicine. While the majority of AEON’s current testing volume is in toxicology, AEON has recently placed its focus and emphasis on growing its DNA pharmacogenomics and cancer genetic testing services in response to rapidly growing market demand for personalized medical testing.

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Overview of Web-Based Software Business

The Company, through its legacy AHC business, provides secure web-based revenue cycle management applications and telehealth products and services that enable health care organizations to (i) increase revenues, (ii) improve productivity, (iii) reduce costs, (iv) organize care for patients, and (v) enhance related administrative and clinical workflows and compliance with regulatory requirements. These web-based services are delivered as Software as a Service (SaaS) to its customers interfacing seamlessly with billing and document management systems. These solutions incorporate multiple features and security technologies such as business rules-based electronic forms, intelligent routing, transaction management, electronic signatures, identity credentialing, content authentication, automated audit trails and remote patient management capabilities. Both web and fax-based communications are integrated into automated, secure and trusted workflow solutions.

Outlook and Trends

The health care system in the United States is evolving and significant change is taking place in the system. We expect that the evolution of the health care industry will continue, and that industry change is likely to be extensive. There are a number of key trends that are having, and that we expect to continue to have, a significant impact on the diagnostic information services business in the United States. These trends present both opportunities and risks. Nevertheless, because of the nature of the services we provide, we believe that the industry will continue to grow over the long-term and that we are well positioned to benefit from the long-term growth expected in the industry.

Consistent with the last few years, we experienced additional reimbursement pressure for the AEON business during fiscal 2018, and we expect this trend to continue for fiscal 2019. Health care market participants, including governments, are focusing on controlling costs by (i) changing reimbursement for health care services (including but not limited to a shift from fee for service to capitation), (ii) changing medical coverage policies (e.g., health care benefits design), (iii) pre-authorization of laboratory testing, (iv) requiring co-pays, (v) introductory laboratory spend management utilities, and payment, and (vi) patient care innovations. As health plans and government programs require greater levels of patient cost-sharing, patient collections could be negatively impacted and adversely impact bad debt expense and potentially causing a shift to capitation arrangements where we agree to a predetermined monthly reimbursement rate for each member enrolled in a restricted plan, regardless of volume of our cost of services.

Fees for the laboratory services we provide are reimbursed by Medicare, Medicaid and commercial payers and are established in the clinical laboratory fee schedule (“CLFS”). Historically, these fee schedules are subject to annual adjustments. During the three months ended September 30, 2018 and 2017, approximately 23.5% and 39%, respectively, of the Company’s laboratory testing revenue was reimbursed from Medicare under the CLFS with the balance of the Company’s revenue derived from commercial insurance providers and Medicaid. For the three months ended September 30, 2018, approximately 93% of the Company’s revenues from laboratory testing services were derived from the provision of toxicology testing services. For the three months ended September 30, 2017, approximately 79% of the Company’s revenues from laboratory testing services were derived from the provision of toxicology testing services.

Over the past several years, the Company has experienced governmental reimbursement reductions as a direct result of the Patient Protection and Affordable Care Act (“ACA”) and other laws. The Protecting Access to Medicare Act (“PAMA”), which became law on April 1, 2014, is expected to result in a future net reduction in reimbursement revenue under the CLFS. These laws include provisions designed to control health care expenses reimbursed by governmental programs through a combination of reductions to fee schedules, incentives to physicians to participate in alternative payment models such as risk-sharing and new methods to establish and adjust fees.

Beginning in calendar year 2016, commercial and governmental payers focused on reducing payments to clinical laboratories by imposing more stringent payment guidelines in their adjudication processes. Additionally, effective January 2016, the Centers for Medicare and Medicaid Services (“CMS”) significantly reduced the unit reimbursement rate for many of the tests typically performed by the Company, along with the number of tests that CMS would reimburse. Because Medicare and Medicaid accounts for close to 30% of our annual revenue, this reduction in reimbursement rates had a substantial negative impact on 2016 revenue. During calendar year 2017, CMS reimbursement rates for the test we performed increased by an average of 18% to $253.87 and decreased 2.7% to $246.92 for calendar year 2018.

We experienced an overall 11% increase in revenues for the three months ended September 30, 2018, as compared to the to the three months ended September 30, 2017, which was largely due to an increase in revenue from one new customer. This customer provided us toxicology samples on a trial basis to assess our testing services. Although no certainty can be given, we anticipate that this customer may generate a large volume of toxicology testing revenue for us in the near future.           

Further payment reductions to Medicare, Medicaid and other government programs could have a direct adverse effect on the Company’s net earnings and cash flows. The Company cannot predict whether changes will be implemented that will result in further payment reductions. In addition to changes in reimbursement rates, the Company is also impacted by changes in coverage policies for laboratory tests. For example, CLFS coding and billing changes related to toxicology and other procedures were implemented in 2017 and 2018, and we experienced delays in the pricing and implementation of these new codes, which may continue. While the impact on price and margin is currently unclear, the Company anticipates that some of the impact will be mitigated by timely negotiation with payers impacted by these changes.

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During 2017 and 2018, the President of the United States and the federal legislature also have taken substantial efforts in an attempt to repeal and replace the Affordable Care Act (“ACA”). Further congressional efforts to repeal, amend, replace, or reform the ACA are possible, and the individual mandate component of the ACA was repealed as part of the Tax Cuts and Jobs Act of 2017. If additional legislation were to be enacted, it could have a significant impact on the U.S. health care system. The ongoing uncertainty regarding the ACA could create uncertainty generally in the health care market. Also, the trend of consolidating, converging and diversifying among customers and payers has continued. Consolidation is increasing price transparency and bargaining power and encouraging internalization of clinical testing.

Despite the market changes regarding reimbursement discussed above, the Company believes that the volume of clinical laboratory testing is positively influenced by several factors, including an expansion of Medicaid, managed care, and private insurance exchanges. Additional factors that may lead to future volume growth include an increase in the number and types of tests that are readily available (due to advances in technology and increased cost efficiencies) for the diagnosis of disease, and the general aging of the U.S. population.

Critical Accounting Policies

The Company's Critical Accounting Policies are listed in Note 2 of the Notes to Condensed Consolidated Financial Statements.

Recent Accounting Pronouncements

See Note 2 of the Notes to Condensed Consolidated Financial Statements for further information of certain accounting standards that have been adopted during fiscal 2018 and the first quarter of fiscal 2019 and certain accounting standards that we have not yet been required to implement but may be applicable to our future operations.

Results of Operations

Three months ended September 30, 2018 compared to three months ended September 30, 2017

Revenues were $3,741,190 for the three months ended September 30, 2018 compared to $3,358,052 for the three months ended September 30, 2017. The increase in revenues was largely from our business development efforts and establishing new customer relationships. In particular, one new customer provided us toxicology samples on a trial basis to assess our testing services.  

Cost of revenues for the three months ended September 30, 2018 was $1,456,650 (39% of total net revenues) compared to $1,128,576 (34% of total net revenues) for the three months ended September 30, 2017. The increase in revenue is primarily due to the timing of the purchase of lab testing supplies.

Gross margin as a percent of revenue for the three months ended September 30, 2018 was 61% as compared to 66% for the three months ended September 30, 2017.  The decrease in the gross margin percentage for the current year period is due to the increase in cost of revenues as a percentage of revenues to 39% from 34% in the prior year. The percentage increase in cost of revenues was due to the timing of lab testing supplies.

 Selling, general and administrative (SG&A) expenses were $2,176,977 (58% of total net revenues) for the three months ended September 30, 2018 as compared to $3,072,428 (92% of total net revenues) for the three months ended September 30, 2017. The decrease in SG&A costs is principally due to lower commissions as the result of an increase in non-commissionable revenue in the first quarter of 2018.

Share based compensation expense was $69,400 for the three months ended September 30, 2018 versus $68,785 for the three months ended September 30, 2018. The increase in 2018 was due to our grants of restricted stock units to our chief executive officer and other non-executive employees in consideration of their agreement to accept such restricted stock units instead of cash for their gross wages.

Depreciation and amortization expense was $125,777 and $222,584 for the three months ended September 30, 2018 and 2017, respectively. In the first quarter of 2018, a larger number of fixed assets were fully depreciated resulting in the reduced depreciation expense for such period.

Other income (expense) was $(126,592) and $7,798 for the three months ended September 30, 2018 and 2017, respectively. On July 19, 2018, approximately $1,351,000 of notes payable was restructured from notes with common stock conversion derivatives to notes without derivatives. The valuation of the warrants and notes payable combined was decreased by $50,966, resulting in additional income of such amount in the first quarter of 2018.

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(Expense) benefit for income taxes was $(9,166) and zero for the three months ended September 30, 2018 and 2017, respectively.

Net loss available to common shareholders for the three months ended September 30, 2018 was $(309,087) or $(0.04) per basic and a diluted common share as compared to a net loss available to common shareholders of $(1,211,073) or ($0.17) per basic and diluted common share in the prior year due to the reasons mentioned above.

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Liquidity and Capital Resources

Overview

The Company’s operations and product development activities have required substantial capital investment to date. As discussed in more detail below, our recurring operating losses and capital needs, among other factors, raise substantial doubt about our ability to continue as a going concern. Our condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Cash Flows

At September 30, 2018, unrestricted cash and cash equivalents amounted to approximately $570,000 and total assets at that date were approximately $10,867,000 compared to cash and cash equivalents at September 30, 2017 of approximately $734,000 and total assets of approximately $15,852,000. As of September 30, 2018, the Company had a working capital deficit of $3,846,000.  Our current estimated monthly cash requirement is approximately $1,200,000. Currently, our available cash and cash equivalents as of the filing date of this Quarterly Report on Form 10-Q is approximately $457,000. Net cash used by operating activities for the three months ended September 30, 2018 was approximately $154,000.

Going Concern

As of the filing date of this Quarterly Report on Form 10-Q, and after giving effect to the recent note exchange transaction described in greater detail in Note 6 of the Notes to Condensed Consolidated Financial Statements, there is outstanding an aggregate principal amount of $3,113,618 of notes, consisting of (i) an aggregate principal amount of $1,698,169 of senior secured convertible notes with a maturity date of March 20, 2020, (ii) a maximum aggregate principal amount of $2.0 million of senior secured grid notes with an aggregate outstanding principal amount of $1,415,449 with a maturity date of June 30, 2020. In addition, there is outstanding secured note subordinated to the interests of the existing senior lenders with a remaining principal amount of $81,000, which is currently due and payable.We continue to make principal payments each month on this subordinated note while discussing an extension. We expect existing resources, revenues generated from operations, and proceeds received from other transactions we are considering (of which there can be no assurance) to satisfy working capital requirements for at least the next twelve months, however, no assurances can be given, that we will be able to generate sufficient cash flow from operations or complete other transactions to satisfy our other obligations. The accompanying condensed consolidated financial statements do not include any adjustments to the recoverability and classification of assets carrying amounts or the amounts and classifications of liabilities that might result from the outcome of these uncertainties. Accordingly, the Company needs to raise additional capital and is exploring potential transactions to improve its capital position. Unless we increase revenues substantially or generate additional capital from other transactions, current cash resources will only satisfy working capital needs for a limited period of time.

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Management has concluded that due to the conditions described above, there is substantial doubt about the entity's ability to continue as a going concern.  We have evaluated the significance of the conditions in relations to our ability to meet our obligations and believe that our current cash balance, together with revenues generated from operations and proceeds received from other transactions we are considering, will provide sufficient capital to continue operations through fiscal 2019.  We cannot assure you that financing will be available on acceptable terms.  Furthermore, despite our optimism regarding the future of the Company, even if the Company is adequately funded, there is no guarantee that any of our services will perform as hoped or that such services can be successfully commercialized.

The Company does not have a bank line-of-credit or other fixed source of capital reserves and is exploring potential transactions to improve its capital position to ensure it is able to meet financing and working capital requirements. In addition to our efforts to improve our capital position through commercial operations and/or product partnering opportunities, we are considering capital raising alternatives, including credit lines from external financing sources.  We would expect to raise additional funds through obtaining a credit facility from an institutional lender or undertaking private debt financing. Raising additional funds by issuing equity or convertible debt securities may cause stockholders to experience substantial dilution in their ownership interests and new investors may have rights superior to the rights of other stockholders. Raising additional funds through debt financing or preferred stock, if available, may involve covenants that restrict the Company’s business activities and options and such additional securities may have powers, designations, preferences or rights senior to currently outstanding securities. We may also enter into financing transactions which involve the granting of liens on the Company’s assets or which grant preferences of payment from its revenue streams, all of which could adversely impact the Company’s ability to rely on revenue from operations to support ongoing operating costs. Alternatively, we may seek to obtain new financing from existing security holders, which may include reducing the exercise or conversion prices of outstanding securities, or the issuance of additional equity securities. Currently we do not have any definitive agreements with any third parties for such transactions and there can be no assurance that we will be successful in raising additional capital or securing financing when needed or on terms satisfactory to the Company. If we are unable to raise additional capital when required, or on acceptable terms, we will risk defaulting on our existing loans and need to reduce costs and operations substantially or potentially suspend operations, any of which would have a material adverse effect on the Company’s business, financial condition and results of operations.

Contractual Commitments

	Total		Less than 1 year		1-3 years		4-5 years		More than 5 years
Leases
Operating	$	5,407,001	$	557,000	$	1,542,001	$	1,373,000	$	1,935,000
Capital		8,052		8,052		-		-		-
Total lease obligations		5,415,053		565,052		1,542,001		1,373,000		1,935,000
Total debt obligations		3,346,145		81,000		3,265,145		-		-
Total obligations	$	8,761,198		646,052	$	4,807,146	$	1,373,000	$	1,935,000

AEON leases its facilities under a lease agreement dated March 1, 2014, as amended January 20, 2016.  The lease, amended, provided for a term of 12 years expiring March 2026.  In connection with the lease agreement, as security for its rent and other obligations under the lease, AEON has provided to the landlord a first priority lien and security interest in substantially all of its assets. Such lien is subordinated to the liens granted to the holders of our senior debt.

The landlord under the lease is Centennial Properties of Georgia, LLC, a Georgia limited liability company. Centennial is owned by Sonny Roshan, Shawn Desai, Pyarali Roy and Sohail Ali, all of whom are former members, or their spouses were former members, of AEON and have received and may in the future receive common stock because from the Merger.

The Company has entered into an amended lease for its offices in New Jersey in September 2015, which has a term of six years and annual rentals ranging from approximately $135,000 in the first year to $148,000 in the final year. The lease also provides the Company with a one-time option to review the lease for the term of five years at the then-current market rate and, provided the Company pays an early termination fee, allows the Company an early termination option on each of the 18^th month, 27^th month, and 36^th month anniversary dates of the effective date of the amendment. As part of the lease agreement, the Company reduced its letter-of-credit securing its lease payments to approximately $121,000. The Company is currently in negotiations to terminate this lease obligation and although not guaranteed, expects to be successful during fiscal year 2019. The Company is evaluating its possible lease obligations and considering its alternatives, and although not guaranteed, expects to be successful.

Other Matters

The events and contingencies described below have impacted or may impact our liquidity and capital resources.

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In connection with the private placement of Series D Preferred Stock in June 2013, we issued 665,000 shares of Series D 5% Convertible Preferred Stock.  Presently, there are 605,000 shares of Series D Preferred Stock outstanding.  The shares of Series D Preferred Stock are convertible into 619,154 shares of common stock at the conversion rate of $9.77139 per share. Each share of Series D Preferred Stock has a stated value of $10.00 per share.  The Company has the right to repurchase these shares at the stated value per share, plus accrued and unpaid dividends and to require the holders to convert such securities into common stock starting in June 2016.  Each holder of Series D Preferred Stock has the right to require the holders to convert such securities into common stock at any time commencing on the six-month anniversary date of the issue date.  The Series D Preferred Stock pays dividends at the rate of 5% per annum, payable in cash or shares of common stock, at the rate of 5% per annum, payable in cash or shares of common stock, at the Company's option, subject to certain limitations.  At September 30, 2018, the Company has accrued dividends on the shares of Series D Preferred Stock in the amount of approximately $75,418 which remain unpaid.

Further, there are 25,000 shares of Series E Preferred Stock outstanding which also accrue dividends at the annual rate of 5% of the issue price payable on a semi-annual basis.  The shares of Series E Preferred Stock were issued in March 2017 in exchange for the surrender of the previously outstanding shares of Series B Preferred Stock.  At September 30, 2018, the Company has accrued dividends in the amount of approximately $9,349 on the shares of Series E Preferred Stock which remain unpaid. 

On March 1, 2017, the Company extended the expiration date of an aggregate of 309,547 outstanding common stock purchase warrants which were original issued in March and September 2012 in separate private placements of the Company’s securities. Of the warrants extended, an aggregate of 124,370 warrants would otherwise have expired on March 15, 2017, and 185,177 would have expired on September 29, 2017. In both cases, the expiration date of the warrants has been extended to September 29, 2018. These warrants have an exercise price of $12.06 per share. On September 26, 2018, the Company extended the expiration date of these for a period of one year to September 29, 2019. Other than the extension of the term of these warrants, the provisions of the warrants remain unchanged.

Debt Exchange and Restructuring Transactions

March 2017

On March 20, 2017, the Company entered into a note exchange agreement with the holders of an aggregate principal amount of $2,170,000 of outstanding promissory notes (the “Original Notes”), which were due and payable, pursuant to which the Company agreed to issue the holders of such notes, in consideration of the cancellation of the Original Notes, new promissory notes in the aggregate principal amount of $2,545,199, which were equal to the sum of the aggregate principal amount of the original notes plus the accrued but unpaid interest on the Original Notes (the “Senior Notes”). The Senior Notes are convertible into shares of the Company’s common stock at an initial conversion price of $2.03 per share. Based on the initial conversion prices, the Senior Notes are convertible into shares of the Company’s common stock at an initial conversion price of $2.03 per share. Based on the initial conversion prices, the Senior Notes were convertible into up to 1,253,792 shares of common stock. If the Company issued or sold shares of its common stock, rights to purchase shares of its common stock, or securities convertible into shares of its common stock for a price per share that was less than the conversion price then in effect, such conversion price would be decreased to equal 85% of such lower price. The foregoing adjustments to the conversion price would not apply to certain exempt issuances, including issuances pursuant to certain employee benefit plans. In addition, the conversion price is subject to adjustment upon stock splits, reverse stock splits, and similar capital changes. All the Senior Notes had a maturity date of one year from the closing date.

The Senior Notes earn interest at a rate of 5% per annum with interest payable upon maturity, the conversion of the Senior Notes or on any earlier redemption date. Commencing one month after the Company’s common stock is listed for trading on national securities exchange the Company will have the right to redeem all or any portion of the outstanding principal balance of the Senior Notes, plus all accrued but unpaid interest at a price equal to 110% of such amount. The holders of the Senior Notes have the right to convert any or the entire amount to be redeemed into common stock to redemption. Subject to certain exceptions, the Senior Notes contain customary covenants against incurring additional indebtedness and granting additional liens and contained customary events of default. Upon the occurrence of an event of default under the Senior Notes, the holders have the right to require the Company to repay all or a portion of the note in cash, at a price equal to 110% of the principal, plus accrued and unpaid interest.

In connection with the above note exchange transaction consummated in March 2017, the Company exchanged all outstanding shares of Series B Convertible Preferred Stock (the “Series B Preferred Stock”) for shares of a new series of convertible preferred stock designated as Series E Convertible Preferred Stock (the “Series E Preferred Stock”). Accordingly, on March 20, 2017, the Company also entered into a separate exchange agreement with the holder of the shares of Series B Preferred Stock, to exchange such shares for a total of 25,000 shares of Series E Preferred Stock. The Shares of Series E Preferred Stock are initially convertible by the holder into an aggregate of 187,000 shares of commons stock at the initial conversion rate of $4.00 per share. The conversion price of the new preferred stock will be subject to adjustment solely in the event of stock dividends, combinations, splits recapitalizations, and similar corporate events and does not provide for general price-based anti-dilution adjustments. Each share of Series E Preferred Stock has a stated value of $30.00 per share. On March 20, 2017, the Company filed with the State of Delaware a Certificate of Designations, Rights and Preferences and Number of Shares of Series E Convertible Preferred Stock, referred to as the Series E Designation. The Series E Preferred Stock has the following rights and preferences: (i) each holder of the Series E Preferred Stock will have the right, at any time, to convert the shares of Series E Preferred Stock into shares of common stock, (ii) the Series E Preferred Stock will be redeemable at option commencing one year after the closing date (provided that the Company’s common stock is listed on a national securities exchange at such time and (iii) the Series E Preferred Stock will pay dividends at a rate of 5% per annum in cash. Pursuant to the exchange for the preferred stock, the holder of the shares of Series B Preferred Stock agreed to waive all unpaid dividends that had accrued on the shares of Series B Preferred Stock.

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March 2018

On March 27, 2018, the Company entered into an agreement with the holders of the Senior Notes to amend certain terms of such notes (the “Note Amendment Transaction”). In the Note Amendment Transaction, the holders of the Senior Notes entered into a consent and amendment agreement with the Company (the “Consent Agreement”), pursuant to which the Senior Notes were amended to extend the maturity date for a period of twelve months, to March 20, 2019 and in consideration thereof, the conversion rate of the Senior Notes was reduced to equal $1.20 per share. Based on the adjusted conversion price, the principal amount of the Senior Notes will be convertible into up to 2,120,199 shares of common stock. As the conversion price of the Senior Notes was further reduced, the exercise price of outstanding warrants to purchase an aggregate of 825,184 shares of common stock, which was adjusted to $2.07 following the 2017 note exchange transaction, was further reduced to $1.22 per share.

Contemporaneously with the Note Amendment Transaction, the Company entered into a note exchange agreement (the “Note Exchange Agreement”) with its Chief Executive Officer, who held a separate promissory note in the aggregate principal amount of $500,000, to exchange such note for a new senior note on terms substantially the same as the Senior Notes (the “2018 Note Exchange Transaction”). Pursuant to the Note Exchange Agreement, the Company issued its Chief Executive Officer, in consideration of the calculation of the then-existing note, a new senior secured note (the “Additional Senior Note”) in the aggregate principal amount of $504,452, which is equal to the sum of the aggregate principal amount of the prior note, plus the accrued but unpaid interest thereon. The closing of the 2018 Note Exchange Transaction occurred on March 27, 2018. The Additional Senior Note is the same, in all material respects, as the Senior Notes described above in the Note Amendment Transaction and is convertible into shares of the Company’s Common Stock at an initial conversion price of $1.20. Based on the initial conversion price, this note is convertible into up to 420,376 shares of common stock. Further the conversion price of the Additional Senior Note may be adjusted upon the occurrence of the same events which would result in an adjustment of the conversion price of the Senior Notes, as described above, including the issuance of securities at a price per share less than the current conversion price. Similarly, the maturity date, interest rate, events of default, redemption and other terms of such Additional Senior Note are the same as for the Senior Notes. The Additional Senior Note is on parity with the Senior Notes and, subject to certain exceptions, is senior to other existing and future indebtedness of the Company and, together with the Senior Notes, is secured by a first priority lien on all of the Company’s assets to the extent and as provided in the Security Agreement, as amended.

July 2018

Pursuant to the Settlement Agreement, Mr. Roshan and Optimum Ventures, LLC (the “Lenders”) agreed to restructure the loans that they previously made to the Company, as evidenced by the Senior Notes held by them and to exchange their existing notes for a new senior credit instrument pursuant to which they will provide up to $2.0 million of credit to the Company. The Company entered into a note exchange agreement dated July 19, 2018 (the “July Exchange Agreement”) with the Lenders, who collectively held senior secured convertible notes in the aggregate principal amount of $1,351,482. Pursuant to the July Exchange Agreement, the Company issued the Lenders new senior secured Grid Notes in the maximum aggregate principal amount of $2.0 million in consideration of the cancellation of their original Senior Notes. The Grid Notes are structured to provide the Company with a credit facility pursuant to which it can borrow, pay, and re-borrow any portion of the maximum principal amount of credit available under these instruments. The Grid Notes are senior, secured obligations and are not convertible into any equity securities of the Company. The Grid Notes bear interest at the rate of 7.5% per annum with interest payable upon maturity or sooner in accordance with the prepayment mechanism of the Grid Notes. The maturity date of the Grid Notes is June 30, 2020.

The Grid Notes were issued in consideration of the exchange of (i) an aggregate principal amount of $759,869 of Senior Notes held by Mr. Roshan and (ii) an aggregate principal amount of $591,613 of Senior Notes held by Optimum Ventures, LLC. Upon the closing, a Grid Note was issued to each of the Lenders in a maximum principal amount based on the relative percentages of the original notes that were held by them. The maximum principal amount under the Grid Note issued to Mr. Roshan is $1,100,000 and the maximum principal amount under the Grid Note issued to Optimum is $900,000. Each Grid Note issued also reflects an outstanding principal amount equal to the sum of the aggregate principal amount of the Senior Notes held by each Lender, plus the accrued but unpaid interest thereon. The aggregate principal amount of the Grid Notes outstanding as of the closing date of the Note Restructuring Transaction, and at September 30, 2018 was $1,415,449.  The closing of this transaction occurred on July 19, 2018. The Grid Notes are on parity with an outstanding principal amount of $1,698,169 of the other outstanding convertible Senior Notes and, subject to certain exceptions, are senior to other existing and future indebtedness of the Company and, together with the remaining Senior Notes, are secured by a first priority lien on all of the Company’s assets to the extent and as provided in a Security Agreement entered into between the Company, the Lenders and the holders of the other Senior Notes (the “Convertible Note Holders”). The Grid Notes contain customary covenants against incurring additional indebtedness and granting additional liens and contains customary events of default, which terms are substantially the same as the corresponding provisions of the original notes. Upon the occurrence of an event of default under the Grid Notes, the Lenders may require the Company to repay all or a portion of the note in cash, at a price equal to 110% of the principal, plus accrued and unpaid interest.

In connection with this restructuring transaction, the Company entered into a consent and amendment agreement with the Convertible Note Holders to obtain their consent to the issuance of the Grid Note. In consideration thereof, the Company and Convertible Note Holders agreed to extend the maturity date of the Senior Convertible Notes for a period of one year to March 20, 2020 and to modify the redemption mechanism of such instruments. In addition, the parties entered into the amendment to the Security Agreement to provide that the Grid Notes shall be secured by the collateral defined in such earlier Security Agreement.

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Subordinated Note

On April 24, 2017, the Company entered into a settlement and mutual release with its former Chief Financial Officer, William A. Marshall to resolve an outstanding arbitration proceeding. Pursuant to the separation agreement and general release, the Company agreed to provide the following to the former Chief Financial Officer: (i) cash payments totaling $170,000 to be paid over time through May 15, 2018, (ii) a lump sum severance payment of $160,000 that was payable on June 15, 2018, (iii) the issuance of a total of 12,835 vested shares of common stock pursuant to the terms of the restricted stock units granted in January 2013 and January 2017, and (iv) 27,388 stock options previously granted became vested and exercisable for the duration of their original exercise periods, subject, however to the terms of a lockup agreement. Pursuant to the settlement agreement, the Company issued a secured senior promissory note, subordinated to the interests of the existing lenders, which provides for events of default that are customary for similar transactions. We continue to make principal payments against the subordinated note each month while discussing an extension, have reduced the outstanding principal of such note to $81,000 as of the date of this report, and expect to extinguish the obligation in full by April 2019. Although no guarantee can be given, management anticipates that it will be able to extend or otherwise modify the Company’s obligations under the notes for an additional period or periods.

Off-Balance Sheet Arrangements

We have not created and are not party to any special-purpose or off-balance sheet entities for raising capital, incurring debt or operating parts of our business that are not consolidated into our financial statements. We do not have any arrangements or relationships with entities that are not consolidated into the Company’s financial statement that are reasonably likely to materially affect liquidity or the availability of capital resources. We have entered into various agreements by which we may be obligated to indemnify the other party with respect to certain matters. These indemnification provisions are generally included in contracts arising in the normal course of business under which we customarily agree to hold the indemnified party harmless against losses arising from a breach of representations related to such matters as intellectual property rights. Payments by us under such indemnification clauses are generally conditioned on the other party making a claim. Such claims are generally subject to challenge by us and to dispute resolution procedures specified in the particular contract. Further, obligations under these arrangements may be limited in terms of time and/or amount and, in some instance, we may have recourse against third parties for certain payments made by us. It is not possible to predict maximum potential amount of future payments under these indemnification agreements due to the conditional nature of these obligations and the unique facts of each particular agreement. We have not historically made any payments under these agreements that have been material individually of in the aggregate. As of September 30, 2018, we are not aware of any obligations under such indemnification agreements that would require material payments.

Effects of Inflation and Changing Prices

The impact of general inflation on our operations has not been significant to date and we believe inflation will continue to have an insignificant impact on us.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

 As of September 30, 2018, we are not exposed to significant financial market risks from changes in foreign currency exchange rates and are only minimally impacted by changes in interest rates. Nevertheless, in the future, we may enter into transactions denominated in non-U.S. currencies or increase the level of our borrowings, which could increase our exposure to these market risks. We have not used, and currently do not contemplate using, any derivative financial instruments.

Interest Rate Risk

At any time, fluctuations in interest rates could affect interest earnings on the Company's cash and marketable securities. We believe that the effect, if any, of reasonably possible near-term changes in interest rates on our financial position, results of operations, and cash flows would not be material. We have not used derivative financial instruments in our investment portfolio.

At September 30, 2018, unrestricted cash totaled approximately $570,000 and was in non-interest-bearing checking accounts used to pay operating expenses.

ITEM 4. CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

We maintain a system of disclosure control 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 within the time periods specified in the SEC’s rules and forms. This information is also accumulated and communicated to management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), as appropriate, to allow timely decisions regarding required disclosure. Our management, under the supervision and with the participation of its CEO and CFO, evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Our management identified material weaknesses in the control environment described below, and based on that evaluation, because of these material weaknesses, our CEO and CFO concluded that our disclosure controls and procedures were not effective as of September 30, 2018. In light of the material weaknesses described below, we performed additional analysis and other post-closing procedures to ensure that our financial statements were prepared in accordance with GAAP. Accordingly, the CEO and CFO believe that the financial statements included in this report fairly represent in all material respects (and in accordance with U.S. generally accepted accounting principles) our financial condition, results of operations and cash flows for the periods presented.

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As reported in our Annual Report on Form 10-K for the fiscal year ended June 30, 2018, management identified the following material weaknesses in the Company’s control environment:

• We have inadequate controls to ensure that information necessary to properly record transactions is adequately communicated on a timely basis from non-financial personnel to those responsible for financial reporting. Management evaluated the impact of the lack of timely communication between non-financial personnel and financial personnel on the assessment of disclosure controls and procedures and has concluded that the control deficiency represented a material weakness.

• There is a lack of sufficient resources in its accounting function and an insufficient level of monitoring and oversight which resulted in the inadequate segregation of duties on the assessment of disclosure controls and procedures and which restricted the Company’s ability to gather, analyze, and properly review information in a timely manner.

• There is a lack of effective controls over the identification of reduced revenue collections due to modifications of payer claims adjudication processes and a lack of communication between financial personnel and non-financial personnel.

• Due to these weaknesses in our system of internal controls, we also determined that our accounting of inventory was not correct in the interim financial statements for the periods ended September 30, 2016, December 31, 2016 and March 31, 2017.

Remedial Actions to Date to Correct Material Weaknesses in Internal Control over Financial Reporting

Considering the material weakness described herein, we have designed and implemented improvements in our internal control over financial reporting to address these material weaknesses. Management is committed to continued planning and implementation of remediation efforts to address the material weaknesses and to enhance our overall financial control environment. In this regard these initiatives include:

Control Environment – to remediate the control environment deficiencies, the leadership team, including the CEO and CFO, have undertaken to reaffirm and reemphasize the importance of internal controls, including general ethical climate and the control environment. In addition, we have implemented the following remedial measures:

● Hired a new CFO in September 2017 to replace the previous CFO, whose position was terminated in January 2017;

● Hired additional personnel in the accounting department with sufficient U.S. GAAP and financial reporting experience to provide additional oversight of the accounting function and to participate in the preparation of our Company’s financial statements and SEC reports;

● Improved the documentation around conclusions reached in applying GAAP to the financial statements;

● Provided training to personnel in our accounting and reporting functions on a continuing basis to ensure the correct application of GAAP to our financial statements and adherence to the written policies and procedures; and

● Reviewed and upgraded the design of the procedures and implemented controls for the preparation of financial statements. 

Notwithstanding these remedial measures, due to the size and nature of the Company, segregation of all conflicting duties may not always be possible and may not be economically feasible. Nevertheless, to the extent possible, the initiation of transactions, the custody of assets and the recording of transactions should be performed by separate individuals.

Monitoring and Control Activities – To further strengthen internal control over financial reporting at the process level, we have performed certain remedial actions, including conducting an internal evaluation of accounting methodologies, reporting architecture, review existing personnel and propose a specific course of action to ensure compliance with all facets of accounting and external reporting. During fiscal 2019, accounting personnel have reviewed and revised written policies and procedures with detailed controls incorporated for each transaction cycle within the Company, including the procedures and controls that need to be in place to properly account and communicate transactions on a timely basis to financial and non-financial personnel.

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Management does not believe that these corrective measures have been operative for a sufficient period of time to warrant independent testing of their effectiveness and therefore, does not believe that all of the material weaknesses described above have been remediated. The Company intends to fully test the remedial measures that it has implemented to determine whether the Company’s internal control over financial reporting and system of disclosure controls and procedures are effective.

Changes in Internal Control over Financial Reporting

Other than the ongoing remediation efforts described above, there have been no changes in our internal control over financial reporting during the quarter ended September 30, 2018 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

See Item 1 of Part I, "Financial Statements - Note 11 - Commitments and Contingencies.

ITEM 1A. RISK FACTORS.

As provided for under the Private Securities Litigation Reform Act of 1995, we wish to caution shareholders and investors that the following important factors, among others discussed throughout this Quarterly Report on Form 10-Q is set forth below. Our operating results and financial condition have varied in the past and may in the future vary significantly depending on a number of factors. In addition to the risks described below and the other information set forth elsewhere in this report, you should carefully consider the factors discussed in the "Risk Factors" section in our Annual Report on Form 10-K for the year ended June 30, 2018 and in our other reports filed with the SEC for a discussion of the risks associated with our business, financial condition and results of operations. These risks have affected, and in some cases, could, have a material adverse effect upon our business, results of operations, financial condition or liquidity and cause our actual results to differ materially from those contained in statements made in this report and presented elsewhere by management from time to time. The risks identified by the Company in its reports are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently believe are immaterial also may materially adversely affect our business, results of operations, financial condition or liquidity. If any of the matters or events described in the following risks occurs, our business, financial condition or results of operations could be harmed. In such case, the trading price of our common stock could decline, and you may lose all or part of your investment due to any of these risks. Except as set forth below, we believe there have been no material changes in our risk factors from those disclosed in our Annual Report on Form 10-K for the fiscal year ended June 30, 2018 and our other reports filed with the SEC.

Our capital requirements are significant and unless our revenues can sufficiently support our operating costs, we expect to raise additional capital to finance our operations and repay outstanding debt obligations.

The Company’s capital requirements have been and will continue to be significant. We are expending significant amounts of capital to develop, promote and market our services. Available cash and cash equivalents as of September 30, 2018 totaled approximately $570,000 and as of such date our working capital deficit was $3,846,000. Available cash and cash equivalents as of the filing date of this Quarterly Report on Form 10-Q is approximately $457,000 and estimated monthly operational requirements are approximately $1,200,000. We used approximately $154,000 and $509,000 in cash from operations for the fiscal quarters ended September 30, 2018 and 2017, respectively. Further, as of the filing date of this Quarterly Report on Form 10-Q, there is outstanding an aggregate principal amount of $3,113,618 of notes, consisting of (i) an aggregate principal amount of $1,698,169 of senior secured convertible notes with a maturity date of March 20, 2020, and (ii) a maximum aggregate principal amount of $2.0 million of senior secured grid notes with an aggregate outstanding principal amount of $1,415,449 with a maturity date of June 30, 2020.  In addition, there is outstanding a secured note subordinated to the interests of the senior lenders with a remaining principal balance of $81,000 to the Company’s former CFO, which is currently due and payable. We continue to make payments each month on the subordinated note while discussing an extension. Although no guarantee can be given, management anticipates that it will be able to extend or otherwise modify the Company’s obligations under the notes for an additional period or periods. We expect the Company’s existing resources, revenues generated from operations, and proceeds received from other transactions we are considering (of which there can be no assurance) to satisfy working capital requirements for at least the next twelve months, although no assurances can be given that we will be able to generate sufficient cash flow from operations or complete other transactions to satisfy other obligations. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying condensed consolidated financial statements do not include any adjustments to the recoverability and classification of assets carrying amounts or the amounts and classification of liabilities that might result from the outcome of these uncertainties. Accordingly, we need to raise additional capital from other transactions, the Company’s current cash resources will only satisfy working capital needs for a limited period of time.

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We are exploring potential transactions to improve the Company’s capital position to ensure we are able to meet financing and working capital requirements. We would expect to raise additional funds through obtaining a credit facility from an institutional lender or undertaking private debt financing. Raising additional funds by issuing equity or convertible debt securities may cause stockholders to experience substantial dilution in their ownership interests and new investors may have rights superior to the rights of other stockholders. Raising additional funds through debt financing or preferred stock, if available, may involve covenants that restrict business activities and options and such additional securities may have powers, designations, preferences or rights senior to currently outstanding securities. We may also enter into financial transactions which involve the granting of liens on the Company’s assets or which grant preferences of payment from revenue streams, all of which could adversely impact the Company’s ability to rely on revenue from operations to support ongoing operating costs. Alternatively, we may seek to obtain new financing from existing security holders, which may include reducing the exercise or conversion prices of outstanding securities, or the issuance of additional equity securities. Currently, the Company does not have any definitive agreements with any third parties for such transactions, and there can be no assurance that we will be successful in raising additional capital or securing financing when needed or on terms satisfactory to the Company. If we are unable to raise additional capital when required, or on acceptable terms, we will need to reduce costs and operations substantially or potentially suspend operations, any of which would have a material adverse effect on the Company’s business, financial condition and results of operations. Future capital requirements will depend on, and could increase substantially as a result of many factors including:

● the need to utilize cash to support research and development activities and to make incremental investments in our organization;

● the ability to achieve targeted revenue, gross profit margins and cost management objectives;

● the success of our sales and marketing efforts;

● the need to repay indebtedness;

● the extent and terms of any development marketing or other arrangements; and

● changes in economic, regulatory or competitive conditions, including changes in payer reimbursement rates or claim adjudication processes.

We have identified material weaknesses in internal control over financial reporting, which could continue to impact negatively the Company's ability to report results of operations and financial condition accurately and in a timely manner.

As required by Section 404 of the Sarbanes-Oxley Act of 2002, management conducted an evaluation of the effectiveness of internal control over financial reporting as of June 30, 2018. As reported in our Annual Report on Form 10-K for the fiscal year ended June 30, 2018, we identified material weaknesses in our internal control over financial reporting and concluded that we did not maintain effective control over financial reporting based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. For a detailed description of these material weaknesses, See Item 4, “Controls and Procedures”. Moreover, other material weaknesses may be identified. Each of our material weaknesses results in more than a remote likelihood that a material misstatement of the annual or interim financial statements that we prepare will not be prevented or detected. As a result, we must perform extensive additional work to obtain reasonable assurance regarding the reliability of our financial statements.

We are in the process of remedying all the identified material weaknesses, including testing compliance with our new written policies and procedures. This work will continue during fiscal 2019 and perhaps beyond. For a detailed description of the Company’s remedial efforts, see Item 4, “Controls and Procedures.” There can be no assurance as to when all the material weaknesses will be remedied. Until the Company’s remedial efforts are completed, management will continue to devote significant time and attention to these efforts, and we will continue to incur expenses associated with the additional procedures and resources required to prepare the condensed consolidated financial statements. Certain of the Company’s remedial actions, such as hiring additional qualified personnel to implement the reconciliation and review procedures, will be ongoing and will result in the Company incurring additional costs even after the material weaknesses are remedied.

34

If we are unsuccessful in implementing or following the remediation plan, or fail to update the Company’s internal control over financial reporting as the business evolves or to integrate acquired businesses into the Company’s controls system, we may not be able to timely or accurately report the Company’s financial condition, results of operations or cash flows or to maintain effective disclosure controls and procedures, we could be subject to, among other things: (i) regulatory or enforcement actions by the SEC, (ii) an inability for us to be accepted for listing on any national securities exchange in the near future, (iii) securities litigation, or (iv) a general loss of investor confidence, any one of which could adversely affect the Company’s business prospects and the market value of its common stock. Further there are inherent limitations to the effectiveness of any system of controls and procedures, including the possibility of human error and the circumvention or overriding of controls and procedures. We could face additional litigation exposure and a greater likelihood of an SEC enforcement or other regulatory action if further restatements were to occur or other accounting-related problems emerge, which may adversely affect the Company’s financial condition, results of operations and cash flows.

The Company's outstanding debt may impair our financial and operating flexibility.

   As of September 30, 2018, there was an aggregate principal amount of senior indebtedness of $3,113,618, which consisted of (i) an aggregate principal amount of $1,698,169 of senior secured convertible notes with a maturity date of March 20, 2019, and (ii) a maximum aggregate principal amount of $2.0 million of senior secured grid notes with an aggregate outstanding principal amount of $1,415,449 with a maturity date of June 30, 2020. In addition, there is outstanding secured note subordinated to the interests of the existing senior lenders with a remaining principal amount of $96,000, which is the amount due and payable at September 30, 2018. All of the outstanding notes contain covenants and events of default customary for transactions of this nature. For example, the outstanding senior secured notes include restrictions against incurring additional indebtedness and granting further security interests on the Company’s assets. Without the consent of the holders of these senior debt instruments, we must comply with these restrictions. Among the defined events of default are defaults of the Company’s payment obligations. Breach of any material covenant or representation of the notes or the related transaction agreements, and the commencement of proceedings under applicable U.S. federal or state bankruptcy, insolvency, reorganization or other similar laws either against us or by us. In the event of default under the notes, a holder may require us to repay all or a portion of the outstanding principal, plus interest and certain of the outstanding debt instruments also require that any repayment due to a default will require immediate repayment of the principal and accrued and unpaid interest. If we are unable to consummate an additional financing prior to the maturity date of these debt instruments, or otherwise further extend or exchange them, we will be required to repay these securities, which may have an adverse effect on the Company’s cash position. If we are unable to make the scheduled principal and interest payments on these debt instruments or comply with applicable covenants contained therein, we may be in default under one or more of these securities which would likely have a material adverse effect on the business, financial condition and results of operations. Further, if we are unable to repay the secured debt instruments when due, or upon an event of default, the holders could foreclose on the Company’s encumbered assets.

The exercise of the Company’s outstanding options, restricted stock units and warrants, or conversion of our outstanding convertible debt and convertible preferred stock, may depress our stock price and dilute your ownership of the company.

As of September 30, 2018, the following options, restricted stock units and warrants were outstanding:

● Employee stock options to purchase approximately 236,179 shares of common stock at exercise prices ranging from $1.75 to $36.00 per share, not all of which are immediately exercisable. The weighted average exercise price of the outstanding stock options is $7.54 per share.

● Director stock options to purchase approximately 550,060 shares of common stock at exercise prices ranging from $1.58 to $36.54 per share, all of which are exercisable. The weighted average exercise price of the outstanding and exercisable options is $3.04 per share

● Warrants to purchase approximately 3,397,714 shares of common stock with a weighted average exercise price of $3.25 per share.

● An aggregate of approximately 715,391 unvested restricted stock units.

There are presently outstanding 25,000 shares of Series E Convertible Preferred Stock, which the holder may convert into an aggregate of 187,500 shares of common stock at the initial conversion price of $4.00 per share. Further there is currently outstanding 605,000 shares of Series D Preferred Stock, which are convertible into an aggregate of 619,154 shares of common stock at the initial conversion rate of $9.77 per share (exclusive of any additional shares of common stock that we may elect to issue in lieu of paying cash dividends on the Series D Preferred Stock). Shares of common stock issued upon conversion of Series D or Series E Preferred Stock may be resold from time-to-time by a holder in accordance with Rule 144 under the Securities Act.

As of September 30, 2018, there was an aggregate principal amount of $1,698,169 of outstanding convertible debt, which, subject to certain limitations, may be convertible by holders into an aggregate of 1,415,140 shares of common stock.

To the extent that these securities are extent that these securities are exercised or converted, or we issue additional common shares, dilution to stockholders will occur. In addition, the terms upon which we will be able to obtain additional equity capital may be adversely affected since the holders of these securities can be expected to exercise or convert them at a time when we could expect to be able to obtain needed capital on terms more favorable to us than the exercise and conversion terms provided by those securities. Further, in the event the conversion price of outstanding convertible debentures or shares of convertible preferred stock is lower than the actual trading price on the day of conversion, the holders could immediately sell their converted common shares, which would have a dilutive effect on the value of the outstanding common shares. The significant downward pressure on the trading price of common stock as preferred stock or debentures holders converted these securities and sell the common shares received on conversion could encourage short sales by the holders of preferred stock or other security holders. This would place further downward pressure on the trading price of common stock. Even the mere perception of eventual sales of common shares issued on the conversion of the shares of preferred stock or debentures could lead to a decline in the trading price of common stock.

In addition, as described in greater detail above, in July 2018, the Company, AEON and the Former Members entered into the Settlement Agreement, which, among other things, resolved certain disagreements among themselves relating to the interpretation of certain provisions of the Merger Agreement, including a number of elements of the Earn-Out Payments.  To the extent that these additional common shares are issued, substantial dilution to stockholders will occur, which may adversely impact the trading price of common stock and the terms on which we could raise additional equity capital.  The sale of these shares of common stock may adversely affect the market price of the Company's common stock and the stock price may decline substantially.

35

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

a) Sales of Unregistered Securities

Except as previously disclosed in reports filed with the SEC pursuant to the Securities and Exchange Act of 1934, as amended, or as described elsewhere in this Quarterly Report on Form 10-Q, we did not sell unregistered securities during the quarter ended September 30, 2018.

b) Not applicable

c) Repurchase of Equity Securities

We did not repurchase any of our equity securities during the quarter ended September 30, 2018.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

       None.      

ITEM 4. MINE SAFETY DISCLOSURES.

Not applicable.

ITEM 5. OTHER INFORMATION.

None. 

ITEM 6. EXHIBITS.

Exhibit Number	Description
4.1	Form of Grid Note (filed as Exhibit 4.1 to Current Report on Form 8-K, filed July 24, 2018).
10.1	Form of Note Exchange Agreement dated July 18, 2018 (filed as Exhibit 10.2 to Current Report on Form 8-K, filed July 24, 2018).
10.2	Form of Consent and Amendment Agreement dated July 18, 2018 (filed as Exhibit 10.3 to Current Report on Form 8-K, filed July 24, 2018).
10.3	Form of Amendment to Amended and Restated Security Agreement dated July 18, 2018 (filed as Exhibit 10.4 to Current Report on Form 8-K, filed July 24, 2018).
31.1	Certification Required by Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (*)
31.2	Certification Required by Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (*)
32.1	Section 1350 Certification of Chief Executive Officer (*)
32.2	Section 1350 Certification of Chief Financial Officer (*)
101.INS	XBRL Instance Document (*)
101.SCH	XBRL Taxonomy Extension Schema (*)
101.CAL	XBRL Taxonomy Extension Calculation Linkbase (*)
101.DEF	XBRL Taxonomy Extension Definition Linkbase (*)
101.LAB	XBRL Taxonomy Extension Label Linkbase (*)
101.PRE	XBRL Taxonomy Extension Presentation Linkbase (*)

(*) Filed herewith.

36

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 thereunto duly authorized.

AEON GLOBAL HEALTH CORP.
By:	/s/ Hanif A. Roshan
	Hanif A. Roshan
	Chief Executive Officer
By:	/s/ Michael J. Poelking
	Michael J. Poelking
	Chief Financial Officer

Dated: November 9, 2018

37

EX-31.1

EXHIBIT 31.1

Certification

I, Hanif Roshan, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of AEON Global Health Corp.;

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(s) 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(s) 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:  November 9, 2018
	/s/ Hanif Roshan
	Hanif Roshan
	Chief Executive Officer
	(Principal Executive Officer)

EX-31.2

 EXHIBIT 31.2

I, Michael J. Poelking, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of AEON Global Health Corp.;

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(s) 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(s) 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:  November 9, 2018
	/s/ Michael J. Poelking
	Michael J. Poelking
	Chief Financial Officer and Treasurer
	(Principal Financial Officer)

EX-32.1

 EXHIBIT 32.1

Certification 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 Quarterly Report on Form 10-Q of AEON Global Health Corp. (the “company”) for the period ending September 30, 2018 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, being, Hanif A. Roshan, the Chief Executive Officer of the company, respectfully, certify, pursuant to 18 U.S.C. ss.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) 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 result of operations of the company.

Dated: November 9, 2018
	/s/ Hanif Roshan
	Hanif Roshan
	Chief Executive Officer
	(Principal Executive Officer)

A signed original of this written statement required by Section 906 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.

EX-32.2

 EXHIBIT 32.2

Certification 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 Quarterly Report on Form 10-Q of AEON Global Health Corp. (the “company”) for the period ending September 30, 2018 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, being, Michael J. Poelking, the Chief Financial Officer and Treasurer of the company, respectfully, certify, pursuant to 18 U.S.C. ss.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) 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 result of operations of the company.

Dated: November 9, 2018
	/s/ Michael J. Poelking
	Michael J. Poelking
	Chief Financial Officer and Treasurer
	(Principal Financial Officer)

A signed original of this written statement required by Section 906 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

Document And Entity Information - shares	3 Months Ended
	Sep. 30, 2018	Oct. 25, 2018
Document Information [Line Items]
Entity Registrant Name	Aeon Global Health Corp.
Entity Central Index Key	0000885074
Trading Symbol	aghc
Current Fiscal Year End Date	--06-30
Entity Filer Category	Non-accelerated Filer
Entity Current Reporting Status	Yes
Entity Emerging Growth Company	false
Entity Small Business	true
Entity Common Stock, Shares Outstanding (in shares)		7,383,706
Document Type	10-Q
Document Period End Date	Sep. 30, 2018
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q1
Amendment Flag	false

XML

Consolidated Balance Sheets (Current Period Unaudited) - USD ($)	Sep. 30, 2018	Jun. 30, 2018
Current assets
Cash and cash equivalents	$ 569,694	$ 723,352
Accounts receivable, net	2,701,110	2,507,304
Inventory, net	407,878	453,129
Prepaid expenses and other current assets	79,405	54,058
Total current assets	3,758,087	3,737,843
Property and equipment, net	1,292,990	1,421,097
Other assets
Deferred tax asset	5,816,315	5,816,315
Total assets	10,867,392	10,975,255
Current liabilities
Accounts payable	1,644,229	1,436,897
Accrued expenses	2,029,564	2,082,591
Accrued commissions	459,211	608,405
Accrued dividends	85,941	984,979
Accrued income taxes payable	515,667	515,667
Accrued interest notes payable	151,527	155,257
Deferred rent	204,452	194,628
Notes payable	1,698,169	3,049,651
Derivative liabilities	815,001	1,323,625
Total current liabilities	7,603,761	10,351,700
Deferred rent	157,498	135,001
Related party notes payable	1,415,449
Deferred Taxes Payable
Total liabilities	9,176,708	10,486,701
Commitments and contingencies
Shareholders’ equity
Preferred stock, $.10 par value; 5,000,000 shares authorized, Series D, 605,000 shares and Series E 25,000 shares issued and outstanding at September 30, 2018, and June 30, 2018, respectively	63,000	63,000
Common stock, $.001 par value; 190,000,000 shares authorized, 7,383,706 and 7,249,370 shares issued and outstanding on September 30, 2018, and June 30, 2018 , respectively	25,714	25,579
Additional paid-in capital	46,600,419	45,089,337
(Accumulated deficit) retained earnings	(44,998,449)	(44,689,362)
Total shareholders’ equity	1,690,684	488,554
Total liabilities and shareholders’ equity	$ 10,867,392	$ 10,975,255

XML

Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) - $ / shares	Sep. 30, 2018	Jun. 30, 2018
Preferred stock, par value (in dollars per share)	$ 0.10	$ 0.10
Preferred stock, shares authorized (in shares)	5,000,000	5,000,000
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common stock, shares authorized (in shares)	190,000,000	190,000,000
Common stock, shares issued (in shares)	7,383,706	7,249,370
Common stock, shares outstanding (in shares)	7,383,706	7,249,370
Series D Convertible Preferred Stock [Member]
Preferred stock, shares issued (in shares)	605,000	605,000
Preferred stock, shares outstanding (in shares)	605,000	605,000
Series E Convertible Preferred Stock [Member]
Preferred stock, par value (in dollars per share)	$ 30
Preferred stock, shares issued (in shares)	25,000	25,000
Preferred stock, shares outstanding (in shares)	25,000	25,000

XML

Consolidated Statements of Operations - USD ($)	3 Months Ended
	Sep. 30, 2018	Sep. 30, 2017
Net revenues
Net revenues	$ 3,741,190	$ 3,358,052
Operating expenses
Cost of revenues	1,456,650	1,128,576
Selling, general and administrative	2,176,977	3,072,428
Share based compensation	69,400	68,785
Depreciation and amortization	125,777	222,584
Total operating expenses	3,828,804	4,492,373
Operating loss	(87,614)	(1,134,321)
Other (expense) income
Interest	(48,736)	(27,349)
Change in fair value of derivative liabilities	50,966	73,291
Other	(128,822)	(38,144)
	(126,592)	7,798
Loss before provision for income taxes	(214,206)	(1,126,523)
Provision for income taxes	(9,166)
Net loss	(223,372)	(1,126,523)
Less: preferred dividends	(85,715)	(84,550)
Net loss available to common shareholders	$ (309,087)	$ (1,211,073)
Loss per share:
Basic loss per common share (in dollars per share)	$ (0.04)	$ (0.17)
Diluted loss per common share (in dollars per share)	$ (0.04)	$ (0.17)
Weighted average number of common shares outstanding
Basic (in shares)	7,365,723	7,249,370
Diluted (in shares)	7,365,723	7,249,370
Fees for Service [Member]
Net revenues
Net revenues	$ 3,537,631	$ 3,110,382
Hosted Software Service [Member]
Net revenues
Net revenues	199,009	243,020
Telehealth Product and Service [Member]
Net revenues
Net revenues	$ 4,550	$ 4,650

XML

Consolidated Statements of Shareholders' Equity - 3 months ended Sep. 30, 2018 - USD ($)	Preferred Stock [Member]	Common Stock [Member]	Additional Paid-in Capital [Member]	Retained Earnings [Member]	Total
Balance (in shares) at Jun. 30, 2018	630,000	7,249,370
Balance at Jun. 30, 2018	$ 63,000	$ 25,579	$ 45,089,337	$ (44,689,362)	$ 488,554
Share-based compensation expense			69,400		69,400
Preferred common stock dividends (in shares)		134,336
Preferred common stock dividends		$ 135	984,622	(85,715)	899,042
Related party debt restructuring			457,060		457,060
Net income (loss)				(223,372)	(223,372)
Balance (in shares) at Sep. 30, 2018	630,000	7,383,706
Balance at Sep. 30, 2018	$ 63,000	$ 25,714	$ 46,600,419	$ (44,998,449)	$ 1,690,684

XML

Consolidated Statements of Cash Flows (Unaudited) - USD ($)	3 Months Ended
	Sep. 30, 2018	Sep. 30, 2017
Cash Flow from operating activities
Net income (loss)	$ (223,372)	$ (1,126,523)
Adjustments to reconcile net income (loss) to net cash provided by operating activities
Change in fair value of derivative liabilities	(50,966)	(73,291)
Depreciation and amortization	125,777	222,584
Share based compensation	69,400	68,785
Changes in assets and liabilities
Accounts receivable	(193,806)	205,469
Inventory	45,251	(29,863)
Prepaid expenses and other current assets	(25,347)	(27,378)
Accounts payable	207,332	(472,295)
Accrued expenses	62,746	615,322
Accrued commissions	(202,993)	108,515
Deferred rent	32,320
Net cash used in operating activities	(153,658)	(508,675)
Cash flows from investing activities
Disposal of fixed assets		33
Net cash provided by investing activities		33
Net decrease in cash, cash equivalents, and restricted cash	(153,658)	(508,642)
Cash, cash equivalents, and restricted cash at beginning of year	723,352	1,242,458
Cash, cash equivalents, and restricted cash at end of period	569,694	733,816
Cash and cash equivalents	569,694	733,816
Restricted cash included in restricted bank deposit
Supplemental disclosure of cash paid for:
Income taxes paid	9,224	76,316
Non-cash investing and financing activities
Non-cash preferred dividends	85,715	84,550
Preferred dividends settled in common stock	$ 984,622

XML

Note 1 - Description of Business, Reverse Merger and Liquidity

3 Months Ended

Sep. 30, 2018

Notes to Financial Statements

Business Description and Basis of Presentation [Text Block]

1.

            Description of Business, Reverse Merger and Liquidity  

Business

AEON Global Health Corp. (“AGHC” or the “Company”) and its subsidiaries primarily provides an array of clinical testing services to health care professionals through its wholly-owned subsidiary, Peachstate Health Management, LLC d/b/a AEON Clinical Laboratories (“AEON”). The Company also continues to provide its legacy secure web-based revenue cycle management applications and telehealth products and services that enable healthcare organizations to increase revenues, improve productivity, reduce costs, coordinate care for patients and enhance related administrative and clinical workflows and compliance with regulatory requirements. Web-based services are delivered as Software as a Service (SaaS) to customers interfacing seamlessly with billing, information and records management systems.

Going Concern

   As of the filing date of this Quarterly Report on Form

10

-Q, and after giving effect to the note exchange described in Note

6

of the Notes to Condensed Consolidated Financial Statements, there is outstanding an aggregate principal amount of

$3,113,618

of notes, consisting of (i) an aggregate principal amount of

$1,698,169

of senior secured convertible notes with a maturity date of

March 20, 2020

and (ii) a maximum aggregate principal amount of

$2.0

million of senior secured grid notes with an aggregate outstanding principal amount of

$1,415,449

 at

September 30, 2018

with a maturity date of

June 30, 2020.

In addition, there is outstanding secured note subordinated to the interests of the existing senior lenders with a remaining principal amount of

$81,000,

which is currently due and payable. We expect existing resources, revenues generated from operations, and proceeds received from other transactions we are considering which would satisfy working capital requirements for at least the next

twelve

months; however,

no

assurances can be given that we will be able to generate sufficient cash flow from operations or complete other transactions to satisfy our other obligations. The accompanying condensed consolidated financial statements do

not

include any adjustments to the recoverability and classification of assets carrying amounts or the amounts and classification of liabilities that might result from the outcome of these uncertainties. Accordingly, the Company needs to raise additional capital and is exploring potential transactions to improve our capital position. Unless we can increase revenues substantially or generate additional capital from other transactions, our current cash resources will only satisfy our working capital needs for a limited period of time.

   The Company's capital requirements have been and will continue to be significant and it is expending significant amounts of capital to develop, promote and market its services. The Company’s available cash and cash equivalents as of

September 30, 2018

totaled approximately

$570,000

and the Company’s working capital deficit was

$3,846,000.

Nevertheless, our available cash and cash equivalents as of the filing date of this Quarterly Report on Form

10

-Q is approximately

$457,000

and our estimated monthly cash requirement is approximately

$1,200,000.

   The Company does

not

have a bank line of credit of other fixed source of capital reserves. We are exploring potential transactions to improve our capital position to ensure we can our financing and working capital requirements. We would expect to raise additional funds through obtaining a credit facility from an institutional lender or undertaking private debt financing. Raising additional funds by issuing equity or convertible debt securities

may

cause our stockholders to experience substantial dilution in their ownership interests and new investors

may

have rights superior to the rights of our other stockholders. Raising additional funds through debt financing or preferred stock, if available,

may

involve covenants that restrict our business activities and options and such additional securities

may

have powers, designations, preferences or rights senior to our currently outstanding securities. We

may

also enter into financing transactions which involve the granting of liens on the Company’s assets or which grant preferences of payment from its revenue streams, all of which could adversely impact the Company’s ability to rely on revenue from operations to support ongoing operating costs. Alternatively, we

may

seek to obtain new financing from existing security holders, which

may

include reducing the exercise or conversion prices of outstanding securities, or the issuance of additional equity securities. Currently we do

not

have any definitive agreements with any

third

parties for such transactions and there can be

no

assurance that we will be successful in raising additional capital or securing financing when needed or on terms satisfactory to the Company. If we are unable to raise additional capital when required, or on acceptable terms, we will need to reduce costs and operations substantially or potentially suspend operations, any of which would have a material adverse effect on the Company’s business, financial condition and results of operations.

Management has concluded that due to the conditions described above, there is substantial doubt about the entity’s ability to continue as a going concern. We have evaluated the significance of the conditions in relation to our ability to meet our obligations and believe that our current cash balance and future cash receipts from revenue will provide sufficient capital to continue operations through fiscal 

2019.

In addition to our efforts to improve our capital position through commercial operations and/or product partnering opportunities, we are considering capital raising alternatives, including credit lines from external financial sources. We cannot assure you that financing will be available on acceptable terms. If we are

not

successful in generating or raising additional capital, we will risk defaulting under the terms of our existing loans. Additionally, if additional capital is raised through the sale of equity or convertible debt securities, the issuance of such securities would result in dilution to our existing stockholders. Furthermore, despite our optimism regarding the future of the Company, even if the Company is adequately funded, there is

no

guarantee that any of our services will perform as hoped or that such services can be successfully commercialized.

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Note 2 - Summary of Significant Accounting Policies

3 Months Ended

Sep. 30, 2018

Notes to Financial Statements

Significant Accounting Policies [Text Block]

2. Summary of Significant Accounting Policies

           The Company's condensed consolidated financial statements have been prepared in accordance with U.S. GAAP and following the requirements of the Securities and Exchange Commission ("SEC") for interim reporting.  As permitted under those rules certain footnotes or other financial information that are normally required by U.S. GAAP can be condensed or omitted.  These interim financial statements have been prepared on the same basis as the Company's annual financial statements and, in the opinion of management, reflect all adjustments, consisting only of normal recurring adjustments, which are necessary for a fair statement of the Company's financial information.  These interim results are

not

necessarily indicative of the results of be expected for the year ending

June 30, 2019

or any other interim period or for any other future year.  These unaudited condensed consolidated financial statements should be read in conjunction with the Company's audited consolidated financial statements and the notes thereto for the year ended

June 30, 2018,

included in the Company's

2018

Annual Report on Form

10

-K filed with the SEC.

The balance sheet as of

June 30, 2018

has been derived from audited financial statements at that date but does

not

include all of the information required by U.S. GAAP for complete financial statements.

Principles of Consolidation

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

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

 The most sensitive accounting estimates affecting the financial statements are revenue recognition, the allowance for doubtful accounts, depreciation of long-lived assets, fair value of intangible assets and goodwill, amortization of intangible assets, income taxes and associated deferrals and valuation allowances, commitments and contingencies and measurement of derivative liabilities.

Accounts Receivable, Net

Accounts receivable represent customer obligations due under normal trade terms, net of allowance for doubtful accounts. The allowance for doubtful accounts reflects our best estimate of probable losses inherent in the accounts receivable balance. We determine the allowance based on known troubled accounts, historical experience and other currently available evidence. The allowance for doubtful accounts was approximately

$960,000

and

$942,000

as of

September 30, 2018

and

June 30, 2018,

respectively.

Fair Value Measurements

The Company follows Accounting Standards Codification (“ASC”)

820

-

10,

"Fair Value Measurements and Disclosures"

, of the FASB to measure the fair value of its financial statements and disclosures about fair value of its financial instruments. ASC

820

-

10

establishes a framework for measuring fair value in accounting principles generally accepted in the United States of America (U.S. GAAP), and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, ASC

820

-

10

establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into

three

broad levels. The

three

levels of fair value hierarchy defined by ASC

820

-

10

are described below:

Level  1 -	Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.
Level 2 -	Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.
Level 3 -	Pricing inputs that are generally unobservable input and not corroborated by market data.

The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lower priority to unobservable inputs. If the inputs used to measure the financial assets and liabilities fall within more than

one

level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument. The Company's warrant liabilities and certain conversion features underlying the convertible debt are categorized as Level

3.

Concentrations of Credit Risk

The Company maintains its cash in bank deposit accounts which, at times,

may

exceed federally insured limits. Accounts are guaranteed by the Federal Deposit Insurance Corporation (FDIC) up to certain limits. At

September 30, 2018

and

June 30, 2018,

the Company had approximately

$320,000

and

$473,000

in excess of FDIC-insured limits. The Company has

not

experienced any losses in such accounts.

At

September 30, 2018,

one

customer had an accounts receivable balance of approximately

$1,116,000.

This customer’s accounts receivable balance comprises

31%

of gross accounts receivable at

September 30, 2018.

Income Taxes

The Company accounts for income taxes under an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the Company’s financial statements or tax returns. In estimating future tax consequences, the Company generally considers all expected future events other than enactments of changes in tax laws or rates. The effect on deferred taxes and liabilities of a change in tax rates will be recognized as income or expense in the period that includes the enactment date. A valuation allowance is established when necessary to reduce deferred tax assets to the amount expected to be realized.

Management considers the likelihood of changes by taxing authorities in its filed income tax returns and recognizes a liability for or discloses potential changes that management believes are more likely than

not

to occur upon examination by tax authorities. Management has

not

identified any uncertain tax positions that require recognition or disclosure in the accompanying condensed consolidated financial statements.

Reclassification

Certain prior year amounts have been reclassified to conform to the current year presentation.

 

Recent Accounting Pronouncements

In

May 2014,

the FASB issued ASU

2014

-

09,

“

Revenue from Contracts with Customers

” (Topic

606

). This accounting standard outlines a single comprehensive model to use in accounting for revenue arising from contracts with customers. This standard supersedes existing revenue recognition requirements and eliminates most industry specific guidance from GAAP. The core principal of this revenue recognition standard is to require an entity to recognize as revenue the amount that reflects the consideration to which it expects to be entitled in exchange for goods or services as it transfers control to its customers. The Company has implemented this ASU using the modified retrospective method with immaterial impact. This ASU requires significantly enhanced disclosures as shown in Note

3

of the condensed consolidated financial statements in this Quarterly Report on Form

10

-Q. In compliance with this ASU, the Company records uncollectible accounts receivable amounts against revenue instead of bad debt expense.  There were 

no

material reductions in net revenue for the

three

months ended

September 30, 2018.

In

February 2016,

the FASB issued ASU

2016

-

02,

“

Leases

,

”

which will require recognition on the balance sheet for the rights and obligations created by leases with terms greater than

twelve

months.  The new standard is effective for fiscal years and interim periods within those years beginning after

December 15, 2018,

with early adoption permitted.  The Company plans to adopt this guidance at the beginning of its

first

quarter of fiscal

2020

and plans to utilize the transition option which does

not

require application of the guidance to comparative periods in the year of adoption.  While the Company continues to evaluate this standard and the effect on related disclosures, the primary effect of adoption will be recording right-of-use assets and corresponding lease obligations for current operations leases.  The adoption is expected to have a material impact on the Company's consolidated balance sheets, but

not

on the consolidated statements of income or cash flows.  Additionally, the Company is in the process of reviewing current accounting policies, changes to business processes, systems and controls to support adoption of the new standard, which includes implementing a new lease accounting system.  

In

August 2016,

the FASB issued ASU

2016

-

15,

“

Statement of Cash Flows (Topic

230

): Classification of Certain Cash Receipts and Cash Payments

,” which clarifies how certain cash receipts and payments are to be presented in the statement of cash flows. The Company adopted this ASU on

July 1, 2018

with

no

impact on its cash flow presentation.

In

May 2017,

the FASB issued ASU

217

-

09,

“Compensation-Stock Compensation (Topic

718

): Scope of Modification Accounting”,

which amends the scope of modification accounting for share-based payment arrangements, provides guidance on the types of changes to the terms or conditions or share-based payment awards to which an entity would be required to apply modification accounting. The ASU is effective for annual reporting periods, including interim periods within those annual reporting periods, beginning after

December 15, 2017.

The Company has adopted this ASU, and it does

not

expect it to have a material impact on the

2019

fiscal year financial statements.

In

July 2017,

the FASB issued ASU

2017

-

11,

“

Earnings Per Share (Topic

260

), Distinguishing Liabilities from Equity (Topic

480

) and Derivatives and Hedging (topic

815

); Part I. Accounting for Certain Financial Instruments with Down Round Features and Part II. Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception

”, which states that when determining whether certain financial instruments should be classified as liabilities or equity instruments, a down round feature

no

longer precludes equity classification when assessing whether the instrument is indexed to the company’s own stock. As a result, a freestanding equity-linked financial instrument (or embedded conversion option)

no

longer would be accounted for as a derivative liability at fair value as a result of the existence of a down round feature when it is triggered. That effect is treated as a dividend and as a reduction of income available to common shareholders in basic EPS. The Company continues to evaluate the provisions of this ASU and plans to adopt this ASU effective

July 1, 2019.

In

December 2017,

the Securities and Exchange Commission issued Staff Accounting Bulletin

No.

118,

which is an application of ASC Topic

740,

“Income Taxes

”,

in the reporting period that includes

December

22,2017,

the date on which the Tax Cuts and Jobs Act (the “Act”) was signed into law. The Act changes existing United States tax law and includes numerous provisions that will affect business. Staff Accounting Bulletin

No.

118

implies that if a reasonable estimate can be made of the Act’s effects on the Company’s financial statements, the reasonable estimate should be reported in the period ending after

December 22, 2017.

The Company has implemented Staff Accounting Bulletin

No.

118

during fiscal year

2018

by revaluing its deferred tax asset for the lower tax rates.

In

August 2018,

the FASB issued ASU

2018

-

13.

“Fair Value Measurement (Topic

820

): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement”, which adds disclosure requirements to Topic

820

for the range and weighted average of significant unobservable inputs used to develop Level

3

fair value measurements. The Company is evaluating the provisions of this ASU and plans to adopt this ASU effective

July 1, 2020.

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Note 3 - Revenue Recognition

3 Months Ended

Sep. 30, 2018

Notes to Financial Statements

Revenue from Contract with Customer [Text Block]

3. Revenue Recognition  

The Company commenced recognizing revenue in accordance with the provisions of ASC

606,

Revenue from Contracts with Customers

starting

July 1, 2018

using the modified retrospective method. Net revenues in the Company’s AEON lab test business accounted for approximately

95%

and

93%

of the Company’s total net revenues for the

three

months ended

September 30, 2018

and

2017

and are primarily comprised of a high volume of relatively low-dollar transactions. The AEON business, which provides clinical testing services and other services, satisfies its performance obligation and recognizes revenues upon completion of the testing process or when services have been rendered. The Company estimates the amount of consideration it expects to be entitled to receive from customer groups, determined using the portfolio approach, in exchange for providing services. The portfolios determined using the portfolio approach consist of the following groups of customers: healthcare insurers, government payers, client payers and patients. In determining the amount to accrue for a delivered test, the Company considers factors such as payment history, payer coverage, whether there is a reimbursement contract between the payer and the Company, payment as a percentage of agreed upon rate (if applicable), amount paid per test and any current developments of changes that could impact reimbursement.  These estimates require significant judgement by management.  Revenues for hosted software services, telehealth products, and customer support services are recognized when persuasive evidence of an arrangement exists, delivery has occurred, the selling price is fixed and collectability is reasonably assured.  Contracts with customers in the AEON business do

not

contain significant financing components based on the typical period of time between performance of services and collection of consideration. Net revenues from the telehealth business accounted for approximately

5%

and

7%

of the Company’s total net revenues for the

three

months ended

September 30, 2018.

The following are descriptions of the AEON business’ portfolios:

Healthcare Insurers

Reimbursements from healthcare insurers are based on negotiated fee-for-service schedules. Revenues consist of amounts billed net of contractual allowances for differences between amounts billed and the estimated consideration the Company expects to receive from such payers, which considers historical denial and collection experience and the terms of the Company’s contractual arrangements. Adjustments to the allowances, based on actual receipts from the commercial payers, are recorded upon settlement.

Collection of consideration the Company expects to receive is normally a function of providing complete and correct billing information to the healthcare insurers within the various filing deadlines and typically occurs within

30

to

60

days of billing.

Government Payers

Reimbursements from government payers are based on fee-for-services schedules set by government authorities, including traditional Medicare and Medicaid. Revenues consist of amounts billed net of contractual allowances for differences between amounts billed and the estimated consideration the Company expects to receive from such payers, which considers historical denial and collection experience and other factors. Adjustments to the allowances, based on accrual receipts from the government payers, are recorded upon settlement.

Client Payers

Client payers include physicians, hospitals, accountable care organizations, integrated delivery networks, employers and other commercial laboratories and institutions for which services are performed on a wholesale basis and are billed based on negotiated fee schedules. Collection of consideration the Company expects to receive typically occurs within

60

to

90

days of billing.

Patients

Uninsured patients are billed based on established patient fee schedules or fees negotiated with physicians on behalf of their patients. Insured patients (includes coinsurance and deductible responsibilities) are billed based on fees negotiated with healthcare insurers. Collection of billings from patients is subject to credit risk and ability of the patients to pay. Revenues consist of amounts billed net of discounts provided to uninsured patients. Implicit price concessions represent differences between amounts billed and the estimated consideration the Company expects to receive from patients, which considers historical collection experience and other factors including current market conditions. Adjustments to the estimated allowances, based on actual receipts from the patients, are recorded upon settlement.

Telehealth

The Company enters into contracts with customers that

may

include software license agreements and/or hosting services. The vast majority of revenue derived from these contracts are recognized ratably over the life of the contract.  A minority of such contracts contain a price per transaction, in which case the revenue is recognized in the period when the transaction occurs.

The approximate percentage of net revenue by type of customer was as follows:

	Three Months Ended
	September 30,
	2018
Healthcare Insurers		46.9	%
Government Payers		23.5	%
Client Payers		24.4	%
Patient		0.2	%
Telehealth		5.0	%
Net revenues		100.0	%

XML

Note 4 - Inventory

3 Months Ended

Sep. 30, 2018

Notes to Financial Statements

Inventory Disclosure [Text Block]

4 . Inventory

Inventory consists of the following:

	September 30,		June 30,
	2018		2018
Laboratory testing supplies	$	407,878	$	453,129
Total inventory	$	407,878	$	453,129

XML

Note 5 - Income Taxes

3 Months Ended

Sep. 30, 2018

Notes to Financial Statements

Income Tax Disclosure [Text Block]

5. Income Taxes

The Company's effective tax rate for the

three

months ended

September 30, 2018

and

2017

was

3.4%

and

0.0%,

respectively. For the

three

months ended

September 30, 2018,

the Company calculated income tax expense based upon an annual effective tax rate forecast adjusted for discrete items that specifically relate to the interim period. Changes in tax laws or rates on deferred tax assets and liabilities are recognized as discrete items in the interim period that includes the enactment date. The differences between the effective tax rate and the U.S. federal statutory tax rate of

21%

principally resulted from state and local taxes, federal tax rate reductions, changes in the valuation allowance, non-deductible expenses, and discrete items for the interim period.

At

September 30, 2018,

the Company had a deferred tax asset of approximately

$40,699,000.

Management has considered the realizability of the deferred tax assets and has concluded that a valuation allowance of approximately

$34,883,000

should be recorded, related to net operating loss carryforwards that are

not

anticipated to be realized for a net deferred tax asset of approximately

$5,816,000.

Management determined that a valuation allowance was required with respect to the remaining net deferred tax assets. Realization of these assets is primarily dependent on achieving the forecast of future taxable income, as well as prudent and feasible tax planning strategies.

XML

Note 6 - Related Party Notes Payable

3 Months Ended

Sep. 30, 2018

Notes to Financial Statements

Short-term Debt [Text Block]

6 . Related Party Notes Payable

	September 30, 2018				June 30, 2018
			Interest rate		Note		Interest rate
	Principal		per annum		Payable		per annum
Secured
	$	1,056,875	5% interest paid annually		$	1,056,875	5% interest paid annually
		641,294	5% interest paid annually			641,294	5% interest paid annually
		1,415,449	7.5% interest paid annually			255,417	5% interest paid annually
						591,613	5% interest paid annually
						504,452	5% interest paid annually
Total	$	3,113,618		Total	$	3,049,651

The principal amount listed above is principal only and does

not

include accrued interest of approximately

$49,000

from

July 1, 2018

to

September 30, 2018.

Fiscal

2018

Exchange Transaction

On

March 27, 2018, 

the Company entered into an agreement with the holders of outstanding senior secured convertible notes (the “Senior Notes”) to amend certain terms of such notes as described below ("Note Amendment Transaction").  Contemporaneously with the Note Amendment Transaction, the Company entered into an agreement with its Chief Executive Officer, who held a separate promissory note in the aggregate principal amount of

$500,000,

to exchange such note for an additional new senior note (the “Additional Senior Note”) on terms substantially the same as the senior secured convertible notes in the Note Amendment Transaction (the “Note Exchange Transaction").

Note Amendment Transaction

In the Note Amendment Transaction, the holders (the "Senior Holders") of the outstanding principal amount of

$2,545,199

of Senior Notes entered into a consent and amendment agreement with the Company (the "Consent Agreement"), pursuant to which the Senior Notes were amended to extend the maturity date for a period of

twelve

months, to

March 20, 2019

and in consideration thereof, the conversion rate of the Senior Notes was reduced to

$1.20

per share.  Based on the adjusted conversion price, the principal amount of the Senior Notes was convertible into up to

2,120,999

shares of common stock.  The other material terms and conditions of the Senior Notes were

not

amended.  Certain holders of the Senior Notes are affiliated with the Company as follows: (

1

) an aggregate principal amount of

$255,417

of Senior Notes are held by Hanif A. Roshan, the Chairman and Chief Executive Officer of the Company and (ii) an aggregate principal amount of

$591,613

of Senior Notes are held by Optimum Ventures, LLC, a party affiliated by ownership with the former owners of Peachstate Health Management, LLC, our subsidiary.  Due to the adjustment of the conversion price of the Senior Notes, the exercise price of outstanding warrants to purchase an aggregate of

825,144

shares of common stock has been adjusted from

$2.07

to

$1.22

per share. Unpaid interest on the Senior Notes as of

September 30, 2018

was approximately

$202,000,

which is

not

incorporated into the principal balance. Accrued interest on the Senior Note is due on

March 20, 2019

or any earlier payment of the Senior Notes.

Note Exchange Transaction

In connection with the Note Amendment Transaction, on

March 27, 2018,

the Company entered into a note exchange agreement (the "Note Exchange Agreement") with its Chief Executive Officer, who also held a promissory note in the aggregate principal amount of

$500,000,

pursuant to which the Company agreed to issue to him, in consideration of the cancellation of such note, the Additional Senior Note in the aggregate principal amount of

$504,452,

which is equal to the sum of the aggregate principal amount of the original note plus the accrued but unpaid interest thereon.  The closing of the Note Exchange Transaction occurred on

March 27, 2018.

The Additional Senior Note is the same, in all material respects, as the Senior Notes described above in the Note Amendment Transaction and was convertible into shares of the Company's Common Stock at an initial conversion price of

$1.20.

  Based on the initial conversion price, the Additional Senior Note was convertible into up to

420,376

shares of common stock.  As the Additional Senior Note is the same in all material respects as the Senior Notes, the conversion price of the Additional Senior Note

may

be adjusted upon the occurrence of the same events which would result in an adjustment to the conversion price of the Senior Notes, as described above, including the issuance of securities at a price per share less than the current conversion price.  Similarly, the maturity date, interest rate, events of default, redemption and other terms of the Additional Senior Note are the same as for the Senior Notes.  The Additional Senior Note is on parity with the Senior Notes and, subject to certain exceptions, is senior to other existing and future indebtedness of the Company and, together with the Senior Notes, is secured by a

first

priority lien on all of the Company's assets to the extent and as provided in the Security Agreement as amended.

In accordance with ASC

470

-

50,

"

Debt - Modifications and Extinguishments

", the Company's note exchange agreement was tested to determine whether a debt modification or debt extinguishment had occurred. Based on management's review, debt extinguishment accounting applied.  As a result of the debt exchange, the Company recorded

$247,539

of non-cash expense resulting from the conversion feature of the convertible debt.  The loss consisted of the resulting derivative liability from the embedded conversion options in the new notes. 

Fiscal

2019

Note

Restructuring Transaction

Note Restructuring Transaction

On

July 19, 2018,

the Company entered into the Settlement and Restructuring Agreement (the “Settlement Agreement”) with Peachstate Health Management, LLC (“AEON”), its wholly-owned subsidiary, and the former members of AEON included in the Agreement (the “Former Members”), including its Chief Executive Officer, Hanif A. Roshan. Pursuant to the Agreement, the parties agreed to among other things, resolve certain disagreements among themselves relating to the interpretation of certain provisions of the Merger Agreement.

 As a condition to the effectiveness of the Settlement Agreement, the parties agreed to restructure the loans previously made to the Company by Mr. Roshan and Optimum Ventures, LLC, (together the “Lenders”) and to exchange the existing Senior Notes held by them for a new senior credit instrument pursuant to which they will provide up to

$2.0

million of credit to the Company (the “Note Restructuring Transaction”). In the Note Restructuring Transaction, the Company entered into a note exchange agreement dated

July 19, 2018 (

the

“July

Exchange Agreement”), with the Lenders, who collectively held senior secured convertible notes in the aggregate principal amount of

$1,351,482

(the “Original Notes”).

Pursuant to the

July

Exchange Agreement, the Company agreed to issue the Lenders senior secured grid notes in the aggregate principal amount for a maximum of

$2.0

million (the “Grid Notes”) in consideration of the cancellation of their Original Notes. The Grid Notes are structured to provide the Company with a credit facility pursuant to which it can borrow, pay, and reborrow any portion of the of the maximum principal amount of credit available under these instruments. The Grid Notes are senior, secured obligations and are

not

convertible into any equity securities of the company. The Grid Notes bear interest at the rate of

7.5%

per annum with interest payable upon maturity or sooner in accordance with the prepayment mechanism of the Grid Notes. The maturity date of the Grid Notes is

June 30, 2020.

The Grid Notes are on parity with an outstanding principal amount of

$1,698,169

of other Senior Notes (hereinafter, the “Senior Convertible Notes”) and, subject to certain exceptions, are senior to other existing and future indebtedness of the Company and, together with the Senior Convertible Notes, will be secured by a

first

priority lien on all of the Company’s assets to the extent and as provided in a Security Agreement entered into between the Company, the Lenders and the holders of the Senior Convertible Notes (the “Convertible Note Holders”). The Grid Notes contain customary covenants against incurring additional indebtedness and granting additional liens and contains customary events of default, which terms are substantially the same as the corresponding provisions of the Original Notes. Upon the occurrence of an event of default under the Grid Notes, the Lenders

may

require the Company to repay all or a portion of the note in cash, at a price equal to

110%

of the principal, plus accrued and unpaid interest.

The Grid Notes were issued in consideration of the exchange of (i) an aggregate principal amount of

$759,869

of Original Notes held by Mr. Roshan and (ii) an aggregate principal amount of

$591,613

of Original Notes held by Optimum Ventures, LLC. The maximum principal amount under the Grid Note issued to Mr. Roshan is 

$1,100,000

 and the maximum principal amount under the Grid Note issued to Optimum is 

$900,000.

 Each Grid Note issued also reflects an outstanding principal amount equal to the sum of the aggregate principal amount of the Original Notes held by each Lender, plus the accrued but unpaid interest thereon. The aggregate principal amount of the Grid Notes outstanding as of the closing date of the Note Restructuring Transaction and

September 30, 2018

was

$1,415,449.

  The closing of the Note Restructuring Transaction occurred on 

July 19, 2018.

In accordance with ASC

470

-

50,

"

Debt - Modifications and Extinguishments

", the Company's note exchange agreement was tested to determine whether a debt modification or debt extinguishment had occurred. Based on management's review, debt extinguishment accounting applied.  As a result of the debt exchange, the Company recorded

zero

 of non-cash expense resulting from the conversion feature of the convertible debt.  These notes were deemed to be a related party capital transaction and were included in additional paid-in capital at

September 30, 2018.

In connection with the Note Restructuring Transaction, the Company entered into a consent and amendment agreement with the Convertible Note Holders to obtain their consent to the issuance of the Grid Notes. In consideration thereof, the Company and Convertible Note Holders also agree to extend the maturity date of the Senior Convertible Notes for a period of

one

year to

March 20, 2020

and to modify the redemption mechanism of such instruments by increasing the duration of the redemption notice period defined in the Senior Convertible Notes. In addition, the parties entered into an amendment to the Amended and Restated Security Agreement entered into as of

March 20, 2017,

as previously amended (the “Security Agreement”), to provide that the Grid Notes shall be secured by the collateral defined in such earlier Security Agreement.

XML

Note 7 - Equity

3 Months Ended

Sep. 30, 2018

Notes to Financial Statements

Stockholders' Equity Note Disclosure [Text Block]

7 . Equity

Preferred Stock

As of

September 30, 2018,

there were

25,000

shares of Series E Convertible Preferred Stock outstanding. The shares of Series E Preferred Stock are initially convertible into an aggregate of

187,500

shares of common stock at the initial conversion rate of

$4.00

per share. The conversion price of the Series E Preferred Stock will be subject to adjustment solely in the event of stock dividends, combinations, splits, recapitalizations, and similar corporate events and does

not

provide for general price-based anti-dilution adjustments. Each share of Series E Preferred Stock has a stated value of

$30.00

per share and has the following rights and preferences: (i) each holder of the Series E Preferred Stock has the right, at any time, to convert the shares of Series E Preferred Stock into shares of common stock, (ii) the Series E Preferred Stock is redeemable at the Company's option commencing

one

year after the original issuance date, provided that the Company's common stock is listed on a national securities exchange at such time, and (iii) the Series E Preferred Stock will pay dividends at the rate of

5%

per annum in cash. The shares of Series E Preferred Stock were issued in a transaction with the holder of the Company's previously outstanding shares of Series B Preferred Stock to exchange the shares of Series B Preferred Stock for the shares of Series E Preferred Stock. Pursuant to the exchange agreement for the preferred stock, the holder of the shares of Series B Preferred Stock agreed to waive all unpaid dividends that had accrued on the shares of Series B Preferred Stock. At

September 30, 2018

the Company has accrued dividends of approximately

$9,349

on the Series E Preferred Stock which remain unpaid.

As of

September 30, 2018,

there are

605,000

shares of Series D Convertible Preferred Stock outstanding. The Series D Preferred Stock can be converted by the holders into an aggregate of

619,154

shares of common stock at an initial conversion rate of

$9.77139

per share. The holders of such shares have the right to convert the preferred shares at any time, although the shares received upon conversion

may

not

be offered or sold except pursuant to an effective registration statement or an applicable exemption from the registration requirements of the Securities Act and applicable state securities laws. The Company has the right to repurchase the outstanding Series D Preferred Stock at a redemption price equal to

$10.00

per share, plus accrued and unpaid dividends, and to require holders to convert their Series D Preferred Stock beginning in

June 2016.

Dividends on the Series D Preferred Stock accrue at a rate of

5%

per annum and are payable semi-annually in cash or stock at the Company's option. At 

September 30, 2018,

the Company has accrued dividends in the amount of approximately

$76,366

on the Series D Preferred Stock, which remain unpaid. 

The Company's preferred stock takes precedence over Common Stock but ranks below debt in the event of liquidation. In addition, the Series D Convertible Preferred Stock ranks above the Series E Convertible Preferred Stock.

Earnings per Share

FASB ASC Topic

260,

Earnings per Share

, requires the presentation of basic and diluted earnings per share. Basic earnings per share is calculated based on the weighted-average number of ordinary shares outstanding during the period, while diluted earnings per share is calculated to include any dilutive effects to ordinary shares. For the

three

months ended

September 30, 2018,

our ordinary share equivalents consisted of stock options, restricted stock units, convertible debt, preferred stock and warrants.

	Three Months Ended
	September 30,
	2018			2017
Basic earnings (loss) per share
Net loss	$	(223,372)		$	(1,126,523	)
Preferred stock dividends		(85,715	)		(84,550	)
Net loss available to common shareholders after preferred stock dividends	$	(309,087)		$	(1,211,073	)
Weighted average shares used in the computation of basic earnings per share		7,365,723			7,249,370
Loss per share - basic	$	(0.04)		$	(0.17	)
Dilutive earnings (loss) per share
Loss available to common shareholders	$	(309,087)		$	(1,211,073	)
Weighed average shares used in the computation of diluted loss per share		7,365,723			7,249,370
Shares used in the computation of diluted loss per share		7,365,723			7,249,370
Loss per share - diluted	$	(0.04)			(0.17	)

Common Stock Warrants

A schedule of common stock warrant activity for the

three

 months ended

September 30, 2018

is as follows:

Warrant Activity	Number of Shares			Weighted Average Exercise Price per Share		Weighted Average Remaining Contractual Life (Years)		Aggregate Intrinsic Value
Outstanding June 30, 2018		3,458,826		$	3.65		3.41	$	-
Issued		-
Expired		(61,112	)	$	11.69		-	$	-
Outstanding September 30, 2018		3,397,714		$	3.25		3.30	$	-
Exercisable, September 30, 2018		3,397,714		$	3.25		3.47	$	-

Due to the adjustment of the conversion price of the New Senior Notes, the exercise price of outstanding warrants to purchase an aggregate of

825,144

shares of common stock has been adjusted from

$2.07

to

$1.22

per share.

XML

Note 8 - Share-based Compensation

3 Months Ended

Sep. 30, 2018

Notes to Financial Statements

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

8 . Share-Based Compensation

Stock option activity under the Company's stock option plans for employees and non-executive directors for the 

three

months ended 

September 30, 2018 

is as follows:

Employees Information	Number of Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)
Outstanding June 30, 2018		265,346		$	7.08		6.55
Granted		-			-		-
Expired/Forfeited		(29,167	)		3.39		-
Outstanding September 30, 2018		236,179			7.54		6.13
Exercisable September 30, 2018		139,751		$	11.81		4.21

					Weighted
			Weighted		Average
			Average		Remaining		Aggregate
	Number of		Exercise		Contractual		Intrinsic
Non-Executive Director Information	Options		Price		Life (Years)		Value
Outstanding June 30, 2018		545,059	$	3.08		7.75	$	-
Granted		5,001		0.67		9.93		300
Expired/forfeited		-		-		-
Outstanding and exercisable September 30, 2018		550,060	$	3.04		7.54	$	300

Share based compensation for the

three

months ended

September 30, 2018

and

2017

was approximately

$69,400

and

$69,000

respectively.

Restricted stock unit activity under the Company's restricted stock unit plans for employees and non-executive directors for the

three

months ended

September 30, 2018

is as follows:

	Number of RSUs			Weighted Average Grant Date Fair Value
Outstanding June 30, 2018		752,391		$	1.31
Granted		-			-
Expired/Forfeited		(37,000	)		1.19
Outstanding September 30, 2018		715,391		$	1.32

XML

Note 9 - Earn-out Merger Consideration

3 Months Ended

Sep. 30, 2018

Notes to Financial Statements

Earn-out Stock Compensation Plan [Text Block]

9. Earn-Out  Merger Consideration

             Pursuant to the Amended and Restated Agreement and Plan of Merger dated

January 26, 2016,

as amended on

May 

31,

2016

and

December 2016 (

collectively the "The Merger Agreement"), AEON was merged into a newly formed acquisition subsidiary of Aeon Global Health Corp. (the "Aeon Acquisition").  The original Merger Agreement included, among other things, certain earn-out consideration (the “Earn-out”) and the assumption of certain liabilities. The Earn-out required the achievement of certain earnings before interest, taxes, depreciation and amortization (“EBITDA”) levels that were automatically adjusted upon the change of reimbursement rates adopted by the Centers for Medicare and Medicaid Services. Upon achievement of the EBITDA level for the

three

calendar years ending

December 31, 2018 (

“2018

Earn-out”), the Former Members would receive additional shares of the Company’s common stock so that the total number of shares of the Company’s common stock issued to the Former Members pursuant to the Merger Agreement would equal

85%

of the issued and outstanding shares of the Company’s common stock on a post-issuance and fully-diluted (as defined in the Merger Agreement) basis. In addition, the Merger agreement provided that upon achievement of the EBITDA level for the

four

calendar years ending

December

31,2019

(

“2019

Earn-out”), the Former Members would receive additional shares of the Company’s common stock so that the total number of shares of the Company’s common stock issued to them pursuant to the Merger Agreement would equal

90%

of the issued and outstanding shares of the Company’s common stock on a post-issuance and fully-diluted (as defined in the Merger Agreement) basis. The Former Members were also granted certain registration rights pursuant to the Merger Agreement (the “Registration Rights”), which remain outstanding. Achievement of the maximum amount of Earn-Out would have resulted in the issuance of over

70,000,000

shares of the Company’s common stock.

Subsequently, in connection with the Merger, the parties expressed differences of opinion on the interpretation of certain provisions of the Merger Agreement, the calculation of the number of shares of common stock issued pursuant to the initial tranches of the Earn-out under the Merger Agreement, and the assumption of income tax liabilities for undistributed income earned by AEON prior to the Merger. The Company has also incurred negative cash flow for the calendar years

2016

and

2017,

necessitating the loan of approximately

$760,000

by the Company’s Chief Executive Officer in addition to an amount of

$591,613,

including accrued interest, previously loaned by an entity owned by certain Former Members (collectively the “Loans”), which Loans have been extended on multiple occasions. The Loans were due and payable on

March 20, 2019

and are convertible into common stock at

$1.20

per share (currently

1,126,235

shares). In addition, the Chief Executive Officer and certain of the Former Members reduced their cash compensation as employees to

zero

and have been accepting restricted stock units of the Company as sole compensation.

The Company, AEON and the Former Members reached an agreement to resolve these matters and entered into the Settlement Agreement in order to: (i) provide a source of working capital to the Company to sustain operations and reduce the additional dilution which could have been caused by the conversion of the Loans; (ii) remove the uncertainty as to the number of shares which

may

be issued pursuant to the

2018

and

2019

Earn-outs by replacing percentages with fixed share amounts; (iii) agree that all share calculations for the Earn-outs are to be based on actual shares outstanding rather than on a “Fully-diluted” basis to provide additional certainty and reduce the potential issuances on account of the Merger from approximately

70,000,000

shares of common stock to approximately

1,200,000

shares of common stock; (iv) provide clarity as to the relationship between the

2018

Earn-out and

2019

Earn-out; (v) reduce the maximum percentage ownership of the Former Members; (vi) avoid the expense of a demand registration statement; and (vii) otherwise resolve all outstanding disagreements among the parties arising out of the Merger Agreement.

The parties also resolved all interpretative issues relating to the Merger Agreement and clarified the amount and terms of the Earn-outs as described below.

With respect to

2018

Earn-out, the parties agreed that the

2018

Earn-out, as adjusted according to the Merger Agreement, shall be

$21,483,749

of EBITDA for the

three

calendar years ending

December 31, 2018.

If the

2018

Earn-out target is achieved, then on

October 1, 2019,

subject to the completion of the audited financial statements of AEON for the calendar year ending

December 31, 2018,

the Company shall issue the Former Members a fixed amount of

3,000,000

shares of the Company’s common stock; provided, however, that if AEON does

not

achieve the

2018

Earn-out target, but achieves EBITDA for the

three

calendar years ending

December 31, 2018

of at least

75%

of the

2018

Earn-out target, then on

October 1, 2019,

subject to the completion of the audited financial statements of AEON for the calendar year ending

December 31, 2018,

the Company shall issue the Former Members a fixed amount of

2,250,000

shares of the Company’s common stock.

With respect to the

2019

Earn-out, the parties agreed that the

2019

Earn-out, as adjusted according to the Merger Agreement, shall be

$32,600,530

of EBITDA for the

four

calendar years ending

December 31, 2019.

If the

2019

Earn-out target is achieved, then within

three

business days following the completion of the audited financial statements of AEON for the calendar years ending

December

31,2019,

the Company shall issue the Former Members a fixed amount of

4,000,000

shares of the Company’s common stock. If AEON fails to achieve the

2019

Earn-out target, but achieves EBITDA for the calendar years ending

December 31, 2019

of at least

75%

of the

2019

Earn-out target, then within

three

business days following the completion of the audited financial statements of AEON for the calendar year ending

December 31, 2019,

the Company shall issue the Former Members a fixed amount of

3,000,000

shares of the Company’s common stock.

The parties also agreed that if the

2019

Earn-out target is achieved the Former Members would be entitled to an “earn-out credit” equal to the amount by which such target is exceeded. If AEON did

not

achieve the

2018

Earn-out target (or the adjusted

2018

Earn-out Target), the earn-out credit would be applied to its EBITDA for the

2018

Earn-out and then the determination of whether the

2018

Earn-out was achieved (at either the full or the

75%

level) will be recomputed. If the addition of the earn-out credit results in AEON achieving the

2018

Earn-out (at either level) then several additional shares of common stock shall be issued to the Former Members in accordance with the terms of the Settlement Agreement.

The Company also agreed that in consideration of the restructuring of the consideration due to the Former Members under the Merger Agreement, it shall issue an aggregate of

2,500,000

shares of the Company’s common stock to the Former Members. Such additional shares shall be issued to the Former Members

pro rata

based on their respective percentage ownership of AEON prior to the Merger and shall be deemed earned and issued on

February 28, 2019.

As additional consideration to the Company under the Settlement Agreement, the Former Members agreed: (i) to relinquish all demand registration rights; (ii) that the arrangements set forth in the Settlement Agreement fully resolved any and all claims arising out of the Merger Agreement and the transactions contemplated thereby; and (iii) to a general release of claims as against the Company.

XML

Note 10 - Fair Value Measurements and Other Financial Instruments

3 Months Ended

Sep. 30, 2018

Notes to Financial Statements

Fair Value Disclosures [Text Block]

10 . Fair Value Measurements and Other Financial Instruments

The carrying amounts of the Company's financial assets and liabilities, such as cash, accounts receivable, inventory, prepaid expenses, and other current assets, accounts payable and accrued expenses approximate their fair values because of the short maturity of these instruments.

In connection with the issuance of a convertible promissory notes as discussed in Note

6,

the Company evaluated the note agreement to determine if the agreement contained any embedded components that would qualify the agreement as a derivative. The Company identified certain put features embedded in the convertible note agreement that potentially could result in a settlement in the event of a fundamental transaction, requiring the Company to classify the conversion feature as a derivative liability.  The restructuring of an aggregate principal amount of

$1,351,482

of notes payable on

July 19, 2018

resulted in the issuance of the Grid Notes described in Note

6

to these consolidated financial statements.  Such Grid Notes do

not

include a down-round feature.  This elimination of the conversion feature lowered the value of the Company's related party notes payable. 

The Company's Level

3

financial liabilities consist of the derivative conversion features of underlying convertible debt and warrants issued in

2011

to

2015.

The Company valued the conversion features using the Black Sholes model prior to the

three

months ended

September 30, 2016

and the Monte Carlo model for all periods thereafter. These models incorporate transaction details such as the Company's stock price, contractual terms maturity, risk free rates and volatility as of the date of issuance and each balance sheet date. The decrease in the value of the conversion feature of the convertible debt and warrants issued was primarily due to the change in the stock price compared with prior years.  The remaining

$1,698,169

of notes payable contain conversion features.

The Company utilized the following assumptions in valuing the derivative conversion features:

Exercise Price	$	1.20		-	$	1.22
Risk free interest rate		2.32	%	-		2.93	%
Expected volatility		130	%	-		200	%
Remaining Term (years)		0.47		-		4.82

Fair Value of Financial Assets and Liabilities Measured on a Recurring Basis

The fair value of the Company's financial instruments, using the fair value hierarchy under U.S. GAAP detailed in

"Fair Value Measurements"

in Note

2,

"Summary of Significant Accounting Policies and Recently Issued Accounting Standards," of the Notes to the Condensed Consolidated Financial Statements are included in the tables below.

The Company uses Level

3

of the fair value hierarchy to measure the fair value of the derivative liabilities and revalues its derivative liabilities at every reporting period and recognizes gains and losses in the statement of operations that are attributable to the change in the fair value of the derivative liabilities. Changes in the observable input values would likely cause material changes in the fair value of the Company's Level

3

financial instruments.  The significant unobservable input (probability of a down round event) used in the fair value measurement is the estimation of the likelihood of the occurrence of a change in the contractual terms of the financial instruments.  A significant increase (decrease) in this likelihood or in the volatility assumptions would result in a higher (lower) fair value measurement.

The following tables provide a summary of the changes in fair value, including net transfers in and/or out, of all financial assets / (liabilities) measured at the fair value on a recurring basis using significant unobservable inputs during the 

three

months ended

September 30, 2018.

				Convertible
	Warrants			Notes		Total
Balance - June 30, 2018	$	505,069		$	818,556	$	1,323,625
Change in fair value of derivative liabilities		(64,333	)		(444,291)		(508,624)
Balance - September 30, 2018	$	440,736		$	374,265	$	815,001

	Fair value		Level 1		Level 2		Level 3
June 30, 2018 Derivative liabilities	$	1,323,625	$	-	$	-	$	1,323,625
September 30, 2018 Derivative liabilities	$	815,001	$	-	$	-	$	815,001

Of the

$508,624

reduction in the fair value of the derivative liabilities, approximately

$457,000

was reclassified to additional paid-in capital in conjunction with the extinguishment of certain related party notes on

July 19, 2018. 

See Note

6

for further discussion.

For the

three

months ended 

September 30, 2018 

and

2017,

the Company recorded non-cash income of approximately

$509,000

and

$773,000

for the changes in fair value of the derivative liabilities.

XML

Note 11 - Commitments and Contingencies

3 Months Ended

Sep. 30, 2018

Notes to Financial Statements

Commitments and Contingencies Disclosure [Text Block]

11 . Commitments and Contingencies

In the case captioned

Medlogic, LLC and Malena F. Badon

v

. Peachstate Health

M

anagement, LLC, et al.

, now pending in the

15

th

Judicial District Court, Lafayette Parish, State of Louisiana, Docket

No.:

2015

-

0151

I, the Company is the defendant in a case where the Plaintiffs, as independent contractors, allege they are owed certain commissions that they purportedly earned while marketing the Company’s products and services. The Company believes the contractors were overpaid and has asserted a counterclaim for reimbursement of such overpayments. The Company intends to vigorously defend the claim and pursue its counterclaim. The parties have completed initial discovery and the matter remains pending. The Company believes the resolution of this matter will

not

have a material effect on its financial statements.

Prior to the completion of the merger, AT&T provided various communication services and equipment to the Company, including facsimile lines. AT&T has claimed that the Company owes approximately

$500,000

to it for such services. The Company continues to negotiate with AT&T to seek a compromise of such amount. To the Company’s knowledge,

no

proceedings have been commenced regarding this matter, and the Company has accrued the full amount of its potential liabilities on its financial statements as of the fiscal quarter ended

September 30, 2018.

Regarding the termination of the Company’s relationship with certain executives, including the former Chief Executive Officer of Authentidate Holding Corp., O’Connell Benjamin, the Company has been reviewing its severance obligations and the vesting of post-termination provisions. The Company believes it has accrued all related severance costs as of

September 30, 2018

related to past terminations. Mr. Benjamin commenced an arbitration proceeding before the American Arbitration Association (“AAA”) on or about

June 22, 2016

requesting severance compensation of

$341,620

and other benefits, including the vesting of certain stock option awards, pursuant to an employment agreement. The parties opted to pursue mediation in their attempt to resolve the matter, and a mediation session was held on

October 30, 2017,

but

no

resolution was reached. The Company believes it has valid defenses to Mr. Benjamin’s claims and intends to defend this matter accordingly as the arbitration process ensues.

On

Mar 3, 2017,

the Company received notice from the Office for Civil Rights (“OCR”) of the U.S. Department of Health and Human Services (“DHHS”) informing the Company that the OCR is conducting a review of the Company’s compliance with applicable Federal Standards related to Privacy of Individually Identifiable Health Insurance Portability and Accountability Act of

1996,

as amended (“HIPAA”), and its privacy, security and data breach rules (“HIPAA Rules”). The OCR compliance review covers both the Company’s telehealth business and its clinical laboratory operations. The OCR reviewed the Company’s premises and conducted interviews on Mary

23,

2017

and the Company continues to work on a resolution with the OCR. The OCR

may,

among other things, require a correct action, issue penalties, or reach a monetary settlement. The Company does

not

expect a material adverse determination on consolidated financial position, results of operations, and cash flows.

The Company was the defendant in an action captioned

Cogmedix, Inc. v. Authentidate Holding Corp.

in the Superior Court of Worcester County, Commonwealth of Massachusetts, Case

No.:

1685CV013188.

Suit was filed on

September 6, 2016,

based upon a purchase order dated

December 6, 2013,

alleging the principal amount of

$227,061,

and accumulating interest and attorney fees. On

February 15, 2018,

judgment in the amount of

$320,638

was awarded.  The parties entered into a Forbearance Agreement on

October 17, 2018,

and plaintiff agreed to the Company's tender of

9

monthly installments totaling

$149,996

payable through

June 2019.

The Company, its Chief Executive Officer, and certain yet identified persons are defendants in a case captioned

Carlotta Miraflor

v. Peachstate Health Management, LLC d/b/a Aeon Global Health, et al.

, filed on

October 4, 2017

in the United States District Court for the Central District of California, Case

No.:

5:17

-CV-

02046

-DSF-SP. Service of the Summons and Compliant was made on

January 3, 2018

and an Answer denying liability was timely filed with the Court Clerk. The plaintiff is a principal of a corporate independent contractor which planned to provide marketing services to the Company pursuant to a services agreement. The lawsuit was preceded by a Dismissal and Notice of Rights by the U.S. Equal Employment Opportunity Commission in

July 2017,

on the basis that the Plaintiff was determined to be a principal of a corporate independent contractor. Notwithstanding this ruling the Plaintiff initiated suit alleging wrongful termination, retaliation, harassment, and other claims. The lawsuit seeks monetary damages for Plaintiff’s alleged loss of earning, emotional distress, punitive damages, and attorney’s fees and costs. The Company believes it has strong defenses to Plaintiff’s allegations and intends to vigorously defend the claim. Management is unable to determine at this time whether this claim will have a material impact on the Company’s financial condition, results of operations, or cash flow.

The Company is the defendant in the case captioned

Healthy Practice Solutions, LLC v. Peachstate Health Management, LLC,

now pending in State Court of Fulton County, State of Georgia, Civil Action File

No.:

18

Ev

000042,

where Plaintiff alleges it is owed certain commissions earned while marketing the Company’s products and services. The parties are negotiating the case’s resolution, and the Company believes the resolution of this matter will

not

have a material effect on its financial statements,

On

September 15, 2015,

the Company executed an amendment to the lease for its replacement offices in New Jersey. The term of the lease was for

six

years with annual rentals ranging from approximately

$135,000

in the

first

year to

$148,000

in the final year. The lease provided the Company with opportunities for its early termination by the tender of a pre-negotiated amount on the

18

th

,

27

th

, and

36

th

month anniversary dates of the amendment. As part of the lease terms, the Company provided a letter of credit in the approximate amount of

$121,000

as security for its lease payments. In

July 2017,

the Company vacated the premises, and the landlord took possession of both the premises and the aforementioned letter of credit monies in the

first

quarter of fiscal year

2018.

The Company is evaluating its possible lease obligations and considering its alternatives, and, although

not

guaranteed, expects to be successful.

The Company is also subject to claims and litigation arising in the ordinary course of business. Our management considers that any liability from any reasonably foreseeable disposition of such claims and litigation, individually or in the aggregate, would

not

have a material adverse effect on our consolidated financial position, results of operations or cash flows.

The Company has entered into various agreements by which we

may

be obligated to indemnify the other party with respect to certain matters. Generally, these indemnification provisions are included in contracts arising in the normal course of business under which we customarily agree to hold the indemnified party harmless against losses arising from a breach of representations related to such matters as intellectual property rights. Payments by us under such indemnification clauses are generally conditioned on the other party making a claim. Such claims are generally subject to challenge by us and to dispute resolution procedures specified in the contract. Further, our obligations under these arrangements

may

be limited in terms of time and/or amount and, in some instances, we

may

have recourse against

third

parties for certain payments made by us. It is

not

possible to predict the maximum potential amount of future payments under these indemnification agreements due to the conditional nature of our obligations and the unique facts of each agreement. Historically, we have

not

made any payments under these agreements that have been material individually or in the aggregate. As of

September 30, 2018,

we are

not

aware of any obligations under such indemnification agreements that would require material payments.

XML

Note 12 - Related Party Transactions

3 Months Ended

Sep. 30, 2018

Notes to Financial Statements

Related Party Transactions Disclosure [Text Block]

12 . Related Party Transactions

Except as disclosed herein, the Company has

not

entered into any material transactions or series of similar transactions with any director, executive officer or any security holder owning

5%

or more of common stock since

July 1, 2017.

AEON leases its facilities from Centennial Properties of Georgia, LLC under a lease agreement commencing

April 2014,

as amended

January 20, 2016.

The lease provides for a term of

12

years expiring

March 2026.

The lease payments range from

$46,500

to a maximum of

$60,000.

In connection with the lease agreement, as security for its rent and other obligations under the lease, AEON has provided to the landlord a

first

priority lien and security interest in substantially all its assets. The landlord under the lease is Centennial Properties of Georgia, LLC a Georgia limited liability company. Centennial is owned by Hanif Roshan, Shawn Desai, Pyarali Roy and Sohail Ali, all of whom were AEON members and received common stock in the Company as a result of the AEON Acquisition. Mr. Roshan serves as the Chairman and CEO of the Company. Mr. Desai is the Chief Technology Officer of AEON. Mr. Roy is the Chief Strategy Officer of AEON. Related party rent expense for the

three

months ending

September 2018

and

2017

was approximately

$77,000

and

$144,000,

respectively.

The Company holds certain related party notes payable to certain shareholders and its Chief Executive Officer, as detailed in Note

6.

Interest expense relating to these notes amounted to approximately

$49,000

and

$32,000,

for the

three

months ended

September 30, 2018

and

2017,

respectively. The Company restructured the Senior Notes held by Mr. Roshan and Optimum Ventures and exchanges the Senior Notes held by them for senior secured Grid Notes.

The Company entered into a lease agreement with Hanif A. ("Sonny") Roshan (the "landlord") for a residential premises at

5455

Golf View Drive, Braselton, Georgia

30517

for a term of

one

year beginning on

January 1, 2018

and ending on

December 31, 2018

for a fixed rent in monthly installments of

$7,500

due and payable by the

first

day of each month. The lease is renewable with a

3%

increase in rent for each renewal. The tenant is responsible for utilities and insurance with the landlord responsible for maintenance and taxes on the premises. Rent expense was

$22,500

and

$22,500

for the

three

months ended

September 30, 2018

and

2017.

 

Certain of the Company's affiliates, including members of its senior management and board, as well as their respective family members and other affiliates, have relationships and agreements among themselves as well as with the Company and its affiliates, that create the potential for both real, as well as perceived, conflicts of interest.  These include certain with which the Company does business.  The Company does business with Kemah Palms, an entity that is majority owned by the Company's Chairman and CEO, Hanif Roshan.  AEON generated approximately

$10,000

in revenue from Kemah Palms in fiscal

2018.

On

September 18, 2018,

the Company and its wholly-owned subsidiary, Peachstate Health Management LLC, entered into a shared services agreement with Centennial Properties, LLC, an entity affiliated with the Company’s chief executive officer and which is the owner of the premises in which the Company conducts its operations. Pursuant to this agreement, in consideration of various services and accommodations provided by Centennial Properties, the Company and Peachstate Health Management agreed to provide, or cause to be provided, certain operational and administrative support services to Centennial Properties and certain other related entities. Under this agreement, in

no

event shall any employee of the Company or Peachstate Health Management be required to devote more than

10%

of such employee’s business time per week to the provision of services to Centennial Properties. The shared services agreement has a term of

three

years.

An entity affiliated with the Company’s Chief Executive Officer extended a personal loan of

$500,000

to an entity affiliated with a distributor and business consultant to the Company. The borrower has agreed to repay the loan by assigning a percentage of the net proceeds received by the affiliated distributor as commissions under its distribution agreement. 

XML

Note 13 - Segment Information

3 Months Ended

Sep. 30, 2018

Notes to Financial Statements

Segment Reporting Disclosure [Text Block]

1 3 . Segment Information

The Company is operated as

two

segments: laboratory testing services, and web-based software.  Laboratory testing services includes the testing of an individual's blood, urine or saliva for the presence of drugs or chemicals and the patient's DNA profile. Web-based software provides secure web-based revenue cycle management applications and telehealth products and services that enable healthcare organizations to increase revenues, improve productivity, reduce costs, coordinate care for patients and enhance related administrative and clinical workflows and compliance with regulatory requirements. Management currently runs each segment separately and measures profitability and operational performance based on the financial statements, which are independently maintained.

Selected financial information related to the Company's segments is presented below:

	Authentidate			AEON			Total
Three Months ended September 30, 2018
Net revenues	$	203,559		$	3,537,631		$	3,741,190
Cost of revenues		39,883			1,416,767			1,456,650
Operating expenses		189,841			3,638,963			3,828,804
Operating income (loss)		13,718			(101,332	)		(87,614	)
Net income (loss)		78,793			(302,165)			(223,372	)
Three months ended September 30, 2017
Net revenues	$	247,670		$	3,110,382		$	3,358,052
Cost of revenues		55,127			1,073,449			1,128,576
Operating expenses		873,385			3,618,988			4,492,373
Operating income (loss)		(628,715	)		(505,606	)		(1,134,321	)
Net income (loss)		(520,947	)		(605,576)			(1,126,523	)
September 30, 2018
Total assets	$	5,967,666			4,899,726		$	10,867,392
June 30, 2018
Total Assets	$	7,532,512		$	3,442,743		$	10,975,255

XML

Note 14 - Subsequent Events

3 Months Ended

Sep. 30, 2018

Notes to Financial Statements

Subsequent Events [Text Block]

14.

           Subsequent Events

                The Company was the defendant in an action captioned

Cogmedix, Inc. v. Authentidate Holding Corp.

in the Superior Court of Worcester County, Commonwealth of Massachusetts, Case

No.:

1685CV013188.

Suit was filed on

September 6, 2016,

based upon a purchase order dated

December 6, 2013,

alleging the principal amount of

$227,061,

and accumulating interest and attorney fees. On

February 15, 2018,

judgment in the amount of

$320,638

was awarded.  The parties entered into a Forbearance Agreement on

October 17, 2018,

and plaintiff agreed to the Company's tender of

9

monthly installments totaling

$149,996

payable through

June 2019.

XML

Significant Accounting Policies (Policies)

3 Months Ended

Sep. 30, 2018

Accounting Policies [Abstract]

Consolidation, Policy [Policy Text Block]

Principles of Consolidation

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

Use of Estimates, Policy [Policy Text Block]

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

 The most sensitive accounting estimates affecting the financial statements are revenue recognition, the allowance for doubtful accounts, depreciation of long-lived assets, fair value of intangible assets and goodwill, amortization of intangible assets, income taxes and associated deferrals and valuation allowances, commitments and contingencies and measurement of derivative liabilities.

Trade and Other Accounts Receivable, Policy [Policy Text Block]

Accounts Receivable, Net

Accounts receivable represent customer obligations due under normal trade terms, net of allowance for doubtful accounts. The allowance for doubtful accounts reflects our best estimate of probable losses inherent in the accounts receivable balance. We determine the allowance based on known troubled accounts, historical experience and other currently available evidence. The allowance for doubtful accounts was approximately

$960,000

and

$942,000

as of

September 30, 2018

and

June 30, 2018,

respectively.

Revenue Recognition, Policy [Policy Text Block]

Fair Value Measurements

The Company follows Accounting Standards Codification (“ASC”)

820

-

10,

"Fair Value Measurements and Disclosures"

, of the FASB to measure the fair value of its financial statements and disclosures about fair value of its financial instruments. ASC

820

-

10

establishes a framework for measuring fair value in accounting principles generally accepted in the United States of America (U.S. GAAP), and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, ASC

820

-

10

establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into

three

broad levels. The

three

levels of fair value hierarchy defined by ASC

820

-

10

are described below:

Level  1 -	Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.
Level 2 -	Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.
Level 3 -	Pricing inputs that are generally unobservable input and not corroborated by market data.

The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lower priority to unobservable inputs. If the inputs used to measure the financial assets and liabilities fall within more than

one

level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument. The Company's warrant liabilities and certain conversion features underlying the convertible debt are categorized as Level

3.

Concentration Risk, Credit Risk, Policy [Policy Text Block]

Concentrations of Credit Risk

The Company maintains its cash in bank deposit accounts which, at times,

may

exceed federally insured limits. Accounts are guaranteed by the Federal Deposit Insurance Corporation (FDIC) up to certain limits. At

September 30, 2018

and

June 30, 2018,

the Company had approximately

$320,000

and

$473,000

in excess of FDIC-insured limits. The Company has

not

experienced any losses in such accounts.

At

September 30, 2018,

one

customer had an accounts receivable balance of approximately

$1,116,000.

This customer’s accounts receivable balance comprises

31%

of gross accounts receivable at

September 30, 2018.

Income Tax, Policy [Policy Text Block]

Income Taxes

The Company accounts for income taxes under an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the Company’s financial statements or tax returns. In estimating future tax consequences, the Company generally considers all expected future events other than enactments of changes in tax laws or rates. The effect on deferred taxes and liabilities of a change in tax rates will be recognized as income or expense in the period that includes the enactment date. A valuation allowance is established when necessary to reduce deferred tax assets to the amount expected to be realized.

Management considers the likelihood of changes by taxing authorities in its filed income tax returns and recognizes a liability for or discloses potential changes that management believes are more likely than

not

to occur upon examination by tax authorities. Management has

not

identified any uncertain tax positions that require recognition or disclosure in the accompanying condensed consolidated financial statements.

Reclassification, Policy [Policy Text Block]

Reclassification

Certain prior year amounts have been reclassified to conform to the current year presentation.

New Accounting Pronouncements, Policy [Policy Text Block]

Recent Accounting Pronouncements

In

May 2014,

the FASB issued ASU

2014

-

09,

“

Revenue from Contracts with Customers

” (Topic

606

). This accounting standard outlines a single comprehensive model to use in accounting for revenue arising from contracts with customers. This standard supersedes existing revenue recognition requirements and eliminates most industry specific guidance from GAAP. The core principal of this revenue recognition standard is to require an entity to recognize as revenue the amount that reflects the consideration to which it expects to be entitled in exchange for goods or services as it transfers control to its customers. The Company has implemented this ASU using the modified retrospective method with immaterial impact. This ASU requires significantly enhanced disclosures as shown in Note

3

of the condensed consolidated financial statements in this Quarterly Report on Form

10

-Q. In compliance with this ASU, the Company records uncollectible accounts receivable amounts against revenue instead of bad debt expense.  There were 

no

material reductions in net revenue for the

three

months ended

September 30, 2018.

In

February 2016,

the FASB issued ASU

2016

-

02,

“

Leases

,

”

which will require recognition on the balance sheet for the rights and obligations created by leases with terms greater than

twelve

months.  The new standard is effective for fiscal years and interim periods within those years beginning after

December 15, 2018,

with early adoption permitted.  The Company plans to adopt this guidance at the beginning of its

first

quarter of fiscal

2020

and plans to utilize the transition option which does

not

require application of the guidance to comparative periods in the year of adoption.  While the Company continues to evaluate this standard and the effect on related disclosures, the primary effect of adoption will be recording right-of-use assets and corresponding lease obligations for current operations leases.  The adoption is expected to have a material impact on the Company's consolidated balance sheets, but

not

on the consolidated statements of income or cash flows.  Additionally, the Company is in the process of reviewing current accounting policies, changes to business processes, systems and controls to support adoption of the new standard, which includes implementing a new lease accounting system.  

In

August 2016,

the FASB issued ASU

2016

-

15,

“

Statement of Cash Flows (Topic

230

): Classification of Certain Cash Receipts and Cash Payments

,” which clarifies how certain cash receipts and payments are to be presented in the statement of cash flows. The Company adopted this ASU on

July 1, 2018

with

no

impact on its cash flow presentation.

In

May 2017,

the FASB issued ASU

217

-

09,

“Compensation-Stock Compensation (Topic

718

): Scope of Modification Accounting”,

which amends the scope of modification accounting for share-based payment arrangements, provides guidance on the types of changes to the terms or conditions or share-based payment awards to which an entity would be required to apply modification accounting. The ASU is effective for annual reporting periods, including interim periods within those annual reporting periods, beginning after

December 15, 2017.

The Company has adopted this ASU, and it does

not

expect it to have a material impact on the

2019

fiscal year financial statements.

In

July 2017,

the FASB issued ASU

2017

-

11,

“

Earnings Per Share (Topic

260

), Distinguishing Liabilities from Equity (Topic

480

) and Derivatives and Hedging (topic

815

); Part I. Accounting for Certain Financial Instruments with Down Round Features and Part II. Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception

”, which states that when determining whether certain financial instruments should be classified as liabilities or equity instruments, a down round feature

no

longer precludes equity classification when assessing whether the instrument is indexed to the company’s own stock. As a result, a freestanding equity-linked financial instrument (or embedded conversion option)

no

longer would be accounted for as a derivative liability at fair value as a result of the existence of a down round feature when it is triggered. That effect is treated as a dividend and as a reduction of income available to common shareholders in basic EPS. The Company continues to evaluate the provisions of this ASU and plans to adopt this ASU effective

July 1, 2019.

In

December 2017,

the Securities and Exchange Commission issued Staff Accounting Bulletin

No.

118,

which is an application of ASC Topic

740,

“Income Taxes

”,

in the reporting period that includes

December

22,2017,

the date on which the Tax Cuts and Jobs Act (the “Act”) was signed into law. The Act changes existing United States tax law and includes numerous provisions that will affect business. Staff Accounting Bulletin

No.

118

implies that if a reasonable estimate can be made of the Act’s effects on the Company’s financial statements, the reasonable estimate should be reported in the period ending after

December 22, 2017.

The Company has implemented Staff Accounting Bulletin

No.

118

during fiscal year

2018

by revaluing its deferred tax asset for the lower tax rates.

In

August 2018,

the FASB issued ASU

2018

-

13.

“Fair Value Measurement (Topic

820

): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement”, which adds disclosure requirements to Topic

820

for the range and weighted average of significant unobservable inputs used to develop Level

3

fair value measurements. The Company is evaluating the provisions of this ASU and plans to adopt this ASU effective

July 1, 2020.

XML

Note 3 - Revenue Recognition (Tables)

3 Months Ended

Sep. 30, 2018

Notes Tables

Revenue from External Customers by Products and Services [Table Text Block]

	Three Months Ended
	September 30,
	2018
Healthcare Insurers		46.9	%
Government Payers		23.5	%
Client Payers		24.4	%
Patient		0.2	%
Telehealth		5.0	%
Net revenues		100.0	%

XML

Note 4 - Inventory (Tables)

3 Months Ended

Sep. 30, 2018

Notes Tables

Schedule of Inventory, Current [Table Text Block]

	September 30,		June 30,
	2018		2018
Laboratory testing supplies	$	407,878	$	453,129
Total inventory	$	407,878	$	453,129

XML

Note 6 - Related Party Notes Payable (Tables)

3 Months Ended

Sep. 30, 2018

Notes Tables

Schedule of Debt [Table Text Block]

	September 30, 2018				June 30, 2018
			Interest rate		Note		Interest rate
	Principal		per annum		Payable		per annum
Secured
	$	1,056,875	5% interest paid annually		$	1,056,875	5% interest paid annually
		641,294	5% interest paid annually			641,294	5% interest paid annually
		1,415,449	7.5% interest paid annually			255,417	5% interest paid annually
						591,613	5% interest paid annually
						504,452	5% interest paid annually
Total	$	3,113,618		Total	$	3,049,651

XML

Note 7 - Equity (Tables)

3 Months Ended

Sep. 30, 2018

Notes Tables

Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]

	Three Months Ended
	September 30,
	2018			2017
Basic earnings (loss) per share
Net loss	$	(223,372)		$	(1,126,523	)
Preferred stock dividends		(85,715	)		(84,550	)
Net loss available to common shareholders after preferred stock dividends	$	(309,087)		$	(1,211,073	)
Weighted average shares used in the computation of basic earnings per share		7,365,723			7,249,370
Loss per share - basic	$	(0.04)		$	(0.17	)
Dilutive earnings (loss) per share
Loss available to common shareholders	$	(309,087)		$	(1,211,073	)
Weighed average shares used in the computation of diluted loss per share		7,365,723			7,249,370
Shares used in the computation of diluted loss per share		7,365,723			7,249,370
Loss per share - diluted	$	(0.04)			(0.17	)

Schedule of Stockholders' Equity Note, Warrants or Rights [Table Text Block]

Warrant Activity	Number of Shares			Weighted Average Exercise Price per Share		Weighted Average Remaining Contractual Life (Years)		Aggregate Intrinsic Value
Outstanding June 30, 2018		3,458,826		$	3.65		3.41	$	-
Issued		-
Expired		(61,112	)	$	11.69		-	$	-
Outstanding September 30, 2018		3,397,714		$	3.25		3.30	$	-
Exercisable, September 30, 2018		3,397,714		$	3.25		3.47	$	-

XML

Note 8 - Share-based Compensation (Tables)

3 Months Ended

Sep. 30, 2018

Notes Tables

Share-based Compensation, Stock Options, Activity [Table Text Block]

Employees Information	Number of Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)
Outstanding June 30, 2018		265,346		$	7.08		6.55
Granted		-			-		-
Expired/Forfeited		(29,167	)		3.39		-
Outstanding September 30, 2018		236,179			7.54		6.13
Exercisable September 30, 2018		139,751		$	11.81		4.21

					Weighted
			Weighted		Average
			Average		Remaining		Aggregate
	Number of		Exercise		Contractual		Intrinsic
Non-Executive Director Information	Options		Price		Life (Years)		Value
Outstanding June 30, 2018		545,059	$	3.08		7.75	$	-
Granted		5,001		0.67		9.93		300
Expired/forfeited		-		-		-
Outstanding and exercisable September 30, 2018		550,060	$	3.04		7.54	$	300

Schedule of Share-based Compensation, Restricted Stock Units Award Activity [Table Text Block]

	Number of RSUs			Weighted Average Grant Date Fair Value
Outstanding June 30, 2018		752,391		$	1.31
Granted		-			-
Expired/Forfeited		(37,000	)		1.19
Outstanding September 30, 2018		715,391		$	1.32

XML

Note 10 - Fair Value Measurements and Other Financial Instruments (Tables)

3 Months Ended

Sep. 30, 2018

Notes Tables

Fair Value Measurement Inputs and Valuation Techniques [Table Text Block]

Exercise Price	$	1.20		-	$	1.22
Risk free interest rate		2.32	%	-		2.93	%
Expected volatility		130	%	-		200	%
Remaining Term (years)		0.47		-		4.82

Schedule of Derivative Liabilities at Fair Value [Table Text Block]

				Convertible
	Warrants			Notes		Total
Balance - June 30, 2018	$	505,069		$	818,556	$	1,323,625
Change in fair value of derivative liabilities		(64,333	)		(444,291)		(508,624)
Balance - September 30, 2018	$	440,736		$	374,265	$	815,001

Fair Value, Liabilities Measured on Recurring and Nonrecurring Basis [Table Text Block]

	Fair value		Level 1		Level 2		Level 3
June 30, 2018 Derivative liabilities	$	1,323,625	$	-	$	-	$	1,323,625
September 30, 2018 Derivative liabilities	$	815,001	$	-	$	-	$	815,001

XML

Note 13 - Segment Information (Tables)

3 Months Ended

Sep. 30, 2018

Notes Tables

Schedule of Segment Reporting Information, by Segment [Table Text Block]

	Authentidate			AEON			Total
Three Months ended September 30, 2018
Net revenues	$	203,559		$	3,537,631		$	3,741,190
Cost of revenues		39,883			1,416,767			1,456,650
Operating expenses		189,841			3,638,963			3,828,804
Operating income (loss)		13,718			(101,332	)		(87,614	)
Net income (loss)		78,793			(302,165)			(223,372	)
Three months ended September 30, 2017
Net revenues	$	247,670		$	3,110,382		$	3,358,052
Cost of revenues		55,127			1,073,449			1,128,576
Operating expenses		873,385			3,618,988			4,492,373
Operating income (loss)		(628,715	)		(505,606	)		(1,134,321	)
Net income (loss)		(520,947	)		(605,576)			(1,126,523	)
September 30, 2018
Total assets	$	5,967,666			4,899,726		$	10,867,392
June 30, 2018
Total Assets	$	7,532,512		$	3,442,743		$	10,975,255

XML

Note 1 - Description of Business, Reverse Merger and Liquidity (Details Textual) - USD ($)	Nov. 07, 2018	Oct. 31, 2018	Sep. 30, 2018	Jun. 30, 2018	Sep. 30, 2017
Short-term Debt, Total			$ 1,415,449
Cash and Cash Equivalents, at Carrying Value, Ending Balance			569,694	723,352	$ 733,816
Working Capital (Deficit)			3,846,000
Subsequent Event [Member]
Cash and Cash Equivalents, at Carrying Value, Ending Balance	$ 0	$ 457,000
Estimated Monthly Operational Requirement	1,200,000
Subsequent Event [Member] | Grid Notes [Member]
Debt Instrument, Face Amount	2,000,000
Secured Debt, Total	1,415,449
Subsequent Event [Member] | Secured Notes Maturing on June 15, 2018 [Member]
Debt Instrument, Face Amount	81,000
Subsequent Event [Member] | Subordinated Secured Note Payable [Member] | Former Chief Financial Officer [Member] | Accrued Expenses [Member]
Due to Related Parties, Total	1,698,169
Secured Convertible Note Payable [Member]
Short-term Debt, Total				$ 3,049,651
Debt Instrument, Face Amount			$ 3,113,618
Secured Convertible Note Payable [Member] | Subsequent Event [Member]
Short-term Debt, Total	$ 3,113,618

XML

Note 2 - Summary of Significant Accounting Policies (Details Textual)	3 Months Ended
	Sep. 30, 2018 USD ($)	Jun. 30, 2018 USD ($)
Allowance for Doubtful Accounts Receivable, Current, Ending Balance	$ 960,000	$ 942,000
Cash, Uninsured Amount	320,000	$ 473,000
One Customer [Member]
Accounts Receivable, Net, Total	$ 1,116,000
Customer Concentration Risk [Member] | Accounts Receivable [Member]
Number of Major Customers	1
Customer Concentration Risk [Member] | Accounts Receivable [Member] | One Customer [Member]
Concentration Risk, Percentage	31.00%

XML

Note 3 - Revenue Recognition (Details Textual)	3 Months Ended
	Sep. 30, 2018	Sep. 30, 2017
Percentage of Revenues	100.00%
Lab Test [Member]
Percentage of Revenues	95.00%	93.00%
Telehealth [Member]
Percentage of Revenues	5.00%	7.00%

XML

Note 3 - Revenue Recognition - Revenues by Type of Customers (Details)	3 Months Ended
	Sep. 30, 2018
Percentage of net revenue	100.00%
Healthcare Insurers [Member]
Percentage of net revenue	46.90%
Government Payers [Member]
Percentage of net revenue	23.50%
Client Payers [Member]
Percentage of net revenue	24.40%
Patient [Member]
Percentage of net revenue	0.20%
Telehealth [Member]
Percentage of net revenue	5.00%

XML

Note 4 - Inventory - Inventory (Details) - USD ($)	Sep. 30, 2018	Jun. 30, 2018
Laboratory testing supplies	$ 407,878	$ 453,129
Total inventory	$ 407,878	$ 453,129

XML

Note 5 - Income Taxes (Details Textual) - USD ($)	3 Months Ended		12 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Jun. 30, 2019
Effective Income Tax Rate Reconciliation, Percent, Total	3.40%	0.00%
Deferred Tax Assets, Net, Total	$ 40,699,000
Deferred Tax Assets, Valuation Allowance, Total	34,883,000
Deferred Tax Assets, Operating Loss Carryforwards, Total	$ 5,816,000
Scenario, Forecast [Member]
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent			21.00%

XML

Note 6 - Related Party Notes Payable (Details Textual)				3 Months Ended
	Jul. 19, 2018 USD ($)	Jun. 30, 2018 USD ($) $ / shares	Mar. 27, 2018 USD ($) $ / shares shares	Sep. 30, 2018 USD ($)	Mar. 26, 2018 $ / shares
Interest Payable, Current		$ 155,257		$ 151,527
Short-term Debt, Total				1,415,449
New Notes Warrants [Member]
Class of Warrant or Right, Number of Securities Called by Warrants or Rights | shares			825,144
Class of Warrant or Right, Exercise Price of Warrants or Rights | $ / shares			$ 1.22		$ 2.07
Note Restructuring Transaction [Member] | AEON Global Health Corp [Member] | Lenders [Member]
Debt Agreement, Maximum Borrowing Capacity	$ 2,000,000
Chief Executive Officer [Member] | AEON Global Health Corp [Member]
Short-term Debt, Total		$ 760,000
Chief Executive Officer [Member] | Grid Notes [Member] | AEON Global Health Corp [Member]
Debt Instrument, Face Amount	1,100,000
Short-term Debt, Total	759,869
Optimum Ventures, LLC [Member] | AEON Global Health Corp [Member]
Debt Instrument, Convertible, Conversion Price | $ / shares		$ 1.20
Debt Instrument, Convertible, Number of Equity Instruments		1,126,235
Short-term Debt, Total		$ 591,613
Optimum Ventures, LLC [Member] | Grid Notes [Member] | AEON Global Health Corp [Member]
Debt Instrument, Face Amount	900,000
Short-term Debt, Total	591,613			1,415,449
Lenders [Member]
Debt Instrument, Face Amount	1,351,482
Lenders [Member] | Grid Notes [Member]
Debt Instrument, Face Amount	$ 2,000,000
Debt Instrument, Interest Rate, Stated Percentage	7.50%
Lenders [Member] | Grid Notes [Member] | AEON Global Health Corp [Member]
Debt Instrument, Redemption Price, Percentage	110.00%
Promissory Notes [Member] | Chief Executive Officer [Member]
Debt Instrument, Face Amount			$ 500,000
Secured Convertible Note Payable [Member]
Debt Instrument, Face Amount				3,113,618
Short-term Debt, Total		$ 3,049,651
Paid-in-Kind Interest				0
Secured Convertible Note Payable [Member] | New Notes [Member]
Debt Instrument, Face Amount			$ 2,545,199
Debt Instrument, Convertible, Conversion Price | $ / shares			$ 1.20
Debt Instrument, Convertible, Number of Equity Instruments			2,120,999
Interest Payable, Current				$ 202,000
Gain (Loss) on Extinguishment of Debt, Total			$ (247,539)
Secured Convertible Note Payable [Member] | Additional Senior Note [Member]
Debt Instrument, Face Amount			$ 504,452
Debt Instrument, Convertible, Conversion Price | $ / shares			$ 1.20
Debt Instrument, Convertible, Number of Equity Instruments			420,376
Secured Convertible Note Payable [Member] | Original Notes [Member] | AEON Global Health Corp [Member]
Debt Instrument, Face Amount	$ 1,698,169
Secured Convertible Note Payable [Member] | Chief Executive Officer [Member] | New Notes [Member]
Debt Instrument, Face Amount			$ 255,417
Secured Convertible Note Payable [Member] | Optimum Ventures, LLC [Member] | New Notes [Member]
Debt Instrument, Face Amount			$ 591,613

XML

Note 6 - Related Party Notes Payable - Related Party Notes Payable (Details) - USD ($)	Sep. 30, 2018	Jun. 30, 2018
Related party notes payable	$ 1,415,449
Secured Convertible Note Payable [Member]
Related party notes payable, principal	3,113,618
Related party notes payable		$ 3,049,651
Secured Convertible Note Payable [Member] | Lender One [Member]
Related party notes payable, principal	$ 1,056,875
Debt instrument, stated percentage	5.00%	5.00%
Related party notes payable		$ 1,056,875
Secured Convertible Note Payable [Member] | Lender Two [Member]
Related party notes payable, principal	$ 641,294
Debt instrument, stated percentage	5.00%	5.00%
Related party notes payable		$ 641,294
Secured Convertible Note Payable [Member] | Lender Three [Member]
Related party notes payable, principal	$ 1,415,449
Debt instrument, stated percentage	7.50%	5.00%
Related party notes payable		$ 255,417
Secured Convertible Note Payable [Member] | Lender Four [Member]
Related party notes payable, principal
Debt instrument, stated percentage		5.00%
Related party notes payable		$ 591,613
Secured Convertible Note Payable [Member] | Lender Five [Member]
Related party notes payable, principal
Debt instrument, stated percentage		5.00%
Related party notes payable		$ 504,452

XML

Note 7 - Equity (Details Textual) - USD ($)	3 Months Ended
	Sep. 30, 2018	Jun. 30, 2018	Mar. 27, 2018	Mar. 26, 2018
Preferred Stock, Par or Stated Value Per Share	$ 0.10	$ 0.10
New Notes Warrants [Member]
Class of Warrant or Right, Number of Securities Called by Warrants or Rights			825,144
Class of Warrant or Right, Exercise Price of Warrants or Rights			$ 1.22	$ 2.07
Series E Convertible Preferred Stock [Member]
Preferred Stock, Shares Outstanding, Ending Balance	25,000	25,000
Convertible Preferred Stock, Aggregate Shares Issued upon Conversion	187,500
Convertible Preferred Stock, Conversion Price	$ 4
Preferred Stock, Par or Stated Value Per Share	$ 30
Preferred Stock, Period Following Issuance Date to Initiate Redemption	1 year
Preferred Stock, Dividend Rate, Percentage	5.00%
Dividends Payable	$ 9,349
Series D Convertible Preferred Stock [Member]
Preferred Stock, Shares Outstanding, Ending Balance	605,000	605,000
Convertible Preferred Stock, Aggregate Shares Issued upon Conversion	619,154
Convertible Preferred Stock, Conversion Price	$ 9.77139
Preferred Stock, Dividend Rate, Percentage	5.00%
Dividends Payable	$ 76,366
Preferred Stock, Redemption Price Per Share	$ 10

XML

Note 7 - Equity - Earnings Per Share (Details) - USD ($)	3 Months Ended
	Sep. 30, 2018	Sep. 30, 2017
Basic earnings (loss) per share
Net loss	$ (223,372)	$ (1,126,523)
Preferred stock dividends	(85,715)	(84,550)
Net loss available to common shareholders after preferred stock dividends	$ (309,087)	$ (1,211,073)
Weighted average shares used in the computation of basic earnings per share (in shares)	7,365,723	7,249,370
Loss per share - basic (in dollars per share)	$ (0.04)	$ (0.17)
Dilutive earnings (loss) per share
Loss available to common shareholders	$ (309,087)	$ (1,211,073)
Weighed average shares used in the computation of diluted loss per share (in shares)	7,365,723	7,249,370
Shares used in the computation of diluted loss per share (in shares)	7,365,723	7,249,370
Loss per share - diluted (in dollars per share)	$ (0.04)	$ (0.17)

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Note 7 - Equity - Warrant Activity (Details) - Warrant [Member] - USD ($)	3 Months Ended	12 Months Ended
	Sep. 30, 2018	Jun. 30, 2018
Warrants outstanding (in shares)	3,458,826
Warrants outstanding, weighted average exercise price per share (in dollars per share)	$ 3.65
Warrants outstanding, weighted average remaining contractual life (Year)	3 years 109 days	3 years 149 days
Warrants outstanding, aggregate intrinsic value
Warrants issued (in shares)
Warrants issued, weighted average exercise price per share (in dollars per share)
Warrants expired (in shares)	(61,112)
Warrants expired, weighted average exercise price per share (in dollars per share)	$ 11.69
Warrants outstanding (in shares)	3,397,714	3,458,826
Warrants outstanding, weighted average exercise price per share (in dollars per share)	$ 3.25	$ 3.65
Warrants exercisable (in shares)	3,397,714
Warrants exercisable, weighted average exercise price per share (in dollars per share)	$ 3.25
Warrants exercisable, weighted average remaining contractual life (Year)	3 years 171 days
Warrants exercisable, aggregate intrinsic value

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Note 8 - Share-based Compensation (Details Textual) - USD ($)	3 Months Ended
	Sep. 30, 2018	Sep. 30, 2017
Allocated Share-based Compensation Expense, Total	$ 69,400	$ 69,000

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Note 8 - Share-based Compensation - Stock Option Activity (Details) - USD ($)	3 Months Ended	12 Months Ended
	Sep. 30, 2018	Jun. 30, 2018
Employees [Member]
Outstanding, beginning of period (in shares)	265,346
Outstanding, weighted average exercise price (in dollars per share)	$ 7.08
Outstanding, average remaining contractual life (Year)	6 years 47 days	6 years 200 days
Number of options granted (in shares)
Granted, weighted average exercise price (in dollars per share)
Granted, average remaining contractual life (Year)
Number of options expired/forfeited (in shares)	(29,167)
Expired/forfeited, weighted average exercise price (in dollars per share)	$ 3.39
Expired/forfeited, average remaining contractual life (Year)
Outstanding, end of period (in shares)	236,179	265,346
Outstanding, weighted average exercise price (in dollars per share)	$ 7.54	$ 7.08
Exercisable (in shares)	139,751
Exercisable, weighted average exercise price (in dollars per share)	$ 11.81
Exercisable, average remaining contractual life (Year)	4 years 76 days
Non-Executives [Member]
Outstanding, beginning of period (in shares)	545,059
Outstanding, weighted average exercise price (in dollars per share)	$ 3.08
Outstanding, average remaining contractual life (Year)	7 years 197 days	7 years 273 days
Number of options granted (in shares)	5,001
Granted, weighted average exercise price (in dollars per share)	$ 0.67
Granted, average remaining contractual life (Year)	9 years 339 days
Number of options expired/forfeited (in shares)
Expired/forfeited, weighted average exercise price (in dollars per share)
Expired/forfeited, average remaining contractual life (Year)
Outstanding, end of period (in shares)	550,060	545,059
Outstanding, weighted average exercise price (in dollars per share)	$ 3.04	$ 3.08
Outstanding, aggregate intrinsic value	$ 300
Granted, aggregate intrinsic value	300
Expired/forfeited, aggregate intrinsic value

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Note 8 - Share-based Compensation - Restricted Stock Unit Activity (Details) - Restricted Stock Units (RSUs) [Member]	3 Months Ended
	Sep. 30, 2018 $ / shares shares
Number of RSUs outstanding (in shares) | shares	752,391
RSUs outstanding, weighted average grant date fair value (in dollars per share) | $ / shares	$ 1.31
Number of RSUs granted (in shares) | shares
RSUs granted, weighted average grant date fair value (in dollars per share) | $ / shares
Number of RSUs expired/forfeited (in shares) | shares	(37,000)
RSUs expired/forfeited, weighted average grant date fair value (in dollars per share) | $ / shares	$ 1.19
Number of RSUs outstanding (in shares) | shares	715,391
RSUs outstanding, weighted average grant date fair value (in dollars per share) | $ / shares	$ 1.32

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Note 9 - Earn-out Merger Consideration (Details Textual) - USD ($)	Jul. 19, 2018	Jun. 30, 2018	Sep. 30, 2018
Short-term Debt, Total			$ 1,415,449
AEON Global Health Corp [Member]
Number of Shares of the Company’s Common Stock Issued Presented as Percentage of Issued and Outstanding Shares If EBITDA Level Is Achieved for Three Years		85.00%
Number of Shares of the Company’s Common Stock Issued Presented as Percentage of Issued and Outstanding Shares If EBITDA Level Is Achieved for Four Years		90.00%
Number of Shares Issuable upon Achievement of Earnout	1,200,000	70,000,000
The 2018 Earnout Presented as Amount of EBITDA for Three Years	$ 21,483,749
Fixed Numbers of Shares Issuable If the 2018 Earnout Achieved	3,000,000
Percentage of 2018 Earnout Target Required for Three Years	75.00%
Fixed Numbers of Shares Issuable If 2018 EBITDA for Three Years Is Met	$ 2,250,000
The 2019 Earnout Presented as Amount of EBITDA for Three Years	$ 32,600,530
Fixed Numbers of Shares Issuable If the 2019 Earnout Achieved	4,000,000
Percentage of 2019 Earnout Target Required for Three Years	75.00%
Fixed Numbers of Shares Issuable If 2019 EBITDA for Three Years Is Met	3,000,000
Number of Additional Shares Issuable in Consideration of Restructuring	2,500,000
AEON Global Health Corp [Member] | Chief Executive Officer [Member]
Short-term Debt, Total		$ 760,000
AEON Global Health Corp [Member] | Optimum Ventures, LLC [Member]
Short-term Debt, Total		$ 591,613
Debt Instrument, Convertible, Conversion Price		$ 1.20
Debt Instrument, Convertible, Number of Equity Instruments		1,126,235

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Note 10 - Fair Value Measurements and Other Financial Instruments (Details Textual) - USD ($)	3 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Jul. 19, 2018
Convertible Notes Payable, Total	$ 1,698,169
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Liability, Gain (Loss) Included in Earnings	(508,624)	$ (773,000)
Adjustment to Additional Paid in Capital, Related Party Debt Restructuring	$ 457,060
Lenders [Member]
Debt Instrument, Face Amount			$ 1,351,482

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Note 10 - Fair Value Measurements and Other Financial Instruments - Valuation Techniques (Details)	Sep. 30, 2018 yr
Minimum [Member] | Measurement Input, Exercise Price [Member]
Derivative valuation assumption	1.2
Minimum [Member] | Measurement Input, Risk Free Interest Rate [Member]
Derivative valuation assumption	0.0232
Minimum [Member] | Measurement Input, Price Volatility [Member]
Derivative valuation assumption	1.3
Minimum [Member] | Measurement Input, Expected Term [Member]
Derivative valuation assumption	0.47
Maximum [Member] | Measurement Input, Exercise Price [Member]
Derivative valuation assumption	1.22
Maximum [Member] | Measurement Input, Risk Free Interest Rate [Member]
Derivative valuation assumption	0.0293
Maximum [Member] | Measurement Input, Price Volatility [Member]
Derivative valuation assumption	2
Maximum [Member] | Measurement Input, Expected Term [Member]
Derivative valuation assumption	4.82

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Note 10 - Fair Value Measurements and Other Financial Instruments - Summary in Changes in Fair Value (Details) - USD ($)	3 Months Ended
	Sep. 30, 2018	Sep. 30, 2017
Balance, beginning of period	$ 1,323,625
Change in fair value of derivative liabilities	(508,624)	$ (773,000)
Balance, end of period	815,001
Warrant [Member]
Balance, beginning of period	505,069
Change in fair value of derivative liabilities	(64,333)
Balance, end of period	440,736
Convertible Notes [Member]
Balance, beginning of period	818,556
Change in fair value of derivative liabilities	(444,291)
Balance, end of period	$ 374,265

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Note 10 - Fair Value Measurements and Other Financial Instruments - Derivative Liabilities (Details) - USD ($)	Sep. 30, 2018	Jun. 30, 2018
Derivative liabilities	$ 815,001	$ 1,323,625
Fair Value, Inputs, Level 1 [Member]
Derivative liabilities
Fair Value, Inputs, Level 2 [Member]
Derivative liabilities
Fair Value, Inputs, Level 3 [Member]
Derivative liabilities	$ 815,001	$ 1,323,625

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Note 11 - Commitments and Contingencies (Details Textual)						3 Months Ended
	Oct. 17, 2018 USD ($)	Feb. 15, 2018 USD ($)	Sep. 06, 2016 USD ($)	Jun. 22, 2016 USD ($)	Sep. 15, 2015 USD ($)	Sep. 30, 2018 USD ($)
Offices in New Jersey [Member]
Lessee, Operating Lease, Term of Contract					6 years
Offices in New Jersey [Member] | Letter of Credit [Member]
Repayments of Debt					$ 121,000
Offices in New Jersey [Member] | Minimum [Member]
Operating Leases, Yearly Rent Expense					135,000
Offices in New Jersey [Member] | Maximum [Member]
Operating Leases, Yearly Rent Expense					$ 148,000
Alleged Amount Owed to AT&T [Member]
Loss Contingency, Damages Sought, Value						$ 500,000
Severance Compensation Arbitration Filed by Former CEO [Member]
Loss Contingency, Damages Sought, Value				$ 341,620
Cogmedix, Inc. v. Authentidate Holding Corp [Member]
Loss Contingency, Damages Sought, Value			$ 227,061
Litigation Settlement, Amount Awarded to Other Party		$ 320,638
Cogmedix, Inc. v. Authentidate Holding Corp [Member] | Subsequent Event [Member]
Litigation Settlement, Amount Awarded to Other Party, Number of Monthly Installments	9
Litigation Settlement, Amount Awarded to Other Party, Monthly Installments	$ 149,996

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Note 12 - Related Party Transactions (Details Textual) - USD ($)				3 Months Ended		12 Months Ended
	Sep. 18, 2018	Jan. 01, 2017	Jan. 20, 2016	Sep. 30, 2018	Sep. 30, 2017	Jun. 30, 2018
Interest Expense, Related Party				$ 49,000	$ 32,000
Centennial Properties of Georgia, LLC [Member]
Shared Services Agreement, Term	3 years
Kemah Palms [Member]
Revenue from Related Parties						$ 10,000
Entity Affiliated with Chief Executive Officer [Member]
Due from Related Parties, Total				500,000
Facilities Leased [Member] | Centennial Properties of Georgia, LLC [Member]
Lessee, Operating Lease, Term of Contract			12 years
Operating Leases, Rent Expense, Net, Total				77,000	144,000
Facilities Leased [Member] | Centennial Properties of Georgia, LLC [Member] | Minimum [Member]
Operating Leases, Monthly Rent Expense			$ 46,500
Facilities Leased [Member] | Centennial Properties of Georgia, LLC [Member] | Maximum [Member]
Operating Leases, Monthly Rent Expense			$ 60,000
Residential Premises Leased [Member] | Hanif A. Roshan [Member]
Lessee, Operating Lease, Term of Contract		1 year
Operating Leases, Monthly Rent Expense		$ 7,500
Operating Leases, Rent Expense, Net, Total				$ 22,500	$ 22,500
Operating Leases, Increase in Rent Expense Upon Each Renewal		3.00%

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Note 13 - Segment Information (Details Textual)	3 Months Ended
	Sep. 30, 2018
Number of Operating Segments	2

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Note 13 - Segment Information - Selected Financial Information (Details) - USD ($)	3 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Jun. 30, 2018
Net revenues	$ 3,741,190	$ 3,358,052
Cost of revenues	1,456,650	1,128,576
Operating expenses	3,828,804	4,492,373
Operating income (loss)	(87,614)	(1,134,321)
Net income (loss)	(223,372)	(1,126,523)
Total assets	10,867,392		$ 10,975,255
Web-based Software [Member]
Net revenues	203,559	247,670
Cost of revenues	39,883	55,127
Operating expenses	189,841	873,385
Operating income (loss)	13,718	(628,715)
Net income (loss)	78,793	(520,947)
Total assets	5,967,666		7,532,512
Laboratory Testing Services [Member]
Net revenues	3,537,631	3,110,382
Cost of revenues	1,416,767	1,073,449
Operating expenses	3,638,963	3,618,988
Operating income (loss)	(101,332)	(505,606)
Net income (loss)	(302,165)	$ (605,576)
Total assets	$ 4,899,726		$ 3,442,743

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Note 14 - Subsequent Events (Details Textual) - Cogmedix, Inc. v. Authentidate Holding Corp [Member]	Oct. 17, 2018 USD ($)	Feb. 15, 2018 USD ($)	Sep. 06, 2016 USD ($)
Loss Contingency, Damages Sought, Value			$ 227,061
Litigation Settlement, Amount Awarded to Other Party		$ 320,638
Subsequent Event [Member]
Litigation Settlement, Amount Awarded to Other Party, Number of Monthly Installments	9
Litigation Settlement, Amount Awarded to Other Party, Monthly Installments	$ 149,996