SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2005
[ ] TRANSITION REPORT PURSUANT SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to _________
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 NO.)
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)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities and 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. Yes [X] No [ ]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
Number of shares of Registrant's shares of beneficial interest outstanding as of
June 30, 2005. 26,250,000
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets as of June 30, 2005 (unaudited), December 31, 2004 and June 30, 2004 (unaudited) 1
Statements of Operations for the three months ended June 30, 2005 and 2004 2
Statements of Cash Flows for the three months ended June 30, 2005 and 2004 3
Notes to Interim Financial Statements 4-6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7-10
Item 3. Quantitative and Qualitative Disclosures About Market Risk 11
Item 4. Controls and Procedures 11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 11
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 11
Item 3. Defaults upon Senior Debentures 11
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 5. Other Information 11
Item 6. Exhibits 12
PART I. -- FINANCIAL INFORMATION
FAMILY HOME HEALTH SERVICES INC.
BALANCE SHEETS
(UNAUDITED) (UNAUDITED)
JUNE 30, DECEMBER 31, JUNE 30,
2005 2004 2004
---------------- -------------- --------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 703,781 $ 209,088 $ 423,620
Accounts receivable 1,626,368 1,782,127 1,247,789
Current portion of advances to affiliates 200,000 200,000 200,000
Prepaid expenses and other current assets 185,067 177,562 11,842
---------------- -------------- -----------
TOTAL CURRENT ASSETS 2,715,216 2,368,777 1,883,251
Advances to affiliates, net of current portion 271,375 141,931 64,829
Net property and equipment 242,293 37,549 89,709
Other assets 298,821 23,042 14,993
---------------- -------------- -----------
TOTAL ASSETS $ 3,527,705 $ 2,571,299 $ 2,052,782
================ ============== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 272,382 $ 361,748 $ 175,497
Current portion of long-term debt 47,457 46,295 44,561
Current portion of capital lease obligation 19,314 - -
Accrued compensation 578,631 209,669 228,421
Accrued expenses 122,991 250,000 119,000
Income taxes payable 260,000 - -
Advances from third-party payors 566,056 281,666 355,128
Advances from related party - 300,000 300,000
Advances from affiliate 21,034 21,034 110,094
---------------- -------------- -----------
TOTAL CURRENT LIABILITIES 1,887,865 1,470,412 1,332,701
Long-term debt, net of current portion 143,419 167,478.00 191,457
Capital lease obligation, net of current portion 71,212 - -
---------------- -------------- -----------
TOTAL LIABILITIES 2,102,496 1,637,890 1,524,158
STOCKHOLDERS' EQUITY
Common stock, $.001 par value; authorized 50,000,000 shares,
issued and outstanding 26,250,000 shares 26,250 - -
Additional paid-in capital 200 200 200
Retained earnings 1,398,759 933,209 528,424
---------------- -------------- -----------
TOTAL STOCKHOLDERS' EQUITY 1,425,209 933,409 528,624
---------------- -------------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 3,527,705 $ 2,571,299 $ 2,052,782
================ ============== ===========
The accompanying notes are an integral part of these interim financial
statements.
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FAMILY HOME HEALTH SERVICES INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
-------------------------------------------------------------------------
THREE MONTHS ENDED SIX MONTHS ENDED
------------------------------------- -------------------------
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
2005 2004 2005 2004
------------- ----------- ----------- -----------
REVENUE
Net Medicare patient service revenue $ 3,494,920 $ 2,650,887 $ 7,334,552 $ 4,814,436
Management fee income and other revenues 152,308 120,833 281,963 233,107
------------- ----------- ----------- -----------
TOTAL REVENUE 3,647,228 2,771,720 7,616,515 5,047,543
Cost of services sold 1,328,924 903,092 2,644,463 1,725,623
------------- ----------- ----------- --------------
GROSS PROFIT 2,318,304 1,868,628 4,972,052 3,321,920
Selling, general and administrative expenses 2,372,726 1,318,400 4,200,449 2,434,217
------------- ----------- ---------- --------------
OPERATING INCOME (LOSS) (54,422) 550,228 771,603 887,703
OTHER INCOME (EXPENSE)
Loss on disposal - - - (347,000)
Interest expense 7,090) (15,031) (19,803) (24,937)
------------- ----------- ----------- -----------
INCOME (LOSS) BEFORE INCOME TAXES (CREDIT) (61,512) 535,197 751,800 515,766
Income tax expense (credit) (20,000) - 260,000 -
------------- ----------- ----------- -----------
NET INCOME (LOSS) $ (41,512) 535,197 $ 491,800 515,766
============= ===========
Amount to reflect proforma income tax
expense for change in tax status 104,500 209,000
----------- -----------
PROFORMA NET INCOME AFTER INCOME TAXES FOR
CHANGE IN TAX STATUS $ 430,697 $ 306,766
=========== ===========
BASIC EARNINGS PER SHARE:
Weighted average shares outstanding 26,250,000 26,250,000 26,250,000 26,250,000
NET INCOME (LOSS) PER SHARE $ (0.00) $ 0.02 $ 0.02 $ 0.01
============= =========== =========== ===========
The accompanying notes are an integral part of these interim financial
statements.
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FAMILY HOME HEALTH SERVICES INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
------------------------------------------
SIX MONTHS SIX MONTHS
ENDED ENDED
JUNE 30, JUNE 30,
2005 2004
--------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 491,800 $ 515,766
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization 19,472 20,019
Loss on disposal of software and other assets 347,000
Changes in assets and liabilities that provided (used) cash
Accounts receivable 155,759 (452,197)
Prepaid expenses and other current assets (7,505) 27,076
Other assets (275,779) (3,985)
Accounts payable (89,366) 27,732
Advances from third-party payors 284,390 135,942
Income taxes payable 260,000 -
Accrued expenses and other current liabilities 241,953 92,331
---------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 1,080,724 709,684
---------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (126,216) (190,972)
Advances to affiliates (129,444) (264,829)
---------- ---------
NET CASH USED IN INVESTING ACTIVITIES (255,660) (455,801)
---------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Capital contributions 100
Repayments on long-term debt (22,897) (10,982)
Repayments on capital lease (7,474) -
(Repayments on) net advances from related-party (300,000) 175,000
(Repayments on) net advances from affiliate - (23,500)
Dividends paid - (180,000)
---------- ---------
NET CASH USED IN FINANCING ACTIVITIES (330,371) (39,382)
---------- ---------
Increase in cash and cash equivalents 494,693 214,501
Cash and cash equivalents, beginning of period 209,088 209,119
---------- ---------
Cash and cash equivalents, end of period $ 703,781 $ 423,620
========== =========
The accompanying notes are an integral part of these interim financial
statements.
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NOTES TO INTERIM UNAUDITED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited financial statements of Family Home Health Services,
Inc. (the "Company") have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-QSB and Article 10 of Regulation S-X. Accordingly, they
do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the opinion
of management, all adjustments (consisting only of normal recurring accruals
with the exception of the loss referred to in Note 10) considered necessary for
a fair presentation have been included.
Operating results for the six months ended June 30, 2005 are not necessarily
indicative of the results that may be expected for the year ending December 31,
2005. The Company's business normally experiences some seasonality in its
operations. In general, operating income tends to be lower in the second and
third quarters due to the seasonality of the senior population in the Company's
South Florida markets. For further information, refer to the financial
statements and footnotes included in the Company's recent 8-K/A filing dated
August 15, 2005 which contained audited financial statements for the year ended
December 31, 2004.
NOTE 2 - 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.
NOTE 3 - RECLASSIFICATION
Certain amounts in the June 30, 2004 unaudited financial statements have been
reclassified to conform to the classifications used in the current period.
NOTE 4 - COMMITMENTS
Employment Agreement: The Company had an employment agreement with a regional
clinical manager that extended through January 2009. The employment agreement
specified a base salary and contained a covenant not-to-compete that extended
through a period up to five years after the expiration or termination of the
employment agreement. Effective May 20, that agreement was terminated by mutual
consent of both parties. All future compensation and payments under the
resulting termination agreement have been accrued as of June 30, 2005.
NOTE 5 - 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.
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NOTE 6 - RECAPITALIZATION
Prior to January 17, 2005, the Company was an inactive public shell company
formerly known as Myocash, Inc. On January 17, 2005, Family Home Health
Services, LLC (the "LLC") completed a reverse acquisition with the Company. The
newly combined company issued an aggregate of 20,000,000 shares of its common
stock to the members of the LLC in exchange for all of the members' outstanding
membership interests in the LLC. Also in connection with the transaction, the
Company's former sole shareholder transferred an aggregate of 4,050,000 shares
of common stock to the former members of the LLC for no additional
consideration. Concurrent with the above transactions, the former members of the
LLC became officers of the Company (the former members of the LLC were appointed
to the Board of Directors of the Company in November 2004). For accounting
purposes, the transaction has been treated as a recapitalization of the Company
with the LLC 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 (other than shown in Note 9) is
presented. If the proforma information were presented, however, the results
would essentially be the same as reported in Note 9 since Myocash, Inc. had
virtually no activity. The Company expects that its shares will begin trading on
the OTCBB stock exchange during the third quarter of 2005.
NOTE 7 - RECENTLY ISSUED ACCOUNTING STANDARDS
In April 2005, the Securities and Exchange Commission adopted a new rule that
amends the compliance dates for implementation of the Financial Accounting
Standard Board's ("FASB") Statement of Financial Accounting Standards No. 123
(revised 2004), Share-Based Payment ("SFAS No. 123R"). The Statement requires
that compensation cost relating to share-based payment transactions be
recognized in financial statements and that this cost be measured based on the
fair value of the equity or liability instruments issued. SFAS No. 123R covers a
wide range of share-based compensation arrangements including share options,
restricted share plans, performance-based awards, share appreciation rights, and
employee share purchase plans. The Company will adopt SFAS No. 123R on January
1, 2006 and is currently evaluating the impact the adoption of the standard will
have on the Company's results of operations.
NOTE 8 - COMPUTATIONS OF EARNINGS PER SHARE
Earnings per share is computed using the weighted average number of common
shares outstanding during each period. There are no adjustments required to be
made for purposes of computing diluted earnings per common share since the
Company has no common stock equivalents; accordingly, only basic earnings per
share are disclosed. For the six months ended June 30, 2005 and 2004, the
weighted average numbers of shares outstanding were 26,250,000 and 0,
respectively (see Note 9).
-5-
NOTE 9 - PROFORMA FINANCIAL INFORMATION
Assuming the Company was subject to income taxes at a 34% rate and assuming an
equivalent number of common shares outstanding, proforma operating results for
the six months ended June 30, 2004 are as follows:
Net income for the six months ended June 30, 2004 $ 515,766
Proforma income taxes (209,000)
----------
Proforma net income $ 306,766
==========
Basic earnings per share:
Weighted average shares outstanding 26,250,000
Proforma net income per share $ 0.02
==========
NOTE 10 - LOSS ON 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 4). During 2004, the Company determined that the software
was not suitable for its intended purpose and other assets had little, if any,
future benefit. Accordingly, the Company wrote off the entire acquisition cost
as a loss which is presented below operating results in the accompanying 2004
interim financial statements.
NOTE 11 - SEGMENT INFORMATION
The Company currently operates in one business segment defined by management as
providing home health care services to Medicare eligible patients in the State
of Florida.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following section contains statements that are not historical facts and are
forward-looking statements within the meaning of Section 27A of the Securities
Act and Section 21E of the Exchange Act. Our actual results may differ
materially from those included in the forward-looking statements. We intend
these forward-looking statements to be covered by the safe-harbor provisions for
forward-looking statements contained in the Private Securities Litigation Reform
Act of 1995, and are including this statement for purposes of complying with
those safe-harbor provisions. Forward-looking statements, which are based on our
assumptions and describe future plans, strategies and expectations for
ourselves, are generally identifiable by use of the words "believe," "expect,"
"intend," "anticipate," "estimate," "project," "prospects," or similar
expressions as well as any statements referring to the plan of liquidation or
possibility thereof. Our ability to predict results or the actual effect of our
future plans or strategies is inherently uncertain. Factors which could have a
material adverse affect on our operations and our future prospects on a
consolidated basis include, without limitation, the following:
- our compliance with laws and regulations applicable to health care
providers;
- changes in Medicare reimbursement levels and reimbursement rates from
other third parties;
- our ability to manage our growth;
- our ability to recruit and retain an adequate number of health care
professionals;
- our ability to generate sufficient patient volumes and control the
costs of providing patient services;
- competition from other home health care providers;
- the effectiveness of our software programs and computer networks;
- general economic and market conditions; and,
- the effects of seasonality on our operations.
These risks and uncertainties should be considered in evaluating forward-looking
statements and undue reliance should not be placed on such statements.
Additional information concerning us and our business, including additional
factors that could materially affect our financial results, is included herein
and in our other filings with the SEC.
CRITICAL ACCOUNTING POLICIES
The Company has identified the following accounting policies that require
significant judgment. We believe our judgments relating to revenue recognition
and the collectibility of accounts receivable are appropriate.
Revenue recognition under the Prospective Payment System ("PPS") for Medicare
reimbursement is 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. Initial
Medicare billings under PPS are initially recognized as deferred revenue and are
subsequently amortized into revenue over the episodic period. Revenue is subject
to adjustment during this period if there are significant changes in the
patient's
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condition or if minimum visit criteria are not performed 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.
RESULTS OF OPERATIONS
COMPARISON OF THE THREE MONTHS ENDED JUNE 30, 2005 TO THE THREE MONTHS ENDED
JUNE 30, 2004.
Revenue: For the three months ended June 30, 2005, net patient service revenue
increased $875,000 to $3,840,000, a 32% increase over the same period in 2004.
The increase was mainly attributable to a maturation and expansion of our
business development efforts in markets that were started in early 2004. Those
efforts led to a steady increase in the number of patient episodes that were
serviced during the second quarter of 2005.
Gross Profit: Gross profit margin decreased to 63.6% for the three months ended
June 30, 2005 from 67.4% for the three months ended June 30, 2004. This decrease
was mainly attributable to lower utilization of new salaried clinical staff that
have been added to service the Company's rapid growth.
Selling, General and Administrative Expenses: For the three months ended June
30, 2005, selling, general and administrative expenses increased approximately
$1,050,000 to $2,372,000 over the same period in 2004. This 80% increase was
directly attributable to increases in salary and benefits paid to business
development and clinical management staff hired to procure and process the
growing patient census at each of our branches. Additional corporate resources
were also hired to support our growing local operations and to advise our
management team regarding the Company's entrance into the public market.
Operating Income: As a result of the foregoing, operating income decreased over
$600,000, or 109% to a $50,000 operating loss for the three months ended June
30, 2005 from operating income of $337,000 for the three months ended June 30,
2004.
Other Income (Expense): For the three months ended June 30, 2005, interest
expense decreased by over 50% compared to the same period in 2004 due to the
repayment of advances from a related party. In January 2004, the company
acquired software and other assets that were later determined to be unsuitable
for their intended purpose and to possess little, if any, future benefit.
Accordingly, the full acquisition cost of $347,000 was written off during the
quarter ended March 31, 2004 as other expense.
-8-
Income Taxes: Income tax credits for the three months ended June 30, 2005 were
$20,000 and consisted of estimated taxable losses at an effective tax rate of
34%. Prior to January 2005, the Company was treated as a partnership for federal
income tax purposes. Thus, the three months ended June 30, 2004 included no
provision for income taxes. See Note 9 to the accompanying interim financial
statements for the proforma effect on income taxes assuming the Company had been
subject to income taxes in 2004.
Net Income: Net income decreased $575,000 to a loss of $40,000 in the three
months ended June 30, 2005 from net income of $535,000 during the first three
months of 2004.
The rate of inflation had no material effect on operations for the three months
ended June 30, 2005 or 2004.
COMPARISON OF THE SIX MONTHS ENDED JUNE 30, 2005 TO THE SIX MONTHS ENDED JUNE
30, 2004.
Revenue: For the six months ended June 30, 2005, net patient service revenue
increased $2,570,000 to $7,616,000, a 50% increase over the same period in 2004.
The increase was mainly attributable to a maturation and expansion of our
business development efforts in markets that were started in early 2004. Those
efforts led to a sizeable increase in the number of patient episodes that were
serviced during the first half of 2005.
Gross Profit: Gross profit margin decreased to 65.3% for the six months ended
June 30, 2005 from 65.8% for the six months ended June 30, 2004. This .5%
decrease was caused by second quarter growth issues described in the
aforementioned section on the results from the three months ended June 30,
2005.
Selling, General and Administrative Expenses: For the six months ended June 30,
2005, selling, general and administrative expenses increased approximately
$1,766,000 to $4,200,000 over the same period in 2004. This 72% increase was
directly attributable to increases in salary and benefits paid to business
development and clinical management staff hired to procure and process the
growing patient census at each of our branches. Additional corporate resources
were also hired to support our growing local operations and to advise our
management team regarding the Company's entrance into the public market.
Operating Income: As a result of the foregoing, operating income decreased over
$115,000, or 13% to $770,000 for the six months ended June 30, 2005 from
$885,000 for the six months ended June 30, 2004.
Other Income (Expense): Interest expense dropped by nearly 25% during the
comparative periods as the Company's debt structure was reduced through the
repayment of related party advances at the beginning of the second quarter. In
January 2004, the Company acquired software and other assets that were later
determined to be unsuitable for their intended purpose and to possess little, if
any, future benefit. Accordingly, the full acquisition cost of $347,000 was
written off during the quarter ended March 31, 2004 as other expense.
-9-
Income Taxes: Income tax expense for the six months ended June 30, 2005 was
$260,000 and consisted of estimated taxable income at an effective tax rate of
34%. Prior to January 2005, the Company was treated as a partnership for federal
income tax purposes. Thus, the six months ending June 30, 2004 included no
provision for income taxes. See Note 9 to the accompanying interim financial
statements for the proforma effect on income taxes assuming the Company had been
subject to income taxes in 2004.
Net Income: Net income decreased $25,000 to $490,000 in the six months ended
June 30, 2005 from $515,000 during the first six months of 2004.
The rate of inflation had no material effect on operations for the six months
ended June 30, 2005 or 2004.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents increased by $280,000 to approximately $704,000 at
June 30, 2005 from $424,000 at June 30, 2004. At June 30, 2005, working capital
was $827,000, an increase of approximately $277,000 over June 30, 2004.
The Company provided net cash from operating activities of $1,080,000 during the
six months ended June 30, 2005, up from $710,000 for the same period in 2004.
The 2005 operating cash resulted from $490,000 in net income during the period
plus approximately $590,000 in positive cash flows from increases in advances
from third-party payors, income tax obligations and accrued expenses. As a
whole, changes in other segments of current assets and liabilities had
offsetting impact on operating cash flows during the six months ended June 30,
2005. The 2004 operating cash resulted principally from $515,000 in net income
during the period. As a whole, changes in other segments of current assets and
liabilities had approximately $152,000 of negative impact on operating cash
flows during the six months ended June 30, 2004.
Cash outflows from investing activities totaled $255,000 and $455,000,
respectively, for the six months ended June 30, 2005 and 2004. Investing
activity in both periods consisted of equipment purchases and advances to
affiliates.
Cash used in financing activities totaled $330,000 for the six months ended June
30, 2005 and consisted of repayments on related party advances and payments on
long-term debt and capital leases. The cash flow statement for June 30, 2005
does not reflect a non-cash transaction of approximately $100,000 in which the
Company financed the purchase of certain phone equipment under two capital
leases. Net cash used in financing activities totaled $40,000 for the same six
month period in 2004, consisting of proceeds from related party advances less
cash distributions.
The Company's working capital needs consist primarily of support for operations
such as salaries and normal vendor payments. The nature of the Company's
business requires bi-weekly payments to healthcare personnel at the time patient
services are rendered. The Company typically receives payments for these
services within a range of 90 days with respect to Medicare programs. The
Company's line of business is not capital intensive with the exception of
expenditures for software and computer equipment. The Company intends to fund
its short-term and long-term liquidity needs through a combination of
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current cash balances, cash flows from operations or future financing
arrangements such as traditional credit facilities or capital leases.
OFF-BALANCE SHEET ARRANGEMENTS
The Company had not entered into any material off-balance sheet arrangements as
of June 30, 2005 and 2004.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As of June 30, 2005 and 2004, the Company had no investments that were subject
to material market risk and had no debt or credit facilities that were interest
rate sensitive.
ITEM 4. CONTROLS AND PROCEDURES
We carried out an evaluation, under the supervision and with the participation
of our management, including our President and Chief Executive Officer along
with our Chief Financial Officer, of the effectiveness of the design and
operation of our disclosure controls and procedures as of the end of our second
fiscal quarter of 2005 pursuant to Exchange Act Rule 13a-15(b). Based upon that
evaluation, our President and Chief Executive Officer along with our Chief
Financial Officer concluded, subject to the following paragraph, that our
disclosure controls and procedures were effective.
In our Report on Form 10-QSB for the quarter ended March 31, 2005, we disclosed
certain deficiencies with respect to the Company's software program for tracking
revenue and accounts receivable. During the period of this report, management
implemented several measures to address those deficiencies, including the
implementation of new software programs and systems that process revenues and
accounts receivable. In addition, the Company expanded the size of its financial
staff through the employment of a controller. As a result of taking these
corrective actions, management believes that the deficiencies identified have
been remediated, enabling our Chief Executive Officer and Chief Financial
Officer to conclude that as of the date of this report, our disclosure controls
and procedures were effective in timely alerting them to material information to
be included in this quarterly report.
Except for the corrective measures set forth above, there have been no changes
in our internal control over financial reporting identified in connection with
our evaluation that occurred during the second quarter of 2005 that have
materially affected, or are reasonably likely to materially affect, our internal
control over financial reporting.
-11-
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item 3. Defaults Upon Senior Debentures.
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information.
None.
Item 6. Exhibits.
See Exhibit Index for a description of the documents that are filed as Exhibits
to this report on Form 10-Q or incorporated by reference herein.
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, there unto
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
/s/ James M. Mitchell
-------------------------------
By: James M. Mitchell
Its: Chief Financial Officer and
Treasurer
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EXHIBIT INDEX
31.1 Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
31.2 Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
32.1 Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
32.2 Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.