Financial Statements and Supplementary Information. Venture Café Foundation, Inc. December 31, 2015 and 2014

Transcription

1 Financial Statements and Supplementary Information Venture Café Foundation, Inc. December 31, 2015 and 2014

2 Financial Statements and Supplementary Information Table of Contents Financial Statements: Independent Auditors Report 1-2 Statements of Financial Position 3 Statements of Activities and Changes in Net Assets 4-5 Statements of Cash Flows 6 Notes to Financial Statements 7-12 Supplementary Information: Independent Auditors Report on Supplementary Information 13 Supplemental Schedules of District Hall Activities and Changes in Net Assets 14-15

3 500 Boylston Street Boston, MA Tel: Fax: Independent Auditors Report Board of Directors Venture Café Foundation, Inc. Cambridge, Massachusetts Report on the Financial Statements We have audited the accompanying financial statements of Venture Café Foundation, Inc. (the Foundation ), which comprise the statements of financial position as of December 31, 2015 and 2014, and the related statements of activities and changes in net assets, and cash flows for the years then ended, and the related notes to the financial statements. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors Responsibility Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits 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 from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

4 Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Venture Café Foundation, Inc. as of December 31, 2015 and 2014, and the changes in its net assets and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America. November 8, 2016 Boston, Massachusetts

5 Statements of Financial Position December 31, Assets Cash $ 663,484 $ 525,822 Accounts receivable 225, ,887 Prepaid expense and other assets 66,940 29,938 Property and equipment, net 256, ,491 Due from related parties 61,875 - Total assets $ 1,274,796 $ 885,138 Liabilities and Net Assets Liabilities: Accounts payable and accrued expenses $ 176,261 $ 34,225 Contribution payable 74,195 - Deferred revenue 242, ,292 Due to related parties 467, ,766 Total liabilities 961, ,283 Net assets: Unrestricted 195,352 49,015 Temporarily restricted 118, ,840 Total net assets 313, ,855 Total liabilities and net assets $ 1,274,796 $ 885,138 See accompanying notes to the financial statements. 3

6 Statements of Activities and Changes in Net Assets Years Ended December 31, Temporarily Permanently Unrestricted Restricted Restricted Total Total Revenues: Donations $ 402,116 $ - $ - $ 402,116 $ 782,925 Grants 119, , ,076 Sponsorships 259, , ,362 Room rental 573, , ,716 Other revenues 186, , ,864 Net assets released from restrictions 181,546 (181,546) Total revenue 1,723,275 (181,546) - 1,541,729 1,758,943 Expenses: Program expenses 1,392, ,392, ,392 Fundraising 15, ,568 19,824 General and administrative 94, ,970 79,271 Total operating expenses 1,502, ,502,743 1,094,487 Increase in net assets from operating activities 220,532 (181,546) - 38, ,456 Non-operating activities: Contribution to Venture Café St. Louis (74,195) - - (74,195) - Total change in net assets 146,337 (181,546) - (35,209) 664,456 Net assets, beginning 49, , ,855 (315,601) Net assets, ending $ 195,352 $ 118,294 $ - $ 313,646 $ 348,855 See accompanying notes to the financial statements. 4

7 Statement of Activities and Changes in Net Assets Year Ended December 31, 2014 Temporarily Permanently Unrestricted Restricted Restricted Total Revenues: Donations $ 384,175 $ 398,750 $ - $ 782,925 Grants 176, ,076 Sponsorships 119, ,362 Room rental 432, ,716 Other revenues 247, ,864 Net assets released from restrictions 98,910 (98,910) - - Total revenue 1,459, ,840-1,758,943 Expenses: Program expenses 995, ,392 Fundraising 19, ,824 General and administrative 79, ,271 Total operating expenses 1,094, ,094,487 Total change in net assets 364, , ,456 Net assets, beginning (315,601) - - (315,601) Net assets, ending $ 49,015 $ 299,840 $ - $ 348,855 See accompanying notes to the financial statements. 5

8 Statements of Cash Flows Years Ended December 31, Cash flows from operating activities: Change in net assets $ (35,209) $ 664,456 Adjustments to reconcile change in net assets to net cash provided by operating activities: Depreciation 32,662 7,688 Loss on disposal of property and equipment 8,567 - Bad debt expense 3,200 - Change in: Accounts receivable (68,840) (133,104) Prepaid expenses and other assets (37,002) (29,938) Accounts payable and accrued expenses 142,036 16,072 Contribution payable 74,195 - Deferred revenue 77,454 23,892 Due to related parties 69,307 66,015 Net cash provided by operating activities 266, ,081 Cash flows from investing activities: Purchase of property and equipment (134,308) (177,179) Proceeds from the sale of property and equipment 5,600 - Net cash used in investing activities (128,708) (177,179) Increase in cash 137, ,902 Cash, beginning 525,822 87,920 Cash, ending $ 663,484 $ 525,822 See accompanying notes to the financial statements. 6

9 Notes to Financial Statements Note 1 - Organization and Summary of Significant Accounting Policies The Venture Café Foundation, Inc. (the Foundation ) is a not-for-profit organized in March 2012 to foster and support entrepreneurship and create jobs primarily in New England through educational and other programming. The vision of the Venture Café Foundation is that anyone with an idea should feel empowered to become an entrepreneur. The mission of the Foundation is to accelerate innovation, establish strong support networks for innovators and entrepreneurs and enable a more inclusive innovation economy. The Foundation enhances and accelerates the innovation process by providing spaces for individuals and organizations to gather, tell stories, and build relationships. The Foundation provides programming that creates connections amongst the community and entrepreneurs as well as facilitating conversations and events that expand an integrative understanding of innovation and entrepreneurship. During 2015, Venture Café Foundation also had operations in St. Louis, Missouri; however, in 2016, Venture Café St. Louis became its own not-for-profit entity beginning on January 1, A summary of significant accounting policies applied consistently to the financial statements is as follows: Financial Statement Presentation The financial statements are presented on the accrual basis of accounting and are presented based on any donor-imposed restrictions or lack thereof. Accordingly, the net assets of the Foundation and changes therein are classified and reported as follows: Cash Unrestricted net assets - represent the portion of net assets that is neither permanently restricted nor temporarily restricted by donor-imposed stipulations. Temporarily restricted net assets - include funds with donor-specified restrictions that are satisfied by usage in accordance with donor requirements or the passage of time. Temporarily restricted net assets at December 31, 2015 and 2014 are available for operational support and facilities. For the years ended December 31, 2015 and 2014, net assets were released from donor restrictions as a result of expenditures for operations and facilities as specified by the donors. Permanently restricted net assets - include assets that allow the Foundation to expend part, or all, of any income derived from the donated assets. The Foundation had no such net assets at December 31, 2015 and Cash includes all highly liquid instruments purchased with an original maturity of three months or less. The Foundation maintains its cash balances at several financial institutions, which, at times, may exceed federally insured limits. The Foundation monitors its exposure associated with cash and has not experienced any losses in such accounts. 7

10 Notes to Financial Statements Note 1 - Organization and Summary of Significant Accounting Policies (Continued) Accounts Receivable Accounts receivable are carried at original invoice amounts less an estimated amount for doubtful accounts based on collections history and a review of all outstanding amounts by management. Balances are considered past due when payment is not consistent with contractual terms. Accounts receivable are written off against the allowance when deemed uncollectible. Adjustments to the allowance are charged to bad debt expense. Bad debt expense for the year ended December 31, 2015 was $3,200. As of December 31, 2015 and 2014, all accounts receivable were deemed collectable. Property and Equipment Property and equipment are recorded at cost. Major additions and improvements are capitalized, while repairs and maintenance are charged to expense as incurred. Depreciation is calculated on the straight-line method over the following estimated useful lives: Furniture and fixtures Computer equipment Office equipment Leasehold improvements 7 years 3-5 years 5 years Lesser of the useful life or lease term Revenue Recognition and Deferred Revenue The Foundation earns sponsorship revenue, membership revenue and restaurant rental revenue under various agreements. Sponsorship and membership revenue is recognized when earned based on agreement terms over the term of the agreements. Restaurant rental revenue is recognized on the straight-line method over the term of the agreement. Program service revenue consisting of innovation tours and room rentals is recognized when the services are provided. Funds received prior to delivery of services are classified as deferred revenue until such time services are delivered. As of December 31, 2015 and 2014, deferred revenues consisted of deferred sponsorship, room rental and membership revenues. Fair Value Measurements The Foundation measures fair value in accordance with the fair value measurement standards. These standards require an entity to maximize the use of observable inputs (such as quoted prices in active markets) and minimize the use of unobservable inputs (such as appraisals or valuation techniques) to determine fair value. Fair value standards also require the Foundation to classify its assets and liabilities valued at fair value into a three-level hierarchy, based on the priority of inputs to the valuation technique, as follows: (i) Level 1 inputs utilize unadjusted quoted prices for identical assets or liabilities in active markets that the Foundation has the ability to access; (ii) Level 2 inputs utilize quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in inactive markets; inputs other than quoted market prices that are observable for the asset or liability; and inputs that are derived principally from or corroborated by observable market data by correlation or other means; and (iii) Level 3 inputs are unobservable and significant to the fair value measurement. 8

11 Notes to Financial Statements Note 1 - Organization and Summary of Significant Accounting Policies (Continued) Fair Value Measurements (Continued) The asset or liability s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs. Grants and Donations Grants and donations, including unconditional promises to give, are recognized as revenues in the period verifiably committed. Donations of assets other than cash are recorded at fair value at the original date of recognition. Conditional donations and intentions to give are recorded as revenue when the conditions have been met. Donations are reflected as unrestricted, temporarily restricted or permanently restricted based on the existence or absence of donor restrictions. Amounts received with donor-imposed restrictions are recorded as temporarily restricted revenues until expended or such time as the restriction is removed as specified by the donor. Promises to give that are to be received after one year are initially recorded at fair value based on the present value using a risk adjusted discount rate and expected collections. As of December 31, 2015 and 2014, there are no such receivables. Donations received with donor-imposed restrictions are recorded as temporarily restricted until such time as the restrictive requirements are satisfied. Donated Services Donated services are recognized as contributions at their fair value, if the services create or enhance nonfinancial assets or require specialized skills, are performed by people with those skills, and would otherwise be purchased by the Foundation. Use of Estimates In preparing financial statements in conformity with accounting principles generally accepted in the United States of America, management is required to make estimates and assumptions that affect the amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant management estimates included in the financial statements relate to the allowance for doubtful accounts and estimated useful lives of property and equipment. Income Taxes The Foundation is recognized by the Internal Revenue Service as an organization described in Section 501(c)(3) of the Internal Revenue Code (the Code) and is generally exempt from federal and state income taxes on related income. However, the Foundation is subject to federal income taxes on unrelated business income. The Foundation had no material tax liability due to unrelated business income for the years ended December 31, 2015 and

12 Notes to Financial Statements Note 1 - Organization and Summary of Significant Accounting Policies (Continued) Uncertain Tax Positions The Foundation accounts for the effect of any uncertain tax positions based on a more likely than not threshold to the recognition of the tax positions being sustained based on the technical merits of the position under scrutiny by the applicable taxing authority. If a tax position or positions are deemed to result in uncertainties of those positions, the unrecognized tax benefit is estimated based on a cumulative probability assessment that aggregates the estimated tax liability for all uncertain tax positions. The Foundation has identified its tax status as a tax-exempt entity as a tax position; however, the Foundation has determined that such tax position does not result in an uncertainty requiring recognition. The Foundation is not currently under examination by any taxing jurisdictions. The Foundation s federal and state tax returns are generally open for examination for three years following the date filed. Advertising The Foundation expenses the costs of advertising as incurred. The Foundation incurred advertising expense of approximately $9,800 and $1,900 for the years ended December 31, 2015 and 2014, respectively. Functional Allocation of Expenses The costs of providing the various programs and other activities have been summarized on a functional basis in the statements of activities and changes in net assets. Accordingly, certain costs have been allocated among programs and supporting services benefited. Subsequent Events The Foundation has evaluated subsequent events through November 8, 2016, the date the financial statements were authorized to be issued. Except as discussed in Note 7, no significant matters were identified for disclosure during this evaluation. Note 2 - Property and Equipment, Net Property and equipment, net consisted of the following at December 31: Furniture and fixtures $ 194,139 $ 133,581 Computer equipment 81,746 41,799 Office equipment 1,799 1,799 Leasehold improvements 17, , ,179 Less accumulated depreciation (38,549) (7,688) Total property and equipment, net $ 256,970 $ 169,491 10

13 Notes to Financial Statements Note 2 - Property and Equipment, Net (Continued) Depreciation expense on property and equipment was $32,662 and $7,688 for the years ended December 31, 2015 and 2014, respectively. Note 3 - Related Party Transactions The Foundation works closely with The Cambridge Incubator, Inc. ( CIC ), a for-profit company, which has some common Board membership with the Foundation. CIC makes donations both in cash and space for Foundation meetings. CIC also provides administrative services to the Foundation and actively markets the Foundation to its customers. For the years ended December 31, 2015 and 2014, CIC provided cash donations of $234,743 and $276,406, respectively, and space donations, valued at fair value, of $95,500 and $59,750, respectively. For the years ended December 31, 2015 and 2014, the Foundation recorded $0 and $35,000, respectively, for administrative services provided by CIC. As of December 31, 2015 and 2014, amounts payable to CIC were $245,917 and $159,600, respectively, which is net of other amounts receivable from CIC for support. These payables were for the Venture Café salaries processed through the CIC benefits system as part of its support for the Foundation. In addition, as of December 31, 2015 and 2014, the Foundation owed CIC $222,031 for start up costs. The Foundation has entered into a management agreement with BIC, LLC ( BIC ), a related party, and the Boston Redevelopment Authority (the BRA ) for the Foundation to manage and operate an innovation center ( District Hall ) on behalf of the BRA. District Hall also includes a restaurant which is operated by a third party, which pays rent to BIC. The agreement detailed that rental payments received by BIC pursuant to a restaurant lease shall be paid to the Foundation. Rental payments recorded by the Foundation for the years ended December 31, 2015 and 2014 were $69,500 and $92,375, respectively. The restaurant lease agreement provides for annual rental payments of $75,000 through $125,100 until September Furthermore, the Foundation and BIC have entered into a management fee sharing agreement whereby the Foundation is entitled to 50% of the management fee associated with operating District Hall. For the years ended December 31, 2015 and 2014, the Foundation earned $50,000 under its agreement with BIC and incurred a program fee of $100,000 relating to the operation of District Hall. Restaurant rental revenue and management fee revenue are included in other revenue in the statement of activities and changes in net assets. As of December 31, 2015 and 2014, amounts due from BIC are $61,875 and $42,375, respectively, which is net of other amounts payable to BIC. Note 4 - Concentrations For the years ended December 31, 2015 and 2014, approximately 82% and 43%, respectively, of the Foundation s donations were from CIC. These donations were approximately 19% of total revenue for the years ended December 31, 2015 and For the year ended December 31, 2015, 100% of the Foundation s grant revenue was from three grantors. For the year ended December 31, 2014, 100% of the Foundation s grant revenue was from one grantor. For the year ended December 31, 2015, three sponsors accounted for approximately 49% of the sponsorship revenue. As of December 31, 2015, two customers accounted for approximately 63% of the outstanding accounts receivable balance. As of December 31, 2014, one customer accounted for approximately 92% of the outstanding accounts receivable balance. 11

14 Notes to Financial Statements Note 5 - Net Assets Net assets are comprised of the following at December 31, 2015 and 2014: Unrestricted net assets represent the Foundation s net investment in property and equipment, net, donations without restrictions and remaining net assets available for operations generated by unrestricted activities of the Foundation. Temporarily restricted net assets are mainly restricted from grants and contributions made to support specific programs and operations of the Foundation. These net assets can only be used specifically for the programs and operations as determined by the donor. The Foundation had $118,294 and $299,840 in temporarily restricted net assets at December 31, 2015 and 2014, respectively. Releases from temporarily restricted net assets represent expenses incurred for the operation of the Foundation s programs and operations that satisfy the restrictions as stipulated by donors. Note 6 - Commitments and Contingencies As part of a Payment in Lieu of Taxes (PILOT) agreement with the City of Boston for operating District Hall, Venture Café Foundation pays the City of Boston 20% of annual room rental revenue that is non-innovation related activities. Room rentals that are related to innovation uses are not subject to the PILOT payment. In connection with the management agreement with BIC and the BRA, the Foundation must pay BIC and the BRA 15% of annual District Hall operating income, as defined in the agreement, up to $565,000. As of December 31, 2015, no such payments have been made to these entities. In May 2015, the Foundation entered into a lease agreement for 3,350 square feet of office space in order to launch its new Roxbury Innovation Center program to support its mission. Rent is based on 20% of room rental and program income paid to the Foundation, calculated quarterly and subject to annual maximums from $30,150 to $32,000 over the life of the lease, as stipulated in the lease agreement. The term of the lease is five years with an option for a five year extension. Note 7 - Subsequent Events Beginning on January 1, 2016, Venture Café St. Louis became its own not-for-profit entity with its own financial reporting. In 2016, Venture Café Foundation transferred the net assets and liabilities of Venture Café St. Louis to that entity totaling approximately $76,000 consisting of cash, receivables and property and equipment. At December 31, 2016, this amount is reflected as contribution payable on the accompanying statements of financial position. In May 2016, the Foundation entered into a licensing agreement with the CIC Venture Café Global Institute, a related public benefit corporation through common board membership, for the use of the Venture Café name. The initial annual licensing fee is $46,000 but will be adjusted in future years depending on the activity of the CIC Venture Café Global Institute. 12

15 Supplementary Information

16 500 Boylston Street Boston, MA Tel: Fax: Independent Auditors Report on Supplementary Information Board of Directors Venture Café Foundation, Inc. Cambridge, Massachusetts We have audited the financial statements of Venture Café Foundation, Inc. (the Foundation ) as of and for the years ended December 31, 2015 and 2014, and our report thereon dated November 8, 2016 which expressed an unmodified opinion on those financial statements appears on page 1. Our audits were preformed for the purpose of forming an opinion on the financial statements as a whole. The accompanying Supplemental Schedule of District Hall Activities and Changes in Net Assets is presented for the purpose of additional analysis and is not a required part of the financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the financial statements as a whole. November 8, 2016 Boston, Massachusetts 13

17 Supplemental Schedules of District Hall Activities and Changes in Net Assets Years Ended December 31, Temporarily Permanently Unrestricted Restricted Restricted Total Total Revenues: Grants $ 69,997 $ - $ - $ 69,997 $ 176,076 Sponsorships 144, , ,362 Room rental 559, , ,716 Other revenues 162, ,054 36,627 Net assets released from restrictions Total revenue 936, , ,781 Expenses: Program expenses 629, , ,655 Total operating expenses 629, , ,655 Change in net assets of District Hall Program* 306, , ,126 Change in net assets of all other Venture Café Foundation activities (160,611) (181,546) - (342,157) 475,330 Total change in net assets $ 146,337 $ (181,546) $ - $ (35,209) $ 664,456 *Excludes activities of the Boston Innovation Center, LLC, a separate entity. See Independent Auditors' Report on Supplementary Information. 14

18 Supplemental Schedule of District Hall Activities and Changes in Net Assets Year Ended December 31, 2014 Temporarily Permanently Unrestricted Restricted Restricted Total Revenues: Grants $ 176,076 $ - $ - $ 176,076 Sponsorships 119, ,362 Room rental 432, ,716 Other revenues 36, ,627 Net assets released from restrictions Total revenue 764, ,781 Expenses: Program expenses 575, ,655 Total operating expenses 575, ,655 Change in net assets of District Hall Program* 189, ,126 Change in net assets of all other Venture Café Foundation activities 175, , ,330 Total change in net assets $ 364,616 $ 299,840 $ - $ 664,456 *Excludes activities of the Boston Innovation Center, LLC, a separate entity. See Independent Auditors' Report on Supplementary Information. 15