Discontinued Operations

12 Months Ended

Dec. 31, 2018

Discontinued Operations and Disposal Groups [Abstract]

Discontinued Operations

Note 18 – Discontinued Operations

On July 12, 2017, the Company announced plans to spin off AMSG and in the third quarter of 2017, the Company’s Board of Directors voted unanimously to spin off the Company’s wholly-owned subsidiary, Health Technology Solutions, Inc. (“HTS”), as independent publicly traded companies by way of tax-free distributions to the Company’s stockholders. While these spin offs have taken longer than anticipated, completion of these spin offs is now expected to occur in the first quarter of 2020. The spin offs are subject to numerous conditions, including effectiveness of Registration Statements on Form 10 to be filed with the Securities and Exchange Commission, and consents, including under various funding agreements previously entered into by the Company. A record date to determine those stockholders entitled to receive shares in the spin offs should be approximately 30 to 60 days prior to the dates of the spin offs. The strategic goal of the spin offs is to create three public companies, each of which can focus on its own strengths and operational plans.

In accordance with ASC 205-20 and having met the criteria for “held for sale”, as the Company reached this decision prior to December 31, 2017, the Company has reflected amounts relating to AMSG and HTS as disposal groups classified as held for sale and included as part of discontinued operations. Prior to being classified as “held for sale,” AMSG had been the Company’s Decision Support and Informatics segment, except for the Company’s subsidiary, Alethea Laboratories, Inc., which had been included in the Clinical Laboratory Operations segment and now is part of AMSG, and HTS had been the Company’s Supportive Software Solutions segment. Segment operation disclosures in Note 17 no longer include amounts relating to AMSG and HTS following the reclassification to discontinued operations.

Carrying amounts of major classes of assets and liabilities classified as held for sale and included as part of discontinued operations in the consolidated balance sheets as of December 31, 2018 and 2017 consisted of the following:

AMSG Assets and Liabilities:

	December 31, 2018		December 31, 2017
Cash	$	4,471	$	9,273
Accounts receivable, net		6,838		19,022
Prepaid expenses and other current assets		25,477		25,477
Current assets classified as held for sale	$	36,786	$	53,772
Property and equipment, net	$	-	$	-
Deposits		-		-
Non-current assets classified as held for sale	$	-	$	-
Accounts payable (includes related parties)	$	532,858	$	671,561
Accrued expenses		418,932		375,165
Current portion of notes payable		278,836		249,589
Current liabilities classified as held for sale	$	1,230,626	$	1,296,315
Non-current liabilities classified as held for sale	$	-	$	-

HTS Assets and Liabilities:

	December 31, 2018		December 31, 2017
Cash	$	2,523	$	8,281
Accounts receivable, net		90,743		160,715
Prepaid expenses and other current assets		10,300		3,964
Current assets classified as held for sale	$	103,566	$	172,960
Property and equipment, net	$	5,790	$	21,078
Deposits		6,029		7,756
Non-current assets classified as held for sale	$	11,819	$	28,834
Accounts payable (includes related parties)	$	546,969	$	407,404
Accrued expenses		520,251		269,135
Current liabilities classified as held for sale	$	1,067,220	$	676,539

Consolidated Discontinued Operations Assets and Liabilities:

	December 31, 2018		December 31, 2017
Cash	$	6,994	$	17,554
Accounts receivable, net		97,581		179,737
Prepaid expenses and other current assets		35,777		29,441
Current assets classified as held for sale	$	140,352	$	226,732
Property and equipment, net	$	5,790	$	21,078
Deposits		6,029		7,756
Non-current assets classified as held for sale	$	11,819	$	28,834
Accounts payable (includes related parties)	$	1,079,827	$	1,078,965
Accrued expenses		939,183		644,300
Current portion of notes payable		278,836		249,589
Current liabilities classified as held for sale	$	2,297,846	$	1,972,854

Major line items constituting loss from discontinued operations in the consolidated statements of operations for the years ended December 31, 2018 and 2017 consisted of the following:

AMSG Income (Loss) from Discontinued Operations:

	Year Ended December 31,
	2018			2017
Revenue from services	$	102,991		$	283,460
Cost of services		38,299			12,575
Gross profit		64,692			270,885
Operating expenses		480,436			2,525,110
Gain on sale of stock		(800,000	)		-
Other expense		1,049			46,859
Provision for income taxes		-			-
Income (loss) from Discontinued Operations:	$	383,207		$	(2,301,084	)

HTS Loss from Discontinued Operations:

	Year Ended December 31,
	2018			2017
Revenue from services (**)	$	1,419,494		$	1,650,109
Cost of services		123,721			168,274
Gross profit		1,295,773			1,481,835
Operating expenses		2,108,880			3,402,860
Other expense		4,943			54,809
Provision for income taxes		-			-
Loss from Discontinued Operations:	$	(818,050	)	$	(1,975,834	)

**Revenue from services, includes related party revenue of $0.7 million and $0.7 million, respectively

Consolidated Loss from Discontinued Operations:

	Year Ended December 31,
	2018			2017
Revenue from services	$	1,522,485		$	1,933,569
Cost of services		162,020			180,849
Gross profit		1,360,465			1,752,720
Operating expenses		2,589,316			5,927,970
Gain on sale of stock		(800,000	)		-
Other expense		5,992			101,668
Provision for income taxes		-			-
Loss from Discontinued Operations:	$	(434,843	)	$	(4,276,918	)

Acquisition of Genomas, Inc. on September 27, 2017

On September 29, 2016, the Company announced that it had entered into a Stock Purchase Agreement (the “Purchase Agreement”) to acquire the remaining outstanding equity securities of Genomas, Inc. (“Genomas”) that the Company did not already own, representing approximately 85% of the outstanding equity interests in Genomas, for 1,750,000 shares of the Company’s newly - designated Series F Preferred Stock. (The Series F Preferred Stock is more fully described in Note 14 and below.) Genomas is a biomedical company that develops PhyzioType Systems for DNA-guided management and prescription of drugs used to treat mental illness, pain, heart disease, and diabetes. The Company had previously announced that on July 19, 2016 it acquired approximately 15% of the outstanding equity of Genomas from Hartford Healthcare Corporation (“Hartford”), along with approximately $1.5 million of notes payable to Hartford and certain rights to and license participation in technology that is used by Genomas, for $250,000 in cash. The closing of this acquisition under the Purchase Agreement, which was subject to, among other things, receipt of regulatory and licensure approvals as well as other customary closing conditions, did not occur until September 27, 2017. As a result of delays in the closing of the transaction, the Company expensed all amounts previously paid to the company aggregating $1.0 million during the fourth quarter of 2016, including outstanding advances to Genomas in the amount of $0.4 million. Genomas will be spun-off as part of AMSG, so it is presented here in discontinued operations.

The Series F Preferred Stock issued effective September 27, 2017 has an aggregate stated value of $1,750,000, and is convertible into shares of the Company’s common stock at any time after the one-year anniversary of the closing date at a conversion price per common share equal to the greater of $14,625 or the average closing sales price of the Company’s common stock for the 10 trading days immediately preceding the conversion. The maximum number of common shares issuable upon the conversion of the Series F Preferred Stock is 120. The Company valued the Series F Preferred Stock based on the value of the common stock issuable upon conversion on the date of the acquisition, which was $174,097.

The following table summarizes the fair values of assets acquired and liabilities assumed at the acquisition date of Genomas. See the discussion below regarding the impairment of the goodwill acquired.

Cash	$	7,990
Accounts receivable, net		6,503
Accounts payable and accrued expenses		(458,736	)
Deferred revenue		(20,000	)
Loans payable short-term		(142,514	)
Note payable long-term		(134,118	)
Total identifiable net liabilities		(740,875	)
Goodwill		914,972
Total consideration	$	174,097

During the fourth quarter of 2017, the Company determined that the goodwill acquired in the Genomas acquisition was impaired and, accordingly, it recorded an impairment charge of $914,972 in the discontinued operations of AMSG for the year ended December 31, 2017.