UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31,September 30, 2018
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from
to
Commission File No. 000-54917
FUTURE HEALTHCARE OF AMERICA
(Exact name of registrant as specified in its charter)
WYOMING | 45-5547692 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
5001 Baum Blvd, Suite 770
Pittsburgh, PA 15213
(Address of Principal Executive Offices)
Registrant's Telephone Number: (561) 693-1422
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. (1) Yes [X ][X] No [ ]
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes [X] No [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of ‘‘large accelerated filer”, “accelerated filer,’’ “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer [ ] | Accelerated filer [ ] | |||||
Non-accelerated filer [ ] | Smaller reporting company | [ X ] | ||||
| Emerging Growth company [X] |
If an emerging growth company, indicate by check mark whether the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
As of May 2,October 31, 2018, there were 11,265,631 shares of common stock, par value $0.001, of the registrant issued and outstanding.
1
PART I - FINANCIAL INFORMATION
The Unaudited Consolidated Financial Statements of Future Healthcare of America, a Wyoming corporation (the “Company,” “FHA,” “we,” “our,” “us” and words of similar import) were prepared by management and commence on the following page, together with related notes. In the opinion of management, the Unaudited Consolidated Financial Statements fairly present the financial condition of the Company.
Future Healthcare of America
Index to Unaudited Financial Statements
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Unaudited Condensed Consolidated Balance Sheets | 3 |
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Unaudited Condensed Consolidated Statements of Operations | 4 |
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Unaudited Condensed Consolidated Statements of Cash Flows | 5 |
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Notes to Unaudited Condensed Consolidated Financial Statements | 6 |
2
FUTURE HEALTHCARE OF AMERICA
UNAUDITEDCONDENSED CONSOLIDATED BALANCE SHEETS
| March 31, 2018 |
| December 31, 2017 |
| September 30, 2018 (Unaudited) |
| December 31, 2017 |
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CURRENT ASSETS: |
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Cash | $ 27,117 |
| $ 158,072 |
| $ 60,202 |
| $ 144,462 |
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Accounts receivable | 489,012 |
| 400,584 |
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Accounts receivable, net | 182,360 |
| 198,670 |
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Prepaid expenses | 67,941 |
| 31,390 |
| 13,694 |
| 27,218 |
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Current asset from discontinued operations | 176,601 |
| 219,696 |
| ||||
Total current assets | 584,070 |
| 590,046 |
| 432,857 |
| 590,046 |
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Deferred tax asset, net | - |
| - |
| - |
| - |
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Total assets | $ 584,070 |
| $ 590,046 |
| $ 432,857 |
| $ 590,046 |
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CURRENT LIABILITIES: |
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Accounts payable | 157,737 |
| 103,787 |
| 139,030 |
| 38,559 |
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Accrued expenses | 566,527 |
| 548,052 |
| 660,476 |
| 495,540 |
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Derivative liability | 37,568 |
| 43,726 |
| - |
| 43,726 |
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Deferred revenue | 11,117 |
| 12,832 |
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Notes payable | 41,118 |
| - |
| 279,879 |
| - |
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CONVERTIBLE SECURED DEBENTURE PAYABLE, net of discount of $0 and $0, respectively | 1,010,000 |
| 1,010,000 |
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Convertible note payable | 1,010,000 |
| 1,010,000 |
| ||||
Current liabilities from discontinued operations | 289,983 |
| 130,572 |
| ||||
Total current liabilities | 1,824,067 |
| 1,718,397 |
| 2,379,368 |
| 1,718,397 |
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Total liabilities | 1,824,067 |
| 1,718,397 |
| 2,379,368 |
| 1,718,397 |
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COMMITMENTS & CONTINGENCIES | - |
| - |
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STOCKHOLDERS' DEFICIT |
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Common stock | 11,266 |
| 11,266 |
| 11,266 |
| 11,266 |
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Additional paid-in capital | 1,313,160 |
| 1,313,160 |
| 2,210,420 |
| 1,313,160 |
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Subscription receivable | ||||||||
Accumulated deficit | (2,564,423) |
| (2,452,777) |
| (3,898,192) |
| (2,452,777) |
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Total stockholders' deficit | (1,239,997) |
| (1,128,351) |
| (1,946,511) |
| (1,128,351) |
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Total liabilities and stockholders' deficit | $ 584,070 |
| $ 590,046 |
| $ 432,857 |
| $ 590,046 |
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Future Healthcare of America and Subsidiaries Balance Sheet (Parenthetical) |
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Future Healthcare of America Balance Sheet (Parenthetical) | Future Healthcare of America Balance Sheet (Parenthetical) |
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Statement of Financial Position |
| March 31, 2018 |
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| December 31, 2017 |
| September 30, 2018 |
| December 31, 2017 |
Allowance for doubtful accounts |
| 20,200 |
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| 20,200 | ||||
Allowance for doubtful accounts included in current assets from discontinue operations |
| 45,200 |
| 20,200 | |||||
Common stock authorized |
| 200,000,000 |
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| 200,000,000 |
| 200,000,000 |
| 200,000,000 |
Common stock par value |
| 0.001 |
|
| 0.001 |
| 0.001 |
| 0.001 |
Common stock outstanding |
| 11,265,631 |
|
| 11,265,631 |
| 11,265,631 |
| 11,265,631 |
The accompanying notes are an integral part of these consolidated financial statements.
3
FUTURE HEALTHCARE OF AMERICA
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
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| Three Months Ended |
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| For the Three Months Ended |
| For the Nine Months Ended |
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| March 31, 2018 |
| March 31, 2017 |
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| September 30, 2018 |
| September 30, 2017 |
| September 30, 2018 |
| September 30, 2017 |
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REVENUE |
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Total Revenue | $ | 772,258 | $ | 995,428 |
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| $ | 363,607 | $ | 423,306 | $ | 1,138,825 | $ | 1,433,838 |
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COST OF SERVICES |
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Total Cost of Services |
| 541,459 |
| 701,485 |
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| 261,734 |
| 330,294 |
| 853,702 |
| 1,110,667 |
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Gross Profit |
| 230,799 |
| 293,943 |
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| 101,873 |
| 93,012 |
| 285,123 |
| 323,171 |
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OPERATING EXPENSES |
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Selling expenses |
| 10,543 |
| 17,084 |
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| 4,168 |
| 4,756 |
| 17,982 |
| 22,999 |
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General and administrative |
| 109,916 |
| 125,929 |
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| 35,617 |
| 44,259 |
| 122,529 |
| 142,241 |
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Salaries, wages and related expenses |
| 159,805 |
| 169,841 |
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| 110,829 |
| 100,122 |
| 306,356 |
| 305,352 |
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Consulting fees |
| 42,758 |
| 47,299 |
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Professional and consulting fees |
| 62,324 |
| 7,947 |
| 118,240 |
| 57,775 |
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Total Operating Expenses |
| 323,022 |
| 360,153 |
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| 212,938 |
| 157,084 |
| 565,107 |
| 528,367 |
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LOSS FROM OPERATIONS |
| (92,223) |
| (66,210) |
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Loss from continuing operations |
| (111,065) |
| (64,072) |
| (279,984) |
| (205,196) |
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OTHER INCOME (EXPENSE): |
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Interest income |
| 81 |
| 81 |
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| 85 |
| 161 |
| 162 |
| 232 |
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Gain/(loss) on derivative |
| - |
| (79,124) |
| - |
| (34,065) |
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Interest expense |
| (25,661) |
| (25,475) |
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| (25,583) |
| (25,492) |
| (77,065) |
| (76,411) |
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Gain on Derivative |
| 6,158 |
| 20,667 |
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Other income (expense) |
| - |
| - |
| - |
| - |
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Total Other Expense |
| (25,498) |
| (104,455) |
| (76,903) |
| (110,244) |
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Loss from continuing operations before income tax |
| (136,563) |
| (168,527) |
| (356,887) |
| (315,440) |
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Total Other Loss |
| (19,422) |
| (4,727) |
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LOSS BEFORE INCOME TAXES |
| (111,645) |
| (70,937) |
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Income tax provision |
| - |
| - |
| - |
| - |
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Net loss from continuing operations |
| (136,563) |
| (168,527) |
| (356,887) |
| (315,440) |
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CURRENT INCOME TAX EXPENSE (BENEFIT) |
| - |
| - |
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DEFERRED INCOME TAX EXPENSE (BENEFIT) |
| - |
| - |
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NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS | $ | (111,645) | $ | (70,937) |
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Net income (loss) from discontinued operations, net of tax |
| (158,375) |
| 3,729 |
| (234,994) |
| 33,446 |
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NET LOSS | $ | (294,938) | $ | (164,798) | $ | (591,881) | $ | (281,994) |
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BASIC LOSS PER COMMON SHARE |
| (0.01) |
| (0.006) |
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BASIC WEIGHTED AVERAGE COMMON SHARES OUTSTANDING |
| 11,265,631 |
| 11,265,631 |
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DILUTED LOSS PER COMMON SHARE |
| (0.01) |
| (0.006) |
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DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING |
| 11,265,631 |
| 11,265,631 |
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Basic and Diluted Loss Per Common Share from continuing operations | $ | (0.01) | $ | (0.02) | $ | (0.03) | $ | (0.03) |
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Basic and Diluted Income (Loss) Per Common Share from discontinued operations | $ | (0.02) | $ | 0.00 | $ | (0.02) | $ | 0.00 |
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Basic and Diluted Loss Per Common Share | $ | (0.03) | $ | (0.02) | $ | (0.05) | $ | (0.03) |
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Basic and Diluted Weighted Average Common Shares Outstanding |
| 11,265,631 |
| 11,265,631 |
| 11,265,631 |
| 11,265,631 |
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The accompanying notes are an integral part of these consolidated financial statements.
4
FUTURE HEALTHCARE OF AMERICA
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
|
| Nine Months Ended | ||||||
| September 30, | |||||||
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| March 31, 2018 |
| March 31, 2017 |
| 2018 |
| 2017 |
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Cash Flows from Operating Activities |
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Net loss | $ | (111,645) | $ | (70,937) | ||||
Adjustments to reconcile net loss to net cash used by operating activities: |
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Interest to be paid with stock |
| 25,250 |
| 25,250 | ||||
Depreciation and amortization expense |
| - |
| - | ||||
Gain on derivative instruments |
| (6,158) |
| (20,667) | ||||
Net loss from continuing operations | $ | (356,887) | $ | (315,440) | ||||
Adjustments to reconcile net loss from continuing operations to net cash used by operating activities: |
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Loss on derivative instruments |
| - |
| 34,065 | ||||
Change in assets and liabilities: |
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Accounts receivable |
| (88,428) |
| (53,759) |
| 16,310 |
| 69,514 |
Prepaid expenses |
| (36,551) |
| (9,689) |
| 62,675 |
| 46,125 |
Accounts payable |
| 53,950 |
| 45,366 |
| 100,470 |
| 7,806 |
Accrued expense |
| (6,776) |
| (10,231) |
| 164,936 |
| 100,130 |
Deferred revenue |
| (1,715) |
| 5,003 | ||||
Net Cash Used by Operating Activities |
| (172,073) |
| (89,664) | ||||
Net Cash Used in continuing operations |
| (12,496) |
| (57,800) | ||||
Net Cash Used in discontinued operations |
| (32,487) |
| (19,546) | ||||
Net Cash Used in Operating Activities |
| (44,983) |
| (77,346) | ||||
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Cash Flows from Investing Activities: |
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Net Cash Provided by Investing Activities |
| - |
| - | ||||
Net Cash Used in Investing Activities |
| - |
| - | ||||
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Cash Flows from Financing Activities: |
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Proceed from financing insurances |
| 49,151 |
| 22,216 | ||||
Payments on subscription receivable |
| (270,005) |
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Proceed from note payable |
| 270,005 |
| - | ||||
Proceed from related party advance |
| 23,000 |
| - | ||||
Re-payment of related party advance |
| (23,000) |
| - | ||||
Re-payment of insurance financing |
| (8,033) |
| (2,172) |
| (39,277) |
| (15,420) |
Net Cash Provided by Financing Activities |
| 41,118 |
| 20,044 | ||||
Net Cash Used in Financing Activities |
| (39,277) |
| (15,420) | ||||
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Net Decrease in Cash |
| (130,955) |
| (69,620) |
| (84,260) |
| (92,766) |
Cash at Beginning of Period |
| 158,072 |
| 206,352 |
| 144,462 |
| 206,352 |
Cash at End of Period | $ | 27,117 | $ | 136,732 | $ | 60,202 | $ | 113,586 |
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Supplemental Disclosures of Cash Flow Information |
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Cash paid during the periods for: |
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Interest |
| 411 |
| 225 |
| 1,315 |
| 735 |
Income taxes |
| - |
| - |
| - |
| - |
Supplemental Disclosures of Non-Cash Investing and Financing
Activities:
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| For the Three Months Ended | ||
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| March 31, | ||
NON-CASH EXPENDITURES |
| 2018 |
| 2017 |
Interest expense to be paid with stock |
| 25,250 |
| 25,250 |
Change in FMV of derivative liability |
| (6,158) |
| (20,667) |
Total non-cash expenditures |
| (19,092) |
| (4,583) |
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| For the Nine Months Ended | ||
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| September 30, | ||
NON-CASH EXPENDITURES |
| 2018 |
| 2017 |
Prepaid insurance premiums financed |
| 49,151 |
| 22,216 |
The accompanying notes are an integral part of these consolidated financial statements.
5
FUTURE HEALTHCARE OF AMERICA
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization – On June 22, 2012, FAB Universal (FAB) formed Future Healthcare of America (“FHA”), a wholly owned subsidiary. On October 1, 2012, FHA operations were spun-off in a 1 for 1 dividend to the shareholders of record of FAB on September 5, 2012, the record date. On November 14, 2014, FHA organized Future Healthcare Services Corp. (“FHS”), and transferred all the shares of Interim to FHS. Interim Healthcare of Wyoming, Inc. (“Interim”), a Wyoming corporation, a wholly owned subsidiary of FHS, was organized on September 30, 1991. Interim operates primarily in the home healthcare and healthcare staffing services in Wyoming and Montana. On April 3, 2007, Interim purchased the operations of Professional Personnel, Inc., d.b.a., Professional Nursing Personnel Pool.
Consolidation - The financial statements presented reflect the accounts of FHA, FHS and Interim. All inter-company transactions have been eliminated in consolidation.
Accounting Estimates - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Management made assumptions and estimates for determining reserve for accounts receivable, obsolete inventory and in determining the impairment of definite life intangible assets and goodwill. Actual results could differ from those estimated by management.
Cash and Cash Equivalents – The Company considers all highly liquid investments with an original maturity date of three months or less when purchased to be cash equivalents. At March 31,September 30, 2018, the Company had no cash balances in excess of federally insured limits.
Accounts Receivable - Accounts receivable consist of trade receivables arising in the normal course of business. At March 31,September 30, 2018, and 2017, the Company has an allowance for doubtful accounts of $20,200,$45,200 in discontinued operations, which reflects the Company's best estimate of probable losses inherent in the accounts receivable balance. The Company determines the allowance based on known troubled accounts, historical experience, and other currently available evidence. During the threenine months ended March 31,September 30, 2018 and 2017, the Company adjusted the allowance forrecorded bad debt by $0.expense of $25,000 and $0, respectively.
Depreciation - Depreciation of property and equipment is provided on the straight-line method over the estimated useful lives.
Income /(Loss) Per Share - The Company computes income (loss) per share in accordance with Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 260 Earnings Per Share, which requires the Company to present basic earnings per share and diluted earnings per share when the effect is dilutive (see Note 7)9).
Leases - The Company accounts for leases in accordance with Financial FASB ASC Topic 840, (formerly Statement of Financial Accounting Standards SFAS No. 13 "Accounting for Leases"). Leases that meet one or more of the capital lease criteria of standard are recorded as a capital lease, all other leases are operating leases.
Income Taxes - The Company accounts for income taxes in accordance with FASB ASC Topic 740 Accounting for Income Taxes. This topic requires an asset and liability approach for accounting for income taxes (see Note 8)7).
Advertising Costs - Advertising costs are expensed as incurred and amounted to $10,119$19,391 and $11,170$27,653 for the periods ending March 31,September 30, 2018 and 2017, respectively.
6
FUTURE HEALTHCARE OF AMERICA
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
Fair Value of Financial Instruments – The Company accounts for fair value measurements for financial assets and financial liabilities in accordance with FASB ASC Topic 820. The authoritative guidance, which, among other things, defines fair value, establishes a consistent framework for measuring fair value and expands disclosure for each major asset and liability category measured at fair value on either a recurring or nonrecurring basis. Fair value is defined as the exit price, representing the amount that would either be received to sell an asset or be paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, the guidance establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:
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Level 1. Observable inputs such as quoted prices in active markets for identical assets or liabilities;
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Level 2. Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and
•
Level 3. Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.
Unless otherwise disclosed, the fair value of the Company’s financial instruments including cash, accounts receivable, prepaid expenses, and accounts payable and accrued expenses approximates their recorded values due to their short-term maturities.
Revenue Recognition - On January 1, 2018, the Company adopted Accounting Standards Codification Topic 606, “Revenue from Contracts with Customers,” which includes clarifying ASUs issued in 2015, 2016 and 2017 (“new revenue standard”). The new revenue standard did not have a material impact on revenue recognition. The Company does not expect the impact of the adoption of the new standard to be material to net income on an ongoing basis.
Revenue is recognized when performance obligations with the customer are satisfied which occurs when services are provided to the customer. Revenue is measured as the amount of consideration expected to be received in exchange for providing services. The Company's sales contain performance obligations satisfied at a point in time when the services are provided.
Generally, the time between when revenue is recognized and when payment is due is not significant. Pre-payments received prior to satisfaction of performance obligations through the Recovery Audit Program or RAP payments from Medicare are recorded as a deferred revenue liability. Given the insignificant days between revenue recognition and receipt of payment, financing components do not exist between the Company and its customers.
The following table disaggregates revenue by category:
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| For the nine months ended September 30, 2018 | ||||||||||
| Medicare |
| Private Pay | Medicaid | Staffing | Ins. | Total | |||||
Montana | - |
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| 215,015 |
| 138,629 |
| 704,591 |
| 80,590 |
| 1,138,825 |
|
| For the three months ended March 31, 2018 |
|
|
|
| |||||||||||||||||||||
| Medicare |
|
| Private Pay |
| Medicaid |
| Staffing |
| Ins. |
| Total | |||||||||||||||
Wyoming | $ | 183,872 |
|
|
| $ | 116,277 |
|
| $ | 46,200 |
|
| $ | - |
|
| $ | 14,297 |
|
| $ | 360,646 |
| |||
Montana | - |
|
|
| 68,814 |
|
| 40,829 |
|
| 275,407 |
|
| 26,562 |
|
| 410,612 |
| |||||||||
Total Revenues | $ | 183,872 |
|
|
| $ | 185,091 |
|
| $ | 87,029 |
|
| $ | 275,407 |
|
| $ | 40,859 |
|
| $ | 772,258 |
|
7
FUTURE HEALTHCARE OF AMERICA
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
|
| For the three months ended September 30, 2018 | ||||||||||||
| Medicare |
| Private Pay |
| Medicaid |
| Staffing | Ins. | Total | |||||
Montana | - |
|
| 70,194 |
|
| 46,975 |
|
| 219,286 |
| 27,152 |
| 363,607 |
Derivative Financial Instruments – In July 2017, the FASB issued ASU No. 2017-11, (Part I) Accounting for Certain Financial Instruments with Down Round Features, (Part II) Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception. The Companynew standard applies to issuers of financial instruments with down-round features. A down-round provision is requireda term in an equity-linked financial instrument (i.e. a freestanding warrant contract or an equity conversion feature embedded within a host debt or equity contract) that triggers a downward adjustment to recognize allthe instrument’s strike price (or conversion price) if equity shares are issued at a lower price (or equity-linked financial instruments are issued at a lower strike price) than the instrument’s then-current strike price. The purpose of itsthe feature is typically to protect the instrument’s counterparty from future issuances of equity shares at a more favorable price. The ASU amends (1) the classification of such instruments as liabilities or equity by revising the certain guidance relative to evaluating if they must be accounted for as derivative instruments and (2) the guidance on recognition and measurement of freestanding equity-classified instruments. For the Company, this ASU is effective January 1, 2019, with early adoption permitted.
During the period ending September 30, 2018, we adopted the requirements of the new guidance as either assets or liabilitiesof January 1, 2018, utilizing the modified retrospective method of transition. As a result, we recorded a cumulative adjustment to retained earnings as of January 1, 2018, to reflect the effect of the new guidance.
The impact of adopting the new guidance resulted in a decrease in the Consolidated Balance Sheets at fair value. The accounting for changespreviously recorded derivative liability, an increase in additional paid-in capital and a reduction of retained earnings related to the down-round provisions in the fair value (i.e., gains or losses)Convertible Note Payable and warrants (see Note 4).
The modified retrospective method of a derivative instrument dependstransition requires us to disclose the effect of applying the new guidance on whether it haseach item included in our 2018 financial statements.
Following are the line items from our balance sheet as of September 30, 2018, that were affected, the amounts that would have been designated,reported under the former guidance, the effects of applying the new guidance, and is effective, as a hedgethe balances reported under the new guidance:
| Amounts that | Effects of | Balance |
| would have | applying | As |
| been reported | new guidance | reported |
Assets: | - | - | - |
Liabilities |
|
|
|
Derivative liability | (21,632) | 21,632 | - |
Stockholder’s Deficit |
|
|
|
Accumulated Deficit | 3,022,564 | 875,628 | 3,898,192 |
Additional Paid-In Capital | (1,313,160) | (897,260) | (2,210,420) |
8
FUTURE HEALTHCARE OF AMERICA
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
The following are the line items from the statement of operations for the nine-month period ending September 30, 2018, that were affected, the amounts that would have been reported under the former guidance, the effects of applying the new guidance, and further, on the typeamounts reported under the new guidance:
Statement of operations | Amounts that would have been reported | Effects of applying new guidance | Balance As Reported |
Interest expense | 54,971 | 22,094 | 77,065 |
Net income | (569,787) | (22,094) | (591,881) |
The following are the line items from the statement of hedging relationship. For those derivative instrumentsoperations for the three-month period ending September 30, 2018, that are designatedwere affected, the amounts that would have been reported under the former guidance, the effects of applying the new guidance, and qualify as hedging instruments, a company must designate the hedging instrument, based uponamounts reported under the exposure being hedged, as a fair value hedge, or cash flow hedge. Gains and losses related to a hedge are either recognized in income immediately to offset the gain or loss on the hedged item or are deferred and reported as a component of Accumulated Other Comprehensive Income in the Stockholders' Equity and subsequently recognized in Net income when the hedged item affects Net income. The change in fair value of the ineffective portion of a financial instrument is recognized in Net income immediately. The gain or loss related to financial instruments that are not designated as hedges are recognized immediately in Net income.new guidance:
Statement of operations | Amounts that would have been reported | Effects of applying new guidance | Balance As Reported |
Interest expense | 9,647 | 15,936 | 25,583 |
Net income | (279,002) | (15,936) | (294,938) |
Recently Enacted Accounting Standards - In February 2016, the FASB issued changes to the accounting for leases that primarily affect presentation and disclosure requirements. The new standard will require the recognition of a right to use asset and underlying lease liability for operating leases with an initial life in excess of one year. This standard is effective for us beginning in the first quarter of 2019. We have not yet determined the impact of the new standard on our consolidated financial statements.
Other recent accounting pronouncements issued by the FASB did not or are not believed by management to have a material impact on the Company’s present or future financial statements.
NOTE 2 - GOING CONCERN
The accompanying consolidated financial statements have been prepared in conformity with generally accepted accounting principles of the United States of America, which contemplate continuation of the Company as a going concern. However, the Company has incurred losses, an accumulated deficit and has a short-term note payable in excess of anticipated cash. These factors raise substantial doubt about the ability of the Company to continue as a going concern.concern for a period of one year from the issuance of these financial statements. There is no assurance that the Company will be successful in achieving profitable operations. The financial statements do not include any adjustments that might result from the outcome of these uncertainties.
NOTE 3 - PROPERTY & EQUIPMENT– DISCONTINUED OPERATIONS
Effective August 31, 2018, Future Healthcare of America closed the offices of its Casper, Wyoming operations. During 2018, the Company saw a continued decrease in the utilization of our home healthcare services in Casper, Wyoming. Additionally, we have seen an increase in competition, specifically for Medicare service providers in 2018. Also, there has been a shortage of Registered Nurses, Physical Therapists and management personnel, leading to higher costs due to having to source the required talent from staffing companies. This increase in costs coupled with a decrease in business activity, lead to the decision to close the Casper, Wyoming operations. In closing the office, the Company transitioned its clients to new service providers, and terminated employees as the transition happened. The following is a summary of property and equipment at:
Life March 31, 2018 December 31, 2017 Furniture, fixtures and equipment 2-10 yrs $ 36,384 $ 36,384 36,384 36,384 Less: Accumulated depreciation (36,384) (36,384) Property & equipment, net $ - $ -
Depreciation expense formonth to month lease was terminated with the periods ended Marchlandlord on August 31, 2018, and 2017the office was $0closed the same day. We have one part-time employee, working remotely, primarily on the collection of accounts receivable.
9
FUTURE HEALTHCARE OF AMERICA
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 – DISCONTINUED OPERATIONS
Reconciliation of the Carrying Amounts of Major Classes of Asset and $0, respectively.Liabilities of the Discontinue Operation to Total Assets and Liabilities That are Presented Separately in the Balance Sheet
| September 30, 2018 |
| December 31, 2017 |
|
Carrying amounts of major classes of assets included as part of discontinued operations: |
|
|
|
|
Cash | $ 1,044 |
| $ 13,610 |
|
Accounts receivable, net | 170,396 |
| 201,914 |
|
Prepaid expenses | 5,161 |
| 4,172 |
|
Total current assets of discontinued operations | 176,601 |
| 219,696 |
|
Other assets held for sale | - |
| - |
|
Total assets of discontinued operations | $ 176,601 |
| $ 219,696 |
|
|
|
|
|
|
Carrying amounts of major classes of liabilities included as part of discontinue operations: |
|
|
|
|
Accounts payable | 107,626 |
| 65,228 |
|
Accrued expenses | 142,275 |
| 52,512 |
|
Deferred revenue | 40,082 |
| 12,832 |
|
Total current liabilities of discontinued operations | 289,983 |
| 130,572 |
|
Other liabilities held for sale | - |
| - |
|
Total liabilities of discontinued operations | $ 289,983 |
| $ 130,572 |
|
|
|
|
|
|
Reconciliation of the Major Classes of Line Items Constituting Pretax Profit (Loss) of Discontinued Operations That are Presented Separately in the Statement of Operations
|
| For the Three Months Ended |
| For the Nine Months Ended | ||||
|
| September 30, 2018 |
| September 30, 2017 |
| September 30, 2018 |
| September 30, 2017 |
|
|
|
|
|
|
|
|
|
Major classes of line items constituting pretax income (loss) of discontinued operations |
|
|
|
|
|
|
|
|
Revenue | $ | 123,740 | $ | 416,279 | $ | 763,260 | $ | 1,356,598 |
Cost of Services |
| 229,421 |
| 278,005 |
| 676,169 |
| 908,383 |
Operating Expenses |
| 54,285 |
| 134,522 |
| 323,718 |
| 414,808 |
Other Income |
| (1,591) |
| 23 |
| (1,633) |
| (39) |
Income (loss) of discontinued operations before income tax |
| (158,375) |
| 3,729 |
| (234,994) |
| 33,446 |
Gain on disposal of discontinued operation before tax |
| - |
| - |
| - |
| - |
Total income (loss) on discontinued operations before income tax |
| (158,375) |
| 3,729 |
| (234,994) |
| 33,446 |
Income tax expense or benefit |
| - |
| - |
| - |
| - |
Total profit or loss on discontinue operations that is presented in the statement where net income is presented | $ | (158,375) | $ | 3,729 | $ | (234,994) | $ | 33,446 |
|
|
|
|
|
|
|
|
|
10
FUTURE HEALTHCARE OF AMERICA
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 – NOTES PAYABLE AND CONVERTIBLE DEBENTURE
On September 9, 2013, the Company closed a Subscription Agreement by which one institutional investor purchased a) a Variable Rate Senior Secured Convertible Note payable having a total principal amount of $1,010,000, convertible into common shares of the Company at $0.25 per share and maturing March 9, 2015; b) Warrants to purchase a total of 3,030,000 shares of common stock, at $0.50 per share, exercisable for four years, and c) a greenshoe to purchase a total of 2,000,000 shares of common stock at $0.25 per share, exercisable for one year from the closing date. The note and warrants have a down-round provision, wherein if the Company issues common stock or equity-based instruments with lower prices or strike prices, the note and warrants exercise prices will be adjusted to match the lower prices. On September 9, 2014 the greenshoe expired unexercised. On March 9, 2015, the Note matured.
8
FUTURE HEALTHCARE OF AMERICA
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 – NOTES PAYABLE AND CONVERTIBLE DEBENTURE - Continued
As the note has not been paid nor extended, the outstanding principal, plus accrued but unpaid interest, liquidated damages and other amounts, became due and payable at the election of the holder. The holder has not made such an election. Effective December 14, 2017, the note payable was amended to reduce the conversion price was reduced from $0.25 per share to $0.10 per share.
The fair value of the beneficial conversion feature of the warrants and greenshoe totaled $952,254 and was recorded as a derivative liability. The Company recorded a discount on the note for beneficial conversion feature of the note. The $952,254 discount on the beneficial conversion feature was amortized as interest expense over the term of the note. As of March 31, 2018, the Company has amortized $952,254 of the discount, with no remaining unamortized discount being offset against the outstanding balance of the note in the accompanying balance sheet. As of March 31,September 30, 2018, the Company had accrued interest payable on the debenture of $360,052.$410,552.
On January 2, 2018, the Company financed the premium for directors’ and officers’ insurance. The Company borrowed $26,921 at 6.00% interest, and the note will be repaid in 10 equal installments of $3,079. As of March 31,September 30, 2018, the balance of the note payable was $21,059.$3,061.
On January 25, 2018, the Company financed the premium for liability insurance. The Company borrowed $22,230 at 6.00% interest, and the note will be repaid in 10 equal installments of $2,287. As of March 31,September 30, 2018, the balance of the note payable was $20,059.$6,813.
On September 21, 2018 the Company executed a Promissory Note for $275,000 with Alpha Capital Anstalt (“Alpha”). The value of the note received shall be exchanges for Series A Preferred Stock of the Company at the time of closing of the Share Exchange Agreement between the Company and the shareholders of Natur Holdings, NV, a Netherlands corporation (“Natur”), pursuant to a Securities Purchase Agreement. On September 28, 2018, the Company received $270,005 from Alpha and on the same date, wired $270,005 to Natur. The difference in the face of the note payable and the amount received was due to an error in amount of funds transferred by Alpha.
NOTE 5 – DERIVATIVE FINANCIAL INSTRUMENTS
The Company entered into a variable rate senior secured convertible debenture, wherein the Company agreed to register the underlying share, warrants and greenshoe. The fair value of the beneficial conversion feature of the warrants and greenshoe was estimated using the Black Scholes pricing model and totaled $952,254 upon issuance and was recorded as a derivative liability. As of March 31, 2018, the fair value of the warrants based on the following assumptions (Life .44 years, risk free interest rate 1.93%, volatility of 286.4%, stock price of $.05 and exercise price of $.50) was $37,568, and a gain totaling $6,158 was recorded for the three months ended March 31, 2018.
NOTE 6 – FAIR VALUE OF FINANCIAL INSTRUMENTS
The Fair Value Measurement and Disclosure Topic of FASB and ASC:
·
Defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, and establishes a framework for measuring fair value;
·
Establishes a three-level hierarchy for fair value measurement based upon the transparency of inputs to the valuation as of the measurement date;
·
Expands disclosures about financial instruments measured at fair value.
Financial assets and financial liabilities record on the Balance sheet at fair value are categorized based on the reliability of inputs to the valuation techniques as follows:
Level 1: Financial assets and financial liabilities whose values are based on unadjusted quoted prices for identical assets or liabilities in an active market that the Company can access.
Level 2: Financial assets and financial liabilities whose values are based on the following:
Quoted prices for similar assets or liabilities in active markets; Quoted prices for identical or similar assets or liabilities in non-active markets or Valuation models whose inputs are observable, directly or indirectly, for substantially the full term of the assets or liability
9
FUTURE HEALTHCARE OF AMERICA
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 – FAIR VALUE OF FINANCIAL INSTRUMENTS - Continued
Level 3: Financial assets and financial liabilities whose values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. These inputs may reflect our estimates of the assumptions that market participants would use in valuing the financial assets and financial liabilities.
The following tables summarize Level 1, 2 and 3 financial assets and financial (liabilities) by their classification in the Consolidated Balance Sheet:
|
|
|
| |||
|
|
|
|
NOTE 7 - CAPITAL STOCK
Common Stock - The Company has authorized 200,000,000 shares of common stock, $0.001 par value. As of March 31,September 30, 2018, 11,265,631 shares were issued and outstanding.
NOTE 8 – WARRANTS AND GREENSHOEOn September 21, 2018, the Company executed a Promissory Note for $275,000 with Natur. The note shall be exchanged for Series A Preferred Stock of the Company at the time of closing of the Share Exchange Agreement between the Company and Natur. On September 28, 2018, the Company received $270,005 from Alpha and on the same date, wired $270,005 to Natur for working capital. The note is recorded as a subscription receivable while the Share Exchange Agreement is pending.
A summary of the status of the warrants granted is presented below for the three months ended:NOTE 6 – WARRANTS
| March 31, 2018 |
| December 31, 2017 | ||||
| Shares |
| Weighted Average Exercise Price |
| Shares |
| Weighted Average Exercise Price |
Outstanding at beginning of period | 3,030,000 | $ | 0.50 |
| 3,030,000 | $ | 0.50 |
Granted | - |
| - |
| - |
| - |
Exercised | - |
| - |
| - |
| - |
Forfeited | - |
| - |
| - |
| - |
Expired | - |
| - |
| - |
| - |
Outstanding at end of period | 3,030,000 | $ | 0.50 |
| 3,030,000 | $ | 0.50 |
On September 9, 2013, the Company closed a Subscription Agreement wherein the Company granted warrants to purchase a total of 3,030,000 shares of common stock, at $0.50 per share, exercisable for four years. On September 9, 2017 the expiration date of the warrants was extended to September 9, 2018. On September 9, 2018 the warrants expired.
11
FUTURE HEALTHCARE OF AMERICA
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 96 – WARRANTS - Continued
A summary of the status of the warrants granted is presented below for the three months ended:
| September 30, 2018 |
| December 31, 2017 | |||||||
| Shares |
| Weighted Average Exercise Price |
| Shares |
| Weighted Average Exercise Price | |||
Outstanding at beginning of period | 3,030,000 | $ | 0.50 |
| 3,030,000 | $ | 0.50 | |||
Granted | - |
| - |
| - |
| - | |||
Exercised | - |
| - |
| - |
| - | |||
Expired | 3,030,000 |
| 0.50 |
| - |
| - | |||
Outstanding at end of period | - | $ | - |
| 3,030,000 | $ | 0.50 |
NOTE 7 - INCOME TAXES
The Company accounts for income taxes in accordance with FASB ASC Topic 740, Accounting for Income Taxes which requires the Company to provide a net deferred tax asset or liability equal to the expected future tax benefit or expense of temporary reporting differences between book and tax accounting and any available operating loss or tax credit carryforwards.
Because of the uncertainty surrounding the realization of the loss carryforwards and significant changes in the ownership of the Company, a valuation allowance has been established equal to the tax effect of the loss carryforwards and, therefore, no deferred tax asset has been recognized for the loss carryforwards. The net deferred tax assets are approximately $1,000,000$1,400,000 as of March 31,September 30, 2018, with an offsetting valuation allowance of the same amount.
FUTURE HEALTHCARE OF AMERICA
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 108 – LEASES
Operating Lease - The Company leases office space in Casper, Wyoming for $4,892 a month through June 2018. The Company further leases space in Billings, Montana for $1,525 a month through May 2020.
The future minimum lease payments for non-cancelable operating leases having remaining terms in excess of one year as of March 31,September 30, 2018 are as follows:
Twelve months ending March 31 |
|
| Lease Payments |
|
2019 |
|
| 32,976 |
|
2020 |
|
| 18,300 |
|
2021 |
|
| 3,050 |
|
2022 |
|
| - |
|
Thereafter |
|
| - |
|
Total Minimum Lease Payments |
| $ | 54,326 |
|
Twelve months ending September 30 |
|
| Lease Payments |
|
2019 |
|
| 18,300 |
|
2020 |
|
| 12,200 |
|
Total Minimum Lease Payments |
| $ | 30,500 |
|
Lease expense charged to operations was $19,251$49,077 and $19,146$57,578 for the threenine months ended March 31,September 30, 2018 and 2017, respectively.
NOTE 119 – INCOME/ (LOSS) PER SHARE
The following data shows the amounts used in computing income (loss) per share and the weighted average number of shares of common stock outstanding for the periods presented for the periods ended:
|
| For the Three Months | ||
|
| March 31 | ||
|
| 2018 |
| 2017 |
|
|
|
|
|
Loss from continuing operations available to common stockholders (numerator) | $ | (111,645) | $ | (70,937) |
Loss available to common stockholders (numerator) |
| (111,645) |
| (70,937) |
Weighted average number of common shares outstanding during the period used in loss per share (denominator) |
| 11,265,631 |
| 11,265,631 |
At March 31,September 30, 2018 and 2017, the Company had 3,030,000zero and 3,030,000, respectively, warrants to purchase common stock of the Company at $0.50 per share, and a convertible debenture payable wherein the holder could convert the note and underlying accrued interest into a minimum of 14,802,87010,100,000 and 6,919,259,4,040,000, respectively shares of common stock which were not included in the loss per share computation because their effect would be anti-dilutive.
12
FUTURE HEALTHCARE OF AMERICA
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1210 – COMMITEMENTSCOMMITMENTS AND CONTINGENCIES
On June 17, 2016 and June 30, 2016 two complaints werea complaint was filed with the Federal Equal Employment Opportunity Commission (EEOC) and the Wyoming State Department of Labor against the Company, alleging discrimination on the basis of sex and disability. The complaints docomplaint did not seek any specific monetary relief. The complaints are beingcomplaint was mediated by the Wyoming State Department of Labor. The Wyoming State Department of Labor issued a notice of dismissal for onethe complaint. On February 9, 2018, this former employee filed a lawsuit against Interim Healthcare of the complaints.Wyoming, claiming wrongful termination. After reviewing the facts and circumstances, the Company believes the claims made are weak, at best, and the Company has retained counsel and intends to continue a vigorous defense.
At this time, management cannot reasonably estimate the cost to defend or the outcome of the complaints, and we do not expect it will have a material financial impact on the Company.
FUTURE HEALTHCARE OF AMERICA
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12 – COMMITEMENTS AND CONTINGENCIES - Continued
On February 9, 2018, a former employee filed a lawsuit against Interim Healthcare of Wyoming, claiming wrongful termination.
On March 6, 2018,June 30, 2016 a complaint was filed with the Federal Equal Employment Opportunity Commission (EEOC) against the Company, alleging wage discrimination on the basis of sex.
On June 1, 2018, The U.S. EEOC made a determination that Interim Healthcare of Wyoming Court of Natrona county, alleging violationviolated the Wage discrimination laws (Title VII of the Wyoming Fair Employment PracticesCivil Rights Act of 19651964) by paying a male employee more than female employees. The EEOC has determined that back wages for discrimination based upon sex, disabilitythese individuals plus liquidated damages total $43,593, and retaliation.the Company has recorded an accrual for $17,593 of this amount, as the remainder is in dispute. The complaint does not seek any specific monetary relief. At this time, management cannot reasonably estimatecompany has voluntarily entered into the costConciliation Process with the EEOC to defend or the outcomereach a resolution of the complaints.matter. On September 19, 2018, the Company attended the Conciliation meeting, which the EEOC presented a revised settlement of $133,575 for back wages plus liquidated damages. The Company and the EEOC did not agree to a resolution. On September 28, the EEOC file a complaint claiming Interim Healthcare of Wyoming violated the Wage discrimination laws (Title VII of the Civil Rights Act of 1964) by paying a male employee more than female employees. The Company recorded an accrual totaling $133,575 related to this matter. This accrual is included in the discontinued operations of the Company.
NOTE 11 – RELATED PARTY
During the first six months of 2018, an officer of the Company advanced $23,000 to the company for operating purposes. The advance bears no interest or maturity. The advance was repaid during the third quarter of 2018.
NOTE 1312 - SUBSEQUENT EVENTS
Subsequent eventsOn October 23, 2018 the Company amended its Articles of Incorporation as follows. The Company authorized 2,469.131 shares of Series A Convertible Preferred Stock, $.001 par value and $1,000 stated value. The Company authorized 100,000 shares of Series B Preferred Stock, $.001 par value and $1,000 stated value.
The Series A Convertible Preferred Stock have no voting rights with liquidation rights of stated value plus unpaid dividends and damages. The Series A Convertible Preferred Stock is convertible into common shares at $0.030303 per common shares subject to limitations. A total of 757.575 are convertible at the option of the holder at any time after the original issue date, and a total of 1,711.556 are convertible at any time after the original issue date upon the Corporation amending its Articles of Incorporation to adjust the number of shares of Common Stock sufficient for the conversion of the 1,711.556 the Preferred Stock.
The Series B Preferred Stock has voting rights equal to the number of whole shares of Common Stock into which the shares would be converted as of the record date with liquidation rights $.01 per share after the rights of the Series A Preferred Shareholders have been evaluated throughsatisfied. Each share of Series B Preferred Stock is convertible into 1,000 shares of common stock. Each share of Series B Preferred Stock will convert automatically, without any further action on the date and time of this report.
During April, 2018, an officerpart of the Company advanced $13,000holder, upon the Corporation amending its Articles of Incorporation to adjust the company for operating purposes. number of authorized shares of Common Stock to permit the Corporation to issue a sufficient number of shares of
13
FUTURE HEALTHCARE OF AMERICA
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12 - SUBSEQUENT EVENTS - Continued
Common Stock in conversion of the Series B Preferred Stock. The Corporation undertakes to use its best efforts to adjust the number of authorized shares of Common Stock so as to permit the conversion of the Series B Preferred Stock, within one year of the issuance of the Series B Preferred Stock.
14
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
Safe Harbor Statement.
Statements made in this Form 10-Q which are not purely historical are forward-looking statements with respect to the goals, plan objectives, intentions, expectations, financial condition, results of operations, future performance and business of the Company, including, without limitation, (i) our ability to gain a larger share of the home healthcare industry, our ability to continue to develop services acceptable to our industry, our ability to retain our business relationships, and our ability to raise capital and the growth of the home healthcare industry, and (ii) statements preceded by, followed by or that include the words "may", "would", "could", "should", "expects", "projects", "anticipates", "believes", "estimates", "plans", "intends", "targets", "tend" or similar expressions.
Forward-looking statements involve inherent risks and uncertainties, and important factors (many of which are beyond the Company's control) that could cause actual results to differ materially from those set forth in the forward-looking statements, including the following, in addition to those contained in the Company's reports on file with the Securities and Exchange Commission: general economic or industry conditions, nationally and/or in the communities in which the Company conducts business, changes in the interest rate environment, legislation or regulatory requirements, conditions of the securities markets, changes in the home healthcare industry, the development of services that may be superior to the services offered by the Company, competition, changes in the quality or composition of the Company's services, our ability to develop new services, our ability to raise capital, changes in accounting principles, policies or guidelines, financial or political instability, acts of war or terrorism, other economic, competitive, governmental, regulatory and technical factors affecting the Company’s operations, services and prices.
Accordingly, results actually achieved may differ materially from expected results in these statements. Forward-looking statements speak only as of the date they are made. The Company does not undertake, and specifically disclaims, any obligation to update any forward-looking statements to reflect events or circumstances occurring after the date of such statements.
Business Highlights
Based in Casper, Wyoming, and Billings, Montana, FHA’s subsidiary, Interim Healthcare of Wyoming, Inc., a Wyoming corporation (“Interim”), is an independent franchisee of Interim HealthCare that has been serving its community for over 20 years, and is providing a wide range of visiting nurse services to the elderly, wounded and sick. It is one of the 300 independent home health agencies that comprise the Interim HealthCare network. Our business consists of providing healthcare services for those in need. We record all revenue and expenses and provide all services under one umbrella. Below is a description of our Home Healthcare and Staffing operations.
Our business is driven by a number of different factors and fluctuates significantly as they change.
As the census (number of patients utilizing facilities) in the hospitals fluctuates, we are taking the necessary steps to position ourselves for the ups and downs of the census for these facilities. Our home healthcare service continued to generate the majority of our revenue during the first quarternine months of 2018.2018 has decreased significantly from the previous year. The decrease in business has been driven by the following factors.
As the need for labor diminishes with the gas and oil wells shutting down in Colorado,Wyoming, our business has seen dramatic negative impacts with the resulting decrease in population, both in number of clients as well as available personnel. AsHistorically, as the price of gas decreases, the drilling operations stop, and the population moveshas moved to another area to support themselves.
Our operations are also heavily influenced by increases in minimum wage as well as starting wages being offered by all employers in the region. With the multiple businesses paying higher starting wages, we have seen a decrease in individuals wanting and needing to take employment in the healthcare profession.profession, and we have been unable to continue increasing our starting wages. Additionally, we have seen an increase in direct competition in the market place for the business and clients we serve.
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We have also seen the impact of turn-over in senior management with our clients. As these positions are filled by new personnel, their decisions on utilization of services impacts our businesses, and we have seen a significant decrease in the utilization of our services.
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As a result of financial impact of these factors, we closed the operations in Casper, Wyoming on August 31, 2018.
During the first quarternine months of 2018, FHAFHA’s continuing operations experienced a 22%21% decrease in revenue over the first quarternine months of 2017. This was driven by a decreasedecreases in both our Casper, Wyoming and Billings, Montana businesses. We do not foresee a change in this trend through the end of 2018. We continue to see increased costs to provide services and decreases in reimbursement rates, reducing margins, and difficulty in retaining qualified personnel, making it difficult to cover overhead costs. This can be seen in our results during the first nine months of 2018.
During the first quarternine months of 2018, we have seen a significant decrease in the utilization staffing services in Billings, Montana as facilities that use our services receive directives to remove and reduce the use of staffing services. We’ve also seen significant decreases within our home healthcare services. As for our operations, we anticipate the trends seen in the first quarternine months of 2018 to continue into the second quarter ofthroughout 2018. We anticipate a continued slowing of the use of our staffing services. We also anticipate a continued slowing of the utilization of our home healthcare business in Casper and Billings.business. As such, we will continue to evaluate opportunities to expandare evaluating other options outside the realm of services we offer.home healthcare industry. Promotional activities and operations are being managed as the offices experience fluctuations in the day-to-day activities and as we embark on new business opportunities.
Home Healthcare
Through trained health care professionals, the Company provides home care services including senior care and pediatric nursing; physical, occupational and speech therapy. The Company offices deliver quality home care and treat each patient with genuine compassion, kindness and respect. The Company provides health care professionals at all skill levels, including registered nurses, therapists, LPN's and certified home health aides. FHA derives is revenue from multiple payer sources. These include Medicare, Medicaid, Insurance, Medicaid LTW, and Private Payers. Because our offices are located in areas that do not contain a large population base (less than 200,000 residents), we continually explore opportunities to increase our revenue with our current payer sources and expand through new sources of revenue. The healthcare team is utilized across all payer sources, including staffing services. Our customer base comes from referrals from hospitals, rehab facilities, nursing homes, assisted living facilities and previous patients.
In additional to our professional team, we employ a management team at each facility to handle the day to day operations of the office. This is completed by our Administrators in each location. We also have a Director of Nursing in each location. This person is responsible for the day to day oversight of the service providers and ensuring the certified professionals obtain the necessary training to maintain their certificates as well as the training necessary to be in compliance with all regulating organizations.
Staffing
Interim offices provide nurses, nurse aides and management services to hospitals, prisons, schools, corporations and other health care facilities. Interim’s success is based on our ability to recruit the best health care professionals and the responsiveness of our local managers to fill the needs of our clients in a timely manner. Additionally, we work with our clients should they decide they would like to hire our service professionals on a full time basis. Another key to our success is the personal relationship that our management and sales team build with each of our existing and new clients. As noted previously, in order to reduce turnover of our service team by providing as many hours as possible, similar to the hours of a full-time employee, we utilize the same service team members across all payer sources.
As each of our businesses is located in smaller based population areas of the country, the competition is significantly heightened and the relationships maintained with our clients become very critical to the continued success of our operations.
As we provide diversified services and accept payments from multiple payer sources, we are not heavily dependent on a few clients in order for our business to be successful.
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Results of Operations
ThreeNine Months Ended March 31,September 30, 2018 and 20172017.
During the threenine months ended March 31,September 30, 2018, FHA recorded revenues of $772,258,$1,138,825, a 22%21% decrease over revenues of $995,428$1,433,838 for the same period in 2017. The decrease for 2018 was driven by a significant decrease in the use of our staffing services in Billings, Montana, and our home healthcare services in Billings, Montana. The Casper, Wyoming and Billings, Montana.location was closed on August 31, 2018.
For the quarternine months ended March 31,September 30, 2018, cost of services totaled $541,459,$853,702, a 23% decrease as compared to $701,485$1,110,667 in the comparable period of 2017. This is a reflection of the costs associated with the decrease inoverall reduction of revenue. FHA posted a gross profit of $230,799$285,123 during the first quarternine months of 2018, versus a gross profit of $293,943$323,171 for the first quarternine months of 2017, a decrease of 21%12%.
FHA recorded total operating expenses of $323,022$565,107 during the first quarternine months of 2018, an 10% decreasea 7% increase as compared to operating expenses of $360,153$528,367 in the same period of 2017. General and administrative expenses totaled $109,916$122,529 in the first quarternine months of 2018 versus $125,929$142,241 in the first quarternine months of 2017, a decrease of 13%14%, due todriven by a decrease in legal fees and professional fees.recruiting expense. Consulting fees decreasedincreased from $47,299$57,775 to $42,758$118,240 when comparing the first quarternine months of 2017 versus 2018.2018, driven by an increase in legal fees. Salaries, wages and related expenses decreasedincreased 0% to $159,805$306,356 in the first quarternine months of 2018 from $169,841$305,352 in 2017, a decrease of 6%, driven by the reduction of personnel.2017. Selling expenses in the first quarternine months of 2018 were $10,543$17,982 versus $17,084$22,999 in the comparable quarterperiod of 2017, driven by a decrease in advertising.
For the first nine months of 2018, other expense included $77,065 of interest expense on the notes payable. By way of comparison, for the first nine months of 2017, other income and expense included $34,065 for recognition of a loss on the derivative liability and $76,411 of interest expense on the notes payable.
FHA’s net loss available to common shareholders was $111,645$591,881 for the first nine months of 2018. This represents a 110% increase from our net loss of $281,994 in the first nine months of 2017.
Three Months Ended September 30, 2018 and 2017.
During the three months ended September 30, 2018, FHA recorded revenues of $363,607, a 14% decrease over revenues of $423,306 for the same period in 2017. The decrease for 2018 was driven by a decrease in the use of our staffing services and our home healthcare services in Billings, Montana.
For the quarter ended September 30, 2018, cost of services totaled $261,734, a 21% decrease as compared to $330,294 in the comparable period of 2017. This is a reflection of the costs associated with the overall reduction of revenue. FHA posted gross profit of $101,873 during the third quarter 2018, versus a gross profit of $93,012 for the third quarter of 2017, an increase of 10%.
FHA recorded total operating expenses of $212,938 during the third quarter of 2018, a 36% increase as compared to operating expenses of $157,084 in the same period of 2017. General and administrative expenses totaled $35,617 in the third quarter of 2018 versus $44,259 in the third quarter 2017, a decrease of 20% driven by a decrease in liability insurance and recruiting fees. Consulting fees increased to $62,324 from $7,947 when comparing the third quarter of 2018 versus 2017, driven by an increase in legal fees. Salaries, wages and related expenses increased to $110,829 in the third quarter of 2018 from $100,122 in 2017, an increase of 11%, driven by an increase in accrued wages. Selling expenses in the third quarter of 2018 were $4,168 versus $4,756 in the comparable quarter of 2017.
FHA’s net loss available to common shareholders was $294,938 for the third quarter of 2018. This represents a $40,70879% increase from our net loss of $70,937$164,798 in the firstthird quarter of 2017. A portion of this change was due the recording of $20,667 gain on the derivative instruments, in the first quarter of 2017, as compared to $6,158 in the 2018 period.
Liquidity and Capital Resources.
Cash on hand was $27,117$60,202 at March 31,September 30, 2018, a decrease of $130,955$84,260 from the $158,072$144,462 on hand at December 31, 2017. Cash used in operations for the threenine months ended March 31,September 30, 2018, was $173,073,$44,983, versus cash used in
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operation of $89,664$77,346 for the threenine months ended March 31,September 30, 2017. The increasedecrease is a result of the first quarter increase collection of accounts receivables, couple with our operating results.
On September 21, 2018, the Company executed a Promissory Note for $275,000 with Natur. The note shall be exchanged for Series A Preferred Stock of the Company at the time of closing of the Share Exchange Agreement between the Company and our results of operations in our CasperNatur. On September 28, 2018, the Company received $270,005 from Alpha and Billings locations.on the same date, wired $270,005 to Natur for working capital. The note is recorded as a subscription receivable while the Share Exchange Agreement is pending.
The Company has insufficient cash to finance operations and continues to incur losses and accumulated deficit and has a short-term note payable in default in excess of anticipated cash. These factors raise substantial doubt about the ability of the Company to continue as a going concern. There is no assurance that the Company will be successful in achieving profitable operations or finding additional equity or debt financing. During April 2018, an officer of the Company advanced $13,000 to the Company for operating purposes.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Not required for smaller reporting companies.
Item 4. Controls and Procedures.
(a) Evaluation of Disclosure Controls and Procedures
Our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the "Exchange Act")), which we refer to as disclosure controls, are controls and procedures that are designed with the objective of ensuring that information required to be disclosed in our reports filed under the Exchange Act, such as this report, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms. Disclosure controls are also designed with the objective of ensuring that such information is accumulated and communicated to our management, including the Chief Executive Officer and the Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. There are inherent limitations to the effectiveness of any control system. A control system, no matter how well conceived and
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operated, can provide only reasonable assurance that its objectives are met. No evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected.
As of March 31,September 30, 2018, an evaluation was carried out under the supervision and with the participation of our management, including the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls. Based upon that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that, as of such date, the design and operation of these disclosure controls were effective to accomplish their objectives at the reasonable assurance level.
(b) Changes in Internal Control over Financial Reporting
No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act), occurred during the fiscal quarter ended March 31,September 30, 2018 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
On June 17, 2016 and June 30, 2016 two complaints were filed, one with the Federal Equal Employment Opportunity Commission (“EEOC”) and one with the Wyoming State Department of Labor against the Company, alleging discrimination on the basis of sex and disability. The complaints do not seek any specific monetary relief. The complaints are being mediated by the Wyoming State Department of Labor, and the U.S. Equal Employment Opportunity Commission. The Wyoming State Department of Labor issued a notice of dismissal for one of the complaints. After reviewing the facts and circumstances, the Company believes the claims made are weak, at best, and the Company has retained counsel and intends to continue a vigorous defense. On March 6, 2018, a complaint
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was filed with the Wyoming Court of Natrona County, alleging violation of the Wyoming Fair Employment Practices Act of 1965 for discrimination based upon sex, disability and retaliation. The complaint does not seek any specific monetary relief. At this time, management cannot reasonably estimate the cost to defend or the outcome of the complaints.
On June 1, 2018, The U.S. EEOC made a determination that Interim Healthcare of Wyoming violated the Wage discrimination laws (Title VII of the Civil Rights Act of 1964) by paying a male employee more than female employees. The EEOC has determined that back wages for these individuals plus liquidated damages total $43,593, and the Company has recorded an accrual for $17,593 of this amount, as the remainder is in dispute. The company has voluntarily entered into the Conciliation Process with the EEOC to reach a resolution of the matter. On September 19, 2018, the Company attended the Conciliation meeting, which the EEOC presented a revised settlement of $133,575 for back wages plus liquidated damages. The Company and the EEOC did not agree to a resolution. On September 28, the EEOC file a complaint claiming Interim Healthcare of Wyoming violated the Wage discrimination laws (Title VII of the Civil Rights Act of 1964) by paying a male employee more than female employees. The Company recorded an accrual totaling $133,575 related to this matter.
Item 1A. Risk Factors.
Not required for smaller reporting companies.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None; not applicable.
Item 3. Defaults Upon Senior Securities.
None; not applicable.
Item 4. Mine Safety Disclosures.
None; not applicable.
Item 5. Other Information.
(a)
None; not applicable. On May 18, 2018, the Company and Natur Holding B.V., a Netherlands-based holding company (“Natur”), executed a non-binding letter of intent for the Company to acquire all of Natur’s outstanding capital stock pursuant to a reverse triangular merger or share exchange on mutually agreeable terms. Natur is Europe's first hi-tech health food and beverage company with a mission to revolutionize natural juice and snack consumption, allowing consumers to afford a better quality of life through natural and functional nutrition. See the Company’s Current Report on Form 8-K dated May 18, 2018 and filed with the Securities and Exchange Commission on May 21, 2018.
(b) During the quarterly period ended March 31,September 30, 2018, there were no changes to the procedures by which shareholders may recommend nominees to the Company’s board of directors.
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Item 6. Exhibits.
Exhibit No.
Description
302 Certification of Christopher J. Spencer
302 Certification of John Busshaus
906 Certification.
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SIGNATURES
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, thereunto duly authorized.
FUTURE HEALTHCARE OF AMERICA
Date: |
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| By: | /s/ Christopher J. Spencer |
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| Christopher J. Spencer |
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| Chief Executive Officer and President and Director |
Date: |
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| /s/ John Busshaus |
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| John Busshaus |
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| Chief Financial Officer |
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