XML 37 R7.htm IDEA: XBRL DOCUMENT v2.4.1.9
Basis of Presentation
3 Months Ended
Mar. 31, 2015
Accounting Policies [Abstract]  
Basis of Presentation

Note 2 – Basis of Presentation

Going Concern and Management’s Plan – As of March 31, 2015, the Company had an accumulated deficit of $38.6 million and a working capital deficit of $0.6 million (adjusted for redemption payments of $1.7 million payable to preferred noncontrolling interest holders in 2015). During the three months ended March 31, 2015, the Company generated a net loss attributable to Foundation Healthcare common stock of $1.3 million and generated $0.9 million in cash flow from operating activities from continuing operations. As of March 31, 2015, the Company had cash and cash equivalents of $3.5 million and have access to $1.0 million under a $2.5 million line of credit from its senior lender. Although the Company has access to a line of credit, management, based on existing operations and the due dates of certain liability and debt payments, projects the Company may not be able to meet all of the Company’s obligations as they become due in 2015. Management plans to meet the projected cash flow shortage from management fees earned from new hospital partners the Company anticipates procuring in 2015.  

If the Company is unable to procure the management contracts as noted above, the Company may be forced to obtain extensions on existing debt and other obligations as they become due in 2015. Although the Company has historically been successful in obtaining extensions, there is no assurance that the Company will be able to obtain them in the future. In addition, the Company may choose to raise additional funds through the sale of equity or assets, but there is no assurance that the Company will be successful in completing such actions.

If the Company is not able to obtain incremental management fees from new hospital partners, does not obtain extensions on some of its debt or other obligations during 2015 or if the Company is not able to raise additional funds through the sale of equity or assets, the Company may not have sufficient cash on hand or generate sufficient cash flow from operations to meet the Company’s cash requirements over the next 12 months. These uncertainties raise substantial doubt about the Company’s ability to continue as a going concern. The Company’s consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

Reverse Stock Split – At the Company’s annual meeting of stockholders held on May 12, 2014, the Company’s stockholders approved an amendment to its amended and restated certificate of incorporation to effect a reverse split of its common stock at a ratio between 1-for-3 to 1-for-10 shares.  The Company’s stockholders further authorized the board of directors to determine the ratio at which the reverse split would be effected by filing an appropriate amendment to its amended and restated certificate of incorporation.  The Company’s board of directors authorized the ratio of the reverse split and corresponding reduction in authorized shares on December 29, 2014 and effective at the close of business on January 8, 2015, the Company amended its amended and restated certificate of incorporation to effect a 1-for-10 reverse split of its common stock, or the Reverse Split.  The board of directors considered a ratio that would allow the Company to have a number of outstanding shares to have a sufficient trading volume while considering stock price that would be consistent with the Company’s intention to eventually uplist of its common stock from the OTC Markets QB Tier to a listing on the NYSE MKT exchange, though there can be no assurance that we will ultimately pursue or be successful in seeking to uplist the Company’s common stock on such exchange.  The Board of Directors determined that a ratio of 1-for-10 was the best balance of these and other factors.  The effect of the reverse split reduced the Company’s outstanding common stock shares from 172,638,414 to 17,263,842 shares as of the date of the reverse split.  The accompanying consolidated financial statements give effect to the reverse split as of the first date reported.