NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
On June 22, 2012, FAB Universal (FAB) formed Future Healthcare of America (FHA), a wholly owned subsidiary. On October 1, 2012, FHA operations were spun-off in a 1 for 1 dividend to the shareholders of record of FAB on September 5, 2012, the record date. On November 14, 2014, FHA organized Future Healthcare Services Corp. (FHS), and transferred all the shares of Interim to FHS. Interim Healthcare of Wyoming, Inc. (Interim), a Wyoming corporation, a wholly owned subsidiary of FHS, was organized on September 30, 1991. Interim operates primarily in the home healthcare and healthcare staffing services in Wyoming and Montana. On April 3, 2007, Interim purchased the operations of Professional Personnel, Inc., d.b.a., Professional Nursing Personnel Pool.
Consolidation
- The financial statements presented reflect the accounts of FHA, FHS and Interim. All inter-company transactions have been eliminated in consolidation.
Accounting Estimates
- The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the 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. Management made assumptions and estimates for determining reserve for accounts receivable, obsolete inventory and in determining the impairment of definite life intangible assets and goodwill. Actual results could differ from those estimated by management.
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original maturity date of three months or less when purchased to be cash equivalents. At March 31, 2016, the Company had $41,381 cash balances in excess of federally insured limits.
Accounts Receivable
- Accounts receivable consist of trade receivables arising in the normal course of business. At March 31, 2016 and 2015, the Company has an allowance for doubtful accounts of $20,200, which reflects the Company's best estimate of probable losses inherent in the accounts receivable balance. The Company determines the allowance based on known troubled accounts, historical experience, and other currently available evidence. During the three months ended March 31, 2016 and 2015, the Company adjusted the allowance for bad debt by $0.
Depreciation
- Depreciation of property and equipment is provided on the straight-line method over the estimated useful lives.
Income /(Loss) Per Share
- The Company computes income (loss) per share in accordance with Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 260 Earnings Per Share, which requires the Company to present basic earnings per share and diluted earnings per share when the effect is dilutive (see Note 7).
Leases -
The Company accounts for leases in accordance with Financial FASB ASC Topic 840, (formerly Statement of Financial Accounting Standards SFAS No. 13 "Accounting for Leases"). Leases that meet one or more of the capital lease criteria of standard are recorded as a capital lease, all other leases are operating leases.
Income Taxes
- The Company accounts for income taxes in accordance with FASB ASC Topic 740 Accounting for Income Taxes. This topic requires an asset and liability approach for accounting for income taxes (see Note 8).
Advertising Costs
- Advertising costs are expensed as incurred and amounted to $9,923 and $12,625 for the periods ending March 31, 2016 and 2015, respectively.
6
FUTURE HEALTHCARE OF AMERICA
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
Fair Value of Financial Instruments
The Company accounts for fair value measurements for financial assets and financial liabilities in accordance with FASB ASC Topic 820. The authoritative guidance, which, among other things, defines fair value, establishes a consistent framework for measuring fair value and expands disclosure for each major asset and liability category measured at fair value on either a recurring or nonrecurring basis. Fair value is defined as the exit price, representing the amount that would either be received to sell an asset or be paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, the guidance establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:
Level 1. Observable inputs such as quoted prices in active markets for identical assets or liabilities;
Level 2. Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and
Level 3. Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.
Unless otherwise disclosed, the fair value of the Companys financial instruments including cash, accounts receivable, prepaid expenses, and accounts payable and accrued expenses approximates their recorded values due to their short-term maturities.
Revenue Recognition
- Revenue is generated from various payers including Medicare, Medicaid, Insurance Companies, and various other entities and individuals. In accordance with FASB ASC Topic 605, Revenue is recognized when persuasive evidence of an arrangement exists, services have been provided, the price of services is fixed or determinable, and collection is reasonably assured. Payments received prior to services being provided are recorded as a liability (deferred revenue) until such services are performed. Revenue is recorded as net revenue where contractual adjustments and discounts are deducted from Gross Revenue to determine net revenue.
Derivative Financial Instruments
The Company is required to recognize all of its derivative instruments as either assets or liabilities in the Consolidated Balance Sheets at fair value. The accounting for changes in the fair value (i.e., gains or losses) of a derivative instrument depends on whether it has been designated, and is effective, as a hedge and further, on the type of hedging relationship. For those derivative instruments that are designated and qualify as hedging instruments, a company must designate the hedging instrument, based upon the exposure being hedged, as a fair value hedge, or cash flow hedge. Gains and losses related to a hedge are either recognized in income immediately to offset the gain or loss on the hedged item or are deferred and reported as a component of Accumulated Other Comprehensive Income in the Stockholders' Equity and subsequently recognized in Net income when the hedged item affects Net income. The change in fair value of the ineffective portion of a financial instrument is recognized in Net income immediately. The gain or loss related to financial instruments that are not designated as hedges are recognized immediately in Net income.
Recently Enacted Accounting Standards -
In May 2014, the Financial Accounting Standards Board (FASB) issued a new standard to achieve a consistent application of revenue recognition within the U.S., resulting in a single revenue model to be applied by reporting companies under U.S. generally accepted accounting principles. Under the new model, recognition of revenue occurs when a customer obtains control of promised goods or services in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In addition, the new standard requires that reporting companies disclose the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. On July 9, 2015, the FASB agreed to delay the effective date by one year; accordingly, the new standard is effective for us beginning in the first quarter of 2018 and we expect to adopt it at that time. The new standard is required to be applied retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying it recognized at the date of initial application. We have not yet selected a transition method, nor have we determined the impact of the new standard on our consolidated financial statements.
7
FUTURE HEALTHCARE OF AMERICA
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
In 2015, the FASB issued an amended standard requiring that we classify all deferred tax assets and liabilities as non-current on the balance sheet instead of separating deferred taxes into current and non-current. The amended standard is effective for us beginning in the first quarter of 2017; early adoption is permitted and we are evaluating whether we will early adopt. The amended standard may be adopted on either a prospective or retrospective basis. We do not expect that the adoption of this standard will have a significant impact on our financial position or results of operations.
In February 2016, the FASB issued changes to the accounting for leases that primarily affect presentation and disclosure requirements. The new standard will require the recognition of a right to use asset and underlying lease liability for operating leases with an initial life in excess of one year. This standard is effective for us beginning in the first quarter of 2019. We have not yet determined the impact of the new standard on our consolidated financial statements.
Other recent accounting pronouncements issued by the FASB did not or are not believed by management to have a material impact on the Companys present or future financial statements.
NOTE 2 - GOING CONCERN
The accompanying consolidated financial statements have been prepared in conformity with generally accepted accounting principles of the United States of America, which contemplate continuation of the Company as a going concern. However, the Company has incurred losses, an accumulated deficit and has a short-term note payable in excess of anticipated cash. These factors raise substantial doubt about the ability of the Company to continue as a going concern. There is no assurance that the Company will be successful in achieving profitable operations. The financial statements do not include any adjustments that might result from the outcome of these uncertainties.
NOTE 3 - PROPERTY & EQUIPMENT
The following is a summary of property and equipment at:
|
|
|
|
|
| |
|
Life
|
|
March 31,
2016
|
|
December 31,
2015
|
|
|
|
|
|
|
Furniture, fixtures and equipment
|
2-10 yrs
|
$
|
36,384
|
$
|
36,384
|
|
|
|
36,384
|
|
36,384
|
|
Less: Accumulated depreciation
|
|
|
(36,365)
|
|
(36,348)
|
|
Property & equipment, net
|
|
$
|
19
|
$
|
36
|
Depreciation expense for the periods ended March 31, 2016 and 2015 was $16 and $16, respectively.
NOTE 4 VARIABLE RATE SENIOR SECURED CONVERTIBLE DEBENTURE
On September 9, 2013, the Company closed a Subscription Agreement by which one institutional investor purchased a) a Variable Rate Senior Secured Convertible Note payable having a total principal amount of $1,010,000, convertible into common shares of the Company at $0.25 per share and maturing March 9, 2015; b) Warrants to purchase a total of 3,030,000 shares of common stock, at $0.50 per share, exercisable for four years, and c) a greenshoe to purchase a total of 2,000,000 shares of common stock at $0.25 per share, exercisable for one year from the closing date. On September 9, 2014 the greenshoe expired unexercised. On March 9, 2015, the Note matured. As the note has not been paid nor extended, the outstanding principal, plus accrued but unpaid interest, liquidated damages and other amounts, became due and payable at the election of the holder. The holder has not made such an election.
8
FUTURE HEALTHCARE OF AMERICA
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 VARIABLE RATE SENIOR SECURED CONVERTIBLE DEBENTURE - Continued
The fair value of the beneficial conversion feature of the warrants and greenshoe totaled $952,254 and was recorded as a derivative liability. The Company recorded a discount on the note for beneficial conversion feature of the note. The $952,254 discount on the beneficial conversion feature was amortized as interest expense over the term of the note. As of March 31, 2016, the Company has amortized $952,254 of the discount, with no remaining unamortized discount being offset against the outstanding balance of the note in the accompanying balance sheet. As of March, 31, 2016, the Company had accrued interest payable on the debenture of $158,052.
NOTE 5 DERIVATIVE FINANCIAL INSTRUMENTS
The Company entered into a variable rate senior secured convertible debenture, wherein the Company agreed to register the underlying share, warrants and greenshoe. The fair value of the beneficial conversion feature of the warrants and greenshoe was estimated using the Black Scholes pricing model and totaled $952,254 upon issuance and was recorded as a derivative liability. As of March 9, 2015 and March 31, 2015, the fair value of the unregistered conversion feature of the Note Payable based on the following assumptions (Life 0, risk-free interest rate 0, volatility of 0, and stock price of $.15 and conversion price of $.25) was $0, resulting in the recording of a gain totaling $311,244. As of March 31, 2016, the fair value of the warrants based on the following assumptions (Life 1.44years, risk free interest rate 0.59%, volatility of 253.68%, stock price of $.08 and exercise price of $.50) was $175,286, and a gain totaling $88,247 was recorded for the three months ended March 31, 2016.
NOTE 6 FAIR VALUE OF FINANCIAL INSTRUMENTS
The Fair Value Measurement and Disclosure Topic of FASB and ASC:
·
Defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, and establishes a framework for measuring fair value;
·
Establishes a three-level hierarchy for fair value measurement based upon the transparency of inputs to the valuation as of the measurement date;
·
Expands disclosures about financial instruments measured at fair value.
Financial assets and financial liabilities record on the Balance sheet at fair value are categorized based on the reliability of inputs to the valuation techniques as follows:
Level 1: Financial assets and financial liabilities whose values are based on unadjusted quoted prices for identical assets or liabilities in an active market that the Company can access.
Level 2: Financial assets and financial liabilities whose values are based on the following:
Quoted prices for similar assets or liabilities in active markets; Quoted prices for identical or similar assets or liabilities in non-active markets or Valuation models whose inputs are observable, directly or indirectly, for substantially the full term of the assets or liability
Level 3: Financial assets and financial liabilities whose values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. These inputs may reflect our estimates of the assumptions that market participants would use in valuing the financial assets and financial liabilities.
9
FUTURE HEALTHCARE OF AMERICA
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 FAIR VALUE OF FINANCIAL INSTRUMENTS - Continued
The following tables summarize Level 1, 2 and 3 financial assets and financial (liabilities) by their classification in the Consolidated Balance Sheet:
|
|
|
|
|
| |
As of March 31, 2016:
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
Derivative liability Conversion feature of warrants
|
|
-
|
|
-
|
|
(175,286)
|
NOTE 7 - CAPITAL STOCK
Common Stock
- The Company has authorized 200,000,000 shares of common stock, $0.001 par value. As of March 31, 2016, 11,265,631 shares were issued and outstanding.
On January 7, 2015, the Company issued 50,000 unregistered common shares valued at $7,000 for consulting services.
NOTE 8 WARRANTS AND GREENSHOE
A summary of the status of the warrants granted is presented below for the three months ended:
|
|
|
|
|
|
| |
|
March 31, 2016
|
|
December 31, 2015
|
|
Shares
|
|
Weighted Average Exercise
Price
|
|
Shares
|
|
Weighted Average Exercise
Price
|
Outstanding at beginning of period
|
3,030,000
|
$
|
0.50
|
|
3,030,000
|
$
|
0.50
|
Granted
|
-
|
|
-
|
|
-
|
|
-
|
Exercised
|
-
|
|
-
|
|
-
|
|
-
|
Forfeited
|
-
|
|
-
|
|
-
|
|
-
|
Expired
|
-
|
|
-
|
|
-
|
|
-
|
Outstanding at end of period
|
3,030,000
|
$
|
0.50
|
|
3,030,000
|
$
|
0.50
|
On September 9, 2013, the Company closed a Subscription Agreement wherein the Company granted warrants to purchase a total of 3,030,000 shares of common stock, at $0.50 per share, exercisable for four years.
NOTE 9 - INCOME TAXES
The Company accounts for income taxes in accordance with FASB ASC Topic 740, Accounting for Income Taxes which requires the Company to provide a net deferred tax asset or liability equal to the expected future tax benefit or expense of temporary reporting differences between book and tax accounting and any available operating loss or tax credit carryforwards.
Because of the uncertainty surrounding the realization of the loss carryforwards and significant changes in the ownership of the Company, a valuation allowance has been established equal to the tax effect of the loss carryforwards and, therefore, no deferred tax asset has been recognized for the loss carryforwards. The net deferred tax assets are approximately $1,200,000 as of March 31, 2016, with an offsetting valuation allowance of the same amount.
10
FUTURE HEALTHCARE OF AMERICA
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10 LEASES
Operating Lease
- The Company leases office space in Casper, Wyoming for $4,892 a month through June 2018. The Company further leases space in Billings, Montana for of $1,490 a month through February 2017.
The future minimum lease payments for non-cancelable operating leases having remaining terms in excess of one year as of March 31, 2016 are as follows:
Twelve months ending March 31
Lease Payments
2017
75,094
2018
58,704
2019
14,676
2020
-
Thereafter
-
Total Minimum Lease Payments
$
148,474
Lease expense charged to operations was $19,146 and $19,018 for the three months ended March 31, 2016 and 2015, respectively.
NOTE 11 INCOME/ (LOSS) PER SHARE
The following data shows the amounts used in computing income (loss) per share and the weighted average number of shares of common stock outstanding for the periods presented for the periods ended:
|
|
|
| |
|
|
For the Three Months
|
|
|
March 31
|
|
|
2016
|
|
2015
|
Income/(Loss) from continuing operations available to common stockholders (numerator)
|
$
|
16,944
|
$
|
(249,684)
|
Income/(Loss) available to common stockholders (numerator)
|
|
16,944
|
|
(249,684)
|
Weighted average number of common shares outstanding during the period used in loss per share (denominator)
|
|
11,265,631
|
|
10,661,742
|
At March 31, 2016 and 2015, the Company had 3,030,000 and 3,030,000, respectively, warrants to purchase common stock of the Company at $0.50 per share, and a convertible debenture payable wherein the holder could convert the note and underlying accrued interest into a minimum of 5,416,283 and 4,763,833, respectively shares of common stock which were not included in the loss per share computation because their effect would be anti-dilutive.
NOTE 12 - SUBSEQUENT EVENTS
Subsequent events have been evaluated through the date and time of this report.
11