UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K/A
(Amendment
No. 1)
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 12, 2015 (January 26, 2016)
FIRST
CHOICE HEALTHCARE SOLUTIONS, INC. |
(Exact
name of registrant as specified in its charter) |
Delaware |
000-53012 |
90-0687379 |
(State or other jurisdiction |
(Commission |
(IRS Employer |
of incorporation) |
File Number) |
Identification No.) |
709
S. Harbor Blvd., Suite 250, Melbourne, FL |
32901 |
(Address of principal executive
offices) |
(Zip Code) |
|
|
Registrant's
telephone number, including area code (321) 725-0090
(Former
name of 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:
|
☐ |
Written communications pursuant to Rule 425 under the Securities
Act (17 CFR 230.425) |
|
☐ |
Soliciting material pursuant to Rule 14a-12 under the Exchange
Act (17 CFR 240.14a-12) |
|
☐ |
Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
|
☐ |
Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.01 |
Completion of Acquisition or Disposition of Assets |
On November 2, 2015, First Choice Healthcare
Solutions, Inc. (the “Company”) filed a Current Report on Form 8-K (the “Current Report”) to report that
its newly formed wholly-owned subsidiary, CCSC Holdings, Inc. (“CCSC Holdings”), acquired a 40% interest in Crane Creek
Surgery Center (“Crane Creek”) in exchange for chase consideration of $560,000.
The Current Report is being amended by this
Amendment No. 1 to include the audited and unaudited financial statements and information required by Item 9.01(a) and the pro
forma financial statements required by Item 9.01(b) and to reflect that the acquisition of the 40% interest in Crane Creek was
completed on November 12, 2015. Certain conditions of the Crane Creek transaction were not met until November 12, 2015 and not
October 27, 2015 as originally noted. No other amendments to the Current Report are being made by this Amendment No. 1.
Item 9.01 |
Financial Statements and Exhibits |
(a) Financial Statements
of Crane Creek
The audited financial statements including
the notes thereto for Crane Creek for the years ended December 31, 2014 and December 31, 2013 and the unaudited financial statements
including notes thereto for Crane Creek for the nine months ended September 30, 2015 and 2014, are attached as Exhibits 99.1 and
99.2 and are incorporated herein by reference.
(b) Pro Forma Financial
Information
The unaudited pro forma consolidated balance
sheet of the Company as of September 30, 2015, the unaudited pro forma condensed consolidated statements of operations for the
year ended December 31, 2014 and for the nine months ended September 30, 2015 and the notes thereto, which give effect to the Crane
Creek transaction, are attached hereto as Exhibits 99.3 and incorporated herein by reference.
(c) Shell Company
Transactions
Not applicable
(d) Exhibits
99.1 |
Audited financial statements including the notes thereto for Crane Creek for the years ended December 31,
2014 and, 2013. |
99.2 |
Unaudited financial statements including the notes thereto for Crane Creek for the nine months ended September
30, 2015 and 2014. |
99.3 |
Unaudited pro forma consolidated balance sheet of the Company as of September 30, 2015, the unaudited pro
forma condensed consolidated statements of operations for the year ended December 31, 2014 and for the nine months ended September
30, 2015 and the notes thereto, which give effect to the Crane Creek transaction.
|
2
SIGNATURE
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.
|
FIRST
CHOICE HEALTHCARE SOLUTIONS, INC. |
|
(Registrant) |
|
|
Date:
January 26, 2016 |
|
|
/s/
Chris Romandetti |
|
Name: Chris
Romandetti |
|
Chief Executive
Officer |
3
Exhibit 99.1
CRANE CREEK SURGICAL PARTNERS, LLC
FINANCIAL STATEMENTS
DECEMBER 31, 2014 AND 2013
INDEX TO FINANCIAL STATEMENTS
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Members
Crane Creek Surgical Partners, LLC
We have audited the accompanying balance sheets
of Crane Creek Surgical Partners, LLC (the “Company”) as of December 31, 2014 and 2013, and the related statements
of operations, members’ (deficit) equity, and cash flows for each of the two years in the period ended December 31, 2014.
The Company’s management is responsible for these financial statements. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with
the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company
is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits
included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate
in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control
over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial
statements referred to above present fairly, in all material respects, the financial position of the Company as of
December 31, 2014 and 2013, and the results of its operations and its cash flows for each of the two years in the period ended
December 31, 2014, in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements
have been prepared assuming that the Company will continue as a going concern. As discussed in Note 10 to the financial
statements, the Company has suffered recurring losses from operations and has an accumulated deficit as of December 31, 2014. These
conditions raise 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 Note 10. The financial statements do not include any adjustments relating
to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result
should the Company be unable to continue as a going concern.
/s/ RBSM LLP
New York, New York
January 26, 2016
CRANE CREEK SURGICAL PARTNERS, LLC
BALANCE SHEETS
FOR THE YEARS ENDED
DECEMBER 31, 2014 AND 2013
| |
2014 | |
2013 |
ASSETS | |
| | | |
| | |
Current assets: | |
| | | |
| | |
Cash | |
$ | 103,762 | | |
$ | 249,004 | |
Accounts receivable, net | |
| 845,843 | | |
| 775,560 | |
Prepaid and other current assets | |
| — | | |
| 16,250 | |
Total current assets | |
| 949,605 | | |
| 1,040,814 | |
| |
| | | |
| | |
Property, plant and equipment, net of accumulated depreciation of $1,319,760 and $1,012,494 | |
| 945,557 | | |
| 1,245,153 | |
| |
| | | |
| | |
Total assets | |
$ | 1,895,162 | | |
$ | 2,285,967 | |
| |
| | | |
| | |
LIABILITIES AND MEMBERS’ (DEFICIT) EQUITY | |
| | | |
| | |
Current liabilities: | |
| | | |
| | |
Accounts payable and accrued expenses | |
$ | 200,813 | | |
$ | 65,719 | |
Accrued interest | |
| 6,351 | | |
| 6,351 | |
Due to related party | |
| 140,140 | | |
| — | |
Capital lease payable | |
| 19,650 | | |
| 114,861 | |
Notes payable, current portion | |
| 348,591 | | |
| 308,214 | |
Total current liabilities | |
| 715,545 | | |
| 495,145 | |
| |
| | | |
| | |
Long term debt: | |
| | | |
| | |
Deferred rent | |
| 489,929 | | |
| 428,148 | |
Notes payable, long term portion | |
| 777,320 | | |
| 1,124,236 | |
Total long term debt | |
| 1,267,249 | | |
| 1,552,384 | |
Total liabilities | |
| 1,982,794 | | |
| 2,047,529 | |
| |
| | | |
| | |
Commitments and contingencies | |
| — | | |
| — | |
| |
| | | |
| | |
Members’ (deficit) equity: | |
| (87,632 | ) | |
| 238,438 | |
Total members’ (deficit) equity | |
| (87,632 | ) | |
| 238,438 | |
Total liabilities and members’ (deficit) equity | |
$ | 1,895,162 | | |
$ | 2,285,967 | |
See accompanying notes
CRANE CREEK SURGICAL PARTNERS, LLC
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2014 AND
2013
| |
Year ended December 31, |
| |
2014 | |
2013 |
Revenues: | |
| | | |
| | |
Net patient service revenue | |
$ | 3,248,786 | | |
$ | 3,857,685 | |
Total revenue | |
| 3,248,786 | | |
| 3,857,685 | |
| |
| | | |
| | |
Operating expenses: | |
| | | |
| | |
Salaries and benefits | |
| 917,317 | | |
| 1,088,481 | |
Occupancy | |
| 905,203 | | |
| 813,463 | |
General and administrative | |
| 1,394,630 | | |
| 1,908,636 | |
Depreciation and amortization | |
| 307,266 | | |
| 284,105 | |
Total operating expenses | |
| 3,524,416 | | |
| 4,094,685 | |
| |
| | | |
| | |
Net loss from operations: | |
| (275,630 | ) | |
| (237,000 | ) |
| |
| | | |
| | |
Other income (expense): | |
| | | |
| | |
Other income | |
| 15,424 | | |
| 9,938 | |
Interest expense, net | |
| (65,864 | ) | |
| (80,685 | ) |
Total other income (expense) | |
| (50,440 | ) | |
| (70,747 | ) |
| |
| | | |
| | |
Net loss | |
$ | (326,070 | ) | |
$ | (307,747 | ) |
See accompanying notes
CRANE CREEK SURGICAL PARTNERS, LLC
STATEMENTS OF MEMBERS’ (DEFICIT) EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2014 AND
2013
| |
Accumulated Amount | |
Accumulated Deficit | |
Total |
Balance, December 31, 2012 | |
$ | 1,792,882 | | |
$ | (863,669 | ) | |
$ | 929,213 | |
| |
| | | |
| | | |
| | |
Distribution of capital | |
| (883,028 | ) | |
| — | | |
| (883,028 | ) |
| |
| | | |
| | | |
| | |
Contributions of capital | |
| 500,000 | | |
| — | | |
| 500,000 | |
Net loss | |
| — | | |
| (307,747 | ) | |
| (307,747 | ) |
| |
| | | |
| | | |
| | |
Balance, December 31, 2013 | |
| 1,409,854 | | |
| (1,171,416 | ) | |
| 238,438 | |
Net loss | |
| — | | |
| (326,070 | ) | |
| (326,070 | ) |
| |
| | | |
| | | |
| | |
Balance, December 31, 2014 | |
$ | 1,409,854 | | |
$ | (1,497,486 | ) | |
$ | (87,632 | ) |
See accompanying notes
CRANE CREEK SURGICAL PARTNERS, LLC
STATEMENTS OF CASH FLOWS
FOR THE YEARS
ENDED DECEMBER 31, 2014 AND 2013
| |
Year ended December 31, |
| |
2014 | |
2013 |
CASH FLOWS FROM OPERATING ACTIVITIES: | |
| | | |
| | |
Net Loss | |
$ | (326,070 | ) | |
$ | (307,747 | ) |
Adjustments to reconcile net loss to cash provided by operating activities: | |
| | | |
| | |
Depreciation and amortization expenses | |
| 307,266 | | |
| 284,105 | |
Changes in operating assets and liabilities: | |
| | | |
| | |
Accounts receivable | |
| (70,283 | ) | |
| 430,371 | |
Capital call receivable | |
| 16,250 | | |
| (16,250 | ) |
Accounts payable and accrued expenses | |
| 275,234 | | |
| (72,362 | ) |
Deferred rent | |
| 61,781 | | |
| 80,184 | |
Accrued interest | |
| — | | |
| (1,092 | ) |
Net cash provided by operating activities | |
| 264,178 | | |
| 397,209 | |
| |
| | | |
| | |
CASH FLOWS FROM INVESTING ACTIVITIES: | |
| | | |
| | |
Purchase of equipment | |
| (7,670 | ) | |
| (17,501 | ) |
Net cash used in investing activities | |
| (7,670 | ) | |
| (17,501 | ) |
| |
| | | |
| | |
CASH FLOWS FROM FINANCING ACTIVITIES: | |
| | | |
| | |
Principal payments on notes payable | |
| (306,539 | ) | |
| (324,090 | ) |
Principal payments on capital lease | |
| (95,211 | ) | |
| (133,417 | ) |
Distributions to members | |
| — | | |
| (883,028 | ) |
Contributions by members | |
| — | | |
| 500,000 | |
Net cash used in financing activities | |
| (401,750 | ) | |
| (840,535 | ) |
| |
| | | |
| | |
Net decrease in cash and cash equivalents | |
| (145,242 | ) | |
| (460,827 | ) |
Cash and cash equivalents, beginning of period | |
| 249,004 | | |
| 709,831 | |
| |
| | | |
| | |
Cash and cash equivalents, end of period | |
$ | 103,762 | | |
$ | 249,004 | |
| |
| | | |
| | |
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: | |
| | | |
| | |
Cash paid during the period for interest | |
$ | 65,864 | | |
$ | 80,685 | |
NONCASH TRANSACTION
During the year ended December 31, 2013, the Company
acquired equipment valued at $114,861 through a capital lease.
See accompanying notes
CRANE CREEK SURGICAL PARTNERS, LLC
NOTES
TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2014
AND 2013
NOTE 1- BASIS AND BUSINESS PRESENTATION
A summary of the significant accounting policies
applied in the presentation of the accompanying financial statements follows:
Basis and business presentation
Crane Creek Surgical Partners, LLC, a Florida
limited liability company (the “Company” or “CCSP”), was formed in 2008 to
develop, own and operate a Medicare-certified ambulatory surgery center in Melbourne, Florida. The surgery center is a multi-specialty
surgical center, offering outpatient care in orthopedics, pain, spine, ENT, general surgery, podiatry and urology. The primary
source of revenue is insurance company receipts for patient services.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The preparation of the financial statements
in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain
reported amounts and disclosures. Accordingly, actual results could differ from those estimates. Significant estimates include
the recoverability and useful lives of long-lived assets. Actual results may differ from these estimates.
Revenue Recognition
The Company recognizes revenue in accordance
with Accounting Standards Codification subtopic 605-10, “Revenue Recognition “ (“ASC 605-10”) which
requires that four basic criteria be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2)
delivery has occurred; (3) the selling price is fixed or determinable; and (4) collectability is reasonably assured. Determination
of criteria (3) and (4) are based on management’s judgments regarding the fixed nature of the selling prices of the services
delivered and the collectability of those amounts. Provisions for discounts and rebates to customers, estimated returns and allowances,
and other adjustments are provided for in the same period the related sales are recorded.
The Company recognizes in accordance with Accounting
Standards Codification subtopic 954-310, “Health Care Entities” (“ASC 954-310”), significant patient service
revenue at the time the services are rendered, even though it does not assess the patient’s ability to pay.
Patient Service Revenue
The Company recognizes patient service revenue
associated with services provided to patients who have third-party payer coverage on the basis of gross rates for the services
provided. For uninsured or self-pay patients that do not qualify for charity care, the Company recognizes revenue on the basis
of its standard rates for services provided (or on the basis of discounted rates, if negotiated or provided by policy). Once
a claim is settled, a revenue reduction is recognized for contractual agreements and amounts uncollectible.
Cash
Cash consists of cash held in bank demand deposits. The
Company considers all highly liquid instruments with original maturities of three months or less to be cash equivalents. As of
December 31, 2014 and 2013, the Company had $103,762 and $249,004 in cash, respectively.
Accounts Receivable
For financial statement purposes, the Company
records accounts receivable net of insurance company adjustments, which approximate seventy-seven percent of billings. The Company
considers the net amount to be fully collectable. Therefore, no allowance for doubtful accounts is recorded.
CRANE CREEK SURGICAL PARTNERS, LLC
NOTES
TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2014
AND 2013
Concentrations of Credit Risk
The Company’s financial instruments that
are exposed to a concentration of credit risk are cash and accounts receivable. Occasionally, the Company’s cash and cash
equivalents in interest-bearing accounts may exceed FDIC insurance limits. The financial stability of these institutions is periodically
reviewed by senior management.
Long-Lived Assets
The Company accounts for the valuation of long-lived
assets under Accounting Standards Codification (ASC) 360, Property, Plant and Equipment. ASC requires that long-lived assets and
certain identifiable intangible assets be reviewed for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Recoverability of the long-lived assets is measured by comparing the carrying
amount of the asset to future undiscounted net cash flows expected to be generated by the asset. Long-lived assets to be disposed
of are reported at the lower of carrying amount or fair value, less cost to sell. At December 31, 2014 and 2013, management does
not believe any long-lived assets are impaired and has not identified any assets as being held for disposal.
Property and equipment are stated at cost.
When retired or otherwise disposed, the related carrying value and accumulated depreciation are removed from the respective accounts
and the net difference less any amount realized from disposition, is reflected in earnings. For financial statement purposes, property
and equipment are recorded at cost and depreciated using the straight-line method over their estimated useful lives of 7 to 39
years.
Income Taxes
Under provisions of the Internal Revenue Code,
limited liability companies that are treated as partnerships and partnerships are not subject to income taxes, and any income or
loss realized is taxed to the individual members. Accordingly, no provisions for federal income taxes appear in the financial statements.
The federal income tax returns are subject to examinations by the taxing authorities, generally for a period of three years after
the returns are filed. Therefore, tax returns for the years ended 2012, 2013 and 2014 are still subject to review by revenue agents
Subsequent Events
The Company evaluates events that have occurred
after the balance sheet date but before the financial statements are issued. Based upon the evaluation, the Company did not identify
any recognized or non-recognized subsequent events that would have required adjustment or disclosure in the financial statements,
except as disclosed. See Note 11.
Recent Accounting Pronouncements
The FASB has issued ASU No. 2014-09, Revenue
from Contracts with Customers. This ASU supersedes the revenue recognition requirements in Accounting Standards Codification
605 - Revenue Recognition and most industry-specific guidance throughout the Codification. The standard requires that an
entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration
to which the company expects to be entitled in exchange for those goods or services. This ASU is effective on January 1, 2017 and
should be applied retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially
applying the ASU recognized at the date of initial application. The Company has not yet determined the effect of the adoption of
this standard and it is expected to have an immaterial impact on the Company’s financial statements.
In August, 2014, the
FASB issued ASU No. 2014-15, Presentation of Financial Statements - Going Concern (Subtopic 205-40): Disclosure of Uncertainties
About an Entities Ability to Continue as a Going Concern. The standard is intended to define management’s responsibility
to decide whether there is substantial doubt about an organization’s ability to continue as a going concern and to provide
related footnote disclosures. The standard requires management to decide whether there are conditions or events that raise substantial
doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements
are issued. The standard provides guidance to an organization’s management, with principles and definitions that are intended
to reduce diversity in the timing and content of disclosures that are commonly provided by organizations in the footnotes. The
standard becomes effective in the annual period ending after December 15, 2016, with early application permitted. The adoption
of this pronouncement is not expected to have a material impact on the financial statements.
CRANE CREEK SURGICAL PARTNERS, LLC
NOTES
TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2014
AND 2013
Fair Value
Accounting Standards Codification subtopic
825-10, Financial Instruments (“ASC 825-10”) requires disclosure of the fair value of certain financial instruments.
ASC 825-10 defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets
and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market
in which it would transact and considers assumptions that market participants would use when pricing the asset or liability, such
as inherent risk, transfer restrictions, and risk of nonperformance. ASC 825-10 establishes a fair value hierarchy that requires
an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC
825-10 establishes three levels of inputs that may be used to measure fair value:
|
● |
Level 1 - Quoted prices in active markets for identical assets or liabilities. |
|
● |
Level 2 - Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities. |
|
● |
Level 3 - Unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities. |
To the extent that valuation is based on models
or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. In certain
cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure
purposes, the level in the fair value hierarchy within which the fair value measurement is disclosed and is determined based on
the lowest level input that is significant to the fair value measurement.
The carrying value of the Company’s cash,
accounts receivable, accounts payable, short-term borrowings (including convertible notes payable), and other current assets and
liabilities approximate fair value because of their short-term maturity.
As of December 31, 2014 and 2013, the Company
did not have any items that would be classified as level 1, 2 or 3 disclosures.
NOTE 3 - PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at December 31, 2014 and 2013 are
as follows:
| |
2014 | |
2013 |
Leasehold improvements | |
$ | 182,246 | | |
$ | 182,246 | |
Medical equipment | |
| 1,118,943 | | |
| 1,111,273 | |
Capital lease medical equipment | |
| 884,650 | | |
| 884,650 | |
Furniture & fixtures | |
| 69,693 | | |
| 69,693 | |
Signs | |
| 9,785 | | |
| 9,785 | |
| |
| 2,265,317 | | |
| 2,257,647 | |
Less: accumulated depreciation | |
| (1,319,760 | ) | |
| (1,012,494 | ) |
| |
$ | 945,557 | | |
$ | 1,245,153 | |
During the year ended December 31, 2014 and
2013, depreciation expense charged to operations was $307,266 and $284,105, respectively.
CRANE CREEK SURGICAL PARTNERS, LLC
NOTES
TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2014
AND 2013
NOTE 4 - COMMITMENTS
The Company sub-leases office space
under an operating lease expiring in 2024. Under the terms of this lease, the Company is obligated to pay minimum base rent, amortization
of tenant improvements, additional rent to cover operating cost, plus applicable sales tax. Under generally accepted accounting
principles (GAAP), all rental payments, including fixed rent increases, are recognized on a straight-line basis over the life
of the lease. The difference between GAAP rent expense and the actual lease payments is reflected as deferred rent on the accompanying
balance sheets. Rent expense for the year ended December 31, 2014 and 2013, including charges for operating expenses and taxes,
was $905,203 and $813,463 , respectively. Minimum future rental payments under the terms of the lease are summarized as follows:
|
Years ending December 31: | |
|
| 2015 | | |
$ | 1,094,278 | |
| 2016 | | |
| 1,150,239 | |
| 2017 | | |
| 1,209,961 | |
| 2018 | | |
| 1,273,744 | |
| 2019 | | |
| 1,341,913 | |
| Thereafter | | |
| 7,410,804 | |
| | | |
$ | 13,480,939 | |
The Company operates under a management
services agreement. The initial term of the agreement is ten years and it is automatically renewable for successive three year
terms. Payment is remitted monthly and is based on a percentage of gross revenues net of returns and contractual adjustments and
allowances. The annual percentages are as follows:
|
Year 1 – Year 4 | |
| 6 | % |
|
Year 5 – Year 7 | |
| 5 | % |
|
Year 8 – Year 9 | |
| 4 | % |
|
Year 10 | |
| 3 | % |
Management expense under the terms of
this agreement was $189,566 and $257,262 for the year ended December 31, 2014 and 2013, respectively.
NOTE 5 - RELATED PARTY TRANSACTIONS
As more fully described in Note 4 - Commitments,
during the year ended December 31, 2014 and 2013, the Company incurred expenses payable to BCS-Management, LLC, a related party
for management services in the amounts of $189,566 and $257,262, respectively. BCS-Management, LLC and HMA Blue Chip Investments,
LLC, a member of the Company, are both wholly owned subsidiaries of Blue Chip Surgical Partners, LLC. Due to the related party
for services provided was $140,140 and $0, for the years ended December 31, 2014 and 2013, respectively.
As more fully described in Note 4 - Commitments,
the Company entered into a sublease agreement with Brevard Orthopaedic, Spine & Pain Clinic, Inc., a related party, on September
1, 2009 for certain space in a medical office building in Melbourne, FL. CCSC TBC Group, LLC, a member of the Company, and Brevard
Orthopaedic, Spine & Pain Clinic, Inc. share common ownership. The Company paid $843,422 and $733,279 as payments under
the sublease agreement for the years ended December 31, 2014 and 2013, respectively.
NOTE 6 – MEMBERS’ CAPITAL
As of December 31, 2014 and 2013, there were 96.239 member
interest units issued and outstanding.
CRANE CREEK SURGICAL PARTNERS, LLC
NOTES
TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2014
AND 2013
NOTE 7 - NOTES PAYABLE
Note payable as of December 31, 2014 and 2013 are comprised as
follows:
| |
2014 | |
2013 |
Wells Fargo, note payable bearing variable interest (4.2% – 5.0%), monthly payments of $32,475, maturing in January 2018 | |
$ | 1,125,911 | | |
$ | 1,432,450 | |
| |
| | | |
| | |
Less current portion | |
| (348,591 | ) | |
| (308,214 | ) |
| |
$ | 777,320 | | |
$ | 1,124,236 | |
Aggregate principal maturities of long-term debt as of December
31:
| |
Amount |
| Year ended December 31, 2015 | | |
$ | 348,591 | |
| Year ended December 31, 2016 | | |
| 363,642 | |
| Year ended December 31, 2017 | | |
| 379,519 | |
| Year ended December 31, 2018 | | |
| 34,159 | |
| Total | | |
$ | 1,125,911 | |
NOTE 8 – CAPITAL LEASE
On November 1, 2009, the Company entered into
a lease agreement to acquire equipment with quarterly payments of $41,955 payable through November 1, 2013, with no stated interest
rate. Effective December 31, 2013, the Company extended the lease for one year commencing on April 1, 2014 with monthly payments
of $9,877. The Company may elect to acquire the leased equipment at a nominal amount at the end of the lease.
Aggregate principal maturities of capital lease payments as of
December 31:
| Year ended December 31, 2015 | | |
$ | 19,650 | |
The value of leased property held under capital
lease for December 31, 2014 and 2013 is $884,650 and $884,650, respectively. Depreciation expense of leased property under capital
lease obligations amounted to $110,590 and $126,999 for the years ended December 31, 2014 and 2013, respectively.
NOTE 9 – LIQUIDITY
As of December 31, 2014, the Company’s
working capital current assets minus current liabilities was $234,060. The Company’s owners have entered into an
operating and control agreement giving CCSC Holdings, Inc., a wholly owned subsidiary of First Choice Healthcare Solutions, Inc.
(FCHS), a controlling variable interest in the Company. On October 27, 2015, the operating agreement was executed but made
effective October 1, 2015.
CRANE CREEK SURGICAL PARTNERS, LLC
NOTES
TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2014
AND 2013
NOTE 10 – GOING CONCERN UNCERTAINTIES
The accompanying financial statements have
been prepared on a going concern basis, which contemplates realization of assets and the satisfaction of liabilities in the normal
course of business. As shown in the accompanying financial statement, the Company has a members’ deficit of $87,632 and
accumulated deficit of $1,497,486 as of December 31, 2014. The ability of the Company to continue as a going concern
is in doubt and dependent upon achieving a profitable level of operations or on the ability of the Company to obtain necessary
financing to fund ongoing operations. Management believes that its current and future plans enable it to continue as a going concern
for the next 12 months.
To meet these objectives, the Company continues
to seek other sources of financing in order to support existing operations and expand the range and scope of its business. As such
the Company has taken actions since December 31, 2014 to improve its working capital and deficit positions. These actions include
a capital contribution from its members and repayment of its outstanding bank loan. Additionally, the Company has restructured
and added to its members, providing the Company with additional staffed physicians designed to increase operating capacity up from
its previous 60% operating capacity. However, there are no assurances that capacity can be increased and or maintained. The failure
to increase and maintain operations at higher capacity would have a material adverse effect on the business prospects and, depending
upon the shortfall, the Company may have to curtail or cease its operations.
The accompanying financial statements do not
include any adjustment to the recorded assets or liabilities that might be necessary should the Company have to curtail operations
or be unable to continue in existence.
NOTE 11 - SUBSEQUENT EVENTS
In May 2015, members’ units totaling
24.47% of ownership at that time were redeemed for $1. This effectively reduced the number of members to two, HMA Blue Chip Investments,
LLC and CCSC TBC Group, LLC.
In June 2015, the remaining members advanced
$800,000 to the Company. These funds were used to reduce the note payable at Wells Fargo.
In July 2015, the Company secured an advance
of $140,000 from CCSC Holdings, Inc. These funds were used to further reduce the note payable to Wells Fargo. Effective July, 2015
the note with Wells Fargo has been satisfied.
In October 2015, 40% of the member interest
of Crane Creek Surgical Partners, LLC was purchased by CCSC Holdings, Inc. for $560,000. The following actions took place at the
time of closing:
| ● | HMA Blue Chip Investments, LLC redeemed 25.031 Class B units for $1 |
| ● | CCSC TBC Group, LLC acquired 10.067 Class B units for $1. |
| ● | All units held by HMA Blue Chip Investments, LLC were re-classified as Class B Units |
| ● | All the units held by CCSC TBC Group, LLC were re-classified as C units. |
| ● | CCSC Holdings, Inc. received 38.48 Class D units for the sum of $560,000. |
| ● | The $560,000 was paid by a forgiveness of the $140,000 advance plus cash of $420,000. |
| ● | There was a capital call of $14,000 per one percent (1%) ownership interest in the Company. HMA
Blue Chip Investments, LLC and CCSC TBC Group, LLC’s previous advances were applied to the capital call. |
Effective October 1, 2015, the Company entered
into a business associate agreement and a medical director agreement with Richard A. Hynes, M.D., president of the Company and
CCSC TBC Group, LLC.
NOTE 12 – ASSIGNMENT OF RECEIVABLES
In October of 2012, the Company entered into
an agreement with Medical Funding Consultants, LLC (MFC) for the purpose of screening and underwriting letter of protection accounts.
During the years ended December 31, 2014 and 2013, MFC purchased receivables totaling $740,995 and $1,854,894 for $293,402
and $731,565, respectively.
11
Exhibit 99.2
CRANE CREEK SURGICAL PARTNERS, LLC
FINANCIAL STATEMENTS
SEPTEMBER 30, 2015 AND 2014
INDEX TO FINANCIAL STATEMENTS
CRANE CREEK SURGICAL PARTNERS, LLC
CONDENSED
(UNAUDITED) BALANCE SHEETS
SEPTEMBER 30, 2015 AND 2014
| |
September 30, 2015 | |
September 30, 2014 |
ASSETS | |
| | | |
| | |
Current assets | |
| | | |
| | |
Cash | |
$ | 164,323 | | |
$ | 132,878 | |
Accounts receivable, net | |
| 706,957 | | |
| 959,337 | |
Total current assets | |
| 871,280 | | |
| 1,092,215 | |
| |
| | | |
| | |
Property, plant and equipment, net of accumulated depreciation of $1,546,095 and $1,238,829 | |
| 715,896 | | |
| 1,023,162 | |
| |
| | | |
| | |
Total assets | |
$ | 1,587,176 | | |
$ | 2,115,377 | |
| |
| | | |
| | |
LIABILITIES AND MEMBERS’ CAPITAL | |
| | | |
| | |
Current liabilities | |
| | | |
| | |
Accounts payable and accrued expenses | |
$ | 673,772 | | |
$ | 225,715 | |
Accrued interest | |
| 1,352 | | |
| 6,351 | |
Due to related party | |
| 251,588 | | |
| 94,752 | |
Advances from members | |
| 800,000 | | |
| — | |
Loan payable | |
| 140,000 | | |
| — | |
Capital lease payable | |
| — | | |
| 58,540 | |
Notes payable, current portion | |
| — | | |
| 344,915 | |
Total current liabilities | |
| 1,866,712 | | |
| 730,273 | |
| |
| | | |
| | |
Long term debt | |
| | | |
| | |
| |
| | | |
| | |
Deferred rent | |
| 522,046 | | |
| 474,483 | |
Notes payable, long term portion | |
| — | | |
| 865,857 | |
Total long term debt | |
| 522,046 | | |
| 1,340,340 | |
Total liabilities | |
| 2,388,758 | | |
| 2,070,613 | |
| |
| | | |
| | |
Members’ capital | |
| (801,582 | ) | |
| 44,764 | |
Total members’ capital | |
| (801,582 | ) | |
| 44,764 | |
Total liabilities and members’ capital | |
$ | 1,587,176 | | |
$ | 2,115,377 | |
See accompanying notes
CRANE CREEK SURGICAL PARTNERS, LLC
CONDENSED
(UNAUDITED) STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 2015 AND 2014
| |
Nine months ended September 30, |
| |
2015 | |
2014 |
Revenues | |
| | | |
| | |
Net patient service revenue | |
$ | 2,076,563 | | |
$ | 2,560,867 | |
Total revenue | |
| 2,076,563 | | |
| 2,560,867 | |
| |
| | | |
| | |
Operating expenses | |
| | | |
| | |
Salaries and benefits | |
| 754,083 | | |
| 716,188 | |
Occupancy | |
| 740,373 | | |
| 760,486 | |
General and administrative | |
| 1,065,081 | | |
| 1,007,240 | |
Depreciation and amortization | |
| 229,661 | | |
| 226,335 | |
Total operating expenses | |
| 2,789,198 | | |
| 2,710,249 | |
| |
| | | |
| | |
Net loss from operations | |
| (712,635 | ) | |
| (149,382 | ) |
| |
| | | |
| | |
Other income (expense) | |
| | | |
| | |
Miscellaneous income | |
| 13,149 | | |
| — | |
Interest expense, net | |
| (14,464 | ) | |
| (44,292 | ) |
Total other income (expense) | |
| (1,315 | ) | |
| (44,292 | ) |
| |
| | | |
| | |
Net loss | |
$ | (713,950 | ) | |
$ | (193,674 | ) |
See accompanying notes
CRANE CREEK SURGICAL PARTNERS, LLC
CONDENSED UNAUDITED
STATEMENTS OF CHANGES IN MEMBERS’ CAPITAL
FOR THE NINE MONTHS ENDED SEPTEMBER 30,
2015 AND 2014
| |
Accumulated Amount | |
Accumulated Deficit | |
Total |
Balance, December 31, 2013 | |
$ | 1,409,854 | | |
$ | (1,171,416 | ) | |
$ | 238,438 | |
Net loss | |
| — | | |
| (193,674 | ) | |
| (193,674 | ) |
| |
| | | |
| | | |
| | |
Balance, September 30, 2014 | |
$ | 1,409,854 | | |
$ | (1,365,090 | ) | |
$ | 44,764 | |
| |
| | | |
| | | |
| | |
Balance, December 31, 2014 | |
$ | 1,409,854 | | |
$ | (1,497,486 | ) | |
$ | (87,632 | ) |
Net loss | |
| — | | |
| (713,950 | ) | |
| (713,950 | ) |
| |
| | | |
| | | |
| | |
Balance, September 30, 2015 | |
$ | 1,409,854 | | |
$ | (2,211,436 | ) | |
$ | (801,582 | ) |
See accompanying notes
CRANE CREEK SURGICAL PARTNERS, LLC
CONDENSED UNAUDITED STATEMENTS OF
CASH FLOWS
FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 2015 AND 2014
| |
Nine months ended September 30, |
| |
2015 | |
2014 |
CASH FLOWS FROM OPERATING ACTIVITIES: | |
| | | |
| | |
Net Loss | |
$ | (713,950 | ) | |
$ | (193,674 | ) |
Adjustments to reconcile net loss to cash provided
by operating activities: | |
| | | |
| | |
Depreciation and amortization expenses | |
| 229,661 | | |
| 226,335 | |
Changes in operating assets and liabilities: | |
| | | |
| | |
Accounts receivable | |
| 138,886 | | |
| (183,777 | ) |
Prepaid and other current assets | |
| — | | |
| 16,250 | |
Accounts payable and accrued expenses | |
| 467,960 | | |
| 159,996 | |
Due to related party | |
| 111,448 | | |
| 94,752 | |
Deferred Rent | |
| 32,117 | | |
| 46,335 | |
Net cash provided by operating activities | |
| 266,122 | | |
| 166,217 | |
| |
| | | |
| | |
CASH FLOWS FROM INVESTING ACTIVITIES: | |
| | | |
| | |
Purchase of equipment | |
| — | | |
| (4,344 | ) |
Net cash used in investing activities | |
| — | | |
| (4,344 | ) |
| |
| | | |
| | |
CASH FLOWS FROM FINANCING ACTIVITIES: | |
| | | |
| | |
Principal payments on notes payable | |
| (1,125,911 | ) | |
| (221,678 | ) |
Principal payments on capital lease | |
| (19,650 | ) | |
| (56,321 | ) |
Advances from members | |
| 940,000 | | |
| — | |
Net cash used in financing activities | |
| (205,561 | ) | |
| (277,999 | ) |
| |
| | | |
| | |
Net (decrease) increase in cash and cash equivalents | |
| 60,561 | | |
| (116,126 | ) |
Cash and cash equivalents, beginning of period | |
| 103,762 | | |
| 249,004 | |
| |
| | | |
| | |
Cash and cash equivalents, end of period | |
$ | 164,323 | | |
$ | 132,878 | |
| |
| | | |
| | |
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: | |
| | | |
| | |
Cash paid during the period for interest | |
$ | 13,112 | | |
$ | 44,292 | |
See accompanying notes
CRANE CREEK SURGICAL
PARTNERS, LLC
NOTES
TO THE CONDENSED UNAUDITED FINANCIAL STATEMENTS
FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 2015 AND 2014
NOTE 1- BASIS AND BUSINESS PRESENTATION
A summary of the significant accounting policies
applied in the presentation of the accompanying reviewed financial statements follows:
Basis and business presentation
Crane Creek Surgical Partners, LLC, a Florida
limited liability company (the “Company” or “CCSP”) was formed in 2008 to develop,
own and operate a Medicare-certified ambulatory surgery center in Melbourne, Florida. The surgery center is a multi-specialty
surgical center, offering outpatient care in orthopedics, pain, spine, ENT, general surgery, podiatry and urology. The primary
source of revenue is insurance company receipts for patient services.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The preparation of the financial statements
in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect
certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. Significant estimates
include the recoverability and useful lives of long-lived assets, the fair value of the Company’s stock, and stock-based
compensation. Actual results may differ from these estimates.
Revenue Recognition
The Company recognizes revenue in accordance
with Accounting Standards Codification subtopic 605-10, “Revenue Recognition “ (“ASC 605-10”) which
requires that four basic criteria be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2)
delivery has occurred; (3) the selling price is fixed or determinable; and (4) collectability is reasonably assured. Determination
of criteria (3) and (4) are based on management’s judgments regarding the fixed nature of the selling prices of the products
delivered and the collectability of those amounts. Provisions for discounts and rebates to customers, estimated returns and allowances,
and other adjustments are provided for in the same period the related sales are recorded.
The Company recognizes in accordance with
Accounting Standards Codification subtopic 954-310, “Health Care Entities” (“ASC 954-310”), significant
patient service revenue at the time the services are rendered, even though it does not assess the patient’s ability to pay.
Patient Service Revenue
The Company recognizes patient service revenue
associated with services provided to patients who have third-party payer coverage on the basis of gross rates for the services
provided. For uninsured or self-pay patients that do not qualify for charity care, the Company recognizes revenue on the basis
of its standard rates for services provided (or on the basis of discounted rates, if negotiated or provided by policy). Once
a claim is settled, a revenue reduction is recognized for contractual agreements and amounts uncollectible.
Cash
Cash consists of cash held in bank demand
deposits. The Company considers all highly liquid instruments with original maturities of three months or less to be cash
equivalents. As of September 30, 2015 and 2014, the Company had $164,323 and $132,878 in cash, respectively.
Accounts Receivable
The Company records accounts receivable net
of insurance company adjustments, which approximate seventy-seven percent of billings. The Company considers the net amount to
be fully collectable. Therefore, no allowance for doubtful accounts is recorded.
CRANE CREEK SURGICAL
PARTNERS, LLC
NOTES TO THE CONDENSED
UNAUDITED FINANCIAL STATEMENTS
FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 2015 AND 2014
Concentrations of Credit Risk
The Company’s financial instruments that
are exposed to a concentration of credit risk are cash and accounts receivable. Occasionally, the Company’s cash and cash
equivalents in interest-bearing accounts may exceed FDIC insurance limits. The financial stability of these institutions is periodically
reviewed by senior management.
Long-Lived Assets
The Company accounts for the valuation of
long-lived assets under Accounting Standards Codification (ASC) 360, Property, Plant and Equipment. ASC requires that long-lived
assets and certain identifiable intangible assets be reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. Recoverability of the long-lived assets is measured by comparing
the carrying amount of the asset to future undiscounted net cash flows expected to be generated by the asset. Long-lived assets
to be disposed of are reported at the lower of carrying amount or fair value, less cost to sell. At September 30, 2015 and 2014,
management does not believe any long-lived assets are impaired and has not identified any assets as being held for disposal.
Property and equipment are stated at cost.
When retired or otherwise disposed, the related carrying value and accumulated depreciation are removed from the respective accounts
and the net difference less any amount realized from disposition, is reflected in earnings. For financial statement purposes, property
and equipment are recorded at cost and depreciated using the straight-line method over their estimated useful lives of 7 to 39
years.
Income Taxes
Under provisions of the Internal Revenue Code,
limited liability companies that are treated as partnerships are not subject to income taxes, and any income or loss realized is
taxed to the individual members. Accordingly, no provisions for federal income taxes appear in the financial statements. The Federal
income tax returns are subject to examinations by the taxing authorities, generally for a period of three years after the returns
are filed. Therefore, tax returns for the years ended 2012, 2013 and 2014 are still subject to review by revenue agents.
Subsequent Events
The Company evaluates events that have occurred
after the balance sheet date but before the financial statements are issued. Based upon the evaluation, the Company did not identify
any recognized or non-recognized subsequent events that would have required adjustment or disclosure in the financial statements,
except as disclosed. See Note 7.
Recent Accounting Pronouncements
The FASB has issued ASU No. 2014-09, Revenue
from Contracts with Customers. This ASU supersedes the revenue recognition requirements in Accounting Standards Codification
605 - Revenue Recognition and most industry-specific guidance throughout the Codification. The standard requires that an entity
recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration
to which the company expects to be entitled in exchange for those goods or services. This ASU is effective on January 1, 2017
and should be applied retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of
initially applying the ASU recognized at the date of initial application. The Company has not yet determined the effect of the
adoption of this standard and it is expected to have an immaterial impact on the Company’s financial statements.
In August, 2014,
the FASB issued ASU No. 2014-15, Presentation of Financial Statements - Going Concern (Subtopic 205-40): Disclosure of Uncertainties
About an Entities Ability to Continue as a Going Concern. The standard is intended to define management’s responsibility
to decide whether there is substantial doubt about an organization’s ability to continue as a going concern and to provide
related footnote disclosures. The standard requires management to decide whether there are conditions or events that raise substantial
doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements
are issued. The standard provides guidance to an organization’s management, with principles and definitions that are intended
to reduce diversity in the timing and content of disclosures that are commonly provided by organizations in the footnotes. The
standard becomes effective in the annual period ending after December 15, 2016, with early application permitted. The adoption
of this pronouncement is not expected to have a material impact on the financial statements.
Going Concern
The accompanying
financial statements have been prepared on a going concern basis, which contemplates realization of assets and the satisfaction
of liabilities in the normal course of business. As shown in the accompanying financial statement, the Company has accumulated
a deficit of $2,211,436 and working capital deficit (current liabilities minus current assets) of $995,432 as of September 30,
2015. The ability of the Company to continue as a going concern is in doubt and dependent upon achieving a profitable level of
operations or on the ability of the Company to obtain necessary financing to fund ongoing operations. Management believes that
its current and future plans enable it to continue as a going concern for the next twelve months.
To meet these
objectives, the Company continues to seek other sources of financing in order to support existing operations and expand the range
and scope of its business. However, there are no assurances that capacity can be increased and or maintained. The failure to increase
and maintain operations at higher capacity would have a material adverse effect on the business prospects and, depending upon
the shortfall, the Company may have to curtail or cease its operations. The accompanying financial statements do not include any
adjustment to the recorded assets or liabilities that might be necessary should the Company have to curtail operations or be unable
to continue in existence.
CRANE CREEK SURGICAL
PARTNERS, LLC
NOTES TO THE
CONDENSED UNAUDITED FINANCIAL STATEMENTS
FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 2015 AND 2014
Fair Value
Accounting Standards Codification subtopic
825-10, Financial Instruments (“ASC 825-10”) requires disclosure of the fair value of certain financial instruments.
ASC 825-10 defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets
and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market
in which it would transact and considers assumptions that market participants would use when pricing the asset or liability, such
as inherent risk, transfer restrictions, and risk of nonperformance. ASC 825-10 establishes a fair value hierarchy that requires
an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC
825-10 establishes three levels of inputs that may be used to measure fair value:
|
● |
Level 1 - Quoted prices in active markets for identical assets or liabilities. |
|
● |
Level 2 - Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities. |
|
● |
Level 3 - Unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities. |
To the extent that valuation is based on models
or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. In certain
cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure
purposes, the level in the fair value hierarchy within which the fair value measurement is disclosed and is determined based on
the lowest level input that is significant to the fair value measurement.
The carrying value of the Company’s
cash, accounts receivable, accounts payable, short-term borrowings (including convertible notes payable), and other current assets
and liabilities approximate fair value because of their short-term maturity.
As of September 30, 2015 and 2014, the Company
did not have any items that would be classified as level 1, 2 or 3 disclosures.
NOTE 3 - PROPERTY, PLANT, AND EQUIPMENT
Property, plant and equipment at September 30, 2015 and 2014 are
as follows:
| |
2015 | |
2014 |
Leasehold improvements | |
$ | 182,246 | | |
$ | 182,246 | |
Medical equipment | |
| 2,000,267 | | |
| 2,000,267 | |
Furniture & fixtures | |
| 69,693 | | |
| 69,693 | |
Signs | |
| 9,785 | | |
| 9,785 | |
| |
| 2,261,991 | | |
| 2,261,991 | |
Less: accumulated depreciation | |
| (1,546,095 | ) | |
| (1,238,829 | ) |
| |
$ | 715,896 | | |
$ | 1,023,162 | |
During the nine months ended September 30,
2015 and 2014, depreciation expense charged to operations was $229,661 and $226,335, respectively.
CRANE CREEK SURGICAL
PARTNERS, LLC
NOTES TO THE CONDENSED
UNAUDITED FINANCIAL STATEMENTS
FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 2015 AND 2014
NOTE 4 - COMMITMENTS
The Company sub-leases office space
under an operating lease expiring in 2024. Under the terms of this lease, the Company is obligated to pay minimum base rent, amortization
of tenant improvements, additional rent to cover operating cost, plus applicable sales tax. Minimum future rental payments under
the terms of the lease are summarized as follows:
Twelve months ending September
30:
| 2016 | | |
$ | 1,131,505 | |
| 2017 | | |
| 1,189,971 | |
| 2018 | | |
| 1,252,398 | |
| 2019 | | |
| 1,319,103 | |
| 2020 | | |
| 1,390,431 | |
| Thereafter | | |
| 5,911,960 | |
| | | |
$ | 12,195,368 | |
Rent expense for the nine months ended
September 30, 2015 and 2014, including charges for operating expenses and taxes, was $708,256 and $631,992, respectively.
The Company operates under a management
services agreement. The initial term of the agreement is ten years and it is automatically renewable for successive three year
terms. Payment is remitted monthly and is based on a percentage of gross revenues net of returns and contractual adjustments and
allowances. The annual percentages are as follows:
|
Year 1 – Year 4 | |
| 6 | % |
|
Year 5 – Year 7 | |
| 5 | % |
|
Year 8 – Year 9 | |
| 4 | % |
|
Year 10 | |
| 3 | % |
Management expense under the terms of
this agreement was $111,449 and $141,937 for the nine months ended September 30, 2015 and 2014, respectively.
NOTE 5 - RELATED PARTY TRANSACTIONS
As more fully described in Note 4 – Commitments,
during the year ended September 30, 2015 and 2014, the Company incurred expenses payable to BCS-Management, LLC, a related party
for management services in the amounts of $111,449 and $141,937, respectively. Due to the related party for services provided was
$251,588 and $94,752, for the period ended September 30, 2015 and 2014, respectively.
As more fully described in Note 4 - Commitments,
the Company entered into a sublease agreement with Brevard Orthopaedic, Spine & Pain Clinic, Inc., a related party, on September
1, 2009 for certain space in a medical office building in Melbourne, FL. The Company paid $708,256 and $631,992 as payments under
the sublease agreement for the nine months ended September 30, 2015 and 2014, respectively.
In May 2015 members’ units totaling 24.47% of ownership at
that time were redeemed for $1. This effectively reduced the number of members to two, HMA Blue Chip Investments, LLC and CCSC
TBC Group, LLC.
In June 2015, the remaining members advanced $800,000 to the Company.
These funds were used to reduce the note payable at Wells Fargo.
In July 2015, the Company secured an advance of $140,000 from CCSC
Holdings, Inc. These funds were used to further reduce the note payable to Wells Fargo. Effective July, 2015 the note with Wells
Fargo has been satisfied.
CRANE CREEK SURGICAL
PARTNERS, LLC
NOTES TO THE
CONDENSED UNAUDITED FINANCIAL STATEMENTS
FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 2015 AND 2014
NOTE 6 - NOTES PAYABLE
| |
September 30, 2015 | |
September 30, 2014 |
Wells Fargo, Note payable bearing variable interest
(4.2% - 5.0%), monthly payments of $32,475, maturing in January 2018 | |
$ | — | | |
$ | 1,210,772 | |
Capital Lease Payable | |
| — | | |
| 58,540 | |
Loan payable | |
| 140,000 | | |
| — | |
Subtotal | |
| 140,000 | | |
| 1,269,312 | |
Less current portion | |
| (140,000 | ) | |
| (403,455 | ) |
Long term notes payable | |
$ | — | | |
$ | 865,857 | |
Aggregate principal maturities of long-term debt as of September
30:
| |
2015 | |
2014 |
| Year ended September 30, 2015 | | |
$ | — | | |
$ | 403,455 | |
| Year ended September 30, 2016 | | |
| 140,000 | | |
| 359,808 | |
| Year ended September 30, 2017 | | |
| — | | |
| 375,518 | |
| Year ended September 30, 2018 | | |
| — | | |
| 130,531 | |
| Total | | |
$ | 140,000 | | |
$ | 1,269,312 | |
NOTE 7 - SUBSEQUENT EVENTS
In November 2015, 40% of the Company was purchased by CCSC
Holdings, Inc. for $560,000 with an effective date of October 1, 2015. The following actions took place at the time of
closing:
| ● | HMA Blue Chip Investments, LLC redeemed 25.031 units for $1 |
| ● | CCSC TBC Group, LLC acquired 10.067 Class C units for $1. |
| ● | All units held by HMA Blue Chip Investments, LLC were re-classified as Class B Units |
| ● | All the units held by CCSC TBC Group, LLC were re-classified as C units. |
| ● | CCSC Holdings, Inc. received 38.48 Class D units for the sum of $560,000. |
| ● | The $560,000 was paid by a forgiveness of the $140,000 advance plus cash of $420,000. |
| ● | There was a capital call of $14,000 per one percent (1%) ownership interest in the Company. HMA Blue Chip Investments, LLC
and CCSC TBC Group, LLC’s previous advances were applied to the capital call. |
Effective October 1, 2015, the Company entered into a new agreement
for services with a related party.
10
Exhibit 99.3
First Choice Healthcare
Solutions, Inc.
Condensed Consolidated Pro
Forma Unaudited Financial
Statements
Year ended
December 31, 2014 and Nine
Months Ended September 30, 2015
Table of Contents
FIRST CHOICE HEALTHCARE SOLUTIONS, INC.
CONDENSED CONSOLIDATED PRO FORMA UNAUDITED
BALANCE SHEET SEPTEMBER 30, 2015
| |
Balance Sheet First Choice Healthcare Solutions,
Inc. September 30, | |
Balance Sheet Crane Creek Surgical Partners, LLC. September 30, | |
Pro Forma Adjustments to
Reflect The Variable
Interest Entity of Crane Creek Surgical Partners, LLC. As of January 1, 2015 | |
Balance Sheet Consolidated Pro Forma September 30, |
| |
2015 | |
2015 | |
Dr | |
Cr | |
2015 |
| |
| |
| |
| |
| |
|
ASSETS | |
| | | |
| | | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Current assets | |
| | | |
| | | |
| | | |
| | | |
| | |
Cash | |
$ | 751,559 | | |
$ | 164,323 | | |
| — | | |
| — | | |
$ | 915,882 | |
Cash-restricted | |
| 395,637 | | |
| — | | |
| — | | |
| — | | |
| 395,637 | |
Accounts receivable | |
| 5,611,386 | | |
| 706,957 | | |
| — | | |
| — | | |
| 6,318,343 | |
Employee loans | |
| 493,360 | | |
| — | | |
| — | | |
| — | | |
| 493,360 | |
Prepaid and other current assets | |
| 548,211 | | |
| — | | |
| — | | |
| — | | |
| 548,211 | |
Capitalized financing costs, current portion | |
| 54,858 | | |
| — | | |
| — | | |
| — | | |
| 54,858 | |
Total current assets | |
| 7,855,011 | | |
| 871,280 | | |
| — | | |
| — | | |
| 8,726,291 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Property, plant and equipment, net of accumulated depreciation of $4,152,225 and $1,546,095 | |
| 8,027,163 | | |
| 715,896 | | |
| — | | |
| — | | |
| 8,743,059 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Other assets | |
| | | |
| | | |
| | | |
| | | |
| | |
Deferred costs, net of amortization of $134,435 | |
| 3,091,992 | | |
| — | | |
| — | | |
| — | | |
| 3,091,992 | |
Patient list, net of accumulated amortization of $70,000 | |
| 230,000 | | |
| — | | |
| — | | |
| — | | |
| 230,000 | |
Patents, net of amortization of $33,425 | |
| 253,075 | | |
| — | | |
| — | | |
| — | | |
| 253,075 | |
Investments | |
| 22,200 | | |
| — | | |
| — | | |
| — | | |
| 22,200 | |
Notes receivable, acquisition deposit | |
| 141,352 | | |
| — | | |
| — | | |
| 141,352 | | |
| — | |
Deposits | |
| 2,571 | | |
| — | | |
| — | | |
| — | | |
| 2,571 | |
Total other assets | |
| 3,741,190 | | |
| — | | |
| — | | |
| 141,352 | | |
| 3,599,838 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Total assets | |
$ | 19,623,364 | | |
$ | 1,587,176 | | |
| — | | |
$ | 141,352 | | |
$ | 21,069,188 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
LIABILITIES AND STOCKHOLDERS’ DEFICIT | |
| | | |
| | | |
| | | |
| | | |
| | |
Current liabilities | |
| | | |
| | | |
| | | |
| | | |
| | |
Accounts payable and accrued expenses | |
$ | 2,476,718 | | |
$ | 673,772 | | |
$ | — | | |
$ | — | | |
$ | 3,150,490 | |
Accrued interest | |
| — | | |
| 1,352 | | |
| 1,352 | | |
| — | | |
| — | |
Related party payable | |
| — | | |
| 251,588 | | |
| — | | |
| — | | |
| 251,588 | |
Capital lease payable | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
Due to members | |
| — | | |
| 940,000 | | |
| 140,000 | | |
| — | | |
| 800,000 | |
Line of credit, short term | |
| 1,788,164 | | |
| — | | |
| — | | |
| — | | |
| 1,788,164 | |
Notes payable, current portion | |
| 7,852,176 | | |
| — | | |
| — | | |
| — | | |
| 7,852,176 | |
Unearned revenue | |
| 42,704 | | |
| — | | |
| — | | |
| — | | |
| 42,704 | |
Deferred rent, short term portion | |
| 118,810 | | |
| — | | |
| — | | |
| — | | |
| 118,810 | |
Total current liabilities | |
| 12,278,572 | | |
| 1,866,712 | | |
| 141,352 | | |
| — | | |
| 14,003,932 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Long term debt: | |
| | | |
| | | |
| | | |
| | | |
| | |
Deposits held | |
| 67,432 | | |
| — | | |
| — | | |
| — | | |
| 67,432 | |
Deferred rent, long term portion | |
| 1,489,636 | | |
| 522,046 | | |
| — | | |
| — | | |
| 2,011,682 | |
Notes payable, long term portion | |
| 894,835 | | |
| — | | |
| — | | |
| — | | |
| 894,835 | |
Total long term debt | |
| 2,451,903 | | |
| 522,046 | | |
| — | | |
| — | | |
| 2,973,949 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Total liabilities | |
| 14,730,475 | | |
| 2,388,758 | | |
| 141,352 | | |
| | | |
| 16,997,881 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Equity | |
| | | |
| | | |
| | | |
| | | |
| | |
Common stock, $0.001 par value; 100,000,000 shares authorized, 18,432,055
and 17,951,055 shares issued and outstanding as of September 30, 2015 and December 31, 2014, respectively | |
| 22,433 | | |
| — | | |
| — | | |
| — | | |
| 22,433 | |
Additional paid in capital | |
| 20,696,977 | | |
| — | | |
| — | | |
| — | | |
| 20,696,977 | |
Members’ capital | |
| — | | |
| 1,409,858 | | |
| — | | |
| — | | |
| 1,409,858 | |
Accumulated deficit | |
| (15,687,835 | ) | |
| (2,211,440 | ) | |
| — | | |
| — | | |
| (17,899.275 | ) |
Subtotal equity | |
| 5,031,575 | | |
| (801,582 | ) | |
| — | | |
| | | |
| 4,229,993 | |
Non-controlling interest | |
| (138,686 | ) | |
| — | | |
| — | | |
| — | | |
| (138,686 | ) |
Total equity | |
| 4,892,889 | | |
| (801,582 | ) | |
| — | | |
| — | | |
| 4,091,307 | |
Total liabilities and equity | |
$ | 19,623,364 | | |
$ | 1,587,176 | | |
$ | 141,352 | | |
| — | | |
$ | 21,069,188 | |
See the accompanying notes to these unaudited
condensed consolidated pro forma financial statements
FIRST CHOICE HEALTHCARE SOLUTIONS, INC.
CONDENSED CONSOLIDATED PRO FORMA UNAUDITED
STATEMENTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 2015
| |
First Choice Healthcare Solutions, Inc. 9 Months
Ended September 30, | |
Crane Creek Surgical Partners, LLC 9 Months
Ended September 30, | |
Pro Forma Adjustments to
Reflect The Variable Interest Entity of Crane Creek Surgical Partners, LLC As of January
1, 2015 | |
Consolidated Pro Forma 9 Months Ended September 30, |
| |
2015 | |
2015 | |
Dr | |
Cr | |
2015 |
| |
| |
| |
| |
| |
|
Revenues: | |
| | | |
| | | |
| | | |
| | | |
| | |
Patient Service Revenue | |
$ | 11,871,574 | | |
$ | 2,076,563 | | |
| | | |
| | | |
$ | 13,948,137 | |
Provision for bad debts | |
| (51,485 | ) | |
| — | | |
| | | |
| | | |
| (51,485 | ) |
Net patient service revenue less provision for bad debts | |
| 11,820,089 | | |
| 2,076,563 | | |
| | | |
| | | |
| 13,896,652 | |
Rental Revenue | |
| 1,301,515 | | |
| — | | |
| | | |
| | | |
| 1,301,515 | |
Total Revenue | |
| 13,121,604 | | |
| 2,076,563 | | |
| | | |
| | | |
| 15,198,167 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Operating expenses: | |
| | | |
| | | |
| | | |
| | | |
| | |
Salaries & Benefits | |
| 5,311,710 | | |
| 754,083 | | |
| | | |
| | | |
| 6,065,793 | |
Other Operating expenses | |
| 1,685,830 | | |
| 740,373 | | |
| | | |
| | | |
| 2,426,203 | |
General & Administrative | |
| 4,437,801 | | |
| 1,065,081 | | |
| | | |
| | | |
| 5,502,882 | |
Depreciation and amortization | |
| 558,189 | | |
| 229,661 | | |
| | | |
| | | |
| 787,850 | |
Total operating expenses | |
| 11,993,530 | | |
| 2,789,198 | | |
| | | |
| | | |
| 14,782,728 | |
Net income from operations | |
| 1,128,074 | | |
| (712,635 | ) | |
| | | |
| | | |
| 415,439 | |
Other income (expense): | |
| | | |
| | | |
| | | |
| | | |
| | |
Miscellaneous income | |
| 22,719 | | |
| 13,149 | | |
| | | |
| | | |
| 35,868 | |
Amortization Financing costs | |
| (60,507 | ) | |
| — | | |
| | | |
| | | |
| (60,507 | ) |
Interest expense, net | |
| (925,045 | ) | |
| (14,464 | ) | |
| 1,352 | | |
| 1,352 | | |
| (939,509 | ) |
Total other expense | |
| (962,833 | ) | |
| (1,315 | ) | |
| | | |
| | | |
| (964,148 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | |
NET INCOME (LOSS) | |
$ | 165,241 | | |
$ | (713,950 | ) | |
| | | |
| | | |
$ | (548,709 | ) |
Non-controlling Interest | |
| — | | |
| (428,370 | ) | |
| | | |
| | | |
| (428,370 | ) |
Net Income (Loss) available to shareholder | |
| 0.01 | | |
| (7,418.51 | ) | |
| | | |
| | | |
| (7,418.52 | ) |
Net Income (loss) per common share, basic | |
| 0.01 | | |
| (7,418.51 | ) | |
| | | |
| | | |
| (7,418.52 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Net Income (loss) per common share, diluted | |
| 0.01 | | |
| (7,418.51 | ) | |
| | | |
| | | |
| (7,418.52 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Weighted average number of common shares outstanding, basic | |
| 12,249,783 | | |
| 96.239 | | |
| | | |
| | | |
| 12,249,879.239 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Weighted average number of common shares outstanding, diluted | |
| 21,583,117 | | |
| 96.239 | | |
| | | |
| | | |
| 21,583,213.239 | |
See the accompanying notes to these unaudited
condensed consolidated pro forma financial statements
FIRST CHOICE HEALTHCARE SOLUTIONS,
INC.
CONDENSED CONSOLIDATED PRO FORMA
UNAUDITED STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 2014
| |
First Choice Healthcare Solutions, Inc. Year
Ended December 31, | |
Crane Creek Surgical Partners, LLC Year Ended
December 31, | |
Pro Forma Adjustments to
Reflect The Variable Interest Entity of Crane Creek Surgical Partners, LLC As of January 1,
2014 | |
Consolidated Pro Forma Year Ended December 31, |
| |
2014 | |
2014 | |
Dr | |
Cr | |
2014 |
| |
| |
| |
| |
|
|
|
|
|
Revenues: | |
| | | |
| | | |
| | | |
| |
|
|
| |
|
Patient Service Revenue | |
$ | 7,966,385 | | |
$ | 3,248,786 | | |
| | | |
| | | |
$ |
11,215,171 |
|
Provision for bad debts | |
| (912,782 | ) | |
| — | | |
| | | |
| | | |
|
(912,782 |
) |
Net patient service revenue less provision for bad debts | |
| 7,053,603 | | |
| 3,248,786 | | |
| | | |
| | | |
|
10,302,389 |
|
Rental Revenue | |
| 1,048,999 | | |
| — | | |
| | | |
| | | |
|
1,048,999 |
|
Total Revenue | |
| 8,102,602 | | |
| 3,248,786 | | |
| | | |
| | | |
|
11,351,388 |
|
| |
| | | |
| | | |
| | | |
| |
|
|
| |
|
Operating expenses: | |
| | | |
| | | |
| | | |
| |
|
|
| |
|
Salaries & Benefits | |
| 4,761,573 | | |
| 917,317 | | |
| | | |
| | | |
|
5,678,890 |
|
Other Operating expenses | |
| 1,897,780 | | |
| 905,203 | | |
| | | |
| | | |
|
2,802,983 |
|
General & Administrative | |
| 2,434,259 | | |
| 1,394,630 | | |
| | | |
| | | |
|
3,828,889 |
|
Depreciation and amortization | |
| 552,084 | | |
| 307,266 | | |
| | | |
| | | |
|
859,350 |
|
Total operating expenses | |
| 9,645,696 | | |
| 3,524,416 | | |
| | | |
| | | |
|
13,170,112 |
|
| |
| | | |
| | | |
| | | |
| |
|
|
| |
|
Net (loss) income from operations | |
| (1,543,094 | ) | |
| (275,630 | ) | |
| | | |
| | | |
|
(1,818,724 |
) |
| |
| | | |
| | | |
| | | |
| |
|
|
| |
|
Other income (expense): | |
| | | |
| | | |
| | | |
| |
|
|
| |
|
Miscellaneous income | |
| 3,000 | | |
| 15,424 | | |
| | | |
| | | |
|
18,424 |
|
Amortization Financing costs | |
| (82,744 | ) | |
| — | | |
| | | |
| | | |
|
(82,744 |
) |
Interest expense, net | |
| (866,701 | ) | |
| (65,864 | ) | |
| | | |
| | | |
|
(932,565 |
) |
Total other expense | |
| (946,445 | ) | |
| (50,440 | ) | |
| | | |
| | | |
|
(996,885 |
) |
| |
| | | |
| | | |
| | | |
| |
|
|
| |
|
Net loss before provision for income taxes | |
| (2,489,539 | ) | |
| (326,070 | ) | |
| | | |
| | | |
|
(2,815,609 |
) |
| |
| | | |
| | | |
| | | |
| |
|
|
| |
|
Income taxes (benefit) | |
| — | | |
| — | | |
| | | |
| | | |
|
— |
|
| |
| | | |
| | | |
| | | |
| |
|
|
| |
|
NET LOSS | |
$ | (2,489,539 | ) | |
$ | (326,070 | ) | |
| | | |
| | | |
$ |
(2,815,609 |
) |
| |
| | | |
| | | |
| | | |
| |
|
|
| |
|
Net loss per common share, basic and diluted | |
$ | (0.14) | | |
$ | (3,388.13 | ) | |
| | | |
| | | |
$ |
(3,388.27 |
) |
| |
| | | |
| | | |
| | | |
| |
|
|
| |
|
Weighted average number of common shares outstanding, basic and diluted | |
| 17,249,921 | | |
| 96.239 | | |
| | | |
| | | |
|
17,250,017.239 |
|
See the accompanying notes to these unaudited
condensed .onsolidated pro forma financial statements
FIRST CHOICE HEALTHCARE SOLUTIONS, INC.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - DESCRIPTION OF
BUSINESS
First Choice Healthcare Solutions,
Inc. (“FCHS,” the “Company,” “we,” “our” or “us”) is engaged in the
creation of state-of-the-art, multi-specialty “Medical Centers of Excellence” primarily in select markets in the southeastern
region of the United States. We intend to own and operate these “Medical Centers of Excellence” under the FCHS brand.
We believe by integrating the
synergistic mix of orthopedic, spine, neurology and interventional pain specialties with related diagnostic and ancillary services
and state-of-the-art equipment and technologies all in one location, or a “Medical Center of Excellence,” we are able
to:
|
● |
provide patients with convenient access to musculoskeletal and rehabilitative
care via orthopedic, spine, neurology and interventional pain medicine treatment, diagnostics and ancillary care services,
including, but not limited to magnetic resonance imaging (“MRI”), x-ray (“X-ray”), durable medical
equipment (“DME”) and physical therapy (“PT”); |
|
● |
empower physicians to collaborate as a unified care team, optimizing care coordination
and improving outcomes; and |
|
● |
advance the quality and cost effectiveness of our patients’ healthcare; and ultimately, achieve
strong, sustainable financial performance that serves to create long-term value for our stockholders. |
Our goal is to build a network
of non-physician-owned and operated Medical Centers of Excellence in diverse locations, primarily throughout the southeastern
region of the United States. By centralizing current and future Centers’ business management functions, including call center
operations, scheduling, billing, compliance, accounting, marketing, advertising, legal, information technology and record-keeping,
at our corporate headquarters, we will maintain efficiencies and scales of economies. We believe our structure will enable our
staff physicians to focus on the practice of medicine and the delivery of quality care to the patients we serve, as opposed to
having their time and attention focused on business administration responsibilities.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
A summary of the significant accounting policies
applied in the presentation of the accompanying unaudited condensed financial statements follows:
General
The unaudited condensed combined pro forma
balance sheet gives effect to the acquisition as if the Agreement had taken place on September 30, 2015 and combines CCSP’s
unaudited condensed balance sheet as of September 30, 2015 with First Choice Healthcare Solutions, Inc.’s (FCHS) condensed
balance sheet as of September 30, 2015. The unaudited condensed combined pro forma balance sheet gives effect to the acquisition
as if the Agreement had taken place on September 30, 2015 and combines CCSP’s unaudited condensed balance sheet as of September
30, 2015 with FCHS’s condensed balance sheet as of September 30, 2015. These financial statements have been prepared in
accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information
and the instructions to Form 10-Q and Rule 8-03 of Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been included.
Use of estimates
The preparation of financial statements in
accordance with accounting principles generally accepted in the United States requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of
the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could
differ from those estimates. Significant estimates include the useful life of fixed assets.
Revenue recognition
The Company recognizes revenue in accordance
with Accounting Standards Codification subtopic 605-10, Revenue Recognition (“ASC 605-10”) which requires that
four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery
has occurred; (3) the selling price is fixed and determinable; and (4) collectability is reasonably assured. Determination of
criteria (3) and (4) are based on management’s judgments regarding the fixed nature of the selling prices of the products
delivered and the collectability of those amounts. Provisions for discounts and rebates to customers, estimated returns and allowances,
and other adjustments are provided for in the same period the related sales are recorded.
The Company recognizes in accordance with Accounting
Standards Codification subtopic 954-310, “Health Care Entities” (“ASC 954-310”), significant patient service
revenue at the time the services are rendered, even though it does not assess the patient’s ability to pay.
Cash
Cash consists of cash held in bank demand deposits. The
Company considers all highly liquid instruments with original maturities of three months or less to be cash equivalents.
Property and Equipment
Property and equipment are stated at cost.
When retired or otherwise disposed, the related carrying value and accumulated depreciation are removed from the respective accounts
and the net difference less any amount realized from disposition, is reflected in earnings. For financial statement purposes, property
and equipment are recorded at cost and depreciated using the straight-line method over their estimated useful lives of 5 to 39
years.
FIRST CHOICE HEALTHCARE SOLUTIONS, INC.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(unaudited)
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
(continued)
VIE Consolidation
ASC 810 provides guidance on the accounting
for variable interest entities under US GAAP. Based on management’s interpretation of the six requirements of Accounting
Standards Codification subtopic 810-15-22, the Company meets the definition of the primary beneficiary with control, without a
majority equity interest, for consolidation of the Company’s financial position and operations with the financial position
of CCSC Holdings, Inc. and its parent company, FCHS.
Fair value of financial instruments
Fair value estimates discussed herein are
based upon certain market assumptions and pertinent information available to management as of September 30, 2015 and December
31, 2014. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values. These
financial instruments include cash, accounts payable line of credit and advances. Fair values were assumed to approximate carrying
values for cash and payables because they are short term in nature and their carrying amounts approximate fair values or they
are payable on demand.
Recent accounting
pronouncements
There were various updates recently issued,
most of which represented technical corrections to the accounting literature or application to specific industries and are not
expected to a have a material impact on the Company’s condensed financial position, results of operations or cash flows.
NOTE 3 - LIQUIDITY
As of September 30, 2015, the Company’s
working capital deficit current liabilities minus current assets was $5,277,641. The Company’s owners have entered
into an operating and control agreement giving CCSC Holdings Inc. a wholly owned subsidiary of First Choice Healthcare Solutions,
Inc. (FCHS), a controlling variable interest in the Company. On November 12, 2015, the operating agreement was executed
but made effective October 1, 2015.
NOTE 4 - PROPERTY AND EQUIPMENT
Property plant and equipment, at September
30, 2015, was $8,743,059 net of accumulated depreciation of $5,698,320.
During the nine months ended September 30,
2015, $787,850 was charge to operations depreciation expense.
NOTE 5 - OWNERS’ EQUITY
The Company’s membership interest as
of November 2, 2015 was owned by CCSC Holdings, Inc., a wholly owned subsidiary of First Choice Healthcare Solutions, Inc. (“FCHS”)
CCSC TBC Group, LLC, which is owned by Richard Hynes, M.D., FASC and Devin K. Datta, M.D., and HMA Blue Chip Investments,
LLC (Blue Chip Surgical Center Partners), which developed and manages 17 world class ambulatory surgery centers across the United
States.
Together, CCSC Holdings, Inc. and TBC Group
own 75% interest in Crane Creek Surgical Partners. LLC. In accordance with the Crane Creek Restated and Amended Operating Agreement,
CCSC Holdings, Inc. will exercise sufficient control over the business of Crane Creek that will allow FCHS to treat it
as a variable interest entity (“VIE”), effective October 1, 2015.
FIRST CHOICE HEALTHCARE SOLUTIONS, INC.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(unaudited)
NOTE 6 - COMMITMENTS AND CONTINGENCIES
Operating and Control Agreement for the
controlling variable interest in the Company.
FCHS has the power to make decisions that
most significantly affect the economic performance of CCSP and to absorb significant losses or right to receive benefits that
could potentially be significant. As a result, the Company will include the financial results of the VIE in its consolidated financial
statements in accordance with generally accepted accounting principles.
NOTE 7 - SUBSEQUENT EVENTS
In accordance with FASB ASC 855
“Subsequent Events,” FCHS has evaluated subsequent events through the date the financial statements are
available to be issued, January 25, 2016.
7
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