Consolidated Financial Statements
Table of Contents Independent Auditor s Report 1 2 Financial Statements: Consolidated Statement of Financial Position 3 Consolidated Statement of Activities 4 5 Consolidated Statement of Functional Expenses 6 Consolidated Statement of Cash Flows 7 Notes to Consolidated Financial Statements 8 15 Page
Independent Auditor s Report Board of Directors Pet Partners and Subsidiary Bellevue, Washington We have audited the accompanying consolidated financial statements of Pet Partners and Subsidiary, a nonprofit corporation, which comprise the consolidated statement of financial position as of December 31, 2015, and the related consolidated statements of activities, functional expenses and cash flows for the year 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. Auditor s 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. 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. T: 425-454-4919 T: 800-504-8747 F: 425-454-4620 10900 NE 4th St Suite 1700 Bellevue WA 98004 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 auditor's 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. clarknuber.com
Opinion In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Pet Partners and Subsidiary as of December 31, 2015, and the changes in its net assets and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America. Prior Period Financial Statements The consolidated financial statements of Pet Partners and Subsidiary as of December 31, 2014, were audited by other auditors whose report dated May 12, 2015, expressed an unmodified opinion on those financial statements. Report on Prior Year Summarized Comparative Information The prior year summarized comparative information has been derived from the December 31, 2014 consolidated financial statements and the previous auditor s report dated May 12, 2015, expressed an unmodified opinion on those consolidated financial statements. Report on Supplementary Information Our audit was conducted for the purpose of forming an opinion on the consolidated financial statements as a whole. The accompanying consolidating information is presented for purposes 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 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 relating to the consolidated financial statements as a whole. Certified Public Accountants April 22, 2016 2
Consolidated Statement of Financial Position December 31, 2015 (With Comparative Totals for December 31, 2014) Pet 875 Building Partners LLC Eliminations 2015 Total 2014 Total Current Assets: Cash and cash equivalents $ 329,572 $ 42,284 $ $ 371,856 $ 150,598 Accounts receivable 17,743 11,605 29,348 11,556 Other receivables 106,062 (103,930) 2,132 Contributions receivable, net 154,844 154,844 138,075 Inventory 23,924 23,924 24,796 Prepaid expenses 53,806 4,579 58,385 85,014 Deferred rent 32,511 32,511 Total Current Assets 685,951 90,979 (103,930) 673,000 410,039 Long term portion of contributions receivable 180,000 180,000 120,000 Investments 3,513,762 3,513,762 4,705,495 Investment in 875 Building LLC 2,901,155 (2,901,155) Property, equipment and software 610,975 2,935,237 3,546,212 3,407,623 Total Assets $ 7,891,843 $ 3,026,216 $ (3,005,085) $ 7,912,974 $ 8,643,157 Current Liabilities: Accounts payable and accrued liabilities $ 88,622 $ 21,131 $ $ 109,753 $ 134,599 Intercompany loan payable 103,930 (103,930) Deferred revenue 276,461 276,461 251,280 Total Current Liabilities 365,083 125,061 (103,930) 386,214 385,879 Net Assets: Unrestricted Designated 773,821 773,821 2,138,884 Undesignated 4,452,189 2,901,155 (2,901,155) 4,452,189 3,791,999 Total Unrestricted Net Assets 5,226,010 2,901,155 (2,901,155) 5,226,010 5,930,883 Temporarily restricted 1,238,326 1,238,326 1,266,846 Permanently restricted 1,062,424 1,062,424 1,059,549 Total Net Assets 7,526,760 2,901,155 (2,901,155) 7,526,760 8,257,278 Total Liabilities and Net Assets $ 7,891,843 $ 3,026,216 $ (3,005,085) $ 7,912,974 $ 8,643,157 See accompanying notes. 3
Consolidated Statement of Activities (With Comparative Totals for 2014) Pet Partners Temporarily Permanently 875 Building Unrestricted Restricted Restricted Total LLC Eliminations 2015 Total 2014 Total Operating Support and Revenue: Individual contributions $ 270,397 $ 80,000 $ $ 350,397 $ $ $ 350,397 $ 297,692 Corporation and foundation contributions 593,536 160,000 753,536 753,536 565,021 In kind contributions 429,786 429,786 429,786 Registrations and workshops 438,553 438,553 438,553 360,894 Merchandise sales 98,263 98,263 98,263 98,254 Investment income 42,660 24,559 14,548 81,767 81,767 98,340 Other income 21,065 21,065 21,065 18,009 Net assets released from restrictions Expiration of program restrictions 147,663 (147,663) Expiration of time restrictions 96,230 (96,230) Total Support and Revenue 2,138,153 20,666 14,548 2,173,367 2,173,367 1,438,210 Expenses: Program services 1,827,194 1,827,194 1,827,194 1,436,252 Management and general 332,206 332,206 332,206 377,888 Fundraising 523,137 523,137 523,137 281,965 Total Operating Expenses 2,682,537 2,682,537 2,682,537 2,096,105 Change in Net Assets From Operations (544,384) 20,666 14,548 (509,170) (509,170) (657,895) See accompanying notes. 4
Consolidated Statement of Activities (Continued) (With Comparative Totals for 2014) Nonoperating Activities Pet Partners Temporarily Permanently 875 Building Unrestricted Restricted Restricted Total LLC Eliminations 2015 Total 2014 Total Loss on investment in LLC (177,633) (177,633) 177,633 Contribution of capital from Pet Partners 47,945 (47,945) Investment (losses) gains 16,552 (49,186) (11,673) (44,307) (44,307) 278,913 Recovery (loss) on contributions receivable 825 Building rental income 108,105 108,105 51,962 Other income 592 592 592 LLC expenses Operating expenses (189,170) (189,170) (137,859) Depreciation (96,568) (96,568) (101,465) Change in Net Assets From Nonoperating Activities (160,489) (49,186) (11,673) (221,348) (129,688) 129,688 (221,348) 92,376 Change in Net Assets (704,873) (28,520) 2,875 (730,518) (129,688) 129,688 (730,518) (565,519) Net assets, beginning of year 5,930,883 1,266,846 1,059,549 8,257,278 3,030,843 (3,030,843) 8,257,278 8,822,797 Net Assets, End of Year $ 5,226,010 $ 1,238,326 $ 1,062,424 $ 7,526,760 $ 2,901,155 ($2,901,155) $ 7,526,760 $ 8,257,278 See accompanying notes. 5
Consolidated Statement of Functional Expenses (With Comparative Totals for 2014) Supporting Services Program Management Third Party Total Services and General Fundraising Tenancy Supporting 2015 Total 2014 Total Personnel costs $ 987,174 $ 229,549 $ 197,076 $ $ 426,625 $ 1,413,799 $ 1,301,754 Professional and contract services 192,279 60,343 228,578 288,921 481,200 301,684 Equipment rental and maintenance 6,163 1,293 1,160 2,453 8,616 84,803 Office supplies 29,300 2,302 1,557 3,859 33,159 76,977 Public relations 394,188 291 1,706 1,997 396,185 75,226 Meetings and conferences 41,180 11,611 4,286 15,897 57,077 61,801 Cost of sales 22,256 22,256 42,890 Printing and publishing 14,117 4,249 46,602 50,851 64,968 38,032 Miscellaneous 31,748 6,357 9,228 15,585 47,333 30,992 Postage and mailing 31,218 2,094 19,948 22,042 53,260 29,603 Telephone 16,944 2,213 2,316 4,529 21,473 25,227 Insurance 17,067 2,766 2,481 5,247 22,314 18,639 Depreciation and amortization 43,560 9,138 8,199 17,337 60,897 8,477 Total Expenses Before Depreciation 1,827,194 332,206 523,137 855,343 2,682,537 2,096,105 LLC operating expenses 73,549 15,323 13,280 87,018 115,621 189,170 137,859 LLC depreciation 37,546 7,822 6,779 44,421 59,022 96,568 101,465 Total Expenses $ 1,938,289 $ 355,351 $ 543,196 $ 131,439 $ 1,029,986 $ 2,968,275 $ 2,335,429 See accompanying notes. 6
Consolidated Statement of Cash Flows (With Comparative Totals for 2014) 2015 2014 Reconciliation of Change in Net Assets to Cash Flows From Operating Activities: Change in net assets $ (730,518) $ (565,519) Adjustments to reconcile change in net asset to net cash used by operating activities Depreciation and amortization 157,465 109,942 Reinvested investment income (64,184) (85,289) Gain on investments 44,307 (278,913) Changes in assets and liabilities: Accounts receivable (17,792) (516) Contributions receivable (76,769) (73,322) Other receivables (2,132) Prepaid expenses and deposits 26,629 (47,633) Inventory 872 7,878 Deferred rent (32,511) Accounts payable and accrued liabilities (24,846) (50,818) Deferred revenue 25,181 89,620 Net Cash Used by Operating Activities (694,298) (894,570) Cash Flows From Investing Activities: Proceeds from the sale of investments 1,226,158 1,413,186 Purchase of investments (70,001) Purchase of capital assets (296,054) (355,205) Net Cash Provided by Investing Activities 930,104 987,980 Cash Flows From Financing Activities: Investment earnings restricted to endowment (14,548) (13,051) Changes in Cash and Cash Equivalents 221,258 80,359 Cash and cash equivalents, beginning of year 150,598 70,239 Cash and Cash Equivalents, End of Year $ 371,856 $ 150,598 See accompanying notes. 7
Notes to Consolidated Financial Statements Note 1 Organization and Summary of Significant Accounting Policies Organization Pet Partners (formerly Delta Society) is a not for profit corporation whose mission is to help lead the world in positive human animal interactions to improve people's physical, psychological and emotional health. Pet Partners' largest program is its Therapy Animal Program. This program trains and screens people, along with their pets, for visitinganimal programs in hospitals, nursing homes, rehabilitation centers, schools, and other facilities. In April 2004, Pet Partners incorporated 875 Building LLC (the LLC), a wholly owned for profit subsidiary. In 2008, the Internal Revenue Service approved the LLC's request to be classified as a nonprofit title holding company. The LLC' s purpose is to own Pet Partners' International Training Center and Headquarters building (Building) in Bellevue, Washington. Pet Partners was originally incorporated in 1981 under the name Delta Society and changed its name in March 2013. Basis of Accounting The consolidated financial statements of Pet Partners and the LLC (collectively referred to as Pet Partners) are presented on the accrual basis of accounting. The presentation of financial information for the LLC has been conformed with the basis of presentation for Pet Partners. All appropriate transactions have been eliminated as a result of the consolidation. Net assets and revenues, expenses, gains, and losses are classified based on the existence or absence of donor imposed restrictions. Accordingly, the net assets of Pet Partners and changes therein are classified and reported as follows: Unrestricted Net Assets Net assets that are not subject to donor imposed restrictions. Included in unrestricted net assets at both December 31, 2015 and 2014, are board designated net assets of $773,821 and $2,138,844, respectively. Temporarily Restricted Net Assets Net assets subject to donor imposed restrictions that will be met either by actions of Pet Partners or the passage of time. Temporarily restricted net assets consisted of the following as of December 31: 2015 2014 Time restricted endowment earnings $ 822,406 $ 933,865 Time restricted contributions 280,165 216,396 Purpose restricted contributions 135,755 116,585 $ 1,238,326 $ 1,266,846 Permanently Restricted Net Assets Net assets subject to donor imposed restrictions requiring that they be maintained permanently by Pet Partners. The donors of these assets permit Pet Partners to use portions of the income earned on related investments for unrestricted purposes. Pet Partners has permanently restricted net assets of $1,062,425 and $1,059,549 at December 31, 2015 and 2014, respectively. 8
Notes to Consolidated Financial Statements Note 1 Continued Donor restricted support is reported as an increase in temporarily or permanently restricted net assets, depending on the nature of the restriction. When restrictions expire (that is, when a stipulated time restriction ends or purpose restriction is accomplished), temporarily restricted net assets are reported in the statement of activities as net assets released from restrictions. Use of 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 of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Income Taxes The Internal Revenue Service has recognized Pet Partners as exempt from federal income taxes under Section 501(c)(3) of the Internal Revenue Code. The LLC has also been recognized as exempt from federal income taxes under 501(c)(25) of the Internal Revenue Code as a title holding company. As such, LLC activities will be reported on a Form 990 separate from that of its sole member, Pet Partners. Comparative Amounts for 2014 For comparative purposes, the financial statements include certain prior year summarized information in total but not by net asset class. Such information does not include sufficient detail to constitute a presentation in conformity with accounting principles generally accepted in the United States (US GAAP). Accordingly, such information should be read in conjunction with the Pet Partner s financial statements for the year ended December 31, 2014, from which the summarized information was derived. Cash and Cash Equivalents Cash and cash equivalents consist of highly liquid investments with an original maturity of three months or less. Pet Partners maintains its cash and cash equivalents in bank accounts that may exceed federally insured limits at times during the year. Pet Partners has not experienced any losses in these accounts, and management does not believe it is exposed to any significant credit risk. Investments Investments are reported at their fair values in the statement of financial position. Market risk could occur and is dependent on the future changes in market prices of the various investments held. Accounts Receivable Accounts receivable are stated at the amount management expects to collect from outstanding balances. Management provides for probable uncollectible amounts through a charge to earnings and a credit to a valuation allowance based on its assessment of the current status of individual accounts. Balances still outstanding after management has used reasonable collection efforts are written off through a charge to the valuation allowance and a credit to trade accounts receivable. Changes in the valuation allowance have not been material to the financial statements. Contributions Receivable Contributions receivable are recorded in the financial statements when Pet Partners is notified of the unconditional promise to give. Amounts to be received over future periods are valued at the estimated present value of the future cash flows using a discount rate that market participants would expect on similar assets. As of December 31, 2015 and 2014, discount on contributions receivable due in more than one year was immaterial. 9
Notes to Consolidated Financial Statements Note 1 Continued Contributions receivable at December 31 are as follows: 2015 2014 Receivable in less than one year $ 155,944 $ 139,175 Less allowance for uncollectible pledges (1,100) (1,100) Contributions receivable current 154,844 138,075 Receivable in one to five years 180,000 120,000 Total Contributions Receivable $ 334,844 $ 258,075 Inventory Inventory consists primarily of books, animal wearables and other merchandise and is recorded at lower of cost (FIFO method) or market. Property, Equipment and Software Pet Partners capitalized assets with a cost or donated value greater than $1,000 and a useful life greater than one year. Depreciation is computed using the straight line method over estimated useful lives. Property and equipment consist of the following at December 31: Useful Life 2015 2014 Building 30 years $ 2,887,320 $ 2,883,745 Furniture, equipment and software 3 5 years 1,068,087 412,631 3,955,407 3,296,376 Accumulated depreciation (1,890,835) (1,733,366) 2,064,572 1,563,010 Construction in progress 362,999 Land 1,481,640 1,481,614 $ 3,546,212 $ 3,407,623 Construction in progress included costs capitalized for the development of the new Pet Partners website. The website was completed and placed into service during the year ended December 31, 2015. Financial Instruments and Credit Risk Concentration Financial instruments that potentially subject Pet Partners to concentrations of credit risk consist of investments and cash and cash equivalents. Pet Partners has cash balances that are in excess of the federally insured amounts. 10
Notes to Consolidated Financial Statements Note 1 Continued For the year ended December 31, 2015, contributions included $390,000 in in kind advertising from one donor. Deferred Revenue Income from registrations and workshop fees is deferred and recognized over the period to which it relates. Contributions Contributions, which include unconditional promises to give (pledges), are recognized as support and revenue in the period received. In Kind Goods and Services Contributed materials have been recorded on the basis of rates that otherwise would have been paid for similar goods. Donated services are recorded as in kind contributions and are recognized as revenue at estimated values at the date of receipt if they (a) create or enhance nonfinancial assets, or (b) require specialized skills and would need to be purchased if not provided by donation. Corresponding expenses are recognized as the assets and services are utilized. For the years ended December 31, in kind contributions consisted of the following: 2015 2014 Advertising $ 390,000 $ Legal services 28,617 Fundraising event materials and other 11,169 $ 429,786 $ Contributed advertising of $390,000 has been included in unrestricted contributions and program services for the year ended December 31, 2015. Management believes that this allocation is appropriate given the nature of the advertising to help legitimize the role of animal assisted therapies. A substantial number of volunteers have made significant contributions of time to Pet Partners' program services. The value of this contributed time does not meet the criteria for recognition of contributed services and, accordingly, is not reflected in the accompanying consolidated financial statements. Functional Allocation of Expenses The costs of providing the various program services have been summarized on a functional basis in the statements of activities and of functional expenses. Accordingly, certain costs have been allocated among program services, management and general, and fundraising on the basis of benefits received. Much of Pet Partners' program services are performed by volunteers whose contributed time do not meet the criteria for recognition of contributed services. Therefore, the proportion of management and general, and fundraising expenses may be higher than for other nonprofit organizations that operate with more paid program staff. 11
Notes to Consolidated Financial Statements Note 2 Fair Value Measurements Fair Value Measurements In accordance with financial accounting standards, a three tiered hierarchy of input levels is used for measuring fair value. Financial accounting standards 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. Valuation techniques utilized to determine fair value are consistently applied. The three tiers of inputs used for fair value measurements are as follows: Level 1 Fair values are based on quoted prices in active markets for identical assets and liabilities. Level 2 Fair values are based on observable inputs that include: quoted market prices for similar assets or liabilities; quoted market prices that are not in an active market; or other inputs that are observable in the market and can be corroborated by observable market data for substantially the full term of the assets. Level 3 Fair values are calculated by the use of pricing models and/or discounted cash flow methodologies, and may require significant management judgment or estimation. These methodologies may result in a significant portion of the fair value being derived from unobservable data. Fair value of assets measured on a recurring basis as of December 31, 2015 and 2014 is: Investments at Fair Value as of December 31, 2015 Level 1 Level 2 Level 3 Total Equity securities $ 2,008,383 $ $ $ 2,008,383 Government and corporate bonds 1,505,379 1,505,379 Total Assets at Fair Value $ 3,513,762 $ $ $ 3,513,762 Investments at Fair Value as of December 31, 2014 Level 1 Level 2 Level 3 Total Equity securities $ 2,610,638 $ $ $ 2,610,638 Government and corporate bonds 2,094,857 2,094,857 Total Assets at Fair Value $ 4,705,495 $ $ $ 4,705,495 Note 3 Endowment Funds Pet Partners' endowment consisted of one fund established primarily by two donors for the preservation of Pet Partners' mission. Net assets associated with endowment funds are classified and reported based on the existence or absence of donor imposed restrictions. During the year ended December 31, 2014, one of the donor re directed $10,000 of a previously permanently restricted contribution to temporarily restricted for use in the Pet Partner program. 12
Notes to Consolidated Financial Statements Note 3 Continued Interpretation of Relevant Law The Board of Directors of Pet Partners has reviewed the Washington State Prudent Management of Institutional Funds Act (PMIFA) and, having reviewed its rights and obligations thereunder, has determined that it is desirable to preserve, on a long term basis, the fair value of the original gift as of the gift date of the donorrestricted endowment funds, absent explicit donor stipulations to the contrary. As a result of this determination, Pet Partners classifies as permanently restricted net assets the original value of gifts to the permanent endowment, the original value of subsequent gifts to the permanent endowment, and accumulations to the permanent endowment made in accordance with the direction of the applicable donor gift instrument. The remaining portion of the donor restricted endowment fund that is not classified in permanently restricted net assets is classified as temporarily restricted net assets until those amounts are appropriated for expenditure by Pet Partners in a manner consistent with the standard of prudence prescribed by PMIFA. In accordance with PMIFA, Pet Partners considers the following factors in making a determination to appropriate or accumulate donor restricted endowment funds: The duration and preservation of the fund; The purposes of Pet Partners and the donor restricted endowment fund; General economic conditions; The possible effect of inflation and deflation; The expected total return from income and the appreciation of investments; Other resources of Pet Partners; and The investment policies of the Pet Partners. Return Objectives and Risk Parameters Pet Partners has adopted investment and spending policies for endowment assets that attempt to provide a predictable stream of funding to programs supported by its endowment while seeking to maintain the purchasing power of the endowment assets. Endowment assets include those assets of donor restricted funds that Pet Partners must hold in perpetuity. Under this policy, as approved by the Board Directors, the endowment assets are invested in a manner that is intended to produce results that match the price and yield results of the Russell 3000 Index and Barclays U.S. Aggregate Fixed Income Index, according to the weighted average asset allocation in effect during a year and while assuming a moderate level of risk. Pet Partners expects its endowment funds, over time, to provide an average rate of return of approximately 8 percent annually. Actual returns in any given year may vary from this amount. Strategies Employed for Achieving Objectives To satisfy its long term rate of return objectives, Pet Partners relies on a total return strategy in which investment returns are achieved through both capital appreciation (realized and unrealized) and current yield (interest and dividends). Pet Partners targets a diversified asset allocation that places a greater emphasis on equity based investments to achieve its long term return objectives within prudent risk constraints. Spending Policy and How the Investment Objective Relates to Spending Policy Pet Partners has a policy of appropriating for distribution each year 5 percent of its endowment fund's average fair value over the prior 12 quarters through the calendar year end preceding the fiscal year in which the distribution is planned. In establishing this policy, Pet Partners considered the long term expected return on its endowment. Accordingly, over the long term, Pet Partners expects the current spending policy to allow its endowment to grow at an average of 3 percent annually. This is consistent with Pet Partners' objective to maintain the purchasing power of the endowment assets held in perpetuity or for a specified term as well as to provide additional real growth through new gifts and investment return. 13
Notes to Consolidated Financial Statements Note 3 Continued Endowment net assets by fund type and change in endowment net assets as of and for the year ended December 31, 2015: Temporarily Permanently Unrestricted Restricted Restricted Total Donor restricted endowment net assets, December 31, 2014 $ $ 933,865 $ 1,059,549 $ 1,993,414 Investment return Investment income 24,559 14,548 39,107 Net gains (49,186) (11,673) (60,859) Spending (86,832) (86,832) Donor Restricted Endowment Net Assets, December 31, 2015 $ $ 822,406 $ 1,062,424 $ 1,884,830 Endowment net assets by fund type and change in endowment net assets as of and for the year ended December 31, 2014: Temporarily Permanently Unrestricted Restricted Restricted Total Donor restricted endowment $ 2,923 $ 802,183 $ 1,056,498 $ 1,861,604 net assets, December 31, 2013 Investment return Investment income 22,229 13,051 35,280 Net gains 192,925 192,925 Spend/transfer (2,923) (83,472) (10,000) (96,395) Donor Restricted Endowment Net Assets, December 31, 2014 $ $ 933,865 $ 1,059,549 $ 1,993,414 Note 4 Line of Credit Pet Partners has a $250,000 revolving line of credit with a bank, which bears interest at prime rate plus 1/2% and expires August 2016. Collateral of this line of credit is comprised of property and assets as determined by the bank at the time the line of credit is used. There were no advances at December 31, 2015 or 2014. 14
Notes to Consolidated Financial Statements Note 5 Tenant Lease The estimated yearly rent that Pet Partners would have to pay the LLC for the space it occupies in the Building is $162,000. Pet Partners plans to ultimately occupy the entire Building. Timing of this event will depend on the needs of Pet Partners. Until that time, tenants will be sought for any space not occupied by Pet Partners. Minimum rental payments to be received each year from third party tenants in the Building are as follows: For the Year Ending December 31, 2016 $ 133,844 2017 173,379 2018 164,095 2019 162,033 2020 124,545 Thereafter 560,127 $ 1,318,023 Note 6 Change in Accounting Estimate Prior to January 1, 2014, Pet Partners recognized registration fees using a tiered approach that weighted revenue more heavily toward the beginning of the two years to which the fees applied. This approach was used as management felt that more service was provided to Pet Partner teams at the beginning of the membership term and less toward the end. Effective January 1, 2014, Pet Partners changed to recognizing revenue over the two year term on a straight line basis. This approach is considered to be a more conservative recognition of revenue and is not expected to have a significant impact on revenue in years subsequent to the change. The effect of this change was to increase deferred revenue and reduce registration revenue for 2014 by approximately $90,000. Note 7 Retirement Plan Pet Partners maintains a tax sheltered annuity retirement plan under Internal Revenue Code Section 403(b) which covers substantially all employees. Pet Partners contributes 8% of an employee's base salary. Total employer contributions for the years ended December 31, 2015 and 2014 amounted to $64,620 and $62,631, respectively. Note 8 Subsequent Events Management has evaluated events occurring subsequent through April 22, 2016, which is the date on which the financial statements were available to be issued. 15