EVANGELISM EXPLOSION INTERNATIONAL, INC. COMBINED FINANCIAL STATEMENTS With Independent Auditors Report

Transcription

1 EVANGELISM EXPLOSION INTERNATIONAL, INC. COMBINED FINANCIAL STATEMENTS With Independent Auditors Report June 30, 2010 and 2009

2 Table of Contents Independent Auditors Report 1 Financial Statements Combined Statements of Financial Position 2 Combined Statements of Activities 3 Combined Statements of Cash Flows 4 Notes to Combined Financial Statements 5 Supplementary Data Independent Auditors Report on Supplementary Data 16 Combining Statements of Financial Position 17 Combining Statement of Activities Combining Statement of Activities Schedules of Natural Expenses 23 Schedule of Functional Expenses Schedule of Functional Expenses Analytical Statements of Financial Position 28 Analytical Statements of Activities 29 Page

3 INDEPENDENT AUDITORS REPORT Board of Directors Evangelism Explosion International, Inc. Fort Lauderdale, Florida We have audited the accompanying combined statements of financial position of Evangelism Explosion International, Inc. (a nonprofit corporation) as of June 30, 2010 and 2009, and the related combined statements of activities and cash flows for the years then ended. These combined financial statements are the responsibility of the organization s management. Our responsibility is to express an opinion on these combined financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the combined financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances but not for the purpose of expressing an opinion on the effectiveness of the organization s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the combined financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall combined financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the combined financial statements referred to above present fairly, in all material respects, the financial position of Evangelism Explosion International, Inc. as of June 30, 2010 and 2009, and the changes in its net assets and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States. Atlanta, Georgia October 27, 2010

4 Combined Statements of Financial Position June 30, ASSETS: Current assets: Cash and cash equivalents $ 1,988,203 $ 1,067,423 Investments 389, ,998 Accounts receivable less allowance for doubtful accounts of $5,000 and $5,000 for 2010 and 2009, respectively 41,285 49,497 Contribution receivable - 21,100 Notes receivable 50,061 51,061 Inventory 274, ,257 Prepaid rent and other assets 9,843 17,832 2,753,444 1,954,168 Property and equipment net 491, ,809 Unamortized production costs 259, ,112 Land held for sale 62,000 62,000 Total Assets $ 3,566,164 $ 3,361,089 LIABILITIES AND NET ASSETS: Current liabilities: Accounts payable $ 91,233 $ 202,168 Accrued vacation and other accrued expenses 136, ,225 Deferred revenue 2,600 12,235 Current portion of note payable 17,036 15, , ,592 Note payable net of current portion 373, , , ,202 Net assets: Unrestricted: Undesignated 167,827 (60,615) Equity in property and equipment net 100, , , ,620 Temporarily restricted: Donor-restricted worldwide ministry support 2,677,327 2,043,267 2,945,556 2,565,887 Total Liabilities and Net Assets $ 3,566,164 $ 3,361,089 See notes to combined financial statements -2-

5 Combined Statements of Activities Year Ended June 30, Temporarily Temporarily Unrestricted Restricted Total Unrestricted Restricted Total SUPPORT AND REVENUE: Support: Contributions $ 624,885 $ 5,929,311 $ 6,554,196 $ 261,544 $ 3,878,486 $ 4,140,030 Foundation grants and estate distributions 366, , , , ,417 1,391,701 Gifts-in-kind 27,499-27,499 7,631 83,372 91,003 1,018,429 6,308,528 7,326, ,459 4,633,275 5,622,734 Revenue: Training material sales 702, , , ,349 Clinics and seminars 129, , , ,073 Investment income 21,491-21,491 20,732-20,732 Other income 99,333-99,333 79,329-79,329 Total Support and Revenue 1,971,310 6,308,528 8,279,838 1,958,942 4,633,275 6,592,217 RECLASSIFICATIONS: Net assets released from restrictions: Administrative assessment 381,947 (381,947) - 539,034 (539,034) - Satisfaction of purpose restrictions 5,292,521 (5,292,521) - 4,156,517 (4,156,517) - Total Reclassifications 5,674,468 (5,674,468) - 4,695,551 (4,695,551) - EXPENSES: Program services: Worldwide ministries 5,104,761-5,104,761 4,080,336-4,080,336 Training materials 866, , , ,434 Clinics and seminars 447, , , ,272 6,418,779-6,418,779 4,994,042-4,994,042 Supporting activities: General and administrative 600, ,392 1,032,292-1,032,292 Fund-raising 880, , , ,253 1,481,390-1,481,390 1,925,545-1,925,545 Total Expenses 7,900,169-7,900,169 6,919,587-6,919,587 Change in Net Assets (254,391) 634, ,669 (265,094) (62,276) (327,370) Net Assets, Beginning of Year 522,620 2,043,267 2,565, ,714 2,105,543 2,893,257 Net Assets, End of Year $ 268,229 $ 2,677,327 $ 2,945,556 $ 522,620 $ 2,043,267 $ 2,565,887 See notes to combined financial statements -3-

6 Combined Statements of Cash Flows Year Ended June 30, CASH FLOWS FROM OPERATING ACTIVITIES: Change in net assets $ 379,669 $ (327,370) Adjustments to reconcile change in net assets to net cash provided (used) by operating activities: Amortization 94,430 94,430 Depreciation 39,101 57,847 Realized and unrealized gains on investments (8,968) (10,219) Noncash contributions: Donated securities (1,998) (91,003) Changes in operating assets and liabilities: Accounts receivable 8, ,696 Contribution receivable 21,100 74,500 Notes receivables 1,000 - Inventory 4,267 13,744 Prepaid rent and other assets 7,989 31,557 Accounts payable and accrued expenses (148,021) 207,864 Deferred revenue (9,635) (2,980) Net Cash Provided by Operating Activities 387, ,066 CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of investments (1,280,925) (916,981) Proceeds on sale of investments 1,368,829 1,403,271 Proceeds on sale of donated securities 1,998 91,003 Transfer of ownership of capital assets 473,021 - Purchase of property and equipment (12,351) (144,243) Net Cash Provided by Investing Activities 550, ,050 CASH FLOWS FROM FINANCING ACTIVITIES: Payments on notes payable (16,938) (16,423) Net Cash Used by Financing Activities (16,938) (16,423) Change in Cash and Cash Equivalents 920, ,693 Cash and Cash Equivalents, Beginning of Year 1,067, ,730 Cash and Cash Equivalents, End of Year $ 1,988,203 $ 1,067,423 SUPPLEMENTAL DISCLOSURES: Cash paid for interest expense $ 22,323 $ 27,270 Noncash investing activities: Donated securities $ 1,998 $ 91,003 Transfer of ownership of capital assets $ 473,021 $ - See notes to combined financial statements -4-

7 Notes to Combined Financial Statements June 30, 2010 and NATURE OF ORGANIZATION: Evangelism Explosion International, Inc. (EE) is a Florida nonprofit corporation organized to glorify God by equipping local churches worldwide to multiply through friendship, evangelism, discipleship, and healthy growth. EE is exempt from income tax under Section 501(c)(3) of the U.S. Internal Revenue Code (code), and contributions to it are deductible within the limitations prescribed by the code. EE has been classified as a publicly supported, religious, and educational organization, which is not a private foundation under Section 509(a) of the code. EE s goal is to cooperate with all true believers in the Lord Jesus Christ, of every denomination, to promote the spread of His gospel to everyone on earth and to have at least one church actively engaged in the EE ministry in every nation. EE s international ministries are financed by individual churches and people dedicated to spreading the gospel around the world through the local church. The major programs include worldwide training, the sale and distribution of training materials, and U.S. based clinics and seminars on the proper use of the training materials and evangelism tools. In 2005, EE purchased a building in Arden, North Carolina, which it uses as a warehouse and material distribution center and as offices for its development department. Affiliated ministries in some other countries have been organized using the name of Evangelism Explosion. The operations of these affiliated entities are not included in these combined financial statements because they are not considered to be under common board control. The combined financial statements do not include assets, liabilities, revenue, and expenses of Coral Ridge Presbyterian Church, Inc. (CRPC) or its affiliated ministries (Knox Seminary, Westminster Academy, Radio WAFG) because it does not control and is not controlled by these affiliates (see Note 10). EE s primary sources of revenue are contributions from foundations, churches, and individuals; sales of books, clinic materials, and promotional material; and conducting training clinics and seminars. For the years ended June 30, 2010 and 2009, EE received about 85% and 84%, respectively, of its income from donors in furtherance of the ministry, and approximately 8% and 12%, respectively, of its income from sales of books, clinic materials, and other promotional materials. Cost of goods sold totaled $364,051 and $360,655 for the years ended June 30, 2010, and 2009, respectively. Income from training clinics and seminars comprised 2% of total income, donations from six major donors comprised 44% of EE s contributions, and approximately 19% of total support received by EE was provided by one foundation for each of the years ended June 30, 2010 and

8 Notes to Combined Financial Statements June 30, 2010 and NATURE OF ORGANIZATION, continued: GLOBAL DEVELOPMENT PROJECT The Global Development Project (GDP) exists to promote the spread of His gospel to everyone on earth through the addition of new international workers, Implementation Field Workers (IFW). The goal for IFW is add 423 in the next three years. INTERNATIONAL TRAINING CENTERS EE has entered into agreements with two of its international affiliates relating to the purchase and usage of real property. The two current locations are Fiji and Mongolia. Evangelism Explosion Fiji The agreement in Fiji, called a Goodwill Agreement, was signed in March 2006 by Evangelism Explosion Fiji (EE Fiji) and a national land owner. The purpose of the agreement was to develop an international training center. EE invested $500,000 in developing the land, purchasing equipment, and constructing a building to be used as the training center, along with other supporting structures. The project continued to be recognized as a capital project until it was handed over to EE Fiji. It depreciates over a thirty-year period. As of September 18, 2009, EE granted the usage of the training center to EE Fiji. This agreement will remain in place as long as the center is used as a training center for the South Pacific for EE and as a place for EE Fiji s directors to live. EE retains control of the usage and the selection of a committee to serve as a local Management Team. This team looks after the training center and represents EE s interests in EE Fiji. Under a usage agreement, EE limits the usage of the training center and may change the official usage by providing a 90-day notice. If EE Fiji defaults on the agreement, they will be required to pay EE the original investment of $500,000 plus the total of all accrued appreciation through the date of the default. Evangelism Explosion Mongolia The agreement between Evangelism Explosion International (EE) and Evangelism Explosion Mongolia (EEM) was for the purchase of a condominium apartment in the city of Ulaanbaatar, Mongolia. EEM requested $30,000 from EE to purchase the apartment for use as the EEM offices and as a possible residence for the EE Mongolia director. EE granted the money to the EEM leadership board to purchase the apartment. EE retains control of the usage of the apartment and the selection of a committee to serve as a Management Team. This team looks after the apartment and represents EE s interests in Mongolia. Under a usage agreement, EE limits the usage of the apartment and may change the official usage by providing a 90-day notice. EE carries the investment in the apartment as a note receivable which will be repaid upon the future sale of the apartment. EE may require repayment of the note by providing EEM with a 30-day notice. A promissory note for the $30,000 has been signed by EE and EEM. The note carries an appreciation clause of 5% per annum requiring EEM to pay EE the original investment plus the total of all accrued appreciation through the date of the cancellation of the promissory note. -6-

9 Notes to Combined Financial Statements June 30, 2010 and SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: The combined financial statements have been prepared on the accrual basis of accounting. The significant accounting policies followed are described below to enhance the usefulness of the combined financial statements to the reader. PRINCIPLES OF COMBINATION The combined financial statements include the operations of EE and the GDP (collectively referred to as the Organization). All significant intercompany balances and transactions have been eliminated. CASH AND CASH EQUIVALENTS Cash equivalents are defined as short-term, highly liquid debt securities that are both readily convertible to cash and have an original maturity of three months or less. The Organization maintains cash and cash equivalents in financial institutions which may, at times, exceed federally insured limits. The Organization has not experienced any losses on such accounts. ESTIMATES The preparation of combined financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts and disclosures in the combined financial statements. Actual results could differ from those estimates. RECLASSIFICATION Certain information from the prior year combined financial statements has been reclassified to conform to the current year presentation format. INVESTMENTS Investments consist of an investment portfolio/money market account in the form of cash and money funds, CDs and equivalents, and government securities. Investments in equity securities with readily determinable fair values and all debt securities are reported at fair value with gains and losses included in the combined statements of activities. Other investments are reported at the lower of cost or fair value. EE has established donor-advised fund accounts with a local Christian Community Foundation. They are called The Dr. D. James and Anne Kennedy Foundation for World Evangelism and The Evangelism Explosion Training Center Endowment-Fiji Fund. Since the Foundation has variance power over the funds, they are not reported as an asset of EE. The executive committee of EE has the ability to request grants from the funds. The amounts in these funds as of June 30, 2010 and 2009, were $201,235 and $2,775, respectively. -7-

10 Notes to Combined Financial Statements June 30, 2010 and SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued: ACCOUNTS RECEIVABLE Accounts receivable are reported net of any anticipated losses due to uncollectible accounts. EE s policy for determining when receivables are past due or delinquent is when they exceed 30 days past due. Uncollectible accounts are reported as additions to the allowance for bad debts when it is determined the amounts will become uncollectible, which is typically when the account is one year old. EE assesses finance charges against receivables that are past due 30 days or more at the rate of 12% per annum. EE s policy for placing receivables on non-accrual status is when no collections are received on the accounts after one year. Payments received from non-accrual receivables are credited to appropriate receivable accounts. Accounts older than 30 days amounted to $9,302 and $14,197 as of June 30, 2010 and 2009, respectively. The allowance for doubtful accounts is maintained at a level which, in management s judgment, is adequate to absorb potential losses inherent in the receivable portfolio. The amount of the allowance is based on management s evaluation of the collectability of the receivable portfolio, including the nature of the portfolio, trends in historical loss experience, specific impaired accounts, and economic conditions. An allowance for uncollectible accounts has been provided for in the amount of $5,000 for each year ended June 30, 2010 and 2009, respectively. CONTRIBUTION RECEIVABLE Contributions receivable represent unconditional promises due within one year. The amounts are reported as contributions when the promise is made and carried as a receivables and temporarily restricted net assets. Because the contributions are due within one year, there is no discount, and no allowance for uncollectibles is made or needed. INVENTORY Inventory consists primarily of training materials held for resale in connection with the clinic and seminar activities. Inventory is stated at the lower of cost or market on the first-in, first-out method. PROPERTY, EQUIPMENT, AND DEPRECIATION Property and equipment in excess of $2,500 are capitalized at cost. Donated assets are capitalized at their fair market value on the date of the gift. Depreciation is computed on the straight-line method over the estimated useful lives of the assets. This ranges from eighteen months to ten years, for property and equipment, and thirty years for the warehouse building in North Carolina. -8-

11 Notes to Combined Financial Statements June 30, 2010 and SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued: UNAMORTIZED PRODUCTION COSTS Production development costs are associated with producing XEE materials. They include expenses incurred for production, videotaping, editing, and revising of new ministry video-masters, compact and digital video discs, and books. Upon production completion, costs are amortized on a per unit basis to products produced based on the estimated life and number of units to be sold from the date the title is first offered for sale to the public. Products are produced, packaged, promoted, and held for sale as part of EE s inventory, including direct product costs and amortized production per unit costs. Costs incurred through June 30, 2008 totaled $448,543 with an estimated per unit cost of $7 and an estimated useful life of approximately 6 to 7 years. Management expects these costs to be fully recoverable. CLASSES OF NET ASSETS The combined financial statements report amounts by class of net assets. Unrestricted net assets are currently available for the Organization s purposes under the direction of the board, resources invested in furniture and equipment, or reserved to comply with Florida annuity statutes. Temporarily restricted net assets are contributions with donor stipulations for specific operating purposes, time restrictions, or not currently available for use until commitments regarding their use have been fulfilled. SUPPORT, REVENUE, AND EXPENSES Revenue is recognized when earned and support when contributions are made, which may be when cash is received, unconditional promises are made, or ownership of other assets is transferred to the Organization. The Organization reports gifts of property and equipment as unrestricted support unless explicit donor stipulations specify how the donated assets must be used. Absent explicit donor stipulations about how long those long-lived assets must be maintained, the Organization reports expirations of donor restrictions when the donated or acquired long-lived assets are placed in service. Training material sales, clinics and seminar registration fees, and other income are recorded as revenue when earned. Registration fees received in advance, but not earned, are reported as prepaid registration fees liability. Expenses are recorded when incurred in accordance with the accrual basis of accounting. The costs of providing the various program services and supporting activities are summarized on a functional basis in the combined statements of activities. Accordingly, certain costs have been allocated among the program services and supporting activities benefited. -9-

12 Notes to Combined Financial Statements June 30, 2010 and INVESTMENTS: Investments at fair value consist of: -10- June 30, Cash and money funds $ 8,290 $ 160,944 Certificates of deposits 233, ,949 Corporate bonds 146,951 77,105 Investment income consists of: $ 389,062 $ 467,998 Year Ended June 30, Realized gains (losses) net $ 1,096 $ (1,582) Interest and dividends 20,395 22, PROPERTY AND EQUIPMENT NET: Property and equipment consist of: $ 21,491 $ 20,732 June 30, Land North Carolina $ 70,000 $ 70,000 Building North Carolina 473, ,170 Building training center (assets held outside of U.S.) - 498,589 Property and equipment 307, ,699 Software 35,652 35,652 Website development 11,700 11, ,371 1,383,810 Less accumulated depreciation (407,333) (393,001) Net book value of property and equipment 491, ,809 Less related indebtedness (390,636) (407,574) Equity in property and equipment $ 100,402 $ 583,235 Depreciation in the amounts of $39,101 and $57,847 has been allocated to program services and supporting activities in the combined statements of activities for the years ended June 30, 2010 and 2009, respectively.

13 Notes to Combined Financial Statements June 30, 2010 and NOTES PAYABLE: Notes payable consists of: June 30, Long-term debt consists of a bank term loan with a fixedinterest rate of 5.95% with monthly principal and interest payments of $3,350 per month for 60 months. In March 2010, it will convert to an adjustable rate plus prime. Thenote payable is collateralized by a deed of trust on real estate, an insurance policy, and the remaining EE assets. The loan has a maturity date of March 1, $ 390,636 $ 407,574 Less current portion (17,036) (15,964) Long-term debt net of current portion $ 373,600 $ 391,610 The debt is estimated to mature as follows: Years Ending June 30, Amounts 2011 $ 17, , , , ,467 Thereafter 294,699 $ 390,

14 Notes to Combined Financial Statements June 30, 2010 and ALLOCATION OF JOINT COSTS: For the years ended June 30, 2010 and 2009, EE conducted activities that included requests for contributions, as well as program, and general and administrative components. Those activities included informational materials and special mailings of EE publications and staff prayer letters, as well as invitations to special events, such as dinner meetings and prayer breakfasts. The costs of conducting those activities were allocated as follows: Year Ended June 30, Fund-raising $ 121,183 $ 150,395 Worldwide ministries 46,910 58,218 General and administrative 27,364 33,960 $ 195,457 $ 242, COMMITMENTS AND CONTINGENCIES: EE has entered into various operating leases for the rental of certain telephone and photocopier equipment. In addition to the above equipment leases, EE s office space is rented under a month-to-month lease from Knox Seminary. Rent expense under this arrangement was $39,951 and $167,140, for the years ended June 30, 2010 and 2009, respectively. In 2010 and 2009, $22,000 of the rent was forgiven by CRPC and recognized as a giftin-kind (see Note 10). Rent expenses for the years ended June 30, 2010 and 2009, were $181,514 and $167,140, respectively. 8. NET ASSETS: Temporarily restricted net assets consist of: June 30, Contributions receivable $ - $ 21,100 Global Development Project 2,059, ,987 Missionary support 321, ,997 Project funds 296, ,183 $ 2,677,327 $ 2,043,

15 Notes to Combined Financial Statements June 30, 2010 and EMPLOYEE BENEFIT PLANS: EE provides employee benefit programs for all full-time employees, including major medical, dental, and life insurance. For the year ended June 30, 2010, the contributions to these plans were $785,901 for major medical and dental and $10,306 for life insurance. For the year ended June 30, 2009, the contributions to these plans were $228,528 for major medical and dental and $9,870 for life insurance. EE has a tax-sheltered annuity plan whereby employees may elect to make contributions pursuant to a salary reduction agreement. EE made contributions to the plan in the amounts of $3,305 and $3,531 for the years ended June 30, 2010 and 2009, respectively. 10. RELATED PARTY TRANSACTIONS: EE occupies office facilities owned by CRPC-Knox Seminary (see Note 1) under an informal agreement. Under the agreement, rent expense was paid and in-kind gifts were recognized for forgiveness of rent (see Note 7). EE made payments to CRPC-Knox Seminary for other operating expenses in the amounts of $0 and $18,688 for the years ended June 30, 2010 and 2009, respectively. Sales of material to CRPC totaled $12,603 and $7,742 for the years ended June 30, 2010 and 2009, respectively. EE made payments to Coral Ridge Media Ministries (CRM), a related ministry, of $125 and $8,631 for the years ended June 30, 2010 and 2009, respectively, for the purchase of services and materials. Sales of materials to CRM totaled $79 and $154 for the years ended June 30, 2010 and 2009, respectively. -13-

16 Notes to Combined Financial Statements June 30, 2010 and FAIR VALUE MEASUREMENTS: The Fair Value Measurements and Disclosure topic of the FASB Accounting Standards Codification establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. This hierarchy consists of three broad levels: Level 1 inputs consist of unadjusted quoted prices in active markets for identical assets and have the highest priority, Level 2 inputs consist of observable inputs other than quoted prices for identical assets, and Level 3 inputs have the lowest priority. EE uses appropriate valuation techniques based on the available inputs to measure the fair value of its investments. When available, EE measures fair value using Level 1 inputs because they generally provide the most reliable evidence of fair value. Level 3 inputs are only used when Level 1 or Level 2 inputs are not available. The following table presents the fair value measurements of assets and liabilities recognized in the accompanying combined statements of financial position measured at fair value on a recurring basis and the level within the fair value hierarchy in which the fair value measurements fall at June 30, 2010 and 2009: Fair Value Measurements at June 30, 2010 Total (Level 1) (Level 2) (Level 3) Assets: Investments: Money market funds $ 7,817 $ 7,817 $ - $ - Certificates of deposit $ 233,821 $ - $ 233,821 $ - U.S. corporate bonds $ 146,952 $ 146,952 $ - $ - Fair Value Measurements at June 30, 2009 Total (Level 1) (Level 2) (Level 3) Assets: Investments: Money market funds $ 160,994 $ 160,994 $ - $ - U.S. corporate bonds $ 77,105 $ 77,105 $ - $

17 Notes to Combined Financial Statements June 30, 2010 and FAIR VALUE MEASUREMENTS, continued: Methods and assumptions used by the Organization in estimating fair values are as follows: Money Market funds The fair value of cash and cash equivalents approximate the carrying value due to their short-term nature. Certificates of deposit The fair values of the certificates of deposit are based on observable inputs other then the quoted prices included in Level 1 and thus are based on yields for securities of comparable maturity, quality, and type and obtained from market makers. Bonds The fair value of the financial instruments is based on yields currently available on comparable securities with similar credit ratings. 12. SUBSEQUENT EVENTS: Subsequent events have been evaluated through the report date, which represents the date the combined financial statements were available to be issued. Subsequent events after that date have not been evaluated. 13. NEW ACCOUNTING PRONOUNCEMENTS: On July 1, 2009, EE adopted the new provisions of the Income Tax topic of the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC). These provisions clarify the accounting for uncertainty in tax positions and prescribe guidance related to the combined financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The tax benefit from an uncertain tax position is only recognized in the combined statements of financial position if the tax position is more likely than not to be sustained upon an examination, based on the technical merits of the position. Interest and penalties, if any, are included in expenses in the combined statements of activities. As of June 30, 2010, EE had no uncertain tax positions that qualify for recognition or disclosure in the combined financial statements. The FASB Accounting Standards Codification became the single source of authoritative U.S. GAAP for nongovernmental entities. The ASC modified the hierarchy of GAAP into two levels, authoritative and nonauthoritative. Following the ASC, the FASB will not issue new standards in the form of Statements, FASB Staff Positions, or Emerging Issues Task Force Abstracts. Instead, the FASB will issue Accounting Standards Updates, which will serve only to update the ASC. The ASC is effective for combined financial statements of annual periods ending after September 15,

18 SUPPLEMENTARY DATA

19 INDEPENDENT AUDITORS REPORT ON SUPPLEMENTARY DATA Board of Directors Evangelism Explosion International, Inc. Fort Lauderdale, Florida Our report on our audits of the basic combined financial statements of the Evangelism Explosion International, Inc. for the years ended June 30, 2010 and 2009, appears on page 1. We conducted our audits in accordance with the auditing standards generally accepted in the United States for the purpose of forming an opinion on the basic combined financial statements taken as a whole. The supplementary data on the following pages is presented for purposes of additional analysis and is not a required part of the basic combined financial statements. Such information has been subjected to the auditing procedures applied in the audits of the basic combined financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic combined financial statements taken as a whole. We have also previously audited, in accordance with auditing standards generally accepted in the United States, the combined statements of financial position of Evangelism Explosion International, Inc. as of June 30, 2008, 2007, and 2006, combined and the related combined statements of activities and cash flows for the years then ended, and we expressed unqualified opinions on those combined financial statements. In our opinion, the financial information from those years, included on the following pages, is fairly stated in all material respects in relation to the basic combined financial statements from which it has been derived. Atlanta, Georgia October 27, 2010

20 Combining Statements of Financial Position June 30, EE Global Eliminations Total EE Global Eliminations Total ASSETS: Current assets: Cash and cash equivalents $ 467,272 $ 1,520,931 $ - $ 1,988,203 $ 528,514 $ 538,909 $ - $ 1,067,423 Investments , , ,364 24, ,998 Accounts receivable less allowance for doubtful accounts of $5,000 and $5,000 for 2009 and 2008, respectively 41, ,285 49, ,497 Contribution receivable , ,100 Notes receivable 50, ,061 51, ,061 Inventory 274, , , ,257 Prepaid rent and other assets 9, ,843 17, ,832 Due from EE - 167,922 (167,922) ,444 (30,444) - 843,924 2,077,442 (167,922) 2,753,444 1,390, ,987 (30,444) 1,954,168 Property and equipment net 491, , , , ,809 Unamortized production costs 259, , , ,112 Land held for sale 62, ,000 62, ,000 Total Assets $ 1,656,644 $ 2,077,442 $ (167,922) $ 3,566,164 $ 2,670,502 $ 721,031 $ (30,444) $ 3,361,089 (continued) -17-

21 Combining Statements of Financial Position (continued) June 30, EE Global Eliminations Total EE Global Eliminations Total LIABILITIES AND NET ASSETS: Current liabilities: Accounts payable $ 76,443 $ 14,790 $ - $ 91,233 $ 202,168 $ - $ - $ 202,168 Accrued vacation and other accrued expenses 136, , , ,225 Deferred revenue 2, ,600 12, ,235 Due to Global 167,922 - (167,922) - 30,444 - (30,444) - Current portion of note payable 17, ,036 15, , ,140 14,790 (167,922) 247, ,036 - (30,444) 403,592 Note payable net of current portion 373, , , , ,740 14,790 (167,922) 620, ,646 - (30,444) 795,202 Net assets: Unrestricted: Undesignated 164,514 3, ,827 (187,659) 127,044 - (60,615) Equity in property and equipment net 100, , , , ,916 3, , , , ,620 Temporarily restricted: Donor-restricted worldwide ministry support 617,988 2,059,339-2,677,327 1,449, ,987-2,043, ,904 2,062,652-2,945,556 1,844, ,031-2,565,887 Total Liabilities and Net Assets $ 1,656,644 $ 2,077,442 $ (167,922) $ 3,566,164 $ 2,670,502 $ 721,031 $ (30,444) $ 3,361,

22 Combining Statement of Activities Year Ended June 30, 2010 EE Global Temporarily Temporarily Intercompany Combined Unrestricted Restricted Total Unrestricted Restricted Total Eliminations Total SUPPORT AND REVENUE: Support: Contributions $ 873,794 $ 2,213,096 $ 3,086,890 $ - 3,716,215 $ 3,716,215 $ (248,909) $ 6,554,196 Foundation grants and estate distributions 366, , , ,262 Gifts-in-kind 27,499-27, ,499 1,267,338 2,592,313 3,859,651-3,716,215 3,716,215 (248,909) 7,326,957 Revenue: Training material sales 702, , ,567 Clinics and seminars 129, , ,490 Investment income 18,178-18,178 3,313-3,313-21,491 Other income 99,154-99, ,333 Total Support and Revenue 2,216,727 2,592,313 4,809,040 3,492 3,716,215 3,719,707 (248,909) 8,279,838 RECLASSIFICATIONS: Net assets released from restrictions: Administrative assessment 381,947 (381,947) Satisfaction of purpose restrictions 3,041,658 (3,041,658) - 2,250,863 (2,250,863) Total Reclassifications 3,423,605 (3,423,605) - 2,250,863 (2,250,863) (continued) -19-

23 Combining Statement of Activities (continued) Year Ended June 30, 2010 EE Global Temporarily Temporarily Intercompany Combined Unrestricted Restricted Total Unrestricted Restricted Total Eliminations Total EXPENSES: Program services: Worldwide ministries 3,105,048-3,105,048 2,223,732-2,223,732 (224,019) 5,104,761 Training materials 817, ,678 48,620-48, ,298 Clinics and seminars 368, ,871 78,849-78, ,720 4,291,597-4,291,597 2,351,201-2,351,201 (224,019) 6,418,779 Supporting activities: General and administrative 598, ,397 26,885-26,885 (24,890) 600,392 Fund-raising 880, , ,998 1,479,395-1,479,395 26,885-26,885 (24,890) 1,481,390 Total Expenses 5,770,992-5,770,992 2,378,086-2,378,086 (248,909) 7,900,169 Change in Net Assets (130,660) (831,292) (961,952) (123,731) 1,465,352 1,341, ,669 Net Assets, Beginning of Year 395,576 1,449,280 1,844, , , ,031-2,565,887 Net Assets, End of Year $ 264,916 $ 617,988 $ 882,904 $ 3,313 $ 2,059,339 $ 2,062,652 $ - $ 2,945,

24 Combining Statement of Activities Year Ended June 30, 2009 EE Global Temporarily Temporarily Intercompany Combined Unrestricted Restricted Total Unrestricted Restricted Total Eliminations Total SUPPORT AND REVENUE: Support: Contributions $ 261,544 $ 2,809,486 $ 3,071,030 $ - $ 1,069,000 $ 1,069,000 $ - $ 4,140,030 Foundation grants and estate distributions 720, ,417 1,391, ,391,701 Gifts-in-kind 7,631 83,372 91, , ,459 3,564,275 4,553,734-1,069,000 1,069,000-5,622,734 Revenue: Training material sales 741, , ,349 Clinics and seminars 128, , ,073 Investment income 20,728-20, ,732 Other income 79,329-79, ,329 Total Support and Revenue 1,958,938 3,564,275 5,523, ,069,000 1,069,004-6,592,217 RECLASSIFICATIONS: Net assets released from restrictions: Administrative assessment 539,034 (539,034) Satisfaction of purpose restrictions 3,681,504 (3,681,504) - 475,013 (475,013) Total Reclassifications 4,220,538 (4,220,538) - 475,013 (475,013) (continued) -21-

25 Combining Statement of Activities (continued) Year Ended June 30, 2009 EE Global Temporarily Temporarily Intercompany Combined Unrestricted Restricted Total Unrestricted Restricted Total Eliminations Total EXPENSES: Program services: Worldwide Ministries 3,809,644-3,809, , ,692-4,080,336 Training Materials 649, ,531 32,903-32, ,434 Clinics and Seminars 230, , ,272 4,690,122-4,690, , ,920-4,994,042 Supporting activities: General and administrative 988, ,239 44,053-44,053-1,032,292 Fund-raising 893, , ,253 1,881,492-1,881,492 44,053-44,053-1,925,545 Total Expenses 6,571,614-6,571, , ,973-6,919,587 Change in Net Assets (392,138) (656,263) (1,048,401) 127, , ,031 - (327,370) Net Assets, Beginning of Year 787,714 2,105,543 2,893, ,893,257 Net Assets, End of Year $ 395,576 $ 1,449,280 $ 1,844,856 $ 127,044 $ 593,987 $ 721,031 $ - $ 2,565,

26 Schedules of Combined Natural Expenses Year Ended June 30, Cost of goods sold $ 277,379 $ 409,848 Salary and benefits 3,019,325 3,390,947 Travel and entertainment 380, ,545 Vehicle expense 65,082 52,248 Product amortization 94,430 94,430 Depreciation expense 39,101 57,847 Bank charges 10,914 4,496 Licenses, permits, and memberships 24,187 10,377 Insurance 12,911 10,175 Miscellaneous and other 115, ,349 Postage and delivery 30,391 49,017 Photocopying 6,334 4,563 Consultant expense 401, ,529 Board of directors 40,613 40,119 Rent 181, ,140 Building maintenance 7,367 32,871 Telephone 64,161 77,187 Utilities 15,166 20,803 Office supplies 102, ,257 Office equipment 103,629 30,723 Materials development 111,688 38,595 Clinics 51, ,417 Field representatives 152,919 8,958 Other ministry expense 241, ,701 Conferences 200,872 51,676 Grants to others 2,009, ,645 Interest expense 22,323 27,270 Direct mail/fund-raising 117, ,854 $ 7,900,169 $ 6,919,

27 Schedule of Functional Expenses Year Ended June 30, 2010 Program Services Supporting Activities General Worldwide Training Clinics and and Total Ministries Materials Seminars Total Administrative Fund-raising Total Expenses Cost of goods sold $ - $ 228,759 $ 48,620 $ 277,379 $ - $ - $ - $ 277,379 Salary and benefits 1,677, , ,319 2,266, , , ,582 3,019,325 Travel and entertainment 313,332 8,769 3, ,183 26,654 28,260 54, ,097 Vehicle expense 46,122 10, ,087 3,989 4,006 7,995 65,082 Product amortization - 94,430-94, ,430 Depreciation expense 14,616 5,146-19,762 14,192 5,147 19,339 39,101 Bank charges 5,168 4,762-9, ,914 Licenses, permits, and memberships 2, ,463 7,349 14,375 21,724 24,187 Insurance ,024 11, ,887 12,911 Miscellaneous and other 94,781 12, ,095 6,465 1,310 7, ,870 Postage and delivery 9,616 4,439 4,927 18,982 1,032 10,377 11,409 30,391 Photocopying 2, ,033 5, ,334 Consultant expense 208, ,381 59, , , ,233 Board of directors ,613-40,613 40,613 Rent 90,381 38,958 18, ,689 20,847 12,978 33, ,514 Building maintenance 933 2,750 1,296 4,979 1, ,388 7,367 Telephone 30,335 17,065 4,636 52,036 3,839 8,286 12,125 64,161 (continued) -24-

28 Schedule of Functional Expenses (continued) Year Ended June 30, 2010 Program Services Supporting Activities General Worldwide Training Clinics and and Total Ministries Materials Seminars Total Administrative Fund-raising Total Expenses Utilities 5,543 4,116 1,936 11,595 2,201 1,370 3,571 15,166 Office supplies 61,214 13,099 5,266 79,579 4,634 18,327 22, ,540 Office equipment 58,300 20,730 6,997 86,027 8,011 9,591 17, ,629 Materials development 56,444 52,497 1, , ,688 Clinics 33, ,070 51, ,096 Field representatives 152, , ,919 Other ministry expense 21,003-80, , , , ,471 Conferences 200, , ,872 Grants to others 2,009, ,009, ,009,739 Interest expense 8,318 6,898-15,216-7,107 7,107 22,323 Direct mail/fund-raising , , ,817 $ 5,104,761 $ 866,298 $ 447,720 $ 6,418,779 $ 600,392 $ 880,998 $ 1,481,390 $ 7,900,169 65% 11% 6% 81% 8% 11% 19% 100% -25-

29 Schedule of Functional Expenses Year Ended June 30, 2009 Program Services Supporting Activities General Worldwide Training Clinics and and Total Ministries Materials Seminars Total Administrative Fund-raising Total Expenses Cost of goods sold $ - $ 409,848 $ - $ 409,848 $ - $ - $ - $ 409,848 Salary and benefits 2,132,940 53,385 57,425 2,243, , ,858 1,147,197 3,390,947 Travel and entertainment 461,187 2,183 19, ,542 12,926 65,077 78, ,545 Vehicle expense 35,247-1,487 36,734 4,332 11,182 15,514 52,248 Product amortization - 94,430-94, ,430 Depreciation expense ,047-57,047 57,847 Bank charges 2, ,202 1, ,294 4,496 Licenses, permits, and memberships 1, ,346 8, ,031 10,377 Insurance 2, ,259 7, ,915 10,174 Miscellaneous and other 110,776 75,199 38, ,359 29,120 2,870 31, ,349 Postage and delivery 19,306 2,100 1,609 23,015 7,453 18,549 26,002 49,017 Photocopying 4, , ,563 Consultant expense 26, , ,256 92, , ,529 Board of directors 10, ,030 20,059 10,030 30,089 40,119 Rent 114,856 1, ,656 39,458 11,026 50, ,140 Building maintenance 26, ,574 2,880 3,417 6,297 32,871 Telephone 44,785 2,827 1,049 48,661 22,757 5,769 28,526 77,187 (continued) -26-

30 Schedule of Functional Expenses (continued) Year Ended June 30, 2009 Program Services Supporting Activities General Worldwide Training Clinics and and Total Ministries Materials Seminars Total Administrative Fund-raising Total Expenses Utilities 15, ,457 5, ,346 20,803 Office supplies 74,008 2,950 1,053 78,011 29,510 10,736 40, ,257 Office equipment 15, ,472 12,270 2,981 15,251 30,723 Materials development 4,770 33,825-38, ,595 Clinics , , ,417 Field representatives 8, , ,958 Other ministry expense 691,758 3,370 8, ,322-7,379 7, ,701 Conferences 48, ,335 1,425 1,916 3,341 51,676 Grants to others 228, ,811 1,835-1, ,646 Interest expense ,270-27,270 27,270 Direct mail/fund-raising , , ,854 $ 4,080,336 $ 682,434 $ 231,272 $ 4,994,042 $ 1,032,292 $ 893,253 $ 1,925,545 $ 6,919,587 59% 10% 3% 72% 15% 13% 28% 100% -27-

31 Analytical Combining Statements of Financial Position (Rounded to the Nearest Thousand) June 30, Change year ASSETS: Current assets: Cash and cash equivalents $ 1,988 $ 1,067 $ 339 $ 347 $ 410 $ 921 $ 1,578 Investments ,474 (79) (1,085) Accounts receivable net of allowance (9) 20 Contribution receivable (21) (90) Notes receivable (1) 26 Inventory (4) (86) Prepaid rent and other assets (8) (23) 2,753 1,954 2,084 1,629 2, Property and equipment net , (500) (49) Unamortized product costs (94) 260 Land held for sale Total Assets $ 3,566 $ 3,361 $ 3,415 $ 2,285 $ 3,015 $ 205 $ 551 LIABILITIES AND NET ASSETS: Current liabilities: Accounts payable $ 91 $ 202 $ 77 $ 46 $ 106 $ (111) $ (15) Accrued vacation and other accrued (37) 45 expenses Deferred revenue (9) (22) Current portion of note payable (156) 11 Note payable net of current portion (18) (63) (174) (52) Net assets: Unrestricted: Undesignated 168 (60) (185) Equity in furniture and equipment net (483) (494) Temporarily restricted: Donor-restricted worldwide ministry support 2,677 2,043 2,106 1,408 1, ,228 2,945 2,566 2,894 2,206 2, Total Liabilities and Net Assets $ 3,566 $ 3,361 $ 3,499 $ 2,960 $ 3,069 $ 205 $

32 Analytical Combining Statements of Activities (Rounded to the Nearest Thousand) Year Ended June 30, Change 2010 % 2009 % 2008 % 2007 % 2006 % 2010 SUPPORT AND REVENUE: Support: Contributions $ 6, $ 4, $ 3, $ 3, $ 3, $ 2,414 Foundations and estates , , , (647) Gifts-in-kind (64) 7, , , , , ,703 Revenue: Training material sales (38) Clinics and seminars Investment and other income , , (17) Total Support and Revenue 8, , , , , ,686 EXPENSES: Program services 6, , , , , ,424 Supporting activities: General and administrative , (433) Fund-raising (12) 1, , , , , (445) Total Expenses 7, , , , , Change in Net Assets (328) (190) (3) Net Assets, Beginning of Year: As previously reported 2,566 2,894 2,206 2,396 1,854 (328) Prior period adjustment (23) - As restated 2,566-2,894-2,206-2,396-1,831 - (328) Net Assets, End of Year $ 2,945 $ 2,566 $ 2,894 $ 2,206 $ 2,396 $ 379 OTHER DATA: Depreciation expense $ 39 $ 58 $ 74 $ 63 $ 37 Fund-raising as a percent of support 12% 16% 13% 17% 13% -29-