EXHIBIT 99.2
PHPrecisionMed,
Inc.
(Formerly PHPrecisionMed, LLC)
Financial Statements
As of and for the year ended December 31, 2019
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PAGE
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Independent Auditors’ Report
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3
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Financial Statements
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Balance Sheet as of December 31, 2019
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4
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Statement of Operations for the Year Ended December 31,
2019
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5
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Statement of Changes in Members’ Equity for the Year Ended
December 31, 2019
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6
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Statement of Cash Flows for the Year Ended December 31,
2019
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7
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Notes to Financial Statements
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8
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Report of Independent Auditor
To the
Members
PHPrecisionMed,
Inc.
We have
audited the accompanying financial statements of PHPrecisionMed,
Inc. (formerly known as PHPrecisionMed, LLC) (the
“Company”), which comprise the balance sheet as of
December 31, 2019, and the related statements of operations,
members’ equity, and cash flows for the year then ended, and
the related notes to the financial statements.
Management’s Responsibility for the Financial
Statements
Management
is responsible for the preparation and fair presentation of these
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 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 the Company as
of December 31, 2019, 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.
Going Concern Uncertainty
The
accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Note
2 to the financial statements, the Company’s significant
operating loss and limited capital raise substantial doubt about
its ability to continue as a going concern. Management’s
plans concerning these matters are also described in Note 2. The
financial statements do not include any adjustments that might
result from the outcome of this uncertainty. Our opinion is not
modified with respect to that matter.
/s/ Cherry
Bekaert
Raleigh,
North Carolina
March
30,
2021
PHPrecisionMed, Inc.
(Formerly PHPrecisionMed, LLC)
BALANCE SHEET
PHPrecisionMed, Inc.
(Formerly PHPrecisionMed, LLC)
STATEMENT OF OPERATIONS
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For the year ended December 31,
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2019
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Operating
expenses
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Professional
fees
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$(30,484)
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Other
expenses
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(1,343)
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Total
operating expenses
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(31,827)
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Net
Loss
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$(31,827)
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PHPrecisionMed, Inc.
(Formerly PHPrecisionMed, LLC)
STATEMENT OF CHANGES IN MEMBERS’ EQUITY
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Members' Equity
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Balance
at December 31, 2018
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$-
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Capital
contributed
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35,000
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Net
loss
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(31,827)
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Balance
at December 31, 2019
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$3,173
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PHPrecisionMed, Inc.
(Formerly PHPrecisionMed, LLC)
STATEMENT OF CASH FLOWS
PHPrecisionMed, Inc.
(Formerly PHPrecisionMed, LLC)
NOTES TO FINANCIAL STATEMENTS
NOTE 1. NATURE OF OPERATIONS
PHPrecisionMed,
Inc. (the “Company”), was a limited liability company
organized October 29, 2018 under the laws of New Jersey. On
November 18, 2020, the Company filed a Certificate of Conversion
with the State of Delaware, electing to convert from a New Jersey
limited liability company to a Delaware corporation. The Company
has 5,000 common shares authorized with a $.001 par value. In
conjunction with the conversion, the Company changed its name to
PHPrecisionMed, Inc.
The
Company was organized to develop and commercialize pharmaceuticals
for the treatment of pulmonary arterial hypertension
(“PAH”) and other cardio-pulmonary diseases. The
Company’s activities since inception have consisted of
formation activities and preparations to raise capital. Once the
Company commences its planned principal operations, it will incur
significant additional expenses. The Company is dependent upon
additional capital resources for the commencement of its planned
principal operations and is subject to significant risks and
uncertainties; including failing to secure funding to
operationalize the Company’s planned operations or failing to
profitably operate the business.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Basis of Presentation
The
accounting and reporting policies of the Company conform to
accounting principles generally accepted in the United States of
America (GAAP). The Company’s year-end is the calendar
year.
Use of Estimates
The
preparation of the balance sheet in conformity with accounting
principles generally accepted in the United States
(“GAAP”) requires management to make estimates and
assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at
the date of the balance sheet and the reported amounts of revenues
and expenses during the reporting period. Actual results could
differ from those estimates.
Going Concern
The
accompanying financial statements have been prepared assuming the
Company will continue as a going concern, which contemplates the
recoverability of assets and the satisfaction of liabilities in the
normal course of business. The Company has incurred losses from
inception of $31,827 which, among other factors, raises substantial
doubt about the Company's ability to continue as a going
concern.
The
ability of the Company to continue as a going concern is dependent
upon management's plans to raise additional capital from the
issuance of debt or the sale of member interests, and its ability
to generate positive operational cash flow. The accompanying
financial statements do not include any adjustments that might be
required should the Company be unable to continue as a going
concern.
Cash Equivalents and Concentration of Cash Balance
The
Company considers all highly liquid securities with an original
maturity of less than three months to be cash equivalents. The
Company’s cash and cash equivalents in bank deposit accounts,
at times, may exceed federally insured limits.
Prepaid Expenses
Prepaid expenses are comprised of vendor deposits of
$5,000.
Accounts Payable
Accounts
payable consists of trade accounts payable for costs incurred in
the normal course of business that have not been remitted to
vendors.
Fair Value of Financial Instruments
Financial
Accounting Standards Board (“FASB”) guidance specifies
a hierarchy of valuation techniques based on whether the inputs to
those valuation techniques are observable or unobservable.
Observable inputs reflect market data obtained from independent
sources, while unobservable inputs reflect market assumptions. The
hierarchy gives the highest priority to unadjusted quoted prices in
active markets for identical assets or liabilities (Level 1
measurement) and the lowest priority to unobservable inputs (Level
3 measurement). The three levels of the fair value hierarchy are as
follows:
Level 1
- Unadjusted quoted prices in active markets for identical assets
or liabilities that the reporting entity has the ability to access
at the measurement date. Level 1 primarily consists of financial
instruments whose value is based on quoted market prices such as
exchange-traded instruments and listed equities.
Level 2
- Inputs other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly or
indirectly (e.g., quoted prices of similar assets or liabilities in
active markets, or quoted prices for identical or similar assets or
liabilities in markets that are not active).
Level
3 - Unobservable inputs for the asset or liability. Financial
instruments are considered Level 3 when their fair values are
determined using pricing models, discounted cash flows or similar
techniques and at least one significant model assumption or input
is unobservable.
The
carrying amounts reported in the balance sheet approximate their
fair value.
Organizational Costs
In
accordance with FASB Accounting Standards Codification (ASC) 720,
organizational costs, including accounting fees, legal fees, and
costs of incorporation, are expensed as incurred.
Income Taxes
The
Company is a limited liability company. Accordingly, under the
Internal Revenue Code, all taxable income or loss flows through to
its members. Therefore, no provision for income tax has been
recorded in the statements. Income from the Company is reported and
taxed to the members on their individual tax returns.
The
Company complies with FASB ASC 740 for accounting for uncertainty
in income taxes recognized in a company’s financial
statements, which prescribes a recognition threshold and
measurement process for financial statement recognition and
measurement of a tax position taken or expected to be taken in a
tax return. For those benefits to be recognized, a tax position
must be more likely-than-not to be sustained upon examination by
taxing authorities. FASB ASC 740 also provides guidance on
derecognition, classification, interest and penalties, accounting
in interim periods, disclosure and transition.
Based
on the Company’s evaluation, it has been concluded that there
are no significant uncertain tax positions requiring recognition in
the Company’s financial statements. The Company believes that
its income tax positions would be sustained on audit and does not
anticipate any adjustments that would result in a material change
to its financial position. The Company may in the future become
subject to federal, state and local income taxation though it has
not been since its inception. The Company is not presently subject
to any income tax audit in any taxing jurisdictions.
Recent Accounting Pronouncements
No
recently issued accounting pronouncements are expected to have a
significant impact on the Company's financial
statements
NOTE 3. CONTINGENCIES
The
Company may be subject to pending legal proceedings and regulatory
actions in the ordinary course of business. The results of such
proceedings cannot be predicted with certainty, but the Company
does not anticipate that the final outcome, if any, arising out of
any such matter will have a material adverse effect on its
business, financial condition or results of
operations.
NOTE 4. MEMBERS’ EQUITY
Pursuant
to the operating agreement, each members’ initial
contribution has been credited to their respective capital account
and their initial percentage interests were allocated 35% to the
managing member and 65% to the other members. No member has any
obligation to make additional capital contributions and additional
capital contributions may only be made with the prior written
approval of the managing member. The managing member shall update
the members interest percentages upon the issuance or transfer of
an interests to any new or existing member in accordance with the
operating agreement.
Voting Rights – Each member is entitled to vote in an
amount equal their percentage interest.
Profits and Losses – All items of income, profits,
losses, credits and deductions of the Company are allocated among
the members in proportion to their percentage
interest.
Distributions – Distributions of available cash of the
Company may be made as determined by the managing member. Any
distributions will be made in the following order: (1) In the same
proportion as each member’s capital accounts, and (2) to each
member pro rata in proportion to their percentage
interest.
Liquidation –
Upon any liquidation, dissolution, or
winding up of the Company, members are entitled to be paid in
accordance with distributions of available cash described in
Distributions
above.
The
debts, obligations, and liabilities of the Company, whether arising
in contract, tort, or otherwise, are solely the debts, obligations,
and liabilities of the Company, and no member of the Company is
obligated personally for any such debt, obligation, or
liability.
During
the year ended December 31, 2019, the members of the Company
contributed $35,000 in initial capital contributions.
NOTE 5. SUBSEQUENT EVENTS
COVID-19 Impact and Related Risks -
The continued spread of COVID-19
globally could adversely affect the Company’s ability to
retain principal investigators and site staff who, as healthcare
providers, may have heightened exposure to COVID-19 if an outbreak
occurs in their geography. Further, some of these investigators and
site staff may be unable to comply with clinical trial protocols if
quarantines or travel restrictions impede movement or interrupt
healthcare services, or if they become infected with COVID-19
themselves, which would delay the Company’s ability to
initiate and/or complete planned clinical and preclinical studies
in the future.
The full extent to which the COVID-19 pandemic and the various
responses to it might impact the Company’s business,
operations and financial results will depend on numerous evolving
factors that are not subject to accurate prediction and that are
beyond the Company’s control.
Certificate of Conversion - On November 18, 2020, the
Company filed a Certificate of Conversion with the State of
Delaware, electing to convert from a New Jersey limited liability
company to a Delaware corporation. The Company has 5,000 common
shares authorized with a $.001 par value. In conjunction with the
conversion, the Company changed its name to PHPrecisionMed, Inc.
The Company's founding members became the sole shareholders and
purchased an aggregate of 3,000 shares of company stock at par,
acquiring the same ratable ownership percentages as the previous
member interests.
Merger Agreement - On January 15, 2021, the Company entered
into an Agreement and Plan of Merger (the “Merger
Agreement”), pursuant to which the Company would sell 100% of
its equity to Tenax Therapeutics, Inc., a Delaware corporation
(“Tenax”). Under the terms of the Merger Agreement, the
Company would merge with and into Life Newco II, Inc., a Delaware
corporation and a wholly-owned, direct subsidiary of Tenax with the
Company surviving as a wholly-owned subsidiary of Tenax (the
“Merger”). On January 15, 2021, the Company completed
the acquisition contemplated by the Merger Agreement (the
“Acquisition”).
As
consideration for the Merger, the stockholders of the Company
received (i) 1,892,905 shares of Tenax’s common stock
(“Common Stock”), and (ii) 10,232 shares of
Tenax’s Series B convertible preferred stock, which are
convertible into up to an aggregate of 10,232,000 shares of Common
Stock (“Preferred Stock”) (collectively, the
“Merger Consideration”). The issuance of 1,212,492
shares of Common Stock issuable upon conversion of the Preferred
Stock, representing approximately 10% of the Merger Consideration,
will be delayed as security for closing adjustments and
post-closing indemnification obligations of the Company and its
stockholders. Each share of Preferred Stock will automatically
convert into (i) 881.5 shares of Common Stock following receipt of
the approval of the stockholders of Tenax for the Conversion (as
defined herein), and (ii) 118.5 shares of Common Stock 24 months
after the date of issuance of the Preferred Stock, subject to
reduction for indemnification claims. The number of shares of
Common Stock into which the Preferred Stock converts is subject to
adjustment in the case of stock splits, stock dividends,
combinations of shares and similar recapitalization transactions.
The Preferred Stock does not carry dividends or a liquidation
preference. The Preferred Stock carries voting rights aggregating
4.99% of Tenax’s Common Stock voting power immediately prior
to the closing of the Merger. The rights, preferences and
privileges of the Preferred Stock are set forth in the Certificate
of Designation of Series B Convertible Preferred Stock that Tenax
filed with the Secretary of State of the State of Delaware on
January 15, 2021 (the “Certificate of
Designation”).
Pursuant
to the Merger Agreement, Tenax must, no later than July 31, 2021,
take all action necessary to call, convene and hold a meeting of
the Tenax’s stockholders to vote upon the conversion of the
Preferred Stock pursuant to the Certificate of Designation (the
“Conversion”). If stockholder approval is not obtained
at such meeting, Tenax must call a meeting every 90 days thereafter
to seek stockholder approval for the Conversion until the earlier
of the date stockholder approval for the Conversion is obtained or
the Preferred Stock is no longer outstanding.
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