GLOBAL HOPE NETWORK INTERNATIONAL, INC. (A Not-For-Profit Corporation) FINANCIAL STATEMENTS (With Independent Auditor’s Report Thereon) December 31, 2012 and 2011
GLOBAL HOPE NETWORK INTERNATIONAL, INC. (A Not-For-Profit Corporation) TABLE OF CONTENTS
Page Independent Auditor's Report
1
Financial Statements: Statements of financial position Statements of activities Statements of cash flows
2 3 4
Notes to Financial Statements
5
GLOBAL HOPE NETWORK INTERNATIONAL, INC. (A Not-For-Profit Corporation) STATEMENTS OF FINANCIAL POSITION December 31, 2012 and 2011
2012
2011
ASSETS Current Assets: Cash and cash equivalents Investments Contributions receivable Prepaid expenses and other current assets
$
Total current assets Property and Equipment, net Total assets
465,579 3,952 38,420 54,909
$
356,319 1,809 11,405 16,426
562,860
385,959
4,985
8,404
$
567,845
$
394,363
$
25,647 10,039
$
23,217 1,441
LIABILITIES AND NET ASSETS Current Liabilities: Accounts payable Accrued expenses Total current liabilities
35,686
24,658
Net Assets: Unrestricted Temporarily restricted
484,159 48,000
369,705 -
Total net assets
532,159
369,705
Total liabilities and net assets
$
567,845
$
394,363
The accompanying Notes to Financial Statements are an integral part of these statements. 2
GLOBAL HOPE NETWORK INTERNATIONAL, INC. (A Not-For-Profit Corporation) STATEMENTS OF ACTIVITIES Years Ended December 31, 2012 and 2011
2012
Support and revenue: Contributions Interest and other income Net assets released from restrictions
Unrestricted
Temporarily Restricted
$
$
Total support and revenue Expenses: Program services Supporting activities: General and administrative Fundraising Total expenses Increase in net assets Net Assets - Beginning of Year Net Assets - End of Year
$
1,907,705 322 47,500
2011
95,500 (47,500)
$
Total
Unrestricted
2,003,205 322 -
$
1,780,102 61 -
Temporarily Restricted $
Total -
$
1,780,102 61 -
1,955,527
48,000
2,003,527
1,780,163
-
1,780,163
1,206,907
-
1,206,907
1,121,152
-
1,121,152
300,745 333,421
-
300,745 333,421
334,422 321,969
-
334,422 321,969
1,841,073
-
1,841,073
1,777,543
-
1,777,543
114,454
48,000
162,454
2,620
-
2,620
369,705
-
369,705
367,085
-
367,085
484,159
$
48,000
$
532,159
$
369,705
$
The accompanying Notes to Financial Statements are an integral part of these statements. 3
-
$
369,705
GLOBAL HOPE NETWORK INTERNATIONAL, INC. (A Not-For-Profit Corporation) STATEMENTS OF CASH FLOWS Years Ended December 31, 2012 and 2011
2012 Cash Flows From Operating Activities: Receipts from contributors Investment and other miscellaneous cash receipts Cash paid to employees Cash paid to program suppliers
$
Net cash provided by operating activities
1,974,098 271 (955,896) (907,966)
2011 $
110,507
Cash Flows From Investing Activities: Purchases of property and equipment Net cash used for investing activities
1,820,729 161 (878,181) (853,698) 89,011
(1,247)
(2,522)
(1,247)
(2,522)
Net increase in cash and cash equivalents
109,260
86,489
Cash and Cash Equivalents - Beginning of Year
356,319
269,830
Cash and Cash Equivalents - End of Year Reconciliation of Increase in Net Assets to Net Cash Provided by Operating Activities: Change in net assets Adjustments to reconcile increase in net assets to net cash provided by operating activities: Depreciation Non cash contribution Unrealized (gain) loss on investments, net
$
465,579
$
356,319
$
162,454
$
2,620
4,666 (2,092) (51)
(Increase) decrease in: Contributions receivable Prepaid expenses and other current assets Increase (decrease) in: Accounts payable Accrued expenses Net cash provided by operating activities
7,168 100
164,977
9,888
(27,015) (38,483)
46,829 41,446
2,430 8,598
8,386 (17,538)
$
110,507
$
89,011
$
2,092
$
-
Supplemental Disclosure of Noncash Investing Activities Investments contributed during the year
The accompanying Notes to Financial Statements are an integral part of these statements. 4
GLOBAL HOPE NETWORK INTERNATIONAL, INC. (A Not-For-Profit Corporation) NOTES TO FINANCIAL STATEMENTS Years Ended December 31, 2012 and 2011
Note 1 - Summary of Significant Accounting Policies: Nature of activities - Global Hope Network International, Inc. (the Organization) is a California not-for-profit corporation formed to provide humanitarian aid (including food, clothing, medication, medical supplies, education assistance, social services, and other aid) to destitute persons and others in crisis in foreign countries. The Organization is headquartered in Orlando, Florida. Basis of presentation - The Organization’s financial statements have been prepared on the accrual basis of accounting and in accordance with the provisions of Financial Accounting Standards Board Accounting Standards Codification (FASB ASC) 958-605, Accounting for Contributions Received and Contributions Made, and FASB ASC 958205, Financial Statements of Not-for-Profit Organizations. FASB ASC 958-605 requires that unconditional promises to give (pledges) be recorded as contributions at fair value at the date the promises are received or made. FASB ASC 958-605 also requires the Organization to distinguish between promises received for each net asset category in accordance with donor restrictions, if any. Under FASB ASC 958-205, net assets and revenue, expenses, gains and losses are classified as temporarily restricted, permanently restricted, or unrestricted based on the existence or absence, respectively, of donor-imposed restrictions. Accordingly, the net assets of the Organization and changes therein are classified as follows: Unrestricted net assets - Net assets available for the support of the Organization’s operations. The unrestricted net assets may be used at the discretion of the Organization’s management and Board of Directors. Temporarily restricted net assets - Net assets subject to donor-imposed stipulations that may or will be met either by actions of the Organization or the passage of time. Permanently restricted net assets - Net assets subject to donor-imposed stipulations to be maintained permanently by the Organization. Generally, the donors of these assets permit the Organization to use all or part of the earnings on related investments for the general or specific purposes. The Organization does not have any donor-imposed permanently restricted net assets.
5
GLOBAL HOPE NETWORK INTERNATIONAL, INC. (A Not-For-Profit Corporation) NOTES TO FINANCIAL STATEMENTS (CONTINUED) Years Ended December 31, 2012 and 2011
Note 1 - Summary of Significant Accounting Policies (Continued): Basis of presentation (continued) - Revenue is recognized as an increase in unrestricted net assets unless use of the related assets is limited by donor-imposed or contractual restrictions. Expenses are reported as decreases in unrestricted net assets. Gains and losses on investments and other assets or liabilities are reported as increases or decreases in unrestricted net assets unless their use is restricted by explicit donor stipulation or by contract. Expirations of the temporary donor imposed or contractual restrictions on net assets are reported as reclassifications to unrestricted net assets in the period in which the restriction expires. A restriction expires when the stipulated time period has elapsed and/or the stipulated purpose has been fulfilled. Contributions - Contributions, including unconditional promises (pledges) to give, are recorded when made, which may be when cash is received, unconditionally promised, or ownership of donated assets is transferred. Contributions 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 reclassifications. Support that is restricted by the donor is reported as an increase in unrestricted net assets if the restriction expires in the reporting period in which the support is recognized. The Organization does not have any permanently restricted net assets. The Organization reports non-cash contributions as unrestricted net assets unless explicit donor stipulations specify how the donated assets must be used. Contributions of long-lived assets with explicit restrictions that specify how the assets are to be used and contributions of cash or other assets that must be used to acquire long-lived assets are reported as restricted contributions. Absent explicit donor stipulations about how long those long-lived assets must be maintained, the Organization reports expirations of donor restrictions when the donated or acquired long-lived assets are placed in service. 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 amounts reported 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. Donated materials - Donated materials are recognized as contributions in accordance with FASB ASC 958-605, Accounting for Contributions Received and Contributions Made. Non-cash donations are recorded at their estimated fair market value, as determined by the Corporation, at the date of the donation.
6
GLOBAL HOPE NETWORK INTERNATIONAL, INC. (A Not-For-Profit Corporation) NOTES TO FINANCIAL STATEMENTS (CONTINUED) Years Ended December 31, 2012 and 2011
Note 1 - Summary of Significant Accounting Policies (Continued): Donated services - Donated services are recognized as contributions in accordance with FASB ASC 958-605, Accounting for Contributions Received and Contributions Made, if the services: (a) create or enhance nonfinancial assets or (b) require specialized skills, are performed by people with those skills, and would otherwise have been purchased. Many individuals volunteer significant time to the Organization. No amounts are reflected in the accompanying financial statements for volunteers, as no objective measure is available to measure the value of such contributed services. Functional allocation of expenses - The costs of providing the various programs and other activities of the Organization have been allocated on a functional basis among the program services and supporting activities benefited based on systematic methods and estimates made by management. Fair value of financial instruments - FASB ASC 825-10, Accounting for Financial Instruments, provides guidance on financial instruments with off-balance sheet credit risk. The fair value of the Organization’s cash and cash equivalents, contributions receivable, prepaid expenses and other current assets, and liabilities approximates their carrying values due to the short-term maturities of these instruments. Evaluation of subsequent events - The Organization has evaluated subsequent events through the date of the independent auditor’s report, the date which the accompanying financial statements were available to be issued. Cash and cash equivalents - Cash and cash equivalents include demand deposits, money market accounts, and other highly liquid investments with an original maturity of three months or less when purchased. Contributions receivable - Receivable balances are evaluated for collectability and allowances for amounts deemed uncollectible are determined based on historical trends and aging of these balances. For the years ended December 31, 2012 and 2011, in the opinion of management, all accounts were considered fully collectible and, accordingly, no allowance was necessary. Investments - Investments in securities are reported at fair value (see Note 3). Investment income includes dividends and interest and is recognized as revenue in the period in which it is earned. The amounts are reported as an increase in unrestricted net assets unless otherwise restricted by the donor. Realized and unrealized gains and losses on investments are classified and recorded as increases or decreases in unrestricted net assets, unless otherwise restricted by the donor. Investments are exposed to various risks such as interest rate, market, and credit risks. Due to the level of risk associated with certain investments, it is at least reasonably possible that changes in values of investments will occur in the near term.
7
GLOBAL HOPE NETWORK INTERNATIONAL, INC. (A Not-For-Profit Corporation) NOTES TO FINANCIAL STATEMENTS (CONTINUED) Years Ended December 31, 2012 and 2011
Note 1 - Summary of Significant Accounting Policies (Continued): Property and equipment - Property and equipment is stated at cost if purchased or, if acquired by contribution, at the estimated fair market value on the date of contribution, less accumulated depreciation. The Organization provides for depreciation on operating property and equipment over the estimated useful lives of the related assets using the straight-line method. The Organization follows the practice of capitalizing all expenditures for property and equipment in excess of $1,000. Repairs and maintenance costs are expensed when incurred. Useful lives are summarized in the following table: Computer and office equipment Furniture and fixtures
3 - 5 years 7 years
Impairment of long-lived assets - The carrying value of property and equipment are reviewed for impairment whenever events or changes in circumstances indicate such value may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less cost to sell. The Organization believes no impairment of its long-lived assets existed at December 31, 2012 and 2011. Income taxes - The Organization is exempt from federal and State income taxes under Internal Revenue Section 501(c)(3). Income from activities not directly related to the Organization’s tax-exempt purpose is subject to taxation as unrelated business income at statutory corporate tax rates. For the years ended December 31, 2012 and 2011, the Organization did not have any unrelated business income. The Organization adopted the application of uncertain tax position provisions of FASB ASC 740, Income Taxes. It prescribes an evaluation process for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. It also provides guidance on de-recognition, classification, interest and penalties, disclosure and transition. The provisions have no impact on the Organization’s financial statements. As of December 31, 2012 and 2011, the Organization has accrued no interest and penalties related to uncertain tax positions. It is the Organization’s policy to recognize interest and penalties related to income tax matters in other expense. In addition, the Organization is no longer subject to examinations by tax authorities for U.S. federal income tax returns before fiscal year 2009. Advertising - Advertising is expensed as incurred and amounted to $3,347 and $5,190 for the years ended December 31, 2012 and 2011, respectively.
8
GLOBAL HOPE NETWORK INTERNATIONAL, INC. (A Not-For-Profit Corporation) NOTES TO FINANCIAL STATEMENTS (CONTINUED) Years Ended December 31, 2012 and 2011
Note 1 - Summary of Significant Accounting Policies (Continued): Reclassifications - Certain reclassifications have been made to the 2011 financial statements to conform to the 2012 financial statement presentation. Such reclassifications had no effect on activities or net assets as previously reported. Note 2 - Investments: A summary of investments, by investment type, at December 31, 2012 and 2011 is presented as follows: 2012 Investments: Stocks: Financial & investing Technology Total investments
2011
$
3,215 737
$
1,112 697
$
3,952
$
1,809
The following schedule summarizes the net investment income for the years ended December 31, 2012 and 2011:
2012 Trading securities: Dividends and interest Unrealized gain (loss), net Investment income (loss)
2011
$
271 51
$
161 (100)
$
322
$
61
Note 3 - Fair Value Measurement: FASB ASC 820, Fair Value Measurements, establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Market price observability is impacted by a number of factors, including the type of asset or liability and the characteristics specific to the asset or liability. Assets and liabilities with readily available active quoted prices generally will have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value.
9
GLOBAL HOPE NETWORK INTERNATIONAL, INC. (A Not-For-Profit Corporation) NOTES TO FINANCIAL STATEMENTS (CONTINUED) Years Ended December 31, 2012 and 2011
Note 3 - Fair Value Measurement (Continued): Assets and liabilities measured and reported at fair value are classified and disclosed in one of the following categories: Level 1 - Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. The type of assets and liabilities included in Level 1 includes listed equities, listed debt instruments and listed derivatives. Level 2 - Inputs other than quoted prices within Level 1 that are observable for the asset or liability, either directly or indirectly; and fair value is determined through the use of models and other valuation methodologies. Investments that are generally included in this category include corporate bonds and loans, less liquid and restricted equity securities and certain over-the-counter derivatives. A significant adjustment to a Level 2 input could results in the Level 2 measurement becoming a Level 3 measurement. Level 3 - Inputs are unobservable for the asset or liability and include situations where there is little, if any, market for the asset or liability. The inputs into determination of fair value are based upon the best information in the circumstances and may require significant management judgment or estimation. Assets and liabilities that are included in this category generally include equity and debt positions in privately held entities. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an asset or liability’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The Organization’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. The following tables summarize fair value measurements by level at December 31, 2012 and 2011 for assets measured at fair value on a recurring basis:
December 31, 2012 Common stock: Financial & Investing Technology Total
Fair Value $ $
10
3,216 736 3,952
Quoted Prices (Level 1) $ $
3,216 736 3,952
GLOBAL HOPE NETWORK INTERNATIONAL, INC. (A Not-For-Profit Corporation) NOTES TO FINANCIAL STATEMENTS (CONTINUED) Years Ended December 31, 2012 and 2011
Note 3 - Fair Value Measurement (Continued):
December 31, 2011 Common stock: Financial & Investing Technology Total
Quoted Prices (Level 1)
Fair Value $ $
1,112 697 1,809
$ $
1,112 697 1,809
The Organization recognizes transfers of assets into and out of levels as of the date an event or change in circumstances causes the transfer. There were no transfers between levels for the years ended December 31, 2012 and 2011. Note 4 - Advances: Advances are used as a way to send money to an individual who is otherwise unreachable. These amounts are detailed and reconciled when the money is expended. Money is often sent ahead of a project in order to facilitate the project expenses. Advances totaled $50,962 and $12,209 for the years ended December 31, 2012 and 2011, respectively, and are included in prepaid expenses and other current assets in the accompanying statements of financial position. Note 5 - Property and Equipment: The following is a summary of property and equipment as of December 31, 2012 and 2011: 2012 2011 Computer and office equipment $ 41,492 $ 40,245 Furniture and fixtures 2,149 2,149
Total Less: accumulated depreciation Property and equipment, net
$
43,641
42,394
(38,656)
(33,990)
4,985
$
8,404
Depreciation totaled $4,666 and $7,168 for the years ended December 31, 2012 and 2011, respectively.
11
GLOBAL HOPE NETWORK INTERNATIONAL, INC. (A Not-For-Profit Corporation) NOTES TO FINANCIAL STATEMENTS (CONTINUED) Years Ended December 31, 2012 and 2011
Note 6 - Net Assets: Unrestricted net assets - Unrestricted net assets consist of net assets that are not restricted as to use. Temporarily restricted net assets - At December 31, 2012, temporarily restricted net assets of $48,000 are available for Indonesia water projects. There were no temporarily restricted net assets at December 31, 2011. Note 7 - Description of Leasing Arrangements: The Organization is obligated under non-cancelable operating leases for certain office equipment. The Organization leases its office space on a month-to-month agreement with monthly rents of $1,200. Total rentals under operating leases amounted to $14,363 and $22,209 for the years ended December 31, 2012 and 2011, respectively. Future minimum lease payments due under operating leases with remaining non-cancelable lease terms total $2,382 for the year ending December 31, 2013. Note 8 - Concentration of Credit Risk: Financial instruments that potentially subject the Organization to concentrations of credit risk consist principally of cash and cash equivalents. The Organization maintains its cash balances in various financial institutions. The balances of these accounts are insured by the Federal Deposit Insurance Corporation (FDIC) up to certain limits. At times, such balances may be in excess of the FDIC limit. At December 31, 2012, the Organization had approximately $69,000 in uninsured cash. The risk is managed by maintaining all deposits in high quality institutions. Note 9 - Related Party Transactions: Global Hope Network International - Geneva (GHNI - Geneva) is a separate legal entity located in Geneva, Switzerland that oversees field operations in Europe and the surrounding areas. The Organization remits assessments to GHNI - Geneva for program services support. For the years ended December 31, 2012 and 2011, total assessments remitted to GHNI - Geneva approximated $47,000 and $41,000, respectively, and are included in program services in the accompanying statements of activities. Note 10 - Subsequent Events: The Organization has evaluated subsequent events through the date of the independent auditor’s report, the date which the accompanying financial statements were available to be issued.
12
GLOBAL HOPE NETWORK INTERNATIONAL, INC. (A Not-For-Profit Corporation) NOTES TO FINANCIAL STATEMENTS (CONTINUED) Years Ended December 31, 2012 and 2011
Note 11 - Schedule of Functional Expenses: 2012 Program Services Salaries and benefits Travel Program expenses Telecommunications Miscellaneous Conferences Housing Professional fees Meals and entertainment Occupancy Postage and delivery Office expense Printing and publications Insurance Contractual services Depreciation Promotion and advertising Events Utilities Repairs and maintenance Supplies Training and development
General and Administrative
Fundraising
643,917 254,173 168,272 8,363 34,867 40,717 33,567 12,494 3,424 1,143 3,235 2,735 -
$
90,284 54,160 48,151 34,445 420 15,778 2,718 14,363 2,548 13,343 572 6,542 6,931 4,666 199 2,503 2,310 812
$
221,695 21,595 44,784 6,173 5,726 5,648 10,437 12,454 3,148 1,761 -
$
$ 1,206,907
$
300,745
$
333,421
$ 1,841,073
$
13
Total Expenses 955,896 329,928 168,272 101,298 75,485 41,137 33,567 21,504 20,860 17,787 14,128 13,343 13,026 9,777 6,931 4,666 3,347 2,735 2,503 2,310 1,761 812
GLOBAL HOPE NETWORK INTERNATIONAL, INC. (A Not-For-Profit Corporation) NOTES TO FINANCIAL STATEMENTS (CONTINUED) Years Ended December 31, 2012 and 2011
Note 11 - Schedule of Functional Expenses (Continued): 2011 Program Services Salaries and benefits Travel Program expenses Telecommunications Miscellaneous Postage and delivery Conferences Occupancy Meals and entertainment Professional fees Contractual services Repairs and maintenance Depreciation Insurance Office expense Promotion and advertising Housing Printing and publications Training and development Utilities Supplies
General and Administrative
Fundraising
542,599 251,812 228,717 6,493 15,146 18,698 30,404 7,323 13,533 2,789 3,638 -
$
98,180 54,364 48,067 48,886 4,439 165 14,507 5,630 10,483 13,870 9,642 7,168 5,951 5,315 834 1,004 3,160 2,757 -
$
237,402 33,117 21,664 6,248 7,875 1,795 6,822 4,356 2,423 267
$
$ 1,121,152
$
334,422
$
321,969
$ 1,777,543
$
14
Total Expenses 878,181 339,293 228,717 76,224 70,280 31,012 30,569 21,830 20,958 20,094 13,870 9,642 7,168 5,951 5,315 5,190 3,638 3,427 3,160 2,757 267
