8-K/A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K/A

(Amendment No. 1) 

CURRENT REPORT

Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported) November 12, 2015 (January 26, 2016)

FIRST CHOICE HEALTHCARE SOLUTIONS, INC.

(Exact name of registrant as specified in its charter)

Delaware	000-53012	90-0687379
(State or other jurisdiction	(Commission	(IRS Employer
of incorporation)	File Number)	Identification No.)

709 S. Harbor Blvd., Suite 250, Melbourne, FL	32901
(Address of principal executive offices)	(Zip Code)

Registrant's telephone number, including area code (321) 725-0090

(Former name of former address, if changed since last report.)

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))

Item 2.01 Completion of Acquisition or Disposition of Assets

On November 2, 2015, First Choice Healthcare Solutions, Inc. (the “Company”) filed a Current Report on Form 8-K (the “Current Report”) to report that its newly formed wholly-owned subsidiary, CCSC Holdings, Inc. (“CCSC Holdings”), acquired a 40% interest in Crane Creek Surgery Center (“Crane Creek”) in exchange for chase consideration of $560,000.

The Current Report is being amended by this Amendment No. 1 to include the audited and unaudited financial statements and information required by Item 9.01(a) and the pro forma financial statements required by Item 9.01(b) and to reflect that the acquisition of the 40% interest in Crane Creek was completed on November 12, 2015. Certain conditions of the Crane Creek transaction were not met until November 12, 2015 and not October 27, 2015 as originally noted. No other amendments to the Current Report are being made by this Amendment No. 1.

Item 9.01 Financial Statements and Exhibits

(a) Financial Statements of Crane Creek

The audited financial statements including the notes thereto for Crane Creek for the years ended December 31, 2014 and December 31, 2013 and the unaudited financial statements including notes thereto for Crane Creek for the nine months ended September 30, 2015 and 2014, are attached as Exhibits 99.1 and 99.2 and are incorporated herein by reference.

(b) Pro Forma Financial Information

The unaudited pro forma consolidated balance sheet of the Company as of September 30, 2015, the unaudited pro forma condensed consolidated statements of operations for the year ended December 31, 2014 and for the nine months ended September 30, 2015 and the notes thereto, which give effect to the Crane Creek transaction, are attached hereto as Exhibits 99.3 and incorporated herein by reference.

(c) Shell Company Transactions

Not applicable

(d) Exhibits

99.1	Audited financial statements including the notes thereto for Crane Creek for the years ended December 31, 2014 and, 2013.
99.2	Unaudited financial statements including the notes thereto for Crane Creek for the nine months ended September 30, 2015 and 2014.
99.3	Unaudited pro forma consolidated balance sheet of the Company as of September 30, 2015, the unaudited pro forma condensed consolidated statements of operations for the year ended December 31, 2014 and for the nine months ended September 30, 2015 and the notes thereto, which give effect to the Crane Creek transaction.

2

SIGNATURE

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.

	FIRST CHOICE HEALTHCARE SOLUTIONS, INC.
	(Registrant)
Date: January 26, 2016
	/s/ Chris Romandetti
	Name:  Chris Romandetti
	Chief Executive Officer

3

EX-99.1

Exhibit 99.1

CRANE CREEK SURGICAL PARTNERS, LLC

FINANCIAL STATEMENTS

DECEMBER 31, 2014 AND 2013

INDEX TO FINANCIAL STATEMENTS

CONTENTS	PAGE NO.
Report of Independent Registered Public Accounting Firm	1
Balance Sheets at December 31, 2014 and 2013	2
Statements of Operations for the Years Ended December 31, 2014 and 2013	3
Statements of Members’ (Deficit) Equity for the Years Ended December 31, 2014 and 2013	4
Statements of Cash Flows for the Years Ended December 31, 2014 and 2013	5
Notes to the Financial Statements	6

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Members

Crane Creek Surgical Partners, LLC

We have audited the accompanying balance sheets of Crane Creek Surgical Partners, LLC (the “Company”) as of December 31, 2014 and 2013, and the related statements of operations, members’ (deficit) equity, and cash flows for each of the two years in the period ended December 31, 2014. The Company’s management is responsible for these financial statements. 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. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits 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 control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated 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 the Company as of December 31, 2014 and 2013, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2014, in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 10 to the financial statements, the Company has suffered recurring losses from operations and has an accumulated deficit as of December 31, 2014. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 10. The financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result should the Company be unable to continue as a going concern.

/s/ RBSM LLP

New York, New York

January 26, 2016

1 

CRANE CREEK SURGICAL PARTNERS, LLC

 BALANCE SHEETS

FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013

	2014			2013
ASSETS
Current assets:
Cash	$	103,762		$	249,004
Accounts receivable, net		845,843			775,560
Prepaid and other current assets		—			16,250
Total current assets		949,605			1,040,814
Property, plant and equipment, net of accumulated depreciation of $1,319,760 and $1,012,494		945,557			1,245,153
Total assets	$	1,895,162		$	2,285,967
LIABILITIES AND MEMBERS’ (DEFICIT) EQUITY
Current liabilities:
Accounts payable and accrued expenses	$	200,813		$	65,719
Accrued interest		6,351			6,351
Due to related party		140,140			—
Capital lease payable		19,650			114,861
Notes payable, current portion		348,591			308,214
Total current liabilities		715,545			495,145
Long term debt:
Deferred rent		489,929			428,148
Notes payable, long term portion		777,320			1,124,236
Total long term debt		1,267,249			1,552,384
Total liabilities		1,982,794			2,047,529
Commitments and contingencies		—			—
Members’ (deficit) equity:		(87,632	)		238,438
Total members’ (deficit) equity		(87,632	)		238,438
Total liabilities and members’ (deficit) equity	$	1,895,162		$	2,285,967

See accompanying notes

2 

CRANE CREEK SURGICAL PARTNERS, LLC 

STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013

	Year ended December 31,
	2014			2013
Revenues:
Net patient service revenue	$	3,248,786		$	3,857,685
Total revenue		3,248,786			3,857,685
Operating expenses:
Salaries and benefits		917,317			1,088,481
Occupancy		905,203			813,463
General and administrative		1,394,630			1,908,636
Depreciation and amortization		307,266			284,105
Total operating expenses		3,524,416			4,094,685
Net loss from operations:		(275,630	)		(237,000	)
Other income (expense):
Other income		15,424			9,938
Interest expense, net		(65,864	)		(80,685	)
Total other income (expense)		(50,440	)		(70,747	)
Net loss	$	(326,070	)	$	(307,747	)

See accompanying notes

3 

CRANE CREEK SURGICAL PARTNERS, LLC 

STATEMENTS OF MEMBERS’ (DEFICIT) EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013

	Accumulated Amount			Accumulated Deficit			Total
Balance, December 31, 2012	$	1,792,882		$	(863,669	)	$	929,213
Distribution of capital		(883,028	)		—			(883,028	)
Contributions of capital		500,000			—			500,000
Net loss		—			(307,747	)		(307,747	)
Balance, December 31, 2013		1,409,854			(1,171,416	)		238,438
Net loss		—			(326,070	)		(326,070	)
Balance, December 31, 2014	$	1,409,854		$	(1,497,486	)	$	(87,632	)

See accompanying notes

4 

CRANE CREEK SURGICAL PARTNERS, LLC

STATEMENTS OF CASH FLOWS

 FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013

	Year ended December 31,
	2014			2013
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss	$	(326,070	)	$	(307,747	)
Adjustments to reconcile net loss to cash provided by operating activities:
Depreciation and amortization expenses		307,266			284,105
Changes in operating assets and liabilities:
Accounts receivable		(70,283	)		430,371
Capital call receivable		16,250			(16,250	)
Accounts payable and accrued expenses		275,234			(72,362	)
Deferred rent		61,781			80,184
Accrued interest		—			(1,092	)
Net cash provided by operating activities		264,178			397,209
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment		(7,670	)		(17,501	)
Net cash used in investing activities		(7,670	)		(17,501	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on notes payable		(306,539	)		(324,090	)
Principal payments on capital lease		(95,211	)		(133,417	)
Distributions to members		—			(883,028	)
Contributions by members		—			500,000
Net cash used in financing activities		(401,750	)		(840,535	)
Net decrease in cash and cash equivalents		(145,242	)		(460,827	)
Cash and cash equivalents, beginning of period		249,004			709,831
Cash and cash equivalents, end of period	$	103,762		$	249,004
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for interest	$	65,864		$	80,685

NONCASH TRANSACTION

During the year ended December 31, 2013, the Company acquired equipment valued at $114,861 through a capital lease.

See accompanying notes

5 

CRANE CREEK SURGICAL PARTNERS, LLC

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013

NOTE 1- BASIS AND BUSINESS PRESENTATION

A summary of the significant accounting policies applied in the presentation of the accompanying financial statements follows:

Basis and business presentation

Crane Creek Surgical Partners, LLC, a Florida limited liability company (the “Company” or “CCSP”), was formed in 2008 to develop, own and operate a Medicare-certified ambulatory surgery center in Melbourne, Florida. The surgery center is a multi-specialty surgical center, offering outpatient care in orthopedics, pain, spine, ENT, general surgery, podiatry and urology. The primary source of revenue is insurance company receipts for patient services.

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates

The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. Significant estimates include the recoverability and useful lives of long-lived assets. Actual results may differ from these estimates.

Revenue Recognition

The Company recognizes revenue in accordance with Accounting Standards Codification subtopic 605-10, “Revenue Recognition “ (“ASC 605-10”) which requires that four basic criteria be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the selling price is fixed or determinable; and (4) collectability is reasonably assured. Determination of criteria (3) and (4) are based on management’s judgments regarding the fixed nature of the selling prices of the services delivered and the collectability of those amounts. Provisions for discounts and rebates to customers, estimated returns and allowances, and other adjustments are provided for in the same period the related sales are recorded.

The Company recognizes in accordance with Accounting Standards Codification subtopic 954-310, “Health Care Entities” (“ASC 954-310”), significant patient service revenue at the time the services are rendered, even though it does not assess the patient’s ability to pay.

Patient Service Revenue

The Company recognizes patient service revenue associated with services provided to patients who have third-party payer coverage on the basis of gross rates for the services provided. For uninsured or self-pay patients that do not qualify for charity care, the Company recognizes revenue on the basis of its standard rates for services provided (or on the basis of discounted rates, if negotiated or provided by policy). Once a claim is settled, a revenue reduction is recognized for contractual agreements and amounts uncollectible.

Cash

Cash consists of cash held in bank demand deposits. The Company considers all highly liquid instruments with original maturities of three months or less to be cash equivalents. As of December 31, 2014 and 2013, the Company had $103,762 and $249,004 in cash, respectively.

Accounts Receivable

For financial statement purposes, the Company records accounts receivable net of insurance company adjustments, which approximate seventy-seven percent of billings. The Company considers the net amount to be fully collectable. Therefore, no allowance for doubtful accounts is recorded.

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CRANE CREEK SURGICAL PARTNERS, LLC

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013

Concentrations of Credit Risk

The Company’s financial instruments that are exposed to a concentration of credit risk are cash and accounts receivable. Occasionally, the Company’s cash and cash equivalents in interest-bearing accounts may exceed FDIC insurance limits. The financial stability of these institutions is periodically reviewed by senior management.

Long-Lived Assets

The Company accounts for the valuation of long-lived assets under Accounting Standards Codification (ASC) 360, Property, Plant and Equipment. ASC requires that long-lived assets and certain identifiable intangible assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of the long-lived assets is measured by comparing the carrying amount of the asset to future undiscounted net cash flows expected to be generated by the asset. Long-lived assets to be disposed of are reported at the lower of carrying amount or fair value, less cost to sell. At December 31, 2014 and 2013, management does not believe any long-lived assets are impaired and has not identified any assets as being held for disposal.

Property and equipment are stated at cost. When retired or otherwise disposed, the related carrying value and accumulated depreciation are removed from the respective accounts and the net difference less any amount realized from disposition, is reflected in earnings. For financial statement purposes, property and equipment are recorded at cost and depreciated using the straight-line method over their estimated useful lives of 7 to 39 years.

Income Taxes

Under provisions of the Internal Revenue Code, limited liability companies that are treated as partnerships and partnerships are not subject to income taxes, and any income or loss realized is taxed to the individual members. Accordingly, no provisions for federal income taxes appear in the financial statements. The federal income tax returns are subject to examinations by the taxing authorities, generally for a period of three years after the returns are filed. Therefore, tax returns for the years ended 2012, 2013 and 2014 are still subject to review by revenue agents

Subsequent Events

The Company evaluates events that have occurred after the balance sheet date but before the financial statements are issued. Based upon the evaluation, the Company did not identify any recognized or non-recognized subsequent events that would have required adjustment or disclosure in the financial statements, except as disclosed. See Note 11.

Recent Accounting Pronouncements

The FASB has issued ASU No. 2014-09, Revenue from Contracts with Customers. This ASU supersedes the revenue recognition requirements in Accounting Standards Codification 605 - Revenue Recognition and most industry-specific guidance throughout the Codification. The standard requires that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. This ASU is effective on January 1, 2017 and should be applied retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying the ASU recognized at the date of initial application. The Company has not yet determined the effect of the adoption of this standard and it is expected to have an immaterial impact on the Company’s financial statements.

 In August, 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements - Going Concern (Subtopic 205-40): Disclosure of Uncertainties About an Entities Ability to Continue as a Going Concern. The standard is intended to define management’s responsibility to decide whether there is substantial doubt about an organization’s ability to continue as a going concern and to provide related footnote disclosures. The standard requires management to decide whether there are conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued. The standard provides guidance to an organization’s management, with principles and definitions that are intended to reduce diversity in the timing and content of disclosures that are commonly provided by organizations in the footnotes. The standard becomes effective in the annual period ending after December 15, 2016, with early application permitted. The adoption of this pronouncement is not expected to have a material impact on the financial statements.

7 

CRANE CREEK SURGICAL PARTNERS, LLC

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013

Fair Value

Accounting Standards Codification subtopic 825-10, Financial Instruments (“ASC 825-10”) requires disclosure of the fair value of certain financial instruments. ASC 825-10 defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and considers assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of nonperformance. ASC 825-10 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 825-10 establishes three levels of inputs that may be used to measure fair value:

● Level 1 - Quoted prices in active markets for identical assets or liabilities.

● Level 2 - Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities.

● Level 3 - Unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities.

To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement is disclosed and is determined based on the lowest level input that is significant to the fair value measurement.

The carrying value of the Company’s cash, accounts receivable, accounts payable, short-term borrowings (including convertible notes payable), and other current assets and liabilities approximate fair value because of their short-term maturity.

As of December 31, 2014 and 2013, the Company did not have any items that would be classified as level 1, 2 or 3 disclosures.

NOTE 3 - PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment at December 31, 2014 and 2013 are as follows:

	2014			2013
Leasehold improvements	$	182,246		$	182,246
Medical equipment		1,118,943			1,111,273
Capital lease medical equipment		884,650			884,650
Furniture & fixtures		69,693			69,693
Signs		9,785			9,785
		2,265,317			2,257,647
Less: accumulated depreciation		(1,319,760	)		(1,012,494	)
	$	945,557		$	1,245,153

During the year ended December 31, 2014 and 2013, depreciation expense charged to operations was $307,266 and $284,105, respectively.

8 

CRANE CREEK SURGICAL PARTNERS, LLC

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013

NOTE 4 - COMMITMENTS

The Company sub-leases office space under an operating lease expiring in 2024. Under the terms of this lease, the Company is obligated to pay minimum base rent, amortization of tenant improvements, additional rent to cover operating cost, plus applicable sales tax. Under generally accepted accounting principles (GAAP), all rental payments, including fixed rent increases, are recognized on a straight-line basis over the life of the lease. The difference between GAAP rent expense and the actual lease payments is reflected as deferred rent on the accompanying balance sheets. Rent expense for the year ended December 31, 2014 and 2013, including charges for operating expenses and taxes, was $905,203 and $813,463 , respectively. Minimum future rental payments under the terms of the lease are summarized as follows:

Years ending December 31:
2015	$	1,094,278
2016		1,150,239
2017		1,209,961
2018		1,273,744
2019		1,341,913
Thereafter		7,410,804
	$	13,480,939

The Company operates under a management services agreement. The initial term of the agreement is ten years and it is automatically renewable for successive three year terms. Payment is remitted monthly and is based on a percentage of gross revenues net of returns and contractual adjustments and allowances. The annual percentages are as follows:

Year 1 – Year 4	6	%
Year 5 – Year 7	5	%
Year 8 – Year 9	4	%
Year 10	3	%

Management expense under the terms of this agreement was $189,566 and $257,262 for the year ended December 31, 2014 and 2013, respectively.

NOTE 5 - RELATED PARTY TRANSACTIONS

As more fully described in Note 4 - Commitments, during the year ended December 31, 2014 and 2013, the Company incurred expenses payable to BCS-Management, LLC, a related party for management services in the amounts of $189,566 and $257,262, respectively. BCS-Management, LLC and HMA Blue Chip Investments, LLC, a member of the Company, are both wholly owned subsidiaries of Blue Chip Surgical Partners, LLC. Due to the related party for services provided was $140,140 and $0, for the years ended December 31, 2014 and 2013, respectively.

As more fully described in Note 4 - Commitments, the Company entered into a sublease agreement with Brevard Orthopaedic, Spine & Pain Clinic, Inc., a related party, on September 1, 2009 for certain space in a medical office building in Melbourne, FL. CCSC TBC Group, LLC, a member of the Company, and Brevard Orthopaedic, Spine & Pain Clinic, Inc. share common ownership. The Company paid $843,422 and $733,279  as payments under the sublease agreement for the years ended December 31, 2014 and 2013, respectively. 

NOTE 6 – MEMBERS’ CAPITAL

As of December 31, 2014 and 2013, there were 96.239 member interest units issued and outstanding.

9 

CRANE CREEK SURGICAL PARTNERS, LLC

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013

NOTE 7 - NOTES PAYABLE

Note payable as of December 31, 2014 and 2013 are comprised as follows:

	2014			2013
Wells Fargo, note payable bearing variable interest (4.2% – 5.0%), monthly payments of $32,475, maturing in January 2018	$	1,125,911		$	1,432,450
Less current portion		(348,591	)		(308,214	)
	$	777,320		$	1,124,236

Aggregate principal maturities of long-term debt as of December 31:

	Amount
Year ended December 31, 2015	$	348,591
Year ended December 31, 2016		363,642
Year ended December 31, 2017		379,519
Year ended December 31, 2018		34,159
Total	$	1,125,911

NOTE 8 – CAPITAL LEASE

On November 1, 2009, the Company entered into a lease agreement to acquire equipment with quarterly payments of $41,955 payable through November 1, 2013, with no stated interest rate. Effective December 31, 2013, the Company extended the lease for one year commencing on April 1, 2014 with monthly payments of $9,877. The Company may elect to acquire the leased equipment at a nominal amount at the end of the lease.

Aggregate principal maturities of capital lease payments as of December 31:

Year ended December 31, 2015 $ 19,650

The value of leased property held under capital lease for December 31, 2014 and 2013 is $884,650 and $884,650, respectively. Depreciation expense of leased property under capital lease obligations amounted to $110,590 and $126,999 for the years ended December 31, 2014 and 2013, respectively.

NOTE 9 – LIQUIDITY

As of December 31, 2014, the Company’s working capital current assets minus current liabilities was $234,060. The Company’s owners have entered into an operating and control agreement giving CCSC Holdings, Inc., a wholly owned subsidiary of First Choice Healthcare Solutions, Inc. (FCHS), a controlling variable interest in the Company. On October 27, 2015, the operating agreement was executed but made effective October 1, 2015. 

10 

CRANE CREEK SURGICAL PARTNERS, LLC

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013

NOTE 10 – GOING CONCERN UNCERTAINTIES

The accompanying financial statements have been prepared on a going concern basis, which contemplates realization of assets and the satisfaction of liabilities in the normal course of business. As shown in the accompanying financial statement, the Company has a members’ deficit of $87,632 and accumulated deficit of $1,497,486 as of December 31, 2014. The ability of the Company to continue as a going concern is in doubt and dependent upon achieving a profitable level of operations or on the ability of the Company to obtain necessary financing to fund ongoing operations. Management believes that its current and future plans enable it to continue as a going concern for the next 12 months.

To meet these objectives, the Company continues to seek other sources of financing in order to support existing operations and expand the range and scope of its business. As such the Company has taken actions since December 31, 2014 to improve its working capital and deficit positions. These actions include a capital contribution from its members and repayment of its outstanding bank loan. Additionally, the Company has restructured and added to its members, providing the Company with additional staffed physicians designed to increase operating capacity up from its previous 60% operating capacity. However, there are no assurances that capacity can be increased and or maintained. The failure to increase and maintain operations at higher capacity would have a material adverse effect on the business prospects and, depending upon the shortfall, the Company may have to curtail or cease its operations.

The accompanying financial statements do not include any adjustment to the recorded assets or liabilities that might be necessary should the Company have to curtail operations or be unable to continue in existence.

NOTE 11 - SUBSEQUENT EVENTS

In May 2015, members’ units totaling 24.47% of ownership at that time were redeemed for $1. This effectively reduced the number of members to two, HMA Blue Chip Investments, LLC and CCSC TBC Group, LLC.

In June 2015, the remaining members advanced $800,000 to the Company. These funds were used to reduce the note payable at Wells Fargo.

In July 2015, the Company secured an advance of $140,000 from CCSC Holdings, Inc. These funds were used to further reduce the note payable to Wells Fargo. Effective July, 2015 the note with Wells Fargo has been satisfied.

In October 2015, 40% of the member interest of Crane Creek Surgical Partners, LLC was purchased by CCSC Holdings, Inc. for $560,000. The following actions took place at the time of closing:

● HMA Blue Chip Investments, LLC redeemed 25.031 Class B units for $1

● CCSC TBC Group, LLC acquired 10.067 Class B units for $1.

● All units held by HMA Blue Chip Investments, LLC were re-classified as Class B Units

● All the units held by CCSC TBC Group, LLC were re-classified as C units.

● CCSC Holdings, Inc. received 38.48 Class D units for the sum of $560,000.

● The $560,000 was paid by a forgiveness of the $140,000 advance plus cash of $420,000.

● There was a capital call of $14,000 per one percent (1%) ownership interest in the Company. HMA Blue Chip Investments, LLC and CCSC TBC Group, LLC’s previous advances were applied to the capital call.

Effective October 1, 2015, the Company entered into a business associate agreement and a medical director agreement with Richard A. Hynes, M.D., president of the Company and CCSC TBC Group, LLC.

NOTE 12 – ASSIGNMENT OF RECEIVABLES 

In October of 2012, the Company entered into an agreement with Medical Funding Consultants, LLC (MFC) for the purpose of screening and underwriting letter of protection accounts. During the years ended December 31, 2014 and 2013, MFC  purchased receivables totaling $740,995 and $1,854,894 for $293,402 and $731,565, respectively.

11

EX-99.2

Exhibit 99.2

CRANE CREEK SURGICAL PARTNERS, LLC

FINANCIAL STATEMENTS

SEPTEMBER 30, 2015 AND 2014

INDEX TO FINANCIAL STATEMENTS

CONTENTS	PAGE NO.
Condensed Unaudited Balance Sheets at September 30, 2015 and 2014	2
Condensed Unaudited Statements of Operations for the Nine Months Ended September 30, 2015 and 2014	3
Condensed Unaudited Statement of Changes in Members’ Capital for the Nine Months Ended September 30, 2015 and 2014	4
Condensed Unaudited Statements of Cash Flows for the Nine Months Ended September 30, 2015 and 2014	5
Notes to the Condensed Unaudited Financial Statements	6

CRANE CREEK SURGICAL PARTNERS, LLC 

 CONDENSED (UNAUDITED) BALANCE SHEETS

SEPTEMBER 30, 2015 AND 2014

	September 30, 2015			September 30, 2014
ASSETS
Current assets
Cash	$	164,323		$	132,878
Accounts receivable, net		706,957			959,337
Total current assets		871,280			1,092,215
Property, plant and equipment, net of accumulated depreciation of $1,546,095 and $1,238,829		715,896			1,023,162
Total assets	$	1,587,176		$	2,115,377
LIABILITIES AND MEMBERS’ CAPITAL
Current liabilities
Accounts payable and accrued expenses	$	673,772		$	225,715
Accrued interest		1,352			6,351
Due to related party		251,588			94,752
Advances from members		800,000			—
Loan payable		140,000			—
Capital lease payable		—			58,540
Notes payable, current portion		—			344,915
Total current liabilities		1,866,712			730,273
Long term debt
Deferred rent		522,046			474,483
Notes payable, long term portion		—			865,857
Total long term debt		522,046			1,340,340
Total liabilities		2,388,758			2,070,613
Members’ capital		(801,582	)		44,764
Total members’ capital		(801,582	)		44,764
Total liabilities and members’ capital	$	1,587,176		$	2,115,377

See accompanying notes

2 

CRANE CREEK SURGICAL PARTNERS, LLC 

CONDENSED (UNAUDITED) STATEMENTS OF OPERATIONS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2015 AND 2014

	Nine months ended September 30,
	2015			2014
Revenues
Net patient service revenue	$	2,076,563		$	2,560,867
Total revenue		2,076,563			2,560,867
Operating expenses
Salaries and benefits		754,083			716,188
Occupancy		740,373			760,486
General and administrative		1,065,081			1,007,240
Depreciation and amortization		229,661			226,335
Total operating expenses		2,789,198			2,710,249
Net loss from operations		(712,635	)		(149,382	)
Other income (expense)
Miscellaneous income		13,149			—
Interest expense, net		(14,464	)		(44,292	)
Total other income (expense)		(1,315	)		(44,292	)
Net loss	$	(713,950	)	$	(193,674	)

See accompanying notes

3 

CRANE CREEK SURGICAL PARTNERS, LLC 

CONDENSED UNAUDITED STATEMENTS OF CHANGES IN MEMBERS’ CAPITAL

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2015 AND 2014

	Accumulated Amount		Accumulated Deficit			Total
Balance, December 31, 2013	$	1,409,854	$	(1,171,416	)	$	238,438
Net loss		—		(193,674	)		(193,674	)
Balance, September 30, 2014	$	1,409,854	$	(1,365,090	)	$	44,764
Balance, December 31, 2014	$	1,409,854	$	(1,497,486	)	$	(87,632	)
Net loss		—		(713,950	)		(713,950	)
Balance, September 30, 2015	$	1,409,854	$	(2,211,436	)	$	(801,582	)

See accompanying notes

4 

CRANE CREEK SURGICAL PARTNERS, LLC

CONDENSED UNAUDITED STATEMENTS OF CASH FLOWS

 FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2015 AND 2014

	Nine months ended September 30,
	2015			2014
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss	$	(713,950	)	$	(193,674	)
Adjustments to reconcile net loss to cash provided by operating activities:
Depreciation and amortization expenses		229,661			226,335
Changes in operating assets and liabilities:
Accounts receivable		138,886			(183,777	)
Prepaid and other current assets		—			16,250
Accounts payable and accrued expenses		467,960			159,996
Due to related party		111,448			94,752
Deferred Rent		32,117			46,335
Net cash provided by operating activities		266,122			166,217
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment		—			(4,344	)
Net cash used in investing activities		—			(4,344	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on notes payable		(1,125,911	)		(221,678	)
Principal payments on capital lease		(19,650	)		(56,321	)
Advances from members		940,000			—
Net cash used in financing activities		(205,561	)		(277,999	)
Net (decrease) increase in cash and cash equivalents		60,561			(116,126	)
Cash and cash equivalents, beginning of period		103,762			249,004
Cash and cash equivalents, end of period	$	164,323		$	132,878
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for interest	$	13,112		$	44,292

See accompanying notes

5 

CRANE CREEK SURGICAL PARTNERS, LLC

NOTES TO THE CONDENSED UNAUDITED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2015 AND 2014 

NOTE 1- BASIS AND BUSINESS PRESENTATION

A summary of the significant accounting policies applied in the presentation of the accompanying reviewed financial statements follows:

Basis and business presentation

Crane Creek Surgical Partners, LLC, a Florida limited liability company (the “Company” or “CCSP”) was formed in 2008 to develop, own and operate a Medicare-certified ambulatory surgery center in Melbourne, Florida. The surgery center is a multi-specialty surgical center, offering outpatient care in orthopedics, pain, spine, ENT, general surgery, podiatry and urology. The primary source of revenue is insurance company receipts for patient services.

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates

The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. Significant estimates include the recoverability and useful lives of long-lived assets, the fair value of the Company’s stock, and stock-based compensation. Actual results may differ from these estimates.

Revenue Recognition

The Company recognizes revenue in accordance with Accounting Standards Codification subtopic 605-10, “Revenue Recognition “ (“ASC 605-10”) which requires that four basic criteria be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the selling price is fixed or determinable; and (4) collectability is reasonably assured. Determination of criteria (3) and (4) are based on management’s judgments regarding the fixed nature of the selling prices of the products delivered and the collectability of those amounts. Provisions for discounts and rebates to customers, estimated returns and allowances, and other adjustments are provided for in the same period the related sales are recorded.

The Company recognizes in accordance with Accounting Standards Codification subtopic 954-310, “Health Care Entities” (“ASC 954-310”), significant patient service revenue at the time the services are rendered, even though it does not assess the patient’s ability to pay.

Patient Service Revenue

The Company recognizes patient service revenue associated with services provided to patients who have third-party payer coverage on the basis of gross rates for the services provided. For uninsured or self-pay patients that do not qualify for charity care, the Company recognizes revenue on the basis of its standard rates for services provided (or on the basis of discounted rates, if negotiated or provided by policy). Once a claim is settled, a revenue reduction is recognized for contractual agreements and amounts uncollectible.

Cash

Cash consists of cash held in bank demand deposits. The Company considers all highly liquid instruments with original maturities of three months or less to be cash equivalents. As of September 30, 2015 and 2014, the Company had $164,323 and $132,878 in cash, respectively.

Accounts Receivable

The Company records accounts receivable net of insurance company adjustments, which approximate seventy-seven percent of billings. The Company considers the net amount to be fully collectable. Therefore, no allowance for doubtful accounts is recorded.

6 

CRANE CREEK SURGICAL PARTNERS, LLC

NOTES TO THE CONDENSED UNAUDITED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2015 AND 2014 

Concentrations of Credit Risk

The Company’s financial instruments that are exposed to a concentration of credit risk are cash and accounts receivable. Occasionally, the Company’s cash and cash equivalents in interest-bearing accounts may exceed FDIC insurance limits. The financial stability of these institutions is periodically reviewed by senior management.

Long-Lived Assets

The Company accounts for the valuation of long-lived assets under Accounting Standards Codification (ASC) 360, Property, Plant and Equipment. ASC requires that long-lived assets and certain identifiable intangible assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of the long-lived assets is measured by comparing the carrying amount of the asset to future undiscounted net cash flows expected to be generated by the asset. Long-lived assets to be disposed of are reported at the lower of carrying amount or fair value, less cost to sell. At September 30, 2015 and 2014, management does not believe any long-lived assets are impaired and has not identified any assets as being held for disposal.

Property and equipment are stated at cost. When retired or otherwise disposed, the related carrying value and accumulated depreciation are removed from the respective accounts and the net difference less any amount realized from disposition, is reflected in earnings. For financial statement purposes, property and equipment are recorded at cost and depreciated using the straight-line method over their estimated useful lives of 7 to 39 years.

Income Taxes

Under provisions of the Internal Revenue Code, limited liability companies that are treated as partnerships are not subject to income taxes, and any income or loss realized is taxed to the individual members. Accordingly, no provisions for federal income taxes appear in the financial statements. The Federal income tax returns are subject to examinations by the taxing authorities, generally for a period of three years after the returns are filed. Therefore, tax returns for the years ended 2012, 2013 and 2014 are still subject to review by revenue agents.

Subsequent Events

The Company evaluates events that have occurred after the balance sheet date but before the financial statements are issued. Based upon the evaluation, the Company did not identify any recognized or non-recognized subsequent events that would have required adjustment or disclosure in the financial statements, except as disclosed. See Note 7.

Recent Accounting Pronouncements

The FASB has issued ASU No. 2014-09, Revenue from Contracts with Customers. This ASU supersedes the revenue recognition requirements in Accounting Standards Codification 605 - Revenue Recognition and most industry-specific guidance throughout the Codification. The standard requires that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. This ASU is effective on January 1, 2017 and should be applied retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying the ASU recognized at the date of initial application. The Company has not yet determined the effect of the adoption of this standard and it is expected to have an immaterial impact on the Company’s financial statements.

 In August, 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements - Going Concern (Subtopic 205-40): Disclosure of Uncertainties About an Entities Ability to Continue as a Going Concern. The standard is intended to define management’s responsibility to decide whether there is substantial doubt about an organization’s ability to continue as a going concern and to provide related footnote disclosures. The standard requires management to decide whether there are conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued. The standard provides guidance to an organization’s management, with principles and definitions that are intended to reduce diversity in the timing and content of disclosures that are commonly provided by organizations in the footnotes. The standard becomes effective in the annual period ending after December 15, 2016, with early application permitted. The adoption of this pronouncement is not expected to have a material impact on the financial statements.

Going Concern

The accompanying financial statements have been prepared on a going concern basis, which contemplates realization of assets and the satisfaction of liabilities in the normal course of business. As shown in the accompanying financial statement, the Company has accumulated a deficit of $2,211,436 and working capital deficit (current liabilities minus current assets) of $995,432 as of September 30, 2015. The ability of the Company to continue as a going concern is in doubt and dependent upon achieving a profitable level of operations or on the ability of the Company to obtain necessary financing to fund ongoing operations. Management believes that its current and future plans enable it to continue as a going concern for the next twelve months.

To meet these objectives, the Company continues to seek other sources of financing in order to support existing operations and expand the range and scope of its business. However, there are no assurances that capacity can be increased and or maintained. The failure to increase and maintain operations at higher capacity would have a material adverse effect on the business prospects and, depending upon the shortfall, the Company may have to curtail or cease its operations. The accompanying financial statements do not include any adjustment to the recorded assets or liabilities that might be necessary should the Company have to curtail operations or be unable to continue in existence.

7 

CRANE CREEK SURGICAL PARTNERS, LLC

NOTES TO THE CONDENSED UNAUDITED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2015 AND 2014 

Fair Value

Accounting Standards Codification subtopic 825-10, Financial Instruments (“ASC 825-10”) requires disclosure of the fair value of certain financial instruments. ASC 825-10 defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and considers assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of nonperformance. ASC 825-10 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 825-10 establishes three levels of inputs that may be used to measure fair value:

● Level 1 - Quoted prices in active markets for identical assets or liabilities.

● Level 2 - Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities.

● Level 3 - Unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities.

To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement is disclosed and is determined based on the lowest level input that is significant to the fair value measurement.

The carrying value of the Company’s cash, accounts receivable, accounts payable, short-term borrowings (including convertible notes payable), and other current assets and liabilities approximate fair value because of their short-term maturity.

As of September 30, 2015 and 2014, the Company did not have any items that would be classified as level 1, 2 or 3 disclosures.

NOTE 3 - PROPERTY, PLANT, AND EQUIPMENT

Property, plant and equipment at September 30, 2015 and 2014 are as follows:

	2015			2014
Leasehold improvements	$	182,246		$	182,246
Medical equipment		2,000,267			2,000,267
Furniture & fixtures		69,693			69,693
Signs		9,785			9,785
		2,261,991			2,261,991
Less: accumulated depreciation		(1,546,095	)		(1,238,829	)
	$	715,896		$	1,023,162

During the nine months ended September 30, 2015 and 2014, depreciation expense charged to operations was $229,661 and $226,335, respectively.

8 

CRANE CREEK SURGICAL PARTNERS, LLC

NOTES TO THE CONDENSED UNAUDITED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2015 AND 2014 

NOTE 4 - COMMITMENTS

The Company sub-leases office space under an operating lease expiring in 2024. Under the terms of this lease, the Company is obligated to pay minimum base rent, amortization of tenant improvements, additional rent to cover operating cost, plus applicable sales tax. Minimum future rental payments under the terms of the lease are summarized as follows:

Twelve months ending September 30:

2016	$	1,131,505
2017		1,189,971
2018		1,252,398
2019		1,319,103
2020		1,390,431
Thereafter		5,911,960
	$	12,195,368

Rent expense for the nine months ended September 30, 2015 and 2014, including charges for operating expenses and taxes, was $708,256 and $631,992, respectively.

The Company operates under a management services agreement. The initial term of the agreement is ten years and it is automatically renewable for successive three year terms. Payment is remitted monthly and is based on a percentage of gross revenues net of returns and contractual adjustments and allowances. The annual percentages are as follows:

Year 1 – Year 4	6	%
Year 5 – Year 7	5	%
Year 8 – Year 9	4	%
Year 10	3	%

Management expense under the terms of this agreement was $111,449 and $141,937 for the nine months ended September 30, 2015 and 2014, respectively.

NOTE 5 - RELATED PARTY TRANSACTIONS

As more fully described in Note 4 – Commitments, during the year ended September 30, 2015 and 2014, the Company incurred expenses payable to BCS-Management, LLC, a related party for management services in the amounts of $111,449 and $141,937, respectively. Due to the related party for services provided was $251,588 and $94,752, for the period ended September 30, 2015 and 2014, respectively.

As more fully described in Note 4 - Commitments, the Company entered into a sublease agreement with Brevard Orthopaedic, Spine & Pain Clinic, Inc., a related party, on September 1, 2009 for certain space in a medical office building in Melbourne, FL. The Company paid $708,256 and $631,992 as payments under the sublease agreement for the nine months ended September 30, 2015 and 2014, respectively. 

In May 2015 members’ units totaling 24.47% of ownership at that time were redeemed for $1. This effectively reduced the number of members to two, HMA Blue Chip Investments, LLC and CCSC TBC Group, LLC.

In June 2015, the remaining members advanced $800,000 to the Company. These funds were used to reduce the note payable at Wells Fargo.

In July 2015, the Company secured an advance of $140,000 from CCSC Holdings, Inc. These funds were used to further reduce the note payable to Wells Fargo. Effective July, 2015 the note with Wells Fargo has been satisfied.

9 

CRANE CREEK SURGICAL PARTNERS, LLC

NOTES TO THE CONDENSED UNAUDITED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2015 AND 2014 

NOTE 6 - NOTES PAYABLE

	September 30, 2015			September 30, 2014
Wells Fargo, Note payable bearing variable interest (4.2% - 5.0%), monthly payments of $32,475, maturing in January 2018	$	—		$	1,210,772
Capital Lease Payable		—			58,540
Loan payable		140,000			—
Subtotal		140,000			1,269,312
Less current portion		(140,000	)		(403,455	)
Long term notes payable	$	—		$	865,857

Aggregate principal maturities of long-term debt as of September 30:

	2015		2014
Year ended September 30, 2015	$	—	$	403,455
Year ended September 30, 2016		140,000		359,808
Year ended September 30, 2017		—		375,518
Year ended September 30, 2018		—		130,531
Total	$	140,000	$	1,269,312

NOTE 7 - SUBSEQUENT EVENTS

In November 2015, 40% of the Company was purchased by CCSC Holdings, Inc. for $560,000 with an effective date of October 1, 2015. The following actions took place at the time of closing:

● HMA Blue Chip Investments, LLC redeemed 25.031 units for $1

● CCSC TBC Group, LLC acquired 10.067 Class C units for $1.

● All units held by HMA Blue Chip Investments, LLC were re-classified as Class B Units

● All the units held by CCSC TBC Group, LLC were re-classified as C units.

● CCSC Holdings, Inc. received 38.48 Class D units for the sum of $560,000.

● The $560,000 was paid by a forgiveness of the $140,000 advance plus cash of $420,000.

● There was a capital call of $14,000 per one percent (1%) ownership interest in the Company. HMA Blue Chip Investments, LLC and CCSC TBC Group, LLC’s previous advances were applied to the capital call.

Effective October 1, 2015, the Company entered into a new agreement for services with a related party.

10

EX-99.3

Exhibit 99.3

First Choice Healthcare

Solutions, Inc.

Condensed Consolidated Pro 

Forma Unaudited Financial

Statements

Year ended 

December 31, 2014 and Nine

Months Ended September 30, 2015

Table of Contents

	Page
FINANCIAL STATEMENTS
Condensed Consolidated Pro Forma Unaudited Balance Sheets as of September 30, 2015	2
Condensed Consolidated Pro Forma Unaudited Statement of Operations Nine Months Ended September 30, 2015	3
Condensed Consolidated Pro Forma Unaudited Statement of Operations Year Ended December 31, 2014	4
Notes to Pro Forma Unaudited Condensed Consolidated Financial Statements	5-7

FIRST CHOICE HEALTHCARE SOLUTIONS, INC.

CONDENSED CONSOLIDATED PRO FORMA UNAUDITED BALANCE SHEET SEPTEMBER 30, 2015

	Balance Sheet First Choice Healthcare Solutions, Inc. September 30,			Balance Sheet Crane Creek Surgical Partners, LLC. September 30,			Pro Forma Adjustments to Reflect The Variable Interest Entity of Crane Creek Surgical Partners, LLC. As of January 1, 2015				Balance Sheet Consolidated Pro Forma September 30,
	2015			2015			Dr		Cr		2015
ASSETS
Current assets
Cash	$	751,559		$	164,323			—		—	$	915,882
Cash-restricted		395,637			—			—		—		395,637
Accounts receivable		5,611,386			706,957			—		—		6,318,343
Employee loans		493,360			—			—		—		493,360
Prepaid and other current assets		548,211			—			—		—		548,211
Capitalized financing costs, current portion		54,858			—			—		—		54,858
Total current assets		7,855,011			871,280			—		—		8,726,291
Property, plant and equipment, net of accumulated depreciation of $4,152,225 and $1,546,095		8,027,163			715,896			—		—		8,743,059
Other assets
Deferred costs, net of amortization of $134,435		3,091,992			—			—		—		3,091,992
Patient list, net of accumulated amortization of $70,000		230,000			—			—		—		230,000
Patents, net of amortization of $33,425		253,075			—			—		—		253,075
Investments		22,200			—			—		—		22,200
Notes receivable, acquisition deposit		141,352			—			—		141,352		—
Deposits		2,571			—			—		—		2,571
Total other assets		3,741,190			—			—		141,352		3,599,838
Total assets	$	19,623,364		$	1,587,176			—	$	141,352	$	21,069,188
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities
Accounts payable and accrued expenses	$	2,476,718		$	673,772		$	—	$	—	$	3,150,490
Accrued interest		—			1,352			1,352		—		—
Related party payable		—			251,588			—		—		251,588
Capital lease payable		—			—			—		—		—
Due to members		—			940,000			140,000		—		800,000
Line of credit, short term		1,788,164			—			—		—		1,788,164
Notes payable, current portion		7,852,176			—			—		—		7,852,176
Unearned revenue		42,704			—			—		—		42,704
Deferred rent, short term portion		118,810			—			—		—		118,810
Total current liabilities		12,278,572			1,866,712			141,352		—		14,003,932
Long term debt:
Deposits held		67,432			—			—		—		67,432
Deferred rent, long term portion		1,489,636			522,046			—		—		2,011,682
Notes payable, long term portion		894,835			—			—		—		894,835
Total long term debt		2,451,903			522,046			—		—		2,973,949
Total liabilities		14,730,475			2,388,758			141,352				16,997,881
Equity
Common stock, $0.001 par value; 100,000,000 shares authorized, 18,432,055 and 17,951,055 shares issued and outstanding as of September 30, 2015 and December 31, 2014, respectively		22,433			—			—		—		22,433
Additional paid in capital		20,696,977			—			—		—		20,696,977
Members’ capital		—			1,409,858			—		—		1,409,858
Accumulated deficit		(15,687,835	)		(2,211,440	)		—		—		(17,899.275	)
Subtotal equity		5,031,575			(801,582	)		—				4,229,993
Non-controlling interest		(138,686	)		—			—		—		(138,686	)
Total equity		4,892,889			(801,582	)		—		—		4,091,307
Total liabilities and equity	$	19,623,364		$	1,587,176		$	141,352		—	$	21,069,188

See the accompanying notes to these unaudited condensed consolidated pro forma financial statements

2 

FIRST CHOICE HEALTHCARE SOLUTIONS, INC.

CONDENSED CONSOLIDATED PRO FORMA UNAUDITED STATEMENTS OF OPERATIONS

NINE MONTHS ENDED SEPTEMBER 30, 2015

	First Choice Healthcare Solutions, Inc. 9 Months Ended September 30,			Crane Creek Surgical Partners, LLC 9 Months Ended September 30,			Pro Forma Adjustments to Reflect The Variable Interest Entity of Crane Creek Surgical Partners, LLC As of January 1, 2015				Consolidated Pro Forma 9 Months Ended September 30,
	2015			2015			Dr		Cr		2015
Revenues:
Patient Service Revenue	$	11,871,574		$	2,076,563						$	13,948,137
Provision for bad debts		(51,485	)		—							(51,485	)
Net patient service revenue less provision for bad debts		11,820,089			2,076,563							13,896,652
Rental Revenue		1,301,515			—							1,301,515
Total Revenue		13,121,604			2,076,563							15,198,167
Operating expenses:
Salaries & Benefits		5,311,710			754,083							6,065,793
Other Operating expenses		1,685,830			740,373							2,426,203
General & Administrative		4,437,801			1,065,081							5,502,882
Depreciation and amortization		558,189			229,661							787,850
Total operating expenses		11,993,530			2,789,198							14,782,728
Net income from operations		1,128,074			(712,635	)						415,439
Other income (expense):
Miscellaneous income		22,719			13,149							35,868
Amortization Financing costs		(60,507	)		—							(60,507	)
Interest expense, net		(925,045	)		(14,464	)		1,352		1,352		(939,509	)
Total other expense		(962,833	)		(1,315	)						(964,148	)
NET INCOME (LOSS)	$	165,241		$	(713,950	)					$	(548,709	)
Non-controlling Interest		—			(428,370	)						(428,370	)
Net Income (Loss) available to shareholder		0.01			(7,418.51	)						(7,418.52	)
Net Income (loss) per common share, basic		0.01			(7,418.51	)						(7,418.52	)
Net Income (loss) per common share, diluted		0.01			(7,418.51	)						(7,418.52	)
Weighted average number of common shares outstanding, basic		12,249,783			96.239							12,249,879.239
Weighted average number of common shares outstanding, diluted		21,583,117			96.239							21,583,213.239

See the accompanying notes to these unaudited condensed consolidated pro forma financial statements 

3 

FIRST CHOICE HEALTHCARE SOLUTIONS, INC.

CONDENSED CONSOLIDATED PRO FORMA UNAUDITED STATEMENTS OF OPERATIONS

YEAR ENDED DECEMBER 31, 2014

	First Choice Healthcare Solutions, Inc. Year Ended December 31,			Crane Creek Surgical Partners, LLC Year Ended December 31,			Pro Forma Adjustments to Reflect The Variable Interest Entity of Crane Creek Surgical Partners, LLC As of January 1, 2014		Consolidated Pro Forma Year Ended December 31,
	2014			2014			Dr	Cr	2014
Revenues:
Patient Service Revenue	$	7,966,385		$	3,248,786				$	11,215,171
Provision for bad debts		(912,782	)		—					(912,782	)
Net patient service revenue less provision for bad debts		7,053,603			3,248,786					10,302,389
Rental Revenue		1,048,999			—					1,048,999
Total Revenue		8,102,602			3,248,786					11,351,388
Operating expenses:
Salaries & Benefits		4,761,573			917,317					5,678,890
Other Operating expenses		1,897,780			905,203					2,802,983
General & Administrative		2,434,259			1,394,630					3,828,889
Depreciation and amortization		552,084			307,266					859,350
Total operating expenses		9,645,696			3,524,416					13,170,112
Net (loss) income from operations		(1,543,094	)		(275,630	)				(1,818,724	)
Other income (expense):
Miscellaneous income		3,000			15,424					18,424
Amortization Financing costs		(82,744	)		—					(82,744	)
Interest expense, net		(866,701	)		(65,864	)				(932,565	)
Total other expense		(946,445	)		(50,440	)				(996,885	)
Net loss before provision for income taxes		(2,489,539	)		(326,070	)				(2,815,609	)
Income taxes (benefit)		—			—					—
NET LOSS	$	(2,489,539	)	$	(326,070	)			$	(2,815,609	)
Net loss per common share, basic and diluted	$	(0.14)		$	(3,388.13	)			$	(3,388.27	)
Weighted average number of common shares outstanding, basic and diluted		17,249,921			96.239					17,250,017.239

See the accompanying notes to these unaudited condensed .onsolidated pro forma financial statements

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FIRST CHOICE HEALTHCARE SOLUTIONS, INC.

NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 1 - DESCRIPTION OF BUSINESS

First Choice Healthcare Solutions, Inc. (“FCHS,” the “Company,” “we,” “our” or “us”) is engaged in the creation of state-of-the-art, multi-specialty “Medical Centers of Excellence” primarily in select markets in the southeastern region of the United States. We intend to own and operate these “Medical Centers of Excellence” under the FCHS brand.

We believe by integrating the synergistic mix of orthopedic, spine, neurology and interventional pain specialties with related diagnostic and ancillary services and state-of-the-art equipment and technologies all in one location, or a “Medical Center of Excellence,” we are able to:

● provide patients with convenient access to musculoskeletal and rehabilitative care via orthopedic, spine, neurology and interventional pain medicine treatment, diagnostics and ancillary care services, including, but not limited to magnetic resonance imaging (“MRI”), x-ray (“X-ray”), durable medical equipment (“DME”) and physical therapy (“PT”);

● empower physicians to collaborate as a unified care team, optimizing care coordination and improving outcomes; and

● advance the quality and cost effectiveness of our patients’ healthcare; and ultimately, achieve strong, sustainable financial performance that serves to create long-term value for our stockholders.

Our goal is to build a network of non-physician-owned and operated Medical Centers of Excellence in diverse locations, primarily throughout the southeastern region of the United States. By centralizing current and future Centers’ business management functions, including call center operations, scheduling, billing, compliance, accounting, marketing, advertising, legal, information technology and record-keeping, at our corporate headquarters, we will maintain efficiencies and scales of economies. We believe our structure will enable our staff physicians to focus on the practice of medicine and the delivery of quality care to the patients we serve, as opposed to having their time and attention focused on business administration responsibilities.

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES

A summary of the significant accounting policies applied in the presentation of the accompanying unaudited condensed financial statements follows:

General

The unaudited condensed combined pro forma balance sheet gives effect to the acquisition as if the Agreement had taken place on September 30, 2015 and combines CCSP’s unaudited condensed balance sheet as of September 30, 2015 with First Choice Healthcare Solutions, Inc.’s (FCHS) condensed balance sheet as of September 30, 2015. The unaudited condensed combined pro forma balance sheet gives effect to the acquisition as if the Agreement had taken place on September 30, 2015 and combines CCSP’s unaudited condensed balance sheet as of September 30, 2015 with FCHS’s condensed balance sheet as of September 30, 2015. These financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and the instructions to Form 10-Q and Rule 8-03 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included.

Use of estimates

The preparation of financial statements in accordance with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include the useful life of fixed assets.

Revenue recognition

The Company recognizes revenue in accordance with Accounting Standards Codification subtopic 605-10, Revenue Recognition (“ASC 605-10”) which requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the selling price is fixed and determinable; and (4) collectability is reasonably assured. Determination of criteria (3) and (4) are based on management’s judgments regarding the fixed nature of the selling prices of the products delivered and the collectability of those amounts. Provisions for discounts and rebates to customers, estimated returns and allowances, and other adjustments are provided for in the same period the related sales are recorded.

The Company recognizes in accordance with Accounting Standards Codification subtopic 954-310, “Health Care Entities” (“ASC 954-310”), significant patient service revenue at the time the services are rendered, even though it does not assess the patient’s ability to pay.

Cash

Cash consists of cash held in bank demand deposits. The Company considers all highly liquid instruments with original maturities of three months or less to be cash equivalents.

Property and Equipment

Property and equipment are stated at cost. When retired or otherwise disposed, the related carrying value and accumulated depreciation are removed from the respective accounts and the net difference less any amount realized from disposition, is reflected in earnings. For financial statement purposes, property and equipment are recorded at cost and depreciated using the straight-line method over their estimated useful lives of 5 to 39 years.

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FIRST CHOICE HEALTHCARE SOLUTIONS, INC.

NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (continued)

VIE Consolidation 

ASC 810 provides guidance on the accounting for variable interest entities under US GAAP. Based on management’s interpretation of the six requirements of Accounting Standards Codification subtopic 810-15-22, the Company meets the definition of the primary beneficiary with control, without a majority equity interest, for consolidation of the Company’s financial position and operations with the financial position of CCSC Holdings, Inc. and its parent company, FCHS.

Fair value of financial instruments

Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of September 30, 2015 and December 31, 2014. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values. These financial instruments include cash, accounts payable line of credit and advances. Fair values were assumed to approximate carrying values for cash and payables because they are short term in nature and their carrying amounts approximate fair values or they are payable on demand.

Recent accounting pronouncements

There were various updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries and are not expected to a have a material impact on the Company’s condensed financial position, results of operations or cash flows.

NOTE 3 - LIQUIDITY

As of September 30, 2015, the Company’s working capital deficit current liabilities minus current assets was $5,277,641. The Company’s owners have entered into an operating and control agreement giving CCSC Holdings Inc. a wholly owned subsidiary of First Choice Healthcare Solutions, Inc. (FCHS), a controlling variable interest in the Company. On November 12, 2015, the operating agreement was executed but made effective October 1, 2015.

NOTE 4 - PROPERTY AND EQUIPMENT

Property plant and equipment, at September 30, 2015, was $8,743,059 net of accumulated depreciation of $5,698,320.

During the nine months ended September 30, 2015, $787,850 was charge to operations depreciation expense.

NOTE 5 - OWNERS’ EQUITY

The Company’s membership interest as of November 2, 2015 was owned by CCSC Holdings, Inc., a wholly owned subsidiary of First Choice Healthcare Solutions, Inc. (“FCHS”) CCSC TBC Group, LLC, which is owned by Richard Hynes, M.D., FASC and Devin K. Datta, M.D., and HMA Blue Chip Investments, LLC (Blue Chip Surgical Center Partners), which developed and manages 17 world class ambulatory surgery centers across the United States.

Together, CCSC Holdings, Inc. and TBC Group own 75% interest in Crane Creek Surgical Partners. LLC. In accordance with the Crane Creek Restated and Amended Operating Agreement, CCSC Holdings, Inc. will exercise sufficient control over the business of Crane Creek that will allow FCHS to treat it as a variable interest entity (“VIE”), effective October 1, 2015.

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FIRST CHOICE HEALTHCARE SOLUTIONS, INC.

NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

NOTE 6 - COMMITMENTS AND CONTINGENCIES

Operating and Control Agreement for the controlling variable interest in the Company.

FCHS has the power to make decisions that most significantly affect the economic performance of CCSP and to absorb significant losses or right to receive benefits that could potentially be significant. As a result, the Company will include the financial results of the VIE in its consolidated financial statements in accordance with generally accepted accounting principles.

NOTE 7 - SUBSEQUENT EVENTS

In accordance with FASB ASC 855 “Subsequent Events,” FCHS has evaluated subsequent events through the date the financial statements are available to be issued, January 25, 2016.

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