Exhibit 99.2
Hughes center for functional medicine Pa
Audited Financial Statements
For the Years Ended December 31, 2018 and 2017
HUGHES CENTER FOR FUNCTIONAL MEDICINE PA
(an S Corporation)
TABLE OF CONTENTS
Independent Auditor’s Report | 1 |
Financial Statements | |
Balance Sheets as of December 31, 2018 and 2017 | 2 |
Statements of Income and Retained Earnings as of December 31, 2018 and 2017 | 3 |
Statements of Cash Flows as of December 31, 2018 and 2017 | 4 |
Notes to Financial Statements | 5-7 |
i
![]() | 805 Third Avenue |
Suite 1430 | |
New York, NY 10022 | |
212.868.3669 | |
212.838.2676 / Fax | |
www.rbsmllp.com |
INDEPENDENT AUDITOR’S REPORT
To the Board of Directors and Stockholders
of Hughes Center for Functional Medicine PA
We have audited the accompanying financial statements of Hughes Center for Functional Medicine PA (the “Company”), a Florida S-corporation, which comprise the balance sheets as of December 31, 2018 and 2017, and the related statements of income and retained earnings, and cash flows for the years 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 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 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 financial statements based on our audits. We conducted our audits 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 financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the 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 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 financial statements.
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 financial statements referred to above present fairly, in all material respects, the financial position of Hughes Center for Functional Medicine PA 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.
New York, NY
April 10, 2019
New York | Washington, DC | California | Nevada | China | India | Greece
Member of ANTEA International with offices worldwide
1
HUGHES CENTER FOR FUNCTIONAL MEDICINE PA
(an S Corporation)
BALANCE SHEETS
December 31, 2018 and 2017
2018 | 2017 | |||||||
ASSETS | ||||||||
Current Assets: | ||||||||
Cash | $ | 83,223 | $ | 112,705 | ||||
Inventory | 83,371 | 103,852 | ||||||
Total Current Assets | 166,594 | 216,557 | ||||||
Furniture and Equipment | 413,671 | 399,314 | ||||||
Less: Accumulated Depreciation | (149,229 | ) | (80,642 | ) | ||||
Net Furniture and Equipment | 264,442 | 318,672 | ||||||
Other Assets: | ||||||||
Security deposit | 5,194 | 5,194 | ||||||
Loan costs net | 119 | 2,291 | ||||||
Total Other Assets | 5,313 | 7,485 | ||||||
Total Assets | $ | 436,349 | $ | 542,714 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current Liabilities: | ||||||||
Accounts payable | $ | 38,060 | $ | 52,796 | ||||
Accrued payroll liabilities | 16,213 | 12,774 | ||||||
Line of credit | - | 214,000 | ||||||
Total Current Liabilities | 54,273 | 279,570 | ||||||
Total Liabilities | 54,273 | 279,570 | ||||||
Stockholders’ Equity: | ||||||||
Common stock-100 shares authorized no par value; Issued and outstanding 100 and 100 shares in 2018 and 2017, respectively | - | - | ||||||
Additional paid in capital | 1,000 | 1,000 | ||||||
Retained Earnings | 381,076 | 262,144 | ||||||
Total Stockholders’ Equity | 382,076 | 263,144 | ||||||
Total Liabilities and Stockholders’ Equity | $ | 436,349 | $ | 542,714 |
See accompanying independent auditor’s report and notes to financial statements
2
HUGHES CENTER FOR FUNCTIONAL MEDICINE PA
(an S Corporation)
STATEMENTS OF INCOME AND RETAINED EARNINGS
Years Ended December 31, 2018 and 2017
2018 | 2017 | |||||||
Revenue | $ | 3,023,344 | $ | 2,686,245 | ||||
Cost of Services | 1,092,187 | 970,446 | ||||||
Gross Profit | 1,931,157 | 1,715,799 | ||||||
Operating Expenses: | ||||||||
Salaries and wages | 671,743 | 621,587 | ||||||
Contract/purchased services | 412,372 | 360,328 | ||||||
Fringe benefits and payroll taxes | 132,696 | 132,790 | ||||||
Rent | 106,202 | 98,682 | ||||||
Depreciation and amortization | 72,688 | 53,764 | ||||||
Advertising and promotion | 87,207 | 53,905 | ||||||
Insurance | 11,145 | 17,715 | ||||||
Telephone | 11,946 | 9,868 | ||||||
Dues and subscriptions | 9,557 | 4,038 | ||||||
Records storage | 7,030 | 7,824 | ||||||
Professional fees | 22,389 | 8,165 | ||||||
Repairs and maintenance | 20,153 | 16,223 | ||||||
Postage and shipping | 20,573 | 17,713 | ||||||
Office expense | 34,030 | 41,902 | ||||||
Other operating expense | 11,193 | 13,616 | ||||||
Total operating expenses | 1,630,924 | 1,458,120 | ||||||
Income From Operations | 300,233 | 257,679 | ||||||
Other Income (Expense): | ||||||||
Interest expense | (9,278 | ) | (421 | ) | ||||
Total other (expense) | (9,278 | ) | (421 | ) | ||||
Net Income | 290,955 | 257,258 | ||||||
Retained Earnings At Beginning Of Year | 262,144 | 215,298 | ||||||
Distributions | (172,023 | ) | (210,412 | ) | ||||
Retained Earnings At End Of Year | $ | 381,076 | $ | 262,144 |
See accompanying independent auditor’s report and notes to financial statements
3
HUGHES CENTER FOR FUNCTIONAL MEDICINE PA
(an S Corporation)
STATEMENTS OF CASH FLOWS
Years Ended December 31, 2018 and 2017
2018 | 2017 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
Net Income | $ | 290,955 | $ | 257,258 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization expense | 72,688 | 53,764 | ||||||
Changes in operating assets and liabilities: | ||||||||
Inventory | 20,481 | (15,122 | ) | |||||
Other assets | (1,929 | ) | - | |||||
Accounts payable | (14,736 | ) | 3,256 | |||||
Accrued payroll liabilities | 3,439 | (250 | ) | |||||
NET CASH PROVIDED BY OPERATING ACTIVITIES | 370,898 | 298,906 | ||||||
CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
Equipment acquisitions | (14,357 | ) | (227,633 | ) | ||||
NET CASH USED IN INVESTING ACTIVITIES | (14,357 | ) | (227,633 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
Borrowing on line of credit | - | 224,000 | ||||||
Repayments on line of credit | (214,000 | ) | (60,332 | ) | ||||
Distributions to shareholder | (172,023 | ) | (210,412 | ) | ||||
NET CASH USED IN FINANCING ACTIVITIES | (386,023 | ) | (46,744 | ) | ||||
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS | (29,482 | ) | 24,529 | |||||
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR | 112,705 | 88,176 | ||||||
CASH AND CASH EQUIVALENTS AT END OF YEAR | $ | 83,223 | $ | 112,705 | ||||
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION | ||||||||
Cash paid during the year for: | ||||||||
Interest | $ | 9,278 | $ | 421 |
See accompanying independent auditor’s report and notes to financial statements
4
HUGHES CENTER FOR FUNCTIONAL MEDICINE PA
(an S Corporation)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2018 AND 2017
Note 1. DESCRIPTION OF COMPANY
The Company is a Functional Medical Practice and Professional Association organized under the laws of the State of Florida and is engaged in improving the health of its patients through individualized and integrative health care. Led by Pamela Hughes, DO, ABFM, ABAARM, the Company specializes in treating chronic diseases and helping patients to proactively maintain their long-term health. This is accomplished by exploring the root cause of their condition and partnering with them to shape a customized treatment path to achieve wellness and improved quality of life.
Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The Company prepares its financial statements on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America, except where otherwise noted.
Revenue Recognition
Revenues are recognized when earned and expenditures are recognized when incurred. Amounts billed to patients are collected when services are rendered. The Company does not carry accounts receivable and does not accept insurance.
Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company presents its statement of cash flows using the indirect method. For purposes of the statement of cash flows, cash includes cash in checking, merchant and savings accounts.
Inventory
Inventory consisting of supplements, is stated at the lower of cost or net realizable value. Cost is determined by the first-in, first-out method. Outdated inventory is directly charged to cost of goods sold.
Furniture and Equipment
Equipment is stated at cost. Depreciation is computed primarily using the straight-line method over the estimated useful lives of the assets, which range from 5 to 7 years. Expenditures for repairs and maintenance are charged to expense as incurred. For assets sold or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts, and any related gain or loss is reflected in income for the period.
Impairment of Long-Lived Assets
The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Recoverability of these assets is determined by comparing the forecasted undiscounted net cash flows of the operation to which the assets relate to the carrying amount. If the operation is determined to be unable to recover the carrying amount of its assets, then assets are written down first, followed by other long-lived assets of the operation to fair value. Fair value is determined based on discounted cash
5
HUGHES CENTER FOR FUNCTIONAL MEDICINE PA
(an S Corporation)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2018 AND 2017
Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
flows or appraised values, depending on the nature of the assets. As of December 31, 2018 and 2017, there were no impairment losses recognized for long lived assets.
Advertising and Promotion
The Company expenses all advertising costs as they are incurred. Total advertising expenses were $87,207 and $53,905 for the years ended December 31, 2018 and 2017, respectively.
Shipping Costs
The Company records shipping costs billed to its patients in revenue. Shipping costs recorded in revenue for the years ended December 31, 2018 and 2017 totaled $9,476 and $8,979, respectively.
Income Taxes
Federal income taxes have not been provided because the Company has elected, by consent of its stockholder, to be treated as an S Corporation for federal income tax purposes as provided in Section 1362(a) of the Internal Revenue Code.
The Company’s income or loss and credits are passed through to the stockholder and combined with other personal income and deductions to determine taxable income on the individual tax returns.
In accordance with generally accepted accounting principles, the Company accounts for uncertainty in income taxes by recognizing tax positions in the financial statements when it is more-likely-than-not the position will be sustained upon examination by the tax authorities.
As of December 31, 2018 and 2017, the Company had no uncertain tax positions that qualify for either recognition or disclosure in the financial statements. The Company recognizes interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses. During the years ended December 31, 2018 and 2017, no interest or penalties were incurred.
Note 3. INVENTORIES
Inventories consist of supplements private labeled under Dr. Hughes brand. The carrying value of Inventory stock at December 31, 2018 and 2017 was $83,371 and $103,852, respectively.
Note 4. FURNITURE AND EQUIPMENT
December 31, 2018 | December 31, 2017 | |||||||
Assets: | ||||||||
Computer equipment & software | $ | 49,809 | $ | 39,582 | ||||
Medical equipment | 305,174 | 301,044 | ||||||
Office furniture & equipment | 58,688 | 58,688 | ||||||
413,671 | 399,314 | |||||||
Accumulated Depreciation: | ||||||||
Computer equipment & software | 30,069 | 21,770 | ||||||
Medical equipment | 87,720 | �� | 35,816 | |||||
Office furniture & equipment | 31,440 | 23,056 | ||||||
149,229 | 80,642 | |||||||
Furniture & Equipment Net | $ | 264,442 | $ | 318,672 |
6
HUGHES CENTER FOR FUNCTIONAL MEDICINE PA
(an S Corporation)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2018 AND 2017
Note 5. LINE OF CREDIT
The Company has a line of credit agreement with a bank of $325,000. Borrowings against the line at December 31, 2018 and 2017 were $-0- and $214,000, respectively. The line of credit bears interest of 5.75%. The line is reviewed annually and is due on demand. Under terms of the line of credit, the Company is required to maintain its operating accounts at the issuing bank. Interest expense for the twelve months ended December 31, 2018 and 2017 was $9,278 and $421, respectively.
Note 6. COMMITMENTS AND CONTINGENCIES
The Company leases its office space. The lease was executed on February 23, 2015 for the three-year period commencing March 1, 2015 and terminating February 28, 2018. The Company executed an extension agreement on March 1, 2018 for a period of one-year terminating on February 28, 2019. In addition to minimum monthly rent, the Company is also responsible for common area maintenance costs, which are estimated to be approximately $44,000 and $36,000 annually for the years ended December 31, 2018 and 2017, respectively. Pursuant to the original lease agreement, the Company made a security deposit with the landlord in the amount of $5,194.
U.S. GAAP requires that rent expense be recognized evenly on a straight-line basis over the lease term. The Company recognizes actual amounts paid as an expense in the year payment is made. The overall effect of this departure is immaterial to the Company’s financial statements for the years ending December 31, 2018 and 2017, respectively. Total rent expense for the years ending December 31, 2018 and 2017 was $106,202 and $98,682, respectively.
Future minimum rent payments under the terms of the lease extension agreement are:
Year Ended December 31, | Amount | |||
2019 | $ | 11,014 |
Note 7. CONCENTRATION OF CREDIT RISK
Cash Balances
The Company maintains cash balances in one checking account and one money market account at a single financial institution. These accounts are insured by the Federal Deposit Insurance Corporation (FDIC) up to a combined total of $250,000; at times, the cash in this institution may exceed FDIC insured limits. The Company has not experienced any loss in such accounts. The Company believes it is not exposed to any significant credit risk on these cash balances.
Purchases and Accounts Payable
For the years ending December 31, 2018 and 2017, one vendor individually provided supplement inventory in excess of 10% of the Company’s total purchases. Purchases from this vendor amounted to $301,094 and $311,812 for 2018 and 2017, respectively. The Company had no accounts payable to this vendor at December 31, 2018 and 2017 and the supplies are readily available from other vendors.
Note 8. SUBSEQUENT EVENTS:
The Company has evaluated subsequent events through April 5, 2019, which is the date the financial statements were available to be issued.
On April 5, 2019, the Company entered in to a three-year agreement on its building lease. Minimum monthly lease payments under the new agreement are as follows:
Year ending December 31, 2019 | $ | 47,335 | ||
Year ending December 31, 2120 | 68,237 | |||
Year ending December 31, 2021 | 70,283 | |||
Year ending December 31, 2022 | 20,675 |
On January 15, 2019, the Company entered into a definitive agreement to be acquired by HealthLynked Corp. (OTCQB:HLYK)(“HealthLynked”) for $750,000 in cash, $750,000 in shares of HealthLynked common stock and $500,000 in a three-year performance-based payout.
7