Global Brigades 2017 Audited Financial Statements

Consolidated Financial Statements

For the Year Ended December 31, 2017

Table of Contents

Independent Auditor’s Report

Financial Statements: Consolidated Statement of Financial Position

Consolidated Statement of Activities

Consolidated Statement of Cash Flows

Notes to the Consolidated Financial Statements

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3 4 5 6 ‐ 11

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Independent Auditor’s Report

To the Board of Directors Global Brigades, Inc. Fresno, California

We have audited the accompanying consolidated financial statements of Global Brigades, Inc. and Affiliates (collectively, the Organization), which comprise the consolidated statement of financial position as of December 31, 2017, and the related consolidated statement of activities and cash flows for the year then ended, and the related notes to the consolidated financial statements.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation and maintenance of internal control relevant to the preparation and fair presentation of 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 consolidated financial statements based on our audit. We conducted our audit 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 consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting principles used and the reasonableness of significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified audit opinion.

Basis for Qualified Opinion

The Organization’s consolidated financial statements as of and for the year ended December 31, 2017 include an inventory balance of $188,427 on the consolidated statement of financial position and inventory expenses of $334,748 on the consolidated statement of activities.

Additionally, the beginning net asset balance as of December 31, 2016, includes an inventory balance of $148,453. We were unable to obtain sufficient appropriate audit evidence about these balances because sufficient supporting documentation was not maintained, including activity for donated inventory. Consequently, we were unable to determine whether any adjustments to these amounts were necessary.

Qualified Opinion

In our opinion, except for the possible effects of the matter describe in the Basis for Qualified Opinion paragraph, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Organization as of December 31, 2017, and the consolidated changes in net assets and consolidated cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.

Certified Public Accountants June 7, 2019

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GLOBAL BRIGADES, INC. AND AFFILIATES

Consolidated Statement of Financial Position December 31, 2017

Assets Cash and cash equivalents Prepaid expenses and other assets Accounts receivable Medical supplies Notes receivable, net Property and equipment, net

$ 4,464,634 1,294,491 48,380 188,427 145,042 298,002

Total Assets

$ 6,438,976

Liabilities and Net Assets Liabilities: Accounts payable Grants payable Accrued liabilities

$ 180,871 8,101 47,863

Total Liabilities

236,835

Net Assets: Unrestricted Temporarily restricted

2,507,391 3,694,750

Total Net Assets

6,202,141

Total Liabilities and Net Assets

$ 6,438,976

See accompanying notes. ‐ 3 ‐

GLOBAL BRIGADES, INC. AND AFFILIATES

Consolidated Statement of Activities For the Year Ended December 31, 2017

Unrestricted

Temporarily Restricted

Total

Operating Support and Revenue: Contributions Interest and other Net assets released from restriction

$ 9,220,144 54,758 4,374,378

$ 3,529,555

Total Operating Support and Revenue

13,649,280

(844,823)

Operating Expenses: Program General and administrative Fundraising

10,897,578 1,632,162 391,443

Total Operating Expenses

12,921,183

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12,921,183

Change in Net Assets From Operations

728,097

(844,823)

(116,726)

Nonoperating Activities: Contribution from affiliate (Note 2) Loss on interest in corporate subsidiary (Note 2) Gain on foreign currency exchange

94,530 (70,198) 47,155

Change in Net Assets

799,584

(844,823)

(45,239)

Net assets, beginning of year

1,707,807

4,539,573

6,247,380

Net Assets, End of Year

$ 2,507,391

$ 3,694,750

$ 6,202,141

$ 12,749,699 54,758

(4,374,378) 12,804,457

10,897,578 1,632,162 391,443

94,530 (70,198) 47,155

See accompanying notes. ‐ 4 ‐

GLOBAL BRIGADES, INC. AND AFFILIATES

Consolidated Statement of Cash Flows For the Year Ended December 31, 2017

Cash Flows From Operating Activities: Change in net assets Adjustments to reconcile change in net assets to net cash provided by operating activities‐ Noncash changes: Depreciation Noncash investing activity: Loss on interest in corporate subsidiary Change in note receivable Change in assets and liabilities: Prepaid expenses and other assets Accounts receivable Medical supplies Accounts payable Grants payable Accrued liabilities

579,578 (48,380) (39,974) 185,565 53,154 (93,336)

Net Cash Provided by Operating Activities

677,214

Cash Flows From Investing Activities: Purchase of property and equipment Payments received on notes receivable

(51,655) 47,047

Net Cash Used by Investing Activities

(4,608)

Net Change in Cash and Cash Equivalents

672,606

Cash and cash equivalents, beginning of year

3,792,028

Cash and Cash Equivalents, End of Year

$ 4,464,634

$ (45,239)

26,304 70,198 (10,656)

See accompanying notes. ‐ 5 ‐

GLOBAL BRIGADES, INC. AND AFFILIATES

Notes to the Consolidated Financial Statements For the Year Ended December 31, 2017

Note 1 ‐ Organization and Summary of Accounting Policies

Organization ‐ Global Brigades, Inc. (GBI USA) and Affiliates (collectively, the Organization) is an international nonprofit that empowers communities to meet their health and economic goals through university volunteers and local teams. Through student‐led brigades, participating student and professional volunteers empower communities in developing countries with sustainable solutions that improve quality of life and environment, while respecting local culture. The Organization was established in 2007 and is one of the world’s largest student‐led volunteer relief organizations.

Basis of Presentation ‐ GBI USA works with Global Brigades affiliates (the Affiliates) located in Central America and Africa to achieve its mission. The Affiliates are separate legal entities that are controlled by GBI USA and are consolidated for financial reporting in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP).

The consolidated financial statements include the accounts of GBI USA, registered as a nonprofit public benefit corporation in the State of California, and the following Affiliates: GBO Ghana, registered as a corporation under the Companies Act in 1963 in Ghana and created in 2017; Global Brigades Ventures, Inc. (GBVI), registered as a C‐corporation in the State of California; Global Brigades Foundation of Panama, registered as a nonprofit foundation in Panama; and Global Brigades Logistics, S.A. registered as a for‐profit company in Honduras. In addition to these separate legal entities, GB USA has program operations and is registered as nongovernmental organizations (NGO) in Nicaragua, Panama and Honduras. All inter‐entity accounts and transactions have been eliminated in consolidation. During the year ended December 31, 2017, the Organization dissolved Nicaragua Brigades Logistics, S.A.

The Organization works with other related entities throughout the world. These other entities do not meet the criteria for consolidation in accordance with U.S. GAAP.

The consolidated financial statements of the Organization are presented on the accrual basis of accounting. The Organization has presented an unclassified consolidated statement of financial position which sequences assets according to the nearness of their conversion to cash and sequences liabilities according to the nearness to their maturity and resulting use of cash. Net assets, revenues, gains, and losses are classified based on the existence or absence of donor‐ imposed restrictions. Accordingly, the 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 restrictions.

Temporarily Restricted Net Assets ‐ Net assets subject to donor‐imposed restrictions that will be met either by actions of the Organization and/or the passage of time. Temporarily restricted net assets consist primarily of contributions received to fund specific brigades in a future period.

Permanently Restricted Net Assets ‐ Support received in the form of endowment or sustaining funds which can never be spent. The Organization had no permanently restricted net assets at December 31, 2017.

Support and revenue are reported as increases in unrestricted net assets unless use of the related assets is limited by donor‐imposed restrictions. Expenses are reported as decreases in unrestricted net assets. Gains and losses on assets and liabilities are reported as increases or decreases in unrestricted net assets unless their use is restricted by explicit donor stipulation or by law. Expirations of temporary restrictions on net assets (i.e., the donor‐stipulated purpose has been fulfilled or the stipulated time period has lapsed) are reported as reclassifications between the applicable classes of net assets, except for contributions with restrictions that are satisfied in the same year, which are reported as unrestricted.

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GLOBAL BRIGADES, INC. AND AFFILIATES

Notes to the Consolidated Financial Statements For the Year Ended December 31, 2017

Note 1 ‐ Continued

Cash and Cash Equivalents ‐ Cash and cash equivalents consist of checking and money market accounts. Cash held in foreign countries totaled $235,210 as of December 31, 2017. Of the cash held in foreign countries, $37,824 was held in foreign currencies.

Prepaid Expenses and Other Assets ‐ Prepaid expenses consist of travel and other costs paid related to brigades that will occur after year end.

Accounts Receivable ‐ Accounts receivable consist primarily of amounts due from unconsolidated related parties. Accounts receivable are stated at the amount management expects to collect from the outstanding balances. Management determined that an allowance for uncollectible accounts was not deemed necessary as of December 31, 2017.

Notes Receivable ‐ Notes receivable consist primarily of a loan made by the Organization to an unconsolidated related party. The note is reported at the lower of its outstanding principal balances plus accrued interest or impaired value.

Medical Supplies ‐ Medical supplies on hand are used by volunteers on Brigades. The medical supplies are recorded at cost, which is considered to be the lower of cost or net realizable value. Medical supplies are generally used within one year.

Property and Equipment ‐ The Organization capitalizes property and equipment with a cost or fair value, if donated, over $10,000. Property and equipment is depreciated on the straight‐line basis over their estimated useful lives of three to ten years.

Grants Payable ‐ Grants payable consist of grants awarded but not paid to an unconsolidated related party at December 31, 2017. The grant will be paid within one year.

Concentrations of Credit Risk ‐ Financial instruments that potentially subject the Organization of concentrations of credit risk consist of cash and cash equivalents and notes receivable. Cash and cash equivalents at times exceed Federal Deposit Insurance corporation limits. Notes receivable from related parties are reviewed for impairment by management regularly.

Revenue Recognition ‐ Contributions received for specific brigades are generally nonrefundable and are considered unconditional support. Such contributions are recognized as temporarily restricted contribution revenue and are released from restriction when the specific brigade occurs. If the release occurs in the same year the contribution was received, the activity is reflected as unrestricted on the consolidated statement of activities. Unused temporarily restricted net assets are released for unrestricted use after they have been on hand for more than one year.

The Organization works with university chapters to raise funds for each brigade. At the time the brigade is established, the chapter determines an approximate amount it intends to raise. Unpaid amounts from these estimates are considered conditional pledges and are, therefore, not recognized until they are received.

Gifts‐in‐Kind ‐ A substantial number of volunteers have donated significant amounts of their time to support the Organization’s programs and fundraising campaigns. The donated services do not meet the criteria for recognition in accordance with U.S. GAAP. Therefore, they are not reflected in these consolidated financial statements.

Functional Allocation of Expenses ‐ The costs of providing the various programs and other activities have been summarized on a functional basis in the consolidated statement of activities. Accordingly, certain costs have been allocated among the program, general and administrative, and fundraising categories based on the benefits derived. ‐ 7 ‐

GLOBAL BRIGADES, INC. AND AFFILIATES

Notes to the Consolidated Financial Statements For the Year Ended December 31, 2017

Note 1 ‐ Continued

Operating and Nonoperating Activities ‐ Operating activities represent all sources of support, revenue and expenses except for those designated as nonoperating. Nonoperating activities consist of contributions received outside the normal course of operations, and gains and losses on an unconsolidated corporate subsidiary and on foreign currency exchange.

Use of Estimates ‐ The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect amounts reported in the consolidated financial statements.

Actual results may differ from such estimates.

Federal Income Tax ‐ GBI USA is a California Nonprofit Public Benefit Corporation and is tax‐exempt under Section 501(c)(3) of the Internal Revenue Code. Global Brigades Ventures, Inc. is a C‐corporation and incurred income tax expense totaling $2,725 for the year ended December 31, 2017, and an overpayment of $3,955 as of December 31, 2017 that will be applied against future years income tax liabilities. Accordingly, no provision has been made for federal income tax in the accompanying consolidated financial statements. The Organization files tax returns with the U. S. government and the State of California. The Organization may be subject to income tax examinations for the current year and certain prior years based on the applicable laws and regulations.

GBO Ghana is considered a tax‐exempt organization under the applicable laws of their respective countries. The Organization files tax returns as required in the respective countries in which the Affiliates are located.

Foreign Currency Translation ‐ Substantially all assets and liabilities of the Organization that are held in foreign currencies are translated at year end exchange rates. Revenue and expenses are translated at the average monthly exchange rates during the year. Gains and losses from foreign currency translation for the year are included in the consolidated statement of activities as a nonoperating unrestricted gain or loss.

Note 2 ‐ Related Party Transactions

Notes Receivable ‐ Outstanding notes receivable make up approximately 2% of the Organization’s total assets at December 31, 2017. The note receivable from the unconsolidated related party is collateralized by the assets of related party. The interest rates on the notes are generally determined by market rates and range from 2.5% ‐ 6.0%. An allowance for doubtful accounts is established based on prior collection experience, current economic factors and management’s review of individual loan balances. Balances are written off through a charge to the allowance if the note is determined to be uncollectible. An allowance for doubtful accounts was deemed unnecessary by management as of December 31, 2017. No loans were past due as of December 31, 2017.

Notes receivable were as follows as of December 31:

Note receivable from related party $ 132,786 Other note receivable 12,256

Notes Receivable, Net

$ 145,042

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GLOBAL BRIGADES, INC. AND AFFILIATES

Notes to the Consolidated Financial Statements For the Year Ended December 31, 2017

Note 2 ‐ Continued

Principal payments on the notes are scheduled to be paid as follows:

For the Year Ending December 31, 2018 2019 2020

$ 63,392 53,752 27,898

Notes Receivable, Net

$ 145,042

Total GBA net assets Less 60% impairment loss ($185,725)

202,969 (108,439)

Contribution Recognized from GBA, Net

$ 94,530

Grants Awarded and Grants Payable to Related Party ‐ GB USA awards grants to affiliates to carry‐out each brigade.

Grants awarded to consolidated affiliates are eliminated in consolidation. Grants paid to unconsolidated related parties totaled $2,455,626 for the year ended December 31, 2017. Grants payable to unconsolidated related parties totaled $8,101 as of December 31, 2017 and will be paid within one year.

Acquisition of GBVI ‐ In 2016, GBI USA held 40% of the issued and outstanding shares of GBVI and accounted for this investment under the equity method of accounting. The remaining 60% of the issued and outstanding shares were owned

by Global Brigades Association (GBA), a corporation that was tax‐exempt under Section 501(c)(3) of the Internal Revenue Code. GBA was an unconsolidated related party of GBI USA. GBA dissolved its operations during the year ended December 31, 2017 and donated its net assets to GB USA. At the time of dissolution, GBA’s net assets totaled $202,969 consisting of cash totaling $92,240 and GBA’s interest in GBVI totaling $110,729. Upon GBA’s dissolution, GB USA became the sole shareholder of GBVI.

In accordance with U.S. GAAP, GB USA recognized the contribution from GBA at fair value on the date received. At the time of the donation, it was determined that the value of stock and intangible assets held by GBVI totaling $180,725 was impaired and their fair value was reduced to zero. As a result, GB USA recognized a loss of $70,198, which represents its approximate 40% share of the $180,725 impairment. This loss is included in the consolidated statement of activities as a nonoperating loss on interest in corporate subsidiary. The remaining portion of the impairment was reflected in the contribution recognized by GB USA.

The contribution received from GBA, at fair value, was as follows during the year ended December 31, 2017:

Cash $ 92,240 Investment in GBVI 110,729

The accounts of GBVI are included in the consolidated financial statements of the Organization (Note 1) and all inter‐entity activity is eliminated in consolidation.

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GLOBAL BRIGADES, INC. AND AFFILIATES

Notes to the Consolidated Financial Statements For the Year Ended December 31, 2017

Note 3 ‐ Property and Equipment

Property and equipment consisted of the following as of December 31, 2017:

Land Furniture and equipment Computer and communications equipment Dental equipment Vehicles

$ 162,574 29,614 35,132 25,806 85,944 339,070 (41,068)

Property and Equipment, Net

$ 298,002

Note 4 ‐ Line of Credit

In April 2016, the Organization obtained a revolving line of credit with a bank for a maximum of $250,000. Interest on outstanding draws against the line of credit accrues at 3.25% above Prime rate. The line of credit is secured by all the Organization’s pledges receivable, and it expires on the “final availability date.” Draws on the line of credit may be used only to provide working capital for the Organization. There were no draws outstanding on the line of credit at December 31, 2017.

Note 5 ‐ Temporarily Restricted Net Assets

Temporarily restricted net assets totaled $3,694,750 at December 31, 2017 and were available for specific brigades scheduled to occur after year end. Net assets released from restriction for brigades totaled $4,374,378 during the year ended December 31, 2017.

Note 6 ‐ Employee Retirement Benefits

The Board of Directors implemented a policy during the year ended December 31, 2015, in which the Organization may provide a contribution to certain employees’ Individual Retirement Accounts (IRAs), subject to annual approval of the Compensation Committee. Approved contributions totaled approximately $17,300 for the year ended December 31, 2017.

Note 7 ‐ Commitments and Contingencies

Operating Leases ‐ The Organization has entered into leases for facilities space in the United States, Nicaragua, Ghana and Panama. The lease in the United States expired in September 2017 and was not renewed. The leases in Nicaragua, Ghana and Panama are generally for a term of one year, renewable annually. Rent under these leases ranges from $400 to $1,600 per month. Rent expense for all leases in effect totaled $85,572 for the year ended December 31, 2017.

Contingencies ‐ The Organization has various claims in process and other contingencies, including one matter that is in mediation. The Organization carries liability insurance, and in management’s opinion, the outcome from these matters will not materially impact the Organization’s financial position or results of activities.

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GLOBAL BRIGADES, INC. AND AFFILIATES

Notes to the Consolidated Financial Statements For the Year Ended December 31, 2017

Note 8 ‐ Subsequent Events

The Organization has evaluated subsequent events through June 7, 2019, the date on which the financial statements were available to be issued.

Line of Credit ‐ On August 8, 2018, GBI USA entered into a new line of credit with a Bank in the amount of $800,000. This line of credit was given in the replacement, renewal and/or extension of, but not in extinguishment of the indebtedness of the line of credit dated April 25, 2016 in the amount of $250,000 (Note 4). The new line of credit expires on August 10, 2019 and bears interest at the applicable margin of 5.858% plus 3%. The other terms of the new line of credit are similar to those of the line of credit dated April 25, 2016, and contain restrictive covenants including the prohibition of developing or acquiring subsidiaries without approval from the Bank. The line of credit was given as a combined transaction in which $700,000 was withdrawn as cash and $200,000 was given as a credit card. At present, GBI USA is only paying for the interest related to the loan with the intention of paying principal during 2020 (unaudited). The outstanding amount due on the new line of credit was $700,000 as of April 26, 2019.

Asset Purchase Agreement ‐ On October 5, 2018, GBI USA executed an Asset Purchase Agreement (the Agreement) to acquire certain assets of a company (the Company) in which the majority shareholder is an employee and officer of GB USA and married to another employee and officer of GBI USA. Assets acquired include the registered trademark for Squads Abroad along with its domain name, and some of its agreements and employee contracts. GBI USA has agreed to assume liabilities related to the purchased assets which accrue on or after the closing date. A fair market valuation of the assets was completed by third party valuation consultants, which valued the assets at $980,000. The purchase price was $980,000, of which $70,000 was paid under an Option agreement dated September 5, 2018, and $630,000 was paid within two days of the Agreement’s closing. The remaining $280,000 will be paid in 24 monthly installments of $11,667 beginning in January 2019.

Other Agreements (Unaudited) ‐ On October 30, 2018, GBI USA executed a Vendor Agreement with an Entity (the Entity) that began operating volunteer abroad programs in Costa Rica, Greece, Peru, Guatemala, Morocco, Thailand, Kenya and India. Under the terms of the two‐year Vendor Agreement, GBI USA and the Entity may operate their respective programs at one another’s sites. The entity providing the services will receive an administrative fee 29.6% of the cost of goods sold per volunteer participant. The employee and officer of GBI USA (noted in the paragraph above) receives a salary from and holds a noncontrolling equity interest in the Entity. GBVI (Note 1) also has a noncontrolling interest in the Entity.

In April 2018 GBI USA entered into a Travel Services Agreement with a third party in which GBI USA will book airfare for the third party in exchange for a per ticket fee.

Registration and Dissolution of Controlled Entities (Unaudited) ‐ On July 18, 2018, the Organization formed Montemar Logistics, S.A in Tegucigalpa, Honduras. This entity will be consolidated in the Organization’s financial statements.

Subsequent to December 31, 2017, the Organization began the process of dissolving Panama Brigades Logistics, S.A., an entity that was dormant during 2017.

Expanded Operations (Unaudited) ‐ During 2019, the Organization created a Child Impact Fund in which a portion of the revenue from Squads Abroad will be set aside to support charitable programs benefiting women and children in need. The Organization will also be piloting a new program to bring its development programs to refugee camps in Greece. The Organization is currently in the process of registering a legal entity in Greece, Global Brigades Greece.

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