Biocom Institute Financial Statements

BIOCOM Institute Financial Statements Year Ended December 31, 2012

BIOCOM Institute Financial Statements and Supplemental Information Year Ended December 31, 2012

Table of Contents Page Independent Auditors’ Report

1

Financial Statements: Statement of Financial Position

3

Statement of Activities

4

Statement of Functional Expenses

5

Statement of Cash Flows

6

Notes to Financial Statements

7

Supplemental Information:

Independent Auditors’ Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards

10

Independent Auditors’ Report on Compliance for Each Major Program and on Internal Control over Compliance Required by OMB Circular A-133

11

Schedule of Expenditures of Federal Awards

13

Note to Schedule of Expenditures of Federal Awards

14

Schedule of Findings and Questioned Costs

15

Schedule of Prior Audit Findings

16

INDEPENDENT AUDITORS’ REPORT

To the Board of Directors of BIOCOM Institute San Diego, California Report on the Financial Statements We have audited the accompanying financial statements of BIOCOM Institute (a nonprofit organization), which comprise the statements of financial position as of December 31, 2012, and the related statements of activities, functional expenses, and cash flows for the year 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.

Auditors’ 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 audits 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 BIOCOM Institute as of December 31, 2012, and the changes in its net assets and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

San Diego, California June 28, 2013

BIOCOM Institute Statement of Financial Position December 31, 2012

ASSETS Current Assets: Cash Accounts receivable Accounts receivable - related party Unbilled grants receivable Prepaid expenses and other current assets

$

Total Current Assets

386,178 430,012 4,135 6,889 175,423 1,002,637

Property and equipment, net of accumulated depreciation

4,231 $

1,006,868

$

180,716 8,129 580,192 148,680 30,971

LIABILITIES AND NET ASSETS Current Liabilities: Accounts payable Accounts payable - related party Loans payable - related party Deferred revenue Accrued expenses Total Current Liabilities

948,688

Unrestricted Net Assets

58,180 $

See accompanying notes to financial statements.

1,006,868

3

BIOCOM Institute Statement of Activities Year Ended December 31, 2012

Unrestricted Revenue and Support: Federal grants State grants Forgiveness of accrued interest payable - related party Golf tournament Education series Other revenue and support Other grants

$

Total Unrestricted Revenue and Support

1,094,629

Expenses: Program services Supporting services: Management and general Fundraising

793,079 233,515 59,340

Total Expenses

1,085,934

Increase in Unrestricted Net Assets

8,695

Unrestricted Net Assets, beginning Unrestricted Net Assets, ending

See accompanying notes to financial statements.

811,509 146,969 45,333 67,310 21,374 1,683 451

49,485 $

58,180

4

BIOCOM Institute Statement of Functional Expenses Year Ended December 31, 2012

Supporting Services General and Administrative Fundraising

Program Services Salaries and benefits Sub-contract services Program services Golf tournament Rent Travel Interest Professional services Miscellaneous Donations Supplies Communications Dues and subscriptions Depreciation

Total

$

317,945 245,989 200,697 23,181 1,256 558 1,548 784 629 492

$

130,919 9,579 32,032 29,621 21,317 6,067 2,290 638 590 259 203

$

18,703 38,903 1,368 74 17 91 118 37 29

$

467,567 245,989 200,697 38,903 34,128 32,032 29,621 22,647 6,642 2,290 2,277 1,492 925 724

$

793,079

$

233,515

$

59,340

$

1,085,934

See accompanying notes to financial statements.

5

BIOCOM Institute Statement of Cash Flows Year Ended December 31, 2012

Cash Flows from Operating Activities: Increase in net assets Adjustments to reconcile increase in net assets to net cash provided by operating activities: Depreciation Forgiveness of prior year's accrued interest - related party Changes in operating assets and liabilities: Accounts receivable Accounts receivable - related party Unbilled grants receivable Prepaid expenses and other current assets Accounts payable Accounts payable - related party Deferred revenue Accrued expenses

$

8,695

724 (15,712) (12,573) 3,800 103,842 (175,423) 151,977 (41,793) 148,680 (30,251)

Net Cash Provided by Operating Activities

141,966

Cash Flows Used by Investing Activities: Purchases of property and equipment

(1,457)

Cash Flows from Financing Activities: Proceeds from loans payable - related party Payments on loans payable - related party

270,000 (34,808)

Net Cash Provided by Investing Activities

235,192

Net Increase in Cash

375,701

Cash, beginning Cash, ending

See accompanying notes to financial statements.

10,477 $

386,178

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BIOCOM Institute Notes to Financial Statements Year Ended December 31, 2012

Note 1 – Institute and Summary of Significant Accounting Policies Nature of Activities BIOCOM Institute (Institute) is a non-profit organization formed in January 2008 that provides outreach and education programs to increase science literacy in California. The Institute is primarily supported by government grants.

Financial Statement Presentation The Institute reports 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. x

Unrestricted net assets represent expendable funds available for operations, which are not otherwise limited by donor restrictions.

x

Temporarily restricted net assets consist of contributed funds subject to donor-imposed restrictions contingent upon specific performance of a future event or a specific passage of time before the Institute may spend the funds.

x

Permanently restricted net assets are subject to irrevocable donor restrictions requiring that the assets be maintained in perpetuity usually for the purpose of generating investment income to fund current operations.

There were no temporarily or permanently restricted net assets as of December 31, 2012.

Accounts Receivable The accounts receivable arise in the normal course of operations. It is the policy of management to review the outstanding accounts receivable at year end, as well as the bad debt write-offs experienced in the past, and establish an allowance for doubtful accounts for uncollectible amounts. No allowance for doubtful accounts was recorded for the year ended December 31, 2012 because management believes all amounts are collectible.

Property and Equipment Property and equipment is carried at cost or, if donated, at the approximate fair value at the date of donation. The Institute capitalizes expenditures in excess of $500. Depreciation is computed using the straight-line method over the useful lives of the assets of three to five years.

Revenue and Support Contributions received are recorded as unrestricted, temporarily restricted, or permanently restricted support, depending on the existence and/or nature of any donor restrictions. All donor-restricted support is reported as an increase in temporarily or permanently restricted net assets, depending on the nature of the restriction.

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 statements of activities as net assets released from restrictions. Contributions received with donor-imposed restrictions that are satisfied within the same reporting period are reported as unrestricted support in that period.

Contributed Materials and Services Contributed goods are recorded at their estimated fair market value at the time of donation. Such items are capitalized or charged to operations as appropriate. The fair market value of contributed professional services is reported as support and expense in the period in which the services are performed.

The Institute receives donated services from a variety of unpaid volunteers. No amounts have been recognized in the financial statements because the criteria for recognition as contributions of such volunteer effort have not been satisfied.

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BIOCOM Institute Notes to Financial Statements Year Ended December 31, 2012

Note 1 – Institute and Summary of Significant Accounting Policies, continued Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.

Income Taxes The Institute is exempt from income taxes under Section 501(c)(3) of the Internal Revenue Code and Section 23701(d) of the California Revenue and Taxation Code. The Institute has been determined by the Internal Revenue Service not to be a private foundation within the meaning of Section 509(a) of the Internal Revenue Code. The Institute may be subject to tax on income which is not related to its exempt purpose. For the year ended December 31, 2012, no such unrelated business income was reported and, therefore, no provision for income taxes has been made.

The Institute follows the provisions of uncertain tax positions as addressed in FASB Accounting Standards Codification. The Institute recognizes accrued interest and penalties associated with uncertain tax positions as part of the income tax provision, when applicable. There are no amounts accrued in the financial statements related to uncertain tax positions for the years ended December 31, 2012.

The Institute files informational and income tax returns in the United States and various state and local jurisdictions.

The Institute’s Federal income tax and informational returns for the years ended December 31, 2012, 2011 and 2010 are subject to examination by the Internal Revenue Service, generally for 3 years after the returns were filed. State and local jurisdictions have statutes of limitation that generally range from 3 to 5 years.

Subsequent Events The Institute has evaluated subsequent events through June 28, 2013, which is the date the financial statements were available to be issued.

Note 2 – Concentrations of Credit Risk Cash The Institute maintains its cash in bank deposit accounts that are either insured by the Federal Deposit Insurance Corporation (FDIC) up to a limit of $250,000 per depositor or certain non-interest bearing accounts that are fully insured by the FDIC. At December 31, 2012, the Institute did not have any cash that was exposed to uninsured deposit risk.

Effective January 1, 2013, the FDIC coverage is limited to $250,000 per depositor per financial institution.

Revenue The Institute received a substantial portion of its funding from two sources, the San Diego Workforce Partnership and the SDSU Research Foundation. During the year ended December 31, 2012, funding from these sources totaled approximately $958,000 (88% of revenue). At December 31, 2012 amounts due from these funding sources included in accounts receivable were approximately $422,000 (98% of accounts receivable).

The support received from governmental grants from the San Diego Workforce Partnership and the SDSU Research Foundation are subject to audits by the grantor agencies. The ultimate determinations of amounts received under these programs are generally based upon allowable costs reported to and audited by the grantor agency. Until such audits are completed, there exists the contingency to refund any amounts received in excess of the allowable costs.

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BIOCOM Institute Notes to Financial Statements Year Ended December 31, 2012

Note 3 – Property and Equipment Property and equipment consist of the following:

Computer equipment Tenant improvements

$

Less accumulated depreciation $

1,457 4,945 6,402 (2,171) 4,231

Note 4 – Related Party Transactions BIOCOM, a 501c(6) regional association, focuses on initiatives that positively influence the life science industry through receipt of membership dues. In 2012, four of the ten BIOCOM Institute members of the Board of Directors were also voting members of the BIOCOM Board of Directors.

As of December 31, 2012, BIOCOM owed the Institute approximately $4,000.

The Institute rents office space from BIOCOM on a month-to-month lease. Total rent expense incurred in the year ended December 31, 2012 was approximately $34,000. In addition, BIOCOM billed the Institute approximately $960 for administrative support and related services in 2012. As of December 31, 2012, the Institute owed BIOCOM approximately $4,000 for rent and other expenses.

The Institute obtained short-term loans from BIOCOM totaling $270,000 on various dates during 2012. The loans are payable on demand and accrue interest at Prime (3.25% at December 31, 2012) plus 3%. Total interest incurred in 2012 of approximately $30,000, and $16,000 accrued in 2011, was forgiven by BIOCOM. The principal balance due at December 31, 2012 of approximately $580,000 is included as a current liability.

Note 5 – Functional Allocation of Expenses The costs of providing the various programs and 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.

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