Independent Financial Statements & Report
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CURE INTERNATIONAL, INC. FINANCIAL STATEMENTS AND REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS JUNE 30, 2016 CURE INTERNATIONAL, INC. TABLE OF CONTENTS Page REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS 1-2 FINANCIAL STATEMENTS Statements of Financial Position, June 30, 2016 and 2015 3 Statement of Activities and Changes in Net Assets, Year ended June 30, 2016 with Summarized Information for 2015 4 Statement of Functional Expenses, Year ended June 30, 2016 with Summarized Information for 2015 5 Statements of Cash Flows, Years ended June 30, 2016 and 2015 6 Notes to Financial Statements 7 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS The Board of Directors Cure International, Inc. New Cumberland, Pennsylvania We have audited the accompanying financial statements of Cure International Inc. (“CURE”) which comprise the statement of financial position as of June 30, 2016, and the statements of activities and changes in net assets, functional expenses 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 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 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 financial statements are free of 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 CURE as of June 30, 2016, the changes in its net assets and its cash flows for the year then ended, in accordance with accounting principles generally accepted in the United States of America. 1 The Board of Directors Cure International, Inc. New Cumberland, Pennsylvania Report on Summarized Comparative Information We have previously audited CURE’s 2015 financial statements, and our report dated November 19, 2015, expressed an unmodified audit opinion on those audited financial statements. In our opinion, the summarized comparative information presented herein as of and for the year ended June 30, 2015 is consistent, in all material respects, with the audited financial statements from which it has been derived. Philadelphia, Pennsylvania December 5, 2016 2 CURE INTERNATIONAL, INC. STATEMENT OF FINANCIAL POSITION June 30, 2016 And 2015 2016 2015 ASSETS CURRENT ASSETS Cash and cash equivalents $ 9,597,613 $ 11,439,516 Restricted cash – fixed deposit 1,045,899 1,035,296 Investments 161,405 251,586 Contributions receivable 2,611,500 4,481,758 Patient and other receivables, net 8,866,089 6,396,564 Accounts receivable – U.S. Government - 180,695 Prepaid expenses and other assets 1,696,122 1,227,116 Advances to supplier - 469,470 Total current assets 23,978,628 25,482,001 Inventory of donated and purchased medical equipment and supplies 5,497,023 5,712,462 Buildings and equipment, net 104,629,814 111,464,864 Contributions receivable - 293,532 Total non-current assets 104,629,814 111,758,396 Total assets $ 134,105,465 $ 142,952,859 LIABILITIES AND NET ASSETS CURRENT LIABILITIES Current portion of notes payable $ 3,878,527 $ 715,268 Accounts payable and accrued expenses 10,340,594 9,513,152 Deferred Income 297,201 264,014 Total current liabilities 14,516,322 10,492,434 Notes payable 5,017,020 2,940,376 Severance payable 2,408,425 2,631,973 Deferred Income 6,761,281 6,329,514 Total non-current liabilities 14,186,726 11,901,863 Total liabilities 28,703,048 22,394,297 NET ASSETS Unrestricted Operations 95,860,019 107,669,988 Donated medical equipment and supplies 5,497,023 5,712,462 Total unrestricted 101,357,042 113,382,450 Temporarily restricted 4,045,375 7,176,112 Total net assets 105,402,417 120,558,562 Total liabilities and net assets $ 134,105,465 $ 142,952,859 See notes to financial statements. 3 CURE INTERNATIONAL, INC. STATEMENT OF ACTIVITIES AND CHANGES IN NET ASSETS Year Ended June 30, 2016 With Summarized Information For 2015 Temporarily 2016 2015 Unrestricted Restricted Totals Totals SUPPORT AND REVENUE Contributions $ 9,104,626 $ 12,862,690 $ 21,967,316 $ 22,212,912 Contributions – In-Kind 1,664,549 - 1,664,549 612,104 Contributions – donated use of facilities and land 1,217,610 - 1,217,610 643,291 Government grants 260,653 - 260,653 424,822 Interest and dividends 6,563 - 6,563 30,620 Realized and unrealized losses on investments 60,759 - 60,759 (1,989) Patient revenue and other income 34,007,801 - 34,007,801 34,710,096 Total 46,322,561 12,862,690 59,185,251 58,631,856 Net assets released from restrictions 15,993,427 (15,993,427) - - Total support and revenue 62,315,988 (3,130,737) 59,185,251 58,631,856 EXPENSES Program Services 67,949,645 - 67,949,645 53,049,394 Supporting Services Administration 838,660 - 838,660 719,625 Fund-raising 4,019,056 - 4,019,056 3,898,346 Total supporting services 4,857,716 - 4,857,716 4,617,971 Total expenses 72,807,361 - 72,807,361 57,667,365 Excess (deficit) of support and revenue over expenses (10,491,373) (3,130,737) (13,622,110) 964,491 OTHER CHANGES Reduction of value of inventory due to obsolescence (515,777) - (515,777) (114,735) Reduction in value of donated equipment - - - (1,299,044) Unrealized loss on foreign exchange rates (1,018,258) - (1,018,258) (1,998,019) (1,534,035) - (1,534,035) (3,411,798) CHANGE IN NET ASSETS (Note 9) (12,025,408) (3,130,737) (15,156,145) (2,447,307) NET ASSETS Beginning of year 113,382,450 7,176,112 120,558,562 123,005,869 End of year $ 101,357,042 $ 4,045,375 $ 105,402,417 $ 120,558,562 See notes to financial statements. 4 CURE INTERNATIONAL, INC. STATEMENT OF FUNCTIONAL EXPENSES Year Ended June 30, 2016 With Summarized Information For 2015 Program Fund- 2016 2015 Services Administration Raising Totals Totals Salaries and benefits $ 32,466,454 $ 258,063 $ 2,043,732 $ 34,768,249 $ 30,907,772 Hospital operating costs and other grant support 20,678,563 - - 20,678,563 20,223,833 Office rent and other expenses 49,674 135,002 - 184,676 132,145 Office supplies and equipment 56,919 52,301 28,968 138,188 104,371 Printing, postage and video production 41,479 15,554 358,882 415,915 823,757 Professional fees 196,741 141,393 490,413 828,547 793,395 Telephone expense 26,666 29,819 16,645 73,130 70,066 Travel , meetings and seminars 943,159 155,287 988,214 2,086,660 2,040,172 Bank fees - 42,935 63,755 106,690 91,909 Depreciation expense 13,448,782 3,400 20,088 13,472,270 2,450,907 Miscellaneous 41,208 4,906 8,359 54,473 29,038 Total expenses $ 67,949,645 $ 838,660 $ 4,019,056 $ 72,807,361 $ 57,667,365 See notes to financial statements. 5 CURE INTERNATIONAL, INC. STATEMENT OF CASH FLOWS Years Ended June 30, 2016 And 2015 2016 2015 CASH FLOWS FROM OPERATING ACTIVITIES Change in net assets $ (15,156,145) $ (2,447,307) Adjustments to reconcile change in net assets to net cash provided by operating activities Depreciation and amortization 13,472,270 2,450,907 Gift-in-kind (1,664,549) (612,104) Unrealized loss on foreign exchange rates 1,018,258 1,998,019 Reduction in value of donated equipment - 1,299,044 Realized and unrealized (gains) losses on investments (60,759) 1,989 Increase in allowance for doubtful accounts 381,671 157,042 Reduction of value of inventory due to obsolescence 515,777 114,735 (Increase) decrease in assets Prepaid and other assets (469,006) (43,339) Advances to supplier 469,470 3,626,284 Patient and other receivables (2,851,196) (1,511,215) Contributions receivable 2,163,790 1,257,328 Inventory of donated medical equipment and supplies 1,152,298 36,120 Accounts receivable – U.S. Government 180,695 (169,828) Increase (decrease) in liabilities Deferred income 464,954 6,593,528 Severance liability (223,548) (476,483) Accounts payable and accrued expenses 827,442 2,783,475 Net cash provided by operating activities 221,422 15,058,195 CASH FLOWS FROM INVESTING ACTIVITIES Purchase of investments (2,054) (6,723) Proceeds from sale of investments 152,994 - Purchase of buildings and equipment (7,443,565) (7,519,506) Net cash used in investing activities (7,292,625) (7,526,229) CASH FLOWS FROM FINANCING ACTIVITIES Change in restricted cash – fixed deposit (10,603) (6,951) Net (payments) proceeds on lines of credit - (1,246,865) Proceeds from debt issuance 6,037,988 - Payments made on debt (798,085) (699,076) Net cash provided by (used in) financing activities 5,229,300 (1,952,892) Net (decrease) increase in cash and cash equivalents (1,841,903) 5,579,074 CASH AND CASH EQUIVALENTS Beginning of year 11,439,516 5,860,442 End of year $ 9,597,613 $ 11,439,516 SUPPLEMENTAL DISCLOSURE Total interest paid for the years ended June 30, 2016 and 2015 was $374,655 and $426,220, respectively.