Foundation Healthcare (FDNH) 8-K Results of Operations and Financial Condition

Stanton Nelson, CEO

May 17, 2016

FOUNDATION

HEALTHCARE

Investor Presentation

Exhibit 99.3

Forward Looking Statements

This

presentation

includes

forward

looking

statements.

All

statements

other

than

statements

of

historical

fact,

including,

without

limitation,

statements

regarding

future

plans

and

objectives

of

Foundation

Healthcare

or

the

Corporation,

are

forward-looking

statements

that

involve

various

risks,

assumptions,

estimates,

and

uncertainties.

These

statements

reflect

the

current

projections,

expectations

or

beliefs

of

Foundation

Healthcare

and

are

based

on

information

currently

available

to

the

Corporation.

There

can

be

no

assurance

that

such

statements

will

prove

to

be

accurate,

and

actual

results

and

future

events

could

differ

materially

from

those

anticipated

in

such

statements.

All

forward

looking

statements

made

in

this

presentation

are

qualified

by

these

cautionary

statements

and

the

risk

factors

described

above.

All

such

statements

are

made

as

of

the

date

this

presentation

is

given

and

Foundation

Healthcare

assumes

no

obligation

to

update

or

revise

these

statements.

An

investment

in

Foundation

Healthcare

is

speculative

due

to

the

nature

of

the

Corporation's

business.

Investors

must

rely

upon

the

ability,

expertise,

judgment,

discretion,

integrity,

and

good

faith

of

the

Management

of

the

Corporation.

Recipient

acknowledges

that

Foundation

Healthcare

is

subject

to

the

reporting

requirements

of

the

Securities

and

Exchange

Commission.

Recipient

further

acknowledges

that

the

financial

information

included

in

this

presentation

related

to

Foundation

Healthcare

is

confidential

until

such

time

as

the

financial

information

has

been

filed

with

the

SEC

on

Form

8-K.

Recipient

agrees

not

to

use

any

confidential

information

to

purchase,

sell,

or

otherwise

transfer

or

dispose

of

Foundation

Healthcare’s

common

stock.

2

Foundation Healthcare: Company Snapshot

Foundation Healthcare, Inc. (OTCQB: FDNH) 

Application filed

to up-

list to

NASDAQ

Business Description

Own and operate Surgical Hospitals

Corporate

Headquarters

Oklahoma

City, OK

Shares

O/S;

FDNH

share

price

1

18.1 million @ $2.70/share

Market

Capitalization

1

$48.9 million

Cash

2

$2.9

million

Total

Debt

$60.0

million

Enterprise Value

1, 2

$106.0 million

Reported Q1 3/31/16

Revenue

Adjusted EBITDA

$39.0 million

$1.3 million

Fiscal

Year 2015

Revenue

Adjusted EBITDA

$127.5 million

$14.8

million

1

Share price as of 5/13/16

2

Financial data as of 3/31/16 (Debt includes capitalized lease obligations)

2

FDNH

operates

majority-owned

Surgical

Hospitals

in

partnership

with

physicians

Currently own four surgical hospitals (three majority-owned) and seven

ambulatory surgical centers (ASCs)

Physician partners : 350+ owners and 165 non-owners

Completed the acquisition of University General Hospital (UGH) in Houston

on 12/31/15 (rebranded as Foundation Surgical Hospital of Houston)

FSH-Houston EBITDA accretive in Q1-2016

History of strong revenue and profit growth post acquisition

Robust pipeline of potential hospital acquisitions in addition to UGH

Management

–

experienced

operators

with

strong

bench

strength

Highly-scalable

–

many

markets

with

opportunities

to

drive

revenue

growth

with related services

Foundation Healthcare: Company Overview

4

Foundation Healthcare: Management Objectives

5

Accelerate Growth.

FDNH completed its most recent acquisition of UGH

on 12/31/2015

UGH generated $54.0 million of revenue in 2015

2015 Annual revenue growth expected to exceed 20%

Expect solid organic growth and robust acquisition pipeline

Improve Stock Liquidity. 90%+ of shares are owned by insiders and

other investors who have been owners for many years

Application is pending for up-list to NASDAQ

Improve Awareness.  Management is actively seeking growth oriented

investors and sell-side research firms

Increase Shareholder Value.  Management is focused on improving

returns for shareholders

Management owns >31% of the company

Foundation Healthcare: Management Team

6

Thomas Michaud

Chairman of the

Board

•

Founded Foundation Surgery Affiliates, LLC (“FSA”)

•

CEO of FSA and Foundation Surgical Hospital Affiliates, LLC 

Stanton Nelson

CEO

•

CEO since January 2010

•

Vice Chairman of Valliance Bank.  Prior CEO of Monroe-Stephens

Broadcasting and VP of Oliver Investments

Jennifer Duke

CDO

•

10+ years of health care experience

•

Formerly with Johnson & Johnson and Cardinal Health

Hugh King

CFO

•

35+ years of hospital financial management experience

•

Former Vice President and CFO at four multi-hospital systems.

Travis Crenshaw

CIO

•

Joined Company in 2014

•

Former Vice President & Chief Information Officer, United Surgical

Partners International

Cindy Braly

CNO

•

Joined company in 2011

with 35+ years of leadership in acute care

surgical nursing, quality management, and accreditation

Case Study:  San Antonio –

De Novo Development

Foundation Healthcare: San Antonio

Diagnostic Imaging

Centers

Physical Therapists

Wound Care

8

Foundation Surgical Hospital

of San Antonio

Foundation Healthcare: San Antonio

9

The Proof is in the Numbers…

* Construction/expansion in operating rooms suite to accommodate new

physicians

-

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

4,000,000

4,500,000

5,000,000

Q1

2013

Q2

2013

Q3

2013

Q4

2013

Q1

2014

Q2

2014

Q3

2014

Q4

2014

Q1

2015

Q2

2015

Q3

2015

Q4

2015*

Q1

2016*

San Antonio EBITDA by Quarter

2013-2016

Case Study:  El Paso –

Acquisition out of Bankruptcy

Foundation Healthcare: El Paso

Surgical Centers

Diagnostic Imaging

Centers

Physical Therapists

Reference

Lab

Oncology

Wound Care

11

Foundation Healthcare: El Paso

12

The Proof is in the Numbers…And More

Opportunities to Come.

*Three new physicians starting in 2016

-

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

Q1

2013

Q2

2013

Q3

2013

Q4

2013

Q1

2014

Q2

2014

Q3

2014

Q4

2014

Q1

2015

Q2

2015

Q3

2015

Q4

2015

Q1

2016

El Paso Net Revenues by Quarter

2013-2016

El Paso –

The Proof is in the Numbers…

And More Opportunities to Come…

Foundation Healthcare: El Paso

2013-

2016

1,000,000

2,000,000

3,000,000

4,000,000

(2,000,000)

(1,000,000)

-

Q1

2013

Q2

2013

Q3

2013

Q4

2013

Q1

2014

Q2

2014

Q3

2014

Q4

2014

Q1

2015

Q2

2015

Q3

2015

Q4

2015

Q1

2016

El Paso EBITDA by Quarter

13

UGH Opportunity

Foundation Healthcare: UGH –

Houston

15

Established Surgical Hospital located in a desirable location in Houston, Texas

Opened in 2006 and grandfathered for physician ownership under ACA

Licensed for:

69 inpatient beds

Six operating rooms (main campus)

HOPD ambulatory surgery facility (three operating rooms)

Reported more than $54.0 million of net revenue in 2015

Reported an operating loss of $5.0 million, or (9.4)%

Compared to an operating margin of (17.6)% at El Paso surgical hospital when FDNH

acquired the facility

Significant opportunity for revenue and margin improvement

Acquired by FDNH on 12/31/2015 for $33.0 million financed by cash and debt

Foundation Healthcare: UGH Details and Opportunity

16

Bankruptcy Court approved Section 363 sale to Foundation on November 9,

2015

Purchase price = $33.0 million financed by equipment financing ($5.0 million),

note to UGH parent corporation ($7.9 million) and bank financing ($20.1

million)

FSH-Houston EBITDA accretive in Q1-2016

Patient satisfaction scores for Q1-2016 improved to 93% from 63% reported in

2015

Operating improvement plan includes:

Re-syndicate to 49% physician (predominantly surgeon) ownership

Transition could be completed before July 1, 2015

Buy-in will generate $4.9 million of proceeds used to reduce debt

Improve physician recruitment (owners and partners)

Add additional service lines

Eliminate duplicative overhead costs

Implement

proprietary

program to

drive

staffing

improvement

Implement proprietary BI system to monitor daily profitability by case,

physician and service line

_

Ninety Nine Health Care Management

Ninety Nine Health Care Management

18

Physician services company providing management of the following services

Revenue Cycle

Information Technology

Practice Operations

Human Resources

Competitive Advantage and Strategic Relationships

Established “clinically and financially integrated” physician network

Enables physicians and Foundation Hospitals to participate in higher paying

managed care contracts

Physicians can only participate if:

They contract for the Ninety Nine Management’s billing services to

achieve financial integration.

They contract for the Ninety Nine Management’s information technology

services to achieve clinical integration by interfacing electronic medical

record systems

Currently operating in Dallas market but scalable to all markets in which

there are Foundation hospitals

Ninety Nine Health Care Management

19

Value for the Physician

Higher compensation through economy of scale contracting, lean business

practices and increased productivity.

Value for the Payer

Lower cost of care by re-directing patients from high-cost health systems to

lower-cost providers.

Clinical integration of physician practices offers better oversight of quality

metrics and outcomes.

Value for Foundation Surgical Hospitals

Higher-reimbursement fee schedules from Payers

Physicians benefit from steering patients away from high-cost health

systems

The 99 MGMT Value Proposition

Investment Highlights

20

New Acquisitions, Well-Positioned for Growth

Large, attractive market with powerful secular tail-winds

Addition of UGH, 99 MGMT and facility expansions suggest positive

outlook for 2016

Strong, experienced Corporate and Hospital Leadership teams

Uplist

likely to improve visibility and float

Active pipeline of potential surgical hospital acquisitions

FDNH Financial Appendix

Foundation Healthcare: Income Statement

22

2016

2015

2015

2014

Total Revenue and Equity from Affiliates

39,026

$      

29,981

$      

127,509

$    

104,225

$    

Total Operating Expense

40,907

29,274

121,257

101,591

Total Other Income/(Expense)

(962)

(309)

(1,022)

(1,226)

(Provision) Benefit for Income Taxes

1,200

0

1,120

852

Income (Loss) from Continuing Operations, Net of Taxes

(1,643)

398

6,350

2,260

Income (Loss) from Discontinued Operations, Net of Taxes

(12)

(114)

6,192

255

Net Income (Loss)

(1,655)

284

12,542

2,515

Less: Non-controlling Interests

728

1,421

6,645

3,827

Net Income (Loss) to Foundation HealthCare

(2,383)

$       

(1,137)

$       

5,897

$        

(1,312)

$       

Adjusted EBITDA from Continuing Operations

1,316

$        

2,301

$        

14,218

$      

9,624

$        

Adjusted EBITDA Percentage

3.4%

7.7%

11.2%

9.2%

Three Months Ended

March  31,

December  31,

Year Ended

Dollars In Thousands

Foundation Healthcare: Balance Sheet

23

March 31

December  31,

2016

2015

Cash and Cash Equivalents

2,900

$        

5,062

$          

Working Capital

6,999

9,004

Total Assets

124,064

119,271

Short-Term Debt

804

309

Long Term Debt

80,024

80,740

Total Liabilities From Discontinued Operations

2,359

2,356

Preferred Non-controlling Interests

6,960

6,960

Accumulated Deficit

(34,613)

(32,074)

Total Stockholder Equity (Deficit)

(13,978)

$     

(11,186)

$       

Dollars In Thousands

Foundation Healthcare: Adjusted EBITDA (Cont. Ops)

24

2016

2015

2015

2014

Net Income (Loss) From Continuing Operations

(1,643)

$      

398

$          

6,351

$       

2,872

$       

Interest Expense

1,192

326

1,060

1,611

Provision (Benefit) for Income Taxes

(1,200)

0

(1,120)

(852)

Depreciation and Amortization

2,749

1,381

5,698

5,550

EBITDA From Continuing Operations

1,098

2,105

11,989

9,181

Add: Stock Compensation

218

196

1,637

1,387

Add: S-1 Filing Expenses

319

Add: Acquisiton Expenses

273

Adjusted EBITDA From Continuing Operations

1,316

$       

2,301

$       

14,218

$     

10,568

$     

Three Months Ended

March 31,

December  31,

Year Ended

Dollars In Thousands

Foundation Healthcare: EBITDA –

San Antonio & El Paso Hospitals

24

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Net Income (Loss) From Continuing Operations

(509)

$   

1,067

$

2,470

$

4,048

$ 

1,829

$

1,794

$

1,999

$

1,885

$

1,407

$

1,372

$

3,294

$

2,017

$

1,060

$

Interest Expense

116

156

127

(53)

64

49

40

41

36

34

33

35

44

Provision (Benefit) for Income Taxes

0

0

0

0

0

0

0

0

0

0

0

0

0

Depreciation and Amortization

311

309

268

352

342

308

139

137

118

84

82

84

87

EBITDA From Continuing Operations

(82)

$     

1,532

$

2,864

$

4,347

$ 

2,236

$

2,152

$

2,178

$

2,063

$

1,561

$

1,490

$

3,409

$

2,135

$

1,191

$

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Net Income (Loss) From Continuing Operations

(1,629)

$

(679)

$  

(840)

$  

(1,660)

$

(915)

$  

(905)

$  

575

$   

1,767

$

1,625

$

912

$   

2,152

$

1,166

$

426

$   

Interest Expense

288

324

218

211

146

176

106

112

116

144

144

157

184

Provision (Benefit) for Income Taxes

0

0

0

0

0

0

0

0

0

0

0

0

0

Depreciation and Amortization

588

682

612

586

642

628

682

703

768

769

770

779

770

EBITDA From Continuing Operations

(753)

$   

327

$   

(11)

$   

(863)

$   

(127)

$  

(102)

$  

1,363

$

2,583

$

2,509

$

1,825

$

3,066

$

2,102

$

1,380

$

2016

2016

2014

2015

El Paso EBITDA Reconciliation

Dollars In Thousands

2013

2014

2015

San Antonio EBITDA Reconciliation

Dollars In Thousands

2013

Foundation HealthCare

14000 N. Portland Ave., Suite 200

Oklahoma City, OK 73134

800.783.0404

www.fdnh.com