NewTown Macon 2013-2014 Audit by NewTown Macon

NEWTOWN MACON, INC. AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS For the Years Ended June 30, 2014 and 2013

CONTENTS

Page INDEPENDENT AUDITOR’S REPORT…………………………..…………………... 1 CONSOLIDATED FINANCIAL STATEMENTS Consolidated Statements of Financial Position………………………..…………….. 3 Consolidated Statements of Activities………………………………………………. 5 Consolidated Statements of Cash Flows……………………………….…..………... 8 Notes to the Consolidated Financial Statements…………………………………….. 10

Howard, Moore & McDuffie, P.C.

Members Partnering for CPA Practice Success

CERTIFIED PUBLIC ACCOUNTANTS

American Institute of Certified Public Accountants

577 Mulberry Street, Suite 1610, Post Office Box 4547 Macon, Georgia 31208-4547 Telephone (478) 742-5317 Facsimile (478) 738-0038 www.hmmcpaga.com

Georgia Society of Certified Public Accountants

INDEPENDENT AUDITOR’S REPORT

To the Board of Trustees NewTown Macon, Inc. and Subsidiaries We have audited the accompanying consolidated financial statements of NewTown Macon, Inc. (a nonprofit organization) and Subsidiaries, which comprise the consolidated statements of financial position as of June 30, 2014 and 2013, and the related consolidated statements of activities 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 risks 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 NewTown Macon, Inc. and Subsidiaries as of June 30, 2014 and 2013, 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.

Macon, Georgia October 7, 2014

NEWTOWN MACON, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF FINANCIAL POSITION June 30, 2014 and 2013 2014 ASSETS CURRENT ASSETS Cash and cash equivalents Unconditional promises to give, current (Note 2) Accounts receivable Notes receivable including interest (Note 5) Related-party notes receivable (Note 5) Minimum lease payments receivable (Note 6) Inventory Prepaid expenses Due from Macon-Bibb County Total Current Assets OTHER ASSETS Beneficial interest in Community Foundation Funds (Note 3) Beneficial interest in Community Foundation Funds - endowment (Note 4) Property and equipment, net of accumulated depreciation of $177,918 and $196,447, respectively (Note 7) Property held for improvement (Note 7) Unconditional promises to give, net of current (Note 2) Notes receivable, net of current (Note 5) Related-party notes receivable (Note 5) Debt issuance costs, net of accumulated amortization of of $9,056 and $4,528, respectively Utility deposits Total Other Assets TOTAL ASSETS

The accompanying notes are an integral part of these financial statements. 3

602,317 689,760 73,459 100,532 3,360 9,551 23,919 29,949 1,532,847

2013

422,616 1,014,560 37,630 13,853 1,690 6,225 1,809 86,900 19,473 1,604,756

1,195,403

1,731,966

2,302,512

2,012,679

331,237 719,970 1,349,493 2,534,684 961,724

361,328 1,061,284 1,938,551 1,966,387 384,421

72,444 55 9,467,522

76,972 55 9,533,643

$ 11,000,369

$ 11,138,399

NEWTOWN MACON, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (Continued) June 30, 2014 and 2013 2014 LIABILITIES CURRENT LIABILITIES Accounts payable Accrued salaries and benefits Accrued interest payable Total Current Liabilities

69,997 22,733 92,730

2013

102,307 27,204 24,605 154,116

LONG-TERM LIABILITIES Due to Bibb County debt service fund Total Long-Term Liabilities

3,725,906 3,725,906

2,324,743 2,324,743

TOTAL LIABILITIES

3,818,636

2,478,859

NET ASSETS Unrestricted Undesignated Designated Total Unrestricted Net Assets Temporarily restricted Permanently restricted TOTAL NET ASSETS

3,635,388 1,143,396 4,778,784 902,949 1,500,000 7,181,733

4,379,863 2,029,891 6,409,754 749,786 1,500,000 8,659,540

$ 11,000,369

$ 11,138,399

TOTAL LIABILITIES AND NET ASSETS

The accompanying notes are an integral part of these financial statements. 4

NEWTOWN MACON, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF ACTIVITIES For the Years Ended June 30, 2014 and 2013 2014 CHANGES IN UNRESTRICTED NET ASSETS UNRESTRICTED REVENUES, GAINS AND OTHER SUPPORT Support Contributions Special Events Donated facilities and services Membership fees Program Services Government grants and performance contracts Project management fee revenue Rental income and other Investment return, net Total Unrestricted Revenues, Gains and Other Support NET ASSETS RELEASED FROM RESTRICTIONS Restrictions satisfied by payments TOTAL UNRESTRICTED REVENUES, GAINS AND OTHER SUPPORT EXPENSES Program Services Increasing Residents Transitional Property Live Downtown Loft Loan Fund Cherry Street Lane Other Growing Jobs Business Recruitment & Development Other

The accompanying notes are an integral part of these financial statements. 5

218,964 18,274 79,265 85,000 288,161 304,580 15,517

2013

3,156,904 38,661 120,725 106,250 1,103,288 22,035 243,523 (196)

1,009,761

4,791,190

525,915

1,307,242

1,535,676

6,098,432

109,368 27,476 140,228 59,750 183,243 520,065

525,117 25,937 42,908 39,163 146,514 779,639

9,985 108,060 118,045

12,324 127,841 140,165

NEWTOWN MACON, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF ACTIVITIES (Continued) For the Years Ended June 30, 2014 and 2013 2014 EXPENSES (Continued) Creating a Sense of Place Ocmulgee Heritage Trail Trolleys Other Advocating Progress Consolidation

2013

350,359 124,371 275,306 750,036 -

Affiliates Georgia Sports Hall of Fame Gateway Initiative Fiscal Sponsor Macon Pops Fort Hawkins Total Program Expenses Supporting Services Management and general Fundraising Bad debt Total Supporting Services TOTAL EXPENSES INCREASE (DECREASE) IN UNRESTRICTED NET ASSETS CHANGES IN TEMPORARILY RESTRICTED NET ASSETS Contributions Investment return, net Net assets released from restrictions by payment INCREASE (DECREASE) IN TEMPORARILY RESTRICTED NET ASSETS

The accompanying notes are an integral part of these financial statements. 6

395,222 113,013 360,067 868,302 59,780 59,780

634,926 34,499 669,425

737,448 163,584 901,032

127,602 679,173 806,775

40,386 40,386

2,864,346

2,789,304

122,956 158,473 20,871 302,300

114,308 134,971 249,279

3,166,646

3,038,583

(1,630,970)

3,059,849

320,591 358,487 679,078 (525,915) 153,163

316,961 217,534 534,495 (1,307,242) (772,747)

NEWTOWN MACON, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF ACTIVITIES (Continued) For the Years Ended June 30, 2014 and 2013 2014

2013

INCREASE (DECREASE) IN NET ASSETS NET ASSETS AT BEGINNING OF YEAR

$ (1,477,807) 8,659,540

2,287,102 6,372,438

NET ASSETS AT END OF YEAR

$ 7,181,733

8,659,540

The accompanying notes are an integral part of these financial statements. 7

NEWTOWN MACON, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS For the Years Ended June 30, 2014 and 2013

CASH FLOWS FROM (TO) OPERATING ACTIVITIES Increase (decrease) in net assets Adjustments to reconcile change in net assets to net cash provided (used) by operating activities: Contributions received by Community Foundation Expenses paid directly by Community Foundation Distributions received directly from Community Foundation Investment return reinvested in Community Foundation funds Discount on promises to give Depreciation and amortization (Gain) loss on disposal of property Bad debt and forgiveness of debt (Increase) decrease in: Unconditional promises to give Accounts receivable Due from unrelated party Inventory Prepaid expenses Increase (decrease) in: Accounts payable Due to unrelated party Accrued expenses NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES CASH FLOWS FROM (TO) INVESTING ACTIVITIES Contributions received and restricted for long-term purposes Proceeds received from sale of real estate Cash paid for notes receivable Cash collected on notes receivable Cash paid for purchase of equipment and software Cash paid for purchase of real estate and equipment NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES

The accompanying notes are an integral part of these financial statements. 8

2014

2013

$ (1,477,807)

$ 2,287,102

(576,050) 28,943 1,178,850 (385,013) (65,352) 23,265 (39,817) 20,871

(1,216,513) 28,371 178,076 (244,648) 170,239 32,414 444,647 4,207

971,910 (49,400) (10,476) (7,741) 62,981

(2,689,150) (3,060) (19,473) (1,799) 6,021

(32,311) (27,177)

(10,379) (25,313) 30,461

(384,324)

(1,028,797)

823,601 (1,419,115) 298,197 (6,116) -

538,542 443,615 (1,841,538) (13,000) (261,559)

(303,433)

(1,133,940)

NEWTOWN MACON, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued) For the Years Ended June 30, 2014 and 2013 2014 CASH FLOWS FROM (TO) FINANCING ACTIVITIES Payments to Bibb County debt service fund Proceeds from bond fund NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES

(20,373) 887,831

867,458

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS CASH AND EQUIVALENTS, beginning of year CASH AND EQUIVALENTS, end of year

2013 1,912,807 1,912,807

179,701 422,616

(249,930) 672,546

602,317

422,616

91,839

4,269

Building acquired with bond proceeds

425,000

295,000

Interest accrued on notes receivable also due to Bibb County debt service reserve fund

106,805

34,218

Building acquired as a result of loan default

480,000

Note receivable acquired through sale of building

430,000

Long-term liabilities assumed for bond issuance costs

81,500

SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION Cash paid for interest Noncash investing and financing activities:

The accompanying notes are an integral part of these financial statements. 9

NEWTOWN MACON, INC. AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS NOTE 1. NATURE OF ACTIVITIES AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Activities NewTown Macon, Inc. (the Organization) located in Macon, Georgia is a nonprofit organization dedicated to implementing a downtown planning and capital improvement program. The Organization has five wholly-owned subsidiaries to facilitate various projects. The Subsidiary, UDC Realty – Terminal Avenue, LLC was formed to manage property related to an agreement with the City of Macon. The Subsidiary, Urban Development Concepts, LLC was formed to manage the building renovation bond projects described in Note 18. The Subsidiaries, UDC Management, LLC, UDC Realty - Poplar Street, LLC, and UDC Realty, LLC were formed to own and manage the real estate that is used to carry out some of the projects listed below. The Organization’s support comes primarily through donor contributions. Contributions from a single donor made up 48% of the Organization’s total revenue for the year ended June 30, 2013. There were no concentrations related to contributions for the year ended June 30, 2014. NewTown Macon, Inc. is also focused on increasing residents, growing jobs and creating a sense of place in downtown Macon. In its third revitalization phase beginning in 2013, the Organization expects to increase commercial occupancy rates by 25%, add 125 apartments, maintain at least 85% occupancy rates in existing apartments, and leverage at least $27 million in improvements to target blocks. As of June 30, 2014, commercial occupancy rates increased 12%, 154 lofts were added, 95% occupancy was achieved, and $22.1 million in improvements to target blocks were leveraged. The Organization also manages the Georgia Sports Hall of Fame. The 43,000 square foot museum houses over 3,000 artifacts, honors more than 300 inductees, and is the country’s largest state sports museum. Other projects include: Increasing Residents:  Transitional Property Fund  Live Downtown Macon website  Cherry Street Lane Parking & Commercial Facility  Loft Loan Fund (bond projects)  Marketing and consultation to promote residential developments Growing Jobs:  Business recruitment and development  Promotion of downtown properties; marketing support for downtown; and property development services Creating a Sense of Place:  Amerson River Park  Ocmulgee Heritage Trail  Macon Trolleys  Promoting downtown’s unique image and activity

NEWTOWN MACON, INC. AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS NOTE 1. NATURE OF ACTIVITIES AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Nature of Activities (continued) Affiliates  Gateway Initiative  Sports Hall of Fame Fiscal Sponsor  Fort Hawkins  Macon Pops Advocating Progress  Consolidation Basis of Accounting NewTown Macon, Inc. and Subsidiaries prepares its financial statements in accordance with U.S. generally accepted accounting principles. This basis of accounting involves application of accrual accounting; consequently, revenues and gains are recognized when earned, and expenses and losses are recognized when incurred. Promises to Give and Other Receivables Unconditional promises to give are recorded when promised by a donor. Unconditional promises to give due in the next year are reflected as current promises to give and are recorded at their net realizable value. Unconditional promises to give due in two years and beyond are reflected as long-term promises to give and are recorded at the present value of their net realizable value, discounted using risk-free interest rates applicable to the years in which the promises are received. Management directly writes off potentially uncollectible promises to give during the year in which those promises are deemed uncollectible. Management believes that the use of the direct write-off method approximates the results that would be presented if an allowance for doubtful pledges was recorded. In addition, management expects uncollected pledges to be insignificant. Accounts receivable are stated at the amount management expects to collect from outstanding balances. Management directly writes off potentially uncollectible accounts during the year in which all collection efforts have been exhausted. Management believes all of the accounts receivable are fully collectible. Therefore, no allowance for doubtful receivables has been recorded.

NEWTOWN MACON, INC. AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS NOTE 1. NATURE OF ACTIVITIES AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Basis of Presentation 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. Cash and Cash Equivalents For the purpose of the statements of cash flows, the Organization considers all unrestricted highly liquid investments with an initial maturity of three months or less to be cash equivalents, excluding cash restricted or designated for long-term purposes. Use of 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 of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates. Buildings, Equipment, Improvements, and Depreciation Buildings, equipment, and improvements are stated at cost less accumulated depreciation. Depreciation is being provided by use of the straight-line method over the estimated useful lives of the related assets ranging from three to thirty-nine years. All property with a useful life of three years or greater and a cost greater than $2,500 is capitalized. Property held for improvement is not depreciated until placed into operation. Collections Collections items consist of music memorabilia that is held for educational and curatorial purposes. Each of the items is cataloged, preserved, and cared for. Collection items are recorded at cost if purchased and at fair value at date of accession if donated. Donated Equipment and Services Donated property and equipment are reflected as contributions in the accompanying financial statements at their estimated fair value at the date of donation. Such donations are reported as increases in unrestricted net assets unless the donor has restricted the donated assets to a specific purpose. Donated services are recognized as contributions if the services (a) create or enhance nonfinancial assets or (b) require specialized skills, are preformed by people with those skills, and would otherwise be purchased by the Organization.

NEWTOWN MACON, INC. AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS NOTE 1. NATURE OF ACTIVITIES AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Expense Allocation Directly identifiable expenses are charged to programs and supporting services. Expenses related to more than one function are charged to programs and supporting services on the basis of periodic time and expenses studies. Management and general expenses include those expenses that are not directly identifiable with any other specific function but provide for the overall support and direction of the Organization. Debt Issuance Costs Debt issuance costs relating to long-term debt are amortized over the term of the related debt (18 years) using the straight line method and are presented on the consolidated statement of financial position net of amortization. Income Taxes NewTown Macon, Inc. and Subsidiaries is exempt from federal income taxes under Internal Revenue Code Section 501(c)(3). However, income from certain activities not directly related to the Organizationâ&#x20AC;&#x2122;s tax-exempt purpose is subject to taxation as unrelated business income. There was no unrelated business taxable income for the years ended June 30, 2014 and 2013. In addition, the Organization qualifies for the charitable organization contribution deduction under section 170(b)(1)(A) and has been classified as an organization that is not a private foundation within the meaning of Section 509(a)(2). The Organization believes that it has appropriate support for any tax positions taken, and as such, does not have any uncertain tax positions that are material to the financial statements. The Organizationâ&#x20AC;&#x2122;s federal and state information returns are subject to examination by the Internal Revenue Service (IRS) and state taxing authorities for three years after they are filed. Investments and Related Income The Organization carries 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. Unrealized gains and losses are included in the consolidated statements of activities. Inventories Inventories are stated at cost.

NEWTOWN MACON, INC. AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS NOTE 1. NATURE OF ACTIVITIES AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Restricted and Unrestricted Revenue Contributions that are restricted by the donor are reported as increases in unrestricted net assets if the restrictions expire (that is, when a stipulated time restriction ends or purpose restriction is accomplished) in the reporting period in which the revenue is recognized. All other donor-restricted contributions and revenues are reported as increases in temporarily or permanently restricted net assets, depending on the nature of the restrictions. When a restriction expires, temporarily restricted net assets are reclassified to unrestricted net assets and reported in the consolidated statement of activities as net assets released from restrictions. Principles of Consolidation The consolidated financial statements include the accounts of NewTown Macon, Inc. and its wholly owned subsidiaries, UDC Realty, LLC, UDC Management, LLC, UDC Realty Poplar Street, LLC, UDC Realty â&#x20AC;&#x201C; Terminal Avenue, LLC, and Urban Development Concepts, LLC. All material interorganization transactions have been eliminated. Reclassifications Certain accounts in the prior-year financial statements have been reclassified for comparative purposes to conform with the presentation in the current-year financial statements. Subsequent Events According to the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 855-10-50-1, management is required to disclose the date through which subsequent events have been reviewed. Accordingly, management has reviewed subsequent events through October 7, 2014, which corresponds with the date that the financial statements were available to be issued. NOTE 2. PROMISES TO GIVE The Organization began a fundraising campaign during the year ended June 30, 2013 for funding of the projects described in Note 1. The contributions are generally available for unrestricted use on any of the Organizationâ&#x20AC;&#x2122;s projects, unless specifically restricted by the donor for a certain project. Promises to give to be received more than one year after June 30, 2014 are discounted at 4.5%.

NEWTOWN MACON, INC. AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS NOTE 2. PROMISES TO GIVE (Continued) Unconditional promises to give are as follows at June 30: 2014 $ 689,760 1,473,280 2,163,040 (123,787) $ 2,039,253

Receivable in less than one year Receivable in one to five years Discount to present value Net unconditional promises to give

2013 $ 1,014,560 2,127,690 3,142,250 (189,139) $ 2,953,111

NOTE 3. BENEFICIAL INTEREST IN COMMUNITY FOUNDATION FUNDS During the year ended June 30, 2014, NewTown Macon, Inc. invested contributions directly into six funds maintained by The Community Foundation of Central Georgia. Under the agreement with The Community Foundation, NewTown Macon, Inc. periodically requests distributions from the funds for its program services. Some funds are held for long-term projects while others are required to be maintained in separate accounts due to donor restrictions. Money held in the funds is invested in money market accounts and pooled funds which are stated at quoted market value. Pooled funds consist of bonds, equity securities, fixed income securities, and cash and equivalents. Investment return is presented net of investment management fees of $3,306 and $2,438 in the consolidated statements of activities for the years ended June 30, 2014 and 2013, respectively. NOTE 4. ENDOWMENT FUNDS The Organizationâ&#x20AC;&#x2122;s endowment represents a donor-restricted fund for maintenance of the Ocmulgee Heritage Trail. As required by generally accepted accounting principles, net assets associated with endowment funds are classified and reported based on the existence or absence of donor-imposed restrictions. Interpretation of Relevant Law The Organization has interpreted the State Prudent Management of Institutional Funds Act (SPMIFA) as requiring the preservation of the fair value of the original gift as of the date of the donor-restricted endowment funds absent explicit donor stipulations to the contrary. As a result of this interpretation, the Organization classifies as permanently restricted net assets (a) the original value of gifts donated to the permanent endowment, (b) the original value of subsequent gifts to the permanent endowment, and (c) accumulations to the permanent endowment made in accordance with the direction of the applicable donor gift instrument at the time the accumulation is added to the fund. The remaining portion of the donor-restricted endowment fund that is not classified in permanently restricted net assets is classified as temporarily restricted net assets until those amounts are appropriated for expenditure by the Organization in a manner consistent with the standard of prudence prescribed by SPMIFA.

NEWTOWN MACON, INC. AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS NOTE 4. ENDOWMENT FUNDS (Continued) In accordance with SPMIFA, the Organization considers the following factors in making a determination to appropriate or accumulate donor-restricted endowment funds: (1) the duration and preservation of the various funds (2) the purposes of the donor-restricted endowment funds (3) general economic conditions (4) the possible effect of inflation and deflation (5) the expected total return from income and the appreciation of investments (6) other resources of the Organization (7) the Organizationâ&#x20AC;&#x2122;s investment policies Donor-restricted Endowment Funds The Organization separately accounts for temporarily restricted income earned on the permanently restricted fund as well as the amounts expended from the temporarily restricted earnings. All temporarily restricted income is subject to the purpose restriction under the SPMIFA. If due to market conditions or appropriations, the fair value of accumulated temporarily restricted earnings falls below zero, this amount is reclassified to unrestricted net assets until the deficiency is corrected. Changes in donor-restricted endowment funds for the year ended June 30, 2014 are as follows: Permanently Temporarily Restricted Restricted Total Endowment net assets-beginning

$ 1,500,000 $ 512,679

$ 2,012,679

Investment return Investment income, net Realized and unrealized appreciation

48,607 303,226

Total investment return

351,833

Amounts appropriated for expenditure

(62,000)

Endowment net assets-ending

$ 1,500,000 $ 802,512

$ 2,302,512

NEWTOWN MACON, INC. AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS NOTE 4. ENDOWMENT FUNDS (Continued) Funds with Deficiencies From time to time, the fair value of assets associated with the donor-restricted endowment funds may fall below the level that the donor or SPMIFA requires the Organization to retain as a fund of perpetual duration. In accordance with generally accepted accounting principles, deficiencies of this nature are reported in unrestricted net assets. There were no deficiencies associated with the donor-restricted endowment fund during the years ended June 30, 2014 or 2013. Return Objectives and Risk Parameters The Organization has adopted investment and spending policies, approved by the Board of Directors, for endowment assets that attempt to provide a predictable stream of funding for maintenance of the Ocmulgee Heritage Trail while also maintaining the purchasing power of the endowment assets over the long-term. Accordingly, the investment process seeks to achieve an after-cost total real rate of return, including investment income as well as capital appreciation, which exceeds the annual distribution with acceptable levels of risk. Endowment assets are invested in a well diversified asset mix, which includes equity and debt securities, that is intended to result in a consistent inflation-protected rate of return that has sufficient liquidity to make an annual distribution of 4%, while growing the funds if possible. Endowment assets include those assets of donor-restricted funds that the Organization must hold in perpetuity or for a donor-specified period. Under this policy, the endowment assets are invested in a manner to minimize the risk of large losses, preserve principal and increase the inflation adjusted value of the investment over time. This objective is to preserve the real purchasing power of the endowment by seeking long-term returns which either match or exceed the spending rate plus inflation. Spending Policy The Organization has a policy of appropriating for distribution each year 4% of its endowment fund’s account value based on a three-year rolling average. In establishing this policy, the Organization considered the long-term expected return on its investment assets and the possible effects of inflation. This policy is consistent with the Organization’s expectation that, over time, the total real return (return net of inflation) from investments will exceed the endowment’s pay-out rate, thus allowing for real growth of endowment assets.

NEWTOWN MACON, INC. AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS NOTE 5. NOTES RECEIVABLE The following schedule outlines the principal and interest amounts owed by various parties to UDC Realty, LLC (the Subsidiary): June 30, 2014 Accrued Note Principal Interest Total Unrelated Party A $ 419,340 $ $ 419,340 B 57,559 57,559 C 393,500 19,645 413,145 D1 1,204,941 22,375 1,227,316 D2 124,740 5,473 130,213 D3 377,707 9,936 387,643 2,577,787 57,429 2,635,216 Related Party E 523,512 F 439,993 963,505 Total

$ 3,541,292

June 30, 2013 Accrued Principal Interest $

430,000 $ 60,752 1,401,200 32,341 55,917 30 1,947,869 32,371

Total $

430,000 60,752 1,433,541 55,947 1,980,240

1,579 1,579

523,512 441,572 965,084

384,421 384,421

1,690 1,690

386,111 386,111

$ 59,008

$ 3,600,300

$ 2,332,290

$ 34,061

$ 2,366,351

The payment terms for the notes receivable issued by the Subsidiary as described below are approximate. Variables such as total loan proceeds, changes in interest rates, and timing of repayment will affect the monthly payments and length of the loan period. A - On June 25, 2013, the Subsidiary sold three buildings to a former tenant in exchange for a note receivable totaling $430,000. The mortgage bears interest at a rate of 5%. Monthly principal and interest payments are $2,838 starting September 23, 2013. The remaining principal and interest are due August 1, 2018. The note is collateralized by the buildings. The Subsidiary also assigned its lease contracts with other tenants on the properties to the buyer. B - On February 2, 2012, the Subsidiary loaned $60,000 to an unrelated party for renovation of a building in downtown Macon. The note bears interest at a rate of 3%. Monthly payments are $414 starting March 2, 2012. The remaining principal and interest are due January 2, 2015. The note is a second lien mortgage collateralized by the building under renovation.

NEWTOWN MACON, INC. AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS NOTE 5. NOTES RECEIVABLE (continued) C – During the year ended June 30, 2014, the Subsidiary sold a building for renovation to an unrelated party in exchange for a note receivable totaling $393,500. The note bears interest at a rate of 5.05% until June 1, 2016 when it increases to 2% above the rate payable on the Series 2012 bonds described in Note 18. Interest only payments begin August 1, 2014, and monthly principal and interest payments begin June 1, 2015. The final principal and interest payment is due April 1, 2030. The note is a second lien mortgage collateralized by the building under renovation. D - During the years ended June 30, 2014 and 2013, the Subsidiary loaned a total of $1,903,647 to an unrelated party for renovation of a building in downtown Macon. The loan is represented by three separate notes receivable. The first note is dated June 29, 2012, and bears interest at a rate of 4.05%. The second note is dated May 29, 2013, and bears interest at a rate of 5.05%. The third note is dated November 8, 2013, and bears interest at a rate of 5.05% until June 1, 2016 when it increases to 2% above the rate payable on the Series 2012 bonds described in Note 18. A payment of principal and interest totaling $260,634 was received January 17, 2014 and applied to the first note. Principal and interest payments on the third note begin August 8, 2014. The first and second notes mature on May 29, 2027. The third note matures July 7, 2027. All notes are second lien mortgages collateralized by the building under renovation. E - During the year ended June 30, 2014, the Subsidiary loaned a total of $523,512 to a board member’s company for renovation of a building in downtown Macon. The note bears interest at a rate of 5.05% until June 1, 2016, and then increases to 2% above the rate payable on the Series 2012 bonds described in Note 18. The renovation of the building had not been completed as of June 30, 2014, and additional funds will be drawn. Monthly interest payments begin no later than October 1, 2015. Principal and interest payments begin June 1, 2016. Monthly payment amounts will be determined once all funds have been drawn for the project. The final principal and interest payment is due April 1, 2030. The note is a second lien mortgage collateralized by the building under renovation. F - During the years ended June 30, 2014 and 2013, the Subsidiary loaned a total of $439,993 to a board member’s company for renovation of a building in downtown Macon. The note bears interest at a rate of 4.05% until June 1, 2016, and then increases to 1% above the rate payable on the Series 2012 bonds described in Note 18. Interest only payments begin August 1, 2014. Monthly principal and interest payments of $3,099 begin June 1, 2016. The remaining principal and interest are due April 1, 2030. The note is a second lien mortgage collateralized by the building under renovation.

NEWTOWN MACON, INC. AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS NOTE 6. FUTURE MINIMUM LEASE PAYMENTS RECEIVABLE During the year ended June 30, 2010, the Organization purchased equipment from an unrelated party, and sold the equipment back to the party under a direct financing lease. The original lease terms included monthly payments of $30, including interest at the rate of 3.6% with final payment due March 31, 2012. In June 2013 the Organizationâ&#x20AC;&#x2122;s management placed the lease on nonaccrual status and negotiated new terms. The note was paid in full as of March 31, 2013. NOTE 7. PROPERTY, EQUIPMENT, AND IMPROVEMENTS Property, equipment, and improvements used in operations consisted of the following at June 30:

Buildings Land Other depreciable property Equipment Leasehold improvements Furniture and fixtures Collections Trolleys

Less accumulated depreciation $

2014 99,962 191,213 25,555 27,954 21,749 25,554 31,768 85,400 509,155 (177,918) 331,237

2013 99,962 191,213 25,555 76,574 21,749 25,554 31,768 85,400 557,775 (196,447) 361,328

Depreciation expense totaled $18,737 and $27,886 for the years ended June 30, 2014 and 2013, respectively. Property held for improvement consisted of the following at June 30: Buildings Building improvements Land

51,362 98,608 570,000 719,970

318,511 98,608 644,165 $ 1,061,284

Property held for improvement is not in service, and therefore, not subject to depreciation.

NEWTOWN MACON, INC. AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS NOTE 8. DONATED SERVICES, MATERIALS, AND FACILITIES NewTown Macon, Inc. and Subsidiaries received donated professional services which included consulting fees, advertising and technical assistance. Donated services totaled $79,265 and $120,725 for the years ended June 30, 2014 and 2013, respectively. NOTE 9. RESTRICTIONS ON NET ASSETS Temporarily restricted net assets were as follows for June 30:

Park and trail maintenance Otis Redding Memorial Building Renovation Amerson River Park Fort Hawkins Commission Camelia Gardens Gateway Initiative Strategic planning Other

2014 767,430 44,457 41,114 37,991 6,233 5,724 902,949

2013 476,096 37,958 79,133 37,634 41,461 22,737 5,685 22,538 26,544 749,786

Restricted funds are represented by investments in the Community Foundation funds and promises to give. NOTE 10. DESIGNATIONS OF NET ASSETS The board of directors of NewTown Macon, Inc. and Subsidiaries designated net assets for the following purposes as of June 30: 2014 $ 1,000,000 49,586 93,810 $ 1,143,396

Cultural institution Georgia Sports Hall of Fame Fort Hawkins Commission

2013 $ 1,000,000 294,673 735,218 $ 2,029,891

NEWTOWN MACON, INC. AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS NOTE 11. OPERATING LEASES The Organization leases office space at 479 Cherry Street in Macon, Georgia. The Organization leases the office for $1,604 on a month-to-month basis. Until December 2013, the Organization leased the Georgia Sports Hall of Fame building for $10,836 per month. The Development Authority of Bibb County purchased the building in December 2013, and NewTownâ&#x20AC;&#x2122;s subsidiary, Urban Development Concepts, LLC (UDC) entered into a new noncancelable lease agreement with that local entity. The lease term is 40 years with monthly payments of $200 beginning January 1, 2014. Escalation will occur in five year intervals with an increase based on the prevailing Consumer Price Index as of each fifth anniversary. Rent expense for the office space and building totaled $85,465 and $149,280 for the years ended June 30, 2014 and 2013, respectively. The future minimum lease payments under the contract with the Development Authority of Bibb County are as follows: Year Ending June 30, 2015 2016 2017 2018 2019 Thereafter

2,400 2,400 2,400 2,400 2,400 82,800

94,800

NOTE 12. CONCENTRATION OF CREDIT RISK At times, cash balances held at banks and financial institutions may exceed federally insured amounts. Deposits held in all accounts at the same bank by the same owner are aggregated, and the combined total is insured up to $250,000. Uninsured cash totaled $122,145 and $33,273 as of June 30, 2014 and 2013, respectively. The Organization believes it mitigates this risk by depositing cash in major financial institutions. NOTE 13. COMPENSATED ABSENCES Full and part-time employees who work at least 20 hours per week are eligible to earn and use vacation time. Employees begin earning vacation time once they have completed their first full month of employment. Each employee may accrue up to thirty days vacation. Accrued vacation hours are payable upon termination of employment. Accrued vacation was $21,233 and $25,971 for the years ended June 30, 2014 and 2013, respectively. Employees are not paid for unused sick time upon termination; therefore no accrual has been made.

NEWTOWN MACON, INC. AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS NOTE 14. EMPLOYEES’ RETIREMENT PLAN On July 1, 2001, the Organization began a 401(k) retirement plan. Under the plan employees may defer 3% to 22% of their salary through payroll deductions. NewTown Macon, Inc. matches employee contributions up to 50% of the contribution, not to exceed 6% of the employee’s salary. The Organization paid approximately $ 13,282 and $13,987 in matching contributions to the plan during the year ended June 30, 2014 and 2013, respectively. NOTE 15. CAFETERIA PLAN On April 1, 2004, the Organization began a flexible benefits plan. The purpose of the Plan is to provide eligible employees a choice between cash and the specified welfare benefits described in the Plan Information Summary. Pre-tax contribution elections under the Plan are intended to qualify for the exclusion from income provided in Section 125 of the Internal Revenue Code of 1986. There were no administrative expenses associated with the flexible benefits plan. NOTE 16. FAIR VALUE MEASUREMENTS FASB ASC 820-10, Fair Value Measurements and Disclosures, defines fair value, establishes a framework for measuring fair value, establishes a three-level valuation hierarchy for disclosure of fair value measurement and enhances disclosure requirements for fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. The three levels are defined as follows: Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets; Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument; and Level 3 inputs to the valuation methodology are unobservable and significant to the fair value measurement. The asset’s and liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.

NEWTOWN MACON, INC. AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS NOTE 16. FAIR VALUE MEASUREMENTS (Continued) Assets at fair market value were as follows as of June 30, 2014:

Beneficial interest in Community Foundation Funds: Fixed income funds Domestic bonds International bonds Growth equity securities Aggressive growth equity securities Beneficial interest in Community Foundation Funds - endowment funds: Fixed income funds Domestic bonds International bonds Growth equity securities Aggressive growth equity securities Total assets at fair value

Fair Value

Quoted Prices in Active Markets (Level 1)

$ 1,151,391 7,335 2,445 22,229 12,003 1,195,403

23,025 379,915 126,638 1,151,256 621,678 2,302,512

$ 3,497,915

Assets at fair market value were as follows as of June 30, 2013:

Beneficial interest in Community Foundation Funds: Fixed income funds Domestic Bonds International bonds Growth equity securities Aggressive growth equity securities Total assets at fair value

Fair Value

Quoted Prices in Active Markets (Level 1)

$ 1,694,387 4,650 2,088 20,592 10,249 $ 1,731,966

NEWTOWN MACON, INC. AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS NOTE 16. FAIR VALUE MEASUREMENTS (Continued) Quoted Prices in Active Markets (Level 1)

Fair Value Beneficial interest in Community Foundation Funds - endowment funds: Fixed income funds Domestic bonds International bonds Growth equity securities Aggressive growth equity securities Total assets at fair value

20,128 246,553 110,697 1,091,878 543,423 2,012,679

$ 3,744,645

20,128 246,553 110,697 1,091,878 543,423 2,012,679

$ 3,744,645

NOTE 17. RELATED PARTIES During the year ended June 30, 2013, the Organization sold a building to a board member’s company for $226,745. The Organization held a note receivable for one board member’s company totaling $441,572 and $386,111 for the years ended June 30, 2014 and 2013, respectively. The Organization held a note receivable for another board member’s company totaling $523,512 for the year ended June 30, 2014. The two notes relate to the Organization’s Loft Loan Fund program. A board member is a member of a partnership that has a lease contract with the Organization. The Organization was reimbursed by the partnership $20,232 and $13,182 in losses related to the lease contract for the years ended June 30, 2014 and 2013, respectively. Another board member was paid $47,880 in commission related to the sale of a building. A portion of the commission was donated back to the Organization. NOTE 18. COMMITMENTS Due to Debt Service Fund and Bond Project Management As part of a private/public partnership effort to renovate, rehabilitate and reconfigure several buildings in downtown Macon, on June 1, 2012, NewTown’s subsidiary Urban Development Concepts, LLC (the Subsidiary) entered into a management agreement with the Development Authority of Bibb County (the Authority) to manage those projects. The projects will be partially funded from County Revenue Bonds, Series 2012 the proceeds of which will not exceed $5,000,000.

NEWTOWN MACON, INC. AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS NOTE 18. COMMITMENTS (Continued) The Subsidiary’s responsibilities under the agreement include the following:          

Selecting the properties for development Developing the financial structure for the projects Taking on the role of point entity for developing the managed properties Supervising the design, construction contracts, plans, and specifications associated with the development of the managed properties Making loans or bridge loans with respect to the managed properties from requisitioned proceeds from the Bonds Approving disbursements of the proceeds of the Bonds to the contractors engaged with respect to the managed properties Overseeing the operations of the various dwelling units and commercial businesses as the various elements of the managed properties are placed in service Handling payment of expenses of the managed properties Collecting loan payments from the properties Remitting collections to the County for payment of debt service on the bonds.

The management agreement between the Authority and the Subsidary names the Subsidiary as guarantor of the debt. In addition, because part of the Subsidiary’s contractual obligations under the agreement is to collect loan payments from property owners and remit the payments to the County, the Subsidiary is liable for repayment to the Bibb County debt service reserve fund of all bond proceeds that have been disbursed and the accrued interest on those proceeds. Interest accrues at the rate of 3.04% until June 1, 2016 at which time the bonds will be remarketed and the interest rate may increase, but will not exceed 8%. The liability is presented on the consolidated statements of financial position as due to Bibb County debt service fund. In the event that property owners default on their loan agreements with the Subsidiary, and the Subsidiary cannot obtain sufficient collateral from the owners, the Subsidiary may be required to satisfy the debt service fund obligation from its assets. Based on information gathered as part of its monitoring of risks, the Subsidiary’s management believes that the risk of default by property owners is at least reasonably possible. However, the Subsidiary’s management works closely with the property owners so that management can be immediately informed when problems arise. Additionally, management agreements with those owners stipulate an open dialogue throughout the project as well as financial transparency. Management believes these efforts partially mitigate the risks associated with its guarantee of the debt. As described in Note 5, the Subsidiary had approved and issued loans to property owners totaling $3,320,652 for building renovation as of June 30, 2014. The Subsidiary also provided bond proceeds totaling $125,000 to the Bibb County Development Authority to assist that entity with purchasing the Georgia Sports Hall of Fame building. In addition, the Subsidiary is responsible for repayment of bond issuance costs, interest and legal fees totaling $156,487 paid from the bond proceeds.

NEWTOWN MACON, INC. AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS NOTE 18. COMMITMENTS (Continued) Based on the total bond proceeds issued through June 30, 2014, future payments that the Subsidiary will be required to remit to the debt service reserve fund are as follows: June 30, 2015 2016 2017 2018 2019 Thereafter

Principal Interest $ $ 101,388 110,276 275,000 110,276 285,000 101,916 295,000 93,252 2,747,139 383,309 $ 3,602,139 $ 900,417

Total 101,388 110,276 385,276 386,916 388,252 3,130,448 4,502,556

Bibb County Bond Revenue, Series 2012 provides for a total of $5,000,000 proceeds available for the projects. As additional amounts are disbursed, the schedule of payments will change. The above schedule also assumes that interest payments will be made monthly. NOTE 19. SUBSEQUENT EVENTS In September 2014 the Organization gifted $500,000 to the local cultural institution for which they were designated. In July 2014, Urban Development Concepts, LLC (the Subsidiary) approved a letter of commitment to loan $500,000 to a related party for renovation of a building in downtown Macon. If the party accepts the terms of the loan, the building will become the seventh of the bond projects described in Note 18.