Report of Independent Auditors

To the Board of Directors

Pulmonary Hypertension Association, Inc.

We have audited the accompanying statement of financial position of the Pulmonary Hypertension Association, Inc. (the Association) as of December 31, 2002 and the related statements of activities, functional expenses and of cash flows for the year then ended. These financial statements are the responsibility of the Association's management. Our responsibility is to express an opinion on these financial statements based on our audit. The financial statements of the Association as of December 31, 2001 were audited by other auditors, whose report thereon dated March 28, 2002 expressed an unqualified opinion on those statements.

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 an audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the Association’s management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the 2002 financial statements referred to above present fairly, in all material respects, the financial position of the Pulmonary Hypertension Association, Inc. as of December 31, 2002 and the changes in their net assets and their cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.

CALIBRE CPA GROUP, PLLC

April 18, 2003

Statements of Financial Position

Statements of Activities

Statements of Functional Expenses

Statements of Cash Flows

Pulmonary Hypertension

Association, Inc.

Notes to Financial Statements

December 31, 2002

Note 1. Organization and Nature of Operations

Pulmonary Hypertension Association, Inc. (the Association), a Florida nonprofit organization, provides fellowship and educational support to pulmonary hypertension patients, their families, physicians, researchers and the public at large.

Note 2. Summary of Significant Accounting Policies

Financial Statement Presentation - The Association is required under generally accepted accounting principles to report information regarding its financial position and activities according to three classes of net assets: unrestricted net assets, temporarily restricted net assets and permanently restricted net assets.

Basis of Accounting - The financial statements of the Association have been prepared on the accrual basis of accounting and accordingly reflect all receivables, payables, and other liabilities.

Estimates - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and 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.

Recognition of Donor Restrictions - Contributions received are recorded as unrestricted, temporarily restricted or permanently restricted support depending on the existence or nature of any donor restrictions. All donor-restricted support is reported as an increase in temporarily or permanently restricted net assets, depending on the nature of the restriction. When a restriction expires, temporarily restricted net assets are reclassified to unrestricted net assets and reported in the statements of activities as net assets released from restrictions.

Cash and Cash Equivalents - The Association considers all cash balances and highly liquid investments with an original maturity of three months or less to be cash equivalents.

Contributions Receivable - All promises receivable are due within one year, and all amounts are considered fully collectible. Consequently, no provision for uncollectible promises has been made.

Membership Income - Membership income is recognized as income in the period received.

Note 2. Summary of Significant Accounting Policies (continued)

Investments - Investments in certificates of deposit and governmental bonds with readily determinable fair values are stated at their fair values in the statements of financial position. Unrealized gains and losses are included in the change in net assets in the accompanying statements of activities. Investment income earned on temporarily restricted contributions is restricted for the same purpose as the contribution on which it was earned.

Equipment and Leasehold Improvements - Equipment and leasehold improvements are stated at cost except for donated equipment which is recorded at fair market value at the date of gift. Depreciation is provided over the estimated useful lives of the assets on a straight line basis.

Donated Goods, Services and Facilities - Donated goods and space are valued at their fair market value. Donated services are recognized in the financial statements at their fair market value if the following criteria are met:

• The services require specialized skills and the services are provided by individuals possessing those skills.

• The services would typically need to be purchased if not donated.

Reclassifications - Certain accounts in the prior-year financial statements have been reclassified for comparative purposes to conform with the presentation in the current-year financial statements.

Note 3. Income Tax Status

The Organization is exempt from Federal income tax under Section 501(c)(3) of the Internal Revenue Code. However, income from certain activities not directly related to the Organization’s tax-exempt purpose is subject to taxation as unrelated business income. In addition, the Organization qualifies for the charitable contribution deduction under Section 170(b)(1)(A) and has been classified as an organization other than a private foundation under Section 509(a)(1).

Note 4. Investments

Investments at December 31, are summarized as follows:

2002 2001

Certificates of deposit $ 199,474 $ 200,738

Government bonds 1,001,715 683,620

$1,201,189 $ 884,358

Note 4. Investments (continued)

Investment income is reported in the statement of activities as follows:

2002 2001

Realized (loss) on investments $ (2,686) $ (10,380)

Interest and dividend income 47,187 33,952

Unrealized gain (loss) 2,493 (3,587)

$ 46,994 $ 19,985

Note 5. Equipment and Leasehold Improvements

2002 2001

Equipment $ 134,187 $ 91,403

Leasehold improvements 15,672 15,672

149,859 107,075

Less accumulated depreciation (54,088) (25,756)

$ 95,771 $ 81,319

Note 6. Temporarily Restricted Net Assets

Temporarily restricted net assets at December 31, 2002 and 2001 are restricted for the following:

2002 2001

Research fund $727,055 $ 645,585

Scholarship fund - 18,912

Pulmonary Hypertension - RN group - 12,694

Salaries - 150,000

Patient advocacy - 119,132

Dukart fund 24,898 19,999

Patient support services 50,000 -

$ 801,953 $ 966,322

Note 7. Operating Lease

The Association leases office space under a three-year non-cancelable lease, with an option to renew for five years. Future minimum payments under the operating lease are $11,431 for the year ending December 31, 2003.

Rent expense for the years ended December 31, 2002 and 2001 was $22,325 and $18,025, respectively.

Note 8. Grants Payable

The Association has made the following unconditional promises to give for research grants as of December 31, 2002 and 2001:

2002 2001

Payable in less than one year $ 206,551 $ 52,500

1 - 5 years 35,000 -

$ 241,551 $ 52,500