REALITY CHANGERS
A NONPROFIT ORGANIZATION
FINANCIAL STATEMENTS
DECEMBER 31, 2014 AND 2013
REALITY CHANGERS
A NONPROFIT ORGANIZATION
Pages
I.
Index
1
II.
Independent Auditor's Report
III.
Statements of Financial Position
4
IV.
Statements of Activities and Changes in Net Assets
5
V.
Statements of Functional Expenses
VI.
Statements of Cash Flows
VII.
Notes to the Financial Statements
2-3
6-7
8
9 - 13
REALITY CHANGERS
A NONPROFIT ORGANIZATION
STATEMENTS OF FINANCIAL POSITION
DECEMBER 31, 2014 AND 2013
Page 4
2014
2013
ASSETS
CURRENT ASSETS
Cash
Grants Receivable
Prepaid Expenses
$
805,122
-
$
544,957
66,000
4,846
805,122
615,803
4,021
8,923
809,143
624,726
CURRENT LIABILITIES
Accounts Payable
Accrued Liabilities
150,833
2,500
79,421
TOTAL LIABILITIES
150,833
81,921
NET ASSETS (Note 4)
Unrestricted Net Assets
Temporarily Restricted Net Assets
563,009
95,301
360,305
182,500
TOTAL NET ASSETS
658,310
542,805
PROPERTY AND EQUIPMENT (Note 3)
TOTAL ASSETS
LIABILITIES AND NET ASSETS
TOTAL LIABILITIES AND NET ASSETS
$
809,143
See Accompanying Notes to the Financial Statements
$
624,726
REALITY CHANGERS
A NONPROFIT ORGANIZATION
STATEMENTS OF ACTIVITIES AND CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013
Page 5
2014
UNRESTRICTED NET ASSETS
REVENUES AND SUPPORT
Contributions
Gifts In-Kind (Note 5)
Other Income
Interest Income
$
1,532,267
234,443
58,299
4
2013
$
1,825,013
NET ASSETS RELEASED FROM RESTRICTIONS
Restrictions Satisfied by Payments
863,711
177,200
63,525
158
1,104,594
(424,760)
(444,088)
TOTAL UNRESTRICTED REVENUES AND SUPPORT
2,249,773
1,548,682
EXPENSES
Program Services
General and Administrative
Fundraising
1,572,915
248,230
225,924
1,346,324
188,986
146,385
TOTAL EXPENSES
2,047,069
1,681,695
INCREASE/(DECREASE) IN UNRESTRICTED
NET ASSETS
202,704
(133,013)
337,561
(424,760)
31,670
200,000
(444,088)
DECREASE IN TEMPORARILY
RESTRICTED NET ASSETS
(87,199)
(212,418)
TOTAL INCREASE/(DECREASE) IN NET ASSETS
115,505
(345,431)
NET ASSETS, BEGINNING OF YEAR
542,805
888,236
TEMPORARILY RESTRICTED NET ASSETS
Contributions
Grants
Net Assets Released from Restrictions (Note 4)
NET ASSETS, END OF YEAR
$
658,310
See Accompanying Notes to the Financial Statements
$
542,805
REALITY CHANGERS
STATEMENT OF FUNCTIONAL EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 2014
Page 6
Program
Services
EXPENSES
Bank Fees
Equipment
Food and Beverage
Graduation Expenses
Insurance
Occupancy
Other Expense
Outside Services
Professional Fees
Publishing and Mailing
Salaries and Benefits
Scholarships
Supplies
Travel and Meetings
TOTAL EXPENSES BEFORE
DEPRECIATION
Depreciation
Loss on Disposal of Property
and Equipment
TOTAL EXPENSES
$
General and
Administrative
175
923
10,329
67,823
48,869
18,502
2,824
6,703
614,090
771,899
9,925
20,853
$
5,640
2,706
10
2,148
6,627
7,348
4,260
32,084
4,587
170,067
4,289
3,561
Fundraising
$
3,259
4,476
2,911
25,674
17,333
5,936
1,547
24,819
126,889
124
12,956
Total
$
3,434
11,039
15,946
93,507
2,148
72,829
31,786
8,631
32,084
36,109
911,046
771,899
14,338
37,370
1,572,915
243,327
225,924
2,042,166
-
3,065
-
3,065
-
1,838
-
1,838
225,924
$ 2,047,069
$ 1,572,915
$
248,230
$
See Accompanying Notes to the Financial Statements
REALITY CHANGERS
STATEMENT OF FUNCTIONAL EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 2013
Page 7
Program
Services
EXPENSES
Bank Fees
Equipment
Food and Beverage
Graduation Expenses
Insurance
Occupancy
Other Expense
Outside Services
Professional Fees
Publishing and Mailing
Salaries and Benefits
Scholarships
Supplies
Travel and Meetings
TOTAL EXPENSES BEFORE
DEPRECIATION
Depreciation
TOTAL EXPENSES
$
General and
Administrative
1,013
109
11,968
56,451
48,307
10,967
2,773
295
6,182
549,149
631,645
10,200
17,265
$
976
5,157
2,787
2,904
6,526
3,006
11,740
37,804
2,395
101,907
4,879
2,956
Fundraising
$
98
4,992
977
17,154
394
2,725
6,206
100,227
1,105
12,507
Total
$
2,087
10,258
15,732
56,451
2,904
71,987
14,367
17,238
38,099
14,783
751,283
631,645
16,184
32,728
1,346,324
183,037
146,385
1,675,746
-
5,949
-
5,949
146,385
$ 1,681,695
$ 1,346,324
$
188,986
$
See Accompanying Notes to the Financial Statements
REALITY CHANGERS
A NONPROFIT ORGANIZATION
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013
Page 8
2014
CASH FLOWS PROVIDED/(USED) BY OPERATING
ACTIVITIES
Increase/(Decrease) in Net Assets
$
2013
115,505
ADJUSTMENTS TO RECONCILE INCREASE/(DECREASE)
IN NET ASSETS TO NET CASH PROVIDED/(USED) BY
OPERATING ACTIVITIES
Depreciation
Loss on Disposal of Property and Equipment
Change in Operating Assets and Liabilities:
Grants Receivable
Pledges Receivable
Prepaid Expenses
Accounts Payable
Accrued Expenses
$
3,065
1,838
(345,431)
5,949
-
66,000
4,846
(2,500)
71,411
159,000
25,000
7,881
(2,339)
13,791
144,660
209,282
NET CASH PROVIDED/(USED) BY OPERATING ACTIVITIES
260,165
(136,149)
CASH, BEGINNING OF YEAR
544,957
681,106
CASH, END OF YEAR
$
805,122
$
544,957
SUPPLEMENTAL DISCLOSURES:
Interest Paid
Taxes Paid
$
$
-
$
$
-
See Accompanying Notes to the Financial Statements
REALITY CHANGERS
A NONPROFIT ORGANIZATION
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2014 AND 2013
Page 9
NOTE 1
THE ORGANIZATION
Reality Changers (the "Organization") is a not-for-profit corporation organized in California for
charitable purposes and exempt from taxation under section 501(c)(3) of the Internal Revenue
Code ("Code"). The purpose of the Organization is to provide inner-city youth from
disadvantaged backgrounds with the resources to become first generation college students by
providing academic support, financial assistance, and leadership training. The Organization was
incorporated in January 2009.
NOTE 2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting - The accompanying financial statements are prepared using the accrual
method of accounting in conformity with generally accepted accounting principles.
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 and disclosures. Actual results could differ from these estimates.
Basis of Presentation - Under accounting standards on Financial Statements of Not-for-profit
Organizations, the Organization is required to report information regarding its financial position
and activities according to three classes of net assets: unrestricted net assets, temporarily
restricted net assets and permanently restricted net assets.
Donor Imposed Restrictions - Contributions received are recorded as unrestricted, temporarily
restricted or permanently restricted depending upon the existence and/or nature of any donor
restrictions. Support that is restricted by a donor is reported as an increase in unrestricted net
assets if the restriction expires in the reporting period in which the support is recognized. All
other donor restricted support is reported as an increase in temporarily restricted or permanently
restricted net assets. 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 net assets released from
restrictions. There were no permanently restricted net assets at December 31, 2014 and 2013.
Cash - Cash includes all cash balances and highly liquid investments with original maturities of
three months or less at the date of acquisition. The Organization maintains cash balances at
three banks located in California, Florida and Texas. Accounts at these institutions are secured
by the Federal Deposit Insurance Corporation (FDIC) for up to $250,000. At times, balances
may exceed federally insured limits. The Organization has not experienced any losses in such
accounts. Management believes that the Organization is not exposed to any significant credit
risk with respect to its cash and cash equivalents.
REALITY CHANGERS
A NONPROFIT ORGANIZATION
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2014 AND 2013
Page 10
NOTE 2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Promises to Give - Unconditional promises to give expected to be collected within one year are
recorded at net realizable value. Unconditional promises to give expected to be collected in
future years are recorded at the present value of estimated future cash flows. The discounts are
computed using a risk-free interest rate applicable to the year in which the contribution is made.
Amortization of the discounts is included in contribution revenue. Conditional promises to give
are not included as support until the conditions are substantially met. The Organization provides
an allowance for estimated uncollectible contributions.
Grants Receivable - Grants receivable consist of amounts to be received from other
organizations and companies. The amounts are recorded when the grant is awarded. Grants
receivable are shown net of the allowance for doubtful accounts. Management assesses the
collectability of the grants at the close of each period on a specific identification basis. The
allowance for doubtful accounts is $0 at December 31, 2014 and 2013.
Property and Equipment - The Organization's policy is to capitalize assets with a useful life of
greater than one year and a value of $5,000 or more at cost. Contributed property and equipment
is recorded at fair value at the date of donation. Property and equipment are depreciated using
the straight-line method over the estimated useful lives of the related assets or, in the case of
leasehold improvements, over the lesser of the useful life of the related asset or the lease term.
Estimated useful lives range from three to ten years. Maintenance and repairs are charged to
expense as incurred; major renewals and betterments are capitalized. When items of property
and equipment are sold or retired, the related cost and accumulated depreciation are removed
from the accounts, and any gain or loss is recognized in the current period financial statements.
Fair Value Measurement - The Organization follows accounting standards which define fair
value, establish a framework for measuring fair value and expand disclosures about fair value
measurements for all financial assets and liabilities.
Functional Expenses - The costs of providing the various programs and other activities have
been summarized on a functional basis in the statements of activities. Accordingly, certain costs
have been allocated among the programs and supporting services benefited based on
management estimates.
Income Taxes - The Organization is generally exempt from federal income taxes under Section
501(c)(3) of the Internal Revenue Code and Section 23701(d) of the California Revenues and
Taxation Code.
REALITY CHANGERS
A NONPROFIT ORGANIZATION
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2014 AND 2013
Page 11
NOTE 2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
The Organization follows accounting standards which clarify the accounting for uncertainty in
income taxes recognized in the Organization's financial statements and prescribe a recognition
threshold and measurement attribute for the financial statement recognition and measurement of
a tax position taken or expected to be taken in a tax return. The standards also provide guidance
on derecognition and measurement of a tax position taken or to be taken in a tax return. As of
December 31, 2014 and 2013, the Organization has not accrued interest or penalties related to
uncertain tax positions. The Organization files tax returns in the U.S. Federal jurisdiction and
the state of California. The Company is no longer subject to U.S. and California examinations
by tax authorities for years before 2011 and 2010, respectively.
NOTE 3
PROPERTY AND EQUIPMENT
The Organization's fixed assets consisted of the following:
Computers
Furniture, Fixtures, and Equipment
$
Less Accumulated Depreciation
$
2014
18,226 $
2,307
20,533
(16,512)
4,021 $
2013
25,220
2,307
27,527
(18,604)
8,923
Depreciation expense was $3,065 and $5,949 for the years ended December 31, 2014 and 2013,
respectively.
REALITY CHANGERS
A NONPROFIT ORGANIZATION
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2014 AND 2013
Page 12
NOTE 4
NET ASSETS
Net assets consist of the following at December 31:
2014
Unrestricted:
Undesignated
$
563,009
$
11,000
40,246
36,244
7,811
95,301
658,310
Temporarily Restricted:
Academic Connections
Alumni Network
College Scholarships
College Town
Core Operating Support
General Scholarships
Total Net Assets
2013
$
360,305
$
12,500
41,252
5,000
10,000
108,748
5,000
182,500
542,805
Net assets released from donor restrictions by satisfying the restricted purposes or by occurrence
of other events specified by the donors during the years ended December 31 are as follows:
Academic Connections
Alumni Network
College Apps Academy
College Scholarships
College Town
Core Operating Support
General Scholarships
Other Restrictions
Total Net Assets Released from Restrictions
$
$
2014
12,500
41,252
273,504
10,000
72,504
15,000
424,760
2013
$
$
13,748
41,000
209,800
174,252
5,288
444,088
REALITY CHANGERS
A NONPROFIT ORGANIZATION
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2014 AND 2013
Page 13
NOTE 5
IN-KIND DONATIONS
The Organization receives discounted tuition at educational programs for students. The
Organization received approximately $224,443 and $167,200 in discounted tuition for the years
ended December 31, 2014 and 2013, respectively.
During the years ended December 31, 2014 and 2013, the Organization received in-kind
contributions of facility space with an estimated value of $10,000.
NOTE 6
COMMITMENTS
The Organization leases office space under an operating lease that expires in June 2015. The
lease payments consist of a base rent, operating expenses, utilities, and janitorial expenses. The
amounts in addition to base rent are subject to change based on the services provided for the
month. Minimum future rental payments under non-cancelable operating leases expiring within
the year for the year ended December 31 is as follows:
2015
$
32,220
Office space rental expense was approximately $63,000 and $58,000 for the years ended
December 31, 2014 and 2013, respectively. These amounts do not include the in-kind donations
of facility space (see Note 5).
NOTE 7
SUBSEQUENT EVENTS
Subsequent events have been evaluated through May 4, 2015, which is the date the financial
statements were available to be issued. There were no material subsequent events which
affected the amounts or disclosures in the financial statements.