AUDITED FINANCIAL STATEMENTS Years Ended December 31, 2013 and 2012
Table of Contents Page No. Independent Auditorʹs Report Statements of Financial Position 3 Statements of Activities 4 5 Statements of Functional Expenses 6 7 Statements of Cash Flows 8 NOTES TO FINANCIAL STATEMENTS 9 15
Statements of Financial Position December 31, 2013 and 2012 ASSETS 2013 2012 Current Assets Cash and Cash Equivalents $ 91,419 $ 58,968 Restricted Cash and Cash Equivalents 18,860 Short Term Loan to Residents 1,240 Total Current Assets 92,659 77,828 Fixed Assets, net of accumulated depreciation of $7,966 701,869 3,088 Other Assets Security Deposits 2,050 Total Assets $ 794,528 $ 82,966 LIABILITIES AND NET ASSETS Current Liabilities Accrued Expenses $ 1,384 $ Payroll Liabilities 179 Current Portion, Debt 25,231 Total Current Liabilities 26,794 Long Term Debt 316,079 Total Liabilities 342,873 Net Assets Unrestricted 451,655 64,106 Temporarily Restricted 18,860 Total Net Assets 451,655 82,966 Total Net Assets $ 794,528 $ 82,966 See Independent Auditorʹs Report The accompanying notes are an integral part of these financial statements. 3
Statements of Activities Years Ended December 31, 2013 and 2012 2013 2012 Unrestricted Temporarily Restricted Total Unrestricted Temporarily Restricted Total Revenues: Contributions, Gifts and Grants: Direct Public Support $ 70,721 $ 24,700 $ 95,421 $ 52,164 $ 12,086 $ 64,250 Donated Property 350,000 350,000 Donated Services 24,930 24,930 24,630 24,630 Donated Goods 11,739 11,739 3,736 3,736 Special Events and Activities 54,516 54,516 7,740 311 8,051 Promotional Sales 1,570 1,570 1,068 1,068 Rental Income 7,652 7,652 1,200 1,200 Net Assets Released from Restrictions 43,560 (43,560) 6,911 (6,911) Total Revenues 564,688 (18,860) 545,828 97,449 5,486 102,935 Expenditures: General 41,227 41,227 40,746 40,746 Fundraising 36,173 36,173 11,183 11,183 Program Services 89,866 89,866 7,455 7,455 Total Expenditures 167,266 167,266 59,384 59,384 Net Revenue 397,422 (18,860) 378,562 38,065 5,486 43,551 See Independent Auditorʹs Report The accompanying notes are an integral part of these financial statements. 4
Statements of Activities Years Ended December 31, 2013 and 2012 2013 2012 Unrestricted Temporarily Restricted Total Unrestricted Temporarily Restricted Total Other Revenues and Expenses: Interest Income 35 35 19 8 27 Interest Expense (9,908) (9,908) Changes in Net Assets 387,549 (18,860) 368,689 38,065 5,486 43,551 Net Assets Beginning of Year 64,106 18,860 82,966 26,022 13,366 39,388 Net Assets End of Year $ 451,655 $ $ 451,655 $ 64,087 $ 18,852 $ 82,939 See Independent Auditorʹs Report The accompanying notes are an integral part of these financial statements. 5
Statements of Functional Expenses Years Ended December 31, 2013 and 2012 Programs Veteran Veteran Summarized General Fundraising Housing Support Total 2013 Total 2012 Payroll Expenses 10,907 3,626 11,087 25,620 2,500 Donated Services 4,831 100 19,165 834 24,930 24,630 Housing Rent 12,300 12,300 5,147 Donated Goods 10,239 1,500 11,739 3,736 Relocation Expense 11,472 11,472 Depreciation 142 7,077 7,219 610 Event Facility Expense 7,605 7,605 5,750 Printing & Reproduction 2,415 3,071 2,731 8,217 1,894 Professional Fees 3,524 2,449 5,973 150 Music & Entertainment 5,880 5,880 Outreach Events 2,585 2,585 Office Rent 3,734 3,734 Utilities 930 4,413 5,343 Travel 1,882 1,382 318 3,582 114 Promotional Items 3,406 3,406 1,191 Taxes, Licenses & Fees 50 1,268 1,858 3,176 838 Office Expense 2,897 2,897 2,382 Payroll Taxes 1,046 376 1,071 2,493 Food Expense 508 1,668 2,176 Advertising & Marketing 2,042 100 2,142 2,203 Insurance 1,330 755 2,085 2,561 See Independent Auditorʹs Report The accompanying notes are an integral part of these financial statements. 6
Statements of Functional Expenses Years Ended December 31, 2013 and 2012 Veteran Programs Veteran Summarized General Fundraising Housing Support Total 2013 Total 2012 Supplies 932 973 1,905 Property Taxes 1,571 1,571 Closing Costs 1,478 1,478 Veteran Support Expenses 1,340 1,340 1,235 Maintenance & Repairs 1,128 1,128 Storage 904 904 Property Improvements 842 842 Meals & Dining 463 331 794 Equipment Rental 766 766 Bank Charges 568 568 221 Postage & Delivery 270 185 455 2,148 Education & Seminars 249 249 1,763 Payroll Processing Fees 205 205 Telephone & Internet 166 166 Auto Expense 120 16 136 311 Meetings 135 135 Charitable Contributions 50 50 Total Expenses $ 41,227 $ 36,173 $ 68,649 $ 21,217 $ 167,266 $ 59,384 See Independent Auditorʹs Report The accompanying notes are an integral part of these financial statements. 7
Statements of Cash Flows Years Ended December 31, 2013 and 2012 2013 2012 CASH FLOWS FROM OPERATING ACTIVITIES Change in Net Assets $ 368,689 $ Adjustments to reconcile change in net assets to net cash provided by (used in) operating activities: Depreciation 7,219 610 Donated Residential Property (350,000) Loans Receivable (1,240) Deposits 2,050 (2,050) Other Liabilities 1,563 (1,984) NET CASH PROVIDED OPERATING ACTIVITIES 28,281 (3,424) CASH FLOWS FROM INVESTING ACTIVITIES Purchase of Property and Equipment (356,000) (2,840) NET CASH USED BY INVESTING ACTIVITIES (356,000) (2,840) CASH FLOWS FROM FINANCING ACTIVITIES Long Term Debt 341,310 (2,840) NET CASH USED BY FINANCING ACTIVITIES 341,310 (2,840) NET CASH INCREASE (DECREASE) FOR PERIOD 13,591 (6,264) CASH AT BEGINNING OF YEAR 77,828 40,514 CASH AT END OF YEAR 91,419 58,968 RESTRICTED CASH AT END OF YEAR 18,860 TOTAL $ 91,419 $ 77,828 SUPPLEMENTAL CASH FLOWS INFORMATION Interest Paid $ 9,908 $ See Independent Auditorʹs Report The accompanying notes are an integral part of these financial statements. 8
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2013 NOTE A SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES This summary of significant accounting policies of Wounded Warrior Homes, Inc. (the Organization ) is presented to assist in understanding the Organization s financial statements. The financial statements and notes are representations of the Organization s management who is responsible for the integrity and objectivity of the financial statements. These accounting policies conform to generally accepted accounting principles and have been consistently applied in the preparation of the financial statements. Formation and Description of Organization Wounded Warrior Homes, Inc. (the Organization ) is a California nonprofit organization and was established in 2010. The Organization provides long term transitional housing to single post 911 combat veterans with Traumatic Brain Injury (TBI) and Post Traumatic Stress. Basis of Presentation The accompanying consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States (GAAP) in accordance with the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC). The Organization follows the financial statement presentation recommended by the Financial Accounting Standards Board ( FASB ) Accounting Standards Codification ( ASC ) 958. Under FASB ASC 958, the Organization is required to report net assets, revenues, expenses, gains, and losses into three categories, according to externally (donor) imposed restrictions. A description of the net asset categories follows: Unrestricted Net Assets: Unrestricted net assets are resources that are available to support the Organization s operations. Temporarily Restricted Net Assets: Temporarily restricted net assets are contributions and grants for which donor imposed restrictions have not been met. When donor restrictions expire, 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. Permanently Restricted Net Assets: Permanently restricted net assets have been restricted by donors to be maintained in perpetuity. Generally, the donors of these assets stipulate at the time the gift is made that all or part of the income earned on related investments can be utilized to support the Organization s operations. Donor Imposed Restrictions All contributions are considered to be available for unrestricted use unless specifically restricted by the donor. If a restriction is fulfilled in the same time period in which a restricted contribution is received, the Organization classifies the support as unrestricted. 9
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2013 NOTE A SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) Cash and Cash Equivalents For purposes of the statements of cash flows, the Organization considers all unrestricted highly liquid investments with an initial maturity of three months or less to be cash equivalents. Contributions The Organization records gifts of cash and other assets at their fair market value as of the date of contribution. Such donations are recorded as unrestricted support unless explicit donor stipulations specify how the donated assets must be used. Gifts having donor stipulations which are satisfied in the period the gift is received are reported as unrestricted revenue and net assets. Restricted net assets are reclassified to unrestricted net assets when donor restrictions expire. This occurs when a donor stipulated time restriction ends or a donor stipulated purpose restriction is accomplished. Such reclassifications are reported as net assets released from donor restrictions. Donated Goods and Services Donated goods and professional services are recognized in the accompanying statements at their estimated market values at date of receipt. Contributions of services are recognized if the services received create or enhance nonfinancial assets or require specialized skills, are provided by individuals possessing those skills, and would typically need to be purchased if not provided by donation. Donated professional services are reported in the financial statements as revenue and expenditures. The value of these donations has been determined from invoices rendered by the various donors. A number of volunteers have made significant contributions of time to the Organization s program and support functions. The value of this contributed time does not meet the criteria for recognition of donated services existing in accounting standards and, accordingly, is not reflected in the accompanying consolidated financial statements. For the year ended December 31, 2013 and 2012, respectively, $36,669 and $28,366 was received in donated services and in kind contributions. Property and Equipment Property and equipment with a value greater than $500 are capitalized at cost or fair market value on the date of receipt in the case of donated property. Major additions and improvements are capitalized and depreciated over the remaining useful life of the asset. Repairs and maintenance that do not improve or extend the life of the assets are expensed. When assets are sold or retired, their cost and accumulated depreciation are removed from the accounts, with the resulting gain or loss reflected in the statement of activities. 10
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2013 NOTE A SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) Property and Equipment (cont.) Depreciation of property and equipment are computed using the straight line method based on the estimated useful lives as follows: Residential Real Estate Furniture, fixtures and equipment Computer equipment 27.5 years 3 10 years 3 5 years Prior Year Summarized Comparative Information The statement of functional expenses includes prior year summarized comparative information in total. Such information does not always include sufficient detail to constitute a presentation in conformity with accounting principles generally accepted in the United States of America ( U.S. GAAP ). Accordingly, such information should be read in conjunction with the Organizationʹs financial statements for the year ended December 31, 2013, from which the summarized comparative information was derived. Use of Estimates 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 revenues and expenses during the reporting period. Actual results could differ from those estimates. Functional Allocation of Expenses The costs of providing the various programs and other activities have been summarized on a functional basis in the statements of functional expenses. Accordingly, certain costs have been allocated amongst the programs and supporting services benefited. Program Services The Organizationʹs primary program is geared toward supporting single service members with Traumatic Brain Injury during recovery and transition from active duty military service to independent living. Currently, the Organization owns a three bedroom house located in Vista, California to provide transitional housing for individuals who submit an application and meet their eligibility criteria. The Organization also provides limited financial support beyond housing to assist the service members with the basic necessities and emergency needs. 11
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2013 NOTE A SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) Income Tax Status The Organization is a tax exempt organization under Section 501(c)(3) of the Internal Revenue Code and is exempt from state franchise taxes under Section 23701(d) of the California Revenue and Taxation Code. The Organization accounts for uncertain tax positions in accordance with FASB ASC 740 10. Accordingly, no provision for income taxes has been reflected in the Organization s financial statements. The Organization evaluates its uncertain tax positions, if any, on a continual basis through review of its policies and procedures, and a review of its regular tax filings. The Organization does not believe there are any material uncertain tax positions and, accordingly, it will not recognize any liability for unrecognized tax benefits. Interpretations and guidance surrounding income tax laws and regulations change over time. As such, changes in the Organization s subjective assumptions and judgments can materially affect amounts recognized in the statements of financial position and statements of activities. The Organization s Federal Return of Organizations Exempt from Income Tax (Form 990) for 2010, 2011, and 2012 are subject to examination by the Internal Revenue Service ( IRS ), generally for three years after they were filed. As of the date of this report, the Organizationʹs 2013 return had not yet been filed. Fair Value Measurements The Organization has determined the fair value of certain assets through application of accounting guidance, FASB ASC 820, Fair Value Measurements and Disclosures, that establishes a framework for measuring fair values The accounting standard 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. This standard also requires the use of valuation techniques that are consistent with the market approach, the income approach and/or the cost approach. Inputs to valuation techniques refer to the assumptions that market participants would use in pricing the asset or liability. Inputs may be observable, meaning those that reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from independent sources, or unobservable, meaning those that reflect the reporting entity s own assumptions about the assumptions market participants would use in pricing the asset or liability based on the best information available in the circumstances. In that regard, a fair value hierarchy has been established for valuation inputs that gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The fair value hierarchy is as follows: 12
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2013 NOTE A SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) Fair Value Measurements (cont.) Level 1 Level 2 Level 3 Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity has the ability to access as of the measurement date. Significant other observable inputs other than the Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, and other inputs that are observable or can be corroborated by observable market data. Significant unobservable inputs that reflect an entity s own assumptions about the assumptions that market participants would use in pricing an asset or liability. The asset or liability s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs. Following is a description of the valuation methodologies used for assets measured at fair value: Harvest Home: Valued at fair market value based on the estimated construction cost plus fair market value of the interior design. Advertising and Promotional Costs Advertising and promotional costs are charged to operations when incurred. Advertising and promotional costs for the year ended December 31, 2013 and 2012 were $2,142 and $3,394, respectively. NOTE B CASH AND CASH EQUIVALENTS The Organization maintains cash balances at a single financial institution. At December 31, 2013, accounts at each institution are insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000 for interest bearing accounts and unlimited insurance for non interest bearing accounts. At December 31, 2013 and 2012, respectively, there were no cash balances at the institutions in excess of federally insured limits. At December 31, 2013, the Organization had no restricted cash. As of December 31, 2012, the Organization had $18,860 of restricted cash. The restricted cash was temporarily restricted because the funds were received with donor stipulations that limit the use of the donated cash. 13
NOTE C PROPERTY AND EQUIPMENT WOUNDED WARRIOR HOMES, INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2013 Property and equipment consisted of the following at December 31: 2013 2012 York House Building $ 188,521 $ Harvest Home 350,000 Land 167,479 Furniture and Equipment 2,933 2,933 Computers 902 902 709,835 3,835 Less Accumulated Depreciation (7,966) (747) Fixed Assets, Net $ 701,869 $ 3,088 Depreciation expense was $7,219 and $747 for the year ended December 31, 2013, and 2012 respectively. NOTE D HARVEST HOME After competing in the U.S. Department of Energy Solar Decathlon 2013, Team Capitol DC agreed to donate the Harvest Home to the Organization in July 2013. The Harvest Home is an innovative house of the future that harvests natural resources to power the home and will be used as a rehabilitation home for military veterans recuperating from physical and mental trauma. In October 2013, the Harvest Home was turned over to the Organization and placed in temporary storage while preparing to permanently place the home on the York property. The estimated market value of the 850 square feet one bedroom home is $300,000 $400,000 and has been capitalized at a fair market value of $350,000. NOTE E COMMITMENTS AND CONTINGENCIES The Organization rented a home at a single location in Vista, California that was subsequently purchased in June 2013. Housing rental expense consisted of $12,300 and $5,147 for the year ended December 31, 2013 and 2012, respectively. The Organization began renting office space for operations out of an office in the Executive Directorʹs residence. Rental expense for office space was $3,734 for the year ended December 31, 2013. 14
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2013 NOTE F DEBT On June 25, 2013 the Organization purchased a residential home located in Vista, California in the amount of $346,000 to be used for its permanent transitional housing. The home closed in July 2013 and was purchased with a mortgage payable to The Thomas Clifton Booker and Mary Catherine Booker Family Trust for $346,000. The terms of the current mortgage payable is interest at 5.75% per annum with monthly payments of $2,433. Principal only payments of $15,000 are due annually by July 1, 2014 through June 2017. Principal only payments increase to $20,000 annually beginning June 2017 through June 2023 when the remaining principal and interest are due. Future payments relating to debt are as follows as of December 31, 2013: Year Ending December 31, Principal Interest Total 2014 $ 25,231 $ 18,962 $ 44,193 2015 26,720 17,473 44,193 2016 28,298 15,895 44,193 2017 30,114 14,079 44,193 2018 32,187 12,006 44,193 Thereafter 189,235 25,058 214,293 Total $ 331,785 $ 103,473 $ 435,258 NOTE G RELATED PARTIES In 2013, the Organization began renting its office space in the residence of the Executive Director. Rent and utilities costs of $4,511 were paid directly to the Executive Director as of December 31, 2013. The Organization began paying its proportionate share of utilities directly to the various utility companies in October 2013. NOTE H SUBSEQUENT EVENTS For purposes of determining the effects of subsequent events on these financial statements, management has evaluated events subsequent to December 31, 2013 and through April 25, 2013, the date on which the financial statements were available to be issued. 15