Current Report Filing (8-k)
November 20 2017 - 4:06PM
Edgar (US Regulatory)
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
8-K
CURRENT
REPORT PURSUANT
TO
SECTION 13 or 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
Date
of report (Date of earliest event reported): November 14, 2017
Rennova
Health, Inc.
(Exact
Name of Registrant as Specified in Its Charter)
Delaware
(State
or Other Jurisdiction of Incorporation)
001-35141
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68-0370244
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(Commission File Number)
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(I.R.S.
Employer Identification No.)
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400
S. Australian Avenue, Suite 800, West Palm Beach,
Florida
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33401
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(Address
of Principal Executive Offices)
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(Zip
Code)
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(561)
855-1626
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(Registrant’s
Telephone Number, Including Area Code)
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(Former
Name or Former Address, if Changed Since Last Report)
Check
the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant
under any of the following provisions (see General Instruction A.2. below):
[ ]
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Written
communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
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[ ]
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Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
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[ ]
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Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
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[ ]
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Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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Indicate
by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405
of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
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. [ ]
Item
4.02
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Non-Reliance
on Previously Issued Financial Statements or a Related Audit Report or Completed Interim Review.
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On November 14, 2017, the board of directors
(the “Board”) of Rennova Health, Inc. (the “Company”) concluded that the previously issued unaudited condensed
consolidated financial statements contained in the Company’s Quarterly Report on Form 10-Q for the three and six months
ended June 30, 2017 (the “Original 10-Q”) should no longer be relied upon because of errors in those financial statements
relating to the Company’s accounting for outstanding common stock warrants. The Company identified errors relating to the accounting
for outstanding common stock warrants described below.
In
July 2017, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) 2017-11 “Earnings
Per Share (Topic 260) Distinguishing Liabilities from Equity (Topic 480) Derivatives and Hedging (Topic 815).” The amendments
in Part I of this ASU change the classification analysis of certain equity-linked financial instruments (or embedded features)
with down round features. 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
an entity’s own stock. The Company determined that the amendment would have a material impact on its condensed consolidated
financial statements and early adopted this ASU. The cumulative effect of the adoption of ASU 2017-11 resulted in the reclassification
of the derivative liability recorded of $56 million and the reversal of $41 million of interest expense recorded in the Company’s
first fiscal quarter of 2017. The remaining $16 million was offset to additional paid in capital (discount on convertible debenture).
Additionally, the Company recognized a deemed dividend from the trigger of the down round provision features of the convertible
debt and common stock warrants of $11.1 million, which was recorded retrospectively as of the beginning of the issuance of the
March 2017 debentures where the initial derivative liability was recorded.
The Company has identified errors in the
calculation of the deemed dividend recorded upon adoption of ASU 2017-11 as the number of outstanding common stock warrants was not
proportionally increased for decreases in the exercise prices of various warrants as a result of the trigger of the down round
provision features. Therefore, the deemed dividend was understated by approximately $31.6 million for the six months ended June
30, 2017. In addition, other existing common stock warrants that also contain down round provisions that require the Company to
reduce the per share exercise price of the warrants and proportionally increase the number of warrants issuable upon exercise,
with certain exceptions, whenever the Company issues its common stock or common stock equivalents in a dilutive issuance were
not revalued as of June 30, 2017. As a result, the Company did not record a deemed dividend associated with these warrants of
approximately $3.5 million and $8.4 million for the three and six months ended June 30, 2017, respectively. The Company is required
to report any increase in the fair value of the common stock warrants resulting from a trigger of the down round feature as a deemed
dividend in its financial statements with a corresponding increase in the net loss available to common shareholders.
The
errors discussed above also resulted in an understatement of the reported number of common stock warrants outstanding at June
30, 2017 from a reported 32,095,655 warrants outstanding to a corrected 156,920,342 warrants outstanding and an overstatement
of the weighted average exercise price of the warrants from a reported $0.85 per share to a corrected weighted average exercise
price of $0.44 per share. The
correction of the errors does not impact assets, liabilities, total stockholders’ deficit, total cash flows, net loss or
comprehensive loss.
The
effect of the restatement on each of our financial statements at June 30, 2017 and for the three and six months ended June 30,
2017 is as follows:
Unaudited
Condensed Consolidated Balance Sheets Data
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As Previously Reported June 30, 2017
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Correction
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As Restated June 30, 2017
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Stockholders’ deficit
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Series G preferred stock, $0.01 par value, 14,000 shares authorized, 215 shares issued and outstanding
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$
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2
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$
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-
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$
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2
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Series H preferred stock, $0.01 par value, 14,202 shares authorized,
60 shares issued and outstanding
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$
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-
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$
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-
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$
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-
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Common stock, $0.01 par value, 500,000,000 shares authorized, 13,408,360
shares issued and outstanding
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$
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134,084
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$
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-
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$
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134,084
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Additional paid-in-capital
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$
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74,430,142
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$
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39,968,327
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$
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114,398,469
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Accumulated deficit
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$
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(92,080,742
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)
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$
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(39,968,327
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)
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$
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(132,049,069
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)
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Total stockholders’ deficit
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$
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(17,516,514
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)
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$
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-
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$
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(17,516,514
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)
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Unaudited
Condensed Consolidated Statements of Operations Data
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For the Three Months Ended June 30, 2017 As Previously Reported
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Correction
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For the Three Months Ended June 30, 2017 As Restated
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Change in fair value of derivative instruments
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$
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-
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$
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-
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$
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-
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Gain on extinguishment of debt
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$
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-
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$
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-
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$
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-
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Net loss from continuing operations
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$
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(10,342,636
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)
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$
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-
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$
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(10,342,636
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)
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Net loss from discontinued operations
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$
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(335,573
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)
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$
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-
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$
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(335,573
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)
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Net loss
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$
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(10,678,209
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)
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$
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-
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$
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(10,678,209
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)
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Deemed dividend from trigger of down round provision feature
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$
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-
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$
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(3,508,587
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$
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(3,508,587
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)
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Net loss to common shareholders
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$
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(10,678,209
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)
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$
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(3,508,587
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$
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(14,186,796
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)
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Net loss per common share:
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Basic and diluted: continuing operations
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$
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(1.37
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$
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(0.46
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$
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(1.83
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Basic and diluted: discontinued operations
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$
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(0.04
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$
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-
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$
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(0.04
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Total basic and diluted
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$
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(1.41
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$
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(0.46
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)
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$
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(1.87
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)
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Unaudited
Condensed Consolidated Statements of Operations Data
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For the Six Months Ended June 30, 2017 As Previously Reported
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Correction
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For the Six Months Ended June 30, 2017 As Restated
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Change in fair value of derivative instruments
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$
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(11,093,012
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$
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(31,609,803
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$
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(42,702,815
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)
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Gain on extinguishment of debt
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$
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11,093,012
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$
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31,609,803
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$
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42,702,815
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Net loss from continuing operations
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$
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(19,663,546
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$
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-
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$
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(19,663,546
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Net loss from discontinued operations
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$
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(683,320
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$
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-
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$
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(683,320
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)
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Net loss
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$
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(20,346,866
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)
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$
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-
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$
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(20,346,866
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)
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Deemed dividend from trigger of down round provision feature
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$
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(11,093,012
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$
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(39,968,327
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$
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(51,061,339
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Net loss to common shareholders
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$
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(31,439,878
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$
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(39,968,327
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$
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(71,408,205
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)
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Net loss per common share:
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Basic and diluted: continuing operations
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$
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(4.93
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)
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$
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(6.41
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)
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$
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(11.34
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)
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Basic and diluted: discontinued operations
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$
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(0.11
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)
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$
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-
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$
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(0.11
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Total basic and diluted
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$
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(5.04
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$
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(6.41
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)
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$
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(11.45
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)
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Unaudited
Condensed Consolidated Statement of Changes in Stockholders’ Deficit Data
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For the Six Months Ended
June 30, 2017 As Previously Reported
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Correction
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For the Six Months Ended
June 30, 2017 As Restated
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Additional paid-in-capital at June 30, 2017
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$
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74,430,142
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$
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39,968,327
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$
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114,398,469
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Accumulated deficit at June 30, 2017
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$
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(92,080,742
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)
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$
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(39,968,327
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)
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$
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(132,049,069
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)
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Total stockholders’ deficit at June 30, 2017
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$
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(17,516,514
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)
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$
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-
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$
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(17,516,514
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)
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Unaudited
Condensed Consolidated Statements of Cash Flows Data
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For
the Six Months Ended June 30, 2017 As Previously Reported
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Correction
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For
the Six Months Ended June 30, 2017 As Restated
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Cash
flows from operating activities:
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Loss
(gain) on extinguishment of debt
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$
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(11,093,012
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)
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$
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(31,609,803
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)
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$
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(42,702,815
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)
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Change
in fair value of derivative instrument
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$
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11,093,012
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$
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31,609,803
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$
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42,702,815
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The
Company plans to file an amended Quarterly Report on Form 10-Q for the quarter ended June 30, 2017 to include the unaudited condensed
consolidated financial statements for the three and six months ended June 30, 2017 and related disclosures reflecting the correction
of the errors described above and their related effects as soon as practicable.
The
Board and the Company’s management have discussed the matters in this Current Report on Form 8-K with its independent registered
public accounting firm, Green & Company, CPAs.
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
Dated:
November 20, 2017
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By:
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/s/
Seamus Lagan
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Seamus
Lagan
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Chief Executive Officer and Interim Chief Financial Officer
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