Summit Healthcare REIT 10-K 2018 FY Annual report

Exhibit 99.1 

WPH SALEM, LLC

COMBINED FINANCIAL STATEMENTS
AND INDEPENDENT AUDITOR'S REPORT

DECEMBER 31, 2018 AND 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 - 15
Schedule II - Combining Statements of Operations and Member's Equity	16 - 17

Independent Auditor's Report

To the Management of
WPH Salem, LLC
Hickory, NC

I have audited the accompanying combined financial statements of WPH Salem, LLC (a Delaware corporation), which comprise the combined balance sheets as of December 31, 2018 and 2017 and the related combined statements of operations and member's equity, and cash flows for the years 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

My responsibility is to express an opinion on these combined financial statements based on my audit. I conducted my audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that I 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, I 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.

I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for our audit opinion.

WPH Salem, LLC
Independent Auditor's Report
Page2

Opinion

In my opinion, the combined 2018 and 2017 financial statements referred to above present fairly, in all material respects, the financial position of WPH Salem, LLC as of December 31, 2018 and 2017, and the results of its operations and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.

Supplementary Information

My 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 andll 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 my opinion, the combining information is fairly stated in all material respects in relation to the combined financial statements as a whole.

/s/ Aaron Bloom CPA

Baltimore, Maryland

March 19, 2019

WPH SALEM, LLC

COMBINED BALANCE SHEETS

DECEMBER 31, 2018 AND 2017

	2018		2017
ASSETS
CURRENT ASSETS
Cash	$	116,812	$	202,962
Resident trust fund cash, restricted		140,923		96,957
Tenant receivables, net		317,382		419,328
Accounts receivable, other		27,539		1,941
Escrow deposits		581,306		753,468
Inventory		6,786		7,662
Prepaid expenses		155,833		124,264
Other current assets		139		139
Total Current Assets		1,346,720		1,606,721
PROPERTY AND EQUIPMENT, NET		817,990		803,319
OTHER ASSETS
Security deposits		722,218		722,218
TOTAL ASSETS	$	2,886,928	$	3,132,258

The accompanying notes are an integral part of these combined financial statements.

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WPH SALEM, LLC

COMBINED BALANCE SHEETS

DECEMBER 31, 2018 AND 2017

(continued)

	2018			2017
LIABILITIES AND MEMBER'S EQUITY
CURRENT LIABILITIES
Cash overdraft	$	82,808		$	80,204
Accounts payable		1,381,576			1,155,861
Accrued expenses		322,425			408,871
Resident trust funds payable		140,923			96,957
Loan payable - current portion		3,589			-
Deferred revenue		97,084			112,411
Total Current Liabilities		2,028,405			1,854,304
LONG-TERM LIABILITIES
Loan Payable		17,210			-
Deferred rent		2,004,737			1,741,863
Total Long Term Liabilities		2,021,947			1,741,863
Total Liabilities		4,050,352			3,596,167
MEMBER'S EQUITY (DEFICIT)
Member's equity (deficit)		(1,163,424	)		(463,909	)
TOTAL LIABILITIES AND MEMBER'S EQUITY	$	2,886,928		$	3,132,258

The accompanying notes are an integral part of these combined financial statements.

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WPH SALEM, LLC

COMBINED STATEMENTS OF OPERATIONS AND MEMBER'S EQUITY

YEARS ENDED DECEMBER 31, 2018 AND 2017

	2018			2017
REVENUE
Assisted living revenue, net of contractual allowances	$	10,586,794		$	9,969,868
Other income		475,785			139,061
Total Revenue		11,062,579			10,108,929
OPERATING EXPENSES
Salaries		3,504,090			3,218,187
Payroll taxes		298,476			291,453
Employee benefits		240,160			214,058
Food costs		565,832			548,446
Utilities		641,860			545,173
Supplies		207,334			182,989
Repairs and maintenance		113,271			162,709
Insurance		198,141			204,193
Property taxes		362,070			294,618
Professional/consulting fees		552,117			371,850
General and administrative expenses		425,718			279,122
Bad debt expense		133,379			905,369
Advertising and marketing		59,387			51,937
Travel and entertainment		36,113			28,979
Management service fee		556,759			501,729
Total Operating Expenses		7,894,707			7,800,812
CAPITAL RELATED EXPENSES
Depreciation and amortization		168,409			155,065
Rent		3,373,746			3,373,748
Total Capital Related Expenses		3,542,155			3,528,813
NET LOSS		(374,283	)		(1,220,696	)
MEMBER'S EQUITY (DEFICIT),beginning of year		(463,909	)		57,759
Contributions from members		251,387			1,396,268
Distributions to members		(576,619	)		(697,240	)
MEMBER'S EQUITY (DEFICIT),end of year	$	(1,163,424	)	$	(463,909	)

The accompanying notes are an integral part of these combined financial statements.

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WPH SALEM, LLC

COMBINED STATEMENTS OF CASH FLOWS

YEARS ENDED DECEMBER 31, 2018 AND 2017

	2018			2017
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(374,283	)	$	(1,220,696	)
Adjustments to reconcile change in net loss to change in net cash used for operating activities:
Depreciation and amortization		168,409			155,065
Provision for bad debts		133,379			905,369
Decrease (increase) in assets:
Resident trust fund cash, restricted		(43,966	)		(20,682	)
Tenant receivables		(31,433	)		(300,427	)
Due from affiliates		-			41,309
Accounts receivable, other		(25,598	)		132,270
Escrow deposits		172,162			(123,056	)
Inventory		876			(648	)
Prepaid expenses		(31,569	)		10,408
Other current assets		-			(139	)
Increase (decrease) in liabilities:
Cash overdraft		2,604			80,204
Accounts payable		225,715			(387,543	)
Accrued expenses		(86,446	)		70,959
Resident trust fund payable		43,966			20,682
Deferred revenue		(15,327	)		(91,664	)
Deferred rent		262,874			327,300
Net Cash Provided by (Used for) Operating Activities		401,363			(401,289	)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment		(183,080	)		(149,967	)
Net Cash Used for Investing Activities		(183,080	)		(149,967	)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds of loan payable		22,658			-
Payments on loan payable		(1,859	)		-
Contributions from members		251,387			1,396,268
Distributions to members		(576,619	)		(697,240	)
Net Cash (Used for) Provided by Financing Activities		(304,433	)		699,028
NET (DECREASE) INCREASE IN CASH		(86,150	)		147,772
CASH,beginning of year		202,962			55,190
CASH,end of year	$	116,812		$	202,962

The accompanying notes are an integral part of these combined financial statements.

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WPH SALEM, LLC

NOTES TO THE COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 2018 AND 2017

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 arid 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 $727,643 and $861,496 as of December 31, 2018 and 2017, respectively.

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WPH SALEM, LLC.

NOTES TO THE COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 2018 AND 2017

(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.

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WPH SALEM, LLC

NOTES TO THE COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 2018 AND 2017

(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 $59,387 and $51,937 for the years ended December 31, 2018 and 2017, 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.

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WPH SALEM, LLC

NOTES TO THE COMBINED FINANCIAL STATEMENTS

DECEMBER 31, 2018 AND 2017

(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 December31, 2018or2017,for uncertain tax positions. The Company continually evaluates expiring statutes of limitations, audits, proposed settlements, changes intax 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 January1, 2015.

NOTE C-PROPERTY AND EQUIPMENT

Property and equipment consist of the following as of December31:

	2018			2017
Furniture, fixtures, and equipment	$	210,625		$	194,505
Other equipment		263,128			161,395
Leasehold improvements		1 127 164			l 064 196
		1,600,917			1,420,096
Less: accumulated depreciation and amortization		(782,927	)		(616.777	)
Property and Equipment, Net	$	817,990		$	803,319

Depreciation and amortization expense for the years ended December31, 2018and2017totaled $168,409 and $155,065, respectively.

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WPH SALEM, LLC

NOTES TO THE COMBINED FINANCIAL STATEMENTS

DECEMBER 31, 2018 AND 2017

(continued)

NOTE D - LOAN PAYABLE

On May 8, 2018 Hamlet purchased a vehicle for its use with a loan in the amount of $22,657 payable over 60 months at an interest rate of 15%. The future loan payments over the next five years are $3,589 for 2019, $4,166 for 2020, $4,835 for 2021, $5,612 for 2022 and $2,597 for 2023. Interest paid on the loan for the years ended December 31, 2018 and 2017 was $1,914 and -0- respectively.

NOTE E - 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, 2018:

Year ending December 31.	Amount
2019	$	3,176,659
2020		3;243,852
2021		3,312,459
2022		3,382,527
2023		3,454,083
Thereafter		23,987,319
	$	40,556,899

Rent expense for the years ended December 31, 2018 and 2017 totaled $3,373,746 and $3,373,748 respectively.

NOTE F - 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.

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WPH SALEM, LLC

NOTES TO THE COMBINED FINANCIAL STATEMENTS

DECEMBER 31, 2018 AND 2017

(continued)

NOTE F -Concentration OF RISK (continued)

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.

The Company derived approximately 53% and 54% of its revenues from Medicaid for the years ended December 31, 2018 and 2017, respectively. Approximately 71% and 74% of gross tenant receivables at December 31, 2018 and 2017, respectively, are due from Medicaid. Management does not believe there are significant credit risks associated with amounts due from Medicaid.

NOTE G - 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 $556,759 and

$501,729 for the years ended December 3 I, 2018 and 2017, 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, 2018 and 2017, the Company purchased medical supplies totaling approximately $26,706 and $27,053, respectively. As of December 31, 2018 and 2017, the Company had outstanding accounts payable due to the related party of approximately $25,660 and $26,762, respectively.

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.

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WPH SALEM, LLC

NOTES TO THE COMBINED FINANCIAL STATEMENTS

DECEMBER 31, 2018 AND 2017

(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 19, 2019, 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.

On February 14, 2019 the operator of Carteret, Hamlet, Shelby and Danby purchased the leased facilities from the owner of the properties with the use of bond financing and has continued to operate the facilities. The sale of the facilities will reduce the minimum future lease payments for the remaining facility for the Company from $40,556,899 to $9,827,954.

The area in which Carteret operates was severely impacted by flooding from Hurricane Florence and caused Carteret to stop operations on September 14, 2018 and place their residents into other facilities. Carteret has not reopened and is fully insured against this loss of operations with a deductible of $100,000 which has been factored into the financial statements.

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SUPPLEMENTARY INFORMATION

WPH SALEM, LLC

SCHEDULE I - COMBINING BALANCE SHEETS

DECEMBER 31, 2018

	Carteret			Hamlet			Shelby			Aledo			Danby			Eliminations		Combined
		ASSETS
CURRENT ASSETS
Cash	$	192		$	-		$	-		$	116,620		$	-		$	-	$	116,812
Resident trust fund cash, restricted		-			43,550			37,802			-			59,571			-		140,923
Tenant receivables, net		11,189			31,257			53,685			82,710			138,541			-		317,382
Accounts receivable, other		-			5			-			25,662			1,872			-		27,539
Escrow deposits		82,374			99,131			59,639			173,176			166,986			-		581,306
Inventory		-			1,875			1,899			-			3,012			-		6,786
Prepaid expenses		29,111			45,308			35,067			4,611			41,736			-		155,833
Other current assets		139			-			-			-			-			-		139
Total Current Assets		123,005			221,126			188,092			402,779			411,718			-		1,346,720
PROPERTY AND EQUIPMENT, NET		181,166			148,648			283,143			85,399			119,634			-		817,990
OTHER ASSETS
Security deposits		102,387			139,706			95,625			166,250			218,250			-		722,218
TOTAL ASSETS	$	406,558		$	509,480		$	566,860		$	654,428		$	749,602		$	-	$	2,886,928
		LIABILITIESANDMEMBER'SEQUITY
CURRENT LIABILITIES
Cash overdraft	$	-		$	22,143		$	31,913		$	-		$	28,752		$	-	$	82,808
Accounts payable		322,906			308,793			341,821			9,872			398,184			-		1,381,576
Accrued expenses		39,185			49,619			60,476			102,227			70,918			-		322,425
Resident trust funds payable		-			43,550			37,802			-			59,571			-		140,923
Loan payable - current portion		-			3,589			-			-			-					3,589
Deferred revenue		-			12,494			4,578			60,842			19,170			-		97,084
Total Current Liabilities		362,091			440,188			476,590			172,941			576,595			-		2,028,405
LONG-TERM LIABILITIES
Loan payable		-			17,210			-			-			-					17,210
Deferred rent		264,088			399,747			276,746			539,543			524,613			-		2,004,737
Total Long Term Liabilities		264,088			416,957			276,746			539,543			524,613					2,021,947
Total Liabilities		626,179			857,145			753,336			712,484			1,101,208			-		4,050,352
MEMBER'S EQUITY
Member's equity (deficit)		(219,621	)		(347,665	)		(186,476	)		(58,056	)		(351,606	)		-		(1,163,424	)
TOTAL LIABILITIES AND MEMBER'S EQUITY	$	406,558		$	509,480		$	566,860		$	654,428		$	749,602		$	-	$	2,886,928

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WPH SALEM, LLC

SCHEDULE I - COMBINING BALANCE SHEETS

December 31, 2017

	Carteret			Hamlet			Shelby			Aledo			Danby			Eliminations		Combined
		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

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WPH SALEM, LLC

SCHEDULE II - COMBINING STATEMENTS OF OPERATIONS AND MEMBER'S EQUITY

YEAR ENDED DECEMBER 31, 2018

	Carteret			Hamlet			Shelby			Aledo			Danby			Combined
REVENUE
Assisted living revenue, net of contractual allowances	$	1,302,689		$	1,597,946		$	1,879,144		$	2,598,063		$	3,208,952		$	10,586,794
Other income		370,677			16,572			33,610			26,420			28,506			475,785
Total Revenue		1,673,366			1,614,518			1,912,754			2,624,483			3,237,458			11,062,579
OPERATING EXPENSES
Salaries		548,511			460,369			739,708			634,915			1,120,587			3,504,090
Payroll taxes		43,925			38,684			62,395			53,903			99,569			298,476
Employee benefits		37,053			35,249			35,437			58,441			73,980			240,160
Food costs		81,170			96,111			102,656			123,712			162,183			565,832
Utilities		115,033			135,671			142,779			126,138			122,239			641,860
Supplies		27,557			27,595			63,194			35,787			53,201			207,334
Repairs and maintenance		17,414			16,464			27,480			28,617			23,296			113,271
Insurance		48,527			30,390			41,217			14,366			63,641			198,141
Property taxes		32,195			57,227			28,223			123,032			121,393			362,070
Professional/consulting fees		103,525			134,181			147,202			31,994			135,215			552,117
General and administrative expenses		75,718			49,643			92,040			52,215			156,102			425,718
Bad debt expense		-			16,047			46,404			38,689			32,239			133,379
Advertising and marketing		25,937			3,215			3,011			24,805			2,419			59,387
Travel and entertainment		2,903			3,784			3,267			22,663			3,496			36,113
Management service fee		87,960			80,234			96,086			131,285			161,194			556,759
Total Operating Expenses		1,247,428			1,184,864			1,631,099			1,500,562			2,330,754			7,894,707
CAPITAL RELATED EXPENSES
Depreciation and amortization		47,151			31,022			48,960			16,128			25,148			168,409
Rent		434,675			657,964			455,510			764,518			1,061,079			3,373,746
Total Capital Related Expenses		481,826			688,986			504,470			780,646			1,086,227			3,542,155
NET INCOME (LOSS)		(55,888	)		(259,332	)		(222,815	)		343,275			(179,523	)		(374,283	)
MEMBER'S EQUITY,beginning of year		(96,562	)		(197,927	)		(14,854	)		(76,331	)		(78,235	)		(463,909	)
Contributions from member		-			109,594			51,193			-			90,600			251,387
Distributions to member		(67,171	)		-			-			(325,000	)		(184,448	)		(576,619	)
MEMBER'S EQUITY (DEFICIT),end of year	$	(219,621	)	$	(347,665	)	$	(186,476	)	$	(58,056	)	$	(351,606	)	$	(1,163,424	)

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WPH SALEM, LLC

SCHEDULE II - COMBINING STATEMENTS OF OPERATIONS AND MEMBER'S EQUITY (DEFICIT)

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 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	)

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