Exhibit 99.7
ABACUS RESOURCE MANAGEMENT COMPANY
FINANCIAL STATEMENTS
For the Year Ended December 31, 2013
CONTENTS
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INDEPENDENT AUDITOR’S REPORT | 1 - 2 |
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FINANCIAL STATEMENTS |
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BALANCE SHEET | 3 - 4 |
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STATEMENT OF INCOME | 5 |
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STATEMENT OF RETAINED EARNINGS | 6 |
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STATEMENT OF CASH FLOWS | 7 |
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NOTES TO FINANCIAL STATEMENTS | 8 - 12 |
| David A. Kuykendall, CPA Thomas H. Hamann, JD/CPA Amy D. Johnson, CPA Carrie N. Kuykendall, CPA
Phone: (503) 656-1405 Fax: (503) 655-7505 |
INDEPENDENT AUDITOR’S REPORT
To the Stockholders
Abacus Resource Management Company
Report on the Financial Statement
We have audited the accompanying balance sheet of Abacus Resource Management Company (a Corporation), as of December 31, 2013, and the related statements of income, retained earnings, cash flows and the related notes to the financial statements for the year then ended.
Management’s Responsibility for the Financial Statement
Management is responsible for the preparation and fair presentation of this financial statement 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 the financial statement that is free from material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on the financial statement 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 financial statement is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statement. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statement, 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 statement 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 statement.
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 statement referred to above presents fairly, in all material respects, the financial position of Abacus Resource Management Company as of December 31, 2013, in accordance with accounting principles generally accepted in the United States of America.
Kent, Kuykendall & Co., P.C.
/s/ Kent, Kuykendall & Co., P.C.
December 26, 2014
ABACUS RESOURCE MANAGEMENT COMPANY
BALANCE SHEET
December 31, 2013
ASSETS | ||||
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CURRENT ASSETS |
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Cash in checking |
| $ | 666,454 |
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Accounts receivable - trade |
| 494,469 |
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Retention receivable |
| 346,964 |
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Costs and estimated earnings in excess of billings on uncompleted contracts |
| 197,815 |
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TOTAL CURRENT ASSETS |
| 1,705,702 |
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PROPERTY AND EQUIPMENT, at cost |
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Equipment |
| 92,615 |
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Furniture and fixtures |
| 23,666 |
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Office and computer equipment |
| 23,510 |
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Vehicles |
| 164,355 |
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| 304,146 |
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Less accumulated depreciation |
| (117,632 | ) | |
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TOTAL PROPERTY AND EQUIPMENT |
| 186,514 |
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OTHER ASSETS |
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Deposits |
| 4,602 |
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TOTAL ASSETS |
| $ | 1,896,818 |
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Continued on next page.
The accompanying notes are an integral part of these financial statements.
ABACUS RESOURCE MANAGEMENT COMPANY
BALANCE SHEET (Continued)
December 31, 2013
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||
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CURRENT LIABILITIES |
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Accounts payable - trade |
| $ | 511,645 |
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Retention payable |
| 139,097 |
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Billings in excess of costs and estimated earnings on uncompleted contracts |
| 135,978 |
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Sales tax payable |
| 907 |
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Current maturities of long-term debt |
| 24,789 |
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TOTAL CURRENT LIABILITIES |
| 812,416 |
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LONG-TERM LIABILITIES |
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Notes payable - stockholders |
| 40,000 |
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Long-term debt, net of current maturities |
| 66,650 |
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TOTAL LONG-TERM LIABILITIES |
| 106,650 |
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TOTAL LIABILITIES |
| 919,066 |
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STOCKHOLDERS’ EQUITY |
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Common stock, no par value, 2,000 shares authorized and issued |
| 2,000 |
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Retained earnings |
| 975,752 |
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TOTAL STOCKHOLDERS’ EQUITY |
| 977,752 |
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TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY |
| $ | 1,896,818 |
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The accompanying notes are an integral part of these financial statements.
ABACUS RESOURCE MANAGEMENT COMPANY
STATEMENT OF INCOME
For the Year Ended December 31, 2013
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| Amount |
| Percent |
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CONTRACT REVENUES |
| $ | 8,732,495 |
| 100.0 | % |
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CONTRACT COSTS |
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Subcontractors |
| 6,114,545 |
| 70.1 |
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Labor |
| 605,081 |
| 6.9 |
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Materials and equipment |
| 9,821 |
| 0.1 |
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Construction bond fees |
| 112,505 |
| 1.3 |
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Travel |
| 36,628 |
| 0.4 |
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TOTAL CONTRACT COSTS |
| 6,878,580 |
| 78.8 |
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GROSS PROFIT FROM CONTRACTS |
| 1,853,915 |
| 21.2 |
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GENERAL AND ADMINISTRATIVE EXPENSES |
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Auto expense |
| 38,932 |
| 0.4 |
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Business development and warranty |
| 8,686 |
| 0.1 |
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Rent |
| 91,407 |
| 1.0 |
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Office expense |
| 15,593 |
| 0.2 |
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Insurance and bonds |
| 25,169 |
| 0.3 |
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Payroll expenses |
| 560,659 |
| 6.4 |
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Taxes - other |
| 40,377 |
| 0.5 |
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Telephone and internet |
| 19,892 |
| 0.2 |
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Travel |
| 9,365 |
| 0.1 |
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Depreciation |
| 60,065 |
| 0.7 |
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Professional services |
| 33,777 |
| 0.4 |
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Business meals and entertainment |
| 6,060 |
| 0.1 |
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Computer expenses |
| 24,048 |
| 0.3 |
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Dues and subscriptions |
| 1,718 |
| — |
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Licenses and permits |
| 1,263 |
| — |
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Small equipment |
| 6,440 |
| 0.1 |
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Advertising |
| 10,955 |
| 0.1 |
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Utilities |
| 3,800 |
| — |
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Miscellaneous |
| 5,415 |
| 0.1 |
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TOTAL GENERAL AND ADMINISTRATIVE EXPENSES |
| 963,621 |
| 11.0 |
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TOTAL OPERATING INCOME |
| 890,294 |
| 10.2 |
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OTHER INCOME (EXPENSE) |
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Interest income |
| 70 |
| — |
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Interest expense |
| (3,771 | ) | (0.1 | ) | |
Loss on disposal of fixed assets |
| (2,893 | ) | — |
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TOTAL OTHER INCOME (EXPENSE) |
| (6,594 | ) | (0.1 | ) | |
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NET INCOME |
| $ | 883,700 |
| 10.1 | % |
The accompanying notes are an integral part of these financial statements.
ABACUS RESOURCE MANAGEMENT COMPANY
STATEMENT OF RETAINED EARNINGS
For the Year Ended December 31, 2013
RETAINED EARNINGS JANUARY 1, 2013 |
| $ | 1,091,132 |
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NET INCOME FOR PERIOD |
| 883,700 |
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STOCKHOLDERS’ DISTRIBUTIONS |
| (999,080 | ) | |
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RETAINED EARNINGS DECEMBER 31, 2013 |
| $ | 975,752 |
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The accompanying notes are an integral part of these financial statements.
ABACUS RESOURCE MANAGEMENT COMPANY
STATEMENT OF CASH FLOWS
For the Year Ended December 31, 2013
CASH FLOWS FROM OPERATING ACTIVITIES |
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Net income |
| $ | 883,700 |
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Adjustments to reconcile net income to net cash provided by operating activities: |
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Depreciation |
| 60,065 |
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Loss on disposal of property and equipment |
| 2,894 |
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Decrease in accounts receivable |
| 35,571 |
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Increase in retention receivable |
| (1,504 | ) | |
Decrease in costs and estimated earnings in excess of billings on uncompleted contracts |
| 47,467 |
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Decrease in accounts payable |
| (70,802 | ) | |
Increase in retention payable |
| 23,138 |
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Increase in billings in excess of costs and estimated earnings on uncompleted contracts |
| 32,272 |
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Decrease in sales tax payable |
| (29,279 | ) | |
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NET CASH PROVIDED BY OPERATING ACTIVITIES |
| 983,522 |
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CASH FLOWS FROM INVESTING ACTIVITIES |
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Decrease in certificates of deposit |
| 100,050 |
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Purchase of property and equipment |
| (42,540 | ) | |
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NET CASH PROVIDED BY INVESTING ACTIVITIES |
| 57,510 |
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CASH FLOWS FROM FINANCING ACTIVITIES |
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Proceeds from long-term debt |
| 35,841 |
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Payments on long-term debt |
| (44,148 | ) | |
Stockholders’ distributions |
| (999,080 | ) | |
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NET CASH USED BY FINANCING ACTIVITIES |
| (1,007,387 | ) | |
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NET INCREASE IN CASH AND CASH EQUIVALENTS |
| 33,645 |
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CASH AND CASH EQUIVALENTS, beginning |
| 632,809 |
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CASH AND CASH EQUIVALENTS, ending |
| $ | 666,454 |
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The accompanying notes are an integral part of these financial statements.
ABACUS RESOURCE MANAGEMENT COMPANY
NOTES TO FINANCIAL STATEMENTS
For the Year Ended December 31, 2013
NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
Abacus Resource Management Company (ARMCO) is a full-service energy services company founded in 1986. ARMCO’s core business is identifying and implementing energy conservation projects for its clients throughout the Pacific Northwest.
Operating Cycle
Assets and liabilities related to long-term contracts are included in current assets and current liabilities in the accompanying balance sheets as they will be liquidated in the normal course of contract completion, although this may require more than one year.
Revenue and Cost Recognition on Construction Contracts
The Corporation recognizes revenues from construction contracts on the percentage-of-completion method, measured by the percentage of cost incurred to date to estimated total costs for each contract. This method is used because management considers total cost to be the best available measure of progress on the contracts.
Contract costs include all direct labor, material, subcontract costs, other direct costs and allocated indirect costs related to contract performance. Selling, general and administrative costs are charged to expense when incurred. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined. Changes in job performance, job conditions, and estimated profitability may result in revisions to costs and income and are recognized in the period in which the revisions are determined.
The asset, “Costs and estimated earnings in excess of billings on uncompleted contracts,” represents revenues recognized in excess of amounts billed. The liability, “Billings in excess of costs and estimated earnings on uncompleted contracts,” represents billings in excess of revenues recognized.
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Corporation considers cash and short-term investments with original maturities of three months or less to be cash equivalents.
The Corporation maintains all of its cash at one bank which, at times, is in excess of federally insured limits. Management monitors the soundness of this financial institution and feels the Corporation’s risk is negligible. The Corporation has not experienced any losses in such accounts.
Accounts Receivable
Accounts receivable have been recorded at full value with no provision for doubtful accounts. All accounts receivable are deemed collectible at December 31, 2013.
ABACUS RESOURCE MANAGEMENT COMPANY
NOTES TO FINANCIAL STATEMENTS
For the Year Ended December 31, 2013
NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Property and Equipment
Property and equipment are recorded at cost and include major expenditures which increase productivity or substantially increase useful lives.
Maintenance, repairs, and minor replacements are charged to expense when incurred. When equipment is sold or otherwise disposed of, the asset and related accumulated depreciation are removed from the accounts and any gain or loss is included in the statements of operations.
The cost of equipment is depreciated over the estimated useful lives of the related assets. Depreciation is computed using the straight-line method for financial reporting purposes. Estimated useful lives range from 3 to 5 years.
Advertising Costs
The Corporation expenses the cost of advertising as incurred. Total advertising costs expensed in 2013 were $10,955.
Income Taxes
Provisions for income taxes have not been provided because the stockholders elected to be treated as an S Corporation for income tax purposes. As such, the corporation income or loss and credits are passed to the stockholders and are combined with their other personal income and deductions to determine taxable income on their individual tax returns. In addition, accelerated depreciation methods are used for tax reporting purposes.
Use of Estimates
Management uses estimates and assumptions in preparing financial statements. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Actual results could differ from these estimates. Management’s estimates and assumptions include, but are not limited to, estimates of contract revenue, costs and gross profit. Management’s estimates and assumptions are derived from and are continually evaluated based upon available information, judgment and experience.
Warranties
The Corporation provides a one-year warranty covering defects specific to its portion of contracts on construction projects. The warranty historically has not produced material costs; therefore, the Corporation does not accrue future estimated expense against current operations.
ABACUS RESOURCE MANAGEMENT COMPANY
NOTES TO FINANCIAL STATEMENTS
For the Year Ended December 31, 2013
NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Compensated Absences
Employees of the Corporation are entitled to paid vacation and paid sick days depending on job classification, length of service, and other factors. It is not practicable for the Corporation to estimate the amount of compensation for future absences. Accordingly, no liability for compensated absences has been recorded in the accompanying financial statements. The Corporation’s policy is to recognize the costs of compensated absences when actually paid to employees.
NOTE 2 — COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS
Costs incurred on uncompleted contracts |
| $ | 7,220,666 |
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Estimated earnings |
| 2,069,567 |
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| 9,290,233 |
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Less billings to date |
| (9,228,396 | ) | |
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| $ | 61,837 |
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Included in the accompanying balance sheet under the following captions: |
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Costs and estimated earnings in excess of billings on uncompleted contracts |
| $ | 197,815 |
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Billings in excess of costs and estimated earnings on uncompleted contracts |
| (135,978 | ) | |
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| $ | 61,837 |
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NOTE 3 — LEASING ARRANGEMENTS
The Corporation conducts its operations from facilities that are leased under a 39-month operating lease that will expire on July 31, 2015. The current monthly rent is $4,602 with a rent concession of $594 per month through July 1, 2014.
The following is a schedule of future minimum rental payments required under the above operating lease as of December 31, 2013:
2014 |
| $ | 51,066 |
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2015 |
| 32,214 |
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| $ | 83,280 |
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Total rent expense under all operating leases was $91,407 for 2013.
ABACUS RESOURCE MANAGEMENT COMPANY
NOTES TO FINANCIAL STATEMENTS
For the Year Ended December 31, 2013
NOTE 4 — LINE OF CREDIT
The Corporation has available a line of credit up to $500,000 with KeyBank National Association at an interest rate of prime plus 1.0%. The line is secured by all assets of the Corporation and the personal guarantees of the Corporation’s stockholders. At December 31, 2013, there was no balance due on the line of credit.
NOTE 5 — LONG-TERM DEBT
Long-term debt consists of the following:
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| Current |
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| Total |
| Portion |
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Note payable to Toyota Motor Credit at $566.83 per month including interest at 3.99%. The note is secured by a 2008 Toyota Sequoia. |
| $ | 16,159 |
| $ | 6,271 |
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Note payable to Dodge Credit at $479.76 per month including interest at 5.75%. The note is secured by a 2011 Dodge Ram. |
| 11,702 |
| 5,220 |
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Note payable to TD Auto Finance at $652.44 per month including interest at 4.09%. The note is secured by a 2013 Dodge Charger. |
| 27,737 |
| 6,822 |
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Note payable to Chrysler Capital at $670.91 per month including interest at 4.59%. The note is secured by a 2014 Dodge Pickup. |
| 35,841 |
| 6,476 |
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| $ | 91,439 |
| $ | 24,789 |
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Principal payments due on long-term debt using these payment amounts for subsequent years are as follows:
2014 |
| $ | 24,789 |
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2015 |
| 26,007 |
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2016 |
| 18,884 |
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2017 |
| 13,910 |
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2018 |
| 7,849 |
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| $ | 91,439 |
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NOTE 6 — STOCKHOLDERS’ EQUITY
The Corporation has 2,000 shares of authorized and issued no par stock with a stated value of $1.00 per share.
ABACUS RESOURCE MANAGEMENT COMPANY
NOTES TO FINANCIAL STATEMENTS
For the Year Ended December 31, 2013
NOTE 7 — MAJOR CUSTOMERS AND RISK CONCENTRATIONS
Contract revenues consist primarily of contracts with public and non-profit entities located throughout Oregon and Washington.
Accounts receivable from one customer as of December 31, 2013 represents 68% of the total trade accounts receivable balance. The Corporation had three customers which made up approximately 79% of the contract revenues for the year ended December 31, 2013.
NOTE 8 — SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
The Corporation uses the indirect method for reporting cash flow.
Cash paid during the period for:
Interest |
| $ | 3,771 |
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Excise taxes |
| $ | 150 |
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NOTE 9 — SUBSEQUENT EVENTS
The Corporation has evaluated subsequent events through December 26, 2014, which is the date the financial statements were available to be issued.
As of the date of the financial statements, the Corporation was in ongoing negotiations for the sale of the entire Corporation.