We evaluate at least annually the amount of our recorded goodwill by performing impairment tests that compare the carrying amount to an estimated fair value. Management considers both the income and market approaches in the fair value determination. In estimating the fair value under the income approach, management makes its best assumptions regarding future cash flows and applies a discount rate to the cash flows to yield a present, fair value of equity. The market approach is based primarily on reference to transactions including the Company’s common stock and the quoted market prices of our common stock. As a result of such tests, management believes there is no material risk of loss from impairment of goodwill. However, actual results may differ significantly from management’s assumptions, resulting in a potentially adverse impact to our consolidated financial statements.
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Notes 1 and 3 to the consolidated financial statements, the Company has suffered recurring losses from operations and has not generated sufficient cash flows from operations to fund its working capital requirements. This raises substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Notes 1 and 3. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The 2009 financial statements do not include any adjustments that are necessary should we be unable to continue as a going concern. We have incurred recurring operating losses and negative cash flows from operating activities. In addition, our note obligations of $4.7 million, including our subordinated debentures of $2.2 million which are currently in default, are due in the coming year. As of December 31, 2009, we had a working capital deficiency of $13.8 million and negative net worth of $2.8 million. These conditions, as well as the uncertainty to generate sufficient cash flows to meet our working capital requirements, raise substantial doubt about our ability to continue as a going concern.
(1) Amount consists of $318,000 due from the minority stockholder of our subsidiary CompCare de Puerto Rico, Inc. and $57,000 representing a refund due of state and federal employment taxes.
The following table summarizes the allocation of implied purchase price to the assets acquired and liabilities assumed at the acquisition date (amounts in thousands):
(2) The promissory note is convertible at the option of the note holder into 800,000 shares of common stock at a conversion price of $0.25 per share.
We offer a 401(k) Plan (the “Plan”), which is a defined contribution plan qualified under Section 401(k) of the Internal Revenue Code, for the benefit of our eligible employees. All full-time and part-time employees who have attained the age of 21 and have completed one thousand hours of service are eligible to participate in the Plan. Each participant may contribute from 2% to 50% of his or her compensation to the Plan up to the annual maximum allowed amount, which was $16,500 during 2009, subject to limitations on the highly compensated employees to ensure the Plan is non-discriminatory. Our plan year ends at May 31. Company contributions are discretionary and are determined by the Company’s management. Our employer matching contributions to the Plan were $0, $4,316 and $8,906 in 2009, 2008 and 2007, respectively.
The following table summarizes information about options granted, exercised, and vested for the years ended December 31, 2009, 2008 and 2007.
Each share of Series D Convertible Preferred Stock acquired through exercise of a warrant is convertible into 100,000 shares of common stock at any time. For the presentation below, warrants to purchase Series D Convertible Preferred Stock are stated in common shares, as if the warrant was exercised and the resulting Series D Convertible Preferred Stock was converted. The exercise price of the warrant has been similarly adjusted to an as-converted common stock equivalent. A summary of our warrant activity for the year ended December 31, 2009 is as follows: