ASSF Assisted 4 Living Inc (PK)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS

Assisted 4 Living, Inc. (“the Company,” “we”, “our” or “us”) was incorporated in the state of Nevada on May 24, 2017, and is based in Bradenton, Florida. Our accounting and reporting policies conform to accounting principles generally accepted in the United States of America (“GAAP”), and the fiscal year end is December 31.

As discussed in NOTE 3, on March 23, 2021, we entered into a Plan of Merger with our wholly-owned subsidiary, BPCC Acquisition, Inc., a Florida corporation (“Merger Sub”) and Banyan Pediatric Care Centers, Inc. (“Banyan”). Under the terms of the Plan of Merger, Merger Sub merged with and into Banyan with Banyan surviving the merger (the “Surviving Entity”) and becoming a wholly-owned subsidiary of the Company (the “Merger”). Pursuant to the Merger, we succeeded to the business of Banyan. The Merger has been treated as a recapitalization and reverse acquisition of the Company for financial accounting purposes, and Banyan is considered the acquirer for financial reporting purposes. This means that the Company’s historical financial statements before the Merger have been replaced with the historical financial statements of Banyan before the Merger in this Quarterly Report and future filings with the SEC.

Banyan, operates three pediatric extended care centers (“PPECs”) in southwest Florida. A PPEC is a nurse-staffed pediatric day care center for medically complex children age birth to 21 years. Our staff includes Registered Nurses (RNs), Licensed Practical Nurses (LPNs), Certified Nursing Assistants (CNAs) and Caregivers, who attend to the children’s medical conditions throughout the day in classroom, dining, play, and clinical settings. Banyan is fully licensed and accepts Florida Medicaid.

As discussed in NOTE 5, on June 10, 2021, we entered into an Amended and Restated Membership Interest Purchase Agreement (the “Restated Purchase Agreement”), by and among the Company, Richard T. Mason (“Mason”), G. Shayne Bench (“Bench”) and Trillium Healthcare Group, LLC, a Florida limited liability company (“Trillium”) to acquire all of the issued and outstanding ownership interests of Fairway Healthcare Properties, LLC (“FHP”) and Trillium Healthcare Consulting, LLC (together with FHP, the “Trillium Subsidiaries”) from Trillium. The transaction closed and was effective June 10, 2021.

Trillium subsidiaries lease and operate 26 facilities in four states: Florida, Georgia, Iowa, and Nebraska with 1,685 total licensed beds (1,546 skilled nursing, 139 assisted living) and 36 independent living apartments. The breakdown by state is as follows: Florida – 1 skilled nursing facility; Georgia – 1 skilled nursing facility; Iowa – 16 skilled nursing facilities, 2 independent living centers and 1 assisted living centers; Nebraska – 4 skilled nursing facilities and 1 assisted living center.

The facilities provide room and board, routine daily care services, post-acute care including rehabilitation and memory care. The Trillium Subsidiaries were organized under the laws of the State of Florida on February 9, 2012, for the purpose of acquiring and managing long term care facilities, such as skilled nursing facilities and assisted living centers.

We are headquartered in Bradenton, Florida.

The corporate website is www.assisted4living.com.

COVID-19

In March 2020, the World Health Organization declared the outbreak of COVID-19 as a pandemic based on the rapid increase in global exposure. COVID-19 continues to spread throughout the world. We are closely monitoring developments and are taking steps to mitigate the potential risks related to the COVID-19 pandemic to the Company, its employees, as well as its residential and consulting clients.

Our evaluations of our practices, procedures, and operations, related to COVID-19, is ongoing. Additional updates to policies, procedures and operations will occur as best practices are adopted and as we deem necessary or advisable, or as further governmental guidance or regulations are implemented.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of the Company (“Financial Statements”) have been prepared in accordance with GAAP for interim financial statements and with the instructions to Form 10-Q and Regulation S-X of the United States Securities and Exchange Commission (“SEC”). Accordingly, they do not contain all information and footnotes required by accounting principles generally accepted in the United States of America for annual financial statements.

In the opinion of management, the accompanying condensed consolidated Financial Statements contain all the adjustments necessary (consisting only of normal recurring accruals) to present the financial position of the Company as of September 30, 2021, and the results of operations and cash flows for the periods presented. The results of operations for the nine months ended September 30, 2021, are not necessarily indicative of the operating results for the full fiscal year or any future period. These condensed consolidated Financial Statements should be read in conjunction with the consolidated financial statements and related notes thereto included in the Company’s Annual Report on Form 10-K filed with the SEC on March 1, 2021 and Current Report on Form 8-K on June 2, 2021. As of April 30, 2021, we had discontinued operations reflected in the accompanying condensed consolidated Financial Statements. As a result of the Plan of Merger completed on March 23, 2021 (see NOTE 3) we have changed our year end reporting period from November to December.

Capital Requirements, Liquidity and Going Concern Considerations

These condensed consolidated Financial Statements are prepared using the generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. Although we had cash and accounts receivable in the amount of approximately $11.4 million at September 30, 2021, we had accrued expenses and current notes payable in excess of cash and accounts receivable in the amount of approximately $6.5 million, and a deficiency in working capital of approximately $20.6 million. For the nine months ended September 30, 2021, our net loss was approximately $6.9 million.

As a result of these factors, we determined it was necessary to review our cash flow for 2021 and an overall analysis of market trends to determine whether or not we have sufficient liquidity to continue as a going concern for a period of at least twelve months from the date of this Quarterly Report. We also determined it was necessary to take certain corporate actions, including reducing discretionary expenses (and reduced reliance on agency staffing), improving revenue (including added Therapy and Rehab services), and raising additional capital, in order to ensure we have sufficient liquidity to continue as a going concern for a period of at least twelve months from the date of this Quarterly Report.

During the three months ended September 30, 2021 we sold 5.0 million shares for an aggregate total of $5.0 million. This capital raise will be used for additional growth through acquisitions and for working capital. However, no assurances can be given that we will be successful. If management is not able to timely and successfully raise additional capital and/or refinance indebtedness, the implementation of the Company’s business plan, financial condition and results of operations will be materially affected.

Basis of Consolidation

These condensed consolidated Financial Statements include the accounts of the Company and the wholly-owned subsidiaries, Banyan Pediatric Care Centers – OPS, LLC, Banyan Pediatric Care Centers – St. Petersburg, LLC, Banyan Pediatric Care Centers, - Pasco, LLC and Banyan Pediatric Care Centers – Sarasota, LLC and the discontinued operations of Assisted 2 Live, Inc., the wholly owned subsidiary that was discontinued as of April 30, 2021. All material intercompany balances and transactions have been eliminated. The condensed consolidated Financial Statements also include the accounts of the Trillium Subsidiaries from June 10, 2021, the effective date of the transaction with Trillium.

Use of Estimates and Assumptions

The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements. The estimates and judgments will also affect the reported amounts for certain revenues and expenses during the reporting period. Actual results could differ from these good faith estimates and judgments.

Cash and Cash Equivalents

The Company considers all short-term investments with an original maturity of three months or less to be cash equivalents. The Company had no cash equivalents at September 30, 2021 and December 31, 2020.

Accounts Receivable

Accounts receivable primarily consists of amounts due from third-party payers (non-governmental), governmental payers and private pay patients and is recorded net of contractual allowances and reserves for doubtful accounts. The Company’s ability to collect outstanding receivables is critical to its results of operations and cash flows. Accordingly, accounts receivable reported in the Company’s Financial Statements is recorded at the net amount expected to be received. The Company’s primary collection risks are (i) the risk of overestimation of net revenues at the time of billing that may result in the Company receiving less than the recorded receivable, (ii) the risk of non-payment as a result of commercial insurance companies’ denial of claims, (iii) the risk that patients will fail to remit insurance payments to the Company when the commercial insurance company pays out-of-network claims directly to the patient, (iv) resource and capacity constraints that may prevent the Company from handling the volume of billing and collection issues in a timely manner, (v) the risk that patients do not pay the Company for their self-pay balances (including co-pays, deductibles and any portion of the claim not covered by insurance) and (vi) the risk of non-payment from uninsured patients.

The Company’s accounts receivable from third-party payers are recorded net of estimated contractual adjustments and allowances from third-party payers, which are estimated based on the historical trend of the Company’s facilities’ cash collections and contractual write-offs, accounts receivable aging, established fee schedules, relationships with payers and procedure statistics. While changes in estimated reimbursement from third-party payers remain a possibility, the Company expects that any such changes would be minimal and, therefore, would not have a material effect on the Company’s financial condition or results of operations. The Company’s collection policies and procedures are based on the type of payor, size of claim and estimated collection percentage for each patient account. The Company analyzes accounts receivable at each of the facilities to ensure the proper collection and aged category. The operating systems generate reports that assist in the collection efforts by prioritizing patient accounts. Collection efforts include direct contact with insurance carriers or patients and written correspondence.

Allowance for Doubtful Accounts, Contractual and Other Discounts

Management estimates the allowance for contractual and other discounts based on its historical collection experience and contracted relationship with the payers. The services authorized and provided and related reimbursement are often subject to interpretation and negotiation that could result in payments that differ from the Company’s estimates. The Company’s allowance for doubtful accounts is based on historical experience, but management also takes into consideration the age of accounts, creditworthiness and current economic trends when evaluating the adequacy of the allowance for doubtful accounts. An account may be written-off only after the Company has pursued collection efforts or otherwise determines an account to be uncollectible. Uncollectible balances are written-off against the allowance. Recoveries of previously written-off balances are credited to income when the recoveries are made.

COVID-19 Pandemic and CARES Act Funding

COVID-19 Pandemic. In January 2020, the Secretary of the U.S. Department of Health and Human Services (“HHS”) declared a national public health emergency due to a novel strain of coronavirus. In March 2020, the World Health Organization declared the outbreak of COVID-19, a disease caused by this coronavirus, a pandemic. The resulting measures to contain the spread and impact of COVID-19 and other developments related to COVID-19 have materially affected the Company’s results of operations during 2020. Where applicable, the impact resulting from the COVID-19 pandemic during the year ended December 31, 2020, has been considered, including updated assessments of the recoverability of assets and evaluation of potential credit losses. As a result of the COVID-19 pandemic, federal and state governments have passed legislation, promulgated regulations and taken other administrative actions intended to assist healthcare providers in providing care to COVID-19 and other patients during the public health emergency. Sources of relief include the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”), which was enacted on March 27, 2020, the Paycheck Protection Program and Health Care Enhancement Act (the “PPPHCE Act”), which was enacted on April 24, 2020, and the Consolidated Appropriations Act, 2021 (the “CAA”), which was enacted on December 27, 2020. In total, the CARES Act, PPPHCE Act and the CAA authorize $178 billion in funding to be distributed to hospitals and other healthcare providers through the Public Health and Social Services Emergency Fund (the “PHSSEF”). In addition, the CARES Act provide for an expansion of the Medicare Accelerated and Advance Payment Program whereby inpatient acute care hospitals and other eligible providers were able to request accelerated payment of up to 100% of their Medicare payment amount for a six-month period to be repaid through withholding of future Medicare fee-for-service payments. Various other state and local programs also exist to provide relief, either independently or through distribution of monies received via the CARES Act. During the period ended September 30, 2021, the Company was a beneficiary of these stimulus measures, including the Medicare Accelerated and Advance Payment Program.

The Company’s accounting policies for the recognition of these stimulus monies is as follows:

Pandemic Relief Funds

Trillium received an aggregate of $13,487,923 in PHSSEF payments, of which $4,242,796 was applied during 2020. Prior to the acquisition date of June 10, 2021 Trillium had recognized $7,081,557 as other operating income. During the three and nine-month period ended September 30, 2021 we recognized $1,385,162 as other operating income resulting in a remaining balance of $778,408 which is classified on the balance sheet as Deferred HHS Revenue. The recognition of amounts received is conditioned upon the provision of care for individuals with possible or actual cases of COVID-19 after January 31, 2020, certification that payment will be used to prevent, prepare for and respond to coronavirus and shall reimburse the recipient only for healthcare-related expenses or lost revenues, as defined by HHS, that are attributable to coronavirus, as well as receipt of the funds. Amounts are recognized as a reduction to operating costs and expenses only to the extent the Company is reasonably assured that underlying conditions have been met.

The Company’s assessment of whether the terms and conditions for amounts received are reasonably assured of having been met considers, among other things, the CARES Act, the CAA and all frequently asked questions and other interpretive guidance issued by HHS, including the Post-Payment Notice of Reporting Requirements issued on January 15, 2021 (the “January 15, 2021 Notice”) and frequently asked questions issued by HHS on January 28, 2021 which clarified previously issued guidance, as well as expenses incurred attributable to the coronavirus and the Company’s results of operations during such period as compared to the Company’s budget. Such guidance, specifically the various Post-Payment Notice of Reporting Requirements and frequently asked questions issued by HHS, set forth the allowable methods for quantifying eligible healthcare related expenses and lost revenues. Only healthcare related expenses attributable to coronavirus that another source has not reimbursed and is not obligated to reimburse are eligible to be claimed. On the basis of guidance available at the time, the Company’s estimate of lost revenues was first based on the negative change in year-over-year net patient care operating revenue, then on the negative change in year-over-year net patient care operating income and finally on the difference between budgeted and actual revenue for calendar year. The calculation as of September 30, 2021 is in accordance with the CAA which indicates that lost revenues may be calculated pursuant to frequently asked questions published by HHS in June 2020, including the difference between a provider’s budgeted and actual revenue if such budget had been established prior to March 27, 2020. The use of funds calculation as of September 30, 2021 takes into account expenses attributable to each respective entity, which primarily relate to incremental labor and supply costs, as well as lost revenues. General fund distributions were allocated among subsidiaries according to total unreimbursed losses. Targeted distributions were not allocated or transferred among subsidiaries. While the CAA, January 15, 2021 Notice and frequently asked questions published by HHS on January 28, 2021 indicate that targeted distribution payments may be allocated or transferred to subsidiaries, distinct conditions exist for such allocations or transfers including that the parent organization have a “direct ownership relationship” with the subsidiary who received the targeted distribution payment. Additionally, the subsidiary that was the recipient of the targeted distribution payment retains responsibility for reporting to HHS on the use of such funds even if they are transferred or allocated to other subsidiaries. There are significant uncertainties as to the meaning and interpretation of conditions specific to the allocation or transfer of targeted distribution payments such that as of September 30, 2021, the Company is not reasonably assured that it can or will choose to comply with such conditions in order to allocate or transfer targeted distribution payments.

HHS’ interpretation of the underlying terms and conditions of such PHSSEF payments, including auditing and reporting requirements, continues to evolve. Additional guidance or new and amended interpretations of existing guidance on the terms and conditions of such PHSSEF payments may result in changes in the Company’s estimate of amounts for which the terms and conditions are reasonably assured of being met, and any such changes may be material. Additionally, any such changes may result in the Company’s inability to recognize additional PHSSEF payments or may result in the de recognition of amounts previously recognized, which (in any such case) may be material.

Medicare Accelerated Payments

The Company recorded payments under the Medicare Accelerated and Advance Payment program in accordance with FASB ASC 606 and has recorded amounts as a contract liability under FASB ASC 606-10-45-2. The contract liability will be reduced over time as revenue is recognized for claims submitted for services provided after the recoupment period begins. Effective October 1, 2020, the program was amended such that providers are required to repay accelerated payments beginning one year after the payment was issued. After such one-year period, Medicare payments owed to providers will be recouped according to the repayment terms. The repayment terms specify that for the first 11 months after repayment begins, repayment will occur through an automatic recoupment of 25% of Medicare payments otherwise owed to the provider. At the end of the eleven-month period, recoupment will increase to 50% for six months. At the end of the six months (or 29 months from the receipt of the initial accelerated payment), Medicare will issue a letter for full repayment of any remaining balance, as applicable. In such event, if payment is not received within 30 days, interest will accrue at the annual percentage rate of four percent (4%) from the date the letter was issued and will be assessed for each full 30-day period that the balance remains unpaid. As of September 30, 2021, $1,671,698 of Medicare accelerated payments are reflected on the balance sheet within advance payments line.

The company receives a substantial portion of our revenues from the Medicare and Medicaid programs. Included in Managed Care and other third-party payors is operating revenues from insurance companies with which we have insurance provider contracts, Medicare managed care, insurance companies for which we do not have insurance provider contracts, workers’ compensation carriers and non-patient service revenue, such as rental income and cafeteria sales. In the future, we generally expect the portion of revenues received from the Medicare and Medicaid programs to increase over the long-term due to the general aging of the population and the impact of the Affordable Care Act. The Affordable Care Act has increased the number of insured patients in states that have expanded Medicaid, which in turn, has reduced the percentage of revenues from self-pay patients. However, it is unclear whether the trend of increased coverage will continue, due in part to the impact of the COVID-19 pandemic and the elimination of the financial penalty associated with the individual mandate, effective January 1, 2019. Further, the Affordable Care Act imposes significant reductions in amounts the government pays Medicare managed care plans. Moreover, the trend toward increased enrollment in Medicare and Medicaid managed care may adversely affect our operating revenue. An executive order issued in October 2019 seeks to accelerate this shift away from traditional fee-for-service Medicare to Medicare managed care. We may also be impacted by regulatory requirements imposed on insurers, such as minimum medical-loss ratios and specific benefit requirements. Furthermore, in the normal course of business, managed care programs, insurance companies and employers actively negotiate the amounts paid to hospitals. Our relationships with payors may be impacted by price transparency initiatives and out-of-network billing restrictions. There can be no assurance that we will retain our existing reimbursement arrangements or that these third-party payors will not attempt to further reduce the rates they pay for our services.

Net operating revenues include amounts estimated by management to be reimbursable by Medicare and Medicaid under prospective payment systems and provisions of cost-based reimbursement and other payment methods. In addition, we are reimbursed by non-governmental payors using a variety of payment methodologies. Amounts we receive for the treatment of patients covered by Medicare, Medicaid and non-governmental payors are generally less than our standard billing rates. We account for the differences between the estimated program reimbursement rates and our standard billing rates as contractual allowance adjustments, which we deduct from gross revenues to arrive at net operating revenues. Final settlements under some of these programs are subject to adjustment based on administrative review and audit by third parties. We account for adjustments to previous program reimbursement estimates as contractual allowance adjustments and report them in the periods that such adjustments become known.

Fair Value of Financial Instruments

The carrying amount of accounts receivable and accounts payable approximate their respective fair values due to the short- term nature. The carrying amount of the line of credit and note payable approximates fair values due to their market interest rates. Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents and accounts receivable.

Property and Equipment

Property and equipment are stated at cost, less accumulated depreciation. Additions and improvements to property and equipment are capitalized at cost. Depreciation of owned assets and amortization of leasehold improvements are computed using the straight-line method over the shorter of the estimated useful lives of the related assets or the lease term. The cost of assets sold or retired, and the related accumulated depreciation are removed from the accounts and any resulting gains or losses are reflected in other income (expense) for the year. Expenditures for maintenance and repairs are charged to expense as incurred.

Goodwill

Our goodwill represents the excess of the purchase price over the fair value of the net identifiable assets acquired in business combinations. The goodwill generated from the business combinations is primarily related to the value placed on the employee workforce and expected synergies. Judgment is involved in determining if an indicator or change in circumstances relating to impairment has occurred. Such changes may include, among others, a significant decline in expected future cash flows, a significant adverse change in the business climate, and unforeseen competition. There was no goodwill impairment for the periods presented.

The Company tests goodwill for impairment on an annual basis, and when events or circumstances indicate the fair value of a reporting unit may be below its carrying value.

Long-Lived Assets

Long-lived assets are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. There were no impairments of long-lived assets for the years presented.

Advertising and Marketing

The Company uses advertising and marketing to promote its services. Advertising and marketing costs are expensed as incurred.

Earnings (Loss) Per Share

Basic Earnings (loss) per common share is computed by dividing net loss applicable to common stockholders by the weighted-average number of common shares outstanding during the period. Diluted earnings per common share is determined using the weighted-average of common shares outstanding during the period, adjusted for the dilutive effect of common stock equivalents, consisting of the conversion option embedded in convertible debt. The weighted-average number of common shares outstanding excludes common stock equivalents because their inclusion would have an anti-dilutive effect.

Fixed grantee stock options (fixed awards) and nonvested stock (including restricted stock) shall be included in the computation of diluted earnings per common share. Even though their issuance may be contingent upon vesting, they shall be considered to be contingently issuable shares. Because issuance of performance based stock options (and performance based nonvested stock) is contingent upon satisfying conditions in addition to the mere passage of time, those options and non vested stock shall be considered to be contingently issuable shares in the computation of diluted earnings per common share.

The dilutive effect of outstanding call options and warrants (and their equivalents) are reflected in diluted earnings per common share by application of the treasury stock method unless another method is required. Equivalents of options and warrants include nonvested stock granted under a share based payment arrangement, stock purchase contracts, and partially paid stock subscriptions. Antidilutive contracts such as purchased put options and purchased call options shall be excluded from diluted earnings per common share.

The Company has included shares issuable under its 2021 Incentive Award Plan in deriving its fully diluted earnings per common share using the Treasury Method in accordance with ASC 260-10-45.

Income Taxes

The Company uses the liability method of accounting for income taxes. Under the liability method, deferred tax assets and liabilities are determined based on differences between financial reporting and the tax basis of assets, liabilities, the carry forward of operating losses and tax credits, and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. An allowance against deferred tax assets is recorded when it is more likely than not that such tax benefits will not be realized.

Any future benefit arising from losses have been offset by a valuation allowance. Accordingly, no provision for income taxes is reflected in the condensed consolidated financial statements. The Company records a liability for uncertain tax positions when it is probable that a loss has been incurred and the amount can be reasonably estimated. Interest and penalties related to income tax matters, if any, would be recognized as a component of income tax expense. At September 30, 2021 and December 31, 2020, the Company had no liabilities for uncertain tax positions. The Company continually evaluates expiring statutes of limitations, audits, proposed settlements, changes in tax law and new authoritative rulings. Currently, the tax years subsequent to 2017 are open and subject to examination by the taxing authorities.

Revenue Recognition

We follow ASC 606, “Revenue from Contracts with Customers.” Revenues are recognized when promised services are transferred to a customer, in an amount that reflects the consideration that we expect to receive in exchange for those services. We derive our revenues from the rendering of services, such as skilled nursing services. The five-step armodel defined by ASC 606 requires us to: (i) identify our contracts with customers, (ii) identify our performance obligations under those contracts, (iii) determine the transaction prices of those contracts, (iv) allocate the transaction prices to our performance obligations in those contracts and (v) recognize revenue when each performance obligation under those contracts is satisfied.

Reimbursement rates to provide services in our facilities are determined by the fee schedules set by the government programs and negotiated in contracts with non-governmental third-party payors and private pay patients. Fees are billed to the payors and private pay patients weekly and monthly following billing guidelines and contract requirements.

Net Patient Revenue

Net operating revenues are recorded at the transaction price estimated by the Company to reflect the total consideration due from patients and third-party payors in exchange for providing services in patient care. These services are considered to be a single performance obligation and have a duration of less than one year. Revenues are recorded as these services are provided. The transaction price, which involves significant estimates, is determined based on the Company’s standard charges for the services provided, with a reduction recorded for price concessions related to third party contractual arrangements as well as patient discounts and other patient price concessions.

The collection of outstanding receivables for Medicare, Medicaid, managed care payers, other third-party payers and patients is our primary source of cash and is critical to our operating performance. The primary collection risks relate to uninsured patient accounts, including patient accounts for which the primary insurance carrier has paid the amounts covered by the applicable agreement, but patient responsibility amounts (deductibles and copayments) remain outstanding. Implicit price concessions relate primarily to amounts due directly from patients. Estimated implicit price concessions are recorded for all uninsured accounts, regardless of the aging of those accounts. Accounts are written off when all reasonable internal and external collection efforts have been performed.

The estimates for implicit price concessions are based upon management’s assessment of historical write-offs and expected net collections, business and economic conditions, trends in federal, state and private employer health care coverage and other collection indicators. Management relies on the results of detailed reviews of historical write-offs and collections at facilities that represent a majority of our revenues and accounts receivable.

Reclassification

Certain amounts from prior periods have been reclassified to conform to the current period presentation.

NOTE 3 – BANYAN MERGER

Effective March 23, 2021, we entered into a Plan of Merger with Merger Sub and Banyan. Under the terms of the Plan of Merger, Merger Sub merged with and into Banyan with Banyan as the Surviving Entity and wholly owned subsidiary of the Company.

The Merger has been treated as a recapitalization and reverse acquisition of the Company for financial accounting purposes, and Banyan is considered the acquirer for accounting purposes. This means that the Company’s historical financial statements before the Merger have been replaced with the historical financial statements of Banyan.

In connection with the Merger, we issued 4,165,418 shares of our common stock in exchange for 49,984,649 outstanding shares of Banyan’s common stock held by 64 shareholders, based on an exchange ratio of one (1) share of our common stock for every twelve (12) shares of Banyan common stock. We also issued a warrant to purchase 75,000 shares of our common stock (the “Warrant”) in exchange for a warrant to purchase 900,000 shares of Banyan’s common stock. The Warrant is held by one investor and is exercisable for cash only until May 2, 2030 at an exercise price of $0.38 per share. The number of shares of common stock deliverable upon exercise of the Warrant contains provisions for standard anti-dilution adjustments.

The Surviving Entity assumed Banyan’s $2,300,000 of outstanding debt, and the $2,000,000 of such debt that was convertible into 20,000,000 shares of Banyan common stock was converted at $0.50 per share into 4,000,000 shares of our common stock, effective March 30, 2021. During the three months ended June 30, 2021, shares were issued to the Noteholders of the $2,000,000 convertible note. The remaining $300,000 of outstanding debt, evidenced by a promissory note dated November 6, 2020, accrues interest at the annual rate of 12%. Interest is payable on the sixth day of each month in the amount of $3,000 until the maturity date of this note on November 6, 2021, at which time, the remaining principal balance, if any, is due and payable.

NOTE 4 – DISCONTINUED OPERATIONS

On April 30, 2021, our Board of Directors (the “Board”) approved the discontinuance of our wholly owned subsidiary, Assisted 2 Live, Inc. (the “Discontinued Subsidiary”). The operations of the Discontinued Subsidiary are reflected on our condensed consolidated statement of operations from the date of the Merger as a loss from discontinued operations in the amount of $26,500.

The April 30, 2021, Board decision was the result of the Purchase and Sale Option Agreement (the “Option Agreement”) with Romulus Barr (“Barr”) which we entered into on November 7, 2020. The Option Agreement provided us with the option to sell all of our interest in Assisted 2 Live, Inc., consisting of 1,000 shares of common stock of the discontinued subsidiary, to Barr in exchange for 200,000 shares of our common stock (the “Shares”) held by Barr. The returned Shares were cancelled and included in authorized but unissued shares of common stock of the Company. The number of issued and outstanding shares of common stock was decreased by 200,000 as of April 30, 2021. The transfer resulted in a gain on disposal of discontinued operations in the amount of $395,500. A share price of $1.85 was used to determine the gain on disposal of discontinued operations based on the share price value on April 30, 2021.

NOTE 5 – TRILLIUM ACQUISITION

On June 10, 2021, we entered into the Restated Purchase Agreement, by and among the Company, Mason, Bench and Trillium to acquire all of the issued and outstanding ownership interests of the Trillium Subsidiaries from Trillium (the “Transaction”). The Transaction closed and was effective June 10, 2021.

Pursuant to the terms and conditions of the Restated Purchase Agreement, the aggregate purchase price consists of: (i) a cash payment of $902,847, minus certain transaction related costs, fees and expenses set forth in the Restated Purchase Agreement and determined post-closing; (ii) 2,500,000 shares of the Company’s Series A Preferred Stock (the “Preferred Shares”); and (iii) shares of the Company’s common stock (“Common Shares”) having an aggregate value of $5,000,000, based on the stock price at the time of issuance, upon the earlier of an initial public offering by the Company or June 10, 2022. Trillium will have the right to acquire an additional 2,500,000 Common Shares during the two-year period after the Transaction closes pursuant to a Business Development Agreement, a copy of which is attached as Exhibit 10.1 to this Quarterly Report.

As a condition to closing, the Trillium Subsidiaries paid with cash on hand $1,200,000 to one of its landlord, CTR Partnership, L.P. (“CTR”), as an additional security deposit under a lease between Greenside Healthcare Properties, LLC, a wholly-owned subsidiary of FHP and CTR and $3,000,000 to Crete Plus Five Property, L.L.C. (“Omega,” and together with CTR, the “Landlords”) as a deposit on the Company’s purchase of 16 facilities on 14 properties (the “Properties”) currently being leased by FHP’s wholly-owned subsidiaries from Omega and its affiliates. The $3,000,000 deposit to Omega is non-refundable and is subject to forfeiture if the purchase of the Properties is not closed by December 30, 2021. If the $3,000,000 deposit is forfeited, Trillium forfeits its right to receive $3,000,000 of the purchase price, first, from the cash payment mentioned in subsection (i) above, and second, from the value of common stock to be issued to Trillium mentioned in subsection (iii) above. In any event, no cash payments may be made to Trillium until the purchase of the Properties closes.

The Preferred Shares, with respect to rights on liquidation, winding up and dissolution, rank pari passu with the Common Shares. The holders of Preferred Shares have the right to cast one (1) vote for each Preferred Share held of record on all matters submitted to a vote of holders of the Common Shares, including the election of directors, and all other matters as required by law. The Preferred Shares are not convertible into Common shares at the election of the holder. However, the Preferred Shares do automatically convert into Common Shares at a one-to-one ratio two years from date of issuance. In lieu of converting the Preferred Shares, the holders thereof may elect to have the Company redeem one or more Preferred Shares at the redemption price of $1.00 per share two years from the date of issuance. The Company is required to issue the Preferred Shares to Trillium within 30 days after the purchase of the Properties closes. In connection with the issuance of the Preferred Shares, the Company will file a Certificate of Designation with the Nevada Secretary of State prior to such issuance.

In connection with obtaining the Landlords’ consent to the Transaction, the Company entered into: (i) a guaranty agreement with each Landlord under which the Company agreed to guaranty all obligations and liabilities under master leases for property and facilities owned by the Landlords’ and their affiliates and leased by FHP’s direct and indirect wholly-owned subsidiaries; and (ii) a Consent Agreement and Fifth Amendment to Master Lease with Omega (the “Consent”) regarding the Properties. Under the terms of the Consent, until the earlier of the purchase of the Properties closes or the expiration of the master lease agreement for the Properties in 2027: (a) Mason and Bench must remain responsible for, and have authority over, the day to day management and operations of the Properties and related facilities; and (b) the Company may not make any payment, transfer or distribution of cash or any assets to one or more equity holders or any person or entity with possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of the Company, through the ownership of voting securities (an “Affiliate”), or return any capital, redemption of any security, or making or assumption of any loans, advances or extension of credit or capital contribution to, or any other investment in, any Affiliate, including, but not limited to, a fee for management, a payment for services rendered, a reimbursement for expenditures or overhead incurred on behalf of the Company or a payment on any debt of an Affiliate; provided, however, the Company may contribute or transfer cash or other assets to its, direct or indirect, wholly-owned subsidiaries, and pay reasonable cash compensation to the members of the Board and executive officers provided that such compensation does not in the aggregate, exceed $600,000 in any six month period.

The initial purchase price has been allocated to the acquired assets and assumed liabilities based on estimated fair values. The purchase price allocation is preliminary pending a final determination of the fair values of the assets and liabilities. The table below provides a preliminary recording of assets acquired and liabilities assumed as of the acquisition date. During the three month period ended September 30, 2021 certain adjustments were made to the fair value of accounts receivable, share liability and goodwill. The amounts recorded for property, plant and equipment, leasehold improvements and goodwill are preliminary and pending finalization of valuation efforts.

NOTE 6– ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

Our accounts payable and accrued liabilities at September 30, 2021 and December 31, 2020 consisted of the following:

NOTE 7 – NOTES PAYABLE

Notes payable at September 30, 2021 and December 31, 2020 consisted of the following:

The entire balance due on each line has been classified as a current liability in accordance with FASB ASC Topic 470-10-45-5, Classification of Revolving Credit Agreements Subject to Lock-Box Arrangements. FASB guidance stipulates that if the contractual provisions of a loan arrangement require, in the ordinary course of business and without another event occurring, the cash receipts of a debtor to be used to repay the existing obligation, the credit agreement should be considered a short-term obligation.

NOTE 8 – LEASEHOLD IMPROVEMENTS

The Company had the following leasehold improvements as of September 30, 2021 and December 31, 2020:

During the year ended December 31, 2020, we recorded $2,669,047 of leasehold improvements. These amounts include costs related to the build out of the Sarasota location in the amount of $1,245,950. These costs will be amortized over the expected term of the lease including extensions that management expects to be 15 years. We also recorded costs in the amount of $1,021,793 related to the New Port Richey location buildout. The expected amortization of the improvements for the New Port Richey location is 17 years. Also recorded were $401,303 of improvements as part of the St. Petersburg-Kidz Club Acquisition. The expected amortization of the improvements for the St. Petersburg location is 15 years. We also recorded $1,213,273 in lease improvements as part of the Trillium acquisition, during the nine-month period ending September 30, 202.

Amortization expense for the three months ended September 30, 2021 and 2020 was $70,193 and $13,593, respectively.

Amortization expense for the nine months ended September 30, 2021 and 2020 was $218,140 and $54,656, respectively.

During the year ended December 31, 2020 we recorded $136,079 in property plant and equipment. These expenses were related to furniture and fixtures and for the new Banyan Sarasota and Pasco locations. We also recorded expenses related to computers and equipment for these new locations, as well as the St Petersburg location acquired in May of 2020. We also purchased buses for the St. Petersburg location, as of the year ended December 2020 we had one bus that was purchased for cash and is being depreciated. Other buses have been purchased with finance leases and are reflected in Right of Use Assets and Lease Liabilities.

During the nine month period ending September 30, 2021 we recorded additional furniture and fixtures related to the Banyan locations in the amount of approximately $23,000   and additional computers and equipment in the amount of approximately $41,000. These purchases were related to the completion of the Banyan Sarasota and Pasco locations that opened in May and July of 2021.

Through the Trillium acquisition on June 10, 2021 we recorded approximately $3.6M in property, plant and equipment consisting of furniture and fixtures, equipment, leasehold improvements in construction and a building. During the three month period ended September 30, 2021 we recorded approximately $69,487 in additional furniture and fixtures for the Trillium locations  .

NOTE 10 – OPERATING AND CAPITAL LEASES

On August 24, 2019, through Banyan Pediatric Care Centers-Sarasota, LLC, we entered into an operating lease with Northeast Plaza Venture I, LLC for the premises located in the Northeast Plaza Shopping Center located on the Northeast corner of 17th Street & Lockwood Ridge Road, in the County of Sarasota, Florida. The initial term of the lease is five years with minimum annual rent of $180,000. The landlord granted rent abatement for this lease until February 24, 2020. The lease end date, including two successive 5-year renewal options, is January 31, 2035. A right of use asset and lease liability in the amount of $1,899,869 associated with this lease was recognized. This lease is treated as an operating lease for accounting purposes.

On October 15, 2019, through Banyan, we entered into an assignment and assumption of lease agreement with The Kidz Club – St. Pete, LLC whereby we assumed approximately 12,137 square feet of space at the southeast corner of 3rd Avenue S. and 9th Street N., Webb’s Plaza, St. Petersburg, FL 33701. The minimum annual rent for the first year of the lease was $113,681. The current lease termination date, with extensions expected to be exercised, is October 31, 2024. Upon the exercise of each extension the base rent shall increase by 1.5%. This assignment of lease was subject to the terms of the Asset Purchase Agreement with The Kidz Club-St. Pete, LLC. A right of use asset and lease liability in the amount of $875,539 was recognized in association with this lease. This lease is treated as an operating lease for accounting purposes.

Effective April 1, 2020, through Banyan Pediatric Care Centers – Pasco, LLC, we entered into an 84-month facility lease with Grand Trinity Plaza, LLC for the premises located in the shopping center known as the Grand Trinity Plaza located in New Port Richey, Florida. The initial term of the lease had a minimum annual base rent of $94,500. The landlord granted rent abatement until September 2020. The lease end date, including two successive 5-year renewals is August 31, 2037. A right of use asset and lease liability in the amount of $1,143,743 was recognized in association with this lease. This lease is treated as an operating lease for accounting purposes.

On June 9, 2020, through Banyan, we entered into a 36-month copier lease with Dex Imaging. The lease was for one copier and a printer. The minimum annual lease payment is $5,376 with annual increases not to exceed 12% annually. This lease will auto renew in 12-month increments. The equipment under this lease has a fixed $1 payment buyout option. This equipment was purchased for the St. Petersburg location. A right of use asset and lease liability in the amount of $16,066 was recognized in association with this lease. This lease is treated as an operating lease for accounting purposes.

On August 25, 2020, through Banyan, we entered into a 60-month financing agreement with Ascentium Capital LLC for two 2020 Turtletop Terra Transit passenger buses for the St. Petersburg location. This lease is considered an operating lease for accounting purposes because the lease period is less than the economic life of the asset being leased. Minimum annual rent payments under this lease are $24,859. At our discretion, we may exercise a purchase option, by giving written notice no later than 30 days but not more than 120 days before the expiration of the initial term. The purchase option price is $23,920 for each bus, based on reasonably predicted fair market value. A right of use asset and lease liability in the amount of $102,393 was recognized in association with this lease. This lease is treated as an operating lease for accounting purposes.

On October 20, 2020, through Banyan, we entered into a 60-month financing agreement with Ascentium Capital LLC for a 2020 Eldorado National Advance 220 p/t 14 passenger bus for the St. Petersburg location. This lease is considered an operating lease for accounting purposes because the lease period is less than the economic life of the asset being leased. Minimum annual rent payments under this lease are $13,381. At our discretion, we may exercise a purchase option, by giving written notice no later than 180 days but not more than 360 days before the expiration of the initial term. The purchase option price is $12,891 based on reasonably predicted fair market value. A right of use asset and lease liability in the amount of $55,345 was recognized in association with this lease. This lease is treated as an operating lease for accounting purposes.

In April of 2021, through Banyan, we entered into a 36-month copier lease with Dex Imaging. The lease was for one copy machine. The minimum annual lease payment is $4,920. The equipment under this lease has a fixed $1 payment buyout option. The equipment was purchased for the Banyan Sarasota location. A right of use asset and lease liability in the amount of $14,693 was recognized in association with this lease. This lease is treated as an operating lease for accounting purposes.

In July of 2021, through Banyan, we entered into a 60-month financing agreement with Ascentium Capital LLC for a 2021 Diamond VIP 2200 passenger bus for the Pasco location. This lease is considered an operating lease for accounting purposes. Minimum annual rent payments under this lease are $15,654 and the purchase option price is $15,193 based on reasonably predicted fair market value. A right of use asset and lease liability in the amount of $65,772 was recognized with this lease.

In August of 2021, through Banyan we entered into a 36-month financing agreement with Dex Imaging. The lease was for one copy machine. The minimum annual lease payment is $4,920. The equipment under this lease has a fixed $1 payment buyout option. The equipment was purchased for the Banyan Pasco location. A right of use asset and lease liability in the amount of $14,040 was recognized in association with this lease. This lease is treated as an operating lease for accounting purposes.

In July of 2021, through Trillium we entered into a 60-month financing agreement with Dex Imaging. The lease was for one copy machine. The minimum annual lease payment is $1,920. A right of use asset and lease liability in the amount of $8,049 was recognized in association with this lease. This lease is treated as an operating lease for accounting purposes.

In August of 2021, through Trillium we entered into a 60-month financing agreement with RJKool for a Unimac commercial washing machine. The minimum annual lease payment is $4,321. A right of use asset and lease liability in the amount of $18,476 was recognized in association with this lease. This lease is treated as an operating lease for accounting purposes.

In July of 2021, through Trillium we entered into a 36-month financing agreement with Southeastern Laundry Equipment Sales for a Unimac commercial washing machine. The minimum annual lease payment is $5,094. A right of use asset and lease liability in the amount of $13,054 was recognized in association with this lease. This lease is treated as an operating lease for accounting purposes.

The leases assumed in the Trillium acquisition effective June 10, 2021 are reflected in accordance with FASB ASC Topic 842-10-65 which states; for leases in which the acquiree is a lessee, the acquirer shall measure the lease liability at the present value of the remaining lease payments, as if the acquired lease were a new lease of the acquirer at the acquisition date. The acquirer shall measure the right-of-use asset at the same amount as the lease liability as adjusted to reflect favorable or unfavorable terms of the lease when compared with market terms.

Through the Trillium acquisition (see NOTE 5) we assumed two master lease agreements. The first master lease agreement with Omega consists of 14 properties. The master lease with Omega was entered into on May 13, 2015, with an initial lease term that expires on May 31, 2027. The Omega master lease provides for two 10-year renewal options. At June 10, 2021 we recognized a right of use asset and lease liability in the amount of $29,906,314 in association with this lease. This lease is treated as an operating lease for accounting purposes.

The second master lease with CTR accounts for 10 properties. The master lease with CTR was entered into on August 16, 2019, with an initial lease term that expires on November 30, 2030. The CTR lease provides for two 5-year renewal options. At June 10, 2021 we recognized a right of use asset and lease liability in the amount of $14,468,509 in association with this lease. This lease is treated as an operating lease for accounting purposes.

Through the Trillium acquisition we also assumed 27   capital leases for the following:

These leases are treated as capital leases for accounting purposes.

In accordance with ASC 842, we recorded the operating lease right of use asset and lease liability as follows:

Maturity of Operating Lease obligations for period ended September 30, 2021 ,

 SCHEDULE OF MATURITY OF OPERATING LEASE LIABILITY

Information associated with the measurement of our remaining operating lease obligations as of September 30, 2021 is as follows:

The operating leases range from a term of 2.89 years to 15.93 years with a weighted average lease term of 5.47 years.

The capital leases range from a term of 1 to 4.96 years with a weighted average lease term of 3.72 years.

The weighted average discount rate for operating leases is 7.80%.

The weighted average discount rate for capital leases is 7.81%.

The lease expense for the three and nine month periods ended September 30, 2021 were $2,991,078 and $3,912,133, respectively, compared to $95,319 and $193,365, during the same periods in the prior year.

NOTE 11 - EQUITY