Exhibit 99.1
WPH SALEM, LLC
COMBINED FINANCIAL STATEMENTS
AND INDEPENDENT AUDITOR’S REPORT
DECEMBER 31, 2017
TABLE OF CONTENTS
| | Page No. |
| | |
| INDEPENDENT AUDITOR’S REPORT | 1-2 |
| | |
| COMBINED FINANCIAL STATEMENTS | |
| | |
| Combined Balance Sheets | 3 - 4 |
| | |
| Combined Statements of Operations and Member’s Equity | 5 |
| | |
| Combined Statements of Cash Flows | 6 |
| | |
| Notes to the Combined Financial Statements | 7 - 13 |
| | |
| SUPPLEMENTARY INFORMATION | |
| | |
| Schedule I – Combining Balance Sheets | 14 - 16 |
| | |
| Schedule II – Combining Statements of Operations and Member’s Equity | 17 - 18 |
10500 Little Patuxent Parkway
Suite 770
Columbia, Maryland 21044
(410) 884-0220
(301) 596-5451
Fax: (301) 596-5471
Independent Auditor’s Report
To the Management of
WPH Salem, LLC
Hickory, NC
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, 2017 and the related combined statements of operations and member’s equity, and cash flows for the year then ended, and the related notes to the combined 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 the 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 from 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.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Members Of The American Institute Of Certified Public Accountants
Columbia, MD Largo, MD Washington, D.C.
WPH Salem, LLC
Independent Auditor’s Report
Page 2
Opinion
In our opinion, the combined 2017 financial statements referred to above present fairly, in all material respects, the financial position of WPH Salem, LLC as of December 31, 2017, 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.
Prior Period Financial Statements
The combined financial statements of WPH Salem, LLC as of December 31, 2016, were audited by other auditors whose report dated March 8, 2017, expressed an unmodified opinion on those statements.
As part of our audit of the 2017 combined financial statements, we also audited the adjustments described in Note G that were applied to restate the 2016 combined financial statements. In our opinion, such adjustments are appropriate and have been properly applied. We were not engaged to audit, review, or apply any procedures to the 2016 combined financial statements of WPH Salem, LLC other than with respect to the adjustments and, accordingly, we do not express an opinion or any other form of assurance on the 2016 combined financial statements as a whole.
Supplementary Information
Our audit was conducted for the purpose of forming an opinion on the combined financial statements as a whole. The combining information presented in Schedules I and II is presented for purposes 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 it is 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.
Columbia, Maryland
March 1, 2018
WPH SALEM, LLC
COMBINED BALANCE SHEETS
DECEMBER 31, 2017 AND 2016
| | | 2017 | | | 2016
(Restated) | |
| ASSETS | | | | | | | | |
| CURRENT ASSETS | | | | | | | | |
| Cash | | $ | 202,962 | | | $ | 55,190 | |
| Resident trust fund cash, restricted | | | 96,957 | | | | 76,275 | |
| Tenant receivables, net | | | 419,328 | | | | 1,024,270 | |
| Due from affiliates | | | - | | | | 41,309 | |
| Accounts receivable, other | | | 1,941 | | | | 134,211 | |
| Escrow deposits | | | 753,468 | | | | 630,412 | |
| Inventory | | | 7,662 | | | | 7,014 | |
| Prepaid expenses | | | 124,264 | | | | 134,672 | |
| Other current assets | | | 139 | | | | - | |
| Total Current Assets | | | 1,606,721 | | | | 2,103,353 | |
| | | | | | | | | |
| PROPERTY AND EQUIPMENT, NET | | | 803,319 | | | | 808,417 | |
| | | | | | | | | |
| OTHER ASSETS | | | | | | | | |
| Security deposits | | | 722,218 | | | | 722,218 | |
| | | | | | | | | |
| TOTAL ASSETS | | $ | 3,132,258 | | | $ | 3,633,988 | |
The accompanying notes are an integral part of these combined financial statements.
WPH SALEM, LLC
COMBINED BALANCE SHEETS
DECEMBER 31, 2017 AND 2016
(continued)
| | | | | | 2016 | |
| | | 2017 | | | (Restated) | |
| | | | | | | |
| LIABILITIES AND MEMBER'S EQUITY | | | | | | | | |
| | | | | | | | | |
CURRENT LIABILITIES | | | | | | | | |
| Cash overdraft | | $ | 80,204 | | | $ | - | |
| Accounts payable | | | 1,155,861 | | | | 1,543,404 | |
| Accrued expenses | | | 408,871 | | | | 337,912 | |
| Resident trust funds payable | | | 96,957 | | | | 76,275 | |
| Deferred revenue | | | 112,411 | | | | 204,075 | |
| Total Current Liabilities | | | 1,854,304 | | | | 2,161,666 | |
| | | | | | | | | |
LONG-TERM LIABILITIES | | | | | | | | |
| Deferred rent | | | 1,741,863 | | | | 1,414,563 | |
| Total Liabilities | | | 3,596,167 | | | | 3,576,229 | |
| | | | | | | | | |
MEMBER'S EQUITY (DEFICIT) | | | | | | | | |
| Member's equity (deficit) | | | (463,909 | ) | | | 57,759 | |
| | | | | | | | | |
TOTAL LIABILITIES AND MEMBER'S EQUITY | | $ | 3,132,258 | | | $ | 3,633,988 | |
The accompanying notes are an integral part of these combined financial statements.
WPH SALEM, LLC
COMBINED STATEMENTS OF OPERATIONS AND MEMBER'S EQUITY
YEARS ENDED DECEMBER 31, 2017 AND 2016
| | | 2017 | | | 2016 (Restated) | |
| REVENUE | | | | | | | | |
| Assisted living revenue, net of contractual allowances | | $ | 9,969,868 | | | $ | 9,759,618 | |
| Other income | | | 139,061 | | | | 42,154 | |
| Total Revenue | | | 10,108,929 | | | | 9,801,772 | |
| | | | | | | | | |
OPERATING EXPENSES | | | | | | | | |
| Salaries | | | 3,218,187 | | | | 3,223,200 | |
| Payroll taxes | | | 291,453 | | | | 308,361 | |
| Employee benefits | | | 214,058 | | | | 274,945 | |
| Food costs | | | 548,446 | | | | 591,655 | |
| Utilities | | | 545,173 | | | | 556,356 | |
| Supplies | | | 182,989 | | | | 173,935 | |
| Repairs and maintenance | | | 162,709 | | | | 158,041 | |
| Insurance | | | 204,193 | | | | 199,247 | |
| Property taxes | | | 294,618 | | | | 338,112 | |
| Professional/consulting fees | | | 371,850 | | | | 395,421 | |
| General and administrative expenses | | | 279,122 | | | | 337,156 | |
| Bad debt expense | | | 905,369 | | | | 385,081 | |
| Advertising and marketing | | | 51,937 | | | | 35,223 | |
| Travel and entertainment | | | 28,979 | | | | 23,694 | |
| Management service fee | | | 501,729 | | | | 496,091 | |
| Total Operating Expenses | | | 7,800,812 | | | | 7,496,518 | |
| | | | | | | | | |
| CAPITAL RELATED EXPENSES | | | | | | | | |
| Depreciation and amortization | | | 155,065 | | | | 148,908 | |
| Rent | | | 3,373,748 | | | | 3,373,747 | |
| Total Capital Related Expenses | | | 3,528,813 | | | | 3,522,655 | |
| | | | | | | | | |
| NET LOSS | | | (1,220,696 | ) | | | (1,217,401 | ) |
| | | | | | | | | |
| MEMBER'S EQUITY,beginning of year | | | 57,759 | | | | 2,404,476 | |
| Prior period adjustment | | | - | | | | (1,024,181 | ) |
| MEMBER'S EQUITY,beginning of year (restated) | | | 57,759 | | | | 1,380,295 | |
| | | | | | | | | |
| Contributions from members | | | 1,396,268 | | | | - | |
| Distributions to members | | | (697,240 | ) | | | (105,135 | ) |
| | | | | | | | | |
| MEMBER'S EQUITY,end of year | | $ | (463,909 | ) | | $ | 57,759 | |
The accompanying notes are an integral part of these combined financial statements.
WPH SALEM, LLC
COMBINED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2017 AND 2016
| | | 2017 | | | 2016
(Restated) | |
| | | | | | | |
| CASH FLOWS FROM OPERATING ACTIVITIES | | | | | | | | |
| Net loss | | $ | (1,220,696 | ) | | $ | (1,217,401 | ) |
Adjustments to reconcile change in net loss to change in net cash used for operating activities: | | | | | | | | |
| Depreciation and amortization | | | 155,065 | | | | 148,908 | |
| Provision for bad debts | | | 905,369 | | | | 32,779 | |
| Decrease (increase) in assets: | | | | | | | | |
| Resident trust fund cash, restricted | | | (20,682 | ) | | | (7,787 | ) |
| Tenant receivables | | | (300,427 | ) | | | (240,737 | ) |
| Due from affiliates | | | 41,309 | | | | (6,023 | ) |
| Accounts receivable, other | | | 132,270 | | | | (73,455 | ) |
| Escrow deposits | | | (123,056 | ) | | | (55,628 | ) |
| Inventory | | | (648 | ) | | | 5,570 | |
| Prepaid expenses | | | 10,408 | | | | 24,978 | |
| Other current assets | | | (139 | ) | | | - | |
| Increase (decrease) in liabilities: | | | | | | | | |
| Cash overdraft | | | 80,204 | | | | - | |
| Accounts payable | | | (387,543 | ) | | | 823,262 | |
| Accrued expenses | | | 70,959 | | | | 108,877 | |
| Resident trust fund payable | | | 20,682 | | | | 7,787 | |
| Deferred revenue | | | (91,664 | ) | | | 51,291 | |
| Deferred rent | | | 327,300 | | | | 390,382 | |
| Net Cash Used for Operating Activities | | | (401,289 | ) | | | (7,197 | ) |
| | | | | | | | | |
CASH FLOWS FROM INVESTING ACTIVITIES | | | | | | | | |
| Purchase of property and equipment | | | (149,967 | ) | | | (48,338 | ) |
| Net Cash Used for Investing Activities | | | (149,967 | ) | | | (48,338 | ) |
| | | | | | | | | |
| CASH FLOWS FROM FINANCING ACTIVITIES | | | | | | | | |
| Contributions from members | | | 1,396,268 | | | | - | |
| Distributions to members | | | (697,240 | ) | | | (105,135 | ) |
| Net Cash Provided by (Used for) Financing Activities | | | 699,028 | | | | (105,135 | ) |
| | | | | | | | | |
| NET INCREASE (DECREASE) IN CASH | | | 147,772 | | | | (160,670 | ) |
| | | | | | | | | |
| CASH,beginning of year | | | 55,190 | | | | 215,860 | |
| | | | | | | | | |
| CASH,end of year | | $ | 202,962 | | | $ | 55,190 | |
The accompanying notes are an integral part of these combined financial statements.
WPH SALEM, LLC
NOTES TO THE COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 2017 AND 2016
NOTE A – NATURE OF THE ORGANIZATION
WPH Salem, LLC (the “Company”) is an LLC taxed as a partnership 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 and Aledo, Illinois. 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.
NOTE B – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Combination
The combined financial statements include the accounts of the five OPCOs which operate under one master lease. All significant intercompany accounts and transactions between the OPCOs have been eliminated in combination.
Basis of Accounting
The combined financial statements were prepared using the accrual basis of accounting. Therefore, revenue and related assets are recognized when earned and expenses and related liabilities are recognized as the obligations are incurred.
Assisted Living Revenue and Tenant Receivables
Tenant receivables are reported at estimated net realizable amounts from tenants. Tenant receivables from Medicaid are carried at a net amount determined by the original charge for the service provided, less an estimate made for contractual adjustments provided to Medicaid. Tenant receivables are reduced by an allowance for doubtful accounts, which is determined by identifying troubled accounts and by historical experience. The Company generally does not charge interest on past due accounts. Tenant receivables are written off against the allowance for doubtful accounts when deemed uncollectible. The allowance for doubtful accounts was $861,496 and $73,807 as of December 31, 2017 and 2016, respectively.
WPH SALEM, LLC
NOTES TO THE COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 2017 AND 2016
(continued)
NOTE B – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(continued)
Assisted Living Revenue and Tenant Receivables (continued)
The Company has agreements with Medicaid that provide for payments to the OPCOs at amounts different from its established rates. Payment arrangements include predetermined fee schedules and discount charges. Contractual adjustments under the Medicaid third-party reimbursement agreements represent the different between the Company’s billings at the established rates and the amounts reimbursed by Medicaid. Contractual allowances and discounts are deducted from assisted living revenue. Assisted living revenue is therefore reported at the estimated net realizable amount from tenants and Medicaid for services rendered, including retroactive adjustments under reimbursement agreements.
Use of Estimates
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 and disclosures. Accordingly, actual results could differ from those estimates.
Resident Trust Fund Cash, Restricted
The Company holds resident personal funds on behalf of the residents. A corresponding Resident Trust Funds Payable is established with respect to these balances.
Escrow Deposits
Under the provisions of the Master Lease Agreement, refundable escrow deposits for capital expenditures, property insurance, and property taxes are required for each of the OPCOs to secure full, faithful, and punctual performance of the lessees. These deposits are due and payable in arrears.
Inventory
Inventory consists of food for residents and is stated at the lower of cost or market.
Security Deposits
Security deposits consist of funds held by the landlord in accordance with the Master Lease Agreement for capital reserve funds and utility deposits held by the related utility company.
WPH SALEM, LLC
NOTES TO THE COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 2017 AND 2016
(continued)
NOTE B – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(continued)
Property and Equipment
Property and equipment are stated at cost. Purchases and improvements greater than $500 and a useful life of one year are charged to the property accounts, while maintenance and repairs, which do not improve or extend life of the respective assets, are expensed as incurred. Depreciation is provided using the straight-line method over estimated useful lives of the assets, ranging from three to ten years. Leasehold improvements are amortized on a straight-line basis over the useful life of the asset or lease term, whichever is less. When assets are retired or disposed of, the cost and accumulated depreciation are removed from the accounts, and any resulting gains or losses are included in operations.
Whenever events or changes in circumstances indicate that the related carrying amount of an asset may not be recovered, management, using its best estimates and projections, reviews for impairment the carrying value of long-lived identifiable assets to be held and used in the future. Any impairment losses identified are recognized when determined.
Deferred Rent
The Company records rent expense including incentives on a straight-line basis over the terms of its leases. Deferred rental liability is recorded as the difference in rent expense recognized on a straight-line basis and cash payments.
Advertising
Advertising costs are expensed as incurred. Advertising expense totaled $51,937 and $35,223 for the years ended December 31, 2017 and 2016, respectively.
Income Taxes
The Company and all related OPCOs included in these combined financial statements are single member limited liability companies whereby all of the elements of income and deductions are included in the tax returns of their member. Therefore, no income tax provision or liability for federal and state purposes related to the entities are recorded in these combined financial statements.
WPH SALEM, LLC
NOTES TO THE COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 2017 AND 2016
(continued)
NOTE B – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(continued)
Income Taxes(continued)
The Company has adopted Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 740, Income Taxes, with no cumulative effect adjustment required. The Company believes that its income tax filing positions and deductions will be sustained upon examination, and accordingly, has not recorded any reserves, or related accruals for interest and penalties as of December 31, 2017 or 2016, for uncertain tax positions. The Company continually evaluates expiring statutes of limitations, audits, proposed settlements, changes in tax law and new authoritative rulings. The Company has adopted a policy under which, if required to be recognized in the future, it will classify interest related to the underpayment of income taxes as a component of interest expense, and will classify any related penalties under general and administrative expenses in the combined statement of income.
With few exceptions, the Company is no longer subject to U.S. federal, state, and local income tax examinations by tax authorities for tax returns filed for years beginning before January 1, 2014.
Reclassifications
Certain amounts in the 2016 financial statements have been reclassified to conform to the 2017 presentation.
NOTE C – PROPERTY AND EQUIPMENT
Property and equipment consist of the following as of December 31:
| | | 2017 | | | 2016 | |
| Furniture, fixtures, and equipment | | $ | 194,505 | | | $ | 192,315 | |
| Other equipment | | | 161,395 | | | | 116,048 | |
| Leasehold improvements | | | 1,064,196 | | | | 961,766 | |
| | | | 1,420,096 | | | | 1,270,129 | |
| Less: accumulated depreciation and amortization | | | (616,777 | ) | | | (461,712 | ) |
| Property and Equipment, Net | | $ | 803,319 | | | $ | 808,417 | |
Depreciation and amortization expense for the years ended December 31, 2017 and 2016 totaled $155,065 and $148,908, respectively.
WPH SALEM, LLC
NOTES TO THE COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 2017 AND 2016
(continued)
NOTE D – LEASE OBLIGATIONS
The Company leases facilities under various lease agreements with unrelated third-party landlords. These non-cancellable lease agreements have terms extending through December 31, 2030. The leases are structured as triple net leases whereby the individual OPCOs are required to pay all executory costs, including taxes, insurance, utilities and maintenance.
The following is a schedule of the future minimum lease payments at December 31, 2017:
| Year ending December 31, | | Amount | |
| 2018 | | $ | 3,110,871 | |
| 2019 | | | 3,176,659 | |
| 2020 | | | 3,243,852 | |
| 2021 | | | 3,312,459 | |
| 2022 | | | 3,382,527 | |
| Thereafter | | | 27,441,402 | |
| | | $ | 43,667,770 | |
Rent expense for the years ended December 31, 2017 and 2016 totaled $3,373,748 and $3,373,747 respectively.
NOTE E – CONCENTRATION OF RISK
Cash
The Company places its cash and temporary cash investments with high credit quality institutions. The Company, at times, could have deposits in excess of federally insured limits. Management does not believe the Company is exposed to any risk, which might affect the financial position of the Company.
Medicaid
The Company provides services to residents of North Carolina who are Medicaid recipients. Accordingly, the company is subject to a concentration of revenue risks related to the North Carolina Medicaid Program. 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 future years. Adjustments that significantly differ from the applicable estimates are reflected as an increase or decrease in resident services revenue in the year the adjustments are finalized.
WPH SALEM, LLC
NOTES TO THE COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 2017 AND 2016
(continued)
NOTE E – CONCENTRATION OF RISK (continued)
The Company derived approximately 54% and 53% of its revenues from Medicaid for the years ended December 31, 2017 and 2016, respectively. Approximately 74% and 59% of gross tenant receivables at December 31, 2017 and 2016, respectively, are due from Medicaid. Management does not believe there are significant credit risks associated with amounts due from Medicaid.
NOTE F – RELATED PARTY TRANSACTIONS
The Company has management agreements with related parties with common ownership to operate the OPCOs. Management fees expensed under these agreements totaled $501,729 and $496,091 for the years ended December 31, 2017 and 2016, respectively.
The Company purchases medical supplies from a vendor in which an executive of one of the aforementioned management companies is a principal. For the years ended December 31, 2017 and 2016, the Company purchased medical supplies totaling approximately $27,053 and $25,400, respectively. As of December 31, 2017 and 2016, the Company had outstanding accounts payable due to the related party of approximately $26,762 and $11,800, respectively.
NOTE G - PRIOR PERIOD ADJUSTMENT
The Company discovered that previously issued financial statements included certain errors related to the fact that it had not previously recognized rental expense on a straight line basis in accordance with Financial Accounting Standards Board Accounting Standards Codification 842:Leases. The errors in accounting required restatements of the 2016 combined financial statements.
As a result of this adjustment, members equity as of December 31, 2015 was reduced by $1,024,181. In addition, deferred rent liability as of December 31, 2016 was increased by $1,414,563. Also as a result of this adjustment, rent expense for the year ended December 31, 2016 was increased by $458,573, resulting in a corresponding decrease in members equity as of December 31, 2016.
NOTE H – PROFESSIONAL LIABILITY INSURANCE
The Company maintains claims-made basis professional liability insurance with a per-claim limit of $1,000,000 and aggregate annual limit of $3,000,000 with a commercial carrier. The Company is liable for a deductible up to $25,000 for each claim.
WPH SALEM, LLC
NOTES TO THE COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 2017 AND 2016
(continued)
NOTE I – SUBSEQUENT EVENTS
In preparing these combined financial statements, the Company has evaluated events and transactions for potential recognition or disclosure through March 1, 2018, the date the combined financial statements were available to be issued. There were no additional events or transactions that were discovered during the evaluation that required further recognition or disclosure.
SUPPLEMENTARY INFORMATION
WPH SALEM, LLC
SCHEDULE I - COMBINING BALANCE SHEETS
DECEMBER 31, 2017
| | | Carteret | | | Hamlet | | | Shelby | | | Aledo | | | Danby | | | Eliminations | | | Combined | |
| | | | | | | | | | | | | | | | | | | | | | |
| ASSETS |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| CURRENT ASSETS | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Cash | | $ | 10,913 | | | $ | - | | | $ | - | | | $ | 192,049 | | | $ | - | | | $ | - | | | $ | 202,962 | |
| Resident trust fund cash, restricted | | | 6,186 | | | | 9,902 | | | | 26,820 | | | | - | | | | 54,049 | | | | - | | | | 96,957 | |
| Tenant receivables, net | | | 3,502 | | | | 78,265 | | | | 108,270 | | | | 66,252 | | | | 163,039 | | | | - | | | | 419,328 | |
| Accounts receivable, other | | | - | | | | 5 | | | | - | | | | - | | | | 1,936 | | | | - | | | | 1,941 | |
| Escrow deposits | | | 124,218 | | | | 150,178 | | | | 68,708 | | | | 158,083 | | | | 252,281 | | | | - | | | | 753,468 | |
| Inventory | | | 1,875 | | | | 1,344 | | | | 1,840 | | | | - | | | | 2,603 | | | | - | | | | 7,662 | |
| Prepaid expenses | | | 30,037 | | | | 21,898 | | | | 45,367 | | | | 6,573 | | | | 20,389 | | | | - | | | | 124,264 | |
| Other current assets | | | 139 | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 139 | |
| Total Current Assets | | | 176,870 | | | | 261,592 | | | | 251,005 | | | | 422,957 | | | | 494,297 | | | | - | | | | 1,606,721 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| PROPERTY AND EQUIPMENT, NET | | | 208,704 | | | | 99,127 | | | | 304,323 | | | | 55,780 | | | | 135,385 | | | | - | | | | 803,319 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| OTHER ASSETS | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Security deposits | | | 102,387 | | | | 139,706 | | | | 95,625 | | | | 166,250 | | | | 218,250 | | | | - | | | | 722,218 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| TOTAL ASSETS | | $ | 487,961 | | | $ | 500,425 | | | $ | 650,953 | | | $ | 644,987 | | | $ | 847,932 | | | $ | - | | | $ | 3,132,258 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| LIABILITIES AND MEMBER'S EQUITY |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| CURRENT LIABILITIES | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Cash overdraft | | $ | - | | | $ | 38,158 | | | $ | 20,536 | | | $ | - | | | $ | 21,510 | | | $ | - | | | $ | 80,204 | |
| Accounts payable | | | 247,894 | | | | 257,171 | | | | 323,531 | | | | 32,962 | | | | 294,303 | | | | - | | | | 1,155,861 | |
| Accrued expenses | | | 75,336 | | | | 39,194 | | | | 48,311 | | | | 139,224 | | | | 106,806 | | | | - | | | | 408,871 | |
| Resident trust funds payable | | | 6,186 | | | | 9,902 | | | | 26,820 | | | | - | | | | 54,049 | | | | - | | | | 96,957 | |
| Deferred revenue | | | 24,470 | | | | 4,814 | | | | 4,917 | | | | 61,342 | | | | 16,868 | | | | - | | | | 112,411 | |
| Total Current Liabilities | | | 353,886 | | | | 349,239 | | | | 424,115 | | | | 233,528 | | | | 493,536 | | | | - | | | | 1,854,304 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| LONG-TERM LIABILITIES | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Deferred rent | | | 230,637 | | | | 349,113 | | | | 241,692 | | | | 487,790 | | | | 432,631 | | | | | | | | 1,741,863 | |
| Total Liabilities | | | 584,523 | | | | 698,352 | | | | 665,807 | | | | 721,318 | | | | 926,167 | | | | - | | | | 3,596,167 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| MEMBER'S EQUITY | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Member's equity (deficit) | | | (96,562 | ) | | | (197,927 | ) | | | (14,854 | ) | | | (76,331 | ) | | | (78,235 | ) | | | - | | | | (463,909 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| TOTAL LIABILITIES AND MEMBER'S EQUITY | | $ | 487,961 | | | $ | 500,425 | | | $ | 650,953 | | | $ | 644,987 | | | $ | 847,932 | | | $ | - | | | $ | 3,132,258 | |
WPH SALEM, LLC
SCHEDULE I - COMBINING BALANCE SHEETS
DECEMBER 31, 2016 (RESTATED)
| | | Carteret | | | Hamlet | | | Shelby | | | Aledo | | | Danby | | | Eliminations | | | Combined | |
| | | | | | | | | | | | | | | | | | | | | | |
| ASSETS |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Cash | | $ | 11,089 | | | $ | 518 | | | $ | 895 | | | $ | 38,621 | | | $ | 4,067 | | | $ | - | | | $ | 55,190 | |
| Resident trust fund cash, restricted | | | 9,345 | | | | 24,046 | | | | 10,834 | | | | - | | | | 32,050 | | | | - | | | | 76,275 | |
| Tenant receivables, net | | | 45,051 | | | | 111,269 | | | | 77,969 | | | | 436,027 | | | | 353,954 | | | | - | | | | 1,024,270 | |
| Due from affiliates | | | 295,537 | | | | - | | | | 267,888 | | | | 40,000 | | | | 1,309 | | | | (563,425 | ) | | | 41,309 | |
| Accounts receivable, other | | | 103,460 | | | | - | | | | - | | | | 21,986 | | | | 8,765 | | | | - | | | | 134,211 | |
| Escrow deposits | | | 99,355 | | | | 138,323 | | | | 62,766 | | | | 137,486 | | | | 192,482 | | | | - | | | | 630,412 | |
| Inventory | | | 1,873 | | | | 1,720 | | | | 1,322 | | | | - | | | | 2,099 | | | | - | | | | 7,014 | |
| Prepaid expenses | | | 29,581 | | | | 16,238 | | | | 27,804 | | | | 45,384 | | | | 15,665 | | | | - | | | | 134,672 | |
| Total Current Assets | | | 595,291 | | | | 292,114 | | | | 449,478 | | | | 719,504 | | | | 610,391 | | | | (563,425 | ) | | | 2,103,353 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| PROPERTY AND EQUIPMENT, NET | | | 247,408 | | | | 100,437 | | | | 311,765 | | | | 47,860 | | | | 100,947 | | | | - | | | | 808,417 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| OTHER ASSETS | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Security deposits | | | 102,387 | | | | 139,706 | | | | 95,625 | | | | 166,250 | | | | 218,250 | | | | - | | | | 722,218 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| TOTAL ASSETS | | $ | 945,086 | | | $ | 532,257 | | | $ | 856,868 | | | $ | 933,614 | | | $ | 929,588 | | | $ | (563,425 | ) | | $ | 3,633,988 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| LIABILITIES AND MEMBER'S EQUITY |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| CURRENT LIABILITIES | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Accounts payable | | $ | 318,040 | | | $ | 423,592 | | | $ | 333,318 | | | $ | 57,143 | | | $ | 411,311 | | | $ | - | | | $ | 1,543,404 | |
| Due to affiliates | | | - | | | | 478,094 | | | | 85,331 | | | | - | | | | - | | | | (563,425 | ) | | | - | |
| Accrued expenses | | | 57,104 | | | | 24,389 | | | | 34,581 | | | | 164,473 | | | | 57,365 | | | | - | | | | 337,912 | |
| Resident trust funds payable | | | 9,345 | | | | 24,046 | | | | 10,834 | | | | - | | | | 32,050 | | | | - | | | | 76,275 | |
| Deferred revenue | | | 82,772 | | | | 9,643 | | | | 6,699 | | | | 66,067 | | | | 38,894 | | | | - | | | | 204,075 | |
| Total Current Liabilities | | | 467,261 | | | | 959,764 | | | | 470,763 | | | | 287,683 | | | | 539,620 | | | | (563,425 | ) | | | 2,161,666 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| LONG-TERM LIABILITIES | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Deferred rent | | | 188,357 | | | | 285,114 | | | | 197,385 | | | | 422,061 | | | | 321,646 | | | | - | | | | 1,414,563 | |
| Total Liabilities | | | 655,618 | | | | 1,244,878 | | | | 668,148 | | | | 709,744 | | | | 861,266 | | | | (563,425 | ) | | | 3,576,229 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| MEMBER'S EQUITY | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Member's equity (deficit) | | | 289,468 | | | | (712,621 | ) | | | 188,720 | | | | 223,870 | | | | 68,322 | | | | - | | | | 57,759 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| TOTAL LIABILITIES AND MEMBER'S EQUITY | | $ | 945,086 | | | $ | 532,257 | | | $ | 856,868 | | | $ | 933,614 | | | $ | 929,588 | | | $ | (563,425 | ) | | $ | 3,633,988 | |
WPH SALEM, LLC
SCHEDULE II - COMBINING STATEMENTS OF OPERATIONS AND MEMBER'S EQUITY
YEAR ENDED DECEMBER 31, 2017
| | | Carteret | | | Hamlet | | | Shelby | | | Aledo | | | Danby | | | Combined | |
| | | | | | | | | | | | | | | | | | | |
| REVENUE | | | | | | | | | | | | | | | | | | | | | | | | |
| Assisted living revenue, net of contractual allowances | | $ | 1,633,527 | | | $ | 1,325,960 | | | $ | 1,648,340 | | | $ | 2,374,744 | | | $ | 2,987,297 | | | $ | 9,969,868 | |
| Other income | | | 13,064 | | | | 7,854 | | | | 76,765 | | | | 20,893 | | | | 20,485 | | | | 139,061 | |
| Total Revenue | | | 1,646,591 | | | | 1,333,814 | | | | 1,725,105 | | | | 2,395,637 | | | | 3,007,782 | | | | 10,108,929 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| OPERATING EXPENSES | | | | | | | | | | | | | | | | | | | | | | | | |
| Salaries | | | 551,119 | | | | 421,967 | | | | 605,329 | | | | 585,269 | | | | 1,054,503 | | | | 3,218,187 | |
| Payroll taxes | | | 49,473 | | | | 38,372 | | | | 54,773 | | | | 49,749 | | | | 99,086 | | | | 291,453 | |
| Employee benefits | | | 22,913 | | | | 18,572 | | | | 31,504 | | | | 88,433 | | | | 52,636 | | | | 214,058 | |
| Food costs | | | 106,155 | | | | 87,551 | | | | 92,184 | | | | 121,840 | | | | 140,716 | | | | 548,446 | |
| Utilities | | | 117,115 | | | | 98,740 | | | | 105,354 | | | | 122,244 | | | | 101,720 | | | | 545,173 | |
| Supplies | | | 31,799 | | | | 28,394 | | | | 40,976 | | | | 32,352 | | | | 49,468 | | | | 182,989 | |
| Repairs and maintenance | | | 27,738 | | | | 32,231 | | | | 40,938 | | | | 28,897 | | | | 32,905 | | | | 162,709 | |
| Insurance | | | 47,061 | | | | 25,281 | | | | 41,455 | | | | 41,790 | | | | 48,606 | | | | 204,193 | |
| Property taxes | | | 31,567 | | | | 39,037 | | | | 23,738 | | | | 123,032 | | | | 77,244 | | | | 294,618 | |
| Professional/consulting fees | | | 59,634 | | | | 81,726 | | | | 105,095 | | | | 32,240 | | | | 93,155 | | | | 371,850 | |
| General and administrative expenses | | | 57,819 | | | | 35,168 | | | | 62,131 | | | | 47,576 | | | | 76,428 | | | | 279,122 | |
| Bad debt expense | | | 16,466 | | | | 90,407 | | | | 44,572 | | | | 482,494 | | | | 271,430 | | | | 905,369 | |
| Advertising and marketing | | | 12,793 | | | | 3,115 | | | | 5,043 | | | | 26,369 | | | | 4,617 | | | | 51,937 | |
| Travel and entertainment | | | 3,728 | | | | 5,377 | | | | 1,475 | | | | 14,900 | | | | 3,499 | | | | 28,979 | |
| Management service fee | | | 81,326 | | | | 68,662 | | | | 83,781 | | | | 116,614 | | | | 151,346 | | | | 501,729 | |
| Total Operating Expenses | | | 1,216,706 | | | | 1,074,600 | | | | 1,338,348 | | | | 1,913,799 | | | | 2,257,359 | | | | 7,800,812 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| CAPITAL RELATED EXPENSES | | | | | | | | | | | | | | | | | | | | | | | | |
| Depreciation and amortization | | | 45,169 | | | | 21,041 | | | | 49,559 | | | | 17,521 | | | | 21,775 | | | | 155,065 | |
| Rent | | | 434,675 | | | | 657,965 | | | | 455,511 | | | | 764,518 | | | | 1,061,079 | | | | 3,373,748 | |
| Total Capital Related Expenses | | | 479,844 | | | | 679,006 | | | | 505,070 | | | | 782,039 | | | | 1,082,854 | | | | 3,528,813 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| NET INCOME (LOSS) | | | (49,959 | ) | | | (419,792 | ) | | | (118,313 | ) | | | (300,201 | ) | | | (332,431 | ) | | | (1,220,696 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| MEMBER'S EQUITY, beginning of year | | | 289,468 | | | | (712,621 | ) | | | 188,720 | | | | 223,870 | | | | 68,322 | | | | 57,759 | |
| Contributions from member | | | 63,180 | | | | 949,286 | | | | 32,986 | | | | - | | | | 350,816 | | | | 1,396,268 | |
| Distributions to member | | | (399,251 | ) | | | (14,800 | ) | | | (118,247 | ) | | | - | | | | (164,942 | ) | | | (697,240 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| MEMBER'S EQUITY (DEFICIT), end of year | | $ | (96,562 | ) | | $ | (197,927 | ) | | $ | (14,854 | ) | | $ | (76,331 | ) | | $ | (78,235 | ) | | $ | (463,909 | ) |
WPH SALEM, LLC
SCHEDULE II - COMBINING STATEMENTS OF OPERATIONS AND MEMBER'S EQUITY (DEFICIT)
YEAR ENDED DECEMBER 31, 2017 (RESTATED)
| | | Carteret | | | Hamlet | | | Shelby | | | Aledo | | | Danby | | | Combined | |
| | | | | | | | | | | | | | | | | | | |
| REVENUE | | | | | | | | | | | | | | | | | | | | | | | | |
| Assisted living revenue, net of contractual allowances | | $ | 1,628,200 | | | $ | 1,408,351 | | | $ | 1,495,350 | | | $ | 2,373,358 | | | $ | 2,854,359 | | | $ | 9,759,618 | |
| Other income | | | 7,158 | | | | 4,535 | | | | 4,781 | | | | 19,951 | | | | 5,729 | | | | 42,154 | |
| Total Revenue | | | 1,635,358 | | | | 1,412,886 | | | | 1,500,131 | | | | 2,393,309 | | | | 2,860,088 | | | | 9,801,772 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| OPERATING EXPENSES | | | | | | | | | | | | | | | | | | | | | | | | |
| Salaries | | | 535,839 | | | | 410,299 | | | | 614,350 | | | | 593,022 | | | | 1,069,690 | | | | 3,223,200 | |
| Payroll taxes | | | 52,563 | | | | 40,704 | | | | 59,407 | | | | 50,862 | | | | 104,825 | | | | 308,361 | |
| Employee benefits | | | 14,055 | | | | 17,480 | | | | 30,335 | | | | 117,326 | | | | 95,749 | | | | 274,945 | |
| Food costs | | | 108,513 | | | | 115,899 | | | | 98,903 | | | | 120,116 | | | | 148,224 | | | | 591,655 | |
| Utilities | | | 114,470 | | | | 78,511 | | | | 95,680 | | | | 131,002 | | | | 136,693 | | | | 556,356 | |
| Supplies | | | 30,270 | | | | 25,441 | | | | 31,359 | | | | 42,707 | | | | 44,158 | | | | 173,935 | |
| Repairs and maintenance | | | 36,567 | | | | 23,851 | | | | 27,599 | | | | 47,403 | | | | 22,621 | | | | 158,041 | |
| Insurance | | | 48,372 | | | | 26,170 | | | | 41,243 | | | | 36,859 | | | | 46,603 | | | | 199,247 | |
| Property taxes | | | 45,147 | | | | 38,348 | | | | 23,474 | | | | 157,801 | | | | 73,342 | | | | 338,112 | |
| Professional/consulting fees | | | 64,397 | | | | 85,249 | | | | 112,797 | | | | 35,794 | | | | 97,184 | | | | 395,421 | |
| General and administrative expenses | | | 45,878 | | | | 29,775 | | | | 49,859 | | | | 148,273 | | | | 63,371 | | | | 337,156 | |
| Bad debt expense | | | 16,347 | | | | 14,129 | | | | 48,767 | | | | 23,930 | | | | 281,908 | | | | 385,081 | |
| Advertising and marketing | | | 7,325 | | | | 3,141 | | | | 4,187 | | | | 16,645 | | | | 3,925 | | | | 35,223 | |
| Travel and entertainment | | | 5,180 | | | | 6,254 | | | | 3,216 | | | | 7,091 | | | | 1,953 | | | | 23,694 | |
| Management service fee | | | 82,186 | | | | 75,468 | | | | 74,892 | | | | 119,111 | | | | 144,434 | | | | 496,091 | |
| Total Operating Expenses | | | 1,207,109 | | | | 990,719 | | | | 1,316,068 | | | | 1,647,942 | | | | 2,334,680 | | | | 7,496,518 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| CAPITAL RELATED EXPENSES | | | | | | | | | | | | | | | | | | | | | | | | |
| Depreciation and amortization | | | 44,470 | | | | 20,036 | | | | 48,566 | | | | 13,963 | | | | 21,873 | | | | 148,908 | |
| Rent | | | 434,675 | | | | 657,965 | | | | 455,511 | | | | 764,518 | | | | 1,061,078 | | | | 3,373,747 | |
| Total Capital Related Expenses | | | 479,145 | | | | 678,001 | | | | 504,077 | | | | 778,481 | | | | 1,082,951 | | | | 3,522,655 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| NET LOSS | | | (50,896 | ) | | | (255,834 | ) | | | (320,014 | ) | | | (33,114 | ) | | | (557,543 | ) | | | (1,217,401 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| MEMBER'S EQUITY, beginning of year | | | 477,807 | | | | (248,742 | ) | | | 652,764 | | | | 704,749 | | | | 817,898 | | | | 2,404,476 | |
| Prior period adjustment | | | (137,443 | ) | | | (208,045 | ) | | | (144,030 | ) | | | (342,630 | ) | | | (192,033 | ) | | | (1,024,181 | ) |
| MEMBER'S EQUITY, beginning of year (restated) | | | 340,364 | | | | (456,787 | ) | | | 508,734 | | | | 362,119 | | | | 625,865 | | | | 1,380,295 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Distributions to member | | | - | | | | - | | | | - | | | | (105,135 | ) | | | - | | | | (105,135 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| MEMBER'S EQUITY (DEFICIT), end of year | | $ | 289,468 | | | $ | (712,621 | ) | | $ | 188,720 | | | $ | 223,870 | | | $ | 68,322 | | | $ | 57,759 | |
