Antioch College Corporation Consolidated Financial Statements June 30, 2014and 2013 withIndependent Auditors’ Report TABLE OF CONTENTS Independent Auditors’ Report.....................................................................................................1–2 Consolidated Financial Statements: Consolidated Statementsof Financial Position..........................................................................3 Consolidated Statementsof Activities and Changes in Net Assets...........................................4 Consolidated Statementsof Cash Flows...................................................................................5 Notes to theConsolidated Financial Statements.....................................................................6–16 Accompanying Information: Independent Auditors’ Reporton ConsolidatingInformation...................................................17 Consolidating Statementsof Financial Position.......................................................................18 Consolidating Statementsof Activities and Changes in Net Assets........................................19 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 Governmental Auditing Standards..................................................................................20–21 INDEPENDENT AUDITORS’ REPORT The Board of Trustees Antioch College Corporation Yellow Springs, Ohio Report on the Consolidated Financial Statements We have audited the accompanying consolidated financial statements of Antioch College Corporationand Affiliate, which comprise the consolidated statements of financial position as of June 30, 2014and 2013, and the relatedconsolidatedstatements of activities and changes in net assetsand cash flows for the years thenended 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 theseconsolidatedfinancial 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 theseconsolidatedfinancial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of Americaand the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the auditsto 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 auditors’ judgment, including the assessment of the risks of material misstatement of theconsolidatedfinancial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Organization’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 Organization’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 theconsolidatedfinancial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. 14 east main street, ste. 500 springfield, oh 45502 www.cshco.com p. 937.399.2000 f. 937.399.5433 cincinnati | cleveland | columbus | miami valley | northern kentucky | springfield | toledo Opinion In our opinion, theconsolidatedfinancial statements referred to above present fairly, in all material respects, the financial position of Antioch College Corporationand Affiliateas of June 30, 2014and 2013, and the changes in theirnet assets and theircash flows for the years thenended inaccordance with accounting principles generally accepted in the United States of America. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated November 25, 2014on our consideration of the Organization's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance.That report is an integral part of an audit performed in accordance with Government Auditing Standardsin considering of Antioch CollegeCorporation and Affiliate's internal control over financial reporting and compliance. Clark, Schaefer, Hackett & Co. Springfield, Ohio November 25, 2014 2 Antioch College Corporation Consolidated Statements of Financial Position June 30, 2014 and 2013 2014 2013 Assets: Cash and cash equivalents $ 1,977,748 1,924,144 Restricted cash 2,776,585 4,424,905 Accounts and grants receivable 167,582 47,641 Pledges receivable, net 12,851,251 8,308,997 Prepaid expenses 94,239 36,868 Investments, at fair value 22,691,135 41,821,832 Investments held in trust, at fair value 236,186 410,038 Interest rate swap, at fair value 7,910 63,388 Beneficial interest in perpetual and remainder trusts 541,418 495,022 Loan costs, net 147,250 197,625 Intangible assets 2,850,637 - Property, plant and equipment, net 35,534,522 19,561,598 Total assets $ 79,876,463 77,292,058 Liabilities: Accounts payable and accrued liabilities 2,447,673 1,506,745 Gift annuity obligations 446,544 518,705 Amounts held on behalf of others in trust 178,714 277,131 Loan costs payable 147,250 177,361 Deferred grants revenue 191,788 230,845 Long-term debt 6,200,000 6,200,000 Total liabilities 9,611,969 8,910,787 Net assets: Unrestricted net assets 7,665,581 9,551,210 Temporarily restricted net assets 43,943,952 40,083,260 Permanently restricted net assets 18,654,961 18,746,801 Total net assets 70,264,494 68,381,271 Total liabilities and net assets $ 79,876,463 77,292,058 See accompanying notes to consolidated financial statements. 3 Antioch College Corporation Consolidated Statements of Activities and Changes in Net Assets Years Ended June 30, 2014 and 2013 2014 2013 Temporarily Permanently Temporarily Permanently Unrestricted Restricted Restricted Total Unrestricted Restricted Restricted Total Operating revenue: Gifts, pledges and bequests $ 13,381,667 743,284 144,811 14,269,762 10,522,897 8,227,337 754,028 19,504,262 Grants 500,239 - - 500,239 93,174 5,200 - 98,374 Interest and dividend income - 170,109 - 170,109 - 343,625 - 343,625 Net realized gain on investments - 1,450,844 - 1,450,844 - 312,251 - 312,251 Change in net unrealized gain on investments - 1,814,866 - 1,814,866 - 1,396,827 - 1,396,827 Program income 1,657,712 - - 1,657,712 825,690 - - 825,690 In-kind revenue 98,875 - - 98,875 27,349 27,349 Other income 454,428 - - 454,428 210,780 - - 210,780 Net assets released from restrictions 658,047 (375,000) (283,047) - 2,196,910 (2,195,384) (1,526) - Total operating revenue 16,750,968 3,804,103 (138,236) 20,416,835 13,876,800 8,089,856 752,502 22,719,158 Operating expenses: Instruction 1,696,209 - - 1,696,209 1,261,001 - - 1,261,001 Academic support 1,383,938 - - 1,383,938 1,288,061 - - 1,288,061 Student services 2,042,169 - - 2,042,169 1,631,379 - - 1,631,379 Institutional support 3,450,862 - - 3,450,862 3,594,455 - - 3,594,455 Facilities 2,523,632 - - 2,523,632 2,090,276 - - 2,090,276 Auxiliary enterprises 3,168,360 - - 3,168,360 1,393,326 - - 1,393,326 Fundraising activities 1,815,948 - - 1,815,948 2,222,369 - - 2,222,369 Total operating expense 16,081,118 - - 16,081,118 13,480,867 - - 13,480,867 Nonoperating income (expense) Change in value of gift annuity - 65,765 - 65,765 - 119,655 - 119,655 Change in value of remainder and perpetual trusts - (9,176) 46,396 37,220 - 125,231 18,185 143,416 Change in value of interest rate swap (55,479) - - (55,479) 63,388 - - 63,388 Total nonoperating income (expense) (55,479) 56,589 46,396 47,506 63,388 244,886 18,185 326,459 Extraordinary Loss Release of reversion rights (2,500,000) - - (2,500,000) - - - - Change in net assets (1,885,629) 3,860,692 (91,840) 1,883,223 459,321 8,334,742 770,687 9,564,750 Net assets, beginning of year 9,551,210 40,083,260 18,746,801 68,381,271 9,091,889 31,748,518 17,976,114 58,816,521 Net assets, end of year $ 7,665,581 43,943,952 18,654,961 70,264,494 9,551,210 40,083,260 18,746,801 68,381,271 See accompanying notes to consolidated financial statements. 4 Antioch College Corporation Consolidated Statements of Cash Flows Years Ended June 30, 2014 and 2013 2014 2013 Cash flows from operating activities: Change in net assets $ 1,883,223 9,564,750 Adjustments to reconcile change in net assets to net cash (used in) provided by operating activities: Depreciation 901,868 453,675 Amortization 46,500 18,486 Provision for uncollectible accounts and pledges 243,586 594,654 Change in discount for future pledges 360,462 141,125 Net realized gain on investments (1,450,844) (312,251) Net unrealized (gain) loss on investments (1,814,866) (1,396,827) Change in beneficial interest in perpetual and remainder trusts (37,220) (143,416) Change in value of interest rate swap 55,479 (63,388) Change in value of gift annuity (65,765) (119,655) Contributions restricted for endowment and facilities (444,733) (2,784,303) (Increase) decrease in operating assets: Accounts and grants receivable (119,941) (36,157) Pledges receivable (5,146,302) (6,296,609) Prepaid expenses (57,371) 102,486 Increase (decrease) in operating liabilities: Accounts payable and accrued expenses 940,928 884,350 Deferred grant revenue (39,057) 216,550 Accounts held on behalf of others in trust (4,183) (185,976) Net cash (used in) provided by operating activities (4,748,236) 637,494 Cash flows from investing activities: Purchase of investments - (2,526,184) Proceeds from sale of investments 22,570,259 8,233,525 Purchase of intangible assets (2,850,637) - Purchase of property, plant and equipment (16,874,792) (7,737,840) Net cash provided by (used in) investing activities 2,844,830 (2,030,499) Cash flows from financing activities: Debt issuance costs financed with guarantor - 232,500 Repayment on loan costs (30,111) (83,059) Contributions restricted for endowment and facilities 444,733 2,784,303 Payments on gift annuity and trust obligations (105,932) (117,512) Net cash provided by financing activities 308,690 2,816,232 Net (decrease) increase in cash and cash equivalents (1,594,716) 1,423,227 Cash and cash equivalents, beginning of year 6,349,049 4,925,822 Cash and cash equivalents, end of year $ 4,754,333 6,349,049 Reconciliation of ending cash to the statement of financial position: Cash and cash equivalents $ 1,977,748 1,924,144 Restricted cash 2,776,585 4,424,905 $ 4,754,333 6,349,049 Supplemental disclosures of cash flow information - interest paid $ 134,889 137,857 Supplemental disclosure of noncash financing activity - refinance debt $ - 6,200,000 See accompanying notes to consolidated financial statements. 5 Antioch College Corporation Notes to Consolidated Financial Statements June 30, 2014 and 2013 1. REPORTING ENTITY: The financial statements include the accounts of the Antioch College Corporation (“the Organization”)and the Continuation Fund, Inc. (“Continuation Fund”). The financial statementsof the Continuation Fund have been consolidatedsince it isa 100% wholly-owned subsidiaryof the Organization, whichcan exert operational control. In addition, the financial resources of the Continuation Fund arededicated to the operation of Antioch College. All balances and transactionsbetween the Organizationand the Continuation Fund have been eliminated. 2. ORGANIZATION: The Organization, a nonprofit organization, is an organization of former alumni and other interested parties, whose mission is to reestablish Antioch College as a private co-educational liberal arts institution of higher education. Antioch College, originally founded in 1854 in Yellow Springs, Ohio, was formerly a wholly owned subsidiary of Antioch University (“the University”) which ceasedAntioch College operations in 2008 due to financial reasons. The Organizationsubsequently purchased Antioch College and related assets and obligations from the Universityon September 4, 2009 for $6,200,000 in cash. Included with the purchase were an endowment and other investments, obligations under various split interest agreements, the Glen Helen Nature Preserve, campus buildings and land, and various other assets and obligations. The Continuation Fund was founded for the purpose of holding the legacy endowment investments received from the University as part of the acquisition. On June 30, 2014, the Continuation Fund was terminated and all assets were contributed to Antioch College. The purchase agreement with the University hada reversionclause under which,if the Organizationwas not successful in reestablishing Antioch College as an accredited institution of higher learning within a sevenyear periodfrom the date of the asset purchase agreement,then the vast majority of remaining assets and obligations purchased under the agreement wouldhave then revertedback to the University, subject to a lien held on certain real assets by the Morgan Family Foundation as part of the loan guaranty (See Note 10). Pursuant to a master agreement dated May 20, 2013, the Organization purchased assets and made payments totaling $8,000,000 to Antioch University on July 3, 2013 as follows:  $3,700,000 to purchase the assets of WYSO, a not-for-profit public radio station, including the broadcast license;  $1,800,000 to purchase the building currently housing WYSO; and  $2,500,000 to release the endowment anddeed restrictions, including reversion clause, from the September 4, 2009 asset purchase agreement described above 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Basis of Presentation The financial statements of the Organizationhave been prepared on the accrual basis of accounting. Resources are reported for accounting purposes, in separate classes of net assets based on the existence or absence of donor-imposed restrictions. In the accompanying financial statements, net assets that have similar characteristics have been combined into similar categories as follows: 6 Antioch College Corporation Notes to Consolidated Financial Statements June 30, 2014 and 2013 Permanently restricted Permanently restricted net assets are subject to donor-imposed stipulations that theassets be maintained permanently by the Organization. Generally, the donors of these assets permit the Organizationto use all or part of the investment return on these assets. Such assets primarily include the Organization’spermanent endowment funds. Temporarily restricted Temporarily restricted net assets are those assets whose use by the Organizationis subject to donor- imposed stipulations that can be fulfilled by actions of the Organizationpursuant to those stipulations or that expire by the passage of time. Unrestricted Unrestricted net assets are assets that are not subject to donor-imposed stipulations. Unrestricted net assets havebeendesignated for specific purposes bythe Board of Trustees(Note 13). In addition, assets may otherwisebe limited by contractual agreements with outside parties. Expenses are generally reported as decreases in unrestricted net assets. Expirations of donor-imposed stipulations,that simultaneously increase one class of net assets and decrease another,are reported as reclassifications between the applicable classes of net assets. Contributions and investment return with donor-imposed restrictions are reported as temporarily restricted revenues and are reclassified to unrestricted net assets when an expense is incurred that satisfies the donor-imposed restriction unless such donor-imposed restrictions are met within the period the contribution is made. In these cases, contributions are reported as unrestricted revenues. Contributions restricted for the endowment are classified as permanently restricted and retained as such in perpetuityin accordance with donor stipulations. Cash and Cash Equivalents Cash and cash equivalents includecash deposits with original maturities of three monthsor less. Cash and cash equivalents that comprise part of the investment balances for the endowment, third party trusts, gift annuities, and other restricted investments are not classified as cash or cash equivalents. Certain cash balances are classified as restricted and listed as a separate line item in the financial statements. Cash and cash equivalents are primarily deposited in one banking institution. Grants Receivable and Deferred Grants Revenue Grants receivable are reported at amounts billed or billable to grantors based upon amounts awarded and expended under these awards prior to the end ofthe fiscal year. Deferred grants receivable represent amounts advanced under certain grant awards whereby the related expenditures have not yet been incurred as of the end of the fiscal year. No allowance for uncollectible grants receivable has been recognized because management believes all amounts due are collectible. Pledges Receivable The Organizationreports unconditional promises to give as pledges receivable and revenue when the promise is madeby individuals and entities. Pledges receivable forcontributions are unsecured and are reported net of an allowance for uncollectible pledgesand a discount for the time value of money for long- term pledges. Contributions received are considered available for unrestricted use unless specifically restricted by the donor. 7 Antioch College Corporation Notes to Consolidated Financial Statements June 30, 2014 and 2013 Pledges receivable greater than one year, less an allowance for uncollectible pledges, are discounted to reflect the time value of money. The Organization’s discount rate of 1.52%is the average of the five year risk free rate of return and the bank prime rate. Investments Investments in equity securities with readily determinable fair values and all investments in debt securities are reported at fair value in the consolidated statementof financial position with gains and losses included in the consolidated statement of activitiesand changes in net assets. Dividend and interest income are accrued as earnedand are net of related investment expenses, which were $193,220and $178,328 for the fiscal years ended June 30, 2014and 2013, respectively. Realized gains and losses are determined on the average costmethod and are reflected in revenue. Intangible Assets Intangible assets at June 30, 2014 represent the WYSO broadcast license. An acquired broadcast license expires in five years. The broadcast license is renewable every 10 years if the Stationprovides at least an average level of service to its customers and complies with the applicable Federal Communications Commission (FCC) rules and policies and the FCC Communications Act of 1934. The license may be renewed indefinitely at little cost and was renewed prior to its recent acquisition. The Collegeintends to renew the license indefinitely, and evidence supports its ability to do so. Therefore, the cash flows from thelicense are expected to continue indefinitely. The broadcast license isdeemed to have an indefinite useful life because cash flows are expected to continue indefinitely. Therefore, the license willnot be amortized until its useful life is deemed to be no longer indefinite,in which case the license would be tested for impairment. Property, Plant and Equipment Property, plant and equipment are recorded at cost at the date of acquisition or, if acquired by gift, at fair value at the date of donation. Depreciation is computed on thestraight-line basis over the estimated useful lives ofthe assets, ranging from 3 to 39years. The cost and related accumulated depreciation of sales and disposals are removed from the accounts, and any gain or loss is reflected in the current year's operations. Expenditures which substantially increase useful lives are capitalized, while maintenance and repairs are expensed as incurred. Contributions In-Kind Donated buildings, equipment, and other donated goods are recorded at their estimated fair value as of the date of the donation. No amounts have been reflected in the financial statements for donated services. Volunteers providedservices throughout the year that werenot recognized as contributions because the recognition criteria were not met. Income Taxes and Uncertain Tax Positions The Organizationand the Continuation Fund areexempt from Federal income taxes under Section 501(c)(3) of the Internal Revenue Code. However, income from certain activities not directly related to the Organization’s tax-exempt purpose is subject to taxation as unrelated business income. The Organization’s reporting returns are subject to audit by federal and state taxing authorities. The Organization’s open audit periods are 2010–2012. No income tax provision has been included in the financial statements as the Board has determined it does not have unrelated business taxable income. 8