PEACEFUL VALLEY DONKEY RESCUE. FINANCIAL STATEMENTS and INDEPENDENT AUDITORS REPORT YEAR ENDED DECEMBER 31, 2012

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1 FINANCIAL STATEMENTS and INDEPENDENT AUDITORS REPORT YEAR ENDED DECEMBER 31, 2012

2 TABLE OF CONTENTS Page Independent Auditors Report Financial Statements Statement of Financial Position Statement of Activities Statement of Functional Expenses Statement of Cash Flows Notes to Financial Statements

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4 FINANCIAL STATEMENTS

5 STATEMENT OF FINANCIAL POSITION December 31, 2012 ASSETS Current assets: Cash $ 413,886 Inventory 3,546 Total current assets 417,432 Non-current assets: Property and equipment, net of accumulated depreciation 1,992,186 Total non-current assets 1,992,186 Total Assets $ 2,409,618 LIABILITIES AND NET ASSETS Current liabilities: Accounts payable $ 36,793 Other liabilities 3,044 Notes payable - current 215,320 Total current liabilities 255,157 Non-current liabilities: Notes payable - non-current 979, ,178 Total liabilities 1,234,335 Net assets: Unrestricted 1,175,283 Total net assets 1,175,283 Total Liabilities and Net Assets $ 2,409,618 See accompanying notes and independent review report -2-

6 STATEMENT OF ACTIVITIES For the Year Ended December 31, 2012 Support Contributions $ 369,874 Merchandise sales 6,147 Miscellaneous 544 Fund raising 2,233,753 Total support 2,610,318 Expenses Program Services 1,056,426 Supporting Services: Management and general 132,371 Fund-raising 1,130,069 Total Expenses 2,318,866 Net Income from Operations 291,452 Other Income (Expense) Interest expense (94,235) Interest income 3 Gain on sale of assets 47,019 Total other income (expense) (47,213) Change in Net Assets 244,239 Net Assets, Beginning of Year 931,044 Net Assets, End of Year $ 1,175,283 See accompanying notes and independent review report -3-

7 STATEMENT OF FUNCTIONAL EXPENSES Year Ended December 31, 2012 Supporting Services Management Total Program and Fund Supporting Combined Services General Raising Services Total Salaries and wages $ 129,850 $ 64,434 $ 10,500 $ 74,934 $ 204,784 Payroll taxes 9,934 4, ,731 15,665 Employee benefits 13,961 6,928 1,129 8,057 22,018 Total payroll expenses 153,745 76,291 12,431 88, ,467 Animal care 742, ,904 Bank fees 6,465 6,465 6,465 Depreciation 75,756 75,756 Fundraising 1,117,638 1,117,638 1,117,638 Gift shop 2,984 2,984 2,984 Insurance 8,548 8,548 8,548 Miscellaneous 21,349 21,349 21,349 Office expense 3,768 3,768 3,768 Postage and printing 3,992 3,992 3,992 Professional fees 8,974 8,974 8,974 Public awareness 9,064 9,064 Repair and maintenance 42,849 42,849 Utilities 32,108 32,108 Total Expenses $ 1,056,426 $ 132,371 $ 1,130,069 $ 1,262,440 $ 2,318,866 See accompanying notes and independent review report -4-

8 STATEMENT OF CASH FLOWS Year Ended December 31, 2012 Cash flows from operating activities Change in net assets $ 244,239 Adjustments to reconcile change in net assets to net cash provided by operating activities: Depreciation 75,756 Gain on sale of investments (47,019) Increase (Decrease) in operating assets Accounts receivable 19,759 Increase (Decrease) in operating liabilities Accounts payable (28,499) Other liabilities 2,382 Net cash provided by operating activities 266,618 Cash flows from investing activities Proceeds from sale of assets 47,019 Purchase of property and equipment (74,143) Net cash used by investing activities (27,124) Cash flows from financing activities Proceeds from note payable 74,542 Payment on note payable (121,535) Net cash provided (used) by financing activities (46,993) Net decrease in cash and cash equivalents 192,501 Cash and cash equivalents at beginning of year 221,385 Cash and cash equivalents at end of year $ 413,886 Supplemental items Interest paid $ 94,235 See accompanying notes and independent review report -5-

9 NOTES TO FINANCIAL STATEMENTS NOTE 1: ORGANIZATION AND PURPOSE Peaceful Valley Donkey Rescue (the Organization) is a not-for-profit with primary offices located Tehachapi, California and Miles, Texas as well as volunteers operating in Oregon, Arizona, Oklahoma, Iowa, Illinois, Virginia, North Carolina, South Carolina, Florida, Tennessee and Kentucky. The organization provides rescue services and/or seeks out and obtains unwanted and abused donkeys. Once the donkeys are rescued, they are given medical treatment and training. When the donkeys are deemed ready, they are made available for adoption. NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The financial statements of Peaceful Valley Donkey Rescue have been prepared on the accrual basis of accounting. The significant accounting policies followed are described below to enhance the usefulness of the financial statements to the reader. Financial Statement Presentation The organization presents financial statements in accordance with Financial Accounting Standards Board Accounting Standards Codification (FASB ASC) , Financial Statements of Not-for-profit Organizations. Under FASB ASC , the organization is required to report information regarding its financial position and activities according to three classes of net assets: unrestricted, temporarily restricted, and permanently restricted 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 certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. Property and Equipment Property and equipment acquired by purchase are recorded at cost and depreciated under the straight-line method over their estimated useful lives. Donations of property and equipment are recorded as support at their estimated fair value. Such donations are reported as unrestricted support unless the donor has restricted the donated asset to a specific purpose. Assets donated with explicit restrictions regarding their use, and contributions of cash that must be used to acquire property and equipment, are reported as restricted support. Absent donor stipulation regarding how long those donated assets must be maintained, the Organization reports expirations of donor restrictions when the donated or acquired assets are placed in service as instructed by the donor. The Organization reclassifies temporarily restricted net assets to unrestricted net assets at that time. The estimated useful lives of the assets are as follows: Years Office Equipment 5-7 Machinery and Equipment 5-7 Improvements

10 NOTES TO FINANCIAL STATEMENTS NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued Contributions Contributions received are recorded as unrestricted, temporarily restricted, or permanently restricted support depending on the existence or nature of any donor restrictions. Contributions with donor-imposed restrictions are reported as temporarily restricted revenues. Temporarily restricted net assets are reclassified to unrestricted net assets when donor restrictions are satisfied. Income Taxes Status The Organization qualifies as tax-exempt organization under Section 501(c)(3) of the Internal Revenue Service Code and Section 23701d of the State of California Revenue and Taxation Code. No provision for taxes is required. The Organization is not considered a private foundation. The informational tax return (Form 990) is generally available for review by the IRS and state for up to three years from the date of filing. The 2012, 2011 and 2010 returns are still subject to review. Cash and Cash Equivalents For purposes of the statement of cash flows, the Organization considers all unrestricted highly liquid investments with an initial maturity of three months or less to be cash equivalents. Inventory Inventory is valued at the lower of cost or market; cost is being determined on first-in, firstout basis. Source of Revenue The Organization receives its revenue from public donation, grants, and fundraising. The grants have no spending stipulations. Fundraising During 2012 the Organization used the services of an external fundraiser, Fund Raising Strategies, Inc. The annual cost expended for the year was $1,117,638 including fees for services and all associated costs, while the gross revenue raised was $2,233,753. NOTE 3: CASH All cash and certificates of deposit are deposited into institutions that are insured or collateralized by the Federal Deposit Insurance Corporation (FDIC). Under FDIC guidelines, each depositor s accounts are insured to an aggregate of $250,000 for interest bearing accounts and unlimited for non-interest bearing accounts. As of December 31, 2012 the organization did not have any cash which exceeded the FDIC limit. -7-

11 NOTES TO FINANCIAL STATEMENTS NOTE 4: PROPERTY AND EQUIPMENT Property and equipment consisted of the following: Land $ 1,044,700 Buildings 872,552 Leasehold improvements 31,956 Automotive equipment 206,359 Machinery and equipment 194,955 Furniture and equipment 1,488 Office equipment 9,793 2,361,803 Less: Accumulated Depreciation 369,617 Net Property and equipment $ 1,992,186 NOTE 5: NOTES PAYABLE The outstanding notes payable as of December 31, 2012 are as follows: Note payable to Ford Motor Credit, secured by a 2011 Ford F-350, payable at $950 per month including interest at 6.49%. The note matures in March Note payable to Ford Motor Credit, secured by a 2012 Ford F-350, payable at $931 per month including interest at 6.89%. The note matures July Note payable to John Deere Credit, secured by a John Deere mower, payable at $122 per month including interest at 4.9%. The note matures in May Note payable to John Deere Credit, secured by a John Deere tractor, payable at $443 per month including interest at 4.9%. The note matures in June Note payable to Art Schaefer Trust, secured by real property located in Tehachapi, California, payable at $5,338 per month including interest at 8.0%. The note matures in December Note payable to Art Schaefer Trust, secured by real property located in Kern County, California, payable at $1,911 per month including interest at 8.0%. The note matures in December Note payable to Art Schaefer Trust, secured by real property located in Tom Green County, Texas, payable at $2,867 per month including interest at 8.0%. The note matures in December $ 33,338 43,773 3,298 21, , , ,207-8-

12 NOTES TO FINANCIAL STATEMENTS NOTE 5: NOTES PAYABLE continued Note payable to Ernest Schaefer Trust, secured by real property located in Tom Green County, Texas, payable in full in April 2013 including interest at 8.0%. 140,000 Note payable to Mark Meyers. Unsecured loan payable at $1, per month including interest at 6.0%. The note matures in January ,244 1,194,498 Less current payable 215,320 Long-term payable $ 979,178 The following is a schedule of maturities as of December 31, 2012: Principal Interest Total 2013 $ 215,320 $ 80,671 $ 295, ,851 71, , ,880 65, , ,803 59, , ,548 53, , , , , ,121 38, ,581 $ 1,194,498 $ 551,182 $ 1,745,680 NOTE 6: RELATED PARTY TRANSACTIONS On June 1, 2005 the Organization entered into a loan agreement with Executive Director; Mark Meyers in the amount of $200,000 paid by Mr. Meyers to the Organization to aid in the construction of the new donkey habitat. The note is to be paid back with interest at 6.00%. The loan was deferred due to continued growth of the Organization and an interest only payment of $12,000 was paid in 2006, with an additional interest only payment of $ 6,000 paid in In the following years, the interest will be rolled into payments. The loan was re-amortized in January of The final loan payment will be in December of See note 5 for repayment terms. On December 22, 2011 the Organization entered into a loan agreement with a Trust in the name of a board trustee, Arthur Schaefer, in the amount of $500,000 paid to the Organization to aid in in the purchase of a dairy farm to be used as grazing property. The loan is broken into two notes $200,000 and $300,000 to be paid back with interest at 8.00%. The loans are to be paid back over a fifteen year term. In addition, the organization has a prior loan balance outstanding from the Arthur Schaefer Trust from December 15, 2006, which was revised on January 18, The new terms stated the remaining balance to be paid back over twelve years with interest at 8.00%. See note 5 for further repayment terms. NOTE 7: SUBSEQUENT EVENTS Subsequent to year end and prior to the date of this report, the Organization sold its California property and used the proceeds to pay off the note payable to the Ernest Schaefer Trust. The note payable was paid in full in April The notes payable to the Art Schaefer Trust were restructured to use the Texas property as collateral. -9-

13 NOTES TO FINANCIAL STATEMENTS NOTE 8: FINANCIAL INSTRUMENTS Fair Value The Organization has estimated that the fair value of all financial instruments (none of which is held for trading purposes) at December 31, 2012, does not differ materially from their aggregate carrying values recorded in the accompanying statement of financial position. The estimate is based on the assumption that fair value approximates carrying values due to short initial maturities. Financial instruments consist of cash and accounts payable. NOTE 9: DATE OF MANAGEMENT S REVIEW Subsequent events were evaluated through October 25, 2013, the date the financial statements were available to be issued. -10-