EX-99.1 3 ex99-1.htm EXHIBIT 99.1 nvee20150413_8ka.htm

 

Exhibit 99.1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

JOSLIN, LESSER & ASSOCIATES, INC.

 

AUDITED FINANCIAL STATEMENTS

 

DECEMBER 31, 2014

 

 

 

 

 

 

 

 

 

 

 
 

 

 

JOSLIN, LESSER & ASSOCIATES, INC.

 

AUDITED FINANCIAL STATEMENTS

 

DECEMBER 31, 2014

 

 

 

 

 

 

 

 

INDEPENDENT ACCOUNTANTS’ AUDIT REPORT

1

   

BALANCE SHEETS

2

   

STATEMENTS OF INCOME AND RETAINED EARNINGS

4

   

STATEMENTS OF CASH FLOWS

5

   

NOTES TO FINANCIAL STATEMENTS

6

  

 
 

 

 

INDEPENDENT ACCOUNTANTS’ AUDIT REPORT

 

To the Stockholders

Joslin, Lesser & Associates, Inc.

 

We have audited the accompanying financial statements of Joslin, Lesser & Associates, Inc., which comprise the balance sheets as of December 31, 2014 and 2013, and the related statements of income and retained earnings, and cash flows for the years then ended, and the related notes to the financial statements.

 

Management’s Responsibility for the Financial Statements

 

Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America and for designing, implementing and maintaining internal control relevant to the preparation and fair presentation of the 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 financial statements based on the results of our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

 

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

 

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

 

Opinion

 

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Joslin, Lesser & Associates, Inc. as of December 31, 2014 and 2013 and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

 

 

/s/ Gray, Gray & Gray, LLP

GRAY, GRAY & GRAY, LLP

 

Canton, MA

April 10, 2015

 

 
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JOSLIN, LESSER & ASSOCIATES, INC.

 

BALANCE SHEETS

 

 

 

ASSETS 

 

   

December 31,

 
   

2014

   

2013

 
                 

CURRENT ASSETS

               

Cash

  $ 899,433     $ 506,833  

Accounts receivable

    411,450       293,614  

Unbilled work in process

    707,602       729,318  

Prepaid expenses

    78,784       124,662  

Investments

    610,906       556,138  
                 

TOTAL CURRENT ASSETS

    2,708,175       2,210,565  
                 

PROPERTY AND EQUIPMENT, NET

    35,879       47,433  
                 

OTHER ASSETS

               

Deposits

    7,500       7,500  
                 

TOTAL ASSETS

  $ 2,751,554     $ 2,265,498  

 

 
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JOSLIN, LESSER & ASSOCIATES, INC.

 

BALANCE SHEETS

 
 
 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

   

December 31,

 
   

2014

   

2013

 
                 

CURRENT LIABILITIES

               

Accrued expenses

  $ 173,528     $ 232,225  

Accrued state taxes

    8,791       -  

Deferred state income taxes

    20,686       17,339  
                 

TOTAL CURRENT LIABILITIES

    203,005       249,564  
                 

STOCKHOLDERS' EQUITY

               

Common stock, no par value:

               

Authorized, issued and outstanding, 100 shares

    2,000       2,000  

Retained earnings

    2,546,549       2,013,934  
                 

TOTAL STOCKHOLDERS' EQUITY

    2,548,549       2,015,934  
                 

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

  $ 2,751,554     $ 2,265,498  

 

 
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JOSLIN, LESSER & ASSOCIATES, INC.

 

STATEMENTS OF INCOME AND RETAINED EARNINGS

 

 

 

   

Years Ended December 31,

 
   

2014

   

2013

 
                 

GROSS REVENUES

  $ 8,886,598     $ 8,667,730  
                 

DIRECT COSTS

               

Salaries and wages

    3,162,683       3,120,339  

Sub-consultant services

    580,249       455,452  

Other direct costs

    38,635       67,818  
                 

TOTAL DIRECT COSTS

    3,781,567       3,643,609  
                 

GROSS PROFIT

    5,105,031       5,024,121  
                 

OPERATING EXPENSES:

               

Salaries and wages, payroll taxes and benefits

    606,778       836,369  

General and administrative

    553,939       540,516  

Facilities and facilities related

    124,951       117,269  

Depreciation and amortization

    19,255       23,549  
                 

TOTAL OPERATING EXPENSES

    1,304,923       1,517,703  
                 

INCOME FROM OPERATIONS

    3,800,108       3,506,418  
                 

OTHER INCOME

               

Realized gains on investments, net

    27,592       18,479  

Unrealized gains on investments, net

    18,351       95,934  

Dividend income

    8,824       9,760  
                 

TOTAL OTHER INCOME

    54,767       124,173  
                 

NET INCOME BEFORE PROVISION FOR STATE INCOME TAXES

    3,854,875       3,630,591  
                 

PROVISION FOR STATE INCOME TAXES

               

Current

    68,913       41,180  

Deferred

    3,347       17,339  
                 

TOTAL PROVISION FOR STATE INCOME TAXES

    72,260       58,519  
                 

NET INCOME

    3,782,615       3,572,072  
                 

RETAINED EARNINGS AT BEGINNING OF YEAR

    2,013,934       1,416,862  
                 

DISTRIBUTIONS TO STOCKHOLDERS

    (3,250,000 )     (2,975,000 )
                 

RETAINED EARNINGS AT END OF YEAR

  $ 2,546,549     $ 2,013,934  

 

 
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JOSLIN, LESSER & ASSOCIATES, INC.

 

STATEMENTS OF CASH FLOWS

 

 

 

         

Year Ended December 31,

 
         

2014

   

2013

 

CASH FLOWS FROM OPERATING ACTIVITIES

               
 

Net income

  $ 3,782,615     $ 3,572,072  
 

Adjustments to reconcile net income to net cash

               
   

provided by operating activities:

               
     

Realized gains on investments

    (27,592 )     (18,479 )
     

Unrealized gains on investments

    (18,351 )     (95,934 )
     

Reinvested dividend income

    (8,824 )     (9,760 )
     

Depreciation and amortization

    19,255       23,549  
     

Deferred state income taxes

    3,347       17,339  
 

(Increase) decrease in assets:

               
   

Accounts receivable

    (117,836 )     133,072  
   

Unbilled work in process

    21,716       (208,574 )
   

Prepaid expenses

    45,878       (129,498 )
 

(Decrease) increase in liabilities:

               
   

Accrued expenses

    (58,697 )     28,186  
   

Accrued state income taxes

    8,791       (44,813 )
   

Accounts payable

    -       (98,539 )
                       
   

NET CASH PROVIDED BY OPERATING ACTIVITIES

    3,650,302       3,168,621  
                       

CASH FLOWS FROM INVESTING ACTIVITIES

               
 

Acquisition of property and equipment

    (7,702 )     (17,755 )
                       
   

NET CASH (USED) BY INVESTING ACTIVITIES

    (7,702 )     (17,755 )
                       

CASH FLOWS FROM FINANCING ACTIVITIES

               
 

Distributions to stockholders

    (3,250,000 )     (2,975,000 )
                       
   

NET CASH (USED) BY FINANCING ACTIVITIES

    (3,250,000 )     (2,975,000 )
                       

NET INCREASE IN CASH

    392,600       175,866  
                       

CASH AT BEGINNING OF YEAR

    506,833       330,967  
                       

CASH AT END OF YEAR

  $ 899,433     $ 506,833  
                       

SUPPLEMENTAL CASH FLOW DISCLOSURES

               
   

Income taxes paid

  $ 13,882     $ 152,919  

 

 
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JOSLIN, LESSER & ASSOCIATES, INC.

 

NOTES TO FINANCIAL STATEMENTS

 

DECEMBER 31, 2014

 

NOTE 1 – BUSINESS

 

Principal Business Activity – Joslin, Lesser & Associates, Inc. (“the Company”) is a project management firm that was established in 1983. The Company acts as both an agent and a consultant through the phases of planning, design, construction, procurement, and final occupancy of public and private facilities. The Company’s clients include state agencies and local school districts. The Company’s clients and projects are located throughout Massachusetts. The Company’s corporate headquarters are located in Massachusetts. Revenues are derived from billings for services, and other reimbursable expenses.

 

 

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES

 

Use of Estimates – The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

 

Cash and Cash Equivalents – Cash and cash equivalents include highly liquid investments purchased with an initial maturity of three months or less. The Company maintains cash in amounts which at times may exceed the federally insured limit of $250,000. The Company has not experienced any losses in such accounts.

 

Investments in Marketable Securities – Investments in certain debt and equity securities are classified based on the Company’s intent and ability to hold such securities. The classifications of the securities as “trading”, “available for sale”, and expected to be “held to maturity” are determined at the time of the investments and are reassessed during the period in which the securities are held. Dividends and interest income is accounted for on the accrual basis.

 

Fair Value – Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. In order to measure fair value, the Company uses a fair value hierarchy for valuation inputs which give the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs.

 

The fair value hierarchy is as follows:

 

Level 1 –

inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities that management has the ability to access.

 

Level 2 –

inputs utilize data points that are observable such as quoted prices, interest rates and yield curves.

 

Level 3 –

inputs are unobservable data points for the asset or liability, and include situations where there is little, if any, market activity for the asset or liability.

 

Revenue Recognition – Revenue for services is recognized as services are rendered based on anticipated billable amounts as direct costs are incurred.  On fixed-price contracts, revenue is recognized on the proportional performance method.  Under this method, the proportional revenue and profit anticipated from the contract is recognized based on direct labor hours and expenses incurred. The Company also recognizes revenue for contracts based on the time and materials method. Unbilled work in process on these contracts represents revenues earned in a month that will be billed in the subsequent month.

 

Accounts Receivable – Accounts receivable are stated at the amount management expects to collect from outstanding balances. The Company maintains an allowance for potentially uncollectible contract and retainage receivables based upon its assessment of the collectability of accounts receivables, which considers historical write-off experience and any specific risks identified in customer collection matters. The Company has no allowance for doubtful accounts as of December 31, 2014 and 2013.

 

 
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JOSLIN, LESSER & ASSOCIATES, INC.

 

NOTES TO FINANCIAL STATEMENTS

 

DECEMBER 31, 2014

 

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

Concentrations of Credit Risk – Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of accounts receivable and direct costs and estimated earnings in excess of billings.

 

Concentrations of credit risk with respect to trade receivables are high due to the low number of customers comprising the Company's customer base. At December 31, 2014 and 2013 there was one customer that made up 47% and 60% of total sales, respectively. As of December 31, 2014, the Company had five customers representing 85% of the total accounts receivable. As of December 31, 2013, the Company had six customers representing 88% of the total accounts receivable. At December 31, 2014 and 2013 there was one customer that made up 36% and 55% of unbilled work in process, respectively.

 

Property and Equipment – Property and equipment are stated at cost, less accumulated depreciation and amortization. Expenditures for routine repairs and maintenance are charged to operations as incurred, while those which significantly improve or extend the lives of existing assets are capitalized. Depreciation and amortization are computed using the straight-line method over the estimated useful lives/lease term of the related assets.

 

Income Taxes – The Company has elected to be treated as an S Corporation for federal and state income tax purposes.  All taxable income or loss and tax credits generally are reflected in the personal income tax returns of the stockholders.  In Massachusetts, qualified S Corporations with annual gross receipts in excess of $6,000,000 are subject to a corporate level tax in addition to the income being included on the stockholders’ individual tax returns.

 

State income taxes are accounted for in accordance with the liability method whereby deferred tax assets or liabilities are computed based on the temporary differences between the financial statement and income tax basis of assets and liabilities using the enacted marginal tax rate. These differences are classified as current or non-current based upon the classification of the related asset or liability. Deferred state income tax provisions or benefits are based on the change in the deferred tax assets and liabilities from period to period. If needed, a valuation allowance is recorded for deferred taxes where it appears more likely than not that the Company will not be able to recover the deferred state income tax asset. The deferred state income tax liability reported on the accompanying balance sheets results from the use of the cash basis method of accounting for income tax reporting purposes.

 

The Company is required to recognize the financial statement impact of a tax position when it is more like-than-not that the position will be sustained upon examination. Any interest and penalties recognized associated with a tax position would be classified as a component of income tax expense.

 

Currently, the 2011, 2012, and 2013 tax years are open and subject to examination by the Internal Revenue Service and Massachusetts Department of Revenue. However, the Company is not currently under audit nor has it been contacted by these jurisdictions.

 

 

NOTE 3 – INVESTMENTS IN TRADING SECURITIES

 

As of December 31, 2014 and 2013, the Company maintains investments in trading securities, which are classified as trading, and consist of mutual funds. The cost of these investments amounted to $441,771 and $405,354 as December 31, 2014 and 2013, respectively. The fair value of these investments amounted to $610,906 and $556,138 respectively. For the years ended December 31, 2014 and 2013, the Company recognized net unrealized gains in the amount of $18,351 and $95,934, respectively.

 

Assets measured at fair value on a recurring basis at December 31, 2014 and 2013 include investments in marketable equity and debt securities. Fair value measurements are based on quoted market prices in active markets, which are considered to be Level 1 inputs in the fair value hierarchy.

 

 
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JOSLIN, LESSER & ASSOCIATES, INC.

 

NOTES TO FINANCIAL STATEMENTS

 

DECEMBER 31, 2014

 

NOTE 4 – PROPERTY AND EQUIPMENT

 

Property and equipment consists of the following as of December 31:

 

   

2014

   

2013

 

Estimated Useful

Lives/Lease Term

                   

Furniture, fixtures, and equipment

  $ 114,971     $ 107,270  

5 Years

Leasehold improvements

    63,735       63,735  

5 Years

Vehicles

    30,592       30,592  

5 Years

                   
      209,298       201,597    

Less accumulated depreciation

    (173,419 )     (154,164 )  
                   
    $ 35,879     $ 47,433    

 

Depreciation for the years ended December 31, 2014 and 2013 totaled $19,255 and $23,549, respectively.

 

 

NOTE 5 – LEASE COMMITMENTS

 

The Company is party to a non-cancelable lease agreement for office space in Watertown, Massachusetts, expiring on March 31, 2016. The Company is obligated to make fixed monthly rental payments in the amount of $7,642 plus certain operating costs. During the years ended December 31, 2014 and 2013, lease expense incurred under this and other agreements amounted to $124,951 and $117,269, respectively.

 

The Company subsequently extended the lease for one year beginning on April 1, 2015, and expiring on March 31, 2016. The Company is obligated to make fixed monthly rental payments in the amount of $8,006 plus certain operating costs.

 

Future minimum base rent for 2015 and 2016 will amount to $94,980 and $24,018, respectively.

 

 

NOTE 6 – PROFIT SHARING PLAN

 

The Company has a 401(k) plan for employees who meet certain eligibility requirements. Under the Plan, participants may make voluntary contributions of their pre-tax gross wages up to certain limits. The Company may, at its sole discretion, make contributions to the Plan. For the years ended December 31, 2014 and 2013 the Company did not make any matching or profit sharing contributions to the 401(k) plan.

 

 

NOTE 7 – SUBSEQUENT EVENTS

 

The Company has evaluated subsequent events through April 10, 2015, the date which the financial statements were available to be issued.

 

Subsequent to year end, the Company was acquired by NV5 Holdings, Inc., a publicly traded company.

 

 

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