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) July 21, 2015 (May 5, 2015)

 

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 May 11, 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, TBC Holdings of Melbourne, Inc. (“TBC Holdings”), entered into an Operating and Control Agreement (the “Agreement”) with Brevard Orthopaedic Spine & Pain Clinic, Inc. (“The B.A.C.K. Center”).

 

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). 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 The B.A.C.K. Center

 

The audited financial statements including the notes thereto for The B.A.C.K. Center for the years ended December 31, 2014 and 2013 and the unaudited financial statements including notes thereto for The B.A.C.K. Center for the three months ended March 31, 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 March 31, 2015, the unaudited pro forma condensed consolidated statements of operations for the year ended December 31, 2014 and for the three months ended March 31, 2015 and the notes thereto, which give effect to The B.A.C.K. Center 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 The B.A.C.K. Center for the years end December 31, 2014 and 2013.

 

99.2Unaudited financial statements including the notes thereto for The B.A.C.K. Center for the three months ended March 31, 2015 and 2014.

 

99.3Unaudited pro forma consolidated balance sheet of the Company as of March 31, 2015, the unaudited pro forma condensed consolidated statements of operations for the year ended December 31, 2014 and for the three months ended March 31, 2015 and the notes thereto, which give effect to The B.A.C.K. Center transaction.

 

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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: July 21, 2015  
  /s/ Chris Romandetti
  Name:  Chris Romandetti
  Chief Executive Officer

 

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Exhibit 99.1

  

Brevard Orthopaedic,
Spine & Pain Clinic, Inc. &
Subsidiary

 

Consolidated Financial
Statements

 

Years ended

December 31, 2014 and 2013

 

 
 

 

[Type text]

 

Table of Contents

 

  Page
   
FINANCIAL STATEMENTS  
   
Report on Independent Registered Accounting Firm 1
   
Consolidated Balance Sheet 2
   
Consolidated Statement of Income and Accumulated Deficit 3
   
Consolidated Statement of Cash Flows 4
   
Notes to Consolidated Financial Statements 4-14

 

 
 

 

BREVARD ORTHOPAEDIC, SPINE & PAIN CLINIC, INC. & SUBSIDIARY

CONSOLIDATED STATEMENT OF INCOME AND ACCUMULATED DEFICIT

YEARS ENDED DECEMBER 31, 2014 AND 2013

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Board of Directors and

Stockholders of Brevard Orthopaedic, Spine& Pain Clinic, Inc.

 

We have audited the accompanying consolidated balance sheets of Brevard Orthopaedic, Spine & Pain Clinic, Inc. and its subsidiary (the “Company”) as of December 31, 2014 and 2013, and the related consolidated statements of operations, stockholders’ deficit, and cash flows for each of the two years in the period ended December 31, 2014. The Company’s management is responsible for these consolidated 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 consolidated financial statements referred to above present fairly, in all material respects, the consolidated 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 consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated 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 2. The consolidated 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

 

July 21, 2015

 

 

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BREVARD ORTHOPAEDIC, SPINE & PAIN CLINIC, INC. & SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

YEARS ENDED DECEMBER 31, 2014 AND 2013

 

   2014   2013 
ASSETS          
Current assets  $483,169   $556,492 
Accounts receivable   1,974,264    1,837,420 
Prepaid and other current assets   55,896    51,949 
Shareholder loan receivables   123,550    123,550 
Capitalized financing costs, current position   5,269    9,221 
Total current assets  $2,642,148   $2,578,631 
           
Property, plant and equipment, net of accumulated depreciation Of $1,161,876 and $1,270,749, respectively   41,131    139,058 
           
Other assets          
Investment in affiliate   26,710    23,054 
           
Total assets  $2,709,989   $2,740,743 
           
LIABILITIES AND STOCKHOLDERS’ DEFICIT          
Current liabilities          
Accounts payable and accrued expenses   600,040    627,352 
Deferred rent   237,620    303,697 
Line of credit, short term   373,782    142,113 
Notes payable, current position   134,172    129,534 
Total current liabilities   1,345,614    1,202,696 
           
Long term debt:          
Deferred rent   1,252,016    882,243 
Notes payable, long term portion   341,906    475,790 
Total long term debt   1,593,922    1,358,033 
           
Total liabilities   2,939,536    2,560,729 
           
Stockholders’ equity          
Common stock, $0.01 par value; 10,000 shares authorized, Issues and outstanding   100    100 
Additional paid in capital   461,873    411,698 
Accumulated deficit   (691,520)   (231,783)
Total stockholders’ deficit   (229,547)   180,014 
           
Total liabilities and stockholders’ deficit  $2,709,989   $2,740,743 

 

See the accompanying notes to these consolidated financial statements

 

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BREVARD ORTHOPAEDIC, SPINE & PAIN CLINIC, INC. & SUBSIDIARY

CONSOLIDATED STATEMENT OF INCOME AND ACCUMULATED DEFICIT

YEARS ENDED DECEMBER 31, 2014 AND 2013

 

   2014   2013 
Revenues:          
Patient service revenue  $12,988,269   $12,804,711 
Provision for bad debts   (37,561)   (47,226)
Net patient service revenue less provision for bad debts   12,950,708    12,757,486 
Rental Revenue   1,069,734    1,010,280 
Total Revenue   14,020,442    13,767,766 
           
Operating expenses:          
Salaries and benefits   8,053,348    8,725,004 
General and administrative   6,143,605    5,241,055 
Depreciation   108,873    133,537 
Total operating expenses   14,305,826    14,099,596 
           
Net (loss) income from operations   (285,384)   (331,829)
           
Other income (expense):          
Other expense   (63,307)   (22,024)
Gain on sale of investment   -    1,223,721 
Amortization financing costs   (3,952)   (3,952)
Interest expense, net   (26,904)   (48,359)
Total other expense   (94,162)   1,149,386 
           
NET INCOME   (379,546)   817,556 
Accumulated Deficit, beginning of year   (231,783)   (1,049,339)
Less S-Corp distributions   (80,190)   - 
Accumulated Deficit, end of year  $(691,520)  $(231,783)

 

See the accompanying notes to these consolidated financial statements

 

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BREVARD ORTHOPAEDIC, SPINE & PAIN CLINIC, INC. & SUBSIDIARY

CONSOLIDATED STATEMENT OF CASH FLOWS

YEARS ENDED DECEMBER 31, 2014 AND 2013

 

   2014   2013 
CASH FLOWS FROM OPERATING ACTIVITIES          
New income (loss)  $(379,546)  $817,556 
Adjustments to reconcile net loss to cash provided by
Operating activities:		          
Depreciation   108,873    133,537 
Amortization of financing costs   3,952    3,952 
Bad debt expense   37,561    47,226 
Gain on sale of investment   0    (1,223,721)
           
Changes in operating assets and liabilities:          
Accounts receivable   (174,405)   (165,710)
Prepaid expenses and other   (3,974)   (1,598)
Investment in affiliate   (3,656)   572,179 
Accounts payable and accrued expenses   (27,312)   32,390 
Deferred rent   303,696    331,474 
Net cash provided by operating activities   (134,811)   527,285 
           
CASH FLOWS FROM INVESTING ACTIVITIES:          
Purchase of equipment   (10,946)   (3,479)
Loans to shareholders   0    (193,094)
Net cash used in investing activities   (10,946)   (196,573)
           
CASH FLOWS FROM FINANCING ACTIVITIES:          
Payments for S-Corp distributions   (80,190)   0 
Proceeds from additional paid in capital   50,175      
Proceeds from line of credit   231,669    163,750 
Net payments on line of credit   0    (409,254)
Net payments on notes payable   (129,246)   (126,501)
Net cash used in financing activities   72,408    (372,005)
           
Net (decrease) increase in cash and cash equivalents   (73,322)   (21,294)
Cash and cash equivalents, beginning of period   556,492    557,786 
           
Cash and cash equivalents, end of period  $483,169   $556,492 
           
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION          
Cash paid during the period for interest  $26,904   $48,359 

 

See the accompanying notes to these consolidated financial statements

 

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BREVARD ORTHOPAEDIC, SPINE & PAIN CLINIC, INC. & SUBSIDIARY

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2014

 

NOTE 1— ORGANIZATION, BUSINESS AND PRINCIPLES OF CONSOLIDATION

 

A summary of the significant accounting policies applied in the presentation of the accompanying consolidated financial statements follows:

 

Basis and business presentation

 

Brevard Orthopaedic Spine & Pain Clinic, Inc. (the “Company” or “BOSPC”) was founded in 1981 by Dr. Glenn Bryan and incorporated in the State of Florida. BOSPC was formally known as Brevard Orthopaedic Clinic, Inc. In 1992 with the addition of Dr. Richard A. Hynes, the focus of the general orthopaedic clinic was shifted to specializing in treatment of the neck and spine. Over the years, multiple physicians and midlevel practitioners joined BOSPC and in 2002, the name of the Company changed to Brevard Orthopaedic Spine and Pain Clinic, Inc. doing business as “The B.A.C.K. Center”. The acronym “B.A.C.K.” stands for "Back Authority for Contemporary Knowledge”. BOSPC provides medical services at a main office building and two satellite locations throughout Brevard County, Florida. The main office building is known as the “Crane Creek Campus” which is located in Melbourne, Florida.

 

At the Crane Creek Campus, BOSPC is able to provide other medical services which include diagnostic testing and an ambulatory surgery center. In addition to medical services at the Crane Creek Campus, BOSPC provides educational programs for the public and staff, as well as a venue for training visiting residents and physicians.

 

The consolidated financial statements include the accounts of the Company, TBC Equipment Leasing, LLC (the “Subsidiary”) which is a wholly-owned subsidiary of BOSPC. All significant intercompany balances and transactions have been eliminated in consolidation.

 

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.

 

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.

 

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BREVARD ORTHOPAEDIC, SPINE & PAIN CLINIC, INC. & SUBSIDIARY

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2014

 

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (continued)

 

Revenue Recognition (continued)

 

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.

 

ASC 605-10 incorporates Accounting Standards Codification subtopic 605-25, “Multiple-Element Arrangements” (“ASC 605-25”). ASC 605-25 addresses accounting for arrangements that may involve the delivery or performance of multiple products, services and/or rights to use assets. The effect of implementing ASC 605-25 on the Company's financial position and results of operations was not significant.

 

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 service are rendered, even though it does not assess the patient’s ability to pay. Therefore, The Company’s interim and annual periods reports disclose both its policy for assessing and disclosing the timing and the amount of uncollectable patient service revenue recognized as doubtful. Qualitative and quantitative information about significant changes in the allowance for doubtful accounts related to patient accounts receivable are disclosed in the Company’s reports. These estimates are based upon the past history and identified trends for each of our payers.

 

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 contractual 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). On the basis of historical experience, a portion of the Company’s patient service revenue may be potentially uncollectible due to patients who are unable or unwilling to pay for the services provided or the portion of their bill for which they are responsible. Thus, the Company records a provision for bad debts related to potentially uncollectible patient service revenue in the period the services are provided.

 

Rental Revenue

 

BOSPC leases 71,387 square feet of commercial office space. The company subleases approximately 34,480 square feet of commercial office space to third party tenants. The Company recognizes rental revenue associated with the period of time the facility is leased at the contractual lease rates (or on the basis of discounted rates, if negotiated).

 

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BREVARD ORTHOPAEDIC, SPINE & PAIN CLINIC, INC. & SUBSIDIARY

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2014

 

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (continued)

 

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 cash balances of $483,169 and $556,492 respectively.

 

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.

 

Accounts Receivable

 

Accounts receivables are carried at their estimated collectible amounts net of doubtful accounts. The Company analyzes its past history and identifies trends for each major payer sources of revenue to estimate the appropriate allowance for doubtful accounts and provision for bad debts. Management regularly reviews data about these major payer sources of revenue in evaluating the sufficiency of the allowance for doubtful accounts.

 

·Rental receivables. Accounts receivable from rental activities are periodically evaluated for collectability in determining the appropriate allowance for doubtful account provision for bad debts and provision of bad debts.

 

·Patient receivable. For accounts receivable from services provided to patients who have third-party coverage, the Company analyzes contractually due amounts and provides a provision for bad debts, if necessary. The Company records a provision for bad debts in the period of service on the basis of past experience or when indications are the patients are unable or unwilling to pay the portion of their bill for which they are responsible. The difference between the standard rates (or the discounted rates if negotiated) and the amounts actually collected after all reasonable collection efforts have been exhausted, is charged off against the allowance for doubtful accounts.

 

As of December 31, 2014 and 2013, the Company’s allowance for bad debts was $1,213,531 and $1,747,815, respectively.

 

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BREVARD ORTHOPAEDIC, SPINE & PAIN CLINIC, INC. & SUBSIDIARY

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2014

 

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (continued)

 

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 7 years.

 

Capitalized financing costs

 

Capitalized financing costs represent costs incurred in connection with obtaining the debt financing. These costs are amortized ratably and charged to amortization expense over the term of the related debt. The amortization for the years ended December 31, 2014 and 2013 was $3,952. Accumulated amortization of deferred financing costs at December 31, 2013 were $14,489, and $10,538, respectively.

 

Investments in Affiliates

 

In accordance with the equity method of accounting, investments in non-consolidated affiliates is carried at cost, adjusted for the Company’s proportionate share of their undistributed earnings or losses.

 

On September 1, 2013, the Company sold its equity method investment in Crane Creek Surgical Partners, LLLP (CCSP), for gross sale proceeds of $2,519,201. For the years ended December 31, 2013, the Company recognized a gain on the sale of CCSP in the amount of $1,223,721, as shown on the statement of income. This gain was computed based on the gross sale proceeds plus the Company’s negative capital account basis at the time of sale.

 

Income Taxes

 

The Company and its subsidiary, with the consent of its shareholders, has elected under the Internal Revenue Code to be an S-Corporation. In lieu of corporate income taxes, the shareholders of an S-Corporation are taxed on their proportionate share of the Company’s taxable income. Therefore, no provision or liability for Federal and state income taxes has been included in the financial statements.

 

Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 740, Accounting for Income Taxes, prescribes a recognition threshold and measurement attribute of the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return.

 

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BREVARD ORTHOPAEDIC, SPINE & PAIN CLINIC, INC. & SUBSIDIARY

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2014

 

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (continued)

 

Income Taxes (continued)

 

Management evaluates the Company’s tax positions, including the effect of changes of tax laws, on an annual basis, both past and current.  If management determines that a past or current tax position is

Uncertain, then a tax liability is calculated to represent the increase in taxes anticipated upon examination.  As of December 31, 2014 and 2013, management has determined that all past and current tax positions were likely to be realizable and sustainable upon examination and that the calculation of a tax liability was not necessary.

 

Tax years ended December 31, 2012 through 2014 remain subject to possible examination by the Internal Revenue Service.

 

Compensated Absences

 

Employees of the Company are entitled to paid vacations, paid, sick days, and personal days off, depending on the job classification, length of service, and other factors. As of December 31, 2014 and 2013, there was $176,439 and $166,498, respectively, of accrued compensated absences eligible to be carried over to the following year.

 

Fair Value

 

Accounting Standards Codification subtopic 825-10, “Financial Instruments” (“ASC 825-10”) requires disclosure of the fair value of certain financial instruments. The carrying value of cash and cash equivalents, accounts payable and accrued liabilities, and short-term borrowings, as reflected in the balance sheets, approximate fair value because of the short-term maturity of these instruments. All other significant financial assets, financial liabilities and equity instruments of the Company are either recognized or disclosed in the financial statements together with other information relevant for making a reasonable assessment of future cash flows, interest rate risk and credit risk. Where practicable the fair values of financial assets and financial liabilities have been determined and disclosed; otherwise only available information pertinent to fair value has been disclosed.

 

The Company follows Accounting Standards Codification subtopic 820-10, Fair Value Measurements and Disclosures (“ASC 820-10”) and Accounting Standards Codification subtopic 825-10, Financial Instruments (“ASC 825-10”), which permits entities to choose to measure many financial instruments and certain other items at fair value. Neither of these statements had an impact on the Company’s financial position, results of operations nor cash flows.

 

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BREVARD ORTHOPAEDIC, SPINE & PAIN CLINIC, INC. & SUBSIDIARY

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2014

 

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (continued)

 

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 consolidated financial statements.

 

There are other various updates recently issued, most of which represent 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 financial position, results of operations or cash flows.

 

NOTE 3 - PROPERTY PLANT & EQUIPMENT

 

Property, plant and equipment at December 31, 2013 and 2014 are as follows:

 

   2013   2014 
Signs  $91,899   $91,899 
Furniture and fixtures   646,787    646,787 
Equipment   406,794    417,740 
Medical equipment   155,454    155,454 
    1,300,934    1,311,880 
Less accumulated depreciation   (1,161,876)   (1,270,749)
   $139,058   $46,400 

 

For the years ended December 31, 2014 and 2013, depreciation expense charged to operations was $108,873 and $133,537, respectively.

 

NOTE 4 - INVESTMENTS

 

At December 31, 2013 and 2014, the Company owned a 0.6660% interest in a non-consolidated affiliate, Doctor’s Surgical Partnership, LTD. In accordance with the equity method of accounting, investments in non-consolidated affiliates are carried at cost, adjusted for the Company’s proportionate share of their undistributed earnings or losses.

 

The Company sold its equity method investment in Crane Creek Surgical Partners, LLLP, on September 1, 2013 for gross proceeds of $2,519,201. The gross proceeds plus the Company’s negative basis in the investment at the time of the sale resulted in a gain of $1,223,721 for the year ended December 31, 2013.

 

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BREVARD ORTHOPAEDIC, SPINE & PAIN CLINIC, INC. & SUBSIDIARY

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2014

 

NOTE 5 - LINES OF CREDIT

 

Line of Credit, Florida Business Bank

 

On June 27, 2012 the Company entered into a Promissory Note (the “Loan Agreement”) with Florida Business Bank, a Florida banking corporation (the “Lender”). Under the Loan Agreement, the Lender committed to make an accounts receivable line of credit in the maximum aggregate amount of $1,000,000, with an interest rate of Prime floating plus 1.0%, as published in the Wall Street Journal, with a floor of 4.50% per annum (the “Loan”).

 

The loan was modified on April 9, 2013, allowing a temporary increase to $1,383,000 and allowing for a one time draw of up to $995,000 to be distributed to the shareholders for the purposes of financing the capitalization of TBC Equipment Leasing, LLC. The one time draw was repaid within 45 days and the availability under the Loan returned to $1,000,000. The modification allows for an interest rate of one month Libor floating plus 2.75, as published in the Wall Street Journal, with a floor of 2.96% per annum (2.96% at December 31, 2014 and 2013, respectively).

 

Interest shall be due and payable monthly and principal in due on demand. The outstanding principal balance plus all accrued but unpaid interest shall be due on demand (the “Maturity Date”). Upon default, the interest may be adjusted to the highest rate permissible by law. The Loan is secured by all assets of the Company now owned or hereafter acquired. The assets constitute the collateral for the repayment of the Loan.

 

The Loan Agreement also includes covenants, representations, warranties, indemnities and events of default that are customary for facilities of this type. The advance rate is defined as: 60% of Medicare and Medicaid receivables less than 90 days old multiplied by a factor of 0.25, plus all other receivables less than ninety days old multiplied by a factor of 0.50.

 

The obligations of the Company under the Loan Agreement are guaranteed by the shareholders of the Company. The Loan Agreement is also guaranteed in the amount of $950,000 by related parties of the shareholders.

 

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BREVARD ORTHOPAEDIC, SPINE & PAIN CLINIC, INC. & SUBSIDIARY

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2014

 

NOTE 6 - NOTE PAYABLE

 

On June 27, 2012 entered into a promissory note as described below to pay down the previous existing line of credit. The aggregate amount of the note of $900,931 bears 5.50% interest per annum with monthly payments of $14,752.82 beginning in July 16, 2012, which is based on a 6 year amortization schedule with all remaining principal and interest due in full on June 16, 2018.

The note was modified on April 9, 2013 requiring a principal and interest payment of $11,434.06 and a fixed interest rate of 3.89%. The note is secured by a hypothecated first position lien on all assets leased to the Company by the Subsidiary and the assignment of $634,000 of life insurance from each Guarantor. The obligations of the Company under the note are guaranteed by the shareholders of the Company.

 

Notes payable as of December 31, 2013 and 2014 is comprised of the following:

 

   2013   2014 
Note payable, Florida Business Bank  $570,124   $453,308 
Capital lease, Equipment   35,200    22,770 
    605,324    476,078 
Less current portion   (129,534)   (134,172)
   $475,790   $341,906 

 

Capital Lease — Equipment

 

On October 25, 2011, the Company entered into a lease agreement to acquire equipment with 60 monthly payments of $1,035.53 payable through October 26, 2016, with no stated interest rate. The Company may elect to acquire the leased equipment at a nominal amount at the end of the lease.

 

Aggregate principal maturities of long-term debt as of December 31:

 

Year ended December 31, 2015  $134,172 
Year ended December 31, 2016   136,903 
Year ended December 31, 2017   131,575 
Year ended December 31, 2018   73,141 

 

12
 

 

BREVARD ORTHOPAEDIC, SPINE & PAIN CLINIC, INC. & SUBSIDIARY

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2014

 

NOTE 7 - RELATED PARTY TRANSACTIONS

 

The Company rents office space from an affiliate of one of the shareholders (see Note 4). For the years ended December 31, 2014 and 2013, total rents paid by the Company to the related party were $209,362.

 

As of December 31, 2014 and 2013, the Company has loan receivables from two shareholders totaling $123,550, for the payment of a capital call to an affiliate of the shareholders. The receivables are non-interest bearing and due on demand.

 

NOTE 8 - COMMITMENTS AND CONTINGENCIES

 

Litigation

 

The Company has a claim filed, in Brevard County, Florida Circuit Court, against Health First Management, Inc due to a contract dispute. A counterclaim was filed against the Company. The case has been litigated for a substantial amount of time and a trial is anticipated to take place within the next twelve months. The Company has vigorously defended against the counterclaim. The Company has accrued a possible loss contingency of approximately $118,000.

 

Operating Leases

 

The Company leases office space under various non-cancelable operating leases that expire at various dates through June 2026. Terms of the lease agreements provide for rental payments ranging from approximately $4,200 to $200,000 per month. Certain leases include charges for sales and real estate taxes and a proration of common area maintenance expenses. 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 GAAP rent expense and the actual lease payments are reflected as deferred rent on the accompanying balance sheet. For the years ended December 31, 2014 and 2013, lease expense amounted to $3,391,720 and $2,939,577, respectively.

 

The following is a schedule of future minimum lease payments for all non-cancelable operating leases for each of the next five years ending December 31 and thereafter:

 

2015   3,494,535 
2016   3,494,547 
2017   3,444,197 
2018   3,444,209 
2018   3,444,221 
   $17,321,709 

 

Guarantees

 

Two of the Company’s shareholders and a related party have guaranteed the full and prompt payment of the base rent, the additional rent and any all other sums and charges payable by a tenant, its successors and assigns under the lease, and the full performance and observance of all the covenants, terms, conditions and agreements for one of the above mentioned operating leases.

 

13
 

  

BREVARD ORTHOPAEDIC, SPINE & PAIN CLINIC, INC. & SUBSIDIARY

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2014

 

NOTE 9 – SUBSEQUENT EVENTS

 

The Company evaluates events that have occurred after the balance sheet date but before the financial statements are issued.

 

In June 2015, one of the Company’s physicians, who is a shareholder of the Company, terminated their employment due to a disability.

 

The Company entered into an operating and control agreement on May 1, 2015 with TBC Holdings of Melbourne, Inc.

 

14

 

 



 

Exhibit 99.2

 

Brevard Orthopaedic,
Spine & Pain Clinic, Inc. &
Subsidiary

 

Unaudited Condensed

Consolidated Financial

Statements

 

Three Months ended

March 31, 2015 and 2014

  

 
 

 

CONDENSED CONSOLIDATED
BALANCE SHEETS
March 31, 2015 and December 31, 2014

 

   (Unaudited)     
   March 31, 2015   December 31, 2014 
ASSETS          
Current assets          
Cash  $665,679   $483,169 

Accounts receivable, net

   1,707,375    1,974,264 
Prepaid and other current assets   306,612    55,896 
Shareholder loan receivables   123,550    123,550 
Capitalized financing costs, current portion   4,281    5,269 
Total current assets   2,807,497    2,642,148 
           
Property, plant and equipment, net of accumulated depreciation of $1,161,876 and $1,270,749, respectively   14,481    41,131 
           
Other assets          
Investment in Affiliate   23,960    26,710 
           
Total assets  $2,845,938   $2,709,989 
           
LIABILITIES AND STOCKHOLDERS' DEFICIT          
Current liabilities          
Accounts payable and accrued expenses   820,722   $600,040 
Deferred rent   178,125    237,620 
Line of credit, short term   532,326    373,782 
Notes payable, current portion   97,830    134,172 
Total current liabilities   1,629,002    1,345,614 
           
Long term debt:          
Deferred rent   1,370,916    1,252,016 
Notes payable, long term portion   345,155    341,906 
Total long term debt   1,716,071    1,593,922 
           
Total liabilities   3,345,074    2,939,536 
           
Stockholders' deficit          
Common stock, $0.01 par value; 10,000 shares authorized, issued and outstanding   100    100 
Additional paid in capital   461,873    461,873 
Accumulated Deficit   (961,108)   (691,520)
Total stockholders' deficit   (499,136)   (229,547)
           
Total liabilities and stockholders' deficit  $2,845,938   $2,709,989 

 

See the accompanying notes to these unaudited condensed consolidated financial statements

 

1
 

 

CONDENSED CONSOLIDATED STATEMENT OF INCOME AND
ACCUMULATED DEFICIT
FOR THE THREE MONTHS ENDED MARCH 31, 2015 AND 2014

(UNAUDITED)

 

   THREE MONTHS   THREE MONTHS 
   ENDED MARCH 31, 2015   ENDED MARCH 31, 2014 
Revenues:          
Patient Service Revenue  $2,626,343   $3,512,968 
Provision for bad debts   (9,390)   (11,806)
Net patient service revenue less provision for bad debts   -    3,501,162 
Rental Revenue   257,945    560,881 
Total Revenue   2,874,898    4,062,043 
           
Operating expenses:          
           
Salaries & Benefits   1,752,554    2,112,003 
General & Administrative   1,428,743    1,809,266 
Depreciation   27,248    34,372 
Total operating expenses   3,208,545    3,955,641 
           
Net (loss) income from operations   (333,647)   106,402 
           
Other income (expense):          
Other income (expense)   72,977    (9,922)
Amortization Financing costs   (988)   (988)
Interest expense, net   (7,894)   (7,570)
Total other expense   64,095    (18,480)
           
NET LOSS   (269,552)  $87,922 
ACCUMULATED DEFICIT, beginning of year   (691,520)   (231,784)
Less S-Corp Distributions   (36)   (43,013)
ACCUMULATED DEFICIT, end of year  $(961,108)  $(186,875)

 

See the accompanying notes to these unaudited condensed consolidated financial statements

 

2
 

 

CONDENSED CONSOLIDATED STATEMENT OF
CASH FLOWS

FOR THE THREE MONTHS ENDED MARCH 31, 2015 AND 2014

(UNAUDITED)

 

   THREE MONTHS   THREE MONTHS 
   ENDED MARCH 31, 2015   ENDED MARCH 31, 2014 
           
CASH FLOWS FROM OPERATING ACTIVITIES:          
           
Net Income (Loss)  $(269,552)  $87,922 
Adjustments to reconcile net loss to cash provided by operating activities:          
Depreciation   27,248    34,372 
Amortization of financing costs   988    988 
Bad debt expense   9,390    11,806 
Changes in operating assets and liabilities:          
Accounts receivable   257,499    (98,277)
Prepaid expenses and other   (250,716)   (2,859)
Investment in affiliate   2,750    - 
Accounts payable and accrued expenses   220,682    124,489 
Deferred rent   59,405    75,924 
Net cash provided by (used in) operating activities   57,694    234,365 
           
CASH FLOWS FROM INVESTING ACTIVITIES:          
Purchase of equipment   (599)   - 
Loans to shareholders   -    - 
Net cash used in investing activities   (599)   - 
           
CASH FLOWS FROM FINANCING ACTIVITIES:          
Payments for S-corp distributions   (36)   (43,013)
Proceeds from additional paid in capital   -    50,175 
Proceeds from line of credit   161,793    - 
Net payments on line of credit   (3,249)   - 
Net payments on notes payable   (33,093)   (31,952)
           
Net cash provided by financing activities   125,415    (24,790)
           
Net (decrease) increase in cash and cash equivalents   182,510    209,575 
Cash and cash equivalents, beginning of period   483,169    556,492 
           
Cash and cash equivalents, end of period  $665,679   $766,067 
           
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:          
Cash paid during the period for interest  $7,894   $7,570 

 

See the accompanying notes to these unaudited condensed consolidated financial statements

 

3
 

 

BREVARD ORTHOPAEDIC, SPINE & PAIN CLINIC, INC. & SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2015 AND 2014

(UNAUDITED)

 

NOTE 1— ORGANIZATION, BUSINESS AND PRINCIPLES OF CONSOLIDATION

 

A summary of the significant accounting policies applied in the presentation of the accompanying condensed consolidated financial statements follows:

 

Basis and business presentation

 

Brevard Orthopaedic Spine & Pain Clinic, Inc. (the “Company” or “BOSPC”) was founded in 1981 by Dr. Glenn Bryan and incorporated in the State of Florida. BOSPC was formally known as Brevard Orthopaedic Clinic, Inc. In 1992 with the addition of Dr. Richard A. Hynes, the focus of the general orthopaedic clinic was shifted to specializing in treatment of the neck and spine. Over the years, multiple physicians and midlevel practitioners joined BOSPC and in 2002, the name of the Company changed to Brevard Orthopaedic Spine and Pain Clinic, Inc. doing business as “The B.A.C.K. Center”. The acronym “B.A.C.K.” stands for "Back Authority for Contemporary Knowledge”. BOSPC provides medical services at a main office building and two satellite locations throughout Brevard County, Florida. The main office building is known as the “Crane Creek Campus” which is located in Melbourne, Florida.

 

At the Crane Creek Campus, BOSPC is able to provide other medical services which include diagnostic testing and an ambulatory surgery center. In addition to medical services at the Crane Creek Campus, BOSPC provides educational programs for the public and staff, as well as a venue for training visiting residents and physicians.

 

The condensed consolidated financial statements include the accounts of the Company, TBC Equipment Leasing, LLC (the “Subsidiary”) which is a wholly-owned subsidiary of BOSPC. All significant intercompany balances and transactions have been eliminated in consolidation.

 

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.

 

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.

 

4
 

 

BREVARD ORTHOPAEDIC, SPINE & PAIN CLINIC, INC. & SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2015 AND 2014

(UNAUDITED)

 

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (continued)

 

Revenue Recognition (continued)

 

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.

 

ASC 605-10 incorporates Accounting Standards Codification subtopic 605-25, “Multiple-Element Arrangements” (“ASC 605-25”). ASC 605-25 addresses accounting for arrangements that may involve the delivery or performance of multiple products, services and/or rights to use assets. The effect of implementing ASC 605-25 on the Company's financial position and results of operations was not significant.

 

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 service are rendered, even though it does not assess the patient’s ability to pay. Therefore, The Company’s interim and annual periods reports disclose both its policy for assessing and disclosing the timing and the amount of uncollectable patient service revenue recognized as doubtful. Qualitative and quantitative information about significant changes in the allowance for doubtful accounts related to patient accounts receivable are disclosed in the Company’s reports. These estimates are based upon the past history and identified trends for each of our payers.

 

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 contractual 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). On the basis of historical experience, a portion of the Company’s patient service revenue may be potentially uncollectible due to patients who are unable or unwilling to pay for the services provided or the portion of their bill for which they are responsible. Thus, the Company records a provision for bad debts related to potentially uncollectible patient service revenue in the period the services are provided.

 

Rental Revenue

 

BOSPC leases 71,387 square feet of commercial office space. The company subleases approximately 34,480 square feet of commercial office space to third party tenants. The Company recognizes rental revenue associated with the period of time the facility is leased at the contractual lease rates (or on the basis of discounted rates, if negotiated).

 

5
 

 

BREVARD ORTHOPAEDIC, SPINE & PAIN CLINIC, INC. & SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2015 AND 2014

(UNAUDITED)

 

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (continued)

 

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 March 31, 2015 and December 31, 2014, the Company had cash balances of $665,679 and $483,169, respectively.

 

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.

 

Accounts Receivable

 

Accounts receivables are carried at their estimated collectible amounts net of doubtful accounts. The Company analyzes its past history and identifies trends for each major payer sources of revenue to estimate the appropriate allowance for doubtful accounts and provision for bad debts. Management regularly reviews data about these major payer sources of revenue in evaluating the sufficiency of the allowance for doubtful accounts.

 

•Rental receivables. Accounts receivable from rental activities are periodically evaluated for collectability in determining the appropriate allowance for doubtful account provision for bad debts and provision of bad debts.

 

•Patient receivable. For accounts receivable from services provided to patients who have third-party coverage, the Company analyzes contractually due amounts and provides a provision for bad debts, if necessary. The Company records a provision for bad debts in the period of service on the basis of past experience or when indications are the patients are unable or unwilling to pay the portion of their bill for which they are responsible. The difference between the standard rates (or the discounted rates if negotiated) and the amounts actually collected after all reasonable collection efforts have been exhausted, is charged off against the allowance for doubtful accounts.

 

As of March 31, 2015 and December 31, 2014, the Company’s allowance for bad debts was $1,395,366 and $1,213,531, respectively.

 

6
 

 

BREVARD ORTHOPAEDIC, SPINE & PAIN CLINIC, INC. & SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2015 AND 2014

(UNAUDITED)

 

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (continued)

 

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 7 years.

 

Capitalized financing costs

 

Capitalized financing costs represent costs incurred in connection with obtaining the debt financing. These costs are amortized ratably and charged to amortization expense over the term of the related debt. The amortization for the Three Months ended March 31, 2015 and 2014 was $988. Accumulated amortization of deferred financing costs were $15,478 and $14,890 at March 31, 2015 and December

31, 2014, respectively.

 

Investments in Affiliates

 

In accordance with the equity method of accounting, investments in non-consolidated affiliates is carried at cost, adjusted for the Company’s proportionate share of their undistributed earnings or losses.

 

Income Taxes

 

The Company and its subsidiary, with the consent of its shareholders, has elected under the Internal Revenue Code to be an S-Corporation. In lieu of corporate income taxes, the shareholders of an S- Corporation are taxed on their proportionate share of the Company’s taxable income. Therefore, no provision or liability for Federal and state income taxes has been included in the financial statements.

 

Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 740, Accounting for Income Taxes, prescribes a recognition threshold and measurement attribute of the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return.

 

7
 

 

BREVARD ORTHOPAEDIC, SPINE & PAIN CLINIC, INC. & SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2015 AND 2014

(UNAUDITED)

 

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (continued)

 

Income Taxes (continued)

 

Management evaluates the Company’s tax positions, including the effect of changes of tax laws, on an annual basis, both past and current. If management determines that a past or current tax position is Uncertain, then a tax liability is calculated to represent the increase in taxes anticipated upon examination. As of March 31, 2015, management has determined that all past and current tax positions were likely to be realizable and sustainable upon examination and that the calculation of a tax liability was not necessary.

 

Tax years ended December 31, 2012 through 2014 remain subject to possible examination by the Internal Revenue Service.

 

Compensated Absences

 

Employees of the Company are entitled to paid vacations, paid, sick days, and personal days off, depending on the job classification, length of service, and other factors. As of March 31, 2015, $148,916 of accrued compensated absences was eligible to be carried through 2015. At December 31, 2014, there was $176,439 of accrued compensated absences eligible to be carried into 2015.

 

Fair Value

 

Accounting Standards Codification subtopic 825-10, “Financial Instruments” (“ASC 825-10”) requires disclosure of the fair value of certain financial instruments. The carrying value of cash and cash equivalents, accounts payable and accrued liabilities, and short-term borrowings, as reflected in the balance sheets, approximate fair value because of the short-term maturity of these instruments. All other significant financial assets, financial liabilities and equity instruments of the Company are either recognized or disclosed in the financial statements together with other information relevant for making a reasonable assessment of future cash flows, interest rate risk and credit risk. Where practicable the fair values of financial assets and financial liabilities have been determined and disclosed; otherwise only available information pertinent to fair value has been disclosed.

 

The Company follows Accounting Standards Codification subtopic 820-10, Fair Value Measurements and Disclosures (“ASC 820-10”) and Accounting Standards Codification subtopic 825-10, Financial Instruments (“ASC 825-10”), which permits entities to choose to measure many financial instruments and certain other items at fair value. Neither of these statements had an impact on the Company’s financial position, results of operations nor cash flows.

 

8
 

 

BREVARD ORTHOPAEDIC, SPINE & PAIN CLINIC, INC. & SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2015 AND 2014

(UNAUDITED)

 

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (continued)

 

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 consolidated financial statements.

 

There are other various updates recently issued, most of which represent 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 financial position, results of operations or cash flows.

 

GOING CONCERN UNCERTAINTIES

  

The accompanying consolidated 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 consolidated financial statement, the Company has accumulated a deficit of $691,520 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 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 any such financing can be obtained on acceptable terms and timely manner, if at all. The failure to obtain the necessary working capital 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 consolidated 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

  

9
 

 

BREVARD ORTHOPAEDIC, SPINE & PAIN CLINIC, INC. & SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2015 AND 2014

(UNAUDITED)

 

NOTE 3 - PROPERTY PLANT & EQUIPMENT

 

Property, plant and equipment at March 31, 2015 and December 31, 2014 are as follows:

 

   March 31, 2015   December 31, 2014 
Signs  $91,899   $91,899 
Furniture and fixtures   647, 385    646,787 
Equipment   417,740    417,740 
Medical equipment   155,454    155,454 
    1,312,478    1,311,880 
Less accumulated depreciation   (1,297,997)   (1,270,749)
   $14,481   $41,131 

 

For the three months ended March 31, 2015 and 2014, depreciation expense charged to operations was $27,248 and $34,372, respectively.

 

NOTE 4 - INVESTMENTS

 

At March 31, 2015 and December 31, 2014, the Company owned a 0.6660% interest in a non-consolidated affiliate, Doctor’s Surgical Partnership, LTD. In accordance with the equity method of accounting, investments in non-consolidated affiliates are carried at cost, adjusted for the Company’s proportionate share of their undistributed earnings or losses.

 

10
 

 

BREVARD ORTHOPAEDIC, SPINE & PAIN CLINIC, INC. & SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2015 AND 2014

(UNAUDITED)

 

NOTE 5 - LINES OF CREDIT

 

Line of Credit, Florida Business Bank

 

On June 27, 2012 the Company entered into a Promissory Note (the “Loan Agreement”) with Florida Business Bank, a Florida banking corporation (the “Lender”). Under the Loan Agreement, the Lender committed to make an accounts receivable line of credit in the maximum aggregate amount of $1,000,000, with an interest rate of Prime floating plus 1.0%, as published in the Wall Street Journal, with a floor of 4.50% per annum (the “Loan”).

 

The loan was modified on April 9, 2013, allowing a temporary increase to $1,383,000 and allowing for a one time draw of up to $995,000 to be distributed to the shareholders for the purposes of financing the capitalization of TBC Equipment Leasing, LLC. The one time draw was repaid within 45 days and the availability under the Loan returned to $1,000,000. The modification allows for an interest rate of one month Libor floating plus 2.75, as published in the Wall Street Journal, with a floor of 2.96% per annum (2.96% at March 31, 2015 and December 31, 2014).

 

Interest shall be due and payable monthly and principal in due on demand. The outstanding principal balance plus all accrued but unpaid interest shall be due on demand (the “Maturity Date”). Upon default, the interest may be adjusted to the highest rate permissible by law. The Loan is secured by all assets of the Company now owned or hereafter acquired. The assets constitute the collateral for the repayment of the Loan.

 

The Loan Agreement also includes covenants, representations, warranties, indemnities and events of default that are customary for facilities of this type. The advance rate is defined as: 60% of Medicare and Medicaid receivables less than 90 days old multiplied by a factor of 0.25, plus all other receivables less than ninety days old multiplied by a factor of 0.50 as of date, the company has not violated the loan covenants.

 

The obligations of the Company under the Loan Agreement are guaranteed by the shareholders of the Company. The Loan Agreement is also guaranteed in the amount of $950,000 by related parties of the shareholders.

 

As of March 31, 2015 and December 31, 2014, the outstanding balance on this is $532,326 and $373,782, respectively.

 

11
 

 

BREVARD ORTHOPAEDIC, SPINE & PAIN CLINIC, INC. & SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2015 AND 2014

(UNAUDITED)

 

NOTE 6 - NOTE PAYABLE

 

On June 27, 2012 entered into a promissory note as described below to pay down the previous existing line of credit. The aggregate amount of the note of $900,931 bears 5.50% interest per annum with monthly payments of $14,752.82 beginning in July 16, 2012, w hi c h is based on a 6 year amortization schedule with all remaining principal and interest due in full on June 16, 2018.

 

The note was modified on April 9, 2013 requiring a principal and interest payment of $11,434.06 and a fixed interest rate of 3.89%. The note is secured by a hypothecated first position lien on all assets leased to the Company by the Subsidiary and the assignment of $634,000 of life insurance from each Guarantor. The obligations of the Company under the note are guaranteed by the shareholders of the Company.

 

Notes payable as of March 31, 2015 and December 31, 2014 are comprised of the following:

 

   March 2015   December 2014 
Note payable, Florida Business Bank  $423,322   $453,308 
Capital lease, Equipment   19,663    22,770 
    442,985    476,078 
Less current portion   (97,830)   (134,172)
   $344,155    341,906 

 

Capital Lease — Equipment

 

On October 25, 2011, the Company entered into a lease agreement to acquire equipment with 60 monthly payments of $1,035.53 payable through October 26, 2016, with no stated interest rate. The Company may elect to acquire the leased equipment at a nominal amount at the end of the lease.

 

Aggregate principal maturities of long-term debt as of March 31:

 

Year ended March 31, 2015  $97,830 
Year ended March 31, 2016   136,903 
Year ended March 31, 2017   131,575 
Year ended March 31, 2018   73,141 

 

12
 

 

BREVARD ORTHOPAEDIC, SPINE & PAIN CLINIC, INC. & SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2015 AND 2014

(UNAUDITED)

 

NOTE 7 - RELATED PARTY TRANSACTIONS

 

The Company rents office space from an affiliate of one of the shareholders (see Note 4). For the three months ended March 31, 2015 and 2014, total rents paid by the Company to the related party were $42,855.

 

As of March 31, 2015 and December 31, 2014, the Company has loan receivables from two shareholders totaling $123,550, for the payment of a capital call to an affiliate of the shareholders. The receivables are non-interest bearing and due on demand.

 

NOTE 8 - COMMITMENTS AND CONTINGENCIES

 

Litigation

 

The Company has a claim filed, in Brevard County, Florida Circuit Court, against Health First Management, Inc due to a contract dispute. A counterclaim was filed against the Company. The case has been litigated for a substantial amount of time and a trial is anticipated to take place within the next twelve months. The Company has vigorously defended against the counterclaim. The Company has accrued a possible loss contingency of approximately $118,000 as of March 31, 2015 and December 31, 2014.

 

Operating Leases

 

The Company leases office space under various non-cancelable operating leases that expire at various dates through June 2026. Terms of the lease agreements provide for rental payments ranging from approximately $4,200 to $200,000 per month. Certain leases include charges for sales and real estate taxes and a proration of common area maintenance expenses. 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 GAAP rent expense and the actual lease payments are reflected as deferred rent on the accompanying balance sheet. For the three months ended March 31, 2015 and 2014, lease expense amounted to $781,739 and $1,127,485, respectively.

 

The following is a schedule of future minimum lease payments for all non-cancelable operating leases for each of the next five years ending March 31 and thereafter:

 

2015  $2,871,808 
2016   3,653,547 
2017   3,603,197 
2018   3,603,209 
2019   3,603,220 
   $17,334,981 

 

13
 

 

BREVARD ORTHOPAEDIC, SPINE & PAIN CLINIC, INC. & SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2015 AND 2014

(UNAUDITED)

 

NOTE 8 - COMMITMENTS AND CONTINGENCIES (continued)

 

Guarantees

 

Two of the Company’s shareholders and a related party have guaranteed the full and prompt payment of the base rent, the additional rent and any all other sums and charges payable by a tenant, its successors and assigns under the lease, and the full performance and observance of all the covenants, terms, conditions and agreements for one of the above mentioned operating leases.

 

NOTE 9 – SUBSEQUENT EVENTS

 

The Company evaluates events that have occurred after the balance sheet date but before the financial statements are issued.

 

In June 2015, one of the Company’s physicians, who is a shareholder of the Company, terminated their employment due to a disability.

 

The Company entered into an operating and control agreement on May 1, 2015 with TBC Holdings of Melbourne, Inc.

 

14



 

Exhibit 99.3

 

First Choice Healthcare
Solutions, Inc.

 

Condensed Consolidated Pro
Forma Unaudited Financial
Statements

 

Year ended

December 31, 2014 & Three
Months Ended March 31, 2015

 

 
 

  

Table of Contents

 

  Page
   
FINANCIAL STATEMENTS  
   
Unaudited Condensed Consolidated Pro Forma Balance Sheets 2
   
Condensed Consolidated Pro Forma Unaudited Statement of Operations Three Months Ended March 31, 2015 4
   
Condensed Consolidated Pro Forma Unaudited Statement of Operations Year Ended December 31, 2014 5
   
Notes to Pro Forma Unaudited Condensed Consolidated Financial Statements 6-8

 

 
 

  

FIRST CHOICE HEALTHCARE SOLUTIONS, INC

CONDENSED CONSOLIDATED PRO FORMA UNAUDITED BALANCE SHEET MARCH 31, 2015

  

   Balance Sheet   Balance Sheet         
   First Choice   Brevard   Pro Forma Adjustments to Reflect     
   Healthcare   Orthopaedic   The Variable Interest Entity of   Balance Sheet 
   Solutions,   Spine & Pain   Brevard Orthopaedic Spine &   Consolidated 
   Inc.   Clinic, Inc.   Pain Clinic, Inc.   Pro Forma 
   March 31,   March 31,   As Of January 1, 2014   March 31, 
   2015   2015   Dr   Cr   2015 
                     
ASSETS                  
                          
Current assets                         
Cash  $112,794   $665,679             $778,473 
Cash-restricted   384,737    -              384,737 
Accounts receivable   2,252,053    1,707,375              3,959,428 
Prepaid and other current assets   127,221    430,162              557,383 
Capitalized financing costs, current portion   68,370    4,281              72,651 
Total current assets   2,945,175    2,807,497              5,752,672 
                          
Property, plant and equipment, net of accumulated depreciation of $2,602,845 and $1,161,876   8,171,848    14,482              8,186,330 
                          
Other assets                         
Capitalized financing costs, long term portion   17,089    -              17,089 
Investment in Affiliate   -    23,960              23,960 
Patient list, net of accumulated amortization of                         
$60,000 and $55,000   240,000    -              240,000 
Patents, net of amortization of $23,875 and $19,100   262,625    -              262,625 
Deposits   2,571    -              2,571 
Total other assets   522,285    23,960              546,244 
                          
Total assets  $11,639,308   $2,845,939             $14,485,247 
                          
LIABILITIES AND STOCKHOLDERS' DEFICIT                         
Current liabilities                         
Accounts payable and accrued expenses  $1,360,890   $820,722             $2,181,612 
Stock based payable   220,000    -              220,000 
Advances   298,000    -              298,000 
Deferred rent, current portion   -    178,125              178,125 
Line of credit, short term   1,377,000    532,326              1,909,326 
Convertible note payable, short term portion   2,192,099    -              2,192,099 
Notes payable, current portion   684,904    134,172              819,076 
Unearned revenue   51,639    -              51,639 
Total current liabilities   6,184,532    1,665,345              7,849,877 
                          
Long term debt:                         
Deposits held   72,901    -              72,901 
Deferred rent   -    1,370,916              1,370,916 
Notes payable, long term portion   8,034,369    308,813              8,343,182 
Total long term debt   8,107,270    1,679,729              9,786,999 
                          
Total liabilities   14,291,802    3,345,074              17,636,876 
                          
Stockholders' deficit                         
Preferred stock, $0.01 par value; 1,000,000 shares authorized, Nil issued and outstanding   -    -              - 
Common stock, $0.001 par value; 100,000,000 shares authorized, 18,432,055 and 17,951,055 shares issued and outstanding as of March 31, 2015 and December 31, 2014, respectively   18,432    -              18,432 
Common stock, $0.01 par value; 10,000 shares authorized, issued and outstanding        100              100 
Additional paid in capital   13,151,461    461,873              13,613,334 
Accumulated deficit   (15,822,387)   (961,108)             (16,783,495)
Total stockholders' deficit   (2,652,494)   (499,135)             (3,151,628)
                          
Total liabilities and stockholders' deficit  $11,639,308   $2,845,939             $14,485,247 

  

See the accompanying notes to these unaudited condensed consolidated pro forma financial statements

 

2
 

  

FIRST CHOICE HEALTHCARE SOLUTIONS, INC

CONDENSED CONSOLIDATED PRO FORMA UNAUDITED STATEMENTS OF OPERATIONS

THREE MONTHS ENDED MARCH 31, 2015

 

   First Choice   Brevard         
   Healthcare   Orthopaedic   Pro Forma Adjustments to Reflect     
   Solutions,   Spine & Pain   The Variable Interest Entity of   Consolidated 
   Inc.   Clinic, Inc.   Brevard Orthopaedic Spine &   Pro Forma 
   3 Months Ended   3 Months Ended   Pain Clinic, Inc.   3 Months Ended 
   March 31,   March 31,   As Of January 1, 2014   March 31, 
   2015   2015   Dr   Cr   2015 
                     
Revenues:                    
Patient Service Revenue  $2,285,288   $2,626,343             $4,911,631 
Provision for bad debts   (45,224)   (9,390)             (54,614)
Net patient service revenue less provision for bad debts   2,240,064    2,616,953              4,857,017 
Rental Revenue   265,103    257,945             $523,048 
Total Revenue   2,505,167    2,874,898              5,380,064 
                          
Operating expenses:                         
Salaries & Benefits   946,120    1,752,554              2,698,674 
Other Operating expenses   451,485    -              451,485 
General & Administrative   553,284    1,428,743              1,982,027 
Depreciation and amortization   140,509    27,248              167,757 
Total operating expenses   2,091,398    3,208,545              5,299,943 
                          
Net income from operations   413,769    (333,647)             80,121 
                          
Other income (expense):                         
Miscellaneous income   750    72,977              73,727 
Amortization Financing costs   (20,686)   (988)             (21,674)
Interest expense, net   (363,144)   (7,894)             (371,038)
Total other expense   (383,080)   64,095              (318,985)
                          
Net income (loss) before provision for income taxes   30,689    (269,552)             (238,864)
                          
Income taxes (benefit)   -    -              - 
                          
NET INCOME (LOSS)  $30,689   $(269,552)            $(238,864)
                          
Net Income (loss) per common share, basic  $0.00   $(26.96)            $(0.01)
                          
Net Income (loss) per common share, diluted  $0.00   $(26.96)            $(0.01)
                          
Weighted average number of common shares outstanding, basic   18,062,466    10,000              18,072,466 
                          
Weighted average number of common shares outstanding, diluted   22,090,565    10,000              22,100,565 

  

See the accompanying notes to these unaudited consolidated condensed pro forma financial statements

 

3
 

  

FIRST CHOICE HEALTHCARE SOLUTIONS, INC

CONDENSED CONSOLIDATED PRO FORMA UNAUDITED STATEMENTS OF OPERATIONS

YEAR ENDED DECEMBER 31, 2014

 

   First Choice   Brevard         
   Healthcare   Orthopaedic   Pro Forma Adjustments to Reflect     
   Solutions,   Spine & Pain   The Variable Interest Entity of   Consolidated 
   Inc.   Clinic, Inc.   Brevard Orthopaedic Spine &   Pro Forma 
   Year Ended   Year Ended   Pain Clinic, Inc.   Year Ended 
   December 31,   December 31,   As Of January 1, 2014   December 31, 
   2014   2014   Dr   Cr   2014 
                     
Revenues:                         
Patient Service Revenue  $7,966,385   $12,667,673           $20,634,058 
Provision for bad debts   (912,782)   (37,561)             (950,343)
Net patient service revenue less provision for bad debts   7,053,603    12,630,112              19,683,714 
Rental Revenue   1,048,999    1,069,734             $2,118,733 
Total Revenue   8,102,602    13,699,846              21,802,447 
                          
Operating expenses:                         
Salaries & Benefits   4,761,573    8,053,348              12,814,921 
Other Operating expenses   1,897,780    -              1,897,780 
General & Administrative   2,434,259    6,143,605              8,577,864 
Impairment of investment   -    -              - 
Depreciation and amortization   552,084    108,873              660,957 
Total operating expenses   9,645,696    14,305,826              23,951,522 
                          
Net (loss) income from operations   (1,543,094)   (605,980)             (2,149,075)
                          
Other income (expense):                         
Miscellaneous income   3,000    -              3,000 
Other expenses   -    (63,306)             (63,306)
Amortization Financing costs   (82,744)   (3,952)             (86,696)
Interest expense, net   (866,701)   (26,904)             (893,605)
Total other expense   (946,445)   (94,162)             (1,040,607)
                          
Net loss before provision for income taxes   (2,489,539)   (700,142)             (3,189,681)
                          
Income taxes (benefit)   -    -              - 
                          
NET LOSS  $(2,489,539)  $(700,142)            $(3,189,681)
                          
Net loss per common share, basic and diluted  $(0.14)  $(70.01)            $(70.16)
                          
Weighted average number of common shares outstanding, basic and diluted   17,249,921    10,000              17,259,921 

 

See the accompanying notes to these unaudited condensed consolidated pro forma financial statements

 

4
 

 

BREVARD ORTHOPAEDIC, SPINE & PAIN CLINIC, INC.

NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 1 –DESCRIPTION OF BUSINESS

Brevard Orthopaedic, Spine & Pain Clinic, Inc. (“the Company”, “BOSPC”, “we”, “our”, or “us”) is a Florida corporation formed March 19, 1996 for the purpose of organizing and establishing a multi-specialty medical group including orthopedics (both operative and non-operative), sports medicine and pain management.

 

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 (a) The unaudited condensed combined pro forma balance sheet gives effect to the acquisition as if the Agreement had taken place on March 31, 2015 and combines BOSPC’s unaudited condensed balance sheet as of March 31, 2015 with FCHS’s condensed balance sheet as of March 31, 2015. (b) The unaudited condensed combined pro forma balance sheet gives effect to the acquisition as if the Agreement had taken place on March 31, 2015 and combines BOSPC’s unaudited condensed balance sheet as of March 31, 2015 with FCHS’s condensed balance sheet as of March 31, 2015 of the Company 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.

 

ASC 605-10 incorporates Accounting Standards Codification subtopic 605-25, Multiple-Element Arraignments (“ASC 605-25”). ASC 605-25 addresses accounting for arrangements that may involve the delivery or performance of multiple products, services and/or rights to use assets. The effect of implementing 605-25 on the Company's financial position and results of operations was not significant.

 

5
 

  

BREVARD ORTHOPAEDIC, SPINE & PAIN CLINIC, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS MARCH 31, 2015

(unaudited)

 

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES(continued)

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 TBC Holdings.

 

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 15 years.

 

Cash

The Company considers cash to consist of cash on hand and temporary investments having an original maturity of 90 days or less that are readily convertible into cash.

 

Fair value of financial instruments

Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of March 31, 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.

 

GOING CONCERN UNCERTAINTIES

  

The accompanying unaudited condensed consolidated 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 unaudited condensed consolidated financial statement, the Company has accumulated a deficit of $961,108 as of March 31, 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 any such financing can be obtained on acceptable terms and timely manner, if at all. The failure to obtain the necessary working capital 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 unaudited condensed consolidated 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 3 — LIQUIDITY

As of March 31, 2015, the Company's working capital deficit was $2,097,205. The Company’s owners have entered into an operating and control agreement giving TBC of Melbourne Holdings Inc. TBC Holdings) a, wholly owned subsidiary of First Choice Healthcare Solutions, Inc. (FCHS), a controlling variable interest in the Company. On May 5, 2015 the operating agreement was executed but made effective May 1, 2015.

 

NOTE 4 – PROPERTY AND EQUIPMENT

Property plant and equipment, at March 31, 2015, was $8,186,330 net of accumulated depreciation of $3,764,721.

 

During the three months ended March 31, 2015, $167,757 was charge to operations depreciation expense.

 

6
 

 

BREVARD ORTHOPAEDIC, SPINE & PAIN CLINIC, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS MARCH 31, 2015

(unaudited)

 

NOTE 5 – OWNERS’ EQUITY

The Company’s membership interest as of May 1, 2015 was owned by Dr. Richard Hynes (39%), Dr. Devin K. Datta (37%) and Dr. Lily Voepel (24%).

 

NOTE 6 – COMMITMENTS AND CONTINGENCIES

Operating and Control Agreement for the controlling variable interest in the Company.

On May 1, 2015 the Company’s members entered into an operating and control agreement with TBC Holdings giving TBC Holdings a controlling variable interest in the Company.

 

Within ninety (90) days prior to the expiration of the initial term of this Agreement (the "Option Period"), the Manager shall have the right to exercise the option (the "Option") to extend the term of this Agreement for an additional eight (8) years and four (4) months or until December 31, 2023, on the same terms and conditions as contained in this Agreement. The Manager will provide the Practice with written notice of its intention to exercise the Option by delivering written notice thereof to the Practice within the Option Period.

 

NOTE 7 – SUBSEQUENT EVENTS

In accordance with FASB ASC 855 “Subsequent Events”, the Company has evaluated subsequent events through the date the financial statements are available to be issued, March 31, 2015.

 

Change in Members

Subsequent to the closing of the Operating and Control Agreement with TBC Holdings, Dr. Voepel terminated her relationship with the Company.

 

7

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