ATLANTA, GEORGIA REPORT ON AUDITS OF FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011

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1 ATLANTA, GEORGIA REPORT ON AUDITS OF FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011

2 INDEX TO FINANCIAL STATEMENTS DECEMBER 31, 2012 AND 2011 PAGE INDEPENDENT AUDITOR'S REPORT STATEMENTS OF FINANCIAL POSITION 1 STATEMENTS OF ACTIVITIES AND NET ASSETS 2 STATEMENTS OF FUNCTIONAL EXPENSES 3-4 STATEMENTS OF CASH FLOWS 5 NOTES TO FINANCIAL STATEMENTS 6-10

3 Jones and Kolb Certified Public Accountants Atlanta, Georgia INDEPENDENT AUDITOR'S REPORT To the Board of Directors StandUp For Kids Atlanta, Georgia We have audited the accompanying financial statements of StandUp For Kids (a nonprofit organization), which comprise the statements of financial position as of December 31, 2012 and 2011, and the related statements of activities and net assets, functional expenses and cash flows for the years 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 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 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. Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of StandUp For Kids as of December 31, 2012 and 2011, and the changes in its net assets and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America. August 8, 2013

4 STATEMENTS OF FINANCIAL POSITION DECEMBER 31, 2012 AND 2011 ASSETS CURRENT ASSETS Cash $ 314,986 $ 152,152 Restricted cash 167, ,095 Contributions receivable 30,896 46,689 Prepaid expenses 9,571 13,837 Total current assets 522, ,773 PROPERTY AND EQUIPMENT, NET 47,212 61,109 DEPOSITS AND OTHER ASSETS 12,566 16,433 Total assets $ 582,298 $ 405,315 LIABILITIES AND NET ASSETS CURRENT LIABILITIES Accounts payable $ 17,560 $ 30,257 Accrued expenses 11,909 - Total current liabilities 29,469 30,257 NET ASSETS Unrestricted 385, ,045 Temporarily restricted 167, ,013 Total net assets 552, ,058 Total liabilities and net assets $ 582,298 $ 405,315 The accompanying notes to financial statements are an integral part of these statements. 1

5 STATEMENTS OF ACTIVITIES AND NET ASSETS The accompanying notes to financial statements are an integral part of these statements. 2 CHANGE IN UNRESTRICTED NET ASSETS REVENUES AND SUPPORT Contributions Individual contributions $ 213,929 $ 256,264 Business contributions 104, ,747 Foundation contributions 229, ,530 Other contributions 139,945 53,506 Special event revenue 215, ,627 Direct costs of special events (93,754) (80,225) In-kind contributions 372, ,828 Other income 11,548 19,437 Total revenue and support 1,192,935 1,259,714 NET ASSETS RELEASED FROM DONOR RESTRICTIONS 217, ,303 Total unrestricted revenues and support 1,410,826 1,458,017 EXPENSES Program services 988,704 1,473,798 Management and general 101, ,029 Fundraising 125, ,461 Total expenses 1,215,109 1,750,288 Change in unrestricted net assets 195,717 (292,271) CHANGE IN TEMPORARILY RESTRICTED NET ASSETS Restricted contributions 199, ,580 Net assets released from donor restrictions (217,891) (198,303) Change in temporarily restricted net assets (17,946) 99,277 CHANGE IN NET ASSETS 177,771 (192,994) NET ASSETS Beginning of year 375, ,052 NET ASSETS End of year $ 552,829 $ 375,058

6 STATEMENT OF FUNCTIONAL EXPENSES FOR THE YEAR ENDED DECEMBER 31, 2012 Program Management Total Services and General Fundraising Expenses Specific assistance $ 491,921 $ - $ - $ 491,921 Salaries and wages 189,597 28,164 63, ,640 Occupancy 172,089 10,135 6, ,949 Fundraising ,869 48,869 Depreciation 32,271 6,051 2,017 40,339 Professional fees 4,755 35,322-40,077 Insurance 17,710 2,367-20,077 Miscellaneous 10,786 7, ,732 Communications 14,351 1,161 1,013 16,525 Repairs and maintenance 15, ,670 Payroll taxes 12,488 1,561 1,561 15,610 Office expense 7,863 5, ,756 Travel 6, ,587 Postage and shipping 5, ,155 Dues and subscriptions 3, ,881 Advertising and public relations 2,101 1,234-3,335 Printing 1, ,550 Conferences and meetings Total expenses $ 988,704 $ 101,040 $ 125,365 $ 1,215,109 The accompanying notes to financial statements are an integral part of this statement. 3

7 STATEMENT OF FUNCTIONAL EXPENSES FOR THE YEAR ENDED DECEMBER 31, 2011 Program Management Total Services and General Fundraising Expenses Specific assistance $ 671,087 $ - $ - $ 671,087 Salaries and wages 319,585 45,934 93, ,336 Occupancy 240,089 12,399 8, ,571 Fundraising ,519 35,519 Depreciation 24,918 3,115 3,115 31,148 Professional fees 15,407 27,015-42,422 Insurance 23,529 2,363-25,892 Miscellaneous 19, ,228 Communications 19,699 2,324 1,443 23,466 Repairs and maintenance 15, ,973 Payroll taxes 24,962 3,120 3,120 31,202 Office expense 11,230 13, ,495 Travel 32, ,384 Postage and shipping 11, ,670 Dues and subscriptions 5,501 1,135 4,184 10,820 Advertising and public relations 15,727 9,237-24,964 Printing 3,812 2, ,956 Conferences and meetings 8, ,205 Employee benefits 10,360 1,295 1,295 12,950 Total expenses $ 1,473,798 $ 125,029 $ 151,461 $ 1,750,288 The accompanying notes to financial statements are an integral part of this statement. 4

8 STATEMENTS OF CASH FLOWS CASH FLOWS FROM OPERATING ACTIVITIES Change in net assets $ 177,771 $ (192,994) ADJUSTMENTS TO RECONCILE CHANGE IN NET ASSETS TO NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES: Depreciation 40,339 31,148 (Increase) decrease in restricted cash (51,972) (77,666) (Increase) decrease in contributions receivable 15,793 (24,393) (Increase) decrease in prepaid expenses 4,266 6,738 (Increase) decrease in deposits and other assets 3,867 (3,133) Increase (decrease) in accounts payable (12,697) 26,057 Increase (decrease) in accrued expenses 11,909 (8,400) Total adjustments 11,505 (49,649) Net cash provided by (used in) operating activities 189,276 (242,643) CASH FLOWS FROM INVESTING ACTIVITIES Payments for property and equipment (26,442) (7,996) Net cash provided by (used in) investing activities (26,442) (7,996) NET INCREASE (DECREASE) IN CASH 162,834 (250,639) CASH Beginning of year 152, ,791 CASH End of year $ 314,986 $ 152,152 The accompanying notes to financial statements are an integral part of these statements. 5

9 NOTES TO FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. StandUp For Kids (the "Organization") was founded in 1990 to help rescue homeless and at-risk youth. With its national headquarters in Atlanta, Georgia, StandUp For Kids is run almost entirely by volunteers, and has established more than thirty outreach programs in twenty states and the District of Columbia. The Organization is supported primarily through donor contributions. A substantial portion of the Organization's income is derived from private companies and individuals. There were no donor concentrations during the years ended December 31, 2012 and B. Property and equipment is stated at cost if purchased; or if donated, at the fair market value on the date of donation. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets, which range from three to seven years. Additions and replacements are charged to the property accounts, while repairs and maintenance are charged to expense as incurred. Property and equipment, which consists of computer equipment, furniture, and leasehold improvements, is reported on the Statements of Financial Position net of accumulated depreciation, which was $117,320 and $83,457 as of December 31, 2012 and 2011, respectively. Depreciation expense was $40,339 and $31,148 for the years ended December 31, 2012 and 2011, respectively. C. The Organization prepares its financial statements in accordance with U.S. generally accepted accounting principles ("GAAP"). The preparation of financial statements in conformity with GAAP 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 reported period. Actual results could differ from those estimates. D. Net assets, revenues, expenses, gains and losses are classified based on the existence or absence of donor-imposed restrictions. The Organization records contributions of cash and other assets as unrestricted income unless specifically restricted by the donor. Restricted contributions, including unconditional promises to give with payments due in future periods, are recorded as restricted income. When the donor restriction is fulfilled or expires, the temporarily restricted net assets are reclassified to unrestricted net assets and are reported as net assets released from donor restrictions. Accordingly, net assets of the Organization and changes therein are classified and reported as follows: Unrestricted net assets - Net assets that are not subject to donor-imposed stipulations. Temporarily restricted net assets - Net assets subject to donor-imposed stipulations that are expected to be met either by actions of the Organization and/or the passage of time. 6

10 NOTES TO FINANCIAL STATEMENTS Permanently restricted net assets - Net assets subject to donor-imposed stipulations that are required to be maintained permanently by the Organization. The Organization had no permanently restricted net assets at December 31, 2012 and E. Contributions, including unconditional promises to give, are recorded as revenue when the unconditional pledge is made. All contributions are available for unrestricted use unless specifically restricted by the donor. The Organization records donated services as contribution revenue and expense if the services create or enhance a non-financial asset, or the services would (1) need to be purchased by the Organization if not provided by contribution, (2) require specialized skills, and (3) are provided by individuals with those skills. Donated materials and services are reflected as contributions in the accompanying statements at their estimated value at date of receipt. During the years ended December 31, 2012 and 2011, the Organization recorded donated services of approximately $24,000 and $34,000, respectively, which consisted primarily of medical, legal and advertising services. The Organization receives donated services from a variety of unpaid volunteers assisting the Organization with the administration of its programs. No amounts have been recorded in the financial statements for those services since they do not meet the criteria for recognition under GAAP. F. The Organization considers all highly liquid investments with maturities of three months or less when purchased to be cash equivalents. The Organization did not have cash equivalents or investments as of December 31, 2012 and The Organization maintains cash deposits that at times may exceed the Federal deposit insurance limit of $250,000. The Organization believes it mitigates any risk by depositing cash with major financial institutions. Interest and gains and losses on investments are recorded as increases or decreases in unrestricted net assets unless their use is temporarily or permanently restricted by donors or by law. G. The Organization is exempt from federal income tax under Section 501(c)(3) of the Internal Revenue Code. Income generated from activities unrelated to the Organization's exempt purpose is subject to tax. The Organization is subject to examinations of its returns by the U.S. Federal, state and local authorities for three years after the returns are filed. Currently, the Organization's 2009 through 2012 tax years are open and subject to examination by the Internal Revenue Service. However, the Organization is not currently under audit nor has it been contacted by the Internal Revenue Service. H. The costs of providing the Organization's various programs and other activities have been summarized on a functional basis in the Statements of Activities and Net Assets. Accordingly, certain costs have been allocated among the programs and supporting services benefited. 7

11 NOTES TO FINANCIAL STATEMENTS I. Certain prior year balances have been reclassified to conform to the current year presentation. J. Subsequent events have been evaluated by management through August 8, 2013, the date these financial statements were available to be issued. 2. RESTRICTED CASH Restricted cash consists of grant proceeds temporarily restricted to pay for certain overhead and salary expenses for the Oceanside Program in California, which totaled $86 at December 31, Oceanside's restricted cash was exhausted at December 31, Under the terms of the grant agreement, the funds are required to be held in a separate account. In addition, during 2011, the Organization opened a separate bank account to deposit all funds received that are subject to donor restriction. Funds subject to these various restrictions were $167,067 and $115,009 at December 31, 2012 and 2011, respectively. 3. PROPERTY AND EQUIPMENT Property and equipment consists of the following at December 31: Computer equipment $ 10,951 $ 16,078 Furniture 31,305 26,980 Leasehold improvements 122, ,508 Total 164, ,566 Less accumulated depreciation 117,320 83,457 Total property and equipment, net $ 47,212 $ 61, OPERATING LEASES The Organization leases certain office space and outreach program centers under operating leases that will expire between 2013 and Lease expense for the years ended December 31, 2012 and 2011 was $135,122 and $171,221, respectively. At December 31, 2012, the future minimum lease payments under all leases are as follows: Year Amount 2013 $ 60, $ 7,523 8

12 NOTES TO FINANCIAL STATEMENTS 5. TEMPORARILY RESTRICTED NET ASSETS Temporarily restricted net assets are as follows at December 31: Oceanside Housing Support $ 42,225 $ 42,459 Virgin Unite USA, Inc. Grant 24,269 22,733 Robert and Sandra Haulter Donation 20,788 25,788 Walmart Foundation 19,978 25,710 Carmax Foundation 13,119 10,000 Agena Foundation 6,940 - South Fulton Initiative Funds 6,000 - Taco Bell Foundation Grant 5,961 1,933 UPS Technology Grant 5,958 7,782 Western Digital Foundation 5,483 4,516 City of Mission Viejo 5,173 5,218 Wells Fargo Foundation 4,178 5,000 Speh Family Foundation 3,455 10,000 Therm-Omega-Tech, Inc. 2,247 12,447 The Fidelity Charitable Gift Fund 1,293 1,927 Ayco Charitable Foundation - 9,000 Burton W. Ruder Foundation Total temporarily restricted net assets $ 167,067 $ 185,013 Temporarily restricted net assets were released for the following purposes for the years ended December 31: Oceanside Housing Support $ 136,545 $ 130,050 Chicago Outreach Center 34,090 - Other 22,392 19,890 Virgin Unite USA, Inc. Grant 13,464 23,855 North Fulton Initiative Grant 11,400 24,508 Total $ 217,891 $ 198,303 9

13 NOTES TO FINANCIAL STATEMENTS 6. IN-KIND CONTRIBUTIONS In-kind contributions received for the years ended December 31, 2012 and 2011 consist of the following: Clothes $ 145,242 $ 220,736 Food 93,914 83,366 Other miscellaneous items 64, ,560 Rent/meeting space 34,024 31,370 Services 24,275 10,215 Hygiene products 10,096 23,052 Advertising - 23,529 Total in-kind contributions $ 372,372 $ 498,828 10