Exhibit 99.1
WPH SALEM, LLC
Combined Financial Statements
As of and For the Year Ended December 31, 2015
With Independent Auditor’s Report
WPH SALEM, LLC
AUDITED COMBINED FINANCIAL STATEMENTS
AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2015
TABLE OF CONTENTS
| | Page |
| | |
| Independent Auditor’s Report | 1-2 |
| | |
| Combined Financial Statements: | |
| | |
| Combined Balance Sheet | 3 |
| | |
| Combined Statement of Income and Member’s Equity | 4 |
| | |
| Combined Statement of Cash Flows | 5 |
| | |
| Notes to the Combined Financial Statements | 6-10 |
| | |
| Supplementary Information: | |
| | |
| Schedule I - Combining Balance Sheet | 11 |
| | |
| Schedule II - Combining Statement of Income and Member’s Equity | 12 |
Independent Auditor’s Report
To the Member of
WPH Salem, LLC
Hickory, North Carolina
We have audited the accompanying combined financial statements of WPH Salem, LLC, (a Delaware corporation) which comprise the combined balance sheet as of December 31, 2015, and the related combined statements of income and member’s equity, and cash flows for the year then ended, and the related notes to the financial statements.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these combined financial statements in accordance with accounting principles generally accepted in the United States of America; this includes 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.
Auditor’s Responsibility
Our responsibility is to express an opinion on these combined financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the combined financial statements are free of material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the combined financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the combined financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the combined financial statements 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 the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the combined financial statements.
730 13th Avenue Drive SE♦Hickory, North Carolina 28602♦Phone 828-327-2727♦Fax 828-328-2324
13 South Center Street♦Taylorsville, North Carolina 28681♦Phone 828-632-9025♦Fax 828-632-9085
Toll Free Both Locations 1-800-948-0585♦Website: www.martinstarnes.com
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the combined financial statements referred to above present fairly, in all material respects, the financial position of WPH Salem, LLC, as of December 31, 2015, and the results of its operations and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America.
Report on Combining Information
Our audit was conducted primarily for the purpose of forming an opinion on the combined financial statements as a whole. The Combining Balance Sheet and Combining Statement of Income and Member’s Equity on Schedules I and II are presented for the purpose of additional analysis of the combined financial statements rather than to present the financial position, results of operations, and cash flows 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 audit 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.
Martin Starnes & Associates, CPAs, P.A. Hickory, NC
February 29, 2016
WPH SALEM, LLC
COMBINED BALANCE SHEET
DECEMBER 31, 2015
| Assets: |
| Current assets: |
| Cash and cash equivalents | | $ | 215,860 | |
| Resident trust fund cash, restricted | | | 68,488 | |
| Tenant receivables, net of allowance of $41,309 | | | 816,312 | |
| Due from affiliates | | | 41,309 | |
| Accounts receivable, other | | | 60,756 | |
| Escrow deposits | | | 574,784 | |
| Security deposits | | | 722,218 | |
| Inventory | | | 12,584 | |
| Prepaid expenses | | | 159,650 | |
| Total current assets | | | 2,671,961 | |
| | | | | |
| Non-current assets: |
| Property and equipment, net | | | 908,987 | |
| Total non-current assets | | | 908,987 | |
| | | | | |
| Total assets | | $ | 3,580,948 | |
| Liabilities and Member’s Equity: |
| Liabilities: |
| Current liabilities: |
| Accounts payable | | $ | 720,142 | |
| Due to affiliates | | | 6,023 | |
| Accrued liabilities | | | 229,035 | |
| Resident trust funds payable | | | 68,488 | |
| Deferred revenues | | | 152,784 | |
| Total liabilities | | | 1,176,472 | |
| | | | | |
| Member’s Equity: |
| Member’s capital | | | 2,404,476 | |
| Total member’s equity | | | 2,404,476 | |
| | | | | |
| Total liabilities and member’s equity | | $ | 3,580,948 | |
See accompanying notes and auditor’s report.
WPH SALEM, LLC
COMBINED STATEMENT OF INCOME AND MEMBER’S EQUITY
FOR THE YEAR ENDED DECEMBER 31, 2015
| Revenues: |
| Assisted living revenue | | $ | 9,786,214 | |
| Other income | | | 26,668 | |
| Total revenues | | | 9,812,882 | |
| | | | | |
| Operating Expenses: |
| Salaries and wages | | | 3,081,477 | |
| Payroll taxes | | | 315,563 | |
| Employee benefits | | | 270,889 | |
| Food costs | | | 597,700 | |
| Utilities | | | 539,504 | |
| Supplies | | | 174,292 | |
| Repairs and maintenance | | | 162,209 | |
| Insurance | | | 176,466 | |
| Property taxes | | | 256,382 | |
| Professional/consulting fees | | | 359,737 | |
| General and administrative expenses | | | 419,243 | |
| Advertising and marketing | | | 21,942 | |
| Travel and entertainment | | | 14,228 | |
| Management service fee | | | 483,814 | |
| Total operating expenses | | | 6,873,446 | |
| | | | | |
| Capital Related Expenses: |
| Depreciation and amortization | | | 136,766 | |
| Rent/lease building | | | 2,915,174 | |
| Total capital related expenses | | | 3,051,940 | |
| | | | | |
| Net income (loss) | | | (112,504 | ) |
| Member’s equity, beginning of year | | | 2,601,980 | |
| Contributions by member | | | 15,000 | |
| Distributions to member | | | (100,000 | ) |
| | | | | |
| Member’s equity, end of year | | $ | 2,404,476 | |
See accompanying notes and auditor’s report.
WPH SALEM, LLC
COMBINED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 2015
| Cash Flows from Operating Activities: |
| Net loss | | $ | (112,504 | ) |
| Adjustments to Reconcile Net Loss to Net Cash and Cash Equivalents |
| Provided by Operating Activities: |
| Depreciation and Amortization | | | 136,766 | |
| Provision for bad debts | | | (90,067 | ) |
| Changes in assets and liabilities: |
| Resident trust fund cash, restricted | | | (40,406 | ) |
| Tenant receivables | | | (214,737 | ) |
| Due to/from affiliates | | | 121,916 | |
| Accounts receivable, other | | | (54,618 | ) |
| Escrow Deposits | | | (43,383 | ) |
| Security deposits | | | 33,200 | |
| Inventory | | | 71 | |
| Prepaid expenses | | | 12,513 | |
| Accounts payable | | | 508,789 | |
| Accrued liabilities | | | (91,418 | ) |
| Resident trust fund payable | | | 31,354 | |
| Deferred revenues | | | 11,737 | |
| Net cash and cash equivalents provided by operating activities | | | 209,213 | |
| | | | | |
| Cash Flows from Investing Activities: |
| Purchase of property and equipment | | | (197,886 | ) |
| Net cash and cash equivalents used by investing activities | | | (197,886 | ) |
| | | | | |
| Cash Flows from Financing Activities: |
| Capital contributed | | | 15,000 | |
| Distributions to member | | | (100,000 | ) |
| Net cash and cash equivalents used by financing activities | | | (85,000 | ) |
| | | | | |
| Net change in cash and cash equivalents | | | (73,673 | ) |
| | | | | |
| Cash and cash equivalents, beginning of year | | | 289,533 | |
| | | | | |
| Cash and cash equivalents, end of year | | $ | 215,860 | |
See accompanying notes and auditor’s report.
WPH SALEM, LLC
NOTES TO THE COMBINED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2015
| 1. | Nature of Business and Summary of Significant Accounting Policies |
Nature of Business.WPH Salem, LLC (the “Company”) is a single-member LLC organized under the laws of the State of Delaware. The Company operates a group of five assisted living facilities (OPCOs) operating out of Hickory, North Carolina. Three of the OPCOs (Hamlet AL Holdings LLC, Carteret-Newport AL Holdings LLC and Shelby AL Holdings LLC) are single-member LLCs organized under the laws of the State of North Carolina. Two of the OPCOs (MW Aledo Operating LLC and Danby House LLC) are single-member LLCs organized under the laws of the State of Delaware. Four of the OPCOS operate in North Carolina. Aledo operates in Illinois. The Company primarily serves elderly Medicaid residents who need assistance with basic living activities.
A Summary of the Significant Accounting Policies follows:
Principles of Combining:The combined financial statements include the accounts of the five OPCOs which operate under one master lease. The single-member parent company, HOB I, LLC, a limited liability company which is the sole member, is not included in the combined financial statements. All significant intercompany accounts and transactions between the OPCOs have been eliminated in combination.
Principles of Accounting and Use of Estimates:The Company’s accounting policy is to prepare its financial statements in conformity with accounting principles generally accepted in the United States of America except for the matter more fully discussed above in Nature of Business. The Company uses the accrual method for reporting. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect certain reported amounts of assets and liabilities and disclosures at the date of the financial statements, and reported amounts of revenues and expenses during the reporting periods. Accordingly, actual results could differ from the estimates and assumptions used in the financial statements and related notes.
Listed below are certain significant estimates and assumptions used in the preparation of the financial statements. It is possible that a change in these estimates will occur in the near term.
Accounts Receivable Allowances:The Company evaluates the adequacy of the allowance for credit losses based on historical loss experience and adverse situations that may affect a customer’s ability to pay. This evaluation is inherently subjective, as it requires estimates that are susceptible to revision as more information becomes available. Management reviews accounts receivable on a periodic basis to determine if any receivables will potentially be uncollectible. After all attempts to collect a receivable have failed, the receivable is written off against the allowance.
WPH SALEM, LLC
NOTES TO THE COMBINED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2015
Useful Lives for Depreciation and Amortization:The Company estimates the useful lives of the individual assets when the assets are placed in service. If events and circumstances indicate that property and equipment should be reviewed for possible impairment, the Company will record an impairment charge to the extent that the carrying value of the assets exceed their fair values as determined by valuation techniques appropriate in the circumstances.
Revenue Recognition:Revenue from the rental units is recognized in the month that it is earned, which is when the respective unit is occupied. Tenant leases are for 12 months or less. Services are recognized upon delivery of the services provided.
Cash and Cash Equivalents:Each of the five OPCO’s maintains a separate cash account and performs individual reconciliations. Each account is insured by the federal limits. The Company believes it is not exposed to any significant credit risk on cash and cash equivalents.
Resident Trust Fund,Restricted: Represents residents personal funds held by the Company on behalf of the residents.
Escrow Deposits:Refundable escrow deposits for capital expenditures, property insurance and property taxes are required under provisions of the Master Lease Agreement for each of the facilities (OPCOs) to secure the full, faithful, and punctual performance of lessees (OPCOs). These deposits, in the form of additional lease payments, are due and payable, in arrears. At December 31, 2015, the Company held accumulated escrow deposits of $574,784.
Security Deposits:Represents funds held by the landlord, pursuant to the Master Lease Agreement for capital reserve funds ($709,502) and utility deposits ($12,716) held by the utility company.
Tenant Receivables:Accounting principles generally accepted in the United States of America require the Company to value its accounts receivable at the net realizable value by providing a valuation allowance based on its assessment of the current status of the individual accounts. The Company evaluates the adequacy of the allowance for credit losses based on historical loss experience and adverse situations that may affect a customer’s ability to pay. This evaluation is inherently subjective, as it requires estimates that are susceptible to revision as more information becomes available. Management reviews accounts receivable on a periodic basis to determine if any receivables will potentially be uncollectible. After all attempts to collect a receivable have failed, the receivable is written off against the allowance. Allowance for doubtful accounts was $41,309 at December 31, 2015.
WPH SALEM, LLC
NOTES TO THE COMBINED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2015
Inventories:Inventories, consisting primarily of food for consumption by the residents, are stated at the lower of cost (average cost) or market (net realizable value).
Property and Equipment:Property and equipment are carried at cost. Maintenance, repairs, and minor renewals are charged to expense as incurred, while expenditures which substantially increase useful lives are capitalized. Depreciation is computed on the straight- line method. Depreciable lives consists of computer equipment for 3 years; furniture and fixtures for 7 years; leasehold improvements for 10 years or the term of the lease, whichever is less; and other equipment for 5 years.
Income Taxes:No income tax provision has been included in these financial statements since income or loss of the Company is required to be reported by the member on its income tax return.
The Financial Accounting Standards Board issued guidance on accounting for uncertainty in income taxes. Management evaluates the Company’s tax positions and concluded that the Company has taken no uncertain tax positions that require adjustments to the financial statements to comply with the provisions of this guidance.
Advertising:Advertising costs are expensed as incurred. Advertising expense amounted to $21,942 for the year ended December 31, 2015.
Deferred Revenues:Deferred revenues consist of income received from assisted living residents who have prepaid their respective assisted living fee one month in advance.
Property and equipment consist of the following:
| | | 2015 | |
| Furniture, fixtures, and equipment | | $ | 199,835 | |
| Other equipment | | | 90,049 | |
| Leasehold improvements | | | 943,891 | |
| | | | 1,233,775 | |
| Less accumulated depreciation and amortization | | | (324,788 | ) |
| | | | | |
| Property and equipment, net | | $ | 908,987 | |
Depreciation and amortization expense for the year ended December 31, 2015 was $136,766.
WPH SALEM, LLC
NOTES TO THE COMBINED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2015
Member’s equity represents the undistributed earnings of the Company.
| 4. | Commitments and Contingencies |
Operating Leases.The Company leases its facilities from an unrelated third-party landlord under non-cancellable operating leases with terms extending through December 31, 2030. The leases are structured as triple net leases requiring the individual OPCOs to pay all executory costs including taxes, insurance, utilities and maintenance.
Future minimum lease payments under the above leases as of December 31, 2015 are as follows:
Year Ending | | Lease
Payments | |
| 2016 | | $ | 2,770,697 | |
| 2017 | | | 3,033,155 | |
| 2018 | | | 3,097,302 | |
| 2019 | | | 3,162,810 | |
| 2020 | | | 3,229,709 | |
| | | | 15,293,673 | |
| Thereafter | | | 32,322,408 | |
| Total | | $ | 47,616,081 | |
Total rental expenses for the above operating leases for the year ended December 31, 2015 were $2,915,174.
Concentration of Revenue Risk.The Company provides its services to residents of North Carolina who are Medicaid recipients. The Company faces a concentration of revenue risks resulting from its dependence on the North Carolina Medicaid system. Revenue received under the North Carolina Medicaid Program is subject to audit and retroactive adjustment by the fiscal intermediary. The Company provides estimates for potential adjustments by the fiscal intermediary which may or may not occur in the future years. Adjustments that are significantly different from the applicable estimates are reflected as an increase or decrease in resident services revenue in the year the adjustments are finalized. The Company derived approximately 51% of its revenues from Medicaid for the year ended December 31, 2015.
WPH SALEM, LLC
NOTES TO THE COMBINED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2015
| 5. | Related Party Transactions |
Management Fees.The Company has a management agreement with a related party, due to common ownership, to operate the facilities (OPCOs). Management fees paid for the year ended December 31, 2015 totaled $483,814.
Management has evaluated events through February 29, 2016, the date the combined financial statements were available to be issued. There are no subsequent events as of February 29, 2016.
Schedule I
WPH SALEM, LLC
COMBINING BALANCE SHEET
DECEMBER 31, 2015
| | | | Carteret | | | | Hamlet | | | | Shelby | | | | Aledo | | | | Danby | | | | Eliminating
Entries | | | | Combined | |
| Assets: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Current assets: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Cash and cash equivalents | | $ | 42,318 | | | $ | 11,019 | | | $ | 831 | | | $ | 140,172 | | | $ | 21,520 | | | $ | - | | | $ | 215,860 | |
| Resident trust fund cash, restricted | | | 14,824 | | | | 32,867 | | | | 6,725 | | | | - | | | | 14,072 | | | | - | | | | 68,488 | |
| Tenant receivables | | | 5,390 | | | | 45,315 | | | | 88,829 | | | | 300,195 | | | | 376,583 | | | | - | | | | 816,312 | |
| Due from affiliates | | | 178,967 | | | | - | | | | 262,000 | | | | 40,000 | | | | 1,309 | | | | (440,967 | ) | | | 41,309 | |
| Accounts receivable, other | | | 8,600 | | | | - | | | | 39,813 | | | | 10,471 | | | | 1,872 | | | | - | | | | 60,756 | |
| Escrow deposits | | | 112,957 | | | | 116,813 | | | | 73,068 | | | | 115,327 | | | | 156,619 | | | | - | | | | 574,784 | |
| Security deposits | | | 102,387 | | | | 139,706 | | | | 95,625 | | | | 166,250 | | | | 218,250 | | | | - | | | | 722,218 | |
| Inventory | | | 2,981 | | | | 2,500 | | | | 4,500 | | | | - | | | | 2,603 | | | | - | | | | 12,584 | |
| Prepaid expenses | | | 21,118 | | | | 13,029 | | | | 22,330 | | | | 53,185 | | | | 49,988 | | | | - | | | | 159,650 | |
| Total current assets | | | 489,542 | | | | 361,249 | | | | 593,721 | | | | 825,600 | | | | 842,816 | | | | (440,967 | ) | | | 2,671,961 | |
| Non-current assets: |
| Property and equipment, net | | | 278,782 | | | | 111,410 | | | | 355,588 | | | | 42,104 | | | | 121,103 | | | | - | | | | 908,987 | |
| Total non-current assets | | | 278,782 | | | | 111,410 | | | | 355,588 | | | | 42,104 | | | | 121,103 | | | | - | | | | 908,987 | |
| Total assets | | $ | 768,324 | | | $ | 472,659 | | | $ | 949,309 | | | $ | 867,704 | | | $ | 963,919 | | | $ | (440,967 | ) | | $ | 3,580,948 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Liabilities and Member’s Equity: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Liabilities: |
| Current liabilities: |
| Accounts payable | | $ | 177,624 | | | $ | 262,680 | | | $ | 185,052 | | | $ | 30,821 | | | $ | 63,965 | | | $ | - | | | $ | 720,142 | |
| Due to affiliates | | | 6,023 | | | | 385,239 | | | | 55,728 | | | | - | | | | - | | | | (440,967 | ) | | | 6,023 | |
| Accrued liabilities | | | 55,279 | | | | 40,615 | | | | 49,040 | | | | 16,117 | | | | 67,984 | | | | - | | | | 229,035 | |
| Resident trust funds payable | | | 14,824 | | | | 32,867 | | | | 6,725 | | | | - | | | | 14,072 | | | | - | | | | 68,488 | |
| Deferred revenues | | | 36,767 | | | | - | | | | - | | | | 116,017 | | | | - | | | | - | | | | 152,784 | |
| Total current liabilities | | | 290,517 | | | | 721,401 | | | | 296,545 | | | | 162,955 | | | | 146,021 | | | | (440,967 | ) | | | 1,176,472 | |
| Total liabilities | | | 290,517 | | | | 721,401 | | | | 296,545 | | | | 162,955 | | | | 146,021 | | | | (440,967 | ) | | | 1,176,472 | |
| Member’s Equity: |
| Member’s capital | | | 477,807 | | | | (248,742 | ) | | | 652,764 | | | | 704,749 | | | | 817,898 | | | | - | | | | 2,404,476 | |
| Total member’s equity (deficit) | | | 477,807 | | | | (248,742 | ) | | | 652,764 | | | | 704,749 | | | | 817,898 | | | | - | | | | 2,404,476 | |
| Total liabilities and member’s equity | | $ | 768,324 | | | $ | 472,659 | | | $ | 949,309 | | | $ | 867,704 | | | $ | 963,919 | | | $ | (440,967 | ) | | $ | 3,580,948 | |
Schedule II
WPH SALEM, LLC
COMBINING STATEMENT OF INCOME AND MEMBER’S EQUITY (DEFICIT)
FOR THE YEAR ENDED DECEMBER 31, 2015
| | | Carteret | | | Hamlet | | | Shelby | | | Aledo | | | Danby | | | Combined | |
| Revenues: | | | | | | | | | | | | | | | | | | | | | | | | |
| Assisted living revenue | | $ | 1,607,792 | | | $ | 1,242,711 | | | $ | 1,675,620 | | | $ | 2,398,335 | | | $ | 2,861,756 | | | $ | 9,786,214 | |
| Other income | | | 556 | | | | 627 | | | | 525 | | | | 24,768 | | | | 192 | | | | 26,668 | |
| Total revenues | | | 1,608,348 | | | | 1,243,338 | | | | 1,676,145 | | | | 2,423,103 | | | | 2,861,948 | | | | 9,812,882 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Operating Expenses: | | | | | | | | | | | | | | | | | | | | | | | | |
| Salaries and wages | | | 539,630 | | | | 411,100 | | | | 549,178 | | | | 594,818 | | | | 986,751 | | | | 3,081,477 | |
| Payroll taxes | | | 59,778 | | | | 46,006 | | | | 59,779 | | | | 59,403 | | | | 90,597 | | | | 315,563 | |
| Employee benefits | | | 28,755 | | | | 21,071 | | | | 32,358 | | | | 94,100 | | | | 94,605 | | | | 270,889 | |
| Food costs | | | 111,470 | | | | 109,819 | | | | 109,037 | | | | 115,873 | | | | 151,501 | | | | 597,700 | |
| Utilities | | | 100,042 | | | | 80,801 | | | | 84,121 | | | | 141,299 | | | | 133,241 | | | | 539,504 | |
| Supplies | | | 29,394 | | | | 17,630 | | | | 30,424 | | | | 45,198 | | | | 51,646 | | | | 174,292 | |
| Repairs and maintenance | | | 24,419 | | | | 23,666 | | | | 29,729 | | | | 30,157 | | | | 54,238 | | | | 162,209 | |
| Insurance | | | 47,084 | | | | 24,615 | | | | 37,803 | | | | 33,111 | | | | 33,853 | | �� | | 176,466 | |
| Property taxes | | | 15,053 | | | | 19,162 | | | | 22,940 | | | | 123,032 | | | | 76,195 | | | | 256,382 | |
| Professional/consulting fees | | | 68,187 | | | | 89,329 | | | | 119,160 | | | | 23,894 | | | | 59,167 | | | | 359,737 | |
| General and administrative expenses | | | 56,769 | | | | 65,074 | | | | 60,121 | | | | 81,989 | | | | 155,290 | | | | 419,243 | |
| Advertising and marketing | | | 5,226 | | | | 1,301 | | | | 1,557 | | | | 10,039 | | | | 3,819 | | | | 21,942 | |
| Travel and entertainment | | | 2,518 | | | | 2,042 | | | | 1,187 | | | | 6,457 | | | | 2,024 | | | | 14,228 | |
| Management service fee | | | 80,193 | | | | 60,889 | | | | 81,818 | | | | 122,053 | | | | 138,861 | | | | 483,814 | |
| Total operating expenses | | | 1,168,518 | | | | 972,505 | | | | 1,219,212 | | | | 1,481,423 | | | | 2,031,788 | | | | 6,873,446 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Capital Related Expenses: | | | | | | | | | | | | | | | | | | | | | | | | |
| Depreciation and amortization | | | 43,004 | | | | 20,190 | | | | 44,170 | | | | 9,686 | | | | 19,716 | | | | 136,766 | |
| Rent/lease building | | | 375,316 | | | | 568,113 | | | | 393,306 | | | | 671,654 | | | | 906,785 | | | | 2,915,174 | |
| Total capital related expenses | | | 418,320 | | | | 588,303 | | | | 437,476 | | | | 681,340 | | | | 926,501 | | | | 3,051,940 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Net income (loss) | | | 21,510 | | | | (317,470 | ) | | | 19,457 | | | | 260,340 | | | | (96,341 | ) | | | (112,504 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Member’s equity, beginning of year | | | 456,297 | | | | 68,728 | | | | 633,307 | | | | 544,409 | | | | 899,239 | | | | 2,601,980 | |
| Contributions by member | | | - | | | | - | | | | - | | | | - | | | | 15,000 | | | | 15,000 | |
| Distributions to member | | | - | | | | - | | | | - | | | | (100,000 | ) | | | - | | | | (100,000 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Member’s equity (deficit), end of year | | $ | 477,807 | | | $ | (248,742 | ) | | $ | 652,764 | | | $ | 704,749 | | | $ | 817,898 | | | $ | 2,404,476 | |
