ENTREPRENEURIAL VENTURES IN EDUCATION, INC. AND SUBSIDIARY Quincy, Massachusetts

ENTREPRENEURIAL VENTURES IN EDUCATION, INC. AND SUBSIDIARY Quincy, Massachusetts CONSOLIDATED FINANCIAL STATEMENTS For the Eighteen-Month Period Ended June 30, 2014

TABLE OF CONTENTS PAGE INDEPENDENT AUDITORS REPORT... 1 FINANCIAL STATEMENTS Consolidated Statement of Financial Position... 3 Consolidated Statement of Activities... 4 Consolidated Statement of Functional Expenses... 5 Consolidated Statement of Cash Flows... 6 Notes to Consolidated Financial Statements... 7 SUPPLEMENTARY INFORMATION Consolidating Information - Statement of Financial Position... 14 Consolidating Information - Statement of Activities... 15 INDEPENDENT AUDITORS REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS... 16

CliftonLarsonAllen LLP www.claconnect.com INDEPENDENT AUDITORS' REPORT Board of Directors Entrepreneurial Ventures in Education, Inc. and Subsidiary Quincy, Massachusetts Report on the Financial Statements We have audited the accompanying consolidated financial statements of Entrepreneurial Ventures in Education, Inc. and Subsidiary (a Massachusetts not for profit corporation), which comprise the consolidated statement of financial position as of June 30, 2014, and the related consolidated statements of activities, functional expenses, and cash flows for the eighteenmonth period then ended, and the related notes to the consolidated financial statements. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these consolidated 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 consolidated 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 consolidated financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditors judgment, including the assessment of the risks of material misstatement of the consolidated 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 consolidated 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 consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. An independent member of Nexia International

Opinion In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Entrepreneurial Ventures in Education, Inc. and Subsidiary as of June 30, 2014, and the changes in its net assets and its cash flows for the eighteen-month period then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Other Information Our audit was conducted for the purpose of forming an opinion on the consolidated financial statements as a whole. The accompanying Consolidating Information Statement of Financial Position and Consolidating Information Statement of Activities is presented for purposes of additional analysis and is not a required part of the consolidated 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 consolidated financial statements. The information has been subjected to the auditing procedures applied in the audit of the consolidated financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the consolidated financial statements or to the consolidated 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 consolidated financial statements as a whole. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated February 26, 2015 on our consideration of Entrepreneurial Ventures in Education, Inc. and Subsidiary's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the result of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering Entrepreneurial Ventures in Education, Inc. and Subsidiary s internal control over financial reporting and compliance. a Indianapolis, Indiana February 26, 2015

CONSOLIDATED STATEMENT OF FINANCIAL POSITION June 30, 2014 ASSETS CURRENT ASSETS Cash and cash equivalents $ 1,777,280 Accounts and grants receivable 867,836 Inventories 155,985 Prepaid expenses 60,690 Total current assets 2,861,791 FURNITURE AND EQUIPMENT, NET 424,612 TOTAL ASSETS $ 3,286,403 LIABILITIES AND NET ASSETS CURRENT LIABILITIES Accounts payable $ 236,628 Accrued liabilities 406,318 Total current liabilities 642,946 NET ASSETS Unrestricted 2,493,457 Temporarily restricted 150,000 Total net assets 2,643,457 TOTAL LIABILITIES AND NET ASSETS $ 3,286,403 The accompanying notes are an integral part of the consolidated financial statements. 3

CONSOLIDATED STATEMENT OF ACTIVITIES Eighteen-Month Period Ended June 30, 2014 Temporarily Unrestricted Restricted Totals REVENUES AND PUBLIC SUPPORT Grants $ 2,673,412 $ - $ 2,673,412 Contributions and donations 878,543 815,000 1,693,543 In-kind contribution 328,450-328,450 Program service fees 5,207,501-5,207,501 School breakfast, lunch, and textbook reimbursement 107,270-107,270 Other income 5,076-5,076 Interest income 951-951 Subtotal revenues and public support 9,201,203 815,000 10,016,203 Released from restriction 716,452 (716,452) - Total revenues and public support 9,917,655 98,548 10,016,203 EXPENSES Program services 6,917,382-6,917,382 Fundraising 150,173-150,173 General and administrative 1,804,536-1,804,536 Total expenses 8,872,091-8,872,091 CHANGES IN NET ASSETS 1,045,564 98,548 1,144,112 NET ASSETS, BEGINNING OF PERIOD 1,447,893 51,452 1,499,345 NET ASSETS, END OF PERIOD $ 2,493,457 $ 150,000 $ 2,643,457 The accompanying notes are an integral part of the consolidated financial statements. 4

CONSOLIDATED STATEMENT OF FUNCTIONAL EXPENSES Eighteen-Month Period Ended June 30, 2014 Program Services Support Services Educational Programs Grants Academics Total Program Services Administrative Fundraising Total Salaries and benefits $ 3,216,430 $ 296,042 $ 697,282 $ 4,209,754 $ 1,149,782 $ 150,051 $ 5,509,586 Professional services 5,559-34,000 39,559 79,286-118,845 Information technology 63,328 3,750 63,385 130,463 71,916-202,379 Legal and accounting - - - - 18,777-18,777 Professional development - 15,943 4,747 20,690 (18,067) - 2,623 Staff recruitment and development 99,313 - - 99,313 13,606-112,919 Cleaning services - - 625 625 - - 625 Security services - - 58,232 58,232 38,769-97,001 Utilities 690 33,222 53,185 87,097 38,347-125,444 Assessment 129,633 - - 129,633 2,500-132,133 Curriculum 177,004 - - 177,004 920-177,924 Learn and earn 654,097 - - 654,097 - - 654,097 Materials and supplies 180,236-63,819 244,055 28,616 26 272,697 Nutritional support - - 113,426 113,426 1,336-114,762 Field trips and events 89,771 - - 89,771 - - 89,771 In-kind services 328,450 - - 328,450 - - 328,450 Sales, marketing, and community relations 30,456-36,393 66,849 53,644-120,493 Travel and entertainment 21,214 2,798-24,011 187,768 96 211,875 Vehicle and transportation - - - - - - - Rent and facilities 3,047-377,647 380,694 14,229-394,923 Depreciation - - 85,496 85,496 - - 85,496 Insurance - - 11,261 11,261 73,313-84,573 Repairs and maintenance - - (33,217) (33,217) 628 - (32,589) Miscellaneous 120 - - 120 49,167-49,287 TOTAL EXPENSES $ 4,999,347 $ 351,755 $ 1,566,280 $ 6,917,382 $ 1,804,536 $ 150,173 $ 8,872,091 The accompanying notes are an integral part of the consolidated financial statements. 5

CONSOLIDATED STATEMENT OF CASH FLOWS Eighteen-Month Period Ended June 30, 2014 CASH FLOWS FROM OPERATING ACTIVITIES Change in net assets $ 1,144,112 Adjustments to reconcile change in net assets to net cash provided by operating activities: Depreciation 85,496 Effects of changes in operating assets and liabilities: Accounts and grants receivable (867,836) Inventories 44,592 Prepaid expenses (57,821) Accounts payable 211,051 Accrued liabilities 380,642 Net cash provided by operating activities 940,236 CASH FLOWS FROM INVESTING ACTIVITIES Purchases of property and equipment (510,108) Net cash used in investing activities (510,108) NET INCREASE IN CASH AND CASH EQUIVALENTS 430,128 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 1,347,152 CASH AND CASH EQUIVALENTS, END OF PERIOD $ 1,777,280 The accompanying notes are an integral part of the consolidated financial statements. 6

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS June 30, 2014 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Entrepreneurial Ventures in Education, Inc. and Subsidiary ( the Organization ) was organized in the Commonwealth of Massachusetts as a not-for-profit corporation on May 13, 2009. The Organization s mission is to provide services to improve the educational performance and increase the life aspirations of children who are living in underprivileged communities and are currently under-performing. Their mission is achieved by the following activities: To provide direct educational services, such as summer learning programs; To work with organizations to raise the academic achievements and life opportunities of children; To work with parents to increase their engagement in the educational success of their children; and, To engage in other educational and charitable activities related to the foregoing activities and purposes. The Phalen Leadership Academy Indiana, Inc. (PLA), a wholly owned nonprofit subsidiary, was incorporated in 2012, under the laws of the State of Indiana and commenced its start-up period in March 2012 with its first school year operations commencing August 2013. PLA is an inner-city Indianapolis charter school that provides a high quality, tuition free school that helps children excel in their academics and grow as well-rounded individuals through a safe and caring learning environment. PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of the Organization and its wholly owned nonprofit subsidiary, PLA. All significant intercompany accounts and transactions have been eliminated in consolidation. The consolidated financial statements have been prepared for the eighteen month period from January 1, 2013 to June 2014 as a result of the Organizations change to fiscal year end of June 30 to align with PLA s reporting period. NET ASSET CLASSIFICATIONS The financial statements have been prepared in accordance with the Financial Accounting Standards Board s (the FASB ) guidance for nonprofit organizations, which requires, among other things, that the financial statements report the changes in total and of each net asset class, based upon donor restrictions, as applicable. Net assets are to be classified as unrestricted, temporarily restricted, and permanently restricted. The following classes of net assets are maintained: Unrestricted Net Assets Net assets that are not subject to donor-imposed restrictions. Unrestricted net assets may be designated for specific purposes by action of the Board of Directors. 7

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS June 30, 2014 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) NET ASSET CLASSIFICATIONS (continued) Temporarily Restricted Net Assets Net assets whose use by the Organization is subject to donor-imposed restrictions that can be fulfilled by actions of the Organization pursuant to those restrictions or that expire by the passage of time. Permanently Restricted Net Assets Net assets subject to donor-imposed restrictions that they be maintained permanently by the Organization. No permanently restricted assets were received or held during the eighteenmonth period ended June 30, 2014 and accordingly, these financials do not reflect any activity related to this class of net assets for 2014. CASH AND CASH EQUIVALENTS For purposes of the statement of cash flows, the Organization considers all highly liquid investments with an initial maturity of nine months or less to be cash equivalents. PROMISES TO GIVE Unconditional promises to give are recognized as revenues in the period received and as assets, decreases of liabilities, or expenses depending on the form of the benefits received. Conditional promises to give are recognized when the conditions on which they depend are substantially met. There were no outstanding promises to give at June 30, 2014. GRANTS RECEIVABLE Grants receivable represent the uncollected portion of funds from grants awarded to PLA. Management has deemed these amounts to be fully collectible within one year. INVENTORIES Inventories consist of curriculum and work books for use by the Organization, are valued at the lower of cost or market determined by the first in-first out (FIFO) method. FURNITURE AND EQUIPMENT Furniture and equipment are reported at cost, less accumulated depreciation. Improvements and replacements of major property additions are capitalized. Repairs, maintenance and minor replacements are expensed. Depreciation is provided on the straight-line method over the estimated useful lives of the assets which are as follows: Furniture and equipment Computer software and equipment Books and educational materials 7-15 years 3 years 5 years 8

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS June 30, 2014 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) RESTRICTED AND UNRESTRICTED REVENUE AND SUPPORT Contributions and donations received are recorded as unrestricted, temporarily restricted, or permanently restricted support, depending on the existence and/or nature of any donor restrictions. 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 Statement of Activities as net assets released from restrictions. PROGRAM SERVICE FEES Financial awards from state governmental entities in the form of grants are subject to special audit. Such audits could result in claims against the Organization for disallowed costs or noncompliance with grantor restrictions. No provision has been made for any liabilities that may arise from such audits since the amounts, if any, cannot be determined at this date. Parent fees are recorded when received. The amounts receivable, allowance for doubtful accounts, bad debt expense, and deferred revenue are adjusted on a periodic basis. IN-KIND CONTRIBUTIONS Donated services are recognized as contributions in accordance with ASC 958-605-25 Revenue Recognition, if the services (a) create or enhance non-financial assets or (b) require specialized skills, are performed by people with those skills and would otherwise be purchased by the Organization. A substantial number of unpaid volunteers, including members of the Board of Directors, contribute significant amounts of their time to the Organization. The value of this contributed time is not reflected in the accompanying financial statements as it does not meet the criteria for recognition. In-kind contributions for the eighteen-month period ended June 30, 2014 were recorded as follows: Bus transportation $ 169,882 Utilities 72,467 Catering 72,468 Curriculum 13,633 FUNCTIONAL ALLOCATION OF EXPENSES Total in-kind contributions $ 328,450 Expenses are allocated among program and supporting services directly or on the basis of time records and utilization estimates made by the Organization s management. General and administrative 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. 9

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS June 30, 2014 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) ADVERTISING Advertising costs are expensed as they are incurred. Advertising expense for the eighteenmonth period ended June 30, 2014 totaled $32,885. IMPAIRMENT OF LONG-LIVED ASSETS On an ongoing basis, the Organization reviews its long-lived assets for impairment whenever events or circumstances indicate that the carrying amount may be overstated. The Organization recognizes impairment losses if the undiscounted cash flows expected to be generated are less than the carrying value of the related asset. If impaired, the assets are adjusted to fair value based on the discounted cash flows. No impairment was incurred in the eighteen-month period ended June 30, 2014. USE OF ESTIMATES IN PREPARING FINANCIAL STATEMENTS The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of the revenues, expenses, gains, losses and other changes in net assets during the reporting period. Actual results could differ from those estimates. SUBSEQUENT EVENTS Management evaluated subsequent events through February 26, 2015, the date the consolidated financial statements were available to be issued. Events or transactions occurring after June 30, 2014, but prior to February 26, 2015, that provided additional evidence about conditions that existed at June 30, 2014, have been recognized in the consolidated financial statements for the eighteen-month period ended June 30, 2014. Events or transactions that provided evidence about conditions that did not exist at June 30, 2014, but arose before the consolidated financial statements were available to be issued, have not been recognized in the consolidated financial statements for the eighteen-month period June 30, 2014. INCOME TAXES The Organization and its subsidiary (PLA) are exempt from federal and state income tax under Section 501(c) (3) of the Internal Revenue Code and accordingly, no provision for income taxes is included in the financial statements. In addition, the Organization qualifies for the charitable contribution deduction under Section 170(b) (1) (a) and has been classified as an organization that is not a private foundation under Section 509(a) (3). Unrelated business income, of which the Organization had none for the eighteen-month period ended June 30, 2014, would be subject to Federal and State taxes. Consequently, the accompanying financial statements do not reflect any provision for income taxes. 10

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS June 30, 2014 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) INCOME TAXES (continued) Accounting principles generally accepted in the United States of America require management to evaluate tax positions taken by the Organization and recognize a tax liability if the Organization has taken an uncertain position that more likely than not would not be sustained upon examination by the IRS. Management has analyzed the tax positions taken by the Organization, and has concluded that as of June 30, 2014, there are no uncertain positions taken or expected to be taken that would require recognition of a liability or disclosure in the financial statements. The U.S. federal and state income tax returns of the Organization and its subsidiary are subject to examination by the IRS and state taxing authorities, generally for three years after they were filed. Filings for tax returns filed for tax years after 2011 are still subject to examination as of June 30, 2014. NOTE 2 CONCENTRATION OF CREDIT RISK The Organization maintains its cash balances with two financial institutions. The deposits are insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000. The deposits at the institutions exceeded federally insured limits. As of June 30, 2014, the uninsured cash totaled $1,213,314. Management monitors the institutions on a regular basis. Credit risk related to grants receivable is limited due to the Organization s ability to accomplish the terms of the grants. No credit losses related to grants receivable were incurred during the eighteen-month period ended June 30, 2014. Certain grants and contracts may be subject to audit by the funding sources. Such audits might result in disallowances of costs submitted for reimbursement. Management is of the opinion that such cost disallowances, if any, will not have a material effect on the accompanying financial statements. Accordingly, no amounts have been provided in the accompanying financial statements for such potential claims. NOTE 3 FURNITURE AND EQUIPMENT The major classes of furniture and equipment, stated at cost, were as follows: Accumulated Cost Depreciation Net Textbooks $ 125,194 $ 21,746 $ 103,448 Computers 82,663 26,476 56,187 Furniture and equipment 281,951 31,239 250,711 Software 20,300 6,036 14,264 Total $ 510,108 $ 85,496 $ 424,611 11

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS June 30, 2014 NOTE 4 TEMPORARILY RESTRICTED NET ASSETS Temporarily restricted net assets of $150,000 at June 30, 2014 are restricted for time restrictions that are expected to expire within one year. During the eighteen-month period ended June 30, 2014, $716,452 was released from temporarily restricted net assets by incurring expenses satisfying the time restrictions specified by the donor. NOTE 5 SUMMARY OF GRANTS/CONTRACTS FUNDING PLA received funds through the following grants and contracts for the period January 1, 2013 to June 30, 2014. Federal Grant Grant Contract Contract Total Recognized Funding Source CFDA # Number Period Grant Support Indiana Department of Education 84.282 A58-3-13SS-1072 8/1/12 8/19/15 $ 717,000 $ 339,742 Indiana Department of Education 84.010 14-9925 Reimbursement 302,337 301,676 Indiana Department of Education 84.027 14214-583-PN01 Reimbursement 30,991 28,138 Indiana Department of Education 10.555 Reimbursement 94,480 94,480 Total Federal Government 1,144,808 764,036 State of Indiana Indiana Department of Education N/A 2013-2014 1,005,573 1,005,573 Total State of Indiana 1,005,573 1,005,573 Foundation and Corporate National Summer Leadership Association N/A 2013-2014 400,000 400,000 Central Indiana Community Foundation N/A 2013 60,000 60,000 Central Indiana Community Foundation N/A 2014 90,000 45,000 Community Foundation of Greater Birmingham N/A 2014 100,000 100,000 Lilly Endowment, Inc. N/A 2013 35,000 35,000 Eli Lilly Foundation N/A 2014 40,000 40,000 The Mind Trust, Inc. N/A 2013 35,000 35,000 Mike and Gillian Goodrich Foundation N/A 2013 60,000 60,000 Junior League of Indianapolis N/A 2014 25,000 25,000 The Mind Trust, Inc. N/A 3/5/12 6/30/15 1,000,000 915,000 IU Health Foundation N/A Equipment 50,000 50,000 Kaboom N/A Equipment 15,000 15,000 Total Foundation and Corporate 1,910,000 1,780,000 Total Grants and Contracts $ 3,054,808 $ 2,544,036 12

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS June 30, 2014 NOTE 6 SIGNIFICANT SUPPORT The Organization received approximately 27% of the total revenues, gains and public support from Chicago Housing Authority for the eighteen-month period ended June 30, 2014. PLA receives operating funds from the Indiana Department of Education which amounted to approximately 17% of the total revenue, gains and public support. Operating funds are determined under a state funding formula based on the number of students enrolled during the school year. NOTE 7 RETIREMENT PLANS PLA has a 403(b) retirement plan. The plan is contributory only and requires no contribution by PLA. PLA does contribute 7.5% of the salary for all teaching staff. The plan is qualified under Section 403(b)(9) of the Internal Revenue Code. Total contributions to the plan for the eighteen-month period ended June 30, 2014 were $45,894. NOTE 8 RELATED PARTY TRANSACTIONS The Executive Director of the Organization is also a board member. Compensation is for employee services only. In addition, the Chief Operating Officer (COO) is also a board member. The COO also owns a company that was compensated $347,695 for their services in assisting with development and management of the Organization s franchise operation during the eighteen-month period ended June 30, 2014. The consolidated statement of financial position reflects $4,532 due to the related company at June 30, 2014. NOTE 9 OPERATING LEASES The Organization rents program space under a memorandum of understanding that can be terminated upon a sixty-day notice. Rent is stated at $7,558 annually, payable monthly plus applicable common expenses. In addition, PLA has entered into an operating lease arrangement for the school facility expiring in June 2023. Minimum rentals for years subsequent to June 30, 2014 are as follows: 2015 $ 429,096 2016 433,387 2017 437,721 2018 442,098 2019 446,519 2020 and thereafter 1,831,177 $ 4,019,998 Total lease expense for the eighteen-month period ended June 30, 2014 under these lease arrangements amounted to $388,355. This information is an integral part of the accompanying consolidated financial statements. 13

SUPPLEMENTARY INFORMATION

CONSOLIDATING INFORMATION - STATEMENT OF FINANCIAL POSITION June 30, 2014 The Phalen Entrepreneurial Leadership Ventures Academy - in Education, Inc. Indiana, Inc. Eliminations Consolidated ASSETS CURRENT ASSETS Cash and cash equivalents $ 1,270,711 $ 506,569 $ - $ 1,777,280 Accounts and grants receivable 701,000 166,836-867,836 Inventories 155,985 - - 155,985 Prepaid expenses - 60,690-60,690 Total current assets 2,127,696 734,095-2,861,791 FURNITURE AND EQUIPMENT, NET - 424,612-424,612 TOTAL ASSETS $ 2,127,696 $ 1,158,707 $ - $ 3,286,403 LIABILITIES AND NET ASSETS CURRENT LIABILITIES Accounts payable $ 214,482 $ 22,146 $ - $ 236,628 Accrued liabilities 327,309 79,009-406,318 Total current liabilities 541,791 101,155-642,946 NET ASSETS Unrestricted 1,585,905 907,552 2,493,457 Temporarily restricted - 150,000-150,000 Total net assets 1,585,905 1,057,552-2,643,457 TOTAL LIABILITIES AND NET ASSETS $ 2,127,696 $ 1,158,707 $ - $ 3,286,403 14

CONSOLIDATING INFORMATION - STATEMENT OF ACTIVITIES Eighteen-Month Period Ended June 30, 2014 Entrepreneurial Ventures in Education, Inc. The Phalen Leadership Academy - Indiana, Inc. Temporarily Temporarily Unrestricted Restricted Totals Unrestricted Restricted Totals REVENUES, GAINS, AND PUBLIC SUPPORT Grants $ 880,000 $ - $ 880,000 $ 1,793,412 $ - $ 1,793,412 Contributions and donations 304,484-304,484 574,059 815,000 1,389,059 In-kind contribution 328,450-328,450 - - - Program service fees 5,207,501-5,207,501 - - - School breakfast, lunch, and textbook reimbursement - - - 107,270-107,270 Other income - - - 5,076-5,076 Interest income 951-951 - - - Subtotal revenues and public support 6,721,386-6,721,386 2,479,817 815,000 3,294,817 Released from restriction 51,452 (51,452) - 665,000 (665,000) - Total revenues and public support 6,772,838 (51,452) 6,721,386 3,144,817 150,000 3,294,817 EXPENSES Program services 4,999,347-4,999,347 1,965,363-1,965,363 Fundraising 150,173-150,173 - - - General and administrative 1,163,745-1,163,745 593,462-593,462 Total expenses 6,313,265-6,313,265 2,558,826-2,558,826 CHANGES IN NET ASSETS 459,573 (51,452) 408,121 585,991 150,000 735,991 NET ASSETS, BEGINNING OF PERIOD 1,126,332 51,452 1,177,784 321,561-321,561 NET ASSETS, END OF PERIOD $ 1,585,905 $ - $ 1,585,905 $ 907,552 $ 150,000 $ 1,057,552

Eliminations Consolidated Temporarily Unrestricted Restricted Totals $ - $ 2,673,412 $ - $ 2,673,412-878,543 815,000 1,693,543-328,450-328,450-5,207,501-5,207,501-107,270-107,270-5,076-5,076-951 - 951-9,201,203 815,000 10,016,203-716,452 (716,452) - - 9,917,655 98,548 10,016,203 (47,329) 6,917,382-6,917,382-150,173-150,173 47,329 1,804,536-1,804,536-8,872,091-8,872,091-1,045,564 98,548 1,144,112-1,447,893 51,452 1,499,345 $ - $ 2,493,457 $ 150,000 $ 2,643,457 15

CliftonLarsonAllen LLP www.claconnect.com INDEPENDENT AUDITORS REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS Board of Directors Entrepreneurial Ventures in Education, Inc. and Subsidiary Quincy, Massachusetts We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of Entrepreneurial Ventures in Education, Inc. and Subsidiary, which comprise the consolidated statement of financial position as of June 30, 2014, and the related consolidated statements of activities, and cash flows for the eighteen-month period then ended, and the related notes to the consolidated financial statements, and have issued our report thereon dated February 26, 2015. Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered Entrepreneurial Ventures in Education, Inc. and Subsidiary's internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of Entrepreneurial Ventures in Education, Inc. and Subsidiary s internal control. Accordingly, we do not express an opinion on the effectiveness of Entrepreneurial Ventures in Education, Inc. and Subsidiary s internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity s financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. An independent member of Nexia International 16

Compliance and Other Matters As part of obtaining reasonable assurance about whether Entrepreneurial Ventures in Education, Inc. and Subsidiary's financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the result of that testing, and not to provide an opinion on the effectiveness of the entity s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. a Indianapolis, Indiana February 26, 2015 17