Exhibit 99.1
GA8 TENANTS
COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 2021 AND 2020
GA8 TENANTS
TABLE OF CONTENTS
DECEMBER 31, 2021 AND 2020
| INDEPENDENT AUDITORS’ REPORT | 1 |
| COMBINED FINANCIAL STATEMENTS | |
| Combined Balance Sheets | 3 |
| Combined Statements of Income and Changes in Members’ Equity | 4 |
| Combined Statements of Cash Flows | 5 |
| Notes to the Combined Financial Statements | 6 |
| SUPPLEMENTARY INFORMATION | |
| Independent Auditors’ Report on Supplementary Information | 14 |
| 2021 Combined Balance Sheet | 15 |
| 2021 Combined Statement of Income and Members’ Equity | 16 |
| 2020 Combined Balance Sheet | 17 |
| 2020 Combined Statement of Income and Members’ Equity | 18 |
INDEPENDENT AUDITORS’ REPORT
To the Owners and Management
GA8 Tenants
Opinion
We have audited the accompanying combined financial statements of GA8 Tenants, which comprise the combined balance sheets as of December 31, 2021 and 2020, and the related combined statements of income and changes in members’ equity and cash flows for the years then ended, and the related notes to the combined financial statements.
In our opinion, the combined financial statements referred to above present fairly, in all material respects, the financial position of GA8 Tenants as of December 31, 2021 and 2020, and the results of their operations and their cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.
Basis for Opinion
We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Combined Financial Statements section of our report. We are required to be independent of GA8 Tenants and to meet our other ethical responsibilities in accordance with the relevant ethical requirements relating to our audits. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Management’s Responsibility for the Combined Financial Statements
Management is responsible for the preparation and fair presentation of the combined financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation and maintenance of internal control relevant to the preparation and fair presentation of combined financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the combined financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about GA8 Tenants’ ability to continue as a going concern within one year after the date that the combined financial statements are available to be issued.
1
Auditors’ Responsibilities for the Audit of the Combined Financial Statements
Our objectives are to obtain reasonable assurance about whether the combined financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with generally accepted auditing standards will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations or the override of internal control. Misstatements, including omissions, are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the combined financial statements.
In performing an audit in accordance with generally accepted auditing standards, we:
| · | Exercise professional judgment and maintain professional skepticism throughout the audit. |
| · | Identify and assess the risks of material misstatement of the combined financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the combined financial statements. |
| · | Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of GA8 Tenants’ internal control. Accordingly, no such opinion is expressed. |
| · | Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the combined financial statements. |
| · | Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about GA8 Tenants’ ability to continue as a going concern for a reasonable period of time. |
We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings and certain internal control related matters that we identified during the audit.
/s/ Warren Averett, LLC
Birmingham, Alabama
August 12, 2022
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GA8 TENANTS
Combined Balance Sheets
DECEMBER 31, 2021 AND 2020
| ASSETS | ||||||||
| 2021 | 2020 | |||||||
| CURRENT ASSETS | ||||||||
| Cash | $ | 3,114,852 | $ | 2,719,538 | ||||
| Patient accounts receivable, net | 12,894,880 | 17,042,269 | ||||||
| Estimated third-party payor settlements | 513,153 | 1,127,070 | ||||||
| Prepaid expenses and other current assets | 502,821 | 949,670 | ||||||
| Other receivables | 5,757,779 | 421,977 | ||||||
| Total current assets | 22,783,485 | 22,260,524 | ||||||
| PROPERTY AND EQUIPMENT, NET | 407,544 | 322,000 | ||||||
| DEPOSITS | 3,462,085 | 67,905 | ||||||
| TOTAL ASSETS | $ | 26,653,114 | $ | 22,650,429 | ||||
| LIABILITIES AND MEMBERS' EQUITY | ||||||||
| 2021 | 2020 | |||||||
| CURRENT LIABILITIES | ||||||||
| Accounts payable | $ | 7,237,383 | $ | 5,973,785 | ||||
| Accrued expenses | 324,384 | 82,295 | ||||||
| Accrued payroll and benefits | 665,197 | 761,124 | ||||||
| Medicare advance payments | 1,879,820 | 3,823,517 | ||||||
| Total current liabilities | 10,106,784 | 10,640,721 | ||||||
| PAYCHECK PROGRAM PROTECTION LOAN | 3,812,300 | 3,812,300 | ||||||
| MEMBERS' EQUITY | 12,734,030 | 8,197,408 | ||||||
| TOTAL LIABILITIES AND MEMBERS' EQUITY | $ | 26,653,114 | $ | 22,650,429 | ||||
See notes to the combined financial statements.
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GA8 TENANTS
Combined Statements of Income and Changes in Members’ Equity
FOR THE YEARS ENDED DECEMBER 31, 2021 AND 2020
| 2021 | 2020 | |||||||
| REVENUES | ||||||||
| Net patient service revenue | $ | 73,028,068 | $ | 73,512,382 | ||||
| COVID-19 Relief Funds revenue | 3,140,176 | 5,286,770 | ||||||
| 76,168,244 | 78,799,152 | |||||||
| OPERATING EXPENSES (INCOME) | ||||||||
| Administrative and general services | 11,154,677 | 11,516,230 | ||||||
| Management services | 3,986,381 | 3,860,066 | ||||||
| Employee health and welfare | 2,932,177 | 2,306,871 | ||||||
| Plant operations | 1,866,549 | 1,950,729 | ||||||
| Dietary services | 4,432,404 | 4,484,088 | ||||||
| Housekeeping and laundry | 2,135,739 | 2,108,129 | ||||||
| Nursing services | 20,755,923 | 17,594,929 | ||||||
| Social services | 241,707 | 230,453 | ||||||
| Medical services | 852,495 | 952,603 | ||||||
| Recreation | 486,707 | 510,966 | ||||||
| Provision for bad debt | 3,168,446 | 3,084,518 | ||||||
| Employee retention tax credit | (6,873,073 | ) | - | |||||
| Rent on facilities | 15,473,348 | 12,415,283 | ||||||
| Rehabilitative therapies | 9,211,057 | 9,731,259 | ||||||
| Total operating expenses | 69,824,537 | 70,746,124 | ||||||
| NET INCOME | 6,343,707 | 8,053,028 | ||||||
| MEMBERS' EQUITY AT BEGINNING OF YEAR | 8,197,408 | 2,718,505 | ||||||
| DISTRIBUTIONS | (1,807,085 | ) | (2,574,125 | ) | ||||
| MEMBERS' EQUITY AT END OF YEAR | $ | 12,734,030 | $ | 8,197,408 | ||||
See notes to the combined financial statements.
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GA8 TENANTS
Combined Statements of Cash Flows
FOR THE YEARS ENDED DECEMBER 31, 2021 AND 2020
| 2021 | 2020 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net income | $ | 6,343,707 | $ | 8,053,028 | ||||
| Adjustments to reconcile net income to net cash provided by (used in) operating activities: | ||||||||
| Depreciation | 132,795 | 24,872 | ||||||
| Provision for bad debt expense | 3,168,446 | 3,084,518 | ||||||
| Change in other assets | (3,394,180 | ) | 134,278 | |||||
| Change in patient accounts receivable | 978,943 | (13,002,857 | ) | |||||
| Change in estimated third-party payor settlements | 613,917 | (1,127,070 | ) | |||||
| Change in prepaid expenses | 446,849 | (825,935 | ) | |||||
| Change in other receivables | (5,335,802 | ) | (871,975 | ) | ||||
| Change in accounts payable | 1,263,598 | 1,513,684 | ||||||
| Change in accrued expenses | 242,089 | (47,076 | ) | |||||
| Change in accrued payroll and benefits | (95,927 | ) | (686,109 | ) | ||||
| (1,979,272 | ) | (11,803,670 | ) | |||||
| Net cash provided by (used in) operating activities | 4,364,435 | (3,750,642 | ) | |||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Purchases of property and equipment | (218,339 | ) | (336,192 | ) | ||||
| Net cash used in investing activities | (218,339 | ) | (336,192 | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Distributions | (1,807,085 | ) | (2,574,125 | ) | ||||
| Change in line of credit | - | (280,963 | ) | |||||
| Paycheck program protection plan | - | 3,812,300 | ||||||
| Proceeds from (repayment of) Medicare advance payment loan | (1,943,697 | ) | 3,823,517 | |||||
| Net cash provided by (used in) financing activities | (3,750,782 | ) | 4,780,729 | |||||
| INCREASE IN CASH | 395,314 | 693,895 | ||||||
| CASH AT BEGINNING OF YEAR | 2,719,538 | 2,025,643 | ||||||
| CASH AT END OF YEAR | $ | 3,114,852 | $ | 2,719,538 | ||||
See notes to the combined financial statements.
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GA8 TENANTS
NOTES TO THE COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 2021 AND 2020
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
GA8 Tenants (the Company) operates eight nursing facilities located in Georgia, which includes, GACalhoun SNF LLC, GAChatsworth SNF LLC, GAFairburn SNF LLC, GADecatur SNF LLC, GACartersville SNF LLC, GAJasper SNF LLC, GAStone Mountain SNF LLC, and Willowwood PAC LLC, collectively known as GA8 Tenants.
Principles of Combination
The accompanying combined financial statements include GACalhoun SNF LLC, GAChatsworth SNF LLC, GAFairburn SNF LLC, GADecatur SNF LLC, GACartersville SNF LLC, GAJasper SNF LLC, GAStone Mountain SNF LLC, and Willowwood PAC LLC, collectively known as GA8 Tenants. Upon combination, all material intercompany balances and transactions have been eliminated.
Use of Estimates
The preparation of the combined financial statements in conformity with generally accepted accounting principles (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the combined financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Cash
The Company maintains its cash in bank deposit accounts which, at times, may exceed federally insured limits. The Company has not experienced any losses in such accounts.
Net Patient Service Revenue
Net patient service revenue is reported at the estimated net realizable amounts from residents, third-party payors and others for services rendered.
Revenue under third-party payor agreements is paid on a prospective basis and is subject to audit by the third-party payor. Provisions for estimated third-party payor settlements are provided in the period the related services are rendered. Differences between the estimated amounts accrued, and interim and final settlements, are reported in operations in the year final settlements are determined.
Government Grants
There is no U.S. GAAP that explicitly covers accounting for government "grants" to for-profit entities, with the exception of certain agricultural subsidies. In the absence of authoritative U.S. GAAP guidance, the Company considered the application of other authoritative accounting guidance by analogy and concluded that the guidance outlined in International Accounting Standard 20 – Accounting for Government Grants and Disclosures of Government Assistance (IAS 20) was the most appropriate analogy for the purpose of recording and classifying the federal stimulus funds received by the Company. Under IAS 20, once it is reasonably assured that the entity will comply with the conditions of the grant, the grant money should be recognized on a systematic basis over the periods in which the entity recognizes the related expenses or losses for which the grant money is intended to compensate. The Company recognizes grants once both of the following conditions are met: (1) the Company is able to comply with the relevant conditions of the grant and (2) the grant is received. Government grants received by the Company are disclosed in Note 8.
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GA8 TENANTS
NOTES TO THE COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 2021 AND 2020
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED
The promise to provide quality care is accounted for as a single performance obligation. The Company has concluded that the contracts with patients and residents represent a bundle of distinct services that are substantially the same, with the same pattern of transfer to the customer. The Company uses the portfolio approach as a practical expedient to group patient contracts with similar characteristics, such that revenue for a given portfolio would not be materially different than if it were evaluated on a contract-by-contract basis. These analyses incorporated consideration of reimbursements at varying rates from Medicaid, Medicare, Private Pay and other commercial payments for services. In order to determine the transaction price, the Company estimates the amount of variable consideration at the beginning of the contract using the expected value method. Changes in the Company's expectation of the amount it will receive from the patient or third-party payors will be recorded in revenue unless there is a specific event that suggests the patient or third-party payor no longer has the ability and intent to pay the amount due and, therefore, the changes in its estimate of variable consideration better represent an impairment, or bad debt. The Company satisfies its performance obligation by providing quality of care services to its patients and residents on a daily basis until termination of the contract.
The following tables summarize revenue from contracts with customers by payor source for the periods presented:
| 2021 | ||||||||||||||||||||
| Other | Total | |||||||||||||||||||
| Third-Party | of All | |||||||||||||||||||
| Medicare | Medicaid | Payors | Patients | Payors | ||||||||||||||||
| Patient service revenue (net of contractual allowances, discounts and implicit price concessions) | $ | 26,600,322 | $ | 38,304,073 | $ | 6,175,651 | $ | 1,948,022 | $ | 73,028,068 | ||||||||||
| 2020 | ||||||||||||||||||||
| Other | Total | |||||||||||||||||||
| Third-Party | of All | |||||||||||||||||||
| Medicare | Medicaid | Payors | Patients | Payors | ||||||||||||||||
| Patient service revenue (net of contractual allowances, discounts and implicit price concessions) | $ | 28,457,529 | $ | 37,626,101 | $ | 6,267,114 | $ | 1,161,638 | $ | 73,512,382 | ||||||||||
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GA8 TENANTS
NOTES TO THE COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 2021 AND 2020
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED
Accounts Receivable
Accounts receivable is reported in the balance sheet at the outstanding balance net of an estimated allowance for doubtful accounts. Billing terms usually provide for payment within 30 days. An allowance for doubtful accounts is estimated based upon review of outstanding receivables, historical collection information and existing economic conditions. Bad debts are charged against the allowance when substantially all collection efforts cease. Recovery of bad debts previously charged off are recorded when received. The Company’s billing arrangements generally do not provide for interest on past due amounts. At December 31, 2021 and 2020, the allowance for doubtful accounts totaled $1,115,435 and $1,641,010. Total receivables totaled $18,683,279 and $14,010,314 at December 31, 2020 and 2021, respectively ($7,792,657 at December 31, 2019).
Concentration of Credit Risk
The Company grants credit without collateral to its patients, most of whom are local residents in relation to the nursing home in which they reside and are insured under third-party payor agreements. The mix of receivables from patients and third-party payors was as follows at December 31:
| 2021 | 2020 | |||||||
| Medicare | 43 | % | 38 | % | ||||
| Medicaid | 43 | % | 47 | % | ||||
| Other insurance | 9 | % | 13 | % | ||||
| Private pay | 5 | % | 2 | % | ||||
| 100 | % | 100 | % | |||||
Property and Equipment
Property and equipment acquisitions are recorded at cost less accumulated depreciation. The Company’s policy is to capitalize individual acquisitions of property and equipment greater than $5,000. Depreciation is provided over the estimated useful life of each class of depreciable assets and is computed using the straight-line method.
Income Taxes
As a limited liability company, income or loss generated by the Company is passed on to the members of the Company and taxed at their individual rates. Therefore, no provision or liability for income taxes has been included in the accompanying combined financial statements.
The Company assessed guidance relating to uncertainty in income taxes. This guidance requires entities to assess their uncertain tax positions for the likelihood that they would be overturned upon Internal Revenue Service (IRS) examination or upon examination by state taxing authorities. The Company has determined that it does not have any positions at December 31, 2021 and 2020, that it would be unable to substantiate. The Company has filed its tax returns for all years through December 31, 2020.
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GA8 TENANTS
NOTES TO THE COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 2021 AND 2020
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED
Insurance
The Company maintains insurance programs including: workers’ compensation, employees’ medical care, property, casualty, directors’ and officers’ liability, and automobile. The Company believes its insurance programs are adequate and, where there has been a direct transfer of risk to the insurance carrier, the Company does not recognize a liability in the combined financial statements. The Company maintains a claims-made insurance program for general and professional liability and provides an estimated reserve for incurred but not reported claims. In the opinion of management, insurance coverage and estimated reserves for incurred but not reported claims are adequate to cover significant losses, if any.
Medicare Advance Payments
During 2020, the Company applied for and received $3,823,517 from the Medicare Advance Payment Program (MAPP). These funds are an interest free loan that will be subsequently repaid over time. In April 2021, the Company began to repay the loan. At December 31, 2021, the remaining amount to be repaid was $1,879,820 and is recorded as Medicare Advance Payment Loan in the accompanying combined financial statements.
Subsequent Events
Management has evaluated subsequent events and their potential effects on these combined financial statements through August 12, 2022, which is the date the combined financial statements were available to be issued.
Recent Accounting Pronouncements
In February 2016, the FASB issued Accounting Standards Update (ASU) 2016-02, Leases, (Subtopic 842). The purpose of this ASU is to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The amendments in this ASU require that lessees recognize the rights and obligations resulting from leases as assets and liabilities on their balance sheets, initially measured at the present value of the lease payments over the term of the lease, including payments to be made in optional periods to extend the lease and payments to purchase the underlying assets if the lessee is reasonably certain of exercising those options. Subtopic 842 requires recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases under previous generally accepted accounting principles. This guidance is effective for the Company in 2022. Management is currently evaluating the impact of this document to the Company’s combined financial statements.
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GA8 TENANTS
NOTES TO THE COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 2021 AND 2020
2. PROPERTY AND EQUIPMENT
A summary of property and equipment as of December 31, is as follows:
| 2021 | 2020 | |||||||
| Furniture and equipment | $ | 75,094 | $ | 21,240 | ||||
| Software and website | 3,913 | 3,913 | ||||||
| Minor movable equipment | 183,667 | 146,637 | ||||||
| Major repairs/improvements | 302,537 | 175,082 | ||||||
| 565,211 | 346,872 | |||||||
| Less accumulated depreciation | 157,667 | 24,872 | ||||||
| $ | 407,544 | $ | 322,000 | |||||
Depreciation charged to operations was $132,795 and $24,872 in 2021 and 2020, respectively.
3. OPERATING LEASES
During 2021 and 2020, the Company leased eight nursing facilities from a related party under common ownership. Due to a change in ownership on the leased nursing homes, the Company enter into a new lease agreement on December 30, 2021, with an unrelated party to continue leasing the nursing home facilities through December 31, 2036. Associated with the new lease, the Company was required to make $3,462,085 in deposits and prepayments related to operating leases. This amount is included in deposits in the accompanying December 31, 2021 combined balance sheet.
Total lease expense for the eight nursing facilities paid to the related party was $15,316,057 and $12,300,000 in 2021 and 2020.
Annual minimum rental commitments at December 31, 2021, are as follows:
| 2022 | $ | 11,700,000 | ||
| 2023 | 11,875,000 | |||
| 2024 | 12,053,633 | |||
| 2025 | 12,234,437 | |||
| 2026 | 12,417,953 | |||
| Thereafter | 124,211,299 | |||
| $ | 184,492,322 |
Various extensions are available at the option of the lessee. Management expects that, in the normal course of business, the leases will be renewed or replaced by other leases.
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GA8 TENANTS
NOTES TO THE COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 2021 AND 2020
4. CONTINGENCIES AND COMMITMENTS
Pursuant to legislative directives and authorizations from Congress, the Centers for Medicare and Medicaid Services (CMS) has developed and instituted various Medicare audit programs under which CMS contracts with private companies to conduct audits on claims and medical records. In the ordinary course of business, the Company is subject to inquiries, investigations and audits by these private companies or other federal and state agencies that oversee applicable healthcare program participation and payment regulations. Audits may include enhanced medical necessity reviews pursuant to the Medicare, Medicaid and SCHIP Extension Act of 2007 and audits under the CMS Recovery Audit Contractor (RAC) program. The Company makes significant efforts through training and education to ensure compliance with all programs.
5. LITIGATION
There are several lawsuits pending against the Company. The ultimate outcome of these claims is uncertain at this time; however, management believes that the ultimate liability resulting from the claims, if any, will not have a material adverse effect in the combined financial statements.
6. COVID-19 RELIEF FUND
As part of the response to the coronavirus pandemic, the federal government passed legislation, referred to as the Coronavirus Aid, Relief, and Economic Security Act, in March 2020, and the America Rescue Plan Act in March of 2021, that included, among other things, financial assistance to offset some of the financial burden expected to be incurred by providers in responding to the pandemic. As a result of this legislation, the Company received $1,597,821 ($5,145,975 in 2020) from funds established under the CARES Act in the form of a grant that, as long as certain terms and conditions are met by the Company, is not required to be repaid. The Company has met the terms and conditions as required by the grants and has recognized $1,597,821 ($5,145,975 in 2020) of the relief funds to offset lost revenues and additional expenses incurred for the year ended December 31, 2021, due to the coronavirus pandemic. This amount is recorded as other operating income in the accompanying combined statements of income and members’ equity.
In addition to the above, the U.S. Department of the Treasury directed funding to state, territorial, tribal and eligible local governments. The funds were required to be used for necessary expenditures incurred in due to COVID-19. The Company has met the terms and conditions of the use funds and recognized amounts into income. The Company received $1,542,355 and $140,795 in funds in 2021 and 2020, respectively.
11
GA8 TENANTS
NOTES TO THE COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 2021 AND 2020
7. MANAGEMENT FEES
The Company pays management fees to a related party that provides general and administrative services to the nursing home operators. Management fee expenses incurred for the years ended December 31, 2021 and 2020, totaled $3,986,381 and $3,860,066, respectively. Management fees are presented as an expense and included in administrative services in the accompanying combined financial statements. At December 31, 2021, the Company had $191,003 due from the related party ($194,560 due to the related party in 2020) included in other receivables in the accompanying combined financial statements.
8. PAYCHECK PROTECTION LOAN
During 2020, the nursing homes were granted loans (the Loan) from a financial institution in the aggregate amount of $3,812,300 pursuant to the Paycheck Protection Program (the PPP) under Division A, Title I of the CARES Act, which was enacted on March 27, 2020. Under the terms of the PPP, certain amounts of the loan may be forgiven if they are used for qualifying expenses and if certain other requirements as described in the CARES Act are met. The Company used the entire loan amount for qualifying expenses. The Company applied for forgiveness with the lender and received forgiveness from the Small Business Administration in 2021 and 2022.
9. LINE OF CREDIT
The Company had a $5,000,000 line of credit with Wells Fargo Bank, which was closed during 2021. The note charged interest at the LIBOR daily rate plus the LIBOR rate margin of 2.3%. Any borrowings were collateralized by all of the Company’s assets as well as the members’ personal guarantee. There were no draws on the line of credit during the years ended December 31, 2021 and 2020.
10. EMPLOYEE RETENTION TAX CREDIT
In December 2020, the Consolidated Appropriations Act, 2021 (CAA) was signed into law which included additional COVID-19 related relief. The CAA substantially and retroactively expended the Employee Retention Tax Credit (ERTC) for eligible companies. Under the revised terms of the ERTC, companies are eligible to claim the payroll tax credit if the company was fully or partially suspended by a COVID-19 government order or if calendar 2021 gross receipts were less than 20% compared to the same quarter in 2019. For the period January 1, 2021 through September 30, 2021, the Company qualified for $6,876,330 in payroll tax credits. The Company received $1,644,793 during 2021. Accordingly, the Company has recorded a receivable (included in Other receivables) on the accompanying combined balance sheets of $5,231,537 as of December 31, 2021, and a reduction to operating expenses of $6,876,330 on the accompanying combined statements of income.
12
SUPPLEMENTARY INFORMATION
INDEPENDENT AUDITORS’ REPORT ON
SUPPLEMENTARY INFORMATION
To the Owners and Management
GA8 Tenants
We have audited the accompanying combined financial statements of GA8 Tenants, as of and for the year ended December 31, 2021 and 2020, and our report thereon dated August 12, 2022, which expressed an unmodified opinion on those combined financial statements on Pages 1 and 2. Our audits were conducted for the purpose of forming an opinion on the combined financial statements as a whole. The combining balance sheets and combining statements of income and members’ equity as of December 31, 2021 and 2020 and for the year then ended are presented for purposes of additional analysis of the combined financial statements rather than to present the financial position and results of operations, of the individual companies, and are not a required part of the combined financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the combined financial statements. The combining information has been subjected to the auditing procedures applied in the audits of the combined financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the combined financial statements or to the combined financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the combining information is fairly stated in all material respects in relation to the combined financial statements as a whole.
/s/ Warren Averett, LLC
Birmingham, Alabama
August 12, 2022
14
GA8 TENANTS
COMBINING BALANCE SHEET
DECEMBER 31, 2021
| ASSETS | |||||||||||||||||||||||||||||||
| GACalhoun | GAChatsworth | GAFairburn | GADecatur | GACartersville | GAJasper | GAStone Mountain | Willowwood | ||||||||||||||||||||||||
| SNF LLC | SNF LLC | SNF LLC | SNF LLC | SNF LLC | SNF LLC | SNF LLC | PAC LLC | Eliminations | TOTAL | ||||||||||||||||||||||
| CURRENT ASSETS | |||||||||||||||||||||||||||||||
| Cash | $ | 598,873 | $ | 851,976 | $ | 160,153 | $ | 20,404 | $ | 378,763 | $ | 5,351 | $ | 21,015 | $ | 1,078,317 | $ | - | $ | 3,114,852 | |||||||||||
| Patient accounts receivable, net | 1,109,316 | 1,271,102 | 950,462 | 2,519,646 | 930,699 | 807,396 | 3,860,699 | 1,445,560 | - | 12,894,880 | |||||||||||||||||||||
| Estimated third-party payor settlements | 3,136 | 315,677 | (56,308 | ) | 22,000 | 23,347 | 37,797 | (67,409 | ) | 234,913 | - | 513,153 | |||||||||||||||||||
| Intercompany receivables | 6,495,824 | 1,910,576 | 2,345,179 | 2,099,797 | 500,325 | 878,111 | 1,832,288 | 729,921 | (16,792,021 | ) | - | ||||||||||||||||||||
| Prepaid expenses and other current assets | 158,216 | 21,645 | 26,878 | 33,881 | 20,152 | 50,572 | 126,597 | 64,880 | - | 502,821 | |||||||||||||||||||||
| Other receivables | 1,181,394 | 648,938 | 552,644 | 572,895 | 890,795 | 400,761 | 859,699 | 650,653 | - | 5,757,779 | |||||||||||||||||||||
| Total current assets | 9,546,759 | 5,019,914 | 3,979,008 | 5,268,623 | 2,744,081 | 2,179,988 | 6,632,889 | 4,204,244 | (16,792,021 | ) | 22,783,485 | ||||||||||||||||||||
| PROPERTY AND EQUIPMENT, NET | 74,693 | 20,435 | 23,561 | 79,768 | 40,566 | 27,406 | 83,372 | 57,743 | - | 407,544 | |||||||||||||||||||||
| DEPOSITS | 175,703 | 851,521 | 387,871 | 263,623 | 490,229 | 285,919 | 723,311 | 283,908 | - | 3,462,085 | |||||||||||||||||||||
| TOTAL ASSETS | $ | 9,797,155 | $ | 5,891,870 | $ | 4,390,440 | $ | 5,612,014 | $ | 3,274,876 | $ | 2,493,313 | $ | 7,439,572 | $ | 4,545,895 | $ | (16,792,021 | ) | $ | 26,653,114 | ||||||||||
| LIABILITIES AND MEMBERS' EQUITY (DEFICIT) | |||||||||||||||||||||||||||||||
| CURRENT LIABILITIES | |||||||||||||||||||||||||||||||
| Accounts payable | $ | 572,141 | $ | 667,811 | $ | 890,566 | $ | 914,568 | $ | 580,830 | $ | 702,397 | $ | 1,221,930 | $ | 1,687,140 | $ | - | $ | 7,237,383 | |||||||||||
| Accrued expenses | 18,329 | 1,919 | 12,727 | 279,471 | 5,606 | (10,666 | ) | 4,516 | 12,482 | - | 324,384 | ||||||||||||||||||||
| Accrued payroll and benefits | 61,277 | 127,337 | 65,209 | 73,137 | 62,828 | 70,625 | 130,585 | 74,199 | - | 665,197 | |||||||||||||||||||||
| Medicare advance payments | 172,137 | 188,892 | 225,499 | 174,534 | 236,923 | 361,041 | 491,246 | 29,548 | - | 1,879,820 | |||||||||||||||||||||
| Intercompany payables | 8,524,150 | 1,257,676 | 415,777 | 856,116 | 2,683,118 | 616,319 | 1,905,721 | 533,144 | (16,792,021 | ) | - | ||||||||||||||||||||
| Total current liabilities | 9,348,034 | 2,243,635 | 1,609,778 | 2,297,826 | 3,569,305 | 1,739,716 | 3,753,998 | 2,336,513 | (16,792,021 | ) | 10,106,784 | ||||||||||||||||||||
| PAYCHECK PROGRAM PROTECTION LOAN | 407,600 | 519,500 | 407,600 | 502,700 | 377,800 | 278,800 | 721,400 | 596,900 | - | 3,812,300 | |||||||||||||||||||||
| MEMBERS' EQUITY (DEFICIT) | 41,521 | 3,128,735 | 2,373,062 | 2,811,488 | (672,229 | ) | 474,797 | 2,964,174 | 1,612,482 | - | 12,734,030 | ||||||||||||||||||||
| TOTAL LIABILITIES AND MEMBERS' EQUITY | $ | 9,797,155 | $ | 5,891,870 | $ | 4,390,440 | $ | 5,612,014 | $ | 3,274,876 | $ | 2,493,313 | $ | 7,439,572 | $ | 4,545,895 | $ | (16,792,021 | ) | $ | 26,653,114 | ||||||||||
See independent auditors’ report on supplementary information.
15
GA8 TENANTS
COMBINING STATEMENT OF INCOME AND MEMBERS’ EQUITY
FOR THE YEAR ENDED DECEMBER 31, 2021
| GACalhoun | GAChatsworth | GAFairburn | GADecatur | GACartersville | GAJasper | GAStone Mountain | Willowwood | |||||||||||||||||||||
| SNF LLC | SNF LLC | SNF LLC | SNF LLC | SNF LLC | SNF LLC | SNF LLC | PAC LLC | TOTAL | ||||||||||||||||||||
| REVENUES | ||||||||||||||||||||||||||||
| Net patient service revenue | $ | 6,867,169 | $ | 11,206,277 | $ | 8,311,066 | $ | 9,068,129 | $ | 8,176,877 | $ | 6,810,229 | $ | 14,884,561 | $ | 7,703,760 | $ | 73,028,068 | ||||||||||
| COVID-19 Relief Funds revenue | 512,161 | 330,796 | 277,872 | 407,428 | 549,979 | 521,541 | 322,755 | 217,644 | 3,140,176 | |||||||||||||||||||
| 7,379,330 | 11,537,073 | 8,588,938 | 9,475,557 | 8,726,856 | 7,331,770 | 15,207,316 | 7,921,404 | 76,168,244 | ||||||||||||||||||||
| OPERATING EXPENSES (INCOME) | ||||||||||||||||||||||||||||
| Administrative and general services | 1,254,872 | 1,313,156 | 1,405,515 | 2,048,987 | 1,115,517 | 1,021,935 | 1,913,522 | 1,081,173 | 11,154,677 | |||||||||||||||||||
| Management services | 371,793 | 612,269 | 452,575 | 496,370 | 436,412 | 382,682 | 801,637 | 432,643 | 3,986,381 | |||||||||||||||||||
| Employee health and welfare | 393,387 | 411,886 | 368,175 | 328,243 | 338,634 | 194,469 | 561,657 | 335,726 | 2,932,177 | |||||||||||||||||||
| Plant operations | 202,721 | 235,244 | 202,599 | 286,316 | 218,094 | 126,477 | 375,264 | 219,834 | 1,866,549 | |||||||||||||||||||
| Dietary services | 539,611 | 624,588 | 576,695 | 536,289 | 515,298 | 376,649 | 786,784 | 476,490 | 4,432,404 | |||||||||||||||||||
| Housekeeping and laundry | 261,343 | 301,989 | 260,084 | 248,206 | 231,859 | 207,932 | 379,386 | 244,940 | 2,135,739 | |||||||||||||||||||
| Nursing services | 2,067,724 | 2,251,946 | 2,287,019 | 3,317,138 | 1,863,115 | 2,478,358 | 3,922,236 | 2,568,387 | 20,755,923 | |||||||||||||||||||
| Medical services | 96,351 | 178,651 | 29,866 | 95,098 | 61,396 | 53,427 | 250,807 | 86,899 | 852,495 | |||||||||||||||||||
| Social services | 22,292 | 38,937 | 35,338 | - | - | 37,234 | 68,458 | 39,448 | 241,707 | |||||||||||||||||||
| Recreation | 20,412 | 66,277 | 65,533 | 75,792 | 136,480 | 34,532 | 57,268 | 30,413 | 486,707 | |||||||||||||||||||
| Provision for bad debt | 363,504 | 746,970 | 237,764 | 359,251 | 287,139 | 227,878 | 588,275 | 357,665 | 3,168,446 | |||||||||||||||||||
| Rehabiliative therapies | 942,844 | 1,105,763 | 1,193,320 | 1,016,057 | 944,774 | 898,496 | 1,931,771 | 1,178,032 | 9,211,057 | |||||||||||||||||||
| Employee retention tax credit | (814,730 | ) | (1,123,683 | ) | (722,306 | ) | (748,264 | ) | (854,455 | ) | (517,075 | ) | (1,253,843 | ) | (838,717 | ) | (6,873,073 | ) | ||||||||||
| Rent on facilities | 1,193,402 | 3,100,205 | 1,164,408 | 1,264,817 | 2,923,091 | 1,685,630 | 3,546,338 | 595,457 | 15,473,348 | |||||||||||||||||||
| TOTAL OPERATING EXPENSES | 6,915,526 | 9,864,198 | 7,556,585 | 9,324,300 | 8,217,354 | 7,208,624 | 13,929,560 | 6,808,390 | 69,824,537 | |||||||||||||||||||
| NET INCOME | $ | 463,804 | $ | 1,672,875 | $ | 1,032,353 | $ | 151,257 | $ | 509,502 | $ | 123,146 | $ | 1,277,756 | $ | 1,113,014 | $ | 6,343,707 | ||||||||||
See independent auditors’ report on supplementary information.
16
GA8 TENANTS
COMBINING BALANCE SHEET
DECEMBER 31, 2020
| ASSETS | |||||||||||||||||||||||||||||||||||||||||
| GACalhoun | GAChatsworth | GAFairburn | GADecatur | GACartersville | GAJasper | GAStone Mountain | Willowwood | ||||||||||||||||||||||||||||||||||
| SNF LLC | SNF LLC | SNF LLC | SNF LLC | SNF LLC | SNF LLC | SNF LLC | PAC LLC | Eliminations | TOTAL | ||||||||||||||||||||||||||||||||
| CURRENT ASSETS | |||||||||||||||||||||||||||||||||||||||||
| Cash | $ | 5,638,274 | $ | (715,705 | ) | $ | (262,780 | ) | $ | (267,684 | ) | $ | (660,502 | ) | $ | (379,388 | ) | $ | (1,011,407 | ) | $ | 378,730 | $ | - | $ | 2,719,538 | |||||||||||||||
| Patient accounts receivable, net | 1,403,703 | 1,825,120 | 1,651,405 | 3,160,897 | 1,387,331 | 1,083,087 | 4,228,390 | 2,302,336 | - | 17,042,269 | |||||||||||||||||||||||||||||||
| Estimated third-party payor settlements | 131,089 | 133,886 | 103,753 | 101,638 | 149,605 | 59,226 | 309,652 | 138,221 | - | 1,127,070 | |||||||||||||||||||||||||||||||
| Intercompany receivables | 92,857,246 | 19,386,421 | 14,824,267 | 14,447,519 | 13,605,334 | 11,446,647 | 25,383,855 | 30 | (191,951,319 | ) | - | ||||||||||||||||||||||||||||||
| Prepaid expenses and other current assets | 122,787 | 93,200 | 118,301 | 164,724 | 104,354 | 78,142 | 176,035 | 92,127 | - | 949,670 | |||||||||||||||||||||||||||||||
| Other receivables | 139,568 | (300,273 | ) | 78,602 | 64,171 | 239,701 | 65,966 | 36,186 | 33,343 | 64,713 | 421,977 | ||||||||||||||||||||||||||||||
| Total current assets | 100,292,667 | 20,422,649 | 16,513,548 | 17,671,265 | 14,825,823 | 12,353,680 | 29,122,711 | 2,944,787 | (191,886,606 | ) | 22,260,524 | ||||||||||||||||||||||||||||||
| PROPERTY AND EQUIPMENT, NET | 35,115 | 10,377 | 30,537 | 96,696 | 26,701 | 13,175 | 58,896 | 50,503 | - | 322,000 | |||||||||||||||||||||||||||||||
| DEPOSITS | 18,480 | 12,615 | - | 10,235 | 17,345 | 9,230 | - | - | - | 67,905 | |||||||||||||||||||||||||||||||
| TOTAL ASSETS | $ | 100,346,262 | $ | 20,445,641 | $ | 16,544,085 | $ | 17,778,196 | $ | 14,869,869 | $ | 12,376,085 | $ | 29,181,607 | $ | 2,995,290 | $ | (191,886,606 | ) | $ | 22,650,429 | ||||||||||||||||||||
| LIABILITIES AND MEMBERS' EQUITY (DEFICIT) | |||||||||||||||||||||||||||||||||||||||||
| CURRENT LIABILITIES | |||||||||||||||||||||||||||||||||||||||||
| Accounts payable | $ | 520,107 | $ | 660,593 | $ | 644,985 | $ | 661,135 | $ | 499,121 | $ | 422,769 | $ | 1,312,893 | $ | 1,252,182 | $ | - | $ | 5,973,785 | |||||||||||||||||||||
| Accrued expenses | 11,500 | 11,500 | 11,500 | 11,500 | 11,500 | 11,500 | 11,500 | 1,795 | - | 82,295 | |||||||||||||||||||||||||||||||
| Accrued payroll and benefits | 58,993 | 93,016 | 95,827 | 118,078 | 41,509 | 58,718 | 201,701 | 93,282 | - | 761,124 | |||||||||||||||||||||||||||||||
| Medicare advance payments | 357,906 | 420,837 | 428,987 | 472,549 | 450,314 | 512,791 | 910,272 | 269,861 | - | 3,823,517 | |||||||||||||||||||||||||||||||
| Intercompany payables | 99,281,157 | 16,939,024 | 13,486,373 | 13,276,533 | 14,345,701 | 10,552,297 | 23,945,334 | 60,187 | (191,886,606 | ) | - | ||||||||||||||||||||||||||||||
| Total current liabilities | 100,229,663 | 18,124,970 | 14,667,672 | 14,539,795 | 15,348,145 | 11,558,075 | 26,381,700 | 1,677,307 | (191,886,606 | ) | 10,640,721 | ||||||||||||||||||||||||||||||
| PAYCHECK PROGRAM PROTECTION LOAN | 407,600 | 519,500 | 407,600 | 502,700 | 377,800 | 278,800 | 721,400 | 596,900 | - | 3,812,300 | |||||||||||||||||||||||||||||||
| MEMBERS' EQUITY (DEFICIT) | (291,001 | ) | 1,801,171 | 1,468,813 | 2,735,701 | (856,076 | ) | 539,210 | 2,078,507 | 721,083 | - | 8,197,408 | |||||||||||||||||||||||||||||
| TOTAL LIABILITIES AND MEMBERS' EQUITY | $ | 100,346,262 | $ | 20,445,641 | $ | 16,544,085 | $ | 17,778,196 | $ | 14,869,869 | $ | 12,376,085 | $ | 29,181,607 | $ | 2,995,290 | $ | (191,886,606 | ) | $ | 22,650,429 | ||||||||||||||||||||
See independent auditors' report on supplementary information.
17
GA8 TENANTS
COMBINING STATEMENT OF INCOME AND MEMBERS’ EQUITY
FOR THE YEAR ENDED DECEMBER 31, 2020
| GACalhoun | GAChatsworth | GAFairburn | GADecatur | GACartersville | GAJasper | GAStone Mountain | Willowwood | |||||||||||||||||||||||||||||
| SNF LLC | SNF LLC | SNF LLC | SNF LLC | SNF LLC | SNF LLC | SNF LLC | PAC LLC | TOTAL | ||||||||||||||||||||||||||||
| REVENUES | ||||||||||||||||||||||||||||||||||||
| Net patient service revenue | $ | 6,790,241 | $ | 11,320,411 | $ | 8,227,636 | $ | 9,156,602 | $ | 7,575,606 | $ | 6,263,023 | $ | 15,788,891 | $ | 8,389,972 | $ | 73,512,382 | ||||||||||||||||||
| COVID-19 Relief Funds revenue | 564,385 | 808,721 | 677,702 | 697,480 | 604,093 | 491,179 | 988,210 | 455,000 | 5,286,770 | |||||||||||||||||||||||||||
| 7,354,626 | 12,129,132 | 8,905,338 | 9,854,082 | 8,179,699 | 6,754,202 | 16,777,101 | 8,844,972 | 78,799,152 | ||||||||||||||||||||||||||||
| OPERATING EXPENSES | ||||||||||||||||||||||||||||||||||||
| Administrative and general services | 1,278,954 | 1,482,409 | 1,471,902 | 1,652,144 | 1,146,733 | 953,193 | 2,000,106 | 1,530,789 | 11,516,230 | |||||||||||||||||||||||||||
| Management services | 355,681 | 592,839 | 440,051 | 481,863 | 394,796 | 330,753 | 820,047 | 444,036 | 3,860,066 | |||||||||||||||||||||||||||
| Employee health and welfare | 231,819 | 272,951 | 254,934 | 243,409 | 213,760 | 226,484 | 561,461 | 302,053 | 2,306,871 | |||||||||||||||||||||||||||
| Plant operations | 226,107 | 301,800 | 201,953 | 244,735 | 245,964 | 129,730 | 391,469 | 208,971 | 1,950,729 | |||||||||||||||||||||||||||
| Dietary services | 562,617 | 629,824 | 477,139 | 489,151 | 521,888 | 427,762 | 862,239 | 513,468 | 4,484,088 | |||||||||||||||||||||||||||
| Housekeeping and laundry | 264,918 | 310,072 | 267,854 | 253,226 | 238,556 | 211,426 | 389,380 | 172,697 | 2,108,129 | |||||||||||||||||||||||||||
| Nursing services | 1,833,434 | 2,375,466 | 1,971,368 | 2,445,128 | 1,819,824 | 1,495,077 | 3,588,453 | 2,066,179 | 17,594,929 | |||||||||||||||||||||||||||
| Medical services | 123,916 | 166,376 | 34,354 | 96,629 | 70,477 | 21,149 | 343,266 | 96,436 | 952,603 | |||||||||||||||||||||||||||
| Social Services | 8,415 | 47,317 | 39,595 | - | - | 39,747 | 74,147 | 21,232 | 230,453 | |||||||||||||||||||||||||||
| Recreation | 29,704 | 74,756 | 71,809 | 67,459 | 100,111 | 32,430 | 84,510 | 50,187 | 510,966 | |||||||||||||||||||||||||||
| Provision for bad debt | 353,160 | 346,516 | 217,833 | 416,361 | 218,297 | 217,690 | 1,088,807 | 225,854 | 3,084,518 | |||||||||||||||||||||||||||
| Rehabilitative therapies | 1,002,677 | 1,150,924 | 1,384,130 | 923,915 | 1,087,421 | 837,199 | 2,346,238 | 998,755 | 9,731,259 | |||||||||||||||||||||||||||
| Rent on facilities | 984,585 | 2,561,017 | 959,264 | 569,586 | 2,411,444 | 1,391,316 | 2,912,663 | 625,408 | 12,415,283 | |||||||||||||||||||||||||||
| TOTAL OPERATING EXPENSES | 7,255,987 | 10,312,267 | 7,792,186 | 7,883,606 | 8,469,271 | 6,313,956 | 15,462,786 | 7,256,065 | 70,746,124 | |||||||||||||||||||||||||||
| NET INCOME (LOSS) | $ | 98,639 | $ | 1,816,865 | $ | 1,113,152 | $ | 1,970,476 | $ | (289,572 | ) | $ | 440,246 | $ | 1,314,315 | $ | 1,588,907 | $ | 8,053,028 | |||||||||||||||||
See independent auditors' report on supplementary information.
18
