Turning Point USA NFP and Subsidiaries June 30, 2017 and 2016 Financial StatementsTURNING POINT USA NFP AND SUBSIDIARIES. JUNE 30, 2017 AND 2016 Independent Auditor's Report Financial Statements: Consolidated Statements of Financial Position Consolidated Statements of Activities Consolidated Statements of Functional Expenses Consolidated Statements of Cash Flows Notes to Consolidated Financial StatementsIndependent Auditor’s Report To the Board of Directors of ‘Turning Point USA NFP We have audited the accompanying consolidated financial statements of Turning Point USA NFP (an Illinois nonprofit organization) and subsidiaries, which comprise the consolidated statements of financial position as of June 30, 2017 and 2016, and the related consolidated statements of activities, functional expenses, and cash flows for the years 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 Responsibil Our responsibility is to express an opinion on these consolidated financial statements based on our audits, We conducted our audits in accordance with auditing standards generally accepted in the United States of America Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of 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 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 intemal 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 intemal 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. Opinion In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Turning Point USA NFP and subsidiaries as of June 30, 2017 and 2016 and the changes in its net assets and their cash flows for the years then ended in accordance with accounting principles. generally accepted in the United States of America. Ay lit f, May 15, 2018TURNING POINT USA NFP AND SUBSIDIARIES. CONSOLIDATED STATEMENTS OF FINANCIAL POSITION JUNE 30, 2017 AND 2016 Current assets. Cash Prepaid expenses Employee advances Total current assets Property and equipment: Vehicles Furniture and fixtures Equipment Leasehold improvements Less: accumulated depreciation Property and equipment, net Other assets: Intangible assets, net of amortization Total assets ASSETS 2017 8 3,414,260 10,000 28,675 3,452,935 37,140 5.979 190,075 3,059 (97,847) 138,406 72,096 663.437 2016 $ 1,545,318 5.000 1,550,318 37,140 4,157 150,596 (24,506 167,387 39,141 $1,756,846, ‘See accompanying notes to consolidated financial statements 1‘TURNING POINT USA NFP AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF FINANCIAL POSITION JUNE 30, 2017 AND 2016 LIABILITIES AND NET ASSETS 2017 2016 Current liabilities: ‘Accounts payable $342,353 S$ 190,941 Unrelated business income taxes payable 814 187 Acerued expenses 55,584 18,700 Due to affiliates 3,750 4435 Deferred revenue 6,000 - Long-term debt, current portion 60,775 58,264 Total current liabilities 469,276 272,527 Long-term liabilities: Long-term debt, less current portion 35.207 116,155 ‘Total liabilities 524,483, 388,682 Net assets Unrestricted 3,128,954 1,368,164 ‘Temporarily restricted 10,000 Total net assets 3,138,954 368,164 Total liabilities and net assets $3,663,437, S_1,756,846 See accompanying notes to consolidated financial statements 2TURNING POINT USA NFP AND SUBSIDIARIES, CONSOLIDATED STATEMENTS OF ACTIVITIES YEARS ENDED JUNE 30, 2017 AND 2016 2017 2016 Unrestricted net assets: Unrestricted revenues and gains: Contributions. $ 8,115,831 S 4.278.442 Special events 33,985 : Investment return 2,264 769 Other 38,776 7,527 Net assets released from restrictions 88,049 34,093 Total unrestricted revenues and gains 8,278,905 4,320,831 Functional expenses: Program services, activism 5,547,660 3,216,067 ‘Supporting services: Fundraising 84,403 137,763 Administ 886,052 520,740 Total functional expenses 6,518,115 3,874,570 Change in unrestricted net assets 1,760,790 446,261 ‘Temporarily restricted net assets: Contributions: Conferences 12,223, . Visit Israel 10,000 - Winter in West Palm Beach 10,500 : ‘Young Latino Leadership Summit 750 240 ‘Young Woman's Leadership Summit 64,576 33,853 Net assets released from restrictions (88.049) 34,093) Change in temporarily restricted net assets 10,000 : Change in net assets 1,770,790 446,261 Net assets, beginning of the year 1,368,164 921,903 Net assets, end of the year $3,138,954 $_1,368.164 See accompanying notes to consolidated financial statements. 3Y ‘iuawiawes [etoueuyy parepljostoa 0} satou SuKuedwoose 295 OHRES CONOR SELES OOSICE S| SITRIST SOON SONS TET ssuada a ara WE VE = : SIEVE WA ual : ns ris - : ‘Soyer ou soutsng prea tovost't loses = : los'ces't onmuodsuesy - oav't9 - : soya, 2 7 Z suoneaugnd pe wondnsqns ros 01 . sso'se soumiiss agnodg - : : ‘sfiey> a1a9g . : souruaiuew pur sido SIL'601 : sx9'rt : Souedna90 pe oy 91799 : ess : SOHN [rUOIDION, v9 : : ues's serine sertbe > : EsT60s see'sse zoel : see's sures s94°9e1 vaeuct aie e sar rove suse : 995'SEL : : m0. o ; ore : : 99} pu sou" 908 : #109 - : isu - : = evn ‘82 Buje pur ssounq 0 : zoe est sno, sseer giver wovcye ree 960'6r sasundxo pooja pue uonesuiuos, : - ost : : : : o9'te 6ov'tz : SmI sows! § StH § S 95% § oIe6EL oy PY Rae py REP aE SaARS SHAS TSS SHAS uoddng lwexoug Sumsoddng woud 510 Tae 9100 GNY L102 ‘0¢ ANAK AANA SUVAA SASNEdX IVNOLLONMA 40 SINAINALYLS GALVANIOSNOD. SARIVIGISAAS ANY AN VSM. LNIOd DNINUNLTURNING POI) YEARS CASH FLOWS FROM OPERATING ACTIVITIES: Change in net assets Adjustments to reconcile change in net assets to net cash provided by operating activities Amortization Depreciation Contributions of donated investments Losses on investments (Increase) decrease in operating assets: Prepaid expenses Increase (decrease) in operating liabilities ‘Accounts payable Unrelated business income taxes payable Accrued expenses Deferred revenue Net cash provided by operating activities CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from sale of donated investments Advances to employees Repayments from employees Purchases of property and equipment Acquisition of intangible assets Proceeds from affiliates Repayments to affiliates Net cash (used) in investing activities ‘CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from long-term debt Repayments of long-term debt Net cash provided (used) by financing activities Net change in eash CASH, BEGINNING CASH, ENDING SUPPLEMENTAL DISCLOSURES: Cash paid for interest, Cash paid for unrelated business income taxes Noncash investing and financing transactions, Fair value of investments acquired See accompanying notes to consolidated financial statements s USA NFP AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS. IDED JUNE 30, 2017 AND 2016 2017 $1,770,790 21,609 B31 (28.256) 661 (10,000) 151,412 627 36,884 6,000 2,023,068, 27,595 (29,800) 6,125 (44,360) (54,564) 685) (95,689 68.37) 8843) 1,808,942 1,545,318 $3,414,260 $6,048 $28,256 2016 $446,261 4748 19,147 (25,072) 709 176,503 187 4,879 627,362 24,363 (5,000) (170,168) (43,889) 4,435 190,259) 181,962 —_—_ie 419 611,522 933.196 S$ _1,545.318 | S805, ; : 25072,i TURNING POINT USA NEP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2017 AND 2016 NATURE OF ACTIVITIES Turning Point USA NEP (the Organization) is a non-profit organization founded in June of 2012. The Organization’s mission is to educate students about the importance of fiscal responsibility, free markets, and limited government throughout the United States of America. The Organization is supported through donor contributions. SIGNIFICANT ACCOUNTING POLICIES Basis of accounting The consolidated financial statements of the Organization have been prepared on the accrual basis of accounting and accordingly reflect all significant receivables, payables, and other liabilities. Estimates ‘The preparation of the Organization's financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. Basis of presentation In 2017, the Board of Directors of the Organization formed Turning Point Endowment for charitable purposes to support and benefit the Organization’s long-term vitality. ‘The consolidated financial statements include the accounts of Turning Point USA NFP and Turning Point Endowment. All significant inter-organization balances and transactions were eliminated in consolidation, Financial statement presentation ‘The consolidated financial statements present information regarding its financial position according to three classes of net assets: unrestricted net assets, temporarily restricted net assets, and permanently restricted net assets. Unrestricted net assets Unrestricted net assets include unrestricted resources which represent the portion of funds that are available for the operating objectives of the Organization. ‘Temporarily restricted net assets Temporarily restricted net assets represent donor-imposed restrictions that either expire by passage of time or can be fulfilled and removed by actions of the Organization pursuant to the donor's stipulations. ‘The Organization had temporarily restricted net assets of $10,000 and $0 at June 30, 2017 and 2016, respectively.TURNING POINT USA NFP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, JUNE 30, 2017 AND 2016 2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Permanently restricted net assets Permanently restricted net assets represent donor-imposed stipulations that neither expire by passage of time nor can be fulfilled or otherwise removed by actions of the Organization. The Organization is permitted to use all or part of the income earned for unrestricted purposes. The Organization had no permanently restricted net assets as of June 30, 2017 and 2016, respectively Recognition of contributions received Contributions are recorded as support at the time the donor makes an unconditional promise to give. The existence or absence of donor restrictions on the gift will determine if it should be classified as an Unrestricted, temporarily restricted, or permanently restricted contribution. All contributions are considered to be available for unrestricted use unless specifically restricted by donors. Unrestricted contributions are recognized when received. All donor-restricted support and revenue is reported as an increase in temporarily or permanently restricted net assets, depending on the nature of the restriction, When a restriction expires (such as 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. Investments Investments in marketable securities with readily determinable fair values and all investments in debt securities are reported at their fair values in the statement of financial position. Donated investments and other noncash donations are recorded as contributions at their fair values at the date of donation Unrealized gains and losses are included in the change in net assets. Investment income and gains restricted by a donor are reported as increases in unrestricted net assets if the restrictions are met (either by passage of time or by use) in the reporting period in which the income and gains are recognized Short-term investments consist of cash, Property an it The Organization capitalizes property and equipment over $1,000. Lesser amounts are normally expensed. Purchased property and equipment is capitalized at cost. Donations of property and equipment are recorded as contributions at their estimated fair value. Such donations are reported as increases in unrestricted net assets unless the donor has restricted the donated assets to a specific Purpose. Assets donated with explicit restrictions regarding their use and contributions of cash that must be used to acquite property and equipment are reported as temporarily restricted contributions. Absent donor stipulations regarding how long those donated assets must be maintained, the Organization reports expirations of donor restrictions when the donated or acquired assets are placed in service as instructed by the donor. The Organization reclassifies temporarily restricted net assets to unrestricted net assets at that time The various classes are depreciated using straight-line and accelerate method over their estimated useful lives. The estimated useful lives for depreciation purposes are as follows: —___Property and equipment Vehicles 5 years Furniture and fixtures T years Equipment 5-7 yearsTURNING POINT USA NFP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2017 AND 2016 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Compensated absences The employees of the Organization are entitled to paid vacation, paid sick days and personal days off, depending on job classification, length of service and other factors. No liability has been recorded in the accompanying financial statements due to immateriality. The Organization's policy is to recognize the costs of compensated absences when paid. Income taxes ‘The Organization is a not-for-profit organization that is exempt from federal income tax under Section 501(c)3) of the Internal Revenue Code. However, income from certain activities not directly related to the Organization’s tax-exempt purpose would be subject to taxation as unrelated business income. The Organization has advertising income which is subject to tax on unrelated business income during the years ended June 30, 2017 and 2016, respectively. It qualifies for charitable contribution deductions under Section 170(b(1)(a) and has been classified as an organization that is not a private foundation under Section 509(a)(2). Accounting for uncertain tax positions Management has evaluated the Organization’s tax positions and concluded that the Organization has taken no uncertain tax positions that require adjustment to or disclosure in the financial statements to comply with the provisions of the accounting guidance for income taxes. The Organization's tax returns are generally subject to examination for a period of three years from the date they are to be filed. Program services Program services consist of activism services carried out by volunteers and employees. The volunteers are mostly students who build campus networks and organize conference and training workshops. Expense allocation The costs of providing various programs and other activities have been summarized on a functional basis, in the Statement of Activities and in the Statement of Functional Expenses. Accordingly, certain costs have been allocated among the programs and supporting services benefited. Advertising The Company expenses advertising costs as they are incurred, Advertising expense amounted to $142,512 to $17,452 for the years ended June 30, 2017 and 2016, respectively Reclassifications -year financial statements have been reclassified for comparative purposes to in the curtent-year financial statements. Certain accounts in the pr conform with the presentTURNING POINT USA NEP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. JUNE 30, 2017 AND 2016 FICANT ACCOUNTING POLICIES (CONTINUED) Sf sequent events Evaluat The Organization has evaluated subsequent events through May 15, 2018, the date which financial statements were available to be issued and the following matters were noted: Subsequent to year end, the Organization was awarded a grant totaling $500,000 to support general operations. The Organization also entered into several operating leases for office space that expire at various dates through June 2026. 3. CONCENTRATION OF CREDIT RISK Cash and cash equivalents ‘The Organization maintains cash balances in several financial institutions. These accounts are insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000. The Organization's uninsured cash balances total $2,870,182 and $1,292,416 as of June 30, 2017 and 2016, respectively. bu The Organization had approximately 16% of total revenue derived from one contributor for the year ended June 30, 2017 and approximately 13% of total revenue derived from one contributor for the year ended June 30, 2016, 4. INVESTMENT RETURN Unrestricted investment return is summarized as follows: —2017_ —2016_ Interest income and dividends $2,925 $1,478 Net realized and unrealized gains (losses) (661) 709) ‘Total investment return $2204 8 _769 5. INTANGIBLE ASSETS The Organization amortizes intangible assets with finite lives on a straight-line basis over their estimated useful lives. Intangible assets include computer software and website development costs that are being amortized using the straight-line method over three years. Amortization expense was $21,609 and $4,748 for the years ended June 30, 2017 and 2016, respectively. Future minimum amortization is as follows: Year 2018 S$ 32,817 2019 28,071 2020 11,208TURNING POINT USA NEP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2017 AND 2016 6. DEFERRED REVENUE Deferred revenue represents revenue for special events that will take place during the next fiscal year. Deferred revenue was $6,000 and $0 for the years ended June 30, 2017 and 2016, respectively. 7. LONG-TERM DEBT Long-term debt is summarized as follows: 2017 _2016 _ Note payable to bank with interest of 4.09% paid monthly through April 2019; secured by equipment: $53,560 $79,802 Note payable to bank with interest of 4.25% paid monthly through May 2019; secured by equipment: 62422 __94,617 Total notes payable 115982174419 Less current portion 60,775) (58,264) Total long-term debt $55,207 S_11G155 Future loan maturities are as follows: Year 2018 $60,775 2019 55.207 $115,982 8. RELATED PARTY TRANSACTIONS Related party transactions occurred between its common board membership during the year as follows: 2017 2016 Postage 8 = $300 Computer : 4l Transportation - 4,000 Office - 94 Repayments 685)TURNING POINT USA NFP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. JUNE 30, 2017 AND 2016 9. COMMITMENTS AND CONTIGENCIES zal matters The Organization is subject to claims that arise out of the normal course of operations. The Organization maintains insurance coverage and uses various risk management activities, which, combined, management believes are sufficient to ensure that the final outcome of any claims or proceedings will not have an adverse material effect on the consolidated financial position, operations, or liquidity of the Organization. Operating leases The Organization leases office space and a vehicle under terms of operating leases that expire at various dates through July 2018. The office space leases generally require the Organization to pay a portion of executory costs stich as taxes, maintenance, and insurance. Rental expenses for those leases consisted of $31,503 and $5,207 for the years ended June 30, 2017 and 2016, respectively. Future m imum lease payment under operating leases are as follows 2018 S$ 37,365 2019 2,000 S_39,365