UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
November 4, 2011
Date of Report (Date of earliest event reported)
Medytox Solutions, Inc.
(Exact name of registrant as specified in its charter)
Nevada
(State or Other Jurisdiction of Incorporation)
000-54346
(Commission File Number)
54-2156042
(IRS Employer Identification No.)
400 S. Australian Ave., Suite 800, West Palm Beach, Florida 33401
(Address of Principal Executive Offices and Zip Code)
(954) 684-8288
(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 (17 CFR 240.14d-2(b))
[__] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c)
Section 1 - Registrant's Business and Operations
Item 1.01 Entry into a Material Definitive Agreement.
<page>
Acquisition of Trident Laboratories, Inc.
As previously reported on October 26, 2011, Medytox Institute of
Laboratory Medicine, Corp. ("Medytox"), a wholly owned subsidiary of
registrant, Casino Players, Inc. (the "Company"), entered into an agreement
(the "Agreement") for the purchase of up to eighty-one percent (81%) of the
issued and outstanding equity ownership interests of Trident Laboratories,
Inc. ("Trident") from its shareholders ("Shareholders"). Trident is a Florida
corporation maintaining its principal place of business at 6011 Rodman Street,
Suite 107, Hollywood, Florida 33032.
As of the signing of the agreement, Trident assigned 49% of the stock to
escrow for the benefit of Medytox and consented to perform testing on behalf
of Medytox. Upon payment of the $500,000 note Medytox will receive the 49% of
the stock plus an additional 32% from the shareholders of Trident and Medytox
will own 81% of the Trident. Until the note is paid in full the former
shareholders of Trident will be allowed to keep 100% of the profits of their
existing and future non-Medytox testing after a fair allocation of operating
costs.
Medytox offers to purchase the remaining 19% from the shareholders of
Trident, after 24 months of combined operations, for consideration equal to
three (3) times the annual profits as determined from audited financial
statements. This offer expires after 36 months.
The Company filed audited financial statements for the years ended
December 31, 2010 via Form 8-K on November 4, 2011. Trident was organized in
December 2009 and started operations in March 2010. Only the 2010 statements
were audited. The balances at August 22, 2011 are as yet unaudited.
Medytox. accounted for the assets, liabilities and ownership interests
in accordance with the provisions of ASC 805, Business Combinations for
acquisitions occurring in years beginning after December 15, 2008 (formerly
SFAS No. 141R, Business Combinations). As such, the recorded assets and
liabilities acquired have been recorded at fair value and any difference in
the net asset values and the consideration given has been recorded as a gain
on acquisition or as goodwill. The unaudited values as of the date of
agreement are as follows:
2
<page>
August 22, 2011 (Unaudited)
Cash $848
Accounts receivable 119,477
Other current assets 24,596
Fixed assets 131,714
Goodwill 500,000
-
Total assets purchased $776,636
Account Payables $44,861
Accrued liabilities 11,287
Related party loans 72,091
LT Liabilities 50,799
Equity 97,598
Note 500,000
Total liabilities assumed and
consideration given $776,636
Pro forma results of operations for the years ended December 31, 2010
and 2009 as though this acquisition had taken place at January 1, 2009 are as
follows:
Year ended December 31, 2009 Year ended December 31, 2010
Revenues $11,082 $415,823
Net Income (loss) $(54,500) $(225,643)
Earnings per share $(0.00) $(0.01)
The unaudited balance sheet and pro forma results disclosed in the
tables above are based on various assumptions and are not necessarily
indicative of the results of the financial position or operations that would
have occurred had the Company completed this acquisition on January 1, 2009 or
2010. The acquired balance sheet above is subject to revision during the year
end audit.
Acquisition of Medical Billing Choices, Inc.
As previously reported, on October 27, 2011, Medytox Solutions, Inc.
(OTCBB: "MMMS"), f/k/a Casino Players, Inc. (the "Company",), entered into an
agreement (the "Agreement") for the purchase of all issued and outstanding
equity ownership interests of Medical Billing Choices, Inc. a/k/a TA ARC
Medical Billing ("MBC") from its shareholders ("Shareholders"). MBC is a
corporation maintaining its principal place of business at 814 Tyvola Road,
Suite 116, Charlotte, North Carolina 28217.
As of the signing of the agreement, MBC assigned 49% of the stock to
escrow for the benefit of the Company and assumed the duties of billing the
medical services provided by any subsidiary of the Company. Upon payment of
the $750,000 note the Company will receive the 49% of the stock and the
remaining 51% from the shareholders of MBC and the Company will own 100% of
the MBC. Until the note is paid in full the former shareholders of MBC will
be allowed to keep 100% of the profits of their existing and future non-
Company billings.
The Company filed audited financial statements for the years ended
December 31, 2010 and December 31, 2009 via Form 8-K on November 4, 2011. The
balances at August 22, 2011 are as yet unaudited.
The Company accounted for the assets, liabilities and ownership
interests in accordance with the provisions of ASC 805, Business Combinations
for acquisitions occurring in years beginning after December 15, 2008
(formerly SFAS No. 141R, Business Combinations). As such, the recorded assets
and liabilities acquired have been recorded at fair value and any difference
in the net asset values and the consideration given has been recorded as a
gain on acquisition or as goodwill. The unaudited values as of the date of
agreement are as follows:
3
<page>
August 22, 2011 (Unaudited)
Cash $80,073
Accounts receivable 15,550
Fixed assets 51,897
Goodwill 812,688
-
Total assets purchased $960,208
Accrued liabilities $58,160
LT Liabilities 52,048
Cash paid 100,000
Installment note given 750,000
-
Total liabilities assumed and
consideration given $960,208
Pro forma results of operations for the years ended December 31, 2010 and 2009
as though this acquisition had taken place at January 1, 2009 are as follows:
Year ended December 31, 2009 Year ended December 31, 2010
Revenues $501,092 $422,810
Net Income (loss) $(42,374) $(358,350)
Earnings per share $(0.00) $(0.01)
The unaudited balance sheet and pro forma results disclosed in the tables
above are based on various assumptions and are not necessarily indicative of
the results of the financial position or operations that would have occurred
had the Company completed this acquisition on January 1, 2009 or 2010. The
acquired balance sheet above is subject to revision during the year end audit.
Pro-forma results of the acquisitions of Medical Billing Choices, Inc and
Trident Laboratories, Inc by Medytox Solutions, Inc and Subsidiary
Pro forma results of operations for the years ended December 31, 2010 and 2009
as though both acquisition had taken place at January 1, 2009 are as follows:
Year ended December 31, 2009 Year ended December 31, 2010
Revenues $501,092 $761,042
Net Income (loss) $(42,374) $(256,952)
Earnings per share $(0.00) $(0.01)
Shares outstanding 30,456,700 32,465,300
Section 2 - Financial Information
Item 2.01 Completion of Acquisition of Disposition of Assets.
See above.
4
<page>
The Trident Laboratories, Inc. Acquisition
Shareholders involved in the transaction include Michele M. Steegstra,
Christopher K. Hawley, Donnette W. Hawley, Skyler V. Lukas and Michael J.
Falestra. There are no material relationships between the Company, Medytox or
their respective affiliates and any of the parties to the Agreement, other
than with respect to the Agreement.
The Medical Billing Choices, Inc. Transaction
The sole Shareholder of Medical Billing Choices, Inc. who entered into the
agreement to sell his shares of common stock is Mike Nicholson. There are no
material relationships between the Company, or its affiliates and any of the
parties to the Agreement, other than with respect to the Agreement. The funds
utilized to date in effectuating the purchase were derived from operating
revenue of Company subsidiary, Medytox Institute of Laboratory Medicine, Inc.
and a loan received from an unaffiliated entity known as Valley View Drive
Associates, LLC, a New Jersey limited liability company.
Section 9 - Financial Statements and Exhibits
Item 9.01 Financial Statements and Exhibits.
(a) Exhibit 10.1 - Agreement between Trident Laboratories, Inc., et al. and
Medytox Institute of Laboratory Medicine, Corp. dated August 22, 2011.
(b) Exhibit 10.2 - Agreement between Medical Billing Choices, Inc., et al.
and Casino Players, Inc. n/k/a Medytox Solutions, Inc. dated August 22, 2011.
(c) Financial Statements of Trident Laboratories, Inc.
(d) Financial Statements of Medical Billing Choices, Inc.
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 hereunto duly authorized.
MEDYTOX SOLUTIONS, INC.
DATED: November 4, 2011. By: /s/: William G. Forhan
William G. Forhan, CEO, CFO and Chairman,
(Principal Executive Officer)
(Principal Financial and Accounting Officer)
5
<page>
Trident Laboratories, Inc.
Financial Statements
December 31, 2010
F-1
<page>
Table of Contents
Report of Independent Registered Public Accounting Firm 2
Balance Sheet as of December 31, 2010 3
Statements of Operations and Changes in Stockholders' Equity
For the year ended December 31, 2010 4
Statements of Cash Flows for the year ended
December 31, 2010 5
Notes to the Financial statements 6 - 11
F-2
<page>
Peter Messineo
Certified Public Accountant
1982 Otter Way Palm Harbor FL 34685
peter@pm-cpa.com
T 727.421.6268 F 727.674.0511
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and
Shareholders of Trident Laboratories, Inc.:
I have audited the accompanying balance sheet of Trident Laboratories, Inc. as
of December 31, 2010 and the related statements of operations and changes in
stockholders' equity and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. My
responsibility is to express an opinion on these financial statements based on
my audit.
I conducted my audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that I
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. The Company is not
required at this time, to have, nor was I engaged to perform an audit of its
internal control over financial reporting. My audit included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose
of expressing an opinion on the effectiveness of the Company's internal
controls over financial reporting. Accordingly, I express no such opinion. 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. I believe
that my audit provided a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Trident Laboratories, Inc. as
of December 31, 2010 and the results of its operations for the year then ended
in conformity with accounting principles generally accepted in the United
States of America.
/s/ Peter Messineo, CPA
Peter Messineo, CPA
Clearwater, Florida
November 4, 2011
F-3
<page>
Trident Laboratories, Inc.
Balance Sheet
December 31, 2010
Assets
Current assets
Cash $69
Accounts receivable 119,476
Other current assets 4,000
Total current assets 123,545
Property & equipment, net of accumulated
depreciation of $1,278 76,661
Total Assets $200,206
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable $24,878
Accrued expenses 10,230
Notes payable 19,544
Total current liabilities 54,652
Notes payable, net of current portion 44,156
Total liabilities 98,808
Stockholders' Equity
Common stock, no par value, 1,000 shares
authorized; 1,000 issued and outstanding 1,000
Subscriptions receivable (1,000)
Retained earnings 101,398
Total stockholders' equity 101,398
Total Liabilities and Stockholders' Equity $200,206
The accompanying notes are an integral part of these financial statements.
F-4
<page>
Trident Laboratories, Inc.
Statement of Operations
For the Year Ended December 31, 2010
Revenues $338,232
Operating expenses:
Compensation 105,159
Consulting 29,070
Professional fees 1,000
General and administrative 100,327
Amortization and depreciation 1,278
Total operating expenses 236,834
Net income from operations before income taxes 101,398
Provision for income taxes -
Net income $101,398
The accompanying notes are an integral part of these financial statements.
F-5
<page>
Trident Laboratories, Inc.
Statement of Stockholders' Equity
<table>
<s> <c> <c> <c> <c> <c>
Stock-
Common Subscription Retained Holders'
shares Value Receivable Earnings Equity
Balance at December 31, 2009 - $- $- $- $-
Initial capitalization 1,000 1,000 (1,000) -
Net income 101,398 101,398
Balance at December 31, 2010 1,000 $1,000 $(1,000) $101,398 $101,398
</table>
The accompanying notes are an integral part of these financial statements.
F-6
<page>
Trident Laboratories, Inc.
Statement of Cash Flows
For the Year Ended
December 31,
2010
Cash Flows from Operating Activities:
Net income $ 101,398
Adjustment to reconcile net income to net
cash provided by operations:
Depreciation 1,278
Changes in assets and liabilities:
Accounts receivable (119,477)
Other current assets (4,000)
Accounts payable 24,878
Accrued expenses 10,231
Net Cash Provided by Operating Activities 14,308
Cash Flows from Investing Activities:
Purchase of property and equipment (14,239)
Net Cash (Used) in Operating Activities (14,239)
Net increase in Cash 69
Cash at beginning of period -
Cash at end of period $69
Supplemental cash flow information:
Interest paid $-
Taxes paid $-
Non-cash transactions:
Purchase of vehicle through direct financing $63,700
The accompanying notes are an integral part of these financial statements.
F-7
<page>
TRIDENT LABORATORIES, INC
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2010 and 2009
1. Description of Business
Trident Laboratories, Inc., ("Trident" or the "Company") was organized under
the laws of Florida in December 2009, with an effective date of January 1,
2010. The Company started operations in May 2010 as a medical testing
laboratory. The Company performs testing on a contract basis for medical and
business entities through-out Florida. The Company operates as an S-
Corporation for corporate tax purposes.
2. Accounting Policies and Basis of Presentation
Basis of Presentation
The Financial Statements and related disclosures have been prepared pursuant
to the rules and regulations of the Securities and Exchange Commission
("SEC"). The Financial Statements have been prepared using the accrual basis
of accounting in accordance with Generally Accepted Accounting Principles
("GAAP") of the United States.
Use of Estimates
The preparation of the Company's financial statements in conformity with
accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the amounts reported
in these financial statements and accompanying notes. Actual results could
differ from those estimates.
Financial Instruments
The carrying amounts of cash, receivables and current liabilities approximated
fair value due to the short-term maturity of the instruments. Debt
obligations, when present, are carried at cost, which approximate fair value
due to the prevailing market rate for similar instruments.
Fair Value Measurement
All financial and nonfinancial assets and liabilities were recognized or
disclosed at fair value in the financial statements. This value was evaluated
on a recurring basis (at least annually). Generally accepted accounting
principles in the United States define fair value as the exchange price that
would be received for an asset or paid to transfer a liability (an exit price)
in the principal or most advantageous market for the asset or liability in an
orderly transaction between market participants on a measurement date. The
accounting principles also established a fair value hierarchy which required
an entity to maximize the use of observable inputs and minimize the use of
unobservable inputs when measuring fair value. Three levels of inputs were
used to measure fair value.
* Level 1: Quotes market prices in active markets for identical assets or
liabilities.
* Level 2: Observable market based inputs or unobservable inputs that were
corroborated by market data.
* Level 3: Unobservable inputs that were not corroborated by market data.
Cash and Cash Equivalents
For purposes of the statements of cash flows, the Company considers all highly
liquid investments with an original maturity of three months or less to be
cash equivalents. The Company maintains its cash deposits in major financial
institutions in the United States. At times deposits within a bank may exceed
the amount of insurance provided on such deposits. Generally, these deposits
are redeemed upon demand and, therefore, are considered by management to bear
minimal risk.
F-8
<page>
Accounts Receivable
Accounts receivable represent amounts due from customers in the ordinary
course of business from sales activities in each of the Company's market
segments. The Company considers accounts more than 90 days old to be past
due. The Company uses the allowance method for recognizing bad debts. When an
account is deemed uncollectible, it is written off against the allowance. The
Company generally does not require collateral for its accounts receivable. The
Company considers all accounts receivable to be collectable and consequently
has provided no allowance for doubtful accounts.
A portion of the receivables are with governmental payers and subject to
periodic review and adjustment.
Property, Plant and Equipment
Property, plant and equipment are stated at cost, less accumulated
depreciation. Depreciation is computed by applying the straight-line method to
the estimated useful lives of the related assets. Useful lives range from 3 to
7 years for office equipment medical equipment, furniture and fixtures.
Leasehold improvements are amortized over the shorter of the lease term or the
estimated useful life of the improvements. When property or equipment is
retired or otherwise disposed of, the net book value of the asset is removed
from the Company's balance sheet and the net gain or loss is included in the
determination of operating income. Property, plant and equipment acquired as
part of a business acquisition is valued at fair value.
Impairment of Long-Lived Assets
The Company evaluates the carrying value of its long-lived assets at least
annually. Impairment losses were recorded on long-lived assets used in
operations when indicators of impairment were present and the undiscounted
future cash flows estimated to be generated by those assets were less than the
assets' carrying amount. If such assets were impaired, the impairment to be
recognized was measured by the amount by which the carrying amount of the
assets exceeds the fair value of the assets. Assets to be disposed of were
reported at the lower of the carrying value or fair value, less costs to sell.
Revenue Recognition
The Company performs medical testing of samples supplied by medical and
corporate customers. Services are billed when the results are presented. The
company uses an outside billing agency to process the invoices. The services
are billed at the estimated reimbursement rates published by the various
payers. A portion of the services are with billed governmental payers and
subject to periodic review and retroactive adjustment.
Retroactive adjustment due to a Medicare or Medicaid review are considered to
be a change in the estimate and recorded in the period that the adjustment is
communicated to the Company. Adjustments are normal and recurring, and
generally communicated within reasonable time or within the billing period.
Adjustments are considered immaterial.
Advertising Costs
The costs of advertising are expensed as incurred. Advertising expenses are
included in the Company's operating expenses. Advertising costs for the year
ended December 31, 2010 was $458.
Income Taxes
A. For the year ended December 31, 2010 the Company had elected to be taxes
as an S-Corporation. As such, the taxable income is passed-through to the
owners and taxed on their return. Therefore no provision or benefit for
income taxes is provided in these statements. The Company follows the
guidance provided by FIN 48, Accounting for Uncertainty in Income Taxes, for
reporting uncertain tax provisions.
F-9
<page>
Effect of Recent Accounting Pronouncements
The Company reviews new accounting standards as issued. No new standards had
any material effect on the financial statements. Accounting pronouncements
issued subsequent to the date of these financial statements were considered
significant by management and evaluated for the potential effect on these
financial statements. Management does not believe any subsequent
pronouncements will have a material effect on these financial statements as
presented and does not anticipate the need for any future restatement of these
financial statements because of the retro-active application of any accounting
pronouncements issued subsequent to December 31, 2010 through the date these
financial statements were issued.
3. Notes Payable
The Company is party a vehicle loan. At December 31, 2010 notes payable
consisted of the following:
<table>
<s> <c>
December 31,
2011
Commercial loan with a finance company, dated December 10, 2010, in the
original amount of $63,700 and bearing interest at 8%. Principle and interest
payments in the amount of $2,000 are payable for 36 months ending on December
10, 2013. This note is secured by a lien on a vehicle with a carrying value of
$63,700 at December 31, 2010 63,700
63,700
Less current portion (19,544)
$44,156
</table>
Principal maturities of notes payables for the next five years and thereafter
are as follows:
Period ended December 31,
2012 $19,544
2013 21,167
2014 22,989
2015 -
2016 -
Thereafter -
$63,700
4. Related Party Transactions
The Company issued stock to organizing stockholders on a subscription
receivable. The subscription receivable is reported in the equity section as
a contra-account to the common stock. The subscription receivable for the
stockholders at December 31, 2010 was $1,000.
The amounts and terms of the above transactions may not necessarily be
indicative of the amounts and terms that would have been incurred had
comparable transactions been entered into with independent third parties.
5. Commitments and Contingencies
From time to time the Company may be a party to litigation matters involving
claims against the Company. Management believes that there are no current
matters that would have a material effect on the Company's financial position
or results of operations.
A portion of the services are to billed governmental payers at published rates
and subject to periodic review and retroactive adjustment. Retroactive
adjustment due to a Medicare or Medicaid review are considered to be a change
in the estimate and recorded in the period that the adjustment is communicated
to the Company.
F-10
<page>
The Company leases office space in Hollywood, Florida under an annually
renewable lease ending each February 2011. The Company was also leasing
medical office equipment under a short-term lease. Rent expense for the
office for year ended December 31, 2010 was $31,896. Leasing costs for the
equipment for the year ended December 31, 2010 was $2,422.
The minimum future lease payments on the office and equipment are as follows:
Year ended December 31,
2011 $5,673
2012 $-
2013 $-
2014 $-
2015 $-
6. Subsequent Events
Subsequent to December 31, 2010, the stockholder elected to sell 81% of the
stock to an unrelated corporation on an installment plan. As of August 22,
2011 the stockholders have assigned 49% of the outstanding stock and hold
those shares in escrow pending full payment of the installment note. Upon
payment of the note the 49% and the additional 32% of the stock will be
transferred to the purchasers.
Management has evaluated subsequent events and is not aware of any significant
events that occurred subsequent to the balance sheet date but prior to the
filing with the Securities and Exchange Commission ("SEC") that would have a
material impact on our financial statements.
F-11
<page>
Medical Billing Choices, Inc.
Financial Statements
December 31, 2010 and 2009
F-12
<page>
Table of Contents
Report of Independent Registered Public Accounting Firm 2
Balance Sheets as of December 31, 2010 and 2009 3
Statements of Operations and Changes in Member's Equity
For the years ended December 31, 2010 and 2009 4
Statements of Cash Flows for the years ended
December 31, 2010 and 2009 5
Notes to the Financial statements 6 - 11
F-13
<page>
Peter Messineo
Certified Public Accountant
1982 Otter Way Palm Harbor FL 34685
peter@pm-cpa.com
T 727.421.6268 F 727.674.0511
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and
Shareholders of Medical Billing Choices, Inc.:
I have audited the accompanying balance sheets of Medical Billing Choices,
Inc. as of December 31, 2010 and 2009 and the related statements of operations
and changes in stockholders' equity and cash flows for the years then ended.
These financial statements are the responsibility of the Company's management.
My responsibility is to express an opinion on these financial statements based
on my audits.
I conducted my audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that I
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. The Company is not
required at this time, to have, nor was I engaged to perform an audit of its
internal control over financial reporting. My audit included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose
of expressing an opinion on the effectiveness of the Company's internal
controls over financial reporting. Accordingly, I express no such opinion. 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. I believe
that my audits provided a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Medical Billing Choices, Inc.
as of December 31, 2010 and 2009and the results of its operations for the
years then ended in conformity with accounting principles generally accepted
in the United States of America.
/s/ Peter Messineo, CPA
Peter Messineo, CPA
Clearwater, Florida
November 3, 2011
F-14
<page>
Medical Billing Choice Inc.
Balance Sheets
<table>
<s> <c> <c>
12/31/10 12/31/09
Assets
Current assets
Cash $329 $734
Accounts receivable, net of allowance for doubtful
accounts of $28,000 and $15,000, respectively. 42,954 51,596
Total current assets 43,283 52,330
Property and equipment, net of accumulated
depreciation of $80,334 and $62,275, respectively 63,861 81,921
Total Assets $107,144 $134,251
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable and accrued expenses $30,707 $12,521
Notes payable, current portion 15,427 13,985
Total current liabilities 46,134 26,506
Notes payable, net of current portion 46,583 62,009
Total liabilities 92,717 88,515
Stockholders' Equity
Common Stock, $0.01 par value, 1,000 shares
authorized; 1,000 and 1,000 shares
issued and outstanding, respectively 10 10
Additional paid-in capital 33,596 33,596
Retained earnings (19,179) 12,130
Total stockholders' equity 14,427 45,736
Total Liabilities and Stockholders' Equity $107,144 $134,251
</table>
The accompanying notes are an integral part of these financial statements.
F-15
<page>
Medical Billing Choice Inc.
Statements of Operations
<table>
<s> <c> <c>
For the Years Ended
December 31,
2010 2009
Revenues $345,219 $490,010
Operating expenses:
Compensation 133,117 184,288
Consulting - 56,012
Professional fees 55,335 16,890
General and administrative 164,350 210,175
Amortization and depreciation 18,059 7,872
Total operating expenses 370,861 475,236
(Loss) income from operations before income taxes (25,642) 14,774
Other (income) expense
Interest expense 5,667 2,644
Provision for income taxes - -
Net (loss) income $(31,309) $12,130
</table>
The accompanying notes are an integral part of these financial statements.
F-16
<page>
Medical Billing Choice Inc.
Statement of Stockholders' Equity
<table>
<s> <c> <c> <c> <c> <c>
Stock-
Common Subscription Retained Holders'
shares Value Receivable Earnings Equity
Balance at December 31, 2008 100 $1 $99 $(57,694) $(57,594)
Recapitalization of ARC, change of
control to minority shareholder
(related party), includes transfer
of ownership of existing assets and
conversion of debt to equity:
Sale of ARC, share cancellation (100) (1) 33,507 57,694 91,200
Issuance of shares 1,000 10 (10) - -
Net loss 12,130 12,130
Balance at December 31, 2009 1,000 10 33,596 12,130 45,736
Net loss (31,309) (31,309)
Balance at December 31, 2010 1,000 $10 $33,596 $(19,179) $14,427
</table>
The accompanying notes are an integral part of these financial statements.
F-17
<page>
Medical Billing Choice Inc.
Consolidated Statement of Cash Flows
<table>
<s> <c> <c>
For the Year Ended
December 31,
2010 2009
Cash Flows from Operating Activities:
Net (loss) income $(31,309) $12,130
Adjustment to reconcile net income to net
cash provided by operations:
Depreciation 18,059 7,872
Changes in assets and liabilities:
Accounts receivable 8,642 (6,663)
Accounts payable and accrued expenses 18,187 9,107
Net Cash Provided by Operating Activities 13,579 22,446
Cash Flows from Investing Activities:
Purchase of assets (2,065)
Net Cash (Used) in Operating Activities - (2,065)
Cash Flows from Financing Activities:
Repayments of notes payable (13,984) (5,606)
Net Cash (Used) in Operating Activities (13,985) (5,606)
Net increase/decrease in Cash (406) 14,775
Cash at beginning of period 734 (14,041)
Cash at end of period $329 $734
Supplemental cash flow information:
Interest paid $5,667 $2,644
Taxes paid $- $-
Non-cash transactions:
Restructuring charges to equity, net of
debt exchange $- $91,200
</table>
The accompanying notes are an integral part of these financial statements.
F-18
<page>
MEDICAL BILLING CHOICES, INC
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2010 and 2009
1. Description of Business
Medical Billing Choices, Inc. ("MBC" or the "Company") was started in 1996 and
organized as ARC Medical Billing Inc., (a North Carolina corporation)
headquartered in Charlotte NC in 2002. ARC Medical Billing Inc. was
reorganized as Medical Billing Choices Inc., (a North Carolina corporation)
dba ARC Medical Billing in May of 2009 and became a full service medical
billing outsourcing firm. We specialize in complete accounts receivable
outsourcing, from insurance billing to self-pay collections, for small to mid-
level medical practices of all specialties. We service clients nationwide but
major focus is in the southeastern US. The Company operates as an S-
Corporation for corporate tax purposes.
2. Accounting Policies and Basis of Presentation
Basis of Presentation
The Financial Statements and related disclosures have been prepared pursuant
to the rules and regulations of the Securities and Exchange Commission
("SEC"). The Financial Statements have been prepared using the accrual basis
of accounting in accordance with Generally Accepted Accounting Principles
("GAAP") of the United States.
Use of Estimates
The preparation of the Company's financial statements in conformity with
accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the amounts reported
in these financial statements and accompanying notes. Actual results could
differ from those estimates.
Financial Instruments
The carrying amounts of cash, receivables and current liabilities approximated
fair value due to the short-term maturity of the instruments. Debt
obligations, when present, are carried at cost, which approximate fair value
due to the prevailing market rate for similar instruments.
Fair Value Measurement
All financial and nonfinancial assets and liabilities were recognized or
disclosed at fair value in the financial statements. This value was evaluated
on a recurring basis (at least annually). Generally accepted accounting
principles in the United States define fair value as the exchange price that
would be received for an asset or paid to transfer a liability (an exit price)
in the principal or most advantageous market for the asset or liability in an
orderly transaction between market participants on a measurement date. The
accounting principles also established a fair value hierarchy which required
an entity to maximize the use of observable inputs and minimize the use of
unobservable inputs when measuring fair value. Three levels of inputs were
used to measure fair value.
* Level 1: Quotes market prices in active markets for identical assets or
liabilities.
* Level 2: Observable market based inputs or unobservable inputs that were
corroborated by market data.
* Level 3: Unobservable inputs that were not corroborated by market data.
Cash and Cash Equivalents
For purposes of the statements of cash flows, the Company considers all highly
liquid investments with an original maturity of three months or less to be
cash equivalents. The Company maintains its cash deposits in major financial
institutions in the United States. At times deposits within a bank may exceed
the amount of insurance provided on such deposits. Generally, these deposits
are redeemed upon demand and, therefore, are considered by management to bear
minimal risk.
F-19
<page>
Accounts Receivable
Accounts receivable represent amounts due from customers in the ordinary
course of business from sales activities in each of the Company's business
segments. The Company considers accounts more than 90 days old to be past
due. The Company uses the allowance method for recognizing bad debts. When an
account is deemed uncollectible, it is written off against the allowance. The
Company generally does not require collateral for its accounts receivable. The
Company considers all accounts receivable to be collectable and consequently
has provided no allowance for doubtful accounts.
Property, Plant and Equipment
Property, plant and equipment are stated at cost, less accumulated
depreciation. Depreciation is computed by applying the straight-line method to
the estimated useful lives of the related assets. Useful lives range from 3 to
7 years for office equipment, furniture and fixtures. Leasehold improvements
are amortized over the shorter of the lease term or the estimated useful life
of the improvements. When property or equipment is retired or otherwise
disposed of, the net book value of the asset is removed from the Company's
balance sheet and the net gain or loss is included in the determination of
operating income. Property, plant and equipment acquired as part of a business
acquisition is valued at fair value.
Impairment of Long-Lived Assets
The Company evaluates the carrying value of its long-lived assets at least
annually. Impairment losses were recorded on long-lived assets used in
operations when indicators of impairment were present and the undiscounted
future cash flows estimated to be generated by those assets were less than the
assets' carrying amount. If such assets were impaired, the impairment to be
recognized was measured by the amount by which the carrying amount of the
assets exceeds the fair value of the assets. Assets to be disposed of were
reported at the lower of the carrying value or fair value, less costs to sell.
Revenue Recognition
The Company contracts with various medical providers to process the invoices
for services and bill the various government and private third party payers or
the patient for the services. The Company receives payment for these services
on a percentage of collections rate basis on short-term contracts. The
providers are billed when payment for the medical charges are collected.
The Company also provides consulting services on billing and collecting
processes to medical providers on fee for services basis. These services are
billed as services are providing according the contract.
Advertising Costs
The costs of advertising are expensed as incurred. Advertising expenses are
included in the Company's operating expenses.
Income Taxes
B. For the years ended December 31, 2010 and 2009, the Company had elected
to be taxes as an S-Corporation. As such, the taxable income is passed-
through to the owners and taxed on their personal returns. Therefore no
provision or benefit for income taxes is provided in these statements. The
Company follows the guidance provided by FIN 48, Accounting for Uncertainty in
Income Taxes, for reporting uncertain tax provisions.
Effect of Recent Accounting Pronouncements
The Company reviews new accounting standards as issued. No new standards had
any material effect on the financial statements. Accounting pronouncements
issued subsequent to the date of these financial statements were considered
significant by management and evaluated for the potential effect on these
financial statements. Management does not believe any subsequent
pronouncements will have a material effect on these financial statements as
presented and does not anticipate the need for any future restatement of these
financial statements because of the retro-active application of any accounting
pronouncements issued subsequent to December 31, 2010 through the date these
financial statements were issued.
F-20
<page>
3. Notes Payable
The Company is party to vehicle loans. At December 31, 2010 and 2009 long
term debt consisted of the following:
<table>
<s> <c> <c>
December 31,
2011 2009
Commercial loan with a finance company, dated September 1, 2009, in the
original amount of $38,800 and bearing interest at 8%. Principle and interest
payments in the amount of $775.47 are payable for 60 months ending on August
31, 2014. This note is secured by a lien on a vehicle with a carrying value of
$28,453 at December 31, 2010. $29,530 $36,181
Commercial loan with a finance company, dated September 1, 2009, in the
original amount of $42,700 and bearing interest at 8%. Principle and interest
payments in the amount of $854.41 are payable for 60 months ending on August
31, 2014. This note is secured by a lien on a vehicle with a carrying value of
$31,313 at December 31, 2010 32,480 39,813
62,010 75,994
Less current portion (15,427) (13,985)
$46,583 $62,009
</table>
Principal maturities of notes payables for the next five years and thereafter
are as follows:
Period ended December 31,
2011 $15,427
2012 16,706
2013 18,094
2014 11,783
2015 and thereafter -
$62,010
4. Related Party Transactions
From time to time, certain employees were paid consulting fees for services
outside their normal duties. Total amounts paid to related parties for the
years ended December 31, 2010 and 2009 were $25,200 and $21,000 respectively
The amounts and terms of the above transactions may not necessarily be
indicative of the amounts and terms that would have been incurred had
comparable transactions been entered into with independent third parties.
F-21
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5. Commitments and Contingencies
From time to time the Company may be a party to litigation matters involving
claims against the Company. Management believes that there are no current
matters that would have a material effect on the Company's financial position
or results of operations.
The Company leases office space in Charlotte, North Carolina under a lease
ending March 31, 2011. The Company also leases a vehicle under a lease ending
August 31, 2011. Rent expense for the office for the years ended December 31,
2010 and 2009 was $29,804 and $25,153, respectively.
The minimum future lease payments on the office and vehicle are as follows:
Year ended December 31,
2011 $21,500
2012 $2,860
2013 $-
2014 $-
2015 and thereafter $-
6. Subsequent Events
Subsequent to December 31, 2010, the shareholder entered into an agreement to
sell 100% of the shares in the Company under an installment agreement. The
Company then entered in to a significant contract with a party related to the
prospective buyers to process the billings for Trident Laboratories, Inc.
Management has evaluated subsequent events and is not aware of any significant
events that occurred subsequent to the balance sheet date but prior to the
filing with the Securities and Exchange Commission ("SEC") that would have a
material impact on our financial statements.
F-22
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