WINTER GARDEN HERITAGE FOUNDATION, INC.

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1 WINTER GARDEN HERITAGE FOUNDATION, INC. FINANCIAL STATEMENTS Year Ended September 30, 2009

2 C O N T E N T S Page Number REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS 1 FINANCIAL STATEMENTS Statement of Financial Position 2 Statement of Activities 3 Statement of Cash Flows 4 Notes to Financial Statements 5

3 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS Board of Trustees Winter Garden Heritage Foundation, Inc. Winter Garden, Florida We have audited the accompanying statement of financial position of Winter Garden Heritage Foundation, Inc. (the Foundation ), a nonprofit organization, as of September 30, 2009, and the related statements of activities and cash flows for the year then ended. These financial statements are the responsibility of the Foundation s management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Foundation as of September 30, 2009, and the changes in its net assets and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. Certified Public Accountants Orlando, Florida June 2,

4 WINTER GARDEN HERITAGE FOUNDATION, INC. STATEMENT OF FINANCIAL POSITION September 30, 2009 ASSETS Temporarily Unrestricted Restricted Total CURRENT ASSETS Cash and cash equivalents $ 63,506 $ 14,722 $ 78,228 Pledges receivable, net 65,233 6,166 71,399 Prepaid expenses 23,484-23,484 TOTAL CURRENT ASSETS 152,223 20, ,111 PROPERTY, EQUIPMENT, AND HISTORICAL ASSETS, net 3,391,939-3,391,939 TOTAL ASSETS $ 3,544,162 $ 20,888 $ 3,565,050 LIABILITIES AND NET ASSETS CURRENT LIABILITIES Accounts payable and accrued expenses $ 304,191 $ - $ 304,191 Accrued interest 58,524-58,524 Unearned revenue 80,816-80,816 Current portion of note payable 1,302,488-1,302,488 TOTAL CURRENT LIABILITIES 1,746,019-1,746,019 NET ASSETS Unrestricted 1,785,143-1,785,143 Board designated for capital maintenance 13,000-13,000 Temporarily restricted - 20,888 20,888 TOTAL NET ASSETS 1,798,143 20,888 1,819,031 TOTAL LIABILITIES AND NET ASSETS $ 3,544,162 $ 20,888 $ 3,565,050 The accompanying notes are an integral part of the financial statements

5 WINTER GARDEN HERITAGE FOUNDATION, INC. STATEMENT OF ACTIVITIES Year Ended September 30, 2009 Temporarily Unrestricted Restricted Total REVENUE AND SUPPORT Contributions $ 296,809 $ - $ 296,809 Events 241, ,856 Merchandise sales 41,936-41,936 Grants 122, ,000 Interest income Net assets released from restrictions 420,956 (420,956) - TOTAL REVENUE AND SUPPORT 1,124,438 (420,956) 703,482 EXPENSES Program services 756, ,957 General expenses 24,500-24,500 Event expense 46,581-46,581 Provision for uncollectible pledges 10,975-10,975 Interest expense 66,872-66,872 TOTAL EXPENSES 905, ,885 CHANGE IN NET ASSETS 218,553 (420,956) (202,403) NET ASSETS AT BEGINNING OF YEAR 1,579, ,844 2,021,434 NET ASSETS AT END OF YEAR $ 1,798,143 $ 20,888 $ 1,819,031 The accompanying notes are an integral part of the financial statements

6 WINTER GARDEN HERITAGE FOUNDATION, INC. STATEMENT OF CASH FLOWS Year Ended September 30, 2009 CASH FLOWS FROM OPERATING ACTIVITIES Change in net assets $ (202,403) Adjustments to reconcile change in net assets to net cash provided by operating activities: Depreciation 201,206 Provision for uncollectible pledges 10,975 Changes in operating assets and liabilities: Decrease in pledges receivable, net 70,060 Increase in prepaid expenses (7,177) Decrease in accounts payable (6,914) Increase in accrued interest 45,570 Decrease in accrued liabilities (44,143) Decrease in unearned revenue (185) NET CASH PROVIDED BY OPERATING ACTIVITIES 66,989 CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property, equipment, and historical assets (29,045) CASH FLOWS FROM FINANCING ACTIVITIES Repayment of advance from board members (27,000) NET CASH PROVIDED BY FINANCING ACTIVITIES (27,000) INCREASE IN CASH 10,944 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 67,284 CASH AND CASH EQUIVALENTS AT END OF YEAR $ 78,228 SUPPLEMENTAL DISCLOSURE: Noncash investing and financing activities Gifts of equipment $ 52,485 Cash paid for interest $ - The accompanying notes are an integral part of the financial statements

7 WINTER GARDEN HERITAGE FOUNDATION, INC. NOTES TO FINANCIAL STATEMENTS Year Ended September 30, 2009 NOTE 1 - NATURE OF ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Organization Winter Garden Heritage Foundation, Inc. (the Foundation ) was organized as a nonprofit corporation for the promotion of preservation, rehabilitation, restoration, and maintenance activities, as well as the acquisition of important natural, scenic, historic, and architectural sites and structures in the City of Winter Garden, Florida. Cash and Cash Equivalents Cash equivalents consist of investments in financial instruments with original maturities of 90 days or less when purchased. Property and Equipment It is the policy of the Foundation to capitalize property and equipment purchases over $1,000; lesser amounts are expensed. Gifts or contributions are recorded at fair market value at the time received. Depreciation has been provided on fixed assets using the straight-line method over the estimated useful lives of the various classes of depreciable assets, which ranges from 5-40 years. Historical Assets It is the policy of the Foundation, since its inception, to capitalize historical assets purchased or appraised at a fair value of $10,000 or more on the date of purchase or contribution. Gains or losses from the sale of historical items contributed or purchased are reflected on the statement of activities as changes in the appropriate net asset classes, depending on the existence and type of donor-imposed restrictions. The Foundation s collections consist of artifacts of historical significance. Each item is identified for educational and historical purposes. Activities verifying their existence and assessing their condition are performed continuously. Prepaid Expenses Prepaid expenses represent payments made to vendors for services that will benefit beyond September 30,

8 NOTE 1 - NATURE OF ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Unearned Revenue Unearned revenue consists of concessioner prepayment of booth space and patron theatre tickets. Contribution Income Contributions received, with donor stipulations that limit their use, are reported as restricted contributions. When the restriction is satisfied, temporarily restricted net assets are reclassified to unrestricted net assets and are reported in the statement of activities as net assets released from restrictions. Donor-restricted contributions whose restrictions are met in the same reporting period are reported as unrestricted contributions in that period. Interest earnings on temporarily restricted investments are presented as unrestricted revenue, unless otherwise stipulated by the donor. Certain materials are contributed to the Foundation. The fair value of these items are reflected as support and expense or capitalized. Grants The Foundation received grants from various external sources, including the State of Florida, United Arts, and the City of Winter Garden (the City ). These grants were provided to support the Foundation s restoration of a historical theatre within the City. Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. NOTE 2 - TEMPORARILY RESTRICTED CONTRIBUTIONS Temporarily restricted net assets at September 30, 2009 are restricted for the historical theatre project and preservation. NOTE 3 - INCOME TAXES The Foundation is exempt from federal income taxes under Section 501(c)(3) of the Internal Revenue Code. Accordingly, no provision for federal income taxes has been included in these financial statements

9 NOTE 4 - PLEDGES RECEIVABLE Pledges receivable are stated at the amount management expects to collect from outstanding balances. Management estimates that approximately 25% of these receivables will be uncollectible and has established an allowance based on this assessment. Changes in this estimate are reported through a provision for doubtful pledges expense, and any recoveries of this amount would be reported as doubtful pledges recovery revenue if received. Restricted pledges receivable of $6,166 are related to the theatre campaign and museum operations and are net of an allowance for doubtful accounts in the amount of $10,000. Unrestricted pledges receivable of $65,233 are for general operating expenses and are net of an allowance for doubtful accounts in the amount of $14,498. NOTE 5 - CONCENTRATIONS OF CREDIT RISK Financial instruments that potentially subject the Foundation to concentrations of credit risk consist principally of cash and cash equivalents, and pledges receivable. The Foundation maintains cash balances at a financial institution, located in Winter Garden, Florida. These accounts are insured by either the Federal Deposit Insurance Corporation, up to $100,000 per institutional account, or the Securities Investor Protection Corporation, up to $400,000 per institutional account. At September 30, 2009, there was no uninsured cash and investment balance of the Foundation. Concentrations of credit risk with respect to pledges receivable are derived from the limited number of donors making up the majority of the receivable. NOTE 6 - PROPERTY, EQUIPMENT, AND HISTORICAL ASSETS Property, equipment, and historical assets consist of the following at September 30, 2009: Building improvements $ 3,677,649 Furniture, fixtures and equipment 76,708 Total depreciable assets 3,754,357 Less accumulated depreciation (426,396) Net depreciable assets 3,327,961 Historical assets 63,978 Total property, equipment, and historical assets, net $ 3,391,939 Depreciation expense for the year ended September 30, 2009 was $201,206, and is included in program expenses (see Note 10)

10 NOTE 7 - NOTE PAYABLE The Foundation has a promissory note (the Note ) with the City, a related party (see Note 8), for a total principal amount of $1,302,488 at September 30, The Note was obtained to finance the restoration of a historical theatre within the City. The Note has an interest rate of 3%, which approximates the City s borrowing rate. Complete information regarding the note is available at the Foundation s administrative office. Principal and interest on the Note are due on June 1 of each year until paid. During the year ended September 30, 2009, the Foundation did not make its required principal and interest payment when it became due, in accordance with the note agreement. The note agreement allows the City to call the Note. The City has classified the debt as being in default but waived its option to call the Note through September 30, Penalties of $19,449 allowed in the agreement have been included as a current liability in these financial statements. Management is renegotiating the terms of the agreement with the City, and the City still maintains the right to call the Note (see Note 10). NOTE 8 - RELATED PARTIES The City has significant influence on the Foundation s operations, as evidenced by direct funding, providing locations for programs at no cost, and providing financing to the Foundation for renovation of a local theatre at the City s borrowing rate (see Note 7). Without this support, the activities of the Foundation would be significantly reduced. Members of the Foundation s Board also provide various services to the Foundation, including pro bono legal and paid educational training. NOTE 9 - STOCK CONTRIBUTION In July 2009, the Foundation received a stock donation of 20,000 shares of Class A Preferred stock. At the time of the contribution, the donor represented that the stock had a per share value of $2.50. The Foundation has no way to value this stock or confirm the represented value, as the stock is not publicly traded and no financial statement information was made available to the Foundation. Therefore, the Foundation has not reported this transaction in these financial statements

11 NOTE 10 - SUBSEQUENT EVENTS Note Payable On December 17, 2009, the City held a special meeting to discuss the outstanding debt with the Foundation. The City approved a transfer ownership of the theater to the City in lieu of the debt being paid back to the City. The City plans to lease the building to the Foundation for a nominal fee; the term is yet to be determined by the City Commission. The City will be responsible for the building s structural maintenance and the Foundation will be responsible for the theater equipment, daily maintenance and janitorial. The Foundation will be responsible for programming, daily operations of the theater, and fundraising. The official transfer of ownership of the building and elimination of debt has not occurred. Bank Note On December 30, 2009, the Foundation took out a loan with a local bank in the amount of $55,444. The funds were used to pay the remaining obligation to the Garden Theatre s general contractor. Evaluation of Subsequent Events The Foundation has evaluated subsequent events through June 2, 2010, the date which the financial statements were available to be issued