UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): JANUARY 17, 2005
FAMILY HOME HEALTH SERVICES INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
NEVADA
(STATE OR OTHER JURISDICTION OF INCORPORATION)
000-32887 02-0718322
(COMMISSION FILE NUMBER) (I.R.S. EMPLOYER IDENTIFICATION NUMBER)
801 WEST ANN ARBOR TRAIL
SUITE 200
PLYMOUTH, MICHIGAN
48170
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE) (ZIP CODE)
(734) 414-9990
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
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(17CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act(17CFR 240.13e-4(c))
Effective on January 17, 2005, the Company entered into and closed on the
Ownership Exchange Agreement and completed the acquisition of Family Home Health
Services, LLC. Under the terms of the Ownership Exchange Agreement, the Company
issued 10,000,000 shares of its common stock to each of Messrs. Ruark and
Pilkington (an aggregate of 20,000,000 shares) in exchange for all outstanding
membership interests of Family Home Health Services, LLC held by them. Family
Home Health Services, LLC has continued as a wholly owned subsidiary of the
Company since the date of the acquisition. The Company previously reported this
transaction on Form 8-K filed on March 16, 2005, which report was amended by
Amendment Number 1 to Form 8-K filed on March 30, 2005. This Amendment Number 2
to Form 8-K amends and supplements the Form 8-K as follows:
ITEM 4.01 CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT
Michael Johnson & Co. LLC furnished to the Company a copy of a letter addressed
to the Securities and Exchange Commission stating whether it agrees with the
statements contained in Item 4.01 of the Form 8-K. In Amendment Number 1 to
Form 8-K, the Company reported that Michael Johnson & Co. LLP served as the
Company's independent accountant and audited the Company's financial statements
until March 15, 2005. However, Michael Johnson & Co. LLC served as the Company's
independent accountant and audited the Company's financial statements until
October 31, 2004. A copy of the letter from Michael Johnson & Co. LLC, dated
August 12, 2005, is attached as Exhibit 16.1 to this Amendment Number 2 to Form
8-K as required by Item 4.01.
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS
(a) & (b) This Amendment Number 2 to Form 8-K contains the audited financial
information in connection with this transaction, consisting of the audited
financial statements of Family Home Health Services, LLC as required by Item
9.01. Pro forma financial statements for the Company as required by Item 9.01(b)
are not required since the transaction is considered a recapitalization and not
a business combination for accounting purposes. However, if presented, proforma
information would be essentially the same as the operating results presented
herein because, as of the date of the acquisition, the Company was a "shell
company" with no material assets or operations.
The financial information begins on page F-1.
(c) Exhibits
(i) Letter from Michael Johnson & Co. LLC dated August 12, 2005.
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.
FAMILY HOME HEALTH SERVICES INC.
Date: August 15, 2005 /s/ Kevin R. Ruark
----------------------------------------
By: Kevin R. Ruark
Its: Chief Executive Officer and
President
INDEX TO FINANCIAL STATEMENTS
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED
Family Home Health Services, LLC
Report of Independent Registered Public Accounting Firm F-2
Financial Statements:
Balance Sheets as of December 31, 2004 and December 31, 2003 F-3
Statements of Income for the year ended December 31, 2004 and the
four months ended December 31, 2003 F-4
Statements of Changes in Members' Equity for the year ended
December 31, 2004 and the four months ended December 31, 2003 F-5
Statements of Cash Flows for the year ended December 31, 2004 and the
four months ended December 31, 2003 F-6
Notes to Financial Statements F-7
FAMILY HOME HEALTH
SERVICES, LLC
FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 2004
AND
FOUR MONTHS ENDED DECEMBER 31, 2003
(LOGO OF REHMANN ROBSON)
Certified Public Accountants
FAMILY HOME HEALTH SERVICES, LLC
TABLE OF CONTENTS
YEAR ENDED DECEMBER 31, 2004 AND FOUR MONTHS ENDED DECEMBER 31, 2003
PAGE
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 1
FINANCIAL STATEMENTS
Balance Sheets 2
Statements of Income 3
Statements of Changes in Members' Equity 4
Statements of Cash Flows 5
Notes to Financial Statements 6-13
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
July 22, 2005
Members
Family Home Health Services, LLC
Plymouth, Michigan
We have audited the accompanying balance sheets of FAMILY HOME HEALTH SERVICES,
LLC as of December 31, 2004 and 2003 and the related statements of income,
changes in members' equity, and cash flows for the year ended December 31, 2004
and the four months ended December 31, 2003. These financial statements are the
responsibility of the Company's management. 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. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of FAMILY HOME HEALTH SERVICES,
LLC as of December 31, 2004 and 2003 and the results of its operations and its
cash flows for the year ended December 31, 2004 and the four months ended
December 31, 2003, in conformity with accounting principles generally accepted
in the United States of America.
REHMANN ROBSON
Jackson, Michigan
-1-
FAMILY HOME HEALTH SERVICES, LLC
BALANCE SHEETS
DECEMBER 31,
-----------------------
2004 2003
---------- ----------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 209,088 $ 209,119
Accounts receivable 1,782,127 795,592
Prepaid expenses and other current assets 177,562 38,918
Current portion of advances to affiliates 200,000 --
---------- ----------
TOTAL CURRENT ASSETS 2,368,777 1,043,629
Advances to affiliates, net of current portion 141,931 --
Net property and equipment 37,549 8,756
Other assets 23,042 21,008
---------- ----------
TOTAL ASSETS $2,571,299 $1,073,393
========== ==========
LIABILITIES AND MEMBERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 361,748 $ 147,765
Current portion of long-term debt 46,295 --
Accrued compensation 209,669 204,920
Accrued expenses 250,000 50,170
Advances from third-party payors 281,666 219,186
Advances from member 300,000 125,000
Advances from affiliate 21,034 133,594
---------- ----------
TOTAL CURRENT LIABILITIES 1,470,412 880,635
Long-term debt, net of current portion 167,478 --
---------- ----------
TOTAL LIABILITIES 1,637,890 880,635
Commitment and contingencies (Notes 4 and 8)
Members' equity 933,409 192,758
---------- ----------
TOTAL LIABILITIES AND MEMBERS' EQUITY $2,571,299 $1,073,393
========== ==========
The accompanying notes are an integral part of these financial statements.
-2-
FAMILY HOME HEALTH SERVICES, INC.
STATEMENTS OF INCOME
FOUR MONTHS
YEAR ENDED ENDED
DECEMBER 31, DECEMBER 31,
2004 2003
------------ ------------
REVENUES
Net Medicare patient service revenue $11,406,851 $2,404,378
Management fee income and other revenues 474,946 160,602
----------- ----------
TOTAL REVENUES 11,881,797 2,564,980
Cost of services sold 4,405,146 916,132
----------- ----------
GROSS PROFIT 7,476,651 1,648,848
Selling, general and administrative expenses 5,819,042 1,364,491
----------- ----------
OPERATING INCOME 1,657,609 284,357
OTHER EXPENSE AND LOSSES
Interest expense (54,980) (1,699)
Loss on disposal of assets (25,078) --
Loss on acquisition of software and other assets (347,000) --
----------- ----------
NET INCOME $ 1,230,551 $ 282,658
=========== ==========
The accompanying notes are an integral part of these financial statements.
-3-
FAMILY HOME HEALTH SERVICES, LLC
STATEMENTS OF CHANGES IN MEMBERS' EQUITY
TOTAL
CONTRIBUTED RETAINED MEMBERS'
CAPITAL EARNINGS EQUITY
----------- ---------- ----------
Capital contributions $100 $ -- $ 100
Net income -- 282,658 282,658
Cash distributions -- (90,000) (90,000)
---- ---------- ----------
BALANCES, DECEMBER 31, 2003 100 192,658 192,758
Capital contributions 100 -- 100
Net income -- 1,230,551 1,230,551
Cash distributions -- (490,000) (490,000)
---- ---------- ----------
BALANCES, DECEMBER 31, 2004 $200 $ 933,209 $ 933,409
==== ========== ==========
The accompanying notes are an integral part of these financial statements.
-4-
FAMILY HOME HEALTH SERVICES, LLC
STATEMENTS OF CASH FLOWS
FOUR MONTHS
YEAR ENDED ENDED
DECEMBER 31, DECEMBER 31,
2004 2003
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $1,230,551 $ 282,658
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization 33,769 7,128
Loss on sale of property and equipment 25,078 --
Loss on acquisition of software and other assets 347,000 --
Changes in operating assets and liabilities which
provided (used) cash
Accounts receivable (986,535) (795,592)
Prepaid expenses and other current assets (108,644) (38,918)
Other assets (15,367) (27,675)
Accounts payable 213,983 147,765
Advances from third-party payors 62,480 219,186
Accrued expenses and other current liabilities 204,579 255,090
---------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 1,006,894 49,642
---------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (204,307) (9,217)
Advances to affiliates (341,931) --
---------- ---------
NET CASH USED IN INVESTING ACTIVITIES (546,238) (9,217)
---------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Capital contributions 100 100
Repayments of long-term debt (33,227) --
Net advances from member 175,000 125,000
(Reimbursements of) advances from affiliates (112,560) 133,594
Distributions paid (490,000) (90,000)
---------- ---------
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES (460,687) 168,694
---------- ---------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (31) 209,119
Cash and cash equivalents, beginning of period 209,119 --
---------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 209,088 $ 209,119
========== =========
The accompanying notes are an integral part of these financial statements.
-5-
FAMILY HOME HEALTH SERVICES, LLC
NOTES TO FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 2004 AND FOUR MONTHS ENDED DECEMBER 31, 2003
1. BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS
Family Home Health Services, LLC (the "Company"), a Delaware limited
liability company, renders skilled, multidisciplinary home healthcare
services to patients within the state of Florida, primarily to Medicare
beneficiaries. The Company's date of inception was June 17, 2003. The
Company had no activity between that date and September 1, 2003, when
operations commenced. The Company provides health and supportive services,
including nursing, physical therapy, occupational therapy, speech therapy,
and medical social work, to primarily elderly individual patients at their
places of residence. Operations are substantially dependent, in particular,
upon the continued qualification of the Company to participate in the
federal Medicare reimbursement program, which accounted for approximately
96% and 94% of service revenues in 2004 and 2003, respectively. Continued
federal funding of the Medicare program is subject to federal and state
economic and political considerations.
The Company is subject to regulations of the Florida Agency for Health Care
Administration - Division of Health Quality Assurance - Home Care Unit and
Medicare, and undergoes periodic examination by these regulatory
authorities and agencies.
CONCENTRATION RISKS
Virtually all of the Company's home health care revenues are earned from
services provided to individual patients that reside within the state of
Florida (see Note 9).
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions and select accounting policies
that affect the reported amounts of assets and liabilities, the disclosure
of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. The Company's financial statements include amounts that
are based on management's best estimates and judgments. Actual results
could differ from those estimates.
The most critical estimates relate to revenue recognition, the
collectibility of accounts receivable and related reserves, obligations
under workers' compensation, professional liability, and Medicare
settlement issues.
-6-
FAMILY HOME HEALTH SERVICES, LLC
NOTES TO FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 2004 AND FOUR MONTHS ENDED DECEMBER 31, 2003
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash on hand and demand deposits in
banks. The Company maintains cash balances at financial institutions that
significantly exceed federally insured limits.
REVENUE RECOGNITION
Under the Prospective Payment System ("PPS") for Medicare reimbursement,
net revenues are recorded based on a reimbursement rate which varies based
on the severity of the patient's condition, service needs, and certain
other factors. The Company recognizes revenue ratably over the episodic
period. Revenue is subject to adjustment during this period if there are
significant changes in the patient's condition during the treatment period.
Initial Medicare billings pursuant to the PPS are initially recognized as
deferred revenue and are subsequently amortized into revenue over the
episodic period. The process for recognizing revenue under the Medicare
program is based on certain assumptions and judgments, including the
appropriateness of the clinical assessment of each patient at the time of
certification and the level of adjustments to the fixed reimbursement rate
relating to patients who receive a limited number of visits, have
significant changes in condition, or are subject to certain other factors
during the episode. As a result, there is at least a reasonable possibility
that recorded estimates will change by a material amount in the near term.
Revenue adjustments result from differences between estimated and actual
reimbursement amounts, an inability to obtain appropriate billing
documentation or authorizations acceptable to the payer, and other reasons
unrelated to credit risk. Revenues are reported net of such adjustments
which are deducted from gross accounts receivable. These revenue
adjustments are based on significant assumptions and judgments that are
determined by Company management based on historical trends and other
pertinent factors. Third party settlements resulting in recoveries are
recognized as net revenues in the period in which the funds are received.
The Company recognizes revenue from sources other than Medicare
reimbursement as such services are provided.
COST OF SERVICES SOLD
Cost of services sold represents the direct costs of providing services to
patients, including direct salaries and related payroll taxes, contracted
healthcare provider services, medical supplies and other direct costs. The
Company records such costs as they are incurred.
-7-
FAMILY HOME HEALTH SERVICES, LLC
NOTES TO FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 2004 AND FOUR MONTHS ENDED DECEMBER 31, 2003
ACCOUNTS RECEIVABLE
The process for estimating the ultimate collection of receivables,
particularly with respect to fee-for-service arrangements, involves
significant assumptions and judgments. Historical collection and payor
reimbursement experience is an integral part of the estimation process
related to determining the allowance for doubtful accounts. In addition,
the Company periodically assesses the current state of its billing
functions in order to identify any known collection or reimbursement issues
to determine the impact, if any, on its estimates for contractual
adjustment and reimbursement allowances, which involve judgment. Revisions
to these reserve estimates are recorded as adjustments to the accounts
receivable allowances, which are reflected as a direct reduction to net
revenues in the accompanying statements of operations. The Company has not
established an allowance for contractual adjustments and reimbursements as
of December 31, 2004 or 2003, as all receivables at those dates are deemed
fully collectible.
SUPPLIES
Supplies, consisting principally of patient care items and medical
supplies, are expensed upon purchase.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Management periodically reviews
these assets to determine whether carrying values have been impaired.
Depreciation is computed using the straight-line method over the related
assets' estimated useful lives, which is five years.
INCOME TAXES
The Company is treated as a partnership for federal income tax purposes and
thus does not incur income taxes. Accordingly, these financial statements
do not reflect a provision for income taxes.
-8-
FAMILY HOME HEALTH SERVICES, LLC
NOTES TO FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 2004 AND FOUR MONTHS ENDED DECEMBER 31, 2003
2. NET PROPERTY AND EQUIPMENT
Net property and equipment consisted of the following amounts at December
31:
2004 2003
------- ------
Equipment $44,676 $9,216
Less accumulated depreciation 7,127 460
------- ------
NET PROPERTY AND EQUIPMENT $37,549 $8,756
======= ======
3. DEBT (INCLUDING RELATED PARTY)
Temporary cash advances received from a member of the Company are evidenced
by promissory notes, which the Company executed in September 2003 and
January 2004. Each note has a stated maturity of six months.
Notwithstanding the stated maturities, the notes are due on demand of the
member, and are renewable at maturity upon approval of both parties.
Interest on the notes is charged at a rate of 16% per annum. Additionally,
each note is subject to a 10% origination fee at the inception of the note
and an additional 10% loan origination fee upon each six-month renewal.
Accrued interest is due and payable monthly (Note 9). Interest expense
incurred on these borrowings, excluding origination fees, was $45,999 in
2004 and $1,699 for the four months ended December 31, 2003.
Long-term debt as of December 31, 2004 consists of a note in the amount of
$213,773 to a former employee of the Company, payable through January 2009,
in equal quarterly installments of $14,046 including interest charged at 5%
per annum (Note 8).
Scheduled principal maturities of long-term debt for each of the five
fiscal years succeeding December 31, 2004 and thereafter are summarized as
follows:
YEAR AMOUNT
---- --------
2005 $ 46,295
2006 48,667
2007 51,163
2008 53,778
2009 13,870
--------
TOTAL $213,773
========
-9-
FAMILY HOME HEALTH SERVICES, LLC
NOTES TO FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 2004 AND FOUR MONTHS ENDED DECEMBER 31, 2003
4. OPERATING LEASES
The Company has various noncancellable operating leases primarily related
to office space and office equipment. Scheduled future minimum lease
payments relating to noncancellable operating lease commitments are
summarized as follows for years subsequent to December 31, 2004:
YEAR AMOUNT
---- ----------
2005 $ 354,121
2006 325,901
2007 212,162
2008 122,569
2009 51,535
----------
$1,066,288
==========
Rent expense was approximately $331,000 in 2004 and $83,000 for the four
months ended December 31, 2003.
5. RELATED PARTY TRANSACTIONS
During 2004, the Company entered into a management services agreement with
a business related to the Company by virtue of common ownership and
ultimate management control. Under that agreement, the Company renders
management and administrative services to the affiliate in exchange for a
monthly fee. During 2004, the Company recorded management fee revenue of
$150,000. Such revenues are recorded in the accompanying 2004 statement of
income within management fee income and other revenues.
Advances to affiliates at December 31, 2004 consist of reimbursable amounts
due from two entities related to the Company by virtue of common ownership
and ultimate management control. The Company has estimated the portion of
such reimbursements that will be collected within the next year and has
classified such amounts as current assets within the accompanying balance
sheets, with all remaining amounts classified as noncurrent.
Advances from affiliate at December 31, 2004 and 2003 consist of
reimbursable amounts due to one entity related to the Company by virtue of
common ownership and ultimate management control.
During 2004, the Company recognized a loss of approximately $25,000 in
connection with the sale of certain vehicles to one of its members.
-10-
FAMILY HOME HEALTH SERVICES, LLC
NOTES TO FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 2004 AND FOUR MONTHS ENDED DECEMBER 31, 2003
6. SUPPLEMENTAL CASH FLOWS INFORMATION
Cash paid for interest amounted to $54,980 in 2004 and $1,699 during the
four months ended December 31, 2003.
7. COMMITMENT AND CONTINGENCIES
EMPLOYMENT AGREEMENT
At December 31, 2004, the Company had an employment agreement with a
regional clinical manager that extended through January 2009 (Note 8). The
employment agreement specified a base salary and contained a covenant
not-to-compete that extends through a period up to five years after the
expiration or termination of the employment agreement. Within the first two
years of the agreement, the Company or the employee may terminate the
agreement for cause, as defined. After the first two years of the
agreement, either party may terminate the agreement with or without cause
with 90 days notice. In May, 2005, the Company and the individual modified
the terms of the employment agreement to allow for the termination of the
individual; the modified terms of the agreement called for a reduced salary
to be paid to the individual on a bi-weekly basis through January 2006.
LEGAL MATTERS
The Company is involved in litigation and regulatory investigations arising
in the normal course of conducting its business. After consultation with
legal counsel, management estimates that these matters will be resolved
without material adverse effect on the Company's future financial position,
results of operations or cash flows.
8. LOSS ON ACQUISITION OF SOFTWARE AND OTHER ASSETS
In January 2004, the Company executed a Software Purchase Agreement with an
individual whereby the Company acquired a software package and other assets
in exchange for the payment of $100,000 in cash and the assumption of
$247,000 in notes payable. The Company concurrently executed an employment
agreement with the individual (Note 7). During 2004, the Company determined
that the software was not suitable for its intended purpose and other
assets had little, if any, future benefit, and accordingly, the Company
wrote off the entire acquisition cost as a loss. Such loss is presented
below operating results in the accompanying 2004 statement of income.
-11-
FAMILY HOME HEALTH SERVICES, LLC
NOTES TO FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 2004 AND FOUR MONTHS ENDED DECEMBER 31, 2003
9. SUBSEQUENT EVENTS
RECAPITALIZATION
On January 17, 2005, Family Home Health Services, Inc. (the "Corporation"),
an inactive public shell company formerly known as Myocash, Inc., issued an
aggregate of 20,000,000 shares of its common stock to the members of the
Company in exchange for all of the members' outstanding membership
interests in the Company. Also in connection with the transaction, the
Corporation's former sole shareholder transferred an aggregate of 4,050,000
shares of common stock to the former members of the Company for no
additional consideration. Concurrent with the above transactions, the
former members of the Company became officers of the Corporation (the
former members of the Company were appointed to the Board of Directors of
the Corporation in November 2004). For accounting purposes, the transaction
has been treated as a recapitalization of the Company with the Company as
the acquirer (i.e., a reverse acquisition).
Since the transaction is considered a recapitalization and not a business
combination for accounting purposes, no proforma information is presented
but if presented, would be essentially the same as the operating results
presented herein since Myocash, Inc. had virtually no activity. The Company
(now known as Family Home Health Services, Inc.) expects that its common
shares will begin trading on the OTCBB stock exchange sometime during the
third fiscal quarter of 2005.
ACQUISITION
On July 1, 2005, the Corporation entered into a purchase agreement with two
officers and directors of the Corporation, pursuant to which the
Corporation acquired a 50% interest in FHHS, LLC, a Michigan limited
liability company ("FHHS"). The purchase price for this collective interest
included $200,000 in cash and the issuance of 372,670 shares of the
Corporation's common stock having an estimated fair value of approximately
$600,000. Concurrently, the Corporation entered into a purchase agreement
with Home Care Partners, LLC, a Michigan limited liability company,
pursuant to which the Corporation acquired the remaining 50% interest in
FHHS. The purchase price for this interest was the issuance of a $450,000
note, payable in monthly installments of approximately $33,000, including
interest at 8.0%, through August 2006. FHHS is a provider of a variety of
home healthcare services, primarily in Southeastern Michigan, for both
Medicare and private-pay patients. FHHS has one office in its region and
employs approximately 30 healthcare professionals.
-12-
FAMILY HOME HEALTH SERVICES, LLC
NOTES TO FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 2004 AND FOUR MONTHS ENDED DECEMBER 31, 2003
REPAYMENT OF ADVANCES FROM MEMBER
In March and April 2005, the Company repaid two notes payable in the
amounts of $135,000 and $165,000, respectively, in full satisfaction of
cash advances made by one of the Company's members.
* * * * * *
-13-
EXHIBIT INDEX
EX NO. DESCRIPTION
- ------ -----------
16.1 Letter from Michael Johnson & Co. LLC dated August 12, 2005.