ADAPTIVE SPORTS FOUNDATION, INC. AUDITED FINANCIAL STATEMENTS JUNE 30, (with summarized comparative information for June 30, 2016)

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1 AUDITED FINANCIAL STATEMENTS JUNE 30, 2017 (with summarized comparative information for June 30, 2016)

2 FINANCIAL STATEMENTS JUNE 30, 2017 TABLE OF CONTENTS Contents Page Independent Auditor's Report 1-2 Statements of Financial Position 3 Statements of Activities 4 Statements of Cash Flows 5-6 Statements of Functional Expenses 7 Notes to Financial Statements 8-21

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5 STATEMENTS OF FINANCIAL POSITION AS OF JUNE 30, 2017 AND 2016 (with summarized comparative information for June 30, 2016) Temporarily Permanently Totals CURRENT ASSETS Unrestricted Restricted Restricted Cash & Cash Equivalents $ 671,335 $ 1,043,726 $ 2,326 $ 1,717,387 $ 1,000,233 Grant Receivable 7, ,965 1,085 Prepaid Expenses 26, ,660 25,239 Prepaid Real Estate Taxes 2, ,383 2,286 Security Deposit - Rental Marketable Securities 969,501-1,568,766 2,538,267 2,234,320 Note Receivable - Current Portion ,000 Land Held for Resale 529, , ,705 TOTAL CURRENT ASSETS 2,207,849 1,043,726 1,571,092 4,822,667 3,843,168 PROPERTY & EQUIPMENT - NET 2,623, ,623,987 2,727,903 OTHER ASSETS Note Receivable - Net of Current Portion ,000 TOTAL OTHER ASSETS ,000 TOTAL ASSETS $ 4,831,836 $ 1,043,726 $ 1,571,092 $ 7,446,654 $ 6,621,071 CURRENT LIABILITIES Accounts Payable $ 8,823 $ - $ - $ 8,823 $ 4,941 Payroll Liabilities ,383 Deferred Grant Revenue 66, , ,201 Deferred Realized Gain - Current 8, ,000 30,219 Land Acquisition Loan 750, ,000 1,000,000 TOTAL CURRENT LIABILITIES 833, ,063 1,217,744 NON CURRENT LIABILITIES Deferred Realized Gain - Non Current ,218 NET ASSETS 3,998,773 1,043,726 1,571,092 6,613,591 5,373,109 TOTAL LIABILITIES AND NET ASSETS $ 4,831,836 $ 1,043,726 $ 1,571,092 $ 7,446,654 $ 6,621,071 See independent auditor's report and accompanying notes to financial statements. (3)

6 Temporarily Permanently Totals PUBLIC SUPPORT AND REVENUE Unrestricted Restricted Restricted PUBLIC SUPPORT Contributions received for support $ 338,364 $ 33,318 - $ 371,682 $ 348,781 Noncash Contributions 297, ,500-1,295, ,388 Grant Revenue 296, , ,865 Special Event Revenue 709, , ,961 TOTAL PUBLIC SUPPORT 1,642,144 1,030,818-2,672,962 1,772,995 REVENUE Program Revenue 205, , ,175 Net Income (Loss) on Retail Sales 2, ,789 2,474 Net Income on Lunch and Vending Sales 4, ,115 1,883 Lease Income 10,000 10,000 10,000 Dividend Income 43, ,560 50,618 Interest Income 18, ,043 17,705 Net Realized/Unrealized Gain (Loss) on Invest. 123, , ,262 (139,068) Net Realized Gain on Land Held for Resale 60, ,437 19,781 Other Income 11, ,937 10,704 TOTAL REVENUE 479, , , ,272 Net Assets Released from Restriction 42,421 (42,421) TOTAL PUBLIC SUPPORT AND REVENUE 2,164, , ,153 3,326,060 1,877,267 EXPENSES ADAPTIVE SPORTS FOUNDATION STATEMENTS OF ACTIVITIES (with summarized comparative information for the year ended June 30, 2016) Program Services 1,336, ,336,976 1,389,158 Supporting Services 735,762-12, , ,506 Total Expenses 2,072,738-12,840 2,085,578 2,058,664 Changes in Net Assets 91, , ,313 1,240,482 (181,397) Interfund Transfers (13,451) - 13, NET ASSETS - BEGINNING OF YEAR 3,920,452 55,329 1,397,328 5,373,109 5,554,506 NET ASSETS - END OF YEAR $ 3,998,773 $ 1,043,726 $ 1,571,092 $ 6,613,591 $ 5,373,109 See independent auditor's report and accompanying notes to financial statements. (4)

7 STATEMENTS OF CASH FLOWS Cash Flows Provided By (Used By) Operating Activities Increase (Decrease) in net assets $ 1,240,482 $ (181,397) Adjustments to reconcile change in net assets to net cash provided from operating activities: Net realized and unrealized gain/loss on investments (296,262) 139,068 Depreciation 138, ,910 Equipment received as donations - (35,800) Net Realized Gain on Land Held for Resale (60,437) (19,781) Marketable Securities received as donations (997,500) - (Increase) Decrease in operating assets: Accounts Receivable - 25,000 Grant Receivable (6,880) 14,040 Prepaid Expenses (1,421) (3,703) Prepaid Real Estate Taxes (97) 1,656 Increase (Decrease) in operating liabilities: Accounts Payable 3, Payroll Liabilities (20,383) 3,617 Deferred Grant Revenue (95,961) 5,312 Deferred Revenue - Other 8,000 - Cash Flows Provided By (Used By) Operating Activities (88,158) 92,766 Cash Flows Provided By (Used By) Investing Activities Proceeds from sale of investments and distributions 1,631, ,507 Purchase of investments (641,656) (1,046,958) Proceeds from Land Held for Resale - 500,000 Additional Costs of Land Held for Resale - (165,875) Note Receivable - Land Held For Resale 100,000 50,000 Acquisition of fixed assets (34,503) (34,292) Cash Flows Provided By (Used By) Investing Activities 1,055,312 23,382 See independent auditor's report and accompanying notes to financial statements. (5)

8 STATEMENTS OF CASH FLOWS - CONTINUED Cash Flows Provided By (Used By) Financing Activities New Borrowings $ - $ - Repayment of Land Acquisition Loan (250,000) - Cash Flows Provided By (Used By) Financing Activities (250,000) - Total Increase (Decrease) in Cash $ 717,154 $ 116,148 Cash at Beginning of Year July 1, 1,000, ,085 Cash at End of Year $ 1,717,387 $ 1,000,233 Supplemental Disclosures Interest Paid $ - $ - Income Taxes Paid $ - $ - Noncash Transactions During the years ended June 30, 2017 and 2016 Adaptive Sports Foundation received total noncash donated services of $78,380 and $71,600, respectively. These amounts were also recorded as noncash transactions for Volunteer Expense. During the years ended June 30, 2017 and 2016 Adaptive Sports Foundation recognized noncash donation income in the amount of $8,850 and $6,400, respectively, for interest expense recognized on an interest free loan from Peter Kellogg. See Note I. During the years ended June 30, 2017 and 2016 Adaptive Sports Foundation recognized noncash donation income in the amount of $207,048 and $219,189, respectively, for donated ski lift tickets. These amounts were also recorded as noncash transactions for Program Expense. During the years ended June 30, 2017 and 2016 Adaptive Sports Foundation recognized noncash donation income in the amounts of $3,269 and $1,399, respectively, for the receipt of donated miscellaneous items utilized by program participants. These amounts were also recorded as noncash transactions for program related expenses. During the year ended June 30, 2017 Adaptive Sports Foundation recognized noncash temporary restricted donation income in the amount of $997,500 for the receipt of marketable securities for purposes of funding employee benefits in future years. See independent auditor's report and accompanying notes to financial statements. (6)

9 STATEMENTS OF FUNCTIONAL EXPENSES (with summarized comparative information for the year ended June 30, 2016) Program Management Totals Services & General Fundraising Gross Wages and Salaries $ 399,766 $ 80,768 $ 97,871 $ 578,405 $ 567,345 Winter Programs Expenses 308, , ,183 Banquet/Special Event Expenses , , ,932 Depreciation 98,125-40, , ,910 Wounded Warrior Program Expenses 98, , ,514 Volunteer Expense 81, ,528 77,970 Insurance Expense 54,348 11,040 13,627 79,015 81,677 Warrior in Motion Program Expenses 70, ,145 34,394 Miscellaneous & Service Charges 20,382 43,234 4,644 68,260 60,695 Employee Benefits 44,517 8,994 10,899 64,410 65,630 Employer Taxes 31,682 6,401 7,756 45,839 45,472 Marketing Expense ,652 41,652 36,661 Veterans Affairs Program Expenses 36, ,346 36,884 Building Maintenance & Expenses 21,702 4,385 5,313 31,400 32,374 Lease Expense - Land 30, ,000 10,000 Printing/Stationery Expense ,400 24,079 21,877 Activities Expense ,104 23,104 19,851 Investment Account Fees - 20,354-20,354 19,315 Legal Fees - 20,265-20,265 2,645 Trophy/Prize Expense ,591 16,591 19,225 Accounting/Audit Expense - 15,375-15,375 16,450 Utilities 8,251 3,687-11,938 10,470 Donation & Awards - 10,626-10,626 3,136 Equipment Expenses 10, ,342 9,687 Computer & Website Expenses 5,886 2,541 1,441 9,868 13,300 Real Estate Taxes - 4,331 5,248 9,579 14,507 Interest Expense 1,475 3,334 4,041 8,850 6,401 Travel Expense - - 7,373 7,373 3,793 Vehicle Expenses 4, ,748 7,323 2,130 Telephone Expense 5,047 1,020 1,236 7,303 8,107 Supplies 1, ,705 4,085 3,816 Office Expenses ,015 3,855 2,897 Postage Expense ,835 3,636 3,872 Training Expense 2, ,316 1,790 Admin. & Bd of Directors Expense TOTAL FUNCTIONAL EXPENSES $ 1,336,976 $ 239,297 $ 509,305 $ 2,085,578 $ 2,058,664 See independent auditor's report and accompanying notes to financial statements. (7)

10 NOTE A NATURE OF ACTIVITIES ADAPTIVE SPORTS FOUNDATION, INC. Adaptive Sports Foundation, Inc. ( ASF or the Organization ) was organized as a not-for-profit corporation on July 1, 2000 under the laws of the State of New York. The Foundation is located in Windham, New York. ASF offers both summer and winter recreational opportunities to individuals with mental and/or physical disabilities. The winter program serves as a model for other ski resorts that are interested in establishing adaptive programs. Prior to the existence of ASF, the adaptive programs were a component of the Professional Ski Instructors of America Eastern Education Foundation. During the year ended June 30, 2001 all assets and liabilities related to the adaptive programs were transferred to ASF in order for ASF to carry out its purposes. The transfers occurred during the month of October ASF is not considered a related party to the Professional Ski Instructors of America Eastern Education Foundation. NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Accounting The financial statements of ASF have been prepared on the accrual basis of accounting and accordingly reflect all significant receivables, payables and other liabilities. Basis of Financial Statement Presentation The classification of ASF s net assets and its support, revenue and expenses is based on the existence or absence of donor-imposed restrictions. It requires that the amounts for each three classes of net assets, permanently restricted, temporarily restricted and unrestricted, be displayed in a statement of financial position and that the amounts of change in each of those classes of net assets be displayed in a statement of activities. The classes of net assets are defined as follows: Unrestricted net assets represent resources whose use is not limited or restricted by donors. Resources are reported as unrestricted when the limitations placed on their use are no more specific than the broad limits of the Organization s purpose. Temporarily restricted net assets represent resources whose use is limited only by donors for the purpose and/or time in which they may be expended. Eventually, temporarily restricted net assets are reclassified to unrestricted as their time and purpose requirements are met. Permanently restricted net assets represent resources that must be maintained permanently. Permanently restricted net assets are generally restricted indefinitely. At June 30, 2017, ASF had all three classes of net assets. Advertising and Marketing Expenses ASF s policy is to recognize advertising and marketing expenses during the period that the expense is incurred. For purposes of these financial statements advertising and marketing expenses included on the Statement of Functional Expenses is considered to be equivalent to Marketing Expense. (8)

11 NOTE B SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Cash and Cash Equivalents ASF considers all money market funds and investments with maturities of three months or less at the time of purchase to be cash equivalents. Contributions Receivable Contributions received are recorded as unrestricted, temporarily restricted, or permanently restricted support, depending on the existence or nature of any donor restrictions. ASF reports unconditional promises to give as Contribution Received For Support. Support that is restricted by the donor is reported as an increase in unrestricted net assets, if the restriction expires in the reporting period in which the support is recognized. All other 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 (that is, when a stipulated time restriction ends or purpose restriction is accomplished), temporarily restricted net assets are reclassified to unrestricted net assets and reported in the Statements of Activities and Changes in Net Assets as net assets released from restrictions. As of June 30, 2017 and 2016 there were no Contributions Receivable. Contributed Services Contributed Services are recognized as contributions in accordance with the Not for Profit Entity s Topic FASB ASC. The services create or enhance nonfinancial assets or require specialized skills, are performed by people with those skills, and would otherwise be purchased by ASF. ASF received 7,838 and 7,160 volunteer hours during the years ended June 30, 2017 and 2016, respectively. For the years ended June 30, 2017 and 2016, the value of contributed services was $78,380 and $71,600, respectively, and recorded as an increase in both noncash contributions and volunteer expenses. Depreciation Depreciation is calculated using the straight-line method over the estimated useful lives of the respective classes of property. Depreciation expense for the years ended June 30, 2017 and 2016 was $138,419 and $143,910, respectively. Endowment According to ASC, Not-for-Profits Entities: Presentation of Financials Statement, ASF is subject to an enacted version of Uniform Prudent Management of Institutional Funds Act (UPMIFA), which requires the Organization to reclassify certain amounts of donor-restricted endowment funds between temporarily restricted net assets and permanently restricted net assets. As of 2010, the state of New York has adopted its own version of UPMIFA. Under the NYPMIFA, Organizations are allowed to spend endowment funds below their original dollar amount ( historic dollar value ) without court approval or Attorney General review if the Organization s board of directors concludes that such spending is prudent. Estimates Management uses estimates and assumptions in preparing financial statements. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Actual results could differ from those estimates. (9)

12 NOTE B SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Functional Allocation of Expenses The costs of providing various programs and other activities have been summarized on a functional basis in the Statement of Activities and in the Statement of Functional Expenses. Accordingly, certain expenses have been allocated between the program and supporting services benefited. Fair Value of Financial Instruments and Fair Value Disclosures The Organization has adopted the accounting guidance in FASB in Accounting Standards Update, Improving Disclosures about Fair Value Measurement Requirements. The guidance defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The guidance also establishes a fair value hierarchy that requires the Organization to maximize the use of observable input when measuring fair value. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Organization s market assumptions. The three levels of valuation hierarchy are as follows: Level 1 Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets. ASF s Level 1 non derivatives financial investments include equity and debt securities, and cash and cash equivalents. 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. Level 3 Inputs to the valuation methodology are unobservable and significant to the fair value measurement. Transfers between levels may occur when there is a change in the observability of significant inputs. A transfer between Level 1 and Level 2 generally occurs when the availability of quoted prices changes or when market activity of an investment significantly changes to active or inactive. A transfer between Level 2 and Level 3 generally occurs when the underlying inputs become, or can no longer be, corroborated with market observable data. For the years ended June 30, 2017 and 2016, there were no transfers between Levels 1, 2 or 3. The following methods and assumptions were used to estimate the fair value of each class of financial instruments in the accordance with the provisions of ASC: Cash and Cash Equivalents The carrying amounts reported in the accompanying statements of financial position approximate their fair value, due to the short-term maturity of these instruments. ASF carries investments in marketable securities with readily determinable fair values and all investments in debt securities at their fair values in the Statement of Financial Position. Unrealized gains and losses are included in the change in net assets in the accompanying Statements of Activities. (10)

13 NOTE B SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Income from Investments Investment income is reported as an increase in unrestricted net assets unless the donor placed restriction on the income s use. Income that is restricted is reported as an increase in temporarily or permanently restricted net assets depending on the nature of the restrictions. Gains and losses are reflected as increases or decreases in the unrestricted class of net assets unless the donor or relevant laws placed temporary or permanent restrictions on those gains and losses. Donor-restricted investment income and gains whose restriction is met in the same reporting period are reported as unrestricted income. During the years ended June 30, 2017 and 2016 investment income from assets that were unrestricted and permanently restricted were recognized and reflected on the Statements of Activities. Income Tax Status ASF is exempt from income taxes under Internal Revenue Service Code Section 501(c)(3). Therefore, income tax expense has not been provided for in these financial statements. Some activities and revenues are recognized as unrelated business income for tax return purposes. Therefore, ASF files Forms 990-T and CT-13 with the Internal Revenue Service and New York State, respectively. None of the filings from inception has resulted in the recognition of taxable income or income tax due. However, filings of these unrelated business income tax returns for the years ended June 30, 2014 and forward are currently open for possible public inspection. Property and Equipment Property and equipment are stated on the balance sheet at cost and do not purport to represent replacement or realizable value. Upon sale or retirement of items, the cost and related accumulated depreciation are removed from the respective accounts and the net difference, less any amount realized from disposition, is reflected in earnings. Revenue Recognition All contributions are considered available for the Organization s general programs unless specifically restricted by the donor. Amounts received that are designated for future periods or restricted by the donor are reported as temporarily or permanently restricted support and increase the respective class of net assets. Contributions received with temporary restrictions that are met in the same reporting period are reported as unrestricted support and increase unrestricted net assets. Investment income that is limited to specific uses by donor restrictions is reported as increases in unrestricted net assets if the restrictions are met in the same reporting period as the income is recognized. (11)

14 NOTE C CASH AND CASH EQUIVALENTS The balances comprising cash and cash equivalents on hand and in bank at June 30, 2017 and 2016 are as follows: June 30, Cash in bank, checking accounts $ 626,590 $ 905,020 Schwab Money Market Funds 1,028,131 43,555 Key Bank - Money Market 62,666 51,658 Total Cash and Cash Equivalents $ 1,717,387 $ 1,000,233 NOTE D PREPAID EXPENSES As of June 30, 2017 and 2016 prepaid expenses consisted of advanced payments for the following: June 30, Insurance $ 4,885 $ 18,347 Golf Tournament Sept 17 5,500 $ - MCC ,000 $ - Bid pal Gala ,892 Otis Contract service 1,276 - Real Estate Taxes 2,383 2,286 Total Prepaid Expenses $ 29,044 $ 27,525 NOTE E MARKETABLE SECURITIES Adaptive Sports Foundation, Inc. s investment portfolio is managed by an outside investment firm which has discretion to alter the portfolio asset allocation within the ranges specified by ASF, depending on the economic and capital market outlook to achieve ASF s investment objectives. Marketable securities consist of common stocks, corporate bonds and stocks and equity mutual funds traded on the national stock exchanges, and are stated at fair value. Market values and unrealized appreciation (depreciation) at June 30, 2017 are summarized below: Unrealized Fair Market Appreciation Year 2017 Cost Value (Depreciation) Stock/Equity Mutual Funds $ 557,353 $ 585,941 $ 28,588 Common Stock 1,221,964 1,635, ,754 Corporate Bonds 326, ,608 (10,247) Total $ 2,106,172 $ 2,538,267 $ 432,095 (12)

15 NOTE E MARKETABLE SECURITIES CONTINUED The unrestricted unrealized appreciation of marketable securities as of the year ended June 30, 2017 was $140,271. The permanently restricted unrealized appreciation of marketable securities as of the year ended June 30, 2017 was $291,824. Market values and unrealized appreciation (depreciation) at June 30, 2016 are summarized below: Unrealized Fair Market Appreciation/ Year 2016 Cost Value (Depreciation) Stock/Equity Mutual Funds $ 479,546 $ 476,671 $ (2,875) Common Stocks 1,256,406 1,430, ,518 Corporate Bonds 326, ,725 (130) $ 2,062,807 $ 2,234,320 $ 171,513 The unrestricted unrealized appreciation of marketable securities as of the year ended June 30, 2016 was $16,566. The permanently restricted unrealized appreciation of marketable securities as of the year ended June 30, 2016 was $154,957. Net realized and unrealized gains (losses) on marketable securities are as follows for the years ended June 30, 2017 and 2016: June 30, Realized gains (loss) $ 35,680 $ (21,733) Unrealized gains (loss) 260,582 (117,335) Net realized & unrealized gains (losses) on marketable securities $ 296,262 $ (139,068) The unrestricted net realized and unrealized gain on marketable securities for the year ended June 30, 2017 was $123,109. For the year ended June 30, 2016 the unrestricted net realized and unrealized loss on marketable securities was $52,161. The permanently restricted net realized and unrealized gain for the year ended June 30, 2017 was $173,153. For the year ended June 30, 2016 the permanently restricted net realized and unrealized loss on marketable securities was $86,907. (13)

16 NOTE F NOTE RECEIVABLE ADAPTIVE SPORTS FOUNDATION, INC. Note Receivable as of June 30, 2016, represented the amount due to the Organization as a result of a sale of one parcel of property held for resale. See Note G. The note was interest free and paid in full for the amount of $100,000 during the year ended June 30, NOTE G LAND HELD FOR RESALE As of June 30, 2017 Land Held for Resale includes property bought in conjunction with the parcel of land purchased for the purposes of the construction for the existing facility which was occupied during the year ended June 30, Land Held for Resale also includes a parcel which was received as a noncash contribution during the year ended June 30, 2014 and held for sale as of June 30, During the year ended June 30, 2016 additional costs were recognized for property held for resale in the amount of $165,875. In addition, one parcel was sold with a selling price of $500,000 and realized loss of $10,437. Included in this transaction was a conveyance/deed transfer modifying the original legal description by 0.5 acres to the parcel, which includes the ASF main building. As a result of this, $90,674 in cost was transferred to Land within Property and Equipment. Land Held for Resale was reduced by this same $90,674. As of June 30, 2016 the Organization was holding a note receivable in the amount of $100,000 as part of the sale in See Note F. This note was paid in full during the year ended June 30, Deferred Realized Gain as a result of the sale in 2015 totaled $60,437 as of June 30, See Note J. As a result of the note being paid in full during the year ended June 30, 2017 this deferred gain was fully recognized as income. Therefore, the Net Realized Gain on Land Held for Resale shown on the Statement of Activities for the years ended June 30, 2017 was $60,437. For the year ended June 30, 2016 the realized gain on Land Held for Resale was $19,781. Land Held for Resale shown on the Statement of Financial Position for the years then ended June 30, 2017 and 2016 were both $529,705. (14)

17 NOTE H PROPERTY & EQUIPMENT ADAPTIVE SPORTS FOUNDATION, INC. Property and equipment at June 30, 2017 and 2016 consist of the following: June 30, Equipment $ 721,884 $ 699,256 Machinery & Equipment 125, ,639 Office Equipment 59,322 59,322 Uniforms 160, ,819 Computer Software 35,758 35,758 Furniture & Fixtures 80,500 80,500 Building 2,288,598 2,288,598 Building Improvements 152, ,322 Land Improvements 41,422 38,922 Land 592, ,066 Total Property & Equipment 4,258,705 4,224,202 Less: Accumulated Depreciation (1,634,718) (1,496,299) Total Property & Equipment - Net $ 2,623,987 $ 2,727,903 During the year ended June 30, 2016 Land increased by $90,674. This relates to the conveyance/deed transfer modification as indicated in Note G, Land Held for Resale. NOTE I LAND ACQUISITION LOAN During the month of March 2005 ASF obtained a non-recourse non-interest loan from Peter Kellogg in the amount of one million two-hundred fifty-thousand dollars ($1,250,000) for the purchase of land on which the existing facility was constructed and occupied during the year ended June 30, The loan is to be repaid without interest upon the sales of parcels held for resale. See Note G. However, even though ASF will not pay interest annually to Mr. Kellogg, the Organization will recognize interest expense and contribution income at the applicable federal interest rate determined at the end of each fiscal year beginning with the year ended June 30, The applicable federal rate as of June 30, 2017 was 1.18%. Therefore, the interest expense and contribution income recognized for the year ended June 30, 2017 was $8,850. The applicable federal interest rate as of June 30, 2016 was 0.64%. Therefore, the interest expense and contribution income recognized for the year ended June 30, 2016 was $6,400. This contribution income is considered a noncash contribution. See Note Q. The sales of the parcels of land held for resale are expected to result in proceeds of at least $1,250,000 net of taxes as a result of capital gains, thus allowing for repayment of the loan in full. If land sales in future years do not recognize a net of the $750,000, the amount still owed to Mr. Kellogg as of June 30, 2017, any remaining difference owed will be forgiven. There is no allowance for forgiveness of debt in these financial statements. Forgiveness of debt, if any, will result in the recognition of revenue during the year of occurrence. (15)

18 NOTE J DEFERRED REALIZED GAIN ADAPTIVE SPORTS FOUNDATION, INC. Deferred Realized Gain represented the gain on sale of land held for resale which was to be recognized in subsequent years. As of June 30, 2016 this amount of deferred realized gain was $60,437. As of June 30, 2017 there is no deferred realized gain. See Note G. NOTE K NET ASSETS Net assets at June 30, 2017 and 2016 consist of the following: June 30, Unrestricted Undesignated $ 3,998,773 $ 3,920,452 Total Undesignated 3,998,773 3,920,452 Temporarily Restricted Elijah Net Asset 631 1,196 Employee Benefits 1,003,871 - MVP Net Asset 1,545 1,545 Staci Net Asset 33,899 48,198 Other Temp Restricted Net Asset 3,780 4,390 Total Temporarily Restricted 1,043,726 55,329 Permanently Restricted Endowment Fund 1,571,092 1,397,328 Total Permanently Restricted 1,571,092 1,397,328 Total Net Assets $ 6,613,591 $ 5,373,109 The interest and dividend earnings from the permanently restricted net assets are to be used towards the maintenance and operations of the facility with any direct expenses related to the investments and any realized and unrealized capital gains and losses to affect the balance of the restricted net assets. As of June 30, 2017 and 2016, the permanently restricted net assets were $1,571,092 and $1,397,328, respectively. These net assets are being held with Charles Schwab in the form of investments and are managed by an outside investment firm. NOTE L ENDOWMENT FUNDS ASF's endowment consists of various individual funds established for a variety of purposes. Its endowment includes donor-restricted funds. As required by generally accepted accounting principles, net assets associated with endowment funds, including funds designated by the Board of Directors to function as endowments, are classified and reported based on the existence or absence of donor-imposed restrictions. (16)

19 NOTE L ENDOWMENT FUNDS CONTINUED ASF has interpreted the New York Prudent Management of Institutional Funds Act (NYPMIFA) as requiring each person responsible for managing and investing an institutional fund "shall manage and invest the fund in good faith and with the care an ordinarily prudent person in a like position would exercise under similar circumstances." The act also requires that the following eight factors, if relevant, be considered in managing and investing an institutional fund: (1) general economic conditions, (2) the possible effect of inflation or deflation, (3) the expected tax consequences, if any, of investment decisions or strategies, (4) the role that each investment or course of action plays within the overall investment portfolio of the fund, (5) the expected total return from income and the appreciation of investments, (6) other resources of the institution, (7) the needs of the institution and the fund to make distributions and to preserve capital, and (8) an asset's special relationship or special value, if any, to the purposes of the institution. In addition to the eight factors set forth above the governing board must consider the purposes of the Organization as well as the purposes for which the fund was established when managing and investing an institutional fund. Under NYPMIFA a fund's investments must be diversified unless the Organization's governing board determines that, due to special circumstances, the purposes of the fund are better served without diversification. Any decision not to diversify must be reviewed by the Organization's governing board at least annually. Management and investment decisions about a specific asset must be made in the context of the portfolio of investments in which the fund is invested, and as part of an overall investment strategy in light of return objectives "reasonably suited" to the charity and the fund. In addition, the organization shall be required, within a reasonable time after receiving property, to make and carry out decisions regarding retaining or disposing of the property, or rebalancing the Organization's portfolio in order to bring the fund into compliance with NYPMIFA, and to take into consideration the Organization's other circumstances, including, for example, its distribution requirements and/or general liquidity needs. The composition of endowment net assets and the changes in endowment net assets are as follows: Temporarily Permanently Unrestricted Restricted Restricted Total Endowment Funds, 7/1/2016 $ - $ 55,329 $ 1,397,328 $ 1,452,657 Contributions - 1,030,818-1,030,818 Net Realized and Unrealized Gain(Loss) , ,153 Investment Fees - - (12,840) (12,840) Net (Released) or Transferred for - (42,421) 13,451 (28,970) Expenditures Endowment funds, 6/30/2017 $ - $ 1,043,726 $ 1,571,092 $ 2,614,818 (17)

20 NOTE M CONTINGENCIES ADAPTIVE SPORTS FOUNDATION, INC. ASF is subject to litigation in its normal course of operations and carries insurance related to such possibilities. Presently, ASF is not subject to any matters that require the recognition of a liability in the financial statements. NOTE N SPECIAL EVENT REVENUE During the years ended June 30, 2017 and 2016, there were many separate special events generating income totaling $709,684 and $706,961, respectively. The income from each of the special events is summarized bellow: June 30, Master Chef Income $ 289,638 $ 348,132 Golf Tournament Income 91, ,175 Dinner Dance/Auction Income 95, ,572 Annual Fund Drive Income 7,846 36,450 Michael Gray Race Income 39,622 36,055 Wine Tasting Income 35,332 29,241 Skiathon Income 19,700 15,640 Chairlift Sponsorship Income 5,501 8,000 Hudson Farms Income 103,850 - Other Special Events Income 21,112 1,696 Total Special Event Income $ 709,684 $ 706,961 NOTE O NET INCOME ON RETAIL SALES ASF periodically sells apparel and other items to its winter and summer program instructors as well as to the public. During the years ended June 30, 2017 and 2016 net income (loss) on retail sales was computed as follows: June 30, Sales Income $ 7,565 $ 5,510 Less: Apparel and Other Item Costs (4,776) (3,036) Net Income (Loss) on Sales of Apparel $ 2,789 $ 2,474 (18)

21 NOTE P NET INCOME LUNCH & VENDING SALES ASF recognizes income and cost of sales from transactions related to unprepared sales of food and beverage in the kitchen area of the facility. Below is a schedule for the years ended June 30, 2017 and 2016 showing the sales and cost of sales related to such transactions: June 30, Sales Income $ 17,682 $ 9,918 Less: Food and Beverage Costs (13,567) (8,035) Net Income on Lunch Program $ 4,115 $ 1,883 NOTE Q NONCASH CONTRIBUTIONS During the years ended June 30, 2017 and 2016 Adaptive Sports Foundation, Inc. received the following noncash contributions that have been reflected in the financial statements of the organization: June 30, Donated Lift Tickets $ 207,048 $ 219,189 Donated Services - Volunteers(See below) 78,380 71,600 Donated Marketable Securities 997,500 - Equipment - 35,800 Interest on loan forgiven - See Note I 8,850 6,400 Other Program Expenses 3,269 1,399 Total Noncash Contributions $ 1,295,047 $ 334,388 During the years ended June 30, 2017 and 2016 donated services from volunteers were recorded based upon the actual number of volunteer hours factored by the average fair market value for costs per hour. The amounts recorded for the years ended June 30, 2017 and 2016 were $78,380 and $71,600, respectively. NOTE R PROGRAM REVENUE During the years ended June 30, 2017 and 2016 income was provided by the various programs offered by ASF as follows: June 30, Soldier Program Revenue $ 78,515 $ 23,606 Winter Program Revenue 127, ,569 Total Program Revenue $ 205,955 $ 130,175 (19)

22 NOTE S GRANTS During the years ended June 30, 2017 and 2016, ASF recognized revenue for grants from various foundations and individuals totaling $228,887 and $328,957, respectively. During the years ended June 30, 2017 and 2016, ASF also recognized revenue for grants from the federal government in the amounts of $67,662 and $53,908, respectively. Grant Receivable as of June 30, 2017 and 2016 represented amounts of $7,965 and $1,085, respectively, recognized as revenue from the federal grant, but not received as of the close of the 2017 and 2016 fiscal years. Deferred Grant Revenue was $66,240 and $162,201 as of June 30, 2017 and 2016, respectively. These are recorded for amounts received from grantors but not yet earned and expended as of the close of the fiscal years. NOTE T LEASE INCOME/LEASE EXPENSE During the year ended June 30, 2006 ASF purchased and installed a chairlift upon land owned by Ski Windham Operating Corporation to provide access to and from base facilities of the ski area to the ASF facilities southeast of the ski lodge. The real estate owners of the ski facilities and owners of the ski operations agreed to this arrangement. The cost of the new ski lift plus installation was $389,021. The most recent agreement entered into by ASF is a ten year agreement (with options for five more years renewal following expiration) effective during the year ended June 30, 2013 with Ski Windham Operating Corporation and Windham Mountain Partners to lease the land necessary for use in its programs for $10,000 per year. Conversely, ASF agreed to a ten year lease for the use of this new lift equipment to the owners of Ski Windham Operating Corporation and Windham Mountain Partners for $10,000 annually. Lease payments are due annually. During the year ended June 30, 2016, ASF entered into a five year lease agreement with Girls Quest for lake use and access of trails, storage and use of property amenities at a local camp known as Camp Oh-Neh-Tah (the Camp). The lease commenced on July 1, 2016 for the amount of $20,000 per year. ASF has the option to be released from this lease agreement at any time, without penalty, if the required programming and/or funding ceases to exist in order to continue such programming at the Camp. (20)

23 NOTE T LEASE INCOME/LEASE EXPENSE CONTINUED The following is a schedule of anticipated future lease payments for the next five years: For the years ending June 30, Amount 2018 $ 30, , , , ,000 Total $ 130,000 NOTE U CONCENTRATION OF CREDIT RISK Financial instruments that potentially subject ASF to concentrations of credit risk consist principally of cash and cash equivalent accounts in financial institutions. The Federal Depository Insurance Corporation (FDIC) provides insured coverage for cash and cash equivalent accounts in member financial institutions up to $250,000 per depositor. This coverage was effective as of and for the years ended June 30, 2017 and For the years ended June 30, 2017 and 2016 ASF was subject to credit risk losses of $437,983 and $705,406, respectively (the amount above the FDIC insured coverage threshold). NOTE V SUBSEQUENT EVENTS Events that occur after the date of the Statements of Financial Position but before the financial statements were available to be issued must be evaluated for recognition or disclosure. The effects of subsequent events that provide evidence about conditions that existed at the date of the Statements of Financial Position are recognized in the accompanying financial statements. Subsequent events which provide evidence about conditions that existed after the date of the Statement of Financial Position require disclosure in the accompanying notes. Management evaluated the activity of the Organization through September 8, 2017 (the date the financial statements were available to be issued) and concluded that no subsequent events have occurred that would require recognition in the financial statements or disclosure in the notes to the financial statements. (21)