PROJECT ANGEL HEART FINANCIAL STATEMENTS * * * * * DECEMBER 31, 2011

CONTENTS Page Report of Independent Certified Public Accountants 1 Statement of Financial Position 2 Statement of Activity and Changes in Net Assets 3 Statement of Functional Expenses 4 Statement of Cash Flows 5 Notes to Financial Statements 6 - 9

CPAs, vc.9457 S. University Blvd., #410

Highlands Ranch, Colorado 80126

303-791-6800, Fox 303-791-1526

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Board of DirectorsProject Angel HeartDenver, Colorado

We have audited the accompanying statement of financial position of Project AngelHeart (a nonprofit corporation) as of December 31, 2011 and the related statementsof activity, functional expenses, and cash flows for the year then ended. Thesefinancial statements are the responsibility of the Organization's management Ourresponsibility is to express an opinion on these financial statements based on ouraudit The prior year summarized comparative information has been derived fromthe Organization's 2010 financial statements, and in our opinion dated March 18,2011, we expressed an unqualified opinion on those statements.

We conducted our audit in accordance with auditing standards generally acceptedin the United States of America. Those standards require that we plan and performthe audit to obtain reasonable assurance about whether the financial statements arefree of material misstatement. An audit includes examining, on a test basis,evidence supporting the amounts and disclosures in the financial statements. Anaudit also includes assessing the accounting principles used and significantestimates made by management, as well as evaluating the overall financialstatement presentation. We believe that our audit provides a reasonable basis forour opinion.

In our opinion, the financial statements referred to above present fairly, in allmaterial respects, the financial position of Project Angel Heart as of December 31,2011 and the results of its operations and cash flows for the year then ended inconformity with accounting principles generally accepted in the United States ofAmerica.

Davis & Co., CPAs, P.C.Certified Public Accountants

Highlands Ranch, ColoradoMay 22,2012

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PROJECT ANGEL HEART Statement of Financial Position December 31, 2011

(With Comparative Totals for 2010) Temporarily Total Total Unrestricted Restricted 2011 2010_ ASSETS Current assets Cash and cash equivalents $ 873,455 $ 381,450 $1,254,906 $2,166,767 Marketable securities 838,926 -- 838,926 1,277,065 Grants and pledges receivables 40,486 1,008,103 1,048,589 551,235 Deposits and prepaid expenses 2,845 -- 2,845 9,212 1,755,713 1,389,553 3,145,266 4,004,279 Bond loan issuance fees, net -- 25,200 25,200 11,900 Fixed long-lived assets, at cost Land, building & improvements 952,500 4,653,351 5,603,851 317,868 Furniture, fixtures and equipment 142,982 455,190 598,172 302,742 Construction in progress - campaign -- -- -- 1,715,389 Leasehold improvements -- -- -- 60,823 1,095,482 5,106,541 6,202,023 2,396,822 Less: accumulated depreciation (122,464) -- (122,464) (656,669) 973,018 5,106,541 6,079,559 1,740,153 $2,728,731 $6,521,294 $9,250,025 $5,756,332 LIABILITIES AND NET ASSETS Current liabilities Accounts payable & other accruals $ 65,720 $ -- $ 65,720 $ 120,744 Mortgage note payable, current 30,000 109,750 139,750 52,410 Accrued payroll liabilities 40,019 -- 40,019 31,069 135,739 109,750 245,489 204,223 Mortgage note payable, long term 922,500 1,900,250 2,822,750 1,313,567 Net assets Unrestricted 1,570,492 -- 1,570,492 1,616,970 Designated 100,000 -- 100,000 100,000 Temporarily restricted -- 4,511,294 4,511,294 2,521,572 1,670,492 4,511,294 6,181,786 4,238,542 $2,728,731 $6,521,294 $9,250,025 $5,756,332 The accompanying notes are a part of this statement.

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PROJECT ANGEL HEART Statement of Activity and Changes in Net Assets For the Year Ended December 31, 2011

(With Comparative Totals for 2010) Temporarily Total Total Unrestricted Restricted 2011__ 2010__ SUPPORT AND REVENUE Contributions from individuals $ 626,111 $ 620,489 $1,246,600 $ 945,458 Contributions from corporations and organizations 294,041 160,373 454,414 345,454 Grants from foundations 535,060 1,272,850 1,807,910 876,569 Government grants 172,095 -- 172,095 264,312 Donated services, food and assets 583,958 233,873 817,831 733,376 Special events (net of costs of $56,819) 111,681 -- 111,681 102,680 Leasing and other income 7,200 4,890 12,090 86,400 Realized investment income 36,638 5,192 41,830 50,975 Total public support and revenue 2,366,784 2,297,667 4,664,451 3,405,224 Net assets released from restrictions due either to the passage of time or the satisfaction of purpose restrictions 307,945 (307,945) _______-- -- Total public support and revenue and reclassifications 2,674,729 1,989,722 4,664,451 3,405,224 FUNCTIONAL EXPENSES Program services Home-delivered meals 2,053,242 -- 2,053,242 2,226,378 Supporting services Management and general 26,768 -- 26,768 23,596 Financial development 147,340 -- 147,340 160,937 Program expansion campaign 433,046 -- 433,046 313,578 Total expenses 2,660,396 -- 2,660,396 2,724,489 Change in net assets - operating 14,333 1,989,722 2,004,055 680,735 Unrealized gains (losses) (60,811) -- (60,811) 96,384 Change in net assets - inclusive (46,478) 1,989,722 1,943,244 777,119 Net assets, beginning of year 1,716,970 2,521,572 4,238,542 3,461,423 Net assets, end of year $1,670,492 $4,511,294 $6,181,786 $4,238,542 The accompanying notes are a part of this statement.

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PROJECT ANGEL HEART Statement of Functional Expenses

For the Year Ended December 31, 2011 (With Comparative Totals for 2010)

Supporting Services_ _ Home- Delivered Management Program Total Total Meals and Financial Expansion 2011 2010 Program General Development Campaign Expenses Expenses Personnel expenses & volunteer labor $1,180,201 $21,241 $102,044 $129,101* $1,432,587 $1,476,182 Cost of meals 499,233 -- -- -- 499,233 547,673 Occupancy costs 109,790 1,976 9,493 186,490 307,749 225,415 Printing, postage & publicity/development 48,090 866 22,904 20,304 92,164 95,858 Program supplies & equipment 31,566 -- -- 993 32,559 41,865 Professional & outside services 75,353 1,356 6,515 56,126 139,350 161,148 Meetings, conferences & travel 45,850 192 924 381 47,347 45,042 Office supplies & expenses 21,726 391 1,878 12,967 36,962 36,264 Telecommunications & other 7,229 130 625 -- 7,984 8,001 Insurance expenses 9,198 166 795 1,684 11,843 9,810 Total before non-cash expenses 2,028,236 26,318 145,178 408,046 2,607,778 2,647,258 Bad debts -- -- -- 25,000 25,000 24,056 Depreciation 25,006 450 2,162 -- 27,618 53,175 Total expenses $2,053,242 $26,768 $147,340 $433,046 $2,660,396 $2,724,489 * - Represents allocated staff time and in-kind, not reimbursed by donor restricted funds. The accompanying notes are a part of this statement.

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PROJECT ANGEL HEART Statement of Cash Flows For the Year Ended December 31, 2011

(With Comparative Totals for 2010) 2011_ 2010_ CASH FLOW FROM OPERATING ACTIVITIES: Change in net assets - inclusive $1,943,244 $ 777,119 Adjustments to reconcile to net cash provided by operating activities: Unrealized (gains) losses 60,811 (96,384) Depreciation 27,618 53,175 Changes in operating assets and liabilities: (Increase) decrease in grants & pledges receivable (497,354) 152,679 (Increase) decrease in marketable securities 377,328 (62,077) (Increase) decrease in deposits & prepaids 6,367 (1,365) Increase (decrease) in accounts payable & other (55,024) 52,930 Increase in accrued payroll liabilities 8,950 7,072 Net cash flow from inclusive activities 1,871,940 883,149 CASH FLOW FROM FINANCING ACTIVITIES: Proceeds from issuance of long-term debt 3,000,000 -- (Repayment) of long-term debt principal (1,403,477) (49,726) 1,596,523 (49,726) CASH FLOW FROM INVESTING ACTIVITIES: Bond loan issuance fees, net (13,300) 1,700 Purchase/construction of long-lived fixed assets (4,367,024) (55,865) (4,380,324) (54,165) CHANGE IN CASH AND CASH EQUIVALENTS (911,861) 779,258 CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR 2,166,767 1,387,509 CASH AND CASH EQUIVALENTS - END OF YEAR $1,254,906 $2,166,767 Supplemental disclosure of cash flow information: Interest expense – cash basis $106,011 $69,688 Interest income – cash basis $41,829 $50,975 The accompanying notes are a part of this statement.

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PROJECT ANGEL HEART Notes to Financial Statements December 31, 2011 Note 1: Summary of Significant Accounting Policies Significant accounting policies are as follows: a. Organization Project Angel Heart (the "Organization") was incorporated under the laws of the

State of Colorado on November 18, 1991. The Organization is a not for profit corporation whose purpose is to provide nutritious, home-delivered meals, at no cost, to residents of metro-Denver and Colorado Springs, Colorado living with life-threatening illnesses. During 2011, the Organization prepared and delivered 427,675 meals to 1,863 unduplicated clients. Meals are delivered either hot daily or frozen weekly depending on each client’s needs and geographical location.

During 2006 the Organization engaged experts to determine the existing and future

unmet client needs within the geographical area it serves. The research indicated there would be a future need for substantial additional kitchen and distribution capacity beyond what current facilities could provide. During 2007 a building was purchased which the Organization started renovating in January 2011. On January 1, 2012, the Organization commenced occupancy of the new facility, which quadruples its capacity to prepare nutritious meals.

b. Financial statement presentation The accompanying financial statements have been prepared in accordance with

accounting principles generally accepted in the United States of America. The Organization follows the provisions of FASB ASC 958-210 “Financial

Statements of Not-for-Profit Organizations”. Under this guidance, the Organization is required to report information regarding its financial position and activities according to three classes of net assets, as follows:

Unrestricted – Resources not subject to donor-imposed restrictions Temporarily restricted – Resources subject to donor-imposed restrictions that will be satisfied by actions of the Organization or the passage of time. Permanent – Resources subject to permanent donor-imposed restrictions as

to the use of principal. c. Cash and cash equivalents The Organization maintains its various cash equivalent accounts in two commercial

banks located in Denver, Colorado. With the exception of $304,349, the balances in these accounts were fully guaranteed by a combination of the statutory coverages provided by either the Federal Deposits Insurance Corporation or the Security Investors Protection Corporation.

d. Furniture and equipment Expenditures for furniture and equipment in excess of $1,000 are capitalized at

cost. Expenditures for maintenance, repairs and other renewals of items are charged to expense. When items are disposed of, the cost and accumulated depreciation are eliminated from the accounts and any gain or loss included in results of operations

(Continued) 6

PROJECT ANGEL HEART Notes to Financial Statements December 31, 2011 Note 1: Summary of Significant Accounting Policies (Continued) d. Furniture and equipment (continued) The provision for depreciation is calculated using the straight-line method.

Depreciation on the Organization’s new facility and related assets will commence on January 1, 2012. At that time, it will be the Organization’s policy to imply a time restriction based on the related assets’ estimated useful lives. The Organization will reclassify temporarily restricted net assets to unrestricted net assets each year for the amount of depreciation expense relating to the items purchased with donor restricted funds.

e. Revenue recognition All contributions are considered to be available for unrestricted use unless

specifically restricted by the donor. Amounts received that are restricted either for future periods or for specific purposes by the donor are reported as temporarily restricted support that increases that net asset class. When a temporary restriction expires, temporarily restricted net assets are reclassified to unrestricted net assets and reported in the statement of activities as net assets released from restrictions. If a donor-imposed restriction is satisfied in the same accounting period that the revenue is received, the Organization reports the revenue as "unrestricted."

Government grants qualify as “exchange transactions”, which means revenues are

recognized in the same period that the underlying services are performed and billed out to the respective grantors. The Organization’s signature fundraiser, “Dining Out for Life,” raised $295,377 (net) which is allocated between individual and corporate contributions herein, as is the “Pie in the Sky” fundraiser, which is conceptually similar.

f. Donated materials and services In-kind donations of non-cash assets, supplies and materials are recorded at their

fair value in the period received if they would have otherwise been purchased. Food, nutritional supplements, packaging and materials in the amount of $120,290 were recorded during 2011 as a component of "cost of meals." $35,166 of delivery mileage is recorded as a component of “meetings, conferences & travel.” $231,885 of non-cash assets are included in the cost basis of the Organization’s new facility.

In-kind contributions of donated services that require specialized skills, are provided

by individuals possessing those skills and typically would have been purchased if not provided by donation, are recorded at their fair value in the period received. The donated time of volunteer cooks, kitchen staff, drivers, committee members and services relating to the capital campaign, in the aggregate amount of $430,490, met these requirements and is recorded under "personnel expense," herein.

g. Estimates The preparation of financial statements in conformity with accounting principles

generally accepted in the United States of America requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.

(Continued) 7

PROJECT ANGEL HEART Notes to Financial Statements December 31, 2011 Note 1: Summary of Significant Accounting Policies (Continued) h. Marketable securities and other investments Marketable securities with a fair value of $838,926 (cost basis of $794,076) consist

of publicly traded mutual funds comprised of equities and fixed income securities. In accordance with accounting principles generally accepted in the United States of America, these investments are classified by the Organization as Level 1 due to the existence of daily published market quotes for valuation inputs.

i. Accrued paid time off In accordance with accounting principles generally accepted in the United States of

America, the Organization’s employees accrue paid time off when earned. The liability of $34,760 recorded herein under “accrued payroll liabilities.”

j. Tax status The Organization is exempt under IRC Section 501(c)(3) from both federal and state

income taxes. Effective January 1, 2010 the Organization adopted FASB ASC 740, “Accounting for Uncertainty in Income Taxes“ (ASC 740), which interpreted various previous announcements with respect to the accounting for all tax positions taken (or expected to be taken) on any income tax return. The Organization determined that no cumulative effect adjustment was necessary upon adoption of ASC 740, and that no uncertain tax positions have been taken (or are expected to be taken) that could have a material effect on its income tax liabilities. The Organization believes that it has conducted its operations in accordance with, and has properly maintained, its tax-exempt status.

k. Subsequent events review

Management has evaluated subsequent events through May 22, 2012, the date on which the signed auditor’s opinion was released.

l. Reclassifications In order to reflect the net effect of prior year campaign related asset and debt

additions not related to donor restricted funds, temporarily restricted net assets as of December 31, 2010 were increased by $351,678.

m. Functional expenses Expenses directly identified with a functional area are charged to such area. If an

expense affects more than one area, it is allocated by the time expended or another reasonable basis.

Note 2: Designated Net Assets The Organizations board of directors resolved in June of 2010 to cap the previously

established asset replacement reserve at $100,000. Expenditures from the reserve are subject to varying levels of approval depending on their nature and amount.

Note 3: Expiration of Lease Commitment The Organization’s ten year lease for its existing space (up until December 31, 2011)

expired on January 31, 2012. Rental expense during the current year of $67,209 is recorded herein as the primary component of “occupancy costs.”

(Continued) 8

PROJECT ANGEL HEART

Notes to Financial Statements December 31, 2011

Note 4: Retirement Plan After one year of employment, employees of The Organization are eligible to participate

in a 403(b) tax sheltered annuity plan under which each employee may contribute salary subject to limits. The Organization is required to make matching contributions of 3% of each participating employee’s annual salary. Matching contributions during 2011 were $13,271.

Note 5: Notes Payable On April 14, 2011 the Organization refinanced the debt remaining on its 2007 purchase

of the building used to expand operations and provided the additional financing needed to complete all necessary renovations and to complete the renovation project. This was accomplished by a series of two 10-year loans and a 5-year loan, aggregating $3,000,000, through a local bank, backed by CHFA revenue bonds and secured by a first lien on the underlying property. The blended interest rate is 3.725% and the loans require 20 to 40 quarterly payments of varying amounts (currently $50,061) which commenced on June 30, 2011 and end on March 31, 2021. The principal payments due over each of the next five years (and thereafter in total) are as follows:

Year ending December 31: Amount 2012 $ 139,750 2013 160,500 2014 168,000 2015 175,500 2016 129,500 Thereafter 2,189,250 Total 2,962,500 Less: current portion (139,750) Long-term portion $2,822,750 Interest paid during 2011 of $106,011 is included under “occupancy costs”, herein.

Note 6: Temporarily Restricted Net Assets/Net Assets Released from Restrictions The Organization’s $4,511,294 of temporarily restricted net assets at December 31,

2011 represents donor-restricted support that was available for the following purposes (along with related activity for the year-ended December 31, 2011):

Balance Donor Expenditures Balance

December 31, Restricted Designated Satisfying December 31,

Purpose 2010 Gifts Interest Restriction(s) 2011__

Program expansion

campaign $2,521,572 $2,292,475 $5,192 $(307,945) $4,511,294*

* - Comprised of cash of $381,450; pledges of $1,008,103; bond fees of $25,200; fixed assets of $5,106,541

and debt of $2,010,000

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