ECGI ECGI Holdings Inc (PK)

Notes to Financial Statements

Years Ended December 31, 2015 and 2014

Note A – Basis of Presentation and Organization

Ambumed, Inc. (‘the Company) was formed in 1986 in Maryland. The Company is doing business under the trade name of National Cardiac Monitoring Center. The Company was formed for the purpose of providing a range of cardiac monitoring services and support for physicians, hospitals, scanning services and home health care agencies and patients. The Company sells cardiac monitoring equipment and provides 24 hour monitoring services to customers, principally in the Mid-Atlantic region. Consequently, the Company’s ability to generate future revenues and collect the amounts due from customers is affected by economic fluctuations in the Mid-Atlantic region

On June 30, 2016 the stockholders sold 100% of the Company’s stock to Event Cardio Group, Inc., a publicly traded company.

The accompanying financial statements are prepared in accordance with the accounting principles generally accepted in the United States of America (“US GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”).

Note B – Summary of Significant Accounting Policies

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 the amounts reported in the financial statements and footnotes thereto. Actual results may differ significantly from those estimates. The estimates underlying the Company’s financial statements relate to, among other things, the accrual for vacation, the allowance for doubtful accounts and the valuation of long-lived assets.

Cash and Cash Equivalents

For purposes of the statements of cash flows, the Company considers all short-term debt securities purchased with a maturity of three months or less to be cash equivalents. They are carried at cost, plus accrued interest, which approximates fair value due to the short-term nature of those instruments.

Accounts Receivable

Accounts receivable from sales of cardiac monitoring equipment and related monitoring services are based upon contracted prices and are carried at original invoice amount less an allowance for doubtful accounts. Accounts receivable potentially subject the company to concentrations of credit risk. Credit is extended based upon management’s evaluation of the customer’s financial condition. Accounts receivable have been reviewed by management and are recorded at the amounts the Company expects to collect on balances outstanding at the time of management’s evaluation.

Allowance for Doubtful Accounts

The Company maintains reserves for potential credit losses on accounts receivable. Management reviews the composition of accounts receivable and analyzes historical bad debts, customer concentrations, customer credit worthiness, current economic trends and changes in customer payment patterns to evaluate the adequacy of these reserves. F- 6

Fixed Assets

Fixed assets are carried at cost. Depreciation on fixed assets is provided principally on the straight line method. Estimated useful lives range from 3 to 5 years. Expenditures for major renewals and betterments which extend the useful lives of property and equipment are capitalized. Expenditures for maintenance and repairs are charged to expense as incurred.

Leased equipment meeting certain capital lease criteria is capitalized and the present value of the related lease payments is recorded as a liability. Amortization of capitalized lease assets is computed on the straight-line method over the shorter of its useful life or the initial lease term.

The components of fixed assets consist of the following as of December 31:

Depreciation and amortization expenses for the years ended December 31, 2015 and 2014 were $4,000 and $1,223, respectively

Income Taxes

Ambumed, Inc. elected to be taxed under the provisions of Subchapter S since its inception. Accordingly, Ambumed, Inc. will not pay corporate income taxes on its taxable income. Instead, the stockholders are liable for individual income taxes on their proportionate share of the Company’s income. Accordingly, no provision or liability for income taxes has been included in these financial statements.

Pursuant to ASC 740, “ Accounting for Uncertainty in Income Taxes ” the accounting for uncertainties in income taxes recognized in an enterprise’s financial statements and prescribes a threshold of more-likely-than-not for recognition and de-recognition of tax positions taken or expected to be taken in a tax return. ASC 740 also provides related guidance on measurement, classification, interest and penalties, and disclosure. The Company is not aware of any uncertain tax positions taken in its US federal, or State tax returns. If the Company incurs any penalties or interest related to its income tax filings, it will elect to include them as a component of operating expenses.

Advertising Costs

The Company uses only non-direct response advertising. All advertising costs are charged to expense as incurred.

Revenue Recognition

Revenue is recognized when persuasive evidence of an arrangement exist, delivery has occurred, the fee is fixed or determinable and collectability is probable. Revenue is generally recognized net of allowances for returns and any taxes collected from customers and subsequently remitted to governmental authorities.

Costs of Revenue

Costs of revenue include payroll and payroll taxes, commissions, supplies and costs of monitors sold during the period.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk are cash, accounts receivable and other receivables arising from its normal business activities. The Company places its cash in what it believes to be credit-worthy financial institutions. The Company has a diversified customer base, most of which are in Mid-Atlantic region. The Company controls credit risk related to accounts receivable through credit approvals, credit limits and monitoring procedures. The Company routinely assesses the financial strength of its customers and, based upon factors surrounding the credit risk, establishes an allowance, if required, for uncollectible accounts and, as a consequence, believes that its accounts receivable credit risk exposure beyond such allowance is limited.

Risks and Uncertainties

The Company is subject to risks from, among other things, competition associated with the industry in general, other risks associated with financing, liquidity requirements and rapidly changing customer requirements.

Contingencies

Loss contingencies, including litigation related contingencies, are included in the Statements of Operations when the Company concludes that a loss is both probable and reasonably estimable. Legal fees related to litigation related matters are expensed as incurred and included in the Statement of Operations under the General and administrative line item. No amount for loss was recorded for the year ended December 31, 2015 or 2014.

Earnings per Share

Basic earnings per share are calculated by dividing net income available to common shareholders by the weighted average number of common shares outstanding during the fiscal period. Diluted earnings per share are based on the weighted average number of common shares outstanding plus, where applicable, the additional common shares that would have been outstanding related to dilutive share-based awards using the treasury stock method. Dilutive potential common shares include outstanding stock options and unvested restricted stock awards. There were no such outstanding stock options or unvested restricted stock awards as of December 31, 2015 or 2014.

Impairment of Long-Lived Assets and Intangible Assets

The Company reviews long-lived assets and amortizable intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. The assessment of possible impairment is based upon the Company's ability to recover the carrying value of the assets from the estimated undiscounted future net cash flows, before interest and taxes, of the related operations. The amount of impairment loss, if any, is measured as the excess of the carrying value of the asset over the present value of estimated future cash flows, using a discount rate commensurate with the risks involved and based on assumptions representative of market participants. As of December 31, 2015 and 2014, there were no impairment losses of long-lived assets.

Fair Value of Financial Instruments

For certain of the Company’s financial instruments, including cash and equivalents, restricted cash, accounts receivable, accounts payable, accrued liabilities and short-term debt, the carrying amounts approximate their fair values due to their short maturities. ASC Topic 820, “Fair Value Measurements and Disclosures,” requires disclosure of the fair value of financial instruments held by the Company. ASC Topic 825, “Financial Instruments,” defines fair value, and establishes a three-level valuation hierarchy for disclosures of fair value measurement that enhances disclosure requirements for fair value measures. The carrying amounts reported in the consolidated balance sheets for receivables and current liabilities each qualify as financial instruments and are a reasonable estimate of their fair values because of the short period of time between the origination of such instruments and their expected realization and their current market rate of interest. The three levels of valuation hierarchy are defined as follows:

Level 1 inputs to the valuation methodology are quoted prices for identical assets or liabilities in active markets.

Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

Level 3 inputs to the valuation methodology are unobservable and significant to the fair value Measurement.

The Company analyzes all financial instruments with features of both liabilities and equity under ASC 480, “Distinguishing Liabilities from Equity,” and ASC 815.

As of December 31, 2015 and 2014, the Company did not identify any assets and liabilities that are required to be presented on the balance sheet at fair value.

Recently Issued Accounting Pronouncements

In November 2015, FASB issued ASU 2015-17,  Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes . This ASU requires the presentation of all deferred tax assets and liabilities as non-current in the consolidated balance sheet. The new guidance is effective for fiscal years and interim periods within those years beginning after December 15, 2016, with early adoption permitted. Management elected to early adopt this new guidance effective for the fourth quarter of fiscal year 2016 in order to simplify the global close processes. Management is currently evaluating this standard.

In February 2016, FASB issued ASU 2016-02,  Leases (Topic 842) . FASB issued ASU 2016-02 to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. Certain qualitative and quantitative disclosures are required, as well as a retrospective recognition and measurement of impacted leases. The new guidance is effective for fiscal years and interim periods within those years beginning after December 15, 2018, with early adoption permitted. Management is currently evaluating this standard.

In March 2016, FASB issued ASU 2016-08,  Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net) . The amendments are intended to improve the operability and understandability of the implementation guidance on principal versus agent considerations. The effective date for this ASU is the same as the effective date for ASU 2014-09. Management is currently evaluating this standard.

Other recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company's present or future financial statements. 

Note C – Accounts Receivable

The Company refers all accounts greater than 90 days past due to an outside medical collection agency. An allowance for doubtful accounts is established based upon historical collection rates from that outside agency. Accounts receivable and the allowance for doubtful accounts consist of the following as of December 31:

Note D – Due From Related Party

The Company has advanced funds to a limited liability company controlled by the owners of the Company. These funds were used to purchase cardiac monitoring equipment. The balance does not bear interest and has no set repayment terms.

The amounts outstanding are $15,000 and $0 at December 31, 2015 and 2014, respectively. This amount was repaid in June 2016.

Note E –Loan from Stockholder

Loan from stockholder consisted of multiple unsecured advances from the Company’s majority stockholder. The balance does not bear interest and has no set repayment terms. As part of the securities purchase agreement dated June 30, 2016, the $320,352 balance of this loan was agreed to be contributed to capital of the Company.

Note F –Major Customers

The majority of the Company’s revenues are processed through insurance companies. Revenues from insurance companies includes one customer that totaled approximately $397,000 and $195,000 which represent 33% and 27% of the Company’s revenue for the years ended December 31, 2015 and 2014, respectively.

Accordingly, if this customers discontinued purchasing services from the Company, the impact would have a material adverse effect on the Company’s liquidity, financial position and results of operation.

Note G – Related Party Transactions

The Company conducts its operations in facilities owned by the Company’s majority stockholder. There is no current lease. Rent paid to this majority stockholder was $28,000 and $20,200 for the years ended December 31, 2015 and 2014, respectively.

Note H – Subsequent Events

Management has evaluated events subsequent through November 18, 2016 for transactions and other events that may require adjustment of and/or disclosure in such financial statements.

After the close of business on June 30, 2016, all of the outstanding shares of the Company were acquired by Event Cardio Group, Inc., a publicly traded company. Accordingly, beginning July 1, 2016 the Company will operate as a wholly owned subsidiary of Event Cardio Group, Inc.

In connection with the purchase of all outstanding shares of the Company by Event Cardio Group, the former minority stockholder of the Company has entered into a four year employment agreement with the Company. The Agreement employs the former minority stockholder as the Chief Operating Officer (COO) and Executive of the Company. Among other things, the agreement sets the COO salary and bonus structure and provides for equity and related equity options in Event Cardio Group, Inc.

On July 14, 2016, Event Cardio Group entered into a lease for 6,000 square feet of office space located in Linthicum, Maryland. The lease is for a five year term, payable in monthly installments of $6,600, plus utilities, taxes and insurance. The Company has provided an unconditional guarantee to the landlord for the first 24 months should Event Cardio Group default under the terms of the lease. The guarantee is limited to $130,000.

AMBUMED, INC.

d/b/a NATIONAL CARDIAC MONITORING CENTER

CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

June 30, 2016

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