WARRIOR FOUNDATION FREEDOM STATION FINANCIAL STATEMENTS DECEMBER 31, 2017 WARRIOR FOUNDATION FREEDOM STATION TABLE OF CONTENTS INDEPENDENT AUDITORS’ REPORT............................................................................................ 1 – 2 FINANCIAL STATEMENTS: Statement of Financial Position ...................................................................................................... 3 Statement of Activities and Changes in Net Assets ........................................................................ 4 Statement of Functional Expenses ................................................................................................. 5 Statement of Cash Flows ............................................................................................................... 6 Notes to Financial Statements ........................................................................................................ 7 Accountants and business advisers INDEPENDENT AUDITORS’ REPORT To the Board of Directors Warrior Foundation Freedom Station San Diego, CA Report on the Financial Statements We have audited the accompanying financial statements of the Warrior Foundation Freedom Station (a nonprofit organization), which comprise the statement of financial position as of December 31, 2017, and the related statements of activities and changes in net assets, functional expenses and cash flows for the year then ended, and the related notes to the financial statements. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s Responsibility Our responsibility is to express an opinion on these 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 financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. PKF, LLP | 2020 Camino del Rio North, Suite 500, San Diego, CA 92108 Telephone: (619) 238.1040 | Fax: (619) 237.5177 | Website: www.pkfcalifornia.com PKF, LLP is a member of the PKF International Limited and Allinial Global, networks of legally independent member firms and does not accept any responsibility or liability for the actions or inactions on the part of any other individual member firm or firms. Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Warrior Foundation Freedom Station as of December 31, 2017, 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. San Diego, California PKF, LLP June 28, 2018 WARRIOR FOUNDATION FREEDOM STATION STATEMENT OF FINANCIAL POSITION DECEMBER 31, 2017 (With Comparative Totals for 2016) 2017 2016 ASSETS ASSETS: Cash and cash equivalents $ 2,569,145 $ 1,816,797 Donations receivable 50,573 16,957 Investments 4,107,336 3,379,276 Other assets 52,688 63,189 Property and equipment, net 1,989,358 1,926,028 TOTAL ASSETS $ 8,769,100 $ 7,202,247 LIABILITIES AND NET ASSETS LIABILITIES: Accounts payable $ 12,829 $ 24,166 Accrued expenses and other 9,689 12,941 Mortgage note payable 1,010,501 1,060,124 Total liabilities 1,033,019 1,097,231 Contingencies (Note 7) NET ASSETS: Unrestricted: Undesignated 6,580,659 4,966,651 Board designated 1,014,386 1,063,365 7,595,045 6,030,016 Temporarily restricted 141,036 75,000 Total net assets 7,736,081 6,105,016 TOTAL LIABILITIES AND NET ASSETS $ 8,769,100 $ 7,202,247 See accompanying notes to the financial statements. - 3 - WARRIOR FOUNDATION FREEDOM STATION STATEMENT OF ACTIVITIES AND CHANGES IN NET ASSETS FOR THE YEAR ENDED DECEMBER 31, 2017 (With Comparative Totals for 2016) 2017 2016 Temporarily Unrestricted Restricted Total Total REVENUES: Public support and other revenue: Fundraising special events $ 218,626 $ - $ 218,626 $ 514,799 Costs of fundraising events (58,279) (58,279) (97,423) Net support from special events 160,347 - 160,347 417,376 Contributions and grants 1,933,952 223,842 2,157,794 1,051,175 Donated services 108,000 - 108,000 126,000 Interest and dividend income 119,552 - 119,552 105,630 Net realized/unrealized gains on investments, net 54,132 - 54,132 74,368 Rental income 96,900 - 96,900 97,500 Other income 15,035 - 15,035 76,030 Net assets released from use restrictions 157,806 (157,806) - - Total revenues 2,645,724 66,036 2,711,760 1,948,079 EXPENSES: Program services 919,895 - 919,895 1,001,801 Management and general 117,369 - 117,369 92,575 Fundraising and development 43,431 - 43,431 52,092 Total expenses 1,080,695 - 1,080,695 1,146,468 Change in net assets 1,565,029 66,036 1,631,065 801,611 Net assets, beginning of year 6,030,016 75,000 6,105,016 5,303,405 Net assets, end of year $ 7,595,045 $ 141,036 $ 7,736,081 $ 6,105,016 See accompanying notes to the financial statements. - 4 - WARRIOR FOUNDATION FREEDOM STATION STATEMENT OF FUNCTIONAL EXPENSES FOR THE YEAR ENDED DECEMBER 31, 2017 (With Comparative Totals for 2016) 2017 2016 Management Fundraising EXPENSES: Program and general and development Total Total Financial assistance to warriors and families $ 395,966 $ - $ - $ 395,966 $ 446,250 Donated services 60,750 15,750 31,500 108,000 126,000 Wolf Pack basketball 96,411 - - 96,411 103,606 PTS study 21,964 - - 21,964 5,062 Wheel chairs 30,583 - - 30,583 35,878 Depreciation 74,679 - - 74,679 70,455 Mortgage interest 37,190 - - 37,190 39,058 Real estate taxes 1,115 - - 1,115 - Warehouse rent 30,000 - - 30,000 30,000 Promotional items and marketing - - 10,895 10,895 13,399 Professional services - 21,609 - 21,609 21,200 Repairs and maintenance 75,868 - - 75,868 92,206 Utilities 9,259 6,937 - 16,196 14,870 Events for warriors 63,029 - - 63,029 67,772 Bank fees and merchant charges - 33,933 - 33,933 8,773 Rent 16,673 - - 16,673 19,800 Travel - 1,879 - 1,879 1,911 Office supplies - 7,558 - 7,558 8,950 Replacements 6,408 - - 6,408 10,657 Computer - 853 - 853 1,650 Website - 16,639 - 16,639 12,286 Insurance - 5,560 - 5,560 5,398 Printing and copying - 1,618 - 1,618 - Postage and shipping - - 1,036 1,036 1,943 Licenses and permits - 170 - 170 185 Catering - 4,863 - 4,863 4,746 Trademark costs - - - - 4,360 Reimburseable expenses - - - - 53 Total expenses $ 919,895 $ 117,369 $ 43,431 $ 1,080,695 $ 1,146,468 See accompanying notes to the financial statements. - 5 - WARRIOR FOUNDATION FREEDOM STATION STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 2017 (With Comparative Totals for 2016) 2017 2016 CASH FLOWS FROM OPERATING ACTIVITIES: Change in net assets $ 1,631,065 $ 801,611 Adjustments to reconcile change in net assets to net cash provided by operating activities: DepreciationDepreciation and amortization 74,679 70,455 Net realized and unrealized gains on investments (54,132) (74,368) Donated investments (6,095) (5,657) Decrease (increase) in operating assets: Donations receivable (33,616) (16,957) Other assets 10,501 (5,551) Increase (decrease) in operating liabilities: Accounts payable (11,337) 12,290 Accrued expenses and other (3,252) 4,054 Net cash provided by operating activities 1,607,813 785,877 CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from the sale of investments 168,791 851,568 Payments for the purchase of investments (836,624) (955,674) Purchases of property and equipment (138,009) (69,200) Net cash used in investing activities (805,842) (173,306) CASH FLOWS FROM FINANCING ACTIVITIES: Payments on mortgage note payable (49,623) (47,762) Net cash used in financing activities (49,623) (47,762) Net increase in cash and cash equivalents 752,348 564,809 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 1,816,797 1,251,988 CASH AND CASH EQUIVALENTS AT END OF YEAR $ 2,569,145 $ 1,816,797 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the year for interest $ 37,038 $ 38,912 NON-CASH INVESTING AND FINANCING ACTIVITIES: Donated investments $ 6,095 $ 5,657 See accompanying notes to the financial statements. - 6 - WARRIOR FOUNDATION FREEDOM STATION NOTES TO FINANCIAL STATEMENTS 1. NATURE OF ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization Warrior Foundation Freedom Station (the “Foundation” or “WF-FS”) is a 501(c)(3) non-profit organization. WF-FS is incorporated in the State of California and is an independent corporation with its own independent Board of Directors, Officers, and volunteer base. WF- FS did not pay compensation of any form to its Board of Directors, Officers, or volunteers in 2017. WF-FS provides financial and transitional assistance to wounded military warriors in a variety of ways, providing quality-of-life items and numerous support services designed to assist them and their families during recovery.