National Braille Press Inc. (A Nonprofit Organization)

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2 Table of Contents Independent Auditor s Report 1 Financial Statements Statements of Financial Position 2 Statement of Activities 3 (with comparative totals for the year ended March 31, 2016) Statement of Functional Expenses 4 (with comparative totals for the year ended March 31, 2016) Statement of Cash Flows 5 (with comparative totals for the year ended March 31, 2016) 6

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5 Statements of Financial Position March 31, 2017 and 2016 Assets Current assets Cash and cash equivalents $ 321,828 $ 241,480 Investments 4,766,003 4,538,761 Accounts receivable, net of allowance for doubtful accounts of $1,000 in 2017 and , ,309 Current portion of contributions and grants receivable 55,122 80,820 Inventories 341, ,230 Prepaid expenses 44,580 31,251 Total current assets 6,009,990 5,684,851 Property, plant and equipment, at cost 2,289,939 2,278,890 Less accumulated depreciation 1,471,866 1,382,741 Property, plant and equipment, net 818, ,149 Other assets Contributions and grants receivable, net of current portion 40,051 58,109 Total assets $ 6,868,114 $ 6,639,109 Liabilities and net assets Current liabilities Line of credit $ 547,235 $ 447,235 Accounts payable and accrued expenses 167, ,846 Deferred revenue 25,867 49,574 Current portion of gift annuity payable 2,896 4,398 Total current liabilities 743, ,053 Gift annuity payable, net of current portion 14,378 24,245 Total liabilities 758, ,298 Net assets Unrestricted net assets - general fund 1,235,007 1,188,860 Unrestricted net assets - endowment fund 4,667,810 4,424,581 Temporarily restricted net assets 206, ,370 Total net assets 6,109,766 5,913,811 Total liabilities and net assets $ 6,868,114 $ 6,639,109 See independent auditor's report and notes to financial statements. 2

6 Statement of Activities (with comparative totals for the year ended March 31, 2016) General Endowment Temporarily Fund Fund Restricted Unrestricted Unrestricted Fund Total Total Revenue and other support Publications $ 194,354 $ - $ - $ 194,354 $ 194,145 Educational services 1,811, ,811,236 1,519,461 Contract revenue 996, , ,135 Donor contributions and grants 531,888 8, , ,364 1,008,609 Interest income 2,207 90,014-92,221 91,384 Gain (loss) on investments 7, , ,764 ( 140,562) Contributed services and in-kind donations 28, ,299 41,281 Other income, net Transfer to general fund 217,927 ( 217,927) Net assets released from restrictions 307,298 - ( 307,298) - - Total revenue and other support 4,097, ,782 ( 93,421) 4,291,250 3,426,513 Expenses Program expenses 2,923, ,923,998 2,720,615 Management and general 584,517 43, , ,303 Building expenses 134, , ,952 Fundraising expenses 408, , ,464 Total expenses 4,051,742 43,553-4,095,295 3,880,334 Changes in net assets 46, ,229 ( 93,421) 195,955 ( 453,821) Net assets, beginning of year 1,188,860 4,424, ,370 5,913,811 6,367,632 Net assets, end of year $ 1,235,007 $ 4,667,810 $ 206,949 $ 6,109,766 $ 5,913,811 See independent auditor's report and notes to financial statements. 3

7 Statement of Functional Expenses (with comparative totals for the year ended March 31, 2016) Program Management Building Fundraising Expenses and General Expenses Expenses Total Total Braille production and cost of goods sold $ 1,962,288 $ 1,181 $ - $ 29,163 $ 1,992,632 $ 1,803,067 Publications 269, , ,555 ReadBooks! 68, ,776 75,359 Program development and marketing 40, ,055 35,548 Public education 49, ,914 59,413 Tests, textbooks and educational materials 192, , ,399 Contract service expenses 164, , ,384 Center for braille innovation 136, , ,742 Consulting services Bad debt expense Bank charges and credit card fees 28, ,298 18,620 Building depreciation ,666-39,666 39,070 Business promotions - 4, ,094 2,987 Computer supplies and support - 39, ,393 33,353 Dues, memberships and subscriptions - 2,276-1,095 3,371 8,020 Employee benefits and payroll taxes - 69,765 2,942 59, , ,394 Fundraising expenses other ,094 15,094 16,879 Insurance - - 9,090-9,090 8,966 Interest expense 10,997 3, ,261 11,448 Investment fees - 43, ,553 40,453 Miscellaneous - 22, ,058 15,496 Office supplies and expenses - 11, ,299 13,157 Postage - 7, ,357 8,648 Professional services - 44, ,148 48,567 Repairs and maintenance ,065-20,065 25,010 Salaries and wages - 337,707 28, , , ,338 Telephone - 11, ,299 8,696 Travel and conferences - 18,464-3,786 22,250 23,781 Utilities ,159-34,159 31,485 Website - 12,192-26,775 38,967 43,570 $ 2,923,998 $ 628,070 $ 134,582 $ 408,645 $ 4,095,295 $ 3,880,334 See independent auditor's report and notes to financial statements. 4

8 Statement of Cash Flows (with comparative totals for the year ended March 31, 2016) Cash flows from operating activities Changes in net assets $ 195,955 $ ( 453,821) Adjustments to reconcile changes in net assets to net cash (used in) provided by operating activities: Depreciation 89,125 86,237 Unrealized (gain) loss on investments ( 334,324) 328,497 Realized gain on investments, net ( 79,440) ( 187,935) Decrease (increase) in operating assets: Accounts receivable 38, ,711 Contributions and grants receivable 43,756 ( 6,224) Inventories ( 67,943) ( 15,665) Prepaid expenses ( 13,329) 20,194 (Decrease) increase in operating liabilities: Accounts payable and accrued expenses ( 31,874) ( 30,513) Deferred revenue ( 23,707) 30,706 Gift annuity payable ( 11,369) ( 4,700) Net cash (used in) provided by operating activities ( 195,125) 24,487 Cash flows from investing activities Purchase of property and equipment ( 11,049) ( 30,314) Proceeds from sale of investments 1,186,764 2,586,511 Purchase of investments ( 1,000,241) ( 2,642,435) Net cash provided by (used in) investing activities 175,474 ( 86,238) Cash flows from financing activities Proceeds from line of credit, net 100,000 31,000 Net cash provided by financing activities 100,000 31,000 Net increase (decrease) in cash and cash equivalents 80,348 ( 30,751) Cash and cash equivalents, beginning of year 241, ,231 Cash and cash equivalents, end of year $ 321,828 $ 241,480 See independent auditor's report and notes to financial statements. 5

9 Note 1 - Nature of the Organization Operations National Braille Press Inc. (the Organization ) was incorporated on June 20, 1929 as a nonprofit organization. The guiding purpose of the Organization is to promote the literacy of blind children through braille and to provide access to information that empowers blind people to actively engage in work, family and community affairs. Note 2 - Summary of Significant Accounting Policies Financial Statement Presentation The financial statements of the Organization have been prepared on the accrual basis of accounting and include all financial activities of the Organization. The Organization complies with Accounting Standards Codification Topic Not-for- Profit Entities Presentation of Financial Statements, (ASC ), issued by the Financial Accounting Standards Board (FASB) for presentation of its financial statements. As such, the financial statements are presented on the basis of unrestricted, temporarily restricted, and permanently restricted net assets. Those classifications are defined as follows: Unrestricted Net Assets consist of assets created through public support and program revenues, which are available and used for operations and programs. Grants and donations are considered available for unrestricted use unless specifically restricted by the donor. Temporarily Restricted Net Assets consist of assets created through public support and program revenues with donor-imposed restrictions, which are satisfied either by the passage of time or by completion of actions by the organization that satisfy the restriction. Permanently Restricted Net Assets consist of assets which have a permanent donor-imposed restriction, which stipulates that the assets are to be maintained permanently, but permit the Organization to expend part or all of the income derived from the donated assets. As of March 31, 2017 and 2016 there were only unrestricted and temporarily restricted net assets. 6

10 Note 2 - Summary of Significant Accounting Policies (Continued) Cash Equivalents Cash equivalents consist of all highly liquid investments with remaining maturities of three months or less. Cash equivalents are carried at cost which approximates market value. Investments The Organization complies with ASC Topic , Not-for-Profit Entities Investments Debt and Equity Securities, (ASC ), issued by the Financial Accounting Standards Board, for financial accounting and reporting for certain investments in securities. Under these standards, investments in marketable equity and debt securities must be reported in the statement of financial position at fair value with any realized or unrealized gains and losses reported in the statement of activities. Investment income is recognized as revenue in the period it is earned and gains and losses are recognized as changes in net assets in the accounting periods in which they occur. Accounts Receivable The Organization extends credit to its customers in the ordinary course of business. After reviewing aged outstanding balances and giving consideration for the Organization s overall collection history, a reserve for uncollectible accounts may be established and after all reasonable attempts to collect the outstanding balances are exhausted, the accounts are written off. The allowance for doubtful accounts totaled $1,000 as of March 31, 2017 and Contributions and Grants Receivable Contributions and grants receivable that are expected to be collected within one year are recorded at net realizable value. Contributions and grants receivable that are expected to be collected in future years are recorded at the present value of estimated future cash flows. Management has reviewed contributions and grants receivable as of March 31, 2017 and 2016, and considers these amounts to be fully collectible and, accordingly, no allowance for doubtful accounts is required. Inventories Inventories, which consist of books and other material for sale and production supplies, are stated at the lower of cost or market; cost is determined on a first-in, first-out basis. Market for raw materials is based on current replacement cost and for work-in process and finished goods on net realizable value. 7

11 Note 2 - Summary of Significant Accounting Policies (Continued) Property, Plant and Equipment Depreciation is computed using the straight-line method calculated to amortize the cost of the assets over their estimated useful lives. When assets are retired or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts, and any resulting gain or loss is recognized in income for the period. The cost of maintenance and repairs is charged to income as incurred while significant renewals and betterments are capitalized. Use of Estimates Management of the Organization has made a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities to prepare these financial statements in conformity with generally accepted accounting principles in the United States. Actual results could differ from those assumptions. Revenue Recognition The Organization complies with ASC Topic , Not-for-Profit Entities Revenue Recognition, (ASC ), issued by the Financial Accounting Standards Board. The Organization s revenue is derived primarily through sales of braille materials, grants and contributions, program services and periodical subscriptions. Unconditional promises to give are recognized as revenues in the period the promise is received. Grants are recognized when the promise to receive funds has been established. The Organization reports gifts of cash and other assets as restricted support if they are received with donor stipulations that limit the use of the donated assets. When a donor restriction is fulfilled or expires, temporarily restricted assets are released to unrestricted assets. Subscription revenue is recognized over the term of the subscriptions as the periodicals are mailed. Deferred subscription revenue represents the amount collected in advance from customers for the sale of publications that have not yet been produced by the Organization as of March 31, 2017 and

12 Note 2 - Summary of Significant Accounting Policies (Continued) Contributed Services A number of unpaid volunteers, including members of the Board of Trustees, have made significant contributions of their time to develop and promote the Organization. The value of this contributed time is not reflected in these financial statements since it is not susceptible to objective measurement or valuation. Contributions of services are recognized if the services received (a) create or enhance non-financial assets or (b) require specialized skills, are provided by individuals possessing those skills, and would typically need to be purchased if not provided by donation. Income Tax Status The Organization is a Massachusetts not-for-profit corporation, exempt from federal income taxes under Section 501(c) (3) of the Internal Revenue Code, and has been classified by the Internal Revenue Service as other than a private foundation. The Organization is required to file an annual information return with the Internal Revenue Service and the Commonwealth of Massachusetts. The Organization has either filed or extended the time to file the annual information returns and has not been notified by any federal or state taxing authorities of any matters that would jeopardize the Organization s tax-exempt status. Accordingly, no income tax expense has been recorded in the financial statements. The Financial Accounting Standards Board (FASB) issued ASC Topic 740, Income Taxes, (ASC 740). ASC 740 clarifies the accounting for income taxes by prescribing a minimum probability threshold that a tax position must meet before a financial statement benefit is recognized. The minimum threshold is defined in ASC 740 as a tax position that is more likely than not to be sustained upon examination by the applicable tax authority, including resolution of any related appeals or litigation processes, based on the technical merits of the position. The tax benefit to be recognized is measured as the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. As of March 31, 2017 and 2016, the Organization had no material unrecognized tax benefits and no adjustments to liabilities or operations were required under ASC 740. The Organization s practice was and continues to be to recognize interest and penalty expenses related to uncertain tax positions in income tax expense, which were zero for the years ended March 31, 2017 and 2016, respectively. Typically, the Organization s three preceding tax years are subject to examination by federal and state taxing authorities. There are no income tax examinations currently in process. 9

13 Note 2 - Summary of Significant Accounting Policies (Continued) Income Tax Status (continued) The Organization evaluates its uncertain tax positions using the provisions of the Accounting Standards Codification 450, Contingencies. Accordingly, a loss contingency is recognized when it is probable that a liability has been incurred as of the date of the financial statements and the amount of the loss can be reasonably estimated. The amount recognized is subject to estimate and management judgment with respect to the likely outcome of each uncertain tax position. The amount that is ultimately sustained for an individual uncertain tax position or for all uncertain tax position in the aggregate could differ from the amount recognized. Expense Allocation 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. Directly identifiable expenses are charged to programs and supporting services. Management and general expenses include those expenses that are not directly identifiable with any other specific function but provide for the overall support and direction of the Organization. Concentrations of Credit Risk Financial instruments which potentially subject the Organization to concentrations of credit risk consist principally of cash, short term investments, trade and pledges receivables. The Organization places its cash and short term investments in high credit financial institutions. However, portions of temporary cash investments may exceed FDIC insured levels from time to time. The Organization grants credit to its customers who are located throughout the United States. Fair Value Measurements Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC Topic 820, Fair Value Measurements and Disclosures, (ASC 820) establishes a three level hierarchy to prioritize the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 inputs). The carrying amounts of financial instruments, including cash and cash equivalents, investment accounts and contributions receivable and accounts payable, approximated fair value as of March 31, 2017 and 2016 due to their short-term nature investments and cash equivalents are all level 1 investments. 10

14 Note 2 - Summary of Significant Accounting Policies (Continued) Subsequent Events Management has evaluated subsequent events through the date the financial statements were issued. For the year ended March 31, 2017, there were no material subsequent events during the evaluation. Note 3 - Cash and Cash Equivalents Cash and cash equivalents at March 31, 2017 and 2016 consisted of the following: Checking accounts with bank $ 201,145 $ 235,928 Savings accounts with bank 120,683 5,552 Note 4 - Investments $ 321,828 $ 241,480 Investments included in the endowment fund are stated at fair market value which is estimated based on quoted market prices for those or similar investments. The following is a summary of investments at fair market value as of March 31, 2017 and 2016: Stocks and mutual funds $ 3,310,018 $ 3,048,189 U.S. Treasury Notes and Government Bonds 1,419,491 1,419,810 Money market funds 36,494 70,762 $ 4,766,003 $ 4,538,761 11

15 Note 4 - Investments (Continued) For the years ended March 31, 2017 and 2016, gain (loss) on investments is comprised of the following: Net, unrealized gain (loss) on changes in fair market value of investments $ 334,324 $ ( 328,497) Net, realized gain on changes in fair market value of investments sold 79, ,935 $ 413,764 $ ( 140,562) Investments are reported at fair value in accordance with the provisions of ASC 820. ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820 establishes a three level hierarchy to prioritize the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).the three levels of the fair value hierarchy under ASC 820 are described below: Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurements date. Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. If the asset or liability has a specified (contractual) term, a Level 2 input must be observable for substantially the full term of the asset or liability. Level 3 inputs are unobservable inputs for the asset or liability in which there is little, if any, market activity for the asset or liability at the measurement date. All investments as of March 31, 2017 and 2016 were measured using level 1 inputs. 12

16 Note 5 - Inventories National Braille Press Inc. At March 31, 2017 and 2016, inventories consisted of the following: Finished goods $ 187,017 $ 104,145 Raw materials 133, ,394 Work-in-process 20,787 44,691 Note 6 - Property, Plant and Equipment $ 341,173 $ 273,230 Property, plant and equipment, at cost and accumulated depreciation are comprised of the following as of March 31, 2017 and 2016: Building and improvements $ 1,311,438 $ 1,304,183 Operating equipment 944, ,757 Land 33,950 33,950 2,289,939 2,278,890 Less: accumulated depreciation 1,471,866 1,382,741 $ 818,073 $ 896,149 Estimated useful lives used for depreciation purposes range between 10 and 31.5 years for buildings and improvements and between 5 and 20 years for operating equipment. Depreciation expense for the years ended March 31, 2017 and 2016 totaled $89,125 and $86,237, respectively. Note 7 - Liabilities Under Split-Interest Agreements The Organization operates a charitable gift annuity program where donors receive a life income in exchange for assets conveyed to the Organization under an annuity contract. The Organization s liabilities under annuity contracts totaled $17,274 and $28,643 at March 31, 2017 and 2016, respectively. As of March 31, 2017 and 2016, $2,896 and $4,398 was determined to be current and anticipated to be repaid in the subsequent year. These contracts are recorded at the present value using actuarial information. Payments totaling approximately $11,300 and $4,400, which represent tax-free and interest portions, were distributed to four donors during both the years ended March 31, 2017 and 2016, respectively. 13

17 Note 8 - Due to Endowment Fund The Board of Trustees voted to allow the transfer of 5% of the three preceding years average market value of the Endowment Fund to support operations of the Organization. Transfers under this arrangement totaled $217,927 and $207,444 for the years ended March 31, 2017 and 2016, respectively. Certain transfers are also made, upon a vote from the Board of Trustees, from the Endowment Fund to the General Fund when operational support is needed. For the years ended March 31, 2017 and 2016, the total transfers from the Endowment Fund to the General Fund amounted to $217,927 and $207,444, respectively. Note 9 - Line of Credit The Organization has a line of credit agreement with a bank, which provides for borrowings up to $600,000 at the bank s LIBOR rate plus 2% (2.78% and 2.44%) as of March 31, 2017 and 2016, respectively), which shall not fall below 2.00% per annum. The line of credit is collateralized by the cash and other investments held with the institution and borrowings can be used to purchase equipment and/or provide general operational support. As of March 31, 2017 and 2016, total borrowings outstanding under the agreement amounted to $547,235 and $447,235, respectively. Under the terms of the line of credit agreement, the Organization is required to pay monthly interest, with principal due on demand by the bank. Note 10 - Major Customers Sales to two and three customers for the years ended March 31, 2017 and 2016, totaled approximately $840,948 and $1,328,786, respectively. This represented approximately 28% and 55% of the Organization s total operating revenues for the years ended March 31, 2017 and 2016, respectively. Amounts due from these customers included in accounts receivable at March 31, 2017 and 2016 totaled approximately $109,354 and $155,296, respectively. 14

18 Note 11 - Retirement Plan The Organization sponsors a 403(b) Plan for full time employees who are eligible to participate on their hire date. Eligible employees are permitted to make tax deferred elective contributions through payroll deductions up to the maximum allowed by the Internal Revenue Code. Contributions to the plan, which are fully vested, consist of participant salary reductions and a match by the Organization of up to 6% of eligible compensation. The Organization s contributions to the plan for the years ended March 31, 2017 and 2016 totaled approximately $84,000 and $77,000, respectively. The plan is administered by a third party administrator and the Organization s management believes it is in compliance with the requirements of the Internal Revenue Code. Note 12 - Related Party Transactions The Organization has numerous transactions with related parties, including receiving contributions from board members and using and paying for services provided by board members or the organizations which the board members represent. Management believes all such transactions are executed at arm s-length. Note 13 - Temporarily Restricted Net Assets The following represents amounts that were released from temporarily restricted net assets to unrestricted net assets during the year ended March 31, 2017 and the balance of temporarily restricted net assets as of March 31, 2017: Released From Temporarily Restricted Net Assets Temporarily Restricted Net Assets Center for Braille innovation $ 107,150 $ 110,844 ReadBooks program 58,542 2,500 Genius award 44,867 48,740 Other 44,060 38,711 Great Expectations 28,360 - CBBC 24,319 6,154 $ 307,298 $ 206,949 15

19 Note 13 - Temporarily Restricted Net Assets (Continued) The Board of Trustees of the Organization has interpreted the State Prudent Management of Institutional Funds Act as requiring the preservation of the fair value of the original gift as of the gift date of donor-restricted endowment funds absent explicit donor stipulations to the contrary. As a result of this interpretation, the Organization classifies as temporarily restricted net assets (a) the original value of gifts donated, (b) the original value of subsequent gifts donated, and (c) accumulations to the temporarily restricted endowment made in accordance with the direction of the applicable donor gift instrument at the time the accumulation is added to the fund. Note 14 - Supplemental Cash Flow Information For the years ended March 31, 2017 and 2016, the Organization paid $14,261 and $11,448 in interest expense, respectively. There were no amounts paid for income taxes for the years ended March 31, 2017 and