Liquidity and Going Concern Assessment

The Company's primary sources of liquidity are cash and cash equivalents as well as availability under a Credit and Security Agreement (the "2016 Credit and Security Agreement") with SCM Specialty Finance Opportunities Fund, L.P. ("SCM"). The Company has historically used availability under a revolving credit facility to fund operations due to a lag between the payment of certain operating expenses and the subsequent billing and collection of the associated revenue based on customer payment terms. To illustrate, in order to conduct successful screenings, the Company must expend cash to deliver the equipment and supplies required for the screenings. The Company must also expend cash to pay the health professionals and site management conducting the screenings. All of these expenditures are incurred in advance of the customer invoicing process and ultimate cash receipts for services performed. Given the seasonal nature of the Company's operations, management expects to continue using a revolving credit facility in 2017 and beyond.

Going Concern

In accordance with ASC 205-40, the following information reflects the results of management’s assessment of the Company's ability to continue as a going concern.

Principal conditions or events that require management's consideration

Following are conditions and events which require management's consideration:

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The Company had a working capital deficit of $10.5 million with $0.2 million in cash and cash equivalents at March 31, 2017. The Company had $4.9 million of payables at March 31, 2017, that were past due-date terms. The Company is working with its vendors to facilitate revised payment terms; however, the Company has had certain vendors who have threatened to terminate services due to aged outstanding payables and in order to accelerate invoice payments. If services were terminated and the Company wasn’t able to find alternative sources of supply, this could have a material adverse impact on the Company’s business.


•	The Company's net cash used in operating activities during the three month period ended March 31, 2017, was $3.2 million, and without giving consideration to the Merger mentioned below, current projections indicate that the Company will have continued negative cash flows for the foreseeable future.


•	The Company incurred a loss from continuing operations of $3.2 million for the three month period ended March 31, 2017, and without giving consideration to the Merger mentioned below, current projections indicate that the Company will have continued recurring losses for the foreseeable future.

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The Company had $4.0 million of outstanding borrowings under the 2016 Credit and Security Agreement with SCM, with unused borrowing capacity of $0.2 million as of March 31, 2017. As of May 12, 2017, after the close of the Merger mentioned below, on a combined basis, the Company had borrowed the maximum available amount under the borrowing capacity. Any borrowings on the unused borrowing capacity are at the discretion of SCM.


•	The Company owed approximately $3.7 million at March 31, 2017, under an existing term loan (the "Term Loan"), which is governed by the terms of a credit agreement (the "Credit Agreement") with SWK Funding LLC ("SWK") and was used to fund the cash component of the acquisition of Accountable Health Solutions, Inc. ("AHS") (the "Acquisition") in 2015.

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Each of these debt agreements described above contain certain financial covenants, including various affirmative and negative covenants including minimum aggregate revenue, adjusted EBITDA, and consolidated unencumbered liquid assets requirements, which the Company did not comply with as of March 31, 2017, and current projections indicate that it will not be able to meet the current June 30, 2017, debt covenants outlined in Note 8 to the condensed consolidated financial statements. However, in conjunction with the Merger Agreement (defined below), the March 31, 2017, covenant violations have been waived and the covenants going forward were revised (see revised covenants in Note 12 to the condensed consolidated financial statements). The Company does anticipate meeting the revised covenants going forward. Noncompliance with these covenants constitutes an event of default. If the Company is unable to comply with financial covenants in the future and in the event that it was unable to modify the covenants, find new or additional lenders, or raise additional equity, SCM reserves the right to terminate access to the unused borrowing capacity under the 2016 Credit and Security Agreement, while both lenders reserve the right to accelerate the repayment of all amounts outstanding and exercise remedies with respect to collateral, which would have a material adverse impact on the Company's business. Additionally, the negative covenants set forth in these debt agreements with SCM and SWK prohibit the Company from incurring additional debt of any kind without prior approval from the lenders. For additional information regarding the 2016 Credit and Security Agreement, the Credit Agreement, and the related covenants, refer to Note 8 to the condensed consolidated financial statements.


•	The Company has contractual obligations related to an operating lease for the Company's headquarters and employment contracts which could adversely affect liquidity.

Management's plans

The Company expects to continue to monitor its liquidity carefully, work to reduce this uncertainty, and address its cash needs through a combination of one or more of the following actions:

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On May 11, 2017, the Company closed the merger agreement (the "Merger Agreement" or the "Merger") with Piper Merger Corp., Provant Health Solutions, LLC, and Wellness Holdings, LLC (collectively, "Provant") that had been previously signed on March 7, 2017. In conjunction with the Merger, new debt agreements were signed which reset all of the debt covenants, and the Company anticipates being able to meet the revised covenants. The Company expects the Merger to increase the scale of the Company, improving gross margins due to combined revenues and operational synergies decreasing costs. While the Company expects its financial condition to improve after the Merger, Provant has a history of operating losses as well, and the Company will be incurring significant costs and additional debt for the transaction. See Part II, Item 1A, Risk Factors and Note 12 to the condensed consolidated financial statements for further discussion.


•	The Company will continue to seek additional equity investments. During the three month period ended March 31, 2017, the Company was able to raise $1.3 million of additional equity through the issuance of common stock and warrants, net of issuance costs.


•	As discussed in Note 9 to the condensed consolidated financial statements, the Company reached settlement agreements for the remaining lease obligations owed under three operating leases for spaces the Company no longer utilizes. The terms of the three lease settlements reduce the Company's obligation by approximately $0.7 million compared to the original stated lease terms.


•	The Company will continue to aggressively seek new and return business from its existing customers and expand its presence in the health and wellness marketplace;


•	The Company will continue to analyze and implement further cost reduction initiatives and efficiency improvements (see Note 9 to the condensed consolidated financial statements), including post-closing synergies related to the Merger.

Management's assessment and conclusion

Management has determined, based on its recent history and liquidity issues, that it is not probable that management's plans will sufficiently alleviate or mitigate, to a sufficient level the relevant conditions or events noted above. Accordingly, management of the Company has concluded that there is substantial doubt about the Company's ability to continue as a going concern within one year after the date the financial statements are available to be widely distributed to all shareholders and other financial statement users.

The condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern and do not include any adjustments that might result from the outcome of this uncertainty.