UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

(Mark one)

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED DECEMBER 31, ~~2014~~2015

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 333-92445

PERNIX GROUP, INC.

(Exact name of Registrant as specified in its charter)

Delaware		36-4025775
(State or other jurisdiction ofincorporation or organization)		(I.R.S. Employer Identification No.)
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

151 E. 22nd Street
Lombard, Illinois 60148

(Address of principal executive offices, including zip code)

(630) 620-4787

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: NONE

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, par value $0.01 per share

(Title of Each Class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. o Yes x No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. o Yes x No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x Yes o No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). x Yes o No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o		Accelerated filer o
Non-accelerated filer o (Do not check if a smaller reporting company)		Smaller reporting company x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ~~o Yes x No~~

~~The~~o ~~aggregate~~Yes ~~market~~x value of registrant’s common stock held by non-affiliates on June 30, 2014 (the last business day of the registrant’s most recently completed second fiscal quarter), based upon the closing price of a share of the registrant’s common stock on such date was approximately $23,509,243.No

~~Number~~The ofaggregate ~~shares~~market value of ~~the~~ registrant’s common stock ~~outstanding~~held asby ofnon-affiliates ~~March~~on 18June 30, 2015: 9(the last business day of the registrant’s most recently completed second fiscal quarter),~~403~~ based upon the closing price of a share of the registrant’s common stock on such date was approximately $526,~~697~~879.

Number of shares of the registrant’s common stock outstanding as of March 22, 2016: 9,403,697

DOCUMENTS INCORPORATED BY REFERENCE:

Portions of the definitive Proxy Statement ~~to be~~ delivered to shareholders in connection with the Annual Meeting of Shareholders held on December 1, ~~2014~~2015 are incorporated by reference into Part III.

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TABLE OF CONTENTS

		Page
	PART I
ITEM 1.	DESCRIPTION OF BUSINESS	24
ITEM 1A.	RISK FACTORS	1315
ITEM 1B.	UNRESOLVED STAFF COMMENTS	1315
ITEM 2.	PROPERTIES	1315
ITEM 3.	LEGAL PROCEEDINGS	1416
ITEM 4.	MINE SAFETY DISCLOSURES	1416
	PART II
ITEM 5.	MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF SECURITIES	1517
ITEM 6.	SELECTED FINANCIAL DATA	1517
ITEM 7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	1617
ITEM 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	2523
ITEM 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	2624
ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	5256
ITEM 9A.	CONTROLS AND PROCEDURES	5256
ITEM 9B.	OTHER INFORMATION	5256
	PART III
ITEM 10.	DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE	5357
ITEM 11.	EXECUTIVE COMPENSATION	5560
ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS	5965
ITEM 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE	6066
ITEM 14.	PRINCIPAL ACCOUNTANT FEES AND SERVICES	6166
	PART IV
ITEM 15.	EXHIBITS AND FINANCIAL STATEMENT SCHEDULES	6267
	SIGNATURES	6570

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Disclosure Regarding Forward-Looking Statements

You are cautioned that the Form 10-K contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. When the words “suggests”, “believes,” “plans,” “anticipates,” “will”, “will likely result,” “will continue,” “projects,” “expects,” “should”, “would”, “could”, “forecast”, and similar expressions are used in the Form 10-K, they are intended to identify “forward-looking statements,” and such statements are subject to certain risks and uncertainties which would cause actual results to differ materially from those projected. Furthermore, the Company strategizes and objectively plans based upon certain current expectations and intentions which are subject to change at any time at the discretion of management and the Board of Directors (the “Board”). These forward-looking statements speak only as of the date this report is filed. The Company does not intend to update the forward-looking statements contained in this report, so as to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events, except as may occur as part of its ongoing periodic reports filed with the United States (U.S.) Securities and Exchange Commission (SEC).

The Company may, from time to time, post financial or other information on its Internet website, www.pernixgroup.com. The internet address is for informational purposes only and is not intended for use as a hyperlink. The Company is not incorporating any material on its website into this report.

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PART I

ITEM 1. DESCRIPTION OF BUSINESS

In this report, we use the terms “Pernix Group,” “Pernix,” “the Company,” “we,” “us” and “our” to refer to Pernix Group, Inc. ~~(formerly known as Telesource International, Inc.)~~ and its consolidated subsidiaries. Unless otherwise noted, references to years are for calendar years. We refer to the calendar year ended December 31, ~~2014~~2015 as “~~2014~~2015” and the calendar year ended December 31, ~~2013~~2014, as “~~2013~~2014.”

Overview

Pernix Group is a global company ~~managed~~operating ~~from~~across ~~Lombard,~~multiple ~~Illinois~~industry ~~and~~sectors ~~was~~providing ~~originally~~a ~~formed~~wide invariety ~~1995~~of ~~as Telesource International~~services, ~~Inc~~employing approx. In ~~2001,~~475 ~~the~~employees ~~Company~~across ~~was~~various ~~incorporated~~international ~~in Delaware~~ and ~~became~~US andomestic ~~SEC registrant~~locations. AsThe ofCompany ~~December 31, 2014, Pernix Group employs 148 people and~~ is over 96.60% owned by Ernil Continental, S.A., BVI, Halbarad Group, Ltd., BVI, and Affiliates. The Company conducts its operations through the parent and its ~~fifteen~~ subsidiaries. The Company’s two primary operating business segments are ~~general~~ construction and power ~~generation~~ services. In addition to these two operating segments, the corporate operations are a separately reported segment that provides administrative support to the operating segments ~~and manages the Corporate headquarters building operations~~.

Pernix has full-scale construction and management capabilities, with some of our subsidiaries located in the ~~South~~United ~~Pacific~~States, ~~islands~~Guam, of Fiji, ~~and~~ Vanuatu, ~~Africa,~~South ~~Azerbaijan~~Korea, ~~Kurdistan~~Africa, ~~United Arab Emirates~~ and ~~in the United States~~Germany. We provide our services in a broad range of end markets, including construction, construction management, ~~power~~ and ~~facility~~power operations and maintenance (“O&M”) services.

~~The~~Construction ~~construction~~services ~~and~~include ~~power~~pre-construction ~~segments~~(pre-con) ~~offer~~consulting ~~diversified general contracting~~services, ~~design/build and~~ construction management, ~~services~~design tobuild ~~public~~ and ~~private~~general ~~agencies.~~contracting Wedelivered ~~have~~either ~~provided~~in ~~construction and power services since 1995 and have established a strong reputation within our markets by delivering complex projects and providing innovative facility O&M solutions to clients world~~lump-~~wide with an unwavering commitment to safety~~sum, ~~quality,~~guaranteed ~~social~~maximum ~~responsibility~~cost ~~and~~or ~~total~~cost-plus ~~customer~~contract ~~satisfaction~~models. WeMarkets ~~have~~include ~~established~~both ~~internationally~~U.S. ~~experienced,~~Department ~~high-performance management teams with a proven track record~~ of ~~successfully~~State ~~completing~~(“DOS”) ~~complex~~and ~~projects~~other ~~around~~government ~~the~~clients ~~globe~~ and inprivate ~~some~~sector ofcommercial ~~the~~clients, ~~most remote locations on~~ the ~~planet.~~latter Wetypically ~~have over twenty years of experience providing the majority of our services~~ in ~~international~~either ~~locations.~~technically Webased ~~believe~~or ~~that~~commercial ~~these attributes are the foundation of Pernix’s success~~facilities.

WePower ~~believe~~services ~~the~~focus ~~unique~~includes ~~collection~~operating ~~of resources, experience, operational~~ and ~~financial~~maintenance ~~attributes~~of ~~that~~power ~~Pernix~~production ~~possess~~facilities ~~properly~~typically ~~position~~with ~~the~~longer ~~Company~~term ~~for future growth, diversification and financial success~~contracts. ~~The~~ ~~Company has transformed over the past several years noting the following achievements:~~

•We ~~Earned~~have ~~four~~provided ~~consecutive~~construction and power services since 1995 and have established a strong reputation within our markets by delivering complex projects and providing innovative facility O&M solutions to clients world-wide with an unwavering commitment to safety, quality, social responsibility and total customer satisfaction. We have established domestic & international experience, high-performance management teams with a proven track record of successfully completing complex projects around the globe and in some of the most remote locations. We have over twenty years of ~~pretax~~experience ~~income~~providing ~~from~~our ~~continuing~~services ~~operations~~in ~~before~~domestic ~~non-controlling~~and ~~interest~~international ~~allocations~~locations. We believe that these attributes are the foundation of Pernix’s success.

•We ~~Significant~~believe ~~reduction~~that inthe ~~leverage~~unique collection of resources, ~~being~~experience, ~~debt~~operational ~~free~~and asfinancial attributes that Pernix possess properly position the Company for future growth, diversification and financial success. The recent acquisitions of ~~December~~BE&K 31Building Group (“BE&K BG”) and certain assets of dck Pacific Guam, ~~2014~~LLC and ~~2013~~dck-ecc Pacific Guam, LLC Joint Venture Interest (collectively, “PPG”) has significantly increased diversification of end markets, services and geographic footprint increased critical mass, and expanded the subcontractor/vendor base as well as the project partner network globally.

• Expansion of its customer base including our first domestic project awarded in early 2014

• The Company has reached an inflection point from which growth should be increasingly profitable

• Enhanced ability to form strategic relationships with vendors, subcontractors and project partners

• The Company has $70.4 million of net operating and capital loss carryforwards that may be used to offset future taxable earnings.

Pernix Group provides its customers with solutions that meet their time and budget constraints. In doing so, Pernix Group developed strong partner and customer relationships, which are the drivers behind contracts and sole source awards and related change orders the Company received in 2014 and 2013 totaling over $100 million.

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Business Segments

~~General~~ Construction Segment

Our ~~general~~ construction segment includes ~~comprehensive~~both ~~pre-construction~~general ~~planning~~contracting and construction management services. Aswith asignificant ~~general~~pre-con ~~contractor,~~consulting. weWe have responsibility from contract award through the successful completion of each project.

We have developed a global network of suppliers and subcontractors. Together with these strategic partners, we utilize niche capabilities and experience that address customer design, budget and schedule requirements. All of our construction management team members have worked on complex international projects. We have the expertise required to successfully conduct full-scale construction projects anywhere in the world. We have demonstrated that we can execute the most technically and geographically challenging projects within time and budget parameters while meeting the exacting quality and safety requirements of the contract, thereby exceeding our clients’ expectations at every opportunity. Pernix Group has the ability to self-perform multiple trades when doing so brings efficiencies and value to a project and our customers.4

ToGeneral minimize overhead costs and maintain a worldwide capacity to handle complex projects, we have adopted a strategy of affiliating ourselves with highly capable subcontractors and business partners strategically located around the world. By working with “best in class” subcontractors and partners, Pernix Group is able to provide the best fit to fulfill our customers’ project requirements. Our various joint venture partners, affiliates and business partners, combined with our own teams and internal resources, provide Pernix Group the ability to offer its customers a best in class solution to their construction needs, worldwide. These strategic partnerships not only assist Pernix Group in winning larger projects, but also mitigate cost, design and other risks, provide experience managing larger projects, expand relations with more subcontractors and vendors, and enhance the number and type of contract opportunities that Pernix can consider, qualify for, bid on and win.Contracting

~~Many~~Our ofgeneral ~~our~~contracting ~~construction~~services ~~projects~~ are ~~for~~focused ~~governmental~~on ~~owners,~~our ~~such~~domestic asand ~~the~~international USprojects ~~Department~~where ofwe ~~State’s~~have ~~Bureau~~developed ofa ~~Overseas~~global ~~Buildings~~network ~~Operations~~of ~~(OBO)~~suppliers asand ~~well~~subcontractors. asTogether ~~select~~with ~~foreign~~these ~~governments.~~strategic Inpartners, ~~most~~we ~~instances~~utilize ~~the~~niche ~~bidding~~capabilities ~~process~~and ~~requires~~experience anthat ~~initial~~address ~~pre-qualification~~customer ~~stage~~design, ~~followed~~budget byand aschedule ~~proposal~~requirements. ~~submission~~This ~~stage~~not ~~for~~only ~~qualified~~assists ~~contractors.~~ Pernix Group ~~focuses its efforts~~ in ~~areas~~winning ~~and~~larger on projects, ~~where~~but wealso ~~have~~mitigates acost, ~~competitive~~design ~~advantage that is within our core competency. We minimize risk~~ and ~~develop~~other ~~winning~~risks, ~~strategies~~provides byexperience ~~thoroughly~~managing ~~studying~~larger ~~local markets~~projects, ~~aligning~~expands ~~ourselves~~relations with ~~capable~~more ~~local or regional large prime-~~subcontractors, and ~~establishing~~vendors, ~~purchasing~~ and ~~logistics~~enhances ~~support~~the ~~locally,~~number ~~or regionally, whenever possible. Our performance history~~ and ~~record~~type of ~~client~~contract ~~retention~~opportunities ~~demonstrate~~that ~~the successful formula~~ Pernix ~~and~~can ~~its~~qualify ~~partners have developed allowing us to grow our business and achieve customer satisfaction~~for, ~~which~~bid ison ~~evidenced by the stream of awarded contracts from OBO to Pernix~~ and ~~Pernix-Serka Joint Venture (PSJV)~~win.

~~Since 2011~~Additionally, ~~OBO~~all ~~has~~of ~~awarded~~our ~~five~~construction ~~projects~~team tomembers ~~Pernix~~have orworked ~~PSJV,~~on acomplex ~~highly~~domestic ~~effective~~and ~~venture~~international ~~with~~projects. ~~Serka~~We ~~Insaat~~have vethe ~~Ticaret,~~expertise ~~A.S.~~required ~~(Serka)~~to ~~that~~successfully isconduct ~~52%~~full ~~owned~~scale byconstruction ~~Pernix~~projects ~~and~~anywhere ~~48%~~in bythe ~~Serka~~world. ~~PSJV~~ ~~has~~We anhave ~~office~~demonstrated inthat ~~Vienna,~~we ~~Virginia,~~can inexecute ~~close~~the ~~proximity~~most totechnically ~~U.S.~~and ~~Government~~geographically ~~agencies~~challenging inprojects ~~order~~within totime ~~closely~~and ~~manage~~budget ~~its~~parameters ~~customer~~while ~~relationships~~meeting ~~(including~~the ~~OBO)~~exacting quality and tosafety ~~provide~~requirements ~~effective~~of the contract, ~~execution~~thereby ~~and~~exceeding ~~oversight~~our ~~for~~clients’ ~~its~~expectations. ~~customers~~Pernix onGroup ~~its~~has ~~mission~~the ~~critical,~~ability ~~fast~~to self-~~track~~perform ~~work~~multiple ~~efforts~~trades inwhen ~~Iraq,~~doing ~~Africa~~so brings efficiencies and ~~elsewhere~~value to a project and our customers.

InConstruction 2014 and 2013, the OBO awarded two projects to PSJV totaling approximately $17.4 million in original contract value. The first award during the two year period was announced on May 30, 2013, when OBO awarded a $6.6 million sole source award to PSJV to construct various security upgrade related structures at the U.S. Embassy in Baku, Azerbaijan (the Baku project). Throughout the Baku project change orders in the amount $1.7 million were received for various additional work to be performed. The Baku project began in mid-2013 and substantial completion was reached in September 2014. The second project award was announced on September 3, 2013, when PSJV was awarded a $10.8 million contract by the OBO for the installation of a rainwater capture and storage system at the U.S. Embassy in Freetown, Sierra Leone (the Freetown project). The Freetown project includes site improvements, rainwater capture and storage systems, conveyance infrastructure, and water treatment for this embassy compound located in West Africa. On December 18, 2013, the Company received the notice to proceed on the Freetown project. As of December 2014 the project has incurred several time delays due to the outbreak of the Ebola virus. Currently the Company is exploring all possible alternatives to complete the project.Management

3We have significant experience in providing at-risk and agency construction management services on complex facility projects typically in the private sector across specific market centers-of-excellence including Advanced Manufacturing, Food/Beverage, Biotech/Pharma, Healthcare, Higher Education and other General Commercial Mixed use sectors.

~~Table~~Our experience has proven that early involvement in a project and its design is one of ~~Contents~~the keys to its success. Our proven approach works in line with our customers’ needs and expectations to develop a plan and an execution schedule that saves time and money and ensures timely completion of our projects. Our state-of-the-art construction management services provide a systematic project review, including a comprehensive construction and start-up schedule. By establishing a singular point of responsibility, we provide continuous updates on project milestones and ensure the safest working environment while we deliver projects on time and on budget.

Additionally, PSJV participates in a multi-billion dollar Indefinite Delivery Indefinite Quantity (IDIQ) contract with OBO. The IDIQ provides PSJV with the opportunity to bid on a significant number of task orders for Containerized Housing Units (CHU) and Modular Office Units to be built internationally. The size of each task order is dependent upon the scope of work and there is no guarantee that PSJV will win any particular task order, but the overall IDIQ program is for five years and totals $12.0 billion. The amount of the awards to any one contractor cannot exceed $500 million in one base year or option year and $2.0 billion over the life of the contract should all four option years be exercised. PSJV has actively responded to several Task Order Proposal Requests to bid under this IDIQ contract and has been awarded three contracts with revenue totaling over $230 million under this program since April 2011.

In addition, in November 2013, the OBO exercised Option Year 3 under our base CHU IDIQ contract extending the period within which additional Task Orders can be awarded to PSJV into January 2015.

In the second quarter of 2011, the Company received an award notification from the OBO for an $18.1 million embassy rehabilitation project in Niger, Africa. On August 3, 2011 we received a Limited Notice to Proceed on the procurement and shipping of items that will be required for the project. On August 16, 2011 OBO exercised a bid alternate for this project valued at $6.4 million to renovate additional office spaces, bringing the total contract value for the Niger rehabilitation project including change orders to $24.5 million. Pernix established a limited liability company in Niger in connection with this contract. In July, 2012, Pernix Group, Inc. received the full Notice to Proceed (NTP). Construction activity on this project began during the third quarter of 2012 and is expected to continue into early 2015.

Our recent experiences with the OBO have strategically strengthened our technical and management expertise and developed relationships that enable us to provide our clients with a broad spectrum of services that leverage the expertise and the construction resumes of our staff and our partners to the mutual benefit of all involved. In addition to PSJV, Pernix has also formed several additional strategic alliances with companies who possess niche capabilities in restoration work as well as critical mass that enables Pernix to be part of a consortium of contractors with the intention of bidding and working together on large scale projects which Pernix may not be able to access on a stand-alone basis.

We believe our experience and track record in Fiji and ongoing experience in Niger, Freetown and Baku demonstrate our ability to bid on, obtain and successfully complete additional embassy and/or US Government projects as the Department of State intends to build, rehab or upgrade more than 33 embassy and consulate facilities in the 2015 — 2018 timeframe.

Pernix LTC JV (PLTC) is a joint venture with LTC Corp (LTC) in which Pernix is the majority owner. PLTC was formed to pursue a project on the campus of Texas A&M University in early 2014. PLTC was awarded a project totaling $23.4 million. LTC filed for Chapter 7 bankruptcy protection on May 2, 2014. The LTC bankruptcy filing has not negatively impacted Pernix, the venture or the project, which is approximately 78% complete with anticipated completion to be in early 2015.

During the third quarter of 2012, the Company established an office in Dubai (United Arab Emirates) to secure new and existing customers in light of significant anticipated demand for construction services forecasted in the region over the next decade. In connection with this effort, the Company organized Pernix Technical Works LLC (PTW), a limited liability company which is consolidated by Pernix Group, Inc. as the primary beneficiary of this variable interest entity.

Pernix Fiji Limited (PFL) was awarded a $1.6 million contract to design, procure and install underground cable in the Solomon Islands between Lungga Power Station and Ranadi Sub-station for the Solomon Islands Electricity Authority (SIEA) in late 2012. In early 2014, PFL was awarded a $30.1 million project to build a 36MW expansion to the Kinoya diesel plant in Fiji. The project scope includes expansion design, procurement and installation. PFL also received a FJD 8.4 million ($4.2 million) award in February 2015 for construction of the substation to support the newly expanded diesel power station previously awarded to PFL.

Design Build

Pernix embraces the design/build model to ensure design excellence and successful completion of construction projects from analysis, architecture and permitting, through engineering, construction, completion and customer acceptance. By establishing a singular point of responsibility, we deliver on our promise to fulfill all project requirements and specifications on-time and on-budget.

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We are committed to understanding the unique requirements and specifications of each project to provide a comprehensive single source solution. This value-added partnership leverages our ability to align and manage the best resources for all aspects of the project.

~~Construction~~Recent ~~Management~~Acquisitions

On June 15, 2015, Pernix ~~Group’s~~Guam ~~nearly~~LLC ~~two~~(“PPG”) ~~decades~~a wholly-owned subsidiary of ~~experience~~the ~~has~~Company, ~~proven~~acquired ~~that~~certain ~~early~~assets ~~involvement~~of indck aPacific ~~project~~Guam LLC, including Guam-based experienced operations and ~~its~~sales ~~design~~personnel, isand ~~one~~a of55% ~~the~~membership ~~keys~~interest toin ~~its~~dck-ecc ~~success~~Pacific Guam LLC joint venture (collectively “PPG”). ~~Our~~PPG ~~proven~~provides ~~approach~~general ~~works~~construction, as well as design-build and construction management-at-risk services. PPG has construction expertise in ~~line~~the ~~with~~military, ~~our~~retail, ~~customers’~~industrial, ~~needs~~commercial and ~~expectations~~healthcare toend ~~develop~~markets. The PPG acquisition establishes a ~~plan~~sizable and anreputable ~~execution~~platform ~~schedule~~in ~~that~~the ~~saves~~region ~~time~~with ~~and~~the ~~money~~ability ~~and~~to ~~ensures~~pursue ~~timely~~opportunities ~~completion~~across ofthe ~~our~~Pacific ~~projects~~Rim. ~~Our~~As ~~state-~~part of- the~~-art~~ ~~construction~~acquisition, ~~management~~PPG ~~services~~obtained ~~provide~~rights to a ~~systematic~~$53.6 million P-109 project ~~review,~~with ~~including~~the aNaval ~~comprehensive~~Facilities ~~construction~~Engineering Command for the design and ~~start-up~~construction ~~schedule~~of an aircraft maintenance hangar on the island of Guam. ByPernix ~~establishing~~assumed a ~~singular~~96% ~~point~~economic interest in the rights and obligations of ~~responsibility,~~the weJV ~~provide~~with ~~continuous~~respect ~~updates~~to onthe aircraft maintenance hangar project, ~~milestones~~while ~~and~~the ~~ensure~~other members of the ~~safest~~JV ~~working~~retain ~~environment~~the ~~while~~rights weto ~~deliver~~all other projects onof ~~time~~the ~~and~~JV. onThe ~~budget~~P-109 project is approximately 37% complete as of December 31, 2015.

Construction Segment Outlook

According to Global Construction 2025, construction in 2013 was an $8.7 trillion market and by 2025, it is estimated construction economic output will have grown by 70% to $15 trillion. Globally, construction in 2025 is forecasted to rise to over 13.5% of world GDP, as growth in construction continues to rise more strongly than GDP. Forecasts show the most dynamic growth for construction over the next decade is expected to come from emerging markets. Population growth will help drive this growth along with cyclical factors. Conversely, construction in most developed countries will be constrained by large public deficits, austerity programs, muted population growth and limited economic expansion.

Construction is expected to outpace world economic growth in the next decade as Asia and India markets continue to develop rapidly and the US / North America will experience the highest developed region growth by registering an upturn in residential and non-residential construction. Qatar is forecasted to have average double-digit growth of 10% per year through 2025. Qatar will benefit from the country’s hosting of the FIFA 2022 World Cup and continuing diversification within its economy. Growth in construction volumes in Qatar is set to slow significantly after 2020. Sub-Saharan Africa is also expected to be a high growth region for construction globally, driven by rising populations, rapid urbanization and much needed development of infrastructure.

As a result of the aforementioned divergence between developed and developing market economies, emerging markets are expected to make up more than half of the global construction market by the end of this decade. In light of its experience, Pernix is uniquely qualified to perform in emerging markets which can be more remote and logistically challenging environments. Furthermore, Pernix has a Middle East presence through PTW in Dubai and is already present and operating in Africa in connection with its embassy upgrade project in Niger and the rainwater recapture project in Sierra Leone.

Power Generation Segment

Although virtually everyone in the world relies on it, the needs and resources required to generate power can vary widely from location to location. From the types of fuels used to the plethora of regulations governing the development, construction and operation of power generation plants, Pernix Group understands the unique needs and requirements of different projects in diverse geographic locations. Pernix focuses on engineering, procurement, and construction (EPC) and O&M for small to mid-size power plants and has the experience to engineer, build, operate, and maintain power plants as well as transmission and distribution grids and underground cable installation. We manage and operate many of the plants that we build. Due to our years of experience, we have developed strong relationships with engine and turbine manufacturers, suppliers of parts for power plants and distribution/ transmission systems, software developers and suppliers for control systems, Customer Information Systems (CIS), and Geographic Information Systems (GIS).

Pernix focuses on operating efficiency and reliability while maintaining safety, security and environmental stewardship. We accomplish this by partnering with our customers throughout all project phases to understand and recognize the unique requirements of each customer and each project phase, and leverage our ability to align and manage the best resources for all aspects of each particular project. The Pernix Group power segment prides itself in being a steward of the environment and the assets entrusted to us by the communities in which our operators work and live. Pernix Group power segment employees are not transient operators but ones who live and work in the community and depend upon the same power being provided to our customers.

~~Table~~On June 30, 2015, Pernix Group acquired KBR Building Group, LLC, now known as BE&K Building Group (“BEK BG”), a diversified domestic construction services company serving Advanced Manufacturing, Food/Beverage, Biotech/Pharma, Healthcare, Higher Education, Commercial/Mixed-use and institutional clients nationally. BEK BG offers a variety of ~~Contents~~construction services and project delivery methods including: pre-con, at-risk and agency construction management, and design/build. As a result of this acquisition, Pernix added locations in Greenville, South Carolina, (BEK BG headquarters) as well as additional regional operations in Chicago, Illinois; Houston, Texas; Washington, D.C.; Research Triangle Park, North Carolina; and Charleston, South Carolina. BEK BG is well-positioned to operate in other parts of the country to accommodate its clients’ building programs. In the last decade alone, BEK BG has executed an impressive list of building programs for major corporations including American Honda Motor Company, BASF, Boeing, Duke Medicine, DuPont, General Mills, Ferguson Enterprises, Gulfstream Aerospace, Novartis Vaccines & Diagnostics, Purdue Pharma, Sysco Foods and Triumph Aerostructures. The vast majority of its projects are for repeat clients, and most of its projects are won on the basis of the qualifications, experience and client-driven values of its people.

~~Our~~Recent power business segment includes plant construction and O&M services. Specifically, Pernix Group provides plant engineering, design, procurement, construction, and operations & maintenance services from the power source through the distribution network on a worldwide basis. We have the capability to address a variety of power generating requirements from initial conceptual design to construction, through operating and maintaining power facilities. Pernix differentiates itself within the power industry as we can scale to various size projects, ranging from small to mid-sized projects on a stand-alone project basis and large projects in association with our strategic partners. This flexibility in the scale of projects on which we work reflects the well thought out design, agility and efficiency in our operations. Pernix also has a wealth of experience in the upgrade of existing facilities to add additional capacity and to achieve operational efficiency improvements by upgrading and replacing outdated equipment while endeavoring to use existing equipment when possible. These upgrade projects typically produce significant cost savings to our customers and can often be carried out while the power plant continues to operate, resulting in even greater cost savings to our customers. Projects

~~Engineering~~BEK BG is providing construction services for an 186,000 ~~Procurement~~sf production/research facility for Mayne Pharma in Greenville, ~~and~~North ~~Construction~~Carolina. ~~(EPC)~~Site construction began October 2015 with completion scheduled for fall of 2017.

~~Pernix~~BEK ~~Group~~BG ~~relies~~is onproviding ~~our~~ construction ~~capability~~ and ~~strong affiliation with world~~design-~~class~~assist ~~design~~services ~~firms~~for and subcontractors to provide comprehensive global power EPC solutions. We have the resources to properly fit technology with our customers’ special requirements, budget and environmental considerations and constraints. Power plants are a ~~significant~~new ~~investment and become a crucial part of a community’s survival~~290,000 ~~hence~~sf weaircraft ~~take~~modernization ~~great~~laboratory ~~care~~facility toin ~~understand~~Oklahoma ~~what~~City ~~our~~for ~~customer~~The ~~requires,~~Boeing ~~and~~Company. ~~ensure~~The ~~that~~building ~~the~~will ~~end~~eventually ~~product~~house ~~exceeds~~approximately ~~their~~800 ~~expectations~~employees ~~for~~working ~~today and contemplates their needs for the future. As noted~~ in ~~the construction segment discussion above~~engineering, ~~our~~research ~~state-of-the-art~~and ~~construction~~development ~~management services provide a systematic project review~~laboratories, ~~including a comprehensive construction~~ and ~~start-up~~support ~~schedule~~areas. ~~Our~~Construction ~~power~~began ~~plant~~May ~~construction~~2015 ~~methodology is not limited to building a facility; we also provide start up and commissioning services to ensure that the equipment is fully integrated~~ with ~~all~~completion ~~other~~scheduled ~~operating systems as well the transmission/distribution system and power grid. Furthermore, we provide the appropriate training~~ for ~~startup~~July ~~as well as future operations and maintenance~~2016.

BEK BG is providing construction services for an autoclave expansion for The Boeing Company in South Carolina. This project is part of a comprehensive building program. BEK BG has provided ongoing construction management services for this client at this location for nearly 10 years. The project size is approximately 30,000 sf, construction began in October 2014 and was substantially completed in February 2016.

BEK BG is providing construction services for Gulfstream Aerospace Corporation’s Georgia headquarters which involves a significant expansion to an existing facility, also constructed by BEK BG. The expansion adds 110,000 sf of high-bay manufacturing space to the original facility. Construction began in March 2015 and was completed in January 2016.

BEK BG is providing construction services for a 120,000 sf judicial center with court and court related facilities for Florence County, in Florence, South Carolina. Construction began February 2016 with completion scheduled for December 2017.

In addition to our construction projects associated with our recent acquisitions, many of the Company’s construction projects are for the DOS as well as select foreign governments. In most instances the bidding process requires an initial pre-qualification of selected contractors, followed by a proposal submission stage for qualified contractors. Pernix Group focuses its efforts in areas and on projects where we have a competitive advantage that is within our core competency. We minimize risk and develop winning strategies by thoroughly studying local markets, aligning ourselves with capable local or regional large prime-subcontractors, and establishing purchasing and logistics support locally, or regionally, whenever possible. Our performance history and record of client retention demonstrate the successful formula Pernix and its partners have developed allowing us to grow our business and achieve customer satisfaction, which is evidenced by the awarded contracts from The Bureau of Overseas Buildings Operations (“OBO”) to Pernix and our joint ventures.

On September 18, 2015, the U.S. DOS awarded the Company a contract totaling $81.6 million for the U.S. Embassy Berlin – Clay Allee Campus. The contract includes major renovations to and the historical preservation of the Berlin Brigade Headquarters constructed by the German Luftwaffe prior to World War II. The contract also includes an upgrade to campus security and a Marine Security Guard Quarters fit-out project.

Since 2011, OBO has awarded five projects to Pernix or PSJV, a highly effective venture with Serka Insaat ve Ticaret, A.S. (Serka) that is 52% owned by Pernix and 48% by Serka. PSJV has an office in Vienna, Virginia, in close proximity to U.S. Government agencies in order to closely manage its customer relationships (including OBO) and to provide effective contract execution and oversight for its customers on its mission critical, fast-track work efforts in Iraq, Africa and elsewhere.

Additionally, PSJV participates in a multi-billion dollar Indefinite Delivery Indefinite Quantity (IDIQ) contract with OBO. The IDIQ provides PSJV with the opportunity to bid on task orders for Containerized Housing Units (CHU) and Modular Office Units to be built internationally. The size of each task order is dependent upon the scope of work and there is no guarantee that PSJV will win any particular task order, but the overall IDIQ program is for five years and totals $12.0 billion. The amount of the awards to any one contractor cannot exceed $500 million in one year and $2.0 billion over the life of the contract should all four option years be exercised. PSJV has actively responded to several Task Order Proposal Requests to bid under this IDIQ contract and has been awarded three contracts with revenue totaling over $230 million under this program since April 2011. In December 2015, OBO extended the period of performance by a period of six months under our base CHU IDIQ contract extending the period within which additional Task Orders can be awarded to PSJV to July 2016.

Our experiences with the OBO have strategically strengthened our technical and management expertise and developed relationships that enable us to provide our clients with a broad spectrum of services that leverage the expertise and the construction résumés of our staff and our partners to the mutual benefit of all involved. In addition to PSJV, Pernix has also formed several additional strategic alliances with companies who possess niche capabilities in restoration work as well as critical mass that enables Pernix to be part of a consortium of contractors with the intention of bidding and working together on large scale projects which Pernix may not be able to access on a stand-alone basis.

On January 22, 2015, the Department of the Army’s U.S. Army Corps of Engineers awarded Pernix-Kaseman JV (a newly formed Limited Liability Company in which the Company owns 51%) a contract totaling $11.6 million to construct a Communications Center Special Area at Camp Humphrey in South Korea. The project is approximately 37% complete as of December 31, 2015.

In early 2014, Pernix Fiji Limited (“PFL”) was awarded a $27.4 million project to build a 36MW expansion to the Kinoya diesel plant in Fiji. The project scope includes design expansion, procurement and installation. PFL also received a $3.4 million award in February 2015 for construction of the sub-station to support the newly expanded diesel power station previously awarded to PFL. This project is substantially complete as of December 31, 2015.

We believe our experience and track record in Fiji and ongoing experience in Niger, Freetown and Baku demonstrate our ability to bid on, obtain and successfully complete additional embassy and/or U.S. Government projects as the DOS intends to build, rehabilitate or upgrade more than 33 embassy and consulate facilities in the 2016 — 2018 timeframe.

Construction Segment Outlook

According to Global Construction 2030, construction is currently in excess of an $8 trillion market globally with the expectation to grow 85%, or almost 4% annually, to $15.5 trillion by 2030. Forecasts show China, the United States and India driving this growth, accounting for 57% of all global growth anticipated for 2015-2030. Overall, developing markets will continue to emerge as some of the fastest growing construction markets, in particular in the ASEAN and Sub-Saharan African nations, as rising populations, rapid urbanization, infrastructure development and strong economic growth prospects serve as catalysts for the construction industry. Positive near-term outlook is also anticipated from developed markets, with higher growth in the United States and United Kingdom offsetting headwinds in Europe and Japan. Challenges across the developed world include poor demographic trends, large public deficits, Eurozone exit fears and limited economic growth prospects.

As a result of the aforementioned demographic and economic trends, emerging markets represent a significant growth opportunity in the near and long term. In light of its experience, Pernix is uniquely qualified to perform in emerging markets which can be more remote and logistically challenging environments. Furthermore, Pernix is currently operating in Africa, East Asia, Europe and the Pacific Rim, demonstrating an ability to navigate market shifts across the developing and developed world.

The U.S. is expected to experience one of the highest developed nation growth rates in 2016 by registering an upturn in both residential and non-residential building construction. Dodge Data & Analytics’ 2016 Dodge Construction Outlook anticipates residential building up 16% with construction start dollars increasing 20% for Single Family Housing and 7% for Multifamily Housing. Additionally, Dodge anticipates total non-residential building growth of 9% that is headlined by Commercial Building growth of 11%, Institutional Building Growth of 9% and a slight decline in Manufacturing Building starts of 1%. Pernix, through its subsidiary BE&K BG, is well positioned to capitalize on these trends with experience in Multifamily, Commercial, Institutional and Manufacturing construction for both global Fortune 100 and regional clients across the United States.

Power Services Segment

Although virtually everyone in the world relies on it, the needs and resources required to generate power can vary widely from location to location. From the types of fuels and technologies employed to the plethora of regulations governing the development, construction and operation of power generation plants, Pernix Group understands the unique needs and requirements of different projects in diverse geographic locations.

Our Power Services business segment includes plant Engineering, Procurement, and Construction (“EPC”), O&M services, and Build, Own, Operate, Transfer (“BOOT”) capabilities. Pernix focuses its service offerings on small to mid-size power plants as well as transmission and distribution grids and underground cable installation.

Operations and Maintenance (O&M)

Pernix Group’s Power O&M services provide an integrated scope of services tocovering ~~effectively maintain and manage~~ all aspects of power operations. WeSpecifically, ~~partner~~our ~~closely~~O&M ~~with~~services ~~public~~include maintenance & operations, engineering, on-going reliability studies, construction management, recovery/rebuild, specialty services and ~~private~~rehabilitation. ~~entities~~Prior to ~~improve~~assuming operating responsibility for customer operations, we perform plant ~~processes~~audits and provide a comprehensive plan, ~~performance~~including timelines for assuming responsibility of the operation, ~~reliability~~as well as initial and ~~customer~~long-term ~~service~~maintenance requirements. Our intense focus is on ~~ensuring~~machine aperformance ~~safe~~ and OEM maintenance requirements ensures efficient ~~working~~and ~~environment~~long term operation of equipment. We also partner closely with public and private entities to improve plant processes, performance, reliability and customer service while reducing operating costs as circumstances allow.

Pernix’s ~~O&M~~focuses ~~services~~on ~~include~~operating ~~maintenance~~efficiency &and ~~operations,~~reliability ~~engineering,~~while ~~on-going~~maintaining ~~reliability studies~~safety, ~~construction~~security ~~management,~~and ~~recovery/rebuild,~~environmental ~~specialty~~stewardship. ~~services~~The ~~and~~Pernix ~~rehabilitation.~~Group Wepower ~~perform~~segment anprides ~~audit~~itself ofin being a ~~customer’s~~steward ~~operations~~of the environment and ~~provide~~the aassets ~~comprehensive~~entrusted ~~plan,~~to ~~including~~us ~~timelines~~by ~~for~~the ~~assuming~~communities ~~responsibility~~in ofwhich ~~the~~we ~~operation~~work. Accordingly, asPernix ~~well~~Group asgoes ~~initial~~to ~~and~~great ~~long-term~~lengths ~~maintenance~~to ~~requirements.~~ensure ~~Our~~that ~~intense~~power ~~focus~~segment onemployees ~~machine~~are ~~performance~~not ~~and~~transient ~~OEM~~operators, ~~maintenance~~but ~~requirements~~ones ~~ensures~~who ~~efficient~~live and ~~long~~work ~~term~~in ~~operation~~the ofcommunity ~~equipment.~~and Independ ~~all~~upon ~~cases,~~the ~~Pernix~~same ~~Group~~power ~~makes~~being ~~every~~provided ~~effort~~ to ~~hire~~our ~~and train local staff~~customers. This is part of our commitment to bring jobs and add value to the communities ~~where~~ we ~~work and~~ serve.

Engineering, Procurement, and Construction (EPC)

Pernix Group relies on its construction capability and strong affiliation with world-class design firms and subcontractors to provide comprehensive global power EPC solutions. We have the resources to properly fit technology with our customers’ special requirements, budget and environmental considerations and constraints. Power plants are a significant investment and become a crucial part of a community’s survival, hence we take great care to understand what our customer requires, and ensure that the end product exceeds their expectations for today and contemplates their needs for the future. We accomplish this by partnering with our customers throughout all project phases to understand and recognize the unique requirements of each customer and each project phase, and leverage our ability to align and manage the best resources for all aspects of each particular project.

Pernix Group differentiates itself in its ability to efficiently scale its services to various size projects, ranging from small to mid-sized projects on a stand-alone project basis to large projects in association with our strategic partners. The variation in the scale of projects on which we work reflects the well thought out design, agility and efficiency in our operations. Pernix also has a wealth of experience upgrading existing facilities including the addition of new capacity or the refurbishment or replacement of outdated equipment at customer sites. These upgrade projects typically produce significant cost savings and performance improvements for our customers and can often be carried out while the power plant continues to operate, resulting in even greater cost savings.

As noted in the construction segment discussion, our state-of-the-art construction management services provide a systematic project review, including a comprehensive construction and start-up schedule. Our power plant construction methodology is not limited to building a facility; we also provide start up and commissioning services to ensure that the equipment is fully integrated with all other operating systems as well the transmission/distribution system and power grid. Furthermore, we provide the appropriate training for startup as well as future operations and maintenance. In many cases, Pernix manages and operates many of the plants that we build. Due to our years of experience and diverse geographic footprint, we have developed strong regional and in-country relationships with engine and turbine manufacturers, suppliers of parts for power plants and distribution/ transmission systems, software developers and suppliers for control systems, Customer Information Systems (CIS), and Geographic Information Systems (GIS). For this reason, Pernix is able to provide world-class power plant O&M services which are broad in scope and competitively priced.

Build, Own, Operate, Transfer (BOOT)

In addition to our ~~EPC and~~ O&M services and EPC, Pernix Group has the ability to implement projects via a BOOT model to help our customers finance and manage their current and potential infrastructure projects. Up-front costs are eliminated and the customer ultimately attains ownership of the final product. This is very similar in concept to a toll road. BOOT makes it easy for the customer to execute critically needed projects now despite budget constraints which would otherwise require deferring such projects well into the future.

Organizations such as the World Bank, USU.S. EX-IM Bank and other international finance institutions (IFIs) have a history of lending money to aid customers in improving and privatizing their infrastructure. The BOOT model is another financial tool available to cash or budget constrained customers to achieve their infrastructure improvement goals. BOOT is one of several financing options that the Pernix Group may be able to offer our clients.

6Current Power Operations & Maintenance Services

~~Table~~Our power projects to date have been primarily international with specific focus in the North and South Pacific. Our power services segment currently operates power plants in the Republic of ~~Contents~~the Fiji Islands (Fiji) and the Republic of Vanuatu (Vanuatu) and it contributed $6.0 million, or 3.0% of our 2015 revenue. Although the revenue from our power operations represents just 3.0% and 7.7% of consolidated revenue during 2015 and 2014, respectively, it historically accounts for a significant portion of the Company’s pretax income from continuing operations in 2014.

Current Power Operations

Our power projects to date have been primarily international with specific focus in the North and South Pacific. Our Power Generation Services segment currently operates power plants in the Republic of the Fiji Islands (Fiji) and the Republic of Vanuatu (Vanuatu) and it contributed $6.6 million, or 7.7% of our 2014 revenue. Although the revenue from our Power operations represents just 7.7% and 7.9% of consolidated revenue during 2014 and 2013, respectively, it consistently accounts for a significant portion of the Company’s pretax income from continuing operations. In addition to the fees generated through power generation service the power segment sourced two construction projects in Fiji and the Solomon Islands that contributed $23.8 million of revenue in 2014.

Pernix Fiji Limited (f.k.a. Telesource Fiji, Limited)

PFL is a subsidiary of Pernix that conducts power ~~generation~~service activities in Fiji. PFL has along-term ~~20 year~~ contract with the Fiji Electricity Authority (“FEA”) to operate and maintain two separate diesel fired power generation plants ~~and to sell electrical power produced, on a wholesale level, at a contractually determined rate, without risk of fuel price fluctuation~~. The O&M ~~contracts~~contract for these plants ~~expire~~expires in May ~~2023~~2028 and ~~include~~includes management of a total of ~~74.3~~110 MW of diesel power generation installed capacity in Fiji. In November 2014, Fijian Holdings Limited (FHL), an unrelated third party, acquired a 25% interest or 249,999 common shares of PFL for $2.3 million. Prior to this transaction, PFL was a wholly-owned subsidiary of Pernix.

The Company operates two power plants in Fiji. The Kinoya Power Plant, situated near Suva, the capital of Fiji, is part of the FEA grid and is the largest diesel fueled power plant in Fiji with an installed capacity of 50.1 MW. The Vuda Power Plant, situated between Nadi and Lautoka is the second largest diesel fueled power plant in Fiji with an installed capacity of 24.2 MW for a total combined installed capacity of 74.3 MW. The Kinoya and Vuda Power Plants are fully compliant with the applicable laws of Fiji relevant to power plant operations such as Labor Industrial Act and Environmental Act, and complies with manufacturers guidelines by applying prudent engineering practice in the operation and maintenance of the power plant in both locations.9

InThe ~~early~~Company ~~2014,~~operates ~~PFL~~two ~~was~~power ~~awarded~~plants ain ~~$30~~Fiji.1 The ~~million~~Kinoya ~~contract~~Power toPlant, ~~design~~which consist of three phased-in plants situated near Suva, ~~supply~~the capital of Fiji, ~~install~~is part of the FEA grid and ~~commission~~is 36the MWlargest ofdiesel ~~auxiliary~~fueled power ~~equipment~~plant atin ~~the~~Fiji ~~Kinoya~~with ~~Power~~an ~~Station~~installed capacity of 86.1 MW. The ~~contract~~Vuda ~~price~~Power ~~being~~Plant, ~~denominated~~situated inbetween ~~11.9~~Nadi ~~million~~and ~~Fijian~~Lautoka ~~Dollars~~is ~~for~~ the ~~onshore~~second ~~work~~largest ~~and~~diesel ~~16.6~~fueled ~~million~~power ~~Euro~~plant ~~for~~in ~~offshore~~Fiji ~~work.~~with Onan ~~March~~installed ~~14,~~capacity ~~2014,~~of ~~PFL~~24.2 ~~entered~~MW ~~into~~for a ~~15.8~~total ~~million~~combined ~~Euro~~installed ~~supply~~capacity ~~contract~~of ~~with~~110 ~~Wartsila~~MW. ~~Finland~~The ~~Oy,~~Kinoya and ~~Wartsila~~Vuda ~~Australia~~Power ~~Pty~~Plants ~~Ltd,~~are ~~collectively~~fully ~~referred~~compliant with the applicable laws of Fiji relative to power plant operations such as the ~~supplier,~~Labor toIndustrial ~~supply~~Act and ~~deliver~~the 4Environmental ~~engines~~Act, and ~~related~~complies ~~equipment~~with ~~(the~~manufacturers ~~offshore~~guidelines ~~work)~~by ~~and~~applying toprudent ~~provide~~engineering ~~technical~~practice ~~assistance~~in ~~during~~the ~~installation~~operation and ~~commissioning~~maintenance of the ~~engines~~power atplant ~~the~~in ~~Kinoya~~both ~~power station~~locations.

~~Demonstrative~~In oflate ~~PFL~~2015, the Company’s ~~outstanding~~existing O&M ~~performance~~service ~~record,~~agreement ~~FEA,~~was ~~has~~amended ~~rated~~to reflect the ~~PFL-managed~~award ~~Vuda and Kinoya power stations first and second out~~ of ~~five power stations in Fiji, and~~ the ~~FEA~~36 ~~report~~MW ~~stated~~expansion ~~that~~project ~~“it~~at isKinoya ~~no coincidence that the two Telesource~~ (as Pernix) ~~stations~~had ~~are~~been ~~ranked~~the ~~first~~EPC ~~and second~~contractor). The ~~They~~Company’s ~~have~~total aoperated ~~dedicated~~capacity ~~technically~~of ~~based~~110 ~~health,~~MW ~~safety and environmental officer who~~ is ~~actively~~inclusive ~~involved in carrying out frequent and regular in house risk management checks”. FEA is the regulatory agency that is charged with protecting the long-term interests~~ of ~~consumers with regard to~~ the ~~price,~~36 ~~quality,~~MW ~~safety, and reliability of regulated services in Fiji and PFL takes pride in the positive recognition from FEA~~expansion.

Demonstrative of PFL’s outstanding O&M performance record, FEA has rated the PFL-managed Vuda and Kinoya power stations first and second out of five power stations in Fiji, and the FEA report stated “...it is no coincidence that the two Telesource (Pernix) stations are ranked first and second. They have a dedicated technically based health, safety and environmental officer who is actively involved in carrying out frequent and regular in house risk management checks”. FEA is a utility wholly-owned by the Government of Fiji and is responsible for the generation, transmission, distribution and retail sale of electricity on the islands of Viti Levu, Vanua Levu and Ovalau. FEA serves approximately 90% of the country’s population. PFL is therefore very proud of the positive recognition given to it by FEA.

Vanuatu Utilities and Infrastructure Limited (VUI)

In late 2010, VUI was selected by the Government of the Republic of Vanuatu to provide O&M services for the Luganville power plant in Vanuatu. VUI earns a monthly fee based on man hours necessary to operate and maintain the facilities. The costs associated with earning the management fee are included in salaries and employee benefits and also in general and administrative expenses in the consolidated statement of operations.

The Utilities Regulatory Authority monitors and reports on the performance of electric utilities in Vanuatu. These reports bring transparency to the performance of the power providers, having recently described how well VUI provided services to its customers since VUI began to manage the power structure on Vanuatu on January 1, 2011. This report found VUI to have performed well in all areas including network performance, safety performance, customer service, reliability and quality of supply, and legislative and regulatory compliance.

Table of Contents

Power Segment Outlook

According to ExxonMobil’s Outlook for Energy, from ~~2010~~2016 to 2040 (the ~~“Outlook period”), the~~ world’s population is projected to grow from 7.2 billion to ~~nearly~~ 9 billion, and the global economy will more than double. As economies and populations grow, and as living standards improve for billions of people, the need for ~~energy~~electricity is expected to continue to rise. Even with significant efficiency gains, global ~~energy~~electricity demand is projected to rise by about 3565% percent from ~~2010~~2014 to 2040. In the countries belonging to the Organization for Economic Cooperation and Development (OECD) - including countries in North America and Europe – energy saving practices and technologies are expected to keep power usage relatively flat, even as these countries achieve economic growth and even higher living standards. In contrast, non-OECD power demand is expected to grow by close to 65 percent due to growing prosperity and expanding economies. Billions of people will be working to advance their living standards, thus requiring more power. The need for energy to make electricity is expected to remain the single biggest driver of demand. By 2040, electricity generation is expected to account for almost one half of the increase in global energy demand.

~~Utilities~~In ~~and~~the ~~other~~countries ~~power~~belonging ~~producers~~to ~~around~~ the ~~world~~Organization ~~can~~for ~~choose~~Economic ~~from~~Cooperation aand ~~variety~~Development of(“OECD”) ~~fuels~~- toincluding ~~make~~countries ~~electricity.~~in ~~They~~North ~~typically~~America ~~seek~~and toEurope ~~use~~ – energy ~~sources~~saving practices and technologies ~~that~~are ~~enable~~expected ~~reliable~~to ~~and~~keep power usage relatively ~~low-cost~~flat, ~~power~~even ~~generation~~as ~~while~~these ~~meeting~~countries ~~environmental~~achieve economic growth and even higher living standards. ~~Over~~In ~~the~~contrast, ~~outlook~~85% ~~period,~~of wenew ~~anticipate~~electricity ~~that~~demand ~~public~~through ~~policies~~2040 ~~will~~is ~~continue~~expected to ~~evolve~~come tofrom ~~place~~Non-OECD ~~tighter~~countries ~~standards~~as ~~and/or~~billions ~~higher~~of ~~costs~~people onworking ~~emissions~~to ~~while~~advance ~~also~~their ~~promoting~~living ~~renewables.~~standards Aswill arequire ~~result,~~more wepower. ~~expect~~By ~~the~~2040 ~~power~~only ~~sector~~550 tomillion ~~adopt~~people ~~combinations~~in ofthe ~~fuels~~world ~~and~~are ~~technologies~~projected ~~that~~to ~~reduce~~remain ~~emissions~~without ~~but~~access ~~also~~to ~~raise~~electricity, the ~~cost~~majority of ~~electricity~~them located in sub-Saharan Africa.

~~At the same time~~Additionally, ~~the~~renewable ~~sector~~energy sources will ~~also~~continue ~~need~~ to ~~manage~~overtake ~~reliability~~coal ~~challenges~~and ~~associated~~other ~~with~~fossil ~~increasing~~fuels ~~penetration~~driving over half of ~~intermittent~~all ~~renewables,~~growth ~~like~~in ~~wind~~electricity ~~and~~demand ~~solar~~to 2040. ~~These~~By ~~renewables~~the ~~have~~early ~~a cost~~2030s, ~~related~~the IEA expects renewables to ~~reliability~~become the largest source of electricity around the world and by 2040 account for ~~times~~50% ~~when~~of generation in the ~~wind~~European isUnion, ~~not~~30% ~~blowing~~of generation in China and Japan and 25% of generation in the ~~sun~~United isStates ~~not~~and ~~shining~~India.

Fuel input to power generation is projected to rise by more than 50 percent, faster than any other sector, over the outlook period. In 2010, coal was the world’s number one fuel for power generation, accounting for about 45 percent of fuel demand. Though coal use will likely increase by about 55 percent in developing countries by 2040, it continues to lose ground in developed countries –10 primarily to natural gas and renewables such as wind and solar. By 2040, demand for natural gas in the power generation sector is expected to rise by close to 80 percent. At that time, natural gas will be approaching coal as the world’s largest energy source for power generation, and coal’s share will have dropped to about 30 percent.

~~Increased~~Pernix ~~local~~is ~~natural~~well-positioned ~~gas~~to ~~production~~meet inthat ~~North~~global ~~America~~demand ~~and~~for ~~elsewhere~~power. As mentioned above, ~~along~~Pernix ~~with~~is ~~expanded~~among ~~international~~few ~~trade,~~within isthe ~~expected~~power toindustry ~~supply~~that ~~the~~have ~~gas~~constructed ~~for~~and operated power ~~generation.~~plants Byin ~~2040,~~some weof ~~expect~~the ~~that~~most remote locations in the ~~use~~world ofand ~~nuclear~~we ~~power~~can ~~will~~readily ~~approximately~~scale ~~double~~to ~~and~~various ~~renewables~~size ~~will~~projects ~~increase~~ranging byfrom ~~about~~small ~~150~~to ~~percent~~mid-sized, ~~led~~on bya ~~wind~~stand-alone project basis and ~~hydroelectric~~to ~~power~~large projects in association with our partners. This flexibility in the scale of projects on which we serve reflects the well thought out design, agility and efficiency in our operations.

~~Oil~~The isCompany ~~expected~~also tohas ~~remain~~ the ~~largest~~capability ~~single~~to ~~source~~provide ofservices ~~energy~~for torenewable ~~2040~~power, ~~growing~~including ~~around~~development, 25design, ~~percent.~~construction ~~But~~and ~~the~~facility ~~most~~O&M ~~significant~~services ~~shift~~for inhydroelectric, ~~the~~solar, ~~energy~~biomass ~~mix occurs as natural gas displaces coal~~ and isother ~~expected~~renewable toenergy ~~become the second-largest fuel by 2025~~sources. ~~Gas~~Pernix iscontinues ~~expected~~ to ~~grow~~actively ~~faster~~pursue ~~than~~those ~~any~~opportunities ~~other~~in ~~major~~Guam, ~~fuel source~~Fiji, ~~with~~Papua ~~demand~~New upGuinea, 65Vanuatu, ~~percent~~Samoa, bythe ~~2040.~~Solomon AnIslands ~~economical~~ and ~~clean~~other ~~fuel~~locations ~~source,~~across ~~gas grows in importance as it helps meet rising power generation demand in~~ the ~~future~~Pacific Rim. ~~Because~~Given ~~they~~its ~~are~~presence ~~abundant in supply~~ and ~~more~~strong ~~economical to develop than other fuel sources~~reputation, ~~oil,~~Pernix ~~natural~~anticipates ~~gas~~that ~~and~~it ~~coal~~ will continue to ~~play~~be asuccessful ~~major role~~ in ~~long-term~~that ~~energy supply~~region. ~~Together, these three fuels are expected to provide approximately 80 percent of total global energy by 2040 while nuclear, wind, solar and biomass will round out the balance of the fuel supply.~~

InWhile ~~recent years, a combination of two technologies in use for decades horizontal drilling and hydraulic fracturing has enabled~~ the ~~energy~~Company’s ~~industry~~outlook ~~to economically access and produce natural gas and oil found in shale and tight rock. Horizontal drilling allows a well to be drilled horizontally underground~~ for ~~thousands~~new ofprojects ~~feet,~~is ~~providing~~highly greater access to reservoirs to enhance and maximize productivity and economic resource recovery. This drilling practice also reduces the environmental footprint by enabling the drilling of multiple wells from a single location. In hydraulic fracturingpositive, aits ~~solution~~relationships ~~– primarily~~in ~~water~~Fiji and ~~sand,~~Vanuatu ~~mixed~~provide ~~with~~ a ~~small~~recurring ~~amount~~revenue ofstream chemicals – is injected into the rock thousands of feet underground to open very thin cracks, allowing trapped natural gas and oil to migrate to the well. This technology has been used in more than one million wells worldwide for the ~~past~~next ~~six~~several ~~decades~~years.

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Together these two technologies have unlocked vast new supplies of natural gas and oil, which otherwise would not have been commercially viable. The results are changing the landscape of energy supply in North America, particularly in the United States. For example, six years ago, production from North Dakota’s Bakken region registered a 100-fold increase in the last six years. These technologies now present new opportunities for construction of power plants and Pernix Group’s power segment is well positioned to pursue these opportunities.

The need for replacement power for retiring facilities and firming power to offset the growth in intermittent renewable facilities (wind and solar PV) creates significant EPC opportunities. In the near term, new power generation required to fill these needs will likely be natural gas fired gas turbine or reciprocating engine technologies for several reasons.

New power generation in the near term will need to be flexible (ability to mobilize on demand) whether the purpose is to replace aging generation or for transmission system firming. Although this can be accomplished with any non-intermittent power source (conventional steam, simple cycle, combined cycle, nuclear, geothermal, and hydro-electric) gas turbine and/or reciprocating engine technologies are likely to be the first choice due to their relatively low environmental impacts and high operational flexibility. Owner/operators will gravitate toward projects that limit their exposure to environmental regulations with natural gas fired generation and avoiding new coal fired generation.

Gas turbine and reciprocating engine generation offers the low capital cost expenditure relative to other forms of firm generation (like nuclear), can ramp up to full load from a cold start relatively quickly when needed, and have relatively short development-to-operation cycle time frame (unlike hydro, nuclear, geothermal or coal fired generation). New supplies of natural gas from gas fracking are expected to keep gas prices low for the near and intermediate term.

This trend in the domestic U.S. power generation industry toward smaller, more flexible operating facilities fits perfectly with Pernix’s experience and capabilities. With over 100 MW of reciprocating engine capacity installations and O&M contracts, Pernix is well positioned to respond to the industry’s current needs.

As mentioned above, Pernix is among few within the power industry that have constructed and operated power plants in some of the most remote locations in the world and we can readily scale to various size projects ranging from small to mid-sized, on a stand-alone project basis and to large projects in association with our partners. This flexibility in the scale of projects on which we serve reflects the well thought out design, agility and efficiency in our operations.

PFL and VUI provide facility O&M services for diesel power plants under long term contracts or memoranda of understanding. The Company has the capability to provide renewable power, including development, design, construction and facility O&M services for hydroelectric, solar and other green energy sources, and it is actively pursuing those opportunities in Fiji, Vanuatu, the Solomon Islands and other locations. Pernix is seeking stand alone and co-invest opportunities in the domestic and foreign power business with its one-stop shop approach which includes: development, design engineering, construction, commissioning and start-up, O&M and asset management.

Corporate Segment

~~During~~The ~~the~~Corporate ~~first~~segment ~~quarter~~covers ~~of 2013,~~ the ~~Company~~indirect ~~established~~activities ~~Pernix~~supporting ~~RE, LLC, a limited liability company for~~ the ~~purpose~~Company’s ofconstruction ~~purchasing the land~~ and ~~building~~power ~~in which its corporate headquarters are maintained~~activities. The ~~land~~Corporate ~~and~~segment ~~building~~earnings ~~were~~consist ~~purchased for $1.1 million from Baron Real Estate Holdings (Baron), a related party. The Company paid cash~~ of ~~$550,000~~rental ~~and~~revenue ~~obtained~~generated ~~seller financing~~ from ~~Baron for $550,000 with interest accruing at a rate of 4.0% per annum. As of December 31, 2013,~~ the ~~note~~Company’s ~~was~~headquarters ~~fully~~in ~~paid. The assets were recorded at the carrying value utilized by Baron (a related party under common control as it is owned by Ernil Continental~~Lombard, SIllinois.~~A., BVI, Halbarad Group, Ltd., BVI, and Affiliates).~~

Our Business Strategy

Our business strategy as a diversified contractor focuses on expanding our public (government funded or sponsored) as well as extending our private ~~general~~sector construction, ~~power~~management ~~construction~~services and ~~facilities~~power ~~O&M~~services ~~service~~construction market segments. Key elements of our strategy include:

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Expand and foster positive relationships with governments, public agencies and private entities worldwide

We will continue to focus on maintaining and expanding our existing relationships with governments, public agencies and private ~~entities~~sector clients worldwide and diversifying our customer base within these sectors both domestically and internationally. We intend to penetrate these markets through strategic relationships, co-~~invest~~investment opportunities and acquisitions. We believe that to develop new contacts and opportunities we must continue to consistently exceed existing customer expectations;, something we strive to do with every opportunity to serve. We will find new opportunities through promoting our Company’s ~~resume~~résumé and our reputation in the marketplace to targeted customers. These efforts will be supplemented by market intelligence gathering and providing customized solutions based upon an understanding of the specific needs of each governmental agency and each private customer. Upon identifying these opportunities we will continue to expand our network of international contacts and communicate our capabilities which in turn, will further expand our client base, as evidenced by our award in the Solomon Islands.

Capitalize on opportunities in challenging geographic locations

Pernix has built its reputation in the public sector on completing difficult projects in the most remote areas of the globe. For example, the Company’s ~~resume’~~résumé includes constructing a broadcasting station on the remote island of Tinian; managing the global logistics necessary to construct or modify the USU.S. Embassies in Suva, Fiji, Baku, Azerbaijan, Freetown, Sierra Leone and Niamey, Niger; managing logistics and construction of the containerized housing projects in Iraq, and finding and training a local workforce to bring electricity to regions in Vanuatu that had never had electric service before. Pernix possesses the ability to help our clients understand, define and complete extraordinary projects of varying scale. Pernix Group understands what is required to execute and complete the most challenging projects regardless of whether the challenge is geographical, political, mechanical, or any combination of` ~~the~~these ~~above~~factors. While many of our competitors are not equipped nor experienced to manage technically challenging projects in remote geographic locations, Pernix Group specializes in and thrives on such challenges.

We intend to leverage our leading positions in the general construction, power construction and facilities O&M capabilities to continue to expand our services and revenue. We believe that the need for infrastructure upgrades, governmental facilities as well as diesel-fired, hydroelectric, biomass, natural gas fueled combined cycle and solar power will result in continued opportunities in our core markets. All of our business segments have unique integration opportunities particularly in the construction and O&M markets. With our ability to manage projects internationally, successful track record and our global resources, we believe we are well-positioned to compete for projects in these global markets.11

We intend to leverage our leading positions in the general construction, power construction and facilities O&M capabilities to continue to expand our services and revenue. We believe that the need for infrastructure upgrades, governmental facilities as well as diesel-fired, hydroelectric, biomass, natural gas fueled combined cycle and solar power will result in continued opportunities in our core markets. All of our business segments have unique integration opportunities particularly in the construction and O&M markets. With our ability to manage projects internationally, our successful track record and our global resources, we believe we are well-positioned to compete for projects in these global markets.

Continue to drive Center-of- Excellence Capabilities

Pernix is well recognized in the private sector across many specific end markets for expertise on all consulting and implementation levels. We will continue to develop our expertise in these specific project types as well as drive operational centers of excellence, including advanced upstream pre-con services and technology/systems enhanced downstream construction management capabilities, across our specific current and several new end markets.

Utilize our long-standing relationships with industry specialists

We have long-standing relationships with a number of industry specialists worldwide. These relationships have been established to enhance our ability to satisfy our clients and deliver comprehensive solutions for customer needs. By collaboratively consolidating knowledge bases, skill sets, resources and contacts, we believe we have the ability to efficiently export our leading edge technical skills to any region in the world in which our clients may need them. We also continually develop new relationships that provide us with the necessary agility and expertise to meet design, construction and operating needs of new and existing customers as their needs evolve.

Continue to pursue our acquisition strategy

We intend to consider acquisitions and co-investment opportunities to grow our general construction, power construction, and facilities O&M businesses. The Pernix Group management team has defined what it considers to be desired potential target characteristics including: companies of a scale and scope that will provide manageable growth that can be readily integrated, will be accretive to earnings, and will facilitate new client relationships. Ideal targets will also expand Pernix Group’s domestic presence and diversify and balance the Company’s profile, credit risk and provide more consistency to Pernix Group’s revenue and earnings streams. We will search for other successful companies whose growth can be enhanced through a synergistic combination of respective resources. This approach will expand, strengthen and diversify our market leadership positions geographically and technically across end markets. We believe that the trend towards consolidation in the industries in which we operate will produce candidates that align with our acquisition strategy.

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Strengthen and support human capital

Our customers benefit from the extensive experience of the Pernix team members; we have engineers at Pernix with project experience in a multitude of different countries. The management team in the Finance and Administration areas has significant prior public accounting and Fortune 100 finance experience. ~~During~~With ~~2013~~the recent acquisitions of BEK BG and PPG (which are disclosed in Note 4), the Company significantly enhanced its business development and operations managers in the construction segment. A large percentage of our employees have technical and professional backgrounds, as well as undergraduate and advanced degrees.

We will continue to focus on providing our personnel with training and other personal and professional growth opportunities, performance-based incentives, opportunities for stock ownership and other competitive benefits in order to strengthen and support our human capital base. The Company has three equity incentive plans and the Company has broadened participation in the equity plans based on performance.

The Company also invests in key leadership positions at the highest levels in the organization, including the Board of Directors. This experience and leadership expertise ensures alignment of business strategy objectives and corporate governance within the organization. Specifically, effective December 31, 2013, Mr. Don J. Gunther assumed the role of Chairman of the Board. Mr. Gunther has served on the Company’s Board of Directors and on the Compensation Committee since December 2012 and brings a wealth of construction and energy knowledge to the Board. Mr. Gunther was President, Vice Chairman and Director of the Bechtel Group, where he had responsibility for all of the global industry units and all corporate functions, including project management, engineering, procurement, construction, information services, information technology and contracts.12

The Company also invests in key leadership positions at the highest levels in the organization, including the Board of Directors. This experience and leadership expertise ensures alignment of business strategy objectives and corporate governance within the organization. Specifically, Mr. Don J. Gunther assumed the role of Chairman of the Board of Directors effective December 31, 2013 through October 6, 2015. He continues to serve on the Company’s Board of Directors as Vice Chairman and on the Compensation Committee since December 2012 and brings a wealth of construction and energy knowledge to the Board. Mr. Gunther was President, Vice Chairman and Director of the Bechtel Group, where he had responsibility for all of the global industry units and all corporate functions, including project management, engineering, procurement, construction, information services, information technology and contracts.

Our Business Segments

The following table sets forth the revenue attributable to our business segments for the periods indicated (1):

	Year End December 31,
		2014		2013
		2015		2014
General Construction	$	78,573,035	$	67,776,314
Construction	$	189,415,888	$	78,573,035
Power Generation Services		6,583,394		5,810,652
Power Services		5,987,511		6,583,394
Corporate		~~144~~87,~~310~~925		~~175~~144,~~182~~310
Total Revenue	$	85195,~~300~~491,~~739~~324	$	7385,~~762~~300,~~148~~739

(1)For additional financial information including net income by segment, see Note 1819 ~~in the notes~~ to our consolidated financial statements.

Our Clients by Segment

In ~~2014~~2015 the ~~general~~ construction segment has ~~three~~one major ~~customers~~customer, ~~the~~who ~~U.S.~~represents ~~Department of State, FEA, and ERB Partners. The loss of these customers would have a material adverse impact on the Company’s consolidated financial performance. These customers represent 88~~26% of the consolidated total revenues of $85195.35 million. The loss or reduction of business from ~~these~~this ~~customers~~customer could materially and negatively impact the Company’s net income, cash flows and financial condition.

As of December 31, ~~2014~~2015, the power ~~generation~~ services segment has ~~three~~two primary customers: the FEA, and the Government of Vanuatu ~~and Solomon Islands Electric Authority (SIEA)~~. In ~~2014~~2015, ~~none~~neither of these customers individually account for more than 10% of the consolidated total revenues. However, ~~FEA and~~ the Government of Vanuatu ~~account~~accounts for $1.~~6 million and $~~1.1 million of the Company’s ~~2014~~2015 pre-tax income~~, respectively~~. The loss of either of these customers could materially and negatively impact the Company’s net income, cash flows and financial condition.

The Corporate revenue consists of rental income received from third parties for space leased in the corporate office headquarters in Lombard, Illinois. The Corporate segment does not have any major customers in ~~2014~~2015.

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Joint Ventures and Other Arrangements

Some of our larger contracts may operate under joint ventures or other arrangements under which we team with other reputable companies, typically companies with which we have worked for many years. This is often done where the scale of the project dictates such an arrangement or when we the parties want to strengthen either its combined market position or technical skills. Several such joint ventures and strategic alliances have been established in the past several years and we continue to develop more strategic relationships.

Competition

The professional, technical and management support ~~services~~service markets we serve are highly fragmented and we compete with a large number of regional, national and international companies. Certain of these competitors have greater financial and other resources than we do. Others are smaller, more specialized, and concentrate their resources in particular areas of expertise. The extent of our competition varies according to the particular markets and geographic area. The degree and type of competition we face is also influenced by the type and scope of a particular project. Our clients make competitive determinations based upon qualifications, experience, performance, reputation, technology, customer relationships and ability to provide the relevant services in a timely, safe and cost-efficient manner. Pernix Group utilizes partnerships and other key strategic relationships to obtain an advantage with regard to niche specialization, to obtain flexibility with regard to scale and scope of projects it may be involved with, thereby enhancing the combined ~~resumes~~résumés of Pernix and its partners. Pernix Group will continue to focus on providing the “best in class” procurement and contract execution processes as well as world class customer service in an agile fashion.

Insurance and Risk Management

We maintain insurance covering professional liability and claims involving bodily injury and property damage. We consider our present limits of coverage, deductibles, and reserves to be adequate. Wherever possible, we endeavor to eliminate or reduce the risk of loss on a project through the use of quality assurance/control, risk management, workplace safety and similar methods. Risk management is an integral part of our project management approach and our project execution process.

Regulation

We are ~~regulated~~subject into avarious ~~number~~government oflaws, ~~fields~~regulations inand/or ~~which~~applicable welaws ~~operate.~~pertaining Into the ~~United~~protection ~~States,~~of wethe environment, primarily ~~deal~~in ~~with~~ the ~~United~~areas ~~States Department~~ of ~~State~~water ~~to bid~~ and ~~execute~~air onpollution ~~the~~(e.g. ~~construction~~Council ofon ~~U.S.~~Environmental ~~embassies~~Quality, ~~containerized~~the ~~housing~~Environmental ~~unit~~Protection ~~task~~Agency ~~orders~~ and ~~other projects~~FEA). ~~When~~These ~~working~~laws ~~with~~and ~~this~~regulations ~~agency,~~in wemany ~~must~~cases ~~comply~~require ~~with~~a ~~laws~~lengthy and ~~regulations~~complex ~~relating~~process toof ~~the~~obtaining ~~formation~~and maintaining licenses, ~~administration~~permits and ~~performance~~approvals offrom ~~contracts~~local agencies. ~~These~~As ~~laws and~~ regulations, ~~among other things:~~

• require certification and disclosure of all cost or pricing data in connection with various contract negotiations;

• impose procurement regulations that define allowable and unallowable costs and otherwise govern our right to reimbursement under various cost-based U.S. government contracts; and

• restrict the use and dissemination of information classified for national security purposes and the exportation of certain products and technical data.

We are also subject to various government laws, regulations and/or applicable laws pertaining to the protection of the environment, primarily in the areas of water and air pollution, i.e. Council on Environmental Quality, the Environmental Protection Agency (EPA) and FEA. These laws and regulations in many cases require a lengthy and complex process of obtaining and maintaining licenses, permits and approvals from local agencies. As regulations

are enacted or adopted in any of these jurisdictions, we cannot predict the effect of compliance therewith on our business. Our failure to comply with any applicable requirements could result in delays in proceeding with any projects under development or require modifications to operating facilities. During periods of non-compliance, our operating facilities also may be forced to shut down until the instances of non-compliance are corrected and/or be subject to fines or penalties. We are responsible for ensuring compliance of facilities with applicable requirements and, accordingly, we attempt to minimize these risks by dealing with reputable contractors and using appropriate technology to measure compliance with the applicable standards.

12We are regulated in a number of fields in which we operate. In the United States, we deal with the DOS to bid and execute on the construction of U.S. embassies and other projects. When working with this agency, we must comply with laws and regulations relating to the formation, administration and performance of contracts. These laws and regulations, among other things:

~~Table~~require certification and disclosure of ~~Contents~~all cost or pricing data in connection with various contract negotiations;

impose procurement regulations that define allowable and unallowable costs and otherwise govern our right to reimbursement under various cost-based U.S. government contracts; and

restrict the use and dissemination of information classified for national security purposes and the exportation of certain products and technical data.

Presently, neither the Customer Choice Act nor other similar proposed legislation dealing with U.S. power policies directly impact us because the legislation and restructuring plan pertain to the retail market or new contracts in wholesale markets. However, we could be impacted in the future by, among other things, increases in competition as a result of deregulation. Compliance with federal, state, local and foreign laws enacted for the protection of the environment have had no significant effect on our capital expenditures, earnings, or competitive position to date. We are actively monitoring these developments in power proceedings in order to evaluate the impact on existing projects, and also to evaluate new business opportunities created by the restructuring of the electric utility industry and technological developments therein.

Contract Backlog

Backlog represents the amount of revenue the Company expects to realize from work to be performed on uncompleted construction contracts in progress at December 31, ~~2014~~2015, and from construction contractual agreements on which work has not yet begun and awarded not booked backlog where a contract agreement has not been signed but there is a high degree of certainty where we expect to recognize revenue in the future. The following summarizes changes in backlog on construction contracts during the fiscal year ended December 31, ~~2014~~2015:

Balance at December 31, 2013	$		37,125,652
Balance at December 31, 2014	$	21,501,972
New construction contracts / amendments to contracts in 2014		62,949,355
New construction contracts / amendments to contracts in 2015		547,346,411
Less: construction revenue earned as of December 31, 2014		(78,573,035)
Less: construction revenue earned as of December 31, 2015		(189,415,888)
Balance at December 31, 2014	$		21,501,972
Balance at December 31, 2015	$	379,432,495

Management anticipates that ~~the~~a ~~full~~significant ~~backlog~~portion of ~~$21.5~~the ~~million~~backlog ~~as of December 31, 2014,~~ will be recognized as revenue during ~~2015~~2016. The table ~~above~~ does not include ~~new contract awards totaling~~ $15169.82 million ~~with~~of ~~Pernix~~revenue ~~Kaseman~~associated JVwith (aour ~~newly~~recent ~~formed~~OBO ~~Limited~~award ~~Liability Company in which the Company owns 51%) in January 2015~~ to construct athe ~~communication~~new ~~center~~U.S. ~~special~~Embassy ~~area~~Compound ~~on Camp Humphrey~~ in ~~South~~Maputo, ~~Korea~~Mozambique ~~and~~(disclosed ~~PFL~~as ~~for the construction of~~ a ~~33MW~~subsequent ~~substation~~event ~~related~~in toNote ~~the Kinoya Expansion project. Finally~~21), ~~the~~nor ~~table~~ does ~~not~~it include ~~revenue associated with~~ our long term ~~contract~~contracts or memo of understanding (MOU) for power ~~operating~~O&M ~~and maintenance~~ services or construction segment stipend income. The stipend income is related to contracts that were not ultimately awarded to the Company as they are not directly related to core construction work.

ITEM 1A. RISK FACTORS

Not applicable.

ITEM 1B. UNRESOLVED STAFF COMMENTS

Not applicable.

ITEM 2. PROPERTIES

~~Our~~Properties ~~corporate~~used ~~offices are located~~ in ~~Lombard, Illinois. We leased the office space until March 4, 2013, when we purchased the office building in which~~ our ~~corporate~~construction ~~offices are located. In order to support our relationship with the U.S. Department of State~~ and ~~OBO,~~power asoperations ~~well~~primarily asconsist ~~to facilitate contract execution that exceeds our customers’ expectations, PSJV has leased space in Vienna, Virginia. The lease term is for a period~~ of ~~48 months beginning in January of 2012. In Fiji, our power generation subsidiary leased~~ office space ~~for~~within ~~a two year term that ended on June 30~~general, ~~2014~~commercial ~~and~~office ~~has~~buildings ~~continued on a month to month basis. In December 2013, we entered into a one year non-cancelable lease agreement effective beginning~~ in ~~February~~major ~~2014 in Colorado to house a regional administrative office~~cities. ~~During October 2014, we renewed a non-cancelable lease agreement effective on November 15, 2014 which includes a term of twelve months to house our United Arab Emirates regional office in Dubai.~~ We believe our ~~current~~ properties are ~~adequate~~well ~~for~~maintained, ~~our business operations and are not currently underutilized. We may add additional facilities from time to time~~ in ~~the~~good ~~future as the need arises. In addition to corporate offices~~condition, weadequate ~~provide~~and ~~housing~~suitable for ~~several~~our ~~employees located in remote locations for construction and power facilities O&M work~~purposes. ~~These~~Our ~~leases~~offices are ~~not individually significant and are generally living expenses that are considered~~ in the ~~cost~~following ~~and~~locations: ~~pricing of the related contracts and in some cases are billed to the joint venture under which the related contract work is being performed.~~

13Offices Business Segment Owned / Leased Lombard, Illinois Corporate Owned Vienna, Virginia Construction Leased Suva, Fiji Islands Power Services Leased Luganville, Espiritu Santo - Vanuatu Power Services Leased Harmon, Guam (USA) Power Services Leased Chicago, Illinois Construction Leased Greenville, South Carolina Construction Leased Durham, North Carolina Construction Leased North Charleston, South Carolina Construction Leased Houston ,Texas Construction Leased McLean, Virginia Construction Leased

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ITEM 3. LEGAL PROCEEDINGS

As a contractor providing services to government ~~contractor~~agencies, we are subject to various laws and regulations that are more restrictive than those applicable to non-government contractors. Intense government scrutiny of contractors’ compliance with those laws and regulations through audits and investigations is inherent in government contracting, and, from time to time, we receive inquiries, subpoenas, and similar demands related to our ongoing business with government entities. Violations can result in civil or criminal liability as well as suspension or debarment from eligibility for awards of new government contracts or option renewals.

~~During 2014 and 2013, no claims have been filed against the Company.~~ The Company may from, time to time, be involved in legal proceedings arising in the ordinary course of business. Although the outcome of our legal proceedings cannot be predicted with certainty and no assurances can be provided, except for the matter discussed below, in the opinion of our management, based upon current information and discussions with counsel, none of the investigations, claims and lawsuits in which we are involved is expected to have a material adverse effect on our consolidated financial position, results of operations, cash flows, or our ability to conduct business. From time to time, we establish reserves for litigation when we consider it probable that a loss will occur.

In late 2010, VUI was selected by the Government of the Republic of Vanuatu to provide O&M services for a power plant in Vanuatu. In 2011, UNELCO, the former concessionaire, brought a case against the Republic of Vanuatu seeking judicial review in relation to the awarding of the electricity concession to VUI. This matter is described as Case No. 101 of 2011. The Republic of Vanuatu is the first defendant and VUI elected to join the suit as a second defendant in order to best preserve its interests. There are currently no claims in relation to damages or otherwise directed at VUI in the proceedings. Therefore, as of December 31, ~~2014~~2015 there are no potential VUI losses that are probable and no accrual is deemed necessary.

In February 2014, during hearings in the Supreme Court of the Republic of Vanuatu (the Court), the Government of Vanuatu proposed a settlement with UNELCO that would leave VUI without a claim to defend pertaining to the concession and would effectively end the litigation in UNELCO’s favor. The proposed settlement called for a re-tender of the concession and required that any company who participates in the retender must waive any outstanding claims against the Government of Vanuatu. VUI in response presented its position to the court arguing that VUI should have an opportunity to be heard and that the Court should not accept the proposed settlement. On October 16, 2014 the Court issued its decision in favor of UNELCO and the government has issued a new agreement to VUI to continue to operate the plant under the MOU terms until the retender process is completed. As of the date of this report, VUI continues to operate and maintain the Luganville plant under the same terms and conditions.

ITEM 4. MINE SAFETY DISCLOSURES

Not Applicable.

1416

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PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF SECURITIES

Our common stock is traded inon the Over-the-Counter Quotation Board (OTCQB) under the symbol “PRXG.” As of December 31, ~~2014~~2015, there were ~~approximately~~fewer ~~197~~than 250 shareholders of record, infour of which ~~four~~ own over 96% of the outstanding shares. The following table sets forth the ~~low~~high and ~~high~~low closing sales prices of a share of our common stock during each of the fiscal quarters presented, based upon quotations on the OTCQB reporting system.

	High SalesPrice ($)	Low SalesPrice ($)
Fiscal 2014:
2015:
First quarter	83.0050	2.4571
Second quarter	503.00	41.0088
Third quarter	91.5088	51.1180
Fourth quarter	52.1100	3.5081

	High SalesPrice ($)	Low SalesPrice ($)
Fiscal 2013:
2014:
First quarter	28.7500	2.7545
Second quarter	550.00	24.4900
Third quarter	29.50	25.5011
Fourth quarter	25.6911	23.50

We have not paid a cash dividend on common stock since our inception and we currently have no plans to pay cash dividends on common stock in the foreseeable future.

The Company implemented an incentive stock option plan for employees (ISOP) in December 2011, a long term incentive plan (LTIP) for non-employee directors and consultants in late 2012 and an equity incentive plan (EIP) for employees and directors in late 2013. As of December 31, 2014 and 2013, there were 283,500 and 379,000 option awards outstanding under the ISOP, respectively. There were 78,500 option awards outstanding as of December 31, 2014 and 2013 under the LTIP plan. There were 1,395,000 and zero option awards outstanding as of December 31, 2014 and 2013, respectively, under the EIP plan.

Unregistered Sales of Equity Securities and Use of Proceeds

InNot ~~December 2013, the Company entered into Preferred Stock Purchase Agreements (SPAs) with each of Ernil Continental S~~applicable.A., BVI (“Ernil”) and Halbarad, Ltd., BVI (“Halbarad”). Pursuant to the terms of the SPAs, Ernil and Halbarad made investments of $2,750,000 and $2,250,000, respectively, in the Company in the form of 550,000 shares and 450,000 shares, respectively, of Series A Cumulative Convertible Preferred Stock. The SPA transactions were closed on December 30, 2013 at which time the preferred stock certificates were issued and cash was received by the Company. No other unregistered securities have been issued since 2010. Previously issued unregistered securities were disclosed in prior periodic filings on Forms 10-Q and 10-K for those periods.

ITEM 6. SELECTED FINANCIAL DATA

Not applicable.

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You are cautioned that this Annual Report on Form 10-K and, in particular, the “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, contains forward-looking statements concerning future operations and performance of the Company within the meaning of the Private Securities Litigation Reform Act of 1995. You should not place undue influence on these forward-looking statements. Forward-looking statements are subject to market, operating and economic risks and uncertainties that may cause the Company’s actual results in future periods to be materially different from any future performance suggested herein. Factors that may cause such differences include, among others: increased competition, increased costs, changes in general market conditions, changes in the regulatory environment, changes in anticipated levels of government spending on infrastructure, and changes in loan relationships or sources of financing, political instability or violence. Such forward-looking statements are made pursuant to the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995.

In this report, we use the terms “Pernix Group”, “Pernix”, “PGI”, “the Company”, ‘we”, “us”, and “our” to refer to Pernix Group, Inc. and its consolidated subsidiaries. Unless otherwise noted, references to years are for calendar years.

Executive Summary

The Executive Summary in this section is intended to highlight significant information and to provide context within which to consider the Company’s results of operations. During 2014 and 2013, the Company earned revenues of $85.3 million and $73.8 million, representing a revenue growth of 16%. This growth reflects the commitment to win new projects and grow the overall business.

Total Consolidated Revenue by year for 2010 through 2014 (in millions):

	2010		2011		2012		2013		2014
$	26.2	$	58.0	$	120.0	$	73.8	$	85.3

Management believes the 2014 revenue increase is due to the overall growth of our construction business through new business additions. During 2014 the Company had 10 ongoing construction projects as compared to 6 during 2013. In early 2015, the Company won contracts totaling over $15.8 million, resulting from the Company’s Pernix-Kaseman JV award in South Korea and PFL for the substation construction project.

The Company’s consolidated pretax (loss) income from operations attributable to Pernix shareholders was $(1.4) million and $0.4 million during 2014 and 2013, respectively. The decrease in pretax income attributable to Pernix shareholders in 2014 from 2013 was most significantly caused by the increase in non-controlling interest share of project operations. Through the Company’s various joint ventures the Company has successfully created new opportunities and allowed the Company to carry out its construction projects in a timely and efficient manner.

Net (loss) attributable to Pernix common shareholders was ($1.8) million and ($4.7) million in 2014 and 2013, respectively. This decrease in net losses for the year were driven by the increased margin on its construction project activities for the year as well as decreased income tax expense which were offset partially by increased earnings attributable to non-controlling interests. Included in the 2013 net loss results is a $4.9 million deferred income tax expense related to an increase in the valuation allowance on deferred tax assets. This expense is a non-cash expense and has no impact on the Company’s liquidity, cash flows, or on its ability to execute projects or conduct ongoing operations.

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We use pretax income from continuing operations attributable to Pernix Group, Inc. to evaluate our performance, both internally and as compared with our peers, because this measure excludes certain income tax items (primarily pertaining to changes in the valuation allowance) and discontinued operations that may not be indicative of our core operating results, as well as items that can vary widely across different industries or among companies within the same industry. Additionally, these measures provide a baseline for analyzing trends in our underlying business. We believe this non-U.S. GAAP financial measure provides meaningful information and helps investors understand our financial results and assess our prospects for future performance. Because non-U.S. GAAP financial measures are not standardized, it may not be possible to compare these financial measures with other companies' non-U.S. GAAP financial measures having the same or similar names. This financial measure should not be considered in isolation from, as substitutes for, or alternative measures of, reported net income from continuing operations, diluted earnings per share from continuing operations and net cash provided by operating activities, and should be viewed in conjunction with the most comparable GAAP financial measures and the provided reconciliations thereto. We believe these non-U.S. GAAP financial measures, when viewed with our U.S. GAAP results and the related reconciliations, provide a more complete understanding of our business. We strongly encourage investors to review our consolidated financial statements and publicly filed reports in their entirety and not rely on any single financial measure.

The following table presents a reconciliation of net income attributable to Common Stockholders of Pernix Group, Inc. to non-GAAP pretax income from continuing operations and non-GAAP basic earnings per share from continuing operations attributable to Common Stockholders of Pernix Group, Inc.:

Non-GAAP net income (loss) and basic earnings per share attributable to Pernix Group, Inc. Common Stockholders reconciliation:

(in thousands, except per share data)		For the Year Ended December 31, 2014		For the Year Ended December 31, 2013
Net loss attributable to Common Stockholders of Pernix Group, Inc.	$	(1,840)	$	(4,680)
Less:
Net impact of income tax expense (benefit)		482		5,042
Non-GAAP Pretax Income (Loss) from continuing operations attributable to Common Stockholders of Pernix Group, Inc.	$	(1,358)	$	362
Non-GAAP Basic and Diluted earnings (loss) per share attributable to Pernix Group, Inc.	$	(0.14)	$	0.04
Basic and diluted weighted shares outstanding		9,403,697		9,403,697

Management is keenly focused on bidding on and winning new contracts on a stand-alone basis as well as with our strategic partners. In early 2015, the Company has entered into new contract awards totaling over $15.8 million thereby restoring the backlog that existed as of December 31, 2013. Pernix will also continue to explore acquisition and co-investment opportunities in both business segments to obtain additional backlog, expand our customer base and optimize the use of our tax loss carryforwards.

Although the revenue from our Power generation segment represents just 7.7% and 7.9% of consolidated revenue, in 2014 and 2013, respectively, it consistently accounts for a significant portion of the Company’s pretax income from continuing operations.

There are three significant recent developments in the power segment that significantly impact its future performance. First, as noted above, the partial sale of a 25% interest in PFL to FHL. Second, PFL received a FJD 8.3 million ($4.2 million) award in December 2014 for construction of the substation to support the expanded diesel power station currently in execution. PFL has accounted for $1.1 million and $0.8 million of Pernix consolidated pretax income during 2014 and 2013, respectively.

Lastly, VUI has received a decision by the Vanuatu judiciary regarding a retender of the long term concession deed to operate and maintain the diesel and hydro power operations in Vanuatu. The government has issued a new agreement to VUI to continue to operate the plant under the MOU terms until the retender process is completed. As of the date of this report, VUI continues to operate and maintain the system. Once a retender is completed and if VUI is not awarded the concession deed or if the VUI is unable to sufficiently reduce operating costs under the new tariff ruling, it could have a material and negative impact on the Company’s income, cash flows and financial condition.

~~Table~~Executive ~~of Contents~~Summary

~~VUI~~The ~~accounted~~Company ~~for~~is ~~$1.0~~very ~~million~~excited ofabout ~~Pernix~~its ~~consolidated~~transformation ~~pretax~~and ~~income~~diversification in ~~2014~~conjunction ~~and~~with ~~2013.~~our ~~VUI~~recent ~~has~~acquisitions. ~~received~~These ~~high~~will ~~ratings~~diversify ~~from~~our ~~the~~customer ~~Utilities~~base, ~~Regulatory~~strengthen ~~Authority~~our ofDOS ~~Vanuatu~~and ~~for~~commercial ~~work~~businesses ~~performed~~including ~~under~~our ~~the~~Pacific ~~MOU~~Rim toregion, ~~date~~which ~~but~~positions ~~the~~us ~~Company~~for ~~does~~significant ~~not~~organic ~~know~~and ~~the~~inorganic ~~likelihood of a successful retender bid by VUI or the financial impact of the new tariff ruling~~growth.

~~Industry~~We ~~experts~~have ~~predict~~successfully ~~that~~completed ~~construction~~projects infor ~~emerging~~Novartis, ~~markets~~Purdue ~~will~~Pharma, ~~make~~Gulfstream upAerospace, ~~more~~Medical ~~than~~University ~~half~~ of ~~the~~South ~~global~~Carolina, ~~construction~~Texas ~~market~~A&M byUniversity, DOS / Freetown and FEA / Kinoya Expansion Construction projects during the ~~end~~year ofended ~~this~~December ~~decade~~31, 2015. InUpon ~~light~~successful completion of ~~its~~the ~~experience~~Kinoya projects, ~~Pernix~~the isO&M ~~uniquely~~Agreement ~~qualified~~between toFEA ~~perform~~and inPFL ~~emerging~~was ~~markets~~amended ~~which~~to ~~can~~include beO&M ~~more~~services ~~remote~~for the newly installed engines and ~~logistically~~the ~~challenging~~master ~~environments.~~O&M ~~The~~agreement ~~combination~~was ofextended ~~growing~~five ~~demand~~years toand ~~supplement~~now orexpires ~~replace~~in ~~aging~~2028. ~~power~~In ~~generation~~September ~~equipment~~2015, ~~growing~~the ~~demand~~DOS awarded the Company a contract for ~~power~~$81.6 inmillion ~~non-OECD~~for ~~countries~~the ~~and~~U.S. ~~demand~~Embassy toBerlin ~~improve~~as ~~power~~well ~~efficiency~~as ~~through~~several ~~the~~large ~~use~~technical ofmarket ~~new~~projects ~~power~~at ~~technologies~~BEK ~~presenting~~BG. aIn ~~wealth~~March of2016, ~~opportunities~~the DOS awarded the Company a contract for ~~construction~~$169.2 ~~and~~million ~~distribution~~for ofthe ~~power~~new U.S. ~~Pernix~~Embassy ~~Group’s~~Compound ~~power~~in ~~segment~~Maputo, isMozambique. ~~well~~We ~~positioned~~are toactively ~~pursue~~pursuing ~~these~~additional ~~opportunities~~DOS ~~which~~projects ~~are~~as ~~expected~~well toas belarge ~~smaller~~commercial and advanced manufacturing opportunities in ~~size~~North America and ~~fit~~large ~~well~~projects in Guam with ~~our~~potential ~~agile~~award ~~organizational~~expectation ~~structure~~in mid-2016.

~~Our~~In ~~revenue~~relation isto ~~dependent on~~ our ~~ability~~recent toBEK ~~attract~~BG and ~~retain~~PPG ~~qualified~~acquisitions, ~~and~~we ~~productive~~retained ~~employees~~the leadership, ~~identify~~operational ~~business~~and ~~opportunities,~~functional ~~allocate~~teams ~~our~~of ~~labor~~both ~~resources~~acquisitions. toThey ~~profitable~~will ~~markets~~continue to serve, ~~align~~grow and utilize customer and supplier relationships which will provide the Company with ~~strategic~~the ~~partners,~~capabilities ~~secure~~to ~~new~~further ~~contracts~~strengthen and leverage global opportunities.

Management continues to focus on bidding and ~~renew~~winning ~~existing~~new ~~client~~contracts ~~agreements~~on ~~among~~a ~~other~~stand-alone ~~factors.~~basis ~~Moreover~~as well as with our strategic partners, pursuing both existing as awell ~~professional~~as ~~services~~new ~~company~~customers. Meanwhile, ~~maintaining~~the Company enjoys the ~~high~~benefit ~~quality~~of having $80.2 million of ~~the~~net ~~work~~operating ~~generated~~and bycapital ~~our~~loss ~~employees~~carryforwards isthat ~~integral~~may be used to offset future U.S. federal and state taxable earnings. These benefits are potentially advantageous to our ~~revenue~~existing ~~generation~~business and could be enhanced by our plan to grow through acquisitions that are accretive to earnings.

~~Our~~During ~~costs~~the ~~consist~~year ~~primarily~~ended ofDecember 31, 2015 and 2014, the ~~compensation~~Company wegenerated ~~pay~~revenues of $195.5 million and $85.3 million, respectively. Construction revenue increased $110.8 million primarily attributable to our ~~employees~~recent acquisitions, ~~including~~while ~~salaries,~~power ~~fringe~~services ~~benefits,~~revenue ~~the~~decreased ~~costs~~$0.6 ofmillion. ~~hiring~~Excluding ~~subcontractors~~our ~~and~~recent ~~other~~acquisitions, ~~project-~~new awards and related ~~expenses,~~change orders with contract value in excess of $83.6 million were granted to the ~~costs~~Company ~~associated~~during ~~with~~the ~~maintaining~~year ended 2015 and ~~operating~~with ~~diesel~~the ~~power~~completion ~~plants~~of ~~(fuel~~two ~~related~~acquisitions ~~costs)~~in ~~and~~June ~~sales~~2015, ~~general~~backlog ~~and~~is ~~administrative~~$379.4 ~~costs~~million as of December 31, 2015.

Gross profit for the year ended December 31, 2015 was $7.6 million or $6.3 million lower than the prior year period driven primarily by completion of DOS projects which carried higher recognized margins, $1.8 million of non-cash amortization expense related to our acquisitions and recognition of additional costs of approximately $2.5 million associated with three loss contracts in 2015.

Total Consolidated Revenue by year for 2011 through 2015 (in millions):

	2011		2012		2013		2014		2015
$	58.0	$	120.0	$	73.8	$	85.3	$	195.5

Other Matters

VUI has received a decision by the Vanuatu judiciary regarding a retender of the long term concession deed to operate and maintain the diesel and hydro power operations in Vanuatu. The government has issued a new agreement to VUI to continue to operate the plant under the MOU terms until the retender process is completed. As of the date of this report, VUI continues to operate and maintain the system. Once a retender is completed and if VUI is not awarded the concession deed or if the VUI is unable to sufficiently reduce operating costs under the new tariff ruling, it could have a material and negative impact on the Company’s future income, cash flows and financial condition.

VUI accounted for $1.0 million of Pernix consolidated pretax income in 2015 and 2014. VUI has received high ratings from the Utilities Regulatory Authority of Vanuatu for work performed under the MOU to date but the Company does not know the likelihood of a successful retender bid by VUI or the financial impact of the new tariff ruling.

Our revenue is dependent on our ability to attract and retain qualified and productive employees, identify business opportunities, allocate our labor resources to profitable markets, align with strategic partners, secure new contracts and renew existing client agreements among other factors. Moreover, as a professional services company, maintaining the high quality of the work generated by our employees is integral to our revenue generation.

Our costs consist primarily of the compensation we pay to our employees, including salaries, benefits, the costs of hiring subcontractors and other project-related expenses, the costs associated with maintaining and operating diesel power plants (fuel related costs) and sales, general and administrative costs.

Critical Accounting Policies and Estimates

Our financial statements are presented in accordance with accounting principles generally accepted in the United States of America (GAAP). Highlighted below are the accounting policies that management considers ~~significant~~critical to understanding the operations of our business. See Note 3 of the notes to our consolidated financial statements for more detailed disclosure of the Company’s significant accounting policies.

Basis of Presentation

The consolidated financial statements include the accounts of all majority-owned subsidiaries in which control does not rest with other entities, as well as joint ventures which are determined to be variable interest entities (“VIE”) and in which the Company is the primary beneficiary. During ~~2014~~2015, ~~and~~the ~~2013,~~Company’s VIE related primarily to its Pernix Guam subsidiary. See Note 4 to the ~~variable~~consolidated ~~interest~~financial ~~entities~~statements. During 2014, the VIE and related financial results ~~are~~were not material. All inter-company accounts have been eliminated in consolidation. The Company effected an elective accounting quasi-reorganization as of September 30, 2012, which eliminated its accumulated deficit in retained earnings and accumulated other comprehensive income (loss) against additional paid-in-capital. The consolidated financial statements as of December 31, ~~2014~~2015 and ~~2013~~2014 reflect the adjustments to fair value of assets and liabilities that were recorded in connection with the implementation of the quasi-reorganization and subsequent amortization thereof. See Note 2 in our notes to our consolidated financial statements.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The more significant estimates affecting amounts reported in the consolidated financial statements relate to revenues under long-term contracts, including estimates of costs to complete projects and provisions for contract losses, fair value allocations used in business combinations, allowances for doubtful accounts, reserves for self-insured risk, valuation of options in connection with various share-based compensation plans, insurance accruals, goodwill impairment evaluations and the valuation allowance against deferred tax assets. Accordingly, there can be no assurance that the estimates, assumptions and values reflected in the valuations will be realized. Actual results could vary materially.

Revenue Recognition

WeConstruction ~~offer~~Revenue. ~~our~~Revenue ~~services~~from ~~through~~construction ~~two~~contracts ~~operating~~is ~~business~~recognized ~~segments:~~using ~~General~~the ~~Construction~~percentage-of-completion method of accounting based upon costs incurred and ~~Power~~estimated ~~Generation~~total ~~Services~~projected ~~which~~costs. ~~are~~Our ~~supported~~projects include general contracting design/build and construction management services, and include provisions of termination for convenience by the ~~Corporate~~party ~~segment~~contracting with us. ~~Revenue~~Such ~~recognition~~provisions also allow payment to us for ~~each~~the work performed through the date of termination. Contracts can vary depending on the ~~non-corporate~~customer’s ~~segments~~need. isOur ~~described~~contracts byare ~~segment~~on ~~below~~lump sum, guaranteed maximum price and the cost plus fee basis.

General Construction Revenue. Revenue from construction contracts is recognized using the percentage-of-completion method of accounting based upon costs incurred and estimated total projected costs. Our current projects with the United States Government are design/build and design/bid/build contracts with fixed contract prices and include provisions of termination for convenience by the party contracting with us. Such provisions also allow payment to us for the work performed through the date of termination. Contracts on our domestic projects can vary depending on the customer’s need. Currently on our domestic work we have active contracts on the lump sum and the cost plus fee basis.

Revenues recognized under the percentage-of-completion method require applying a percentage (actual costs incurred through the reporting date divided by the total estimated costs to complete the project) to the fixed contract price. The Company only uses approved contract changes in its revenue recognition calculation. This method of revenue recognition requires that we estimate future costs to complete a project. Estimating future costs requires

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judgment of the value and timing of material, labor, scheduling, product deliveries, contractual performance standards, liability claims, impact of change orders, contract disputes as well as productivity. In addition, sometimes clients, vendors and subcontractors will present claims against us for recovery of costs they incurred in excess of what they expected to incur, or for which they believe they are not contractually responsible. In turn, we may also present claims to our clients, vendors and subcontractors for costs that we believe were not our responsibility or may be beyond our scope of work. The Company will include costs associated with these claims in its financial information when such costs can be reliably identified and estimated. Similarly, the Company will include in revenue amounts equal to costs for claims, where the outcome is probable that the claim will be found in the favor of the Company. Our estimates, assumptions and judgments are continually evaluated based on known information and experience. However, the actual amounts could be significantly different from our estimates. Costs and estimated earnings in excess of amounts billed to customers are recognized as an asset. Amounts billed in excess of costs and estimated earnings are recognized as a liability. The Company will record a provision for losses when estimated costs exceed estimated revenues. To mitigate risks associated with cost overruns, the Company may employ fixed price contracts with subcontractors.

Costs in excess of billings are assets that represent the contract revenue recognized to date using the percentage-of-completion accounting method but not yet invoiced to the client due to contract terms or the timing of the accounting invoicing cycle. Billings in excess of costs on uncompleted contracts represent the billings to date, as allowed under the terms of a contract, but not yet recognized as contract revenue using the percentage-of-completion accounting method.

Cost of Construction Revenue. Cost of construction revenue consists of direct costs on contracts, including labor and materials, amounts payable to subcontractors, direct and certain indirect overhead costs, equipment expense (primarily depreciation, maintenance, and repairs), interest associated with construction projects, and insurance costs. The Company records a portion of depreciation in cost of revenue. Contracts frequently extend over a period of more than one year. Revisions in cost and profit estimates during construction are recognized in the accounting period in which the facts that require the revision become known. Losses on contracts are provided for in total when determined, regardless of the degree of project completion. Claims for additional contract revenue are recognized in the period when it is probable that the claim will result in additional revenue and the amount can be reasonably estimated.

Power Generation Service Revenue. The Company receives a combination of fixed and variable monthly payments as compensation for its production of power. The variable payments are recognized based upon power produced and billed to the customer as earned during each accounting period.

Claims Recognition

Claims are amounts in excess of the agreed contract price (or amounts not included in the original contract price) that we seek to collect from customers or others for delays, errors in specifications and designs, contract terminations, change orders in dispute or unapproved as to both scope and price or other causes of unanticipated additional costs. The Company records contract revenue related to claims only if it is probable that the claim will result in additional contract revenue and if the amount can be reliably estimated. In such cases, the Company records revenue only to the extent that contract costs relating to the claim have been incurred. The amounts recorded, if material, are disclosed in the notes to the financial statements. Costs attributable to claims are treated as costs of contract performance as incurred.

Stock Based Compensation

We recognize the expense associated with stock option awards over the period during which an employee, director or consultant is required to provide services in exchange for the award, known as the requisite service period (usually the vesting period). The related option awards for employees and directors are classified as equity and as such are valued at the grant date and are not subject to remeasurement thereafter. Estimates are revised if subsequent information indicates that forfeitures will differ from previous estimates, and the cumulative effect on compensation cost of a change in the estimated forfeitures is recognized in the period of the change. The option valuations are performed using a fair value Black Scholes model. Option valuation models require the input of highly subjective assumptions, and changes in the assumptions can materially affect fair value estimates.

~~Table~~Revenues and gross profit on contracts can be significantly affected by change orders and claims that may not have been approved by the customer until the later stages of ~~Contents~~a contract or subsequent to project completion. This method of revenue recognition requires that we estimate future costs to complete a project. Estimating future costs requires judgment of the value and timing of material, labor, scheduling, product deliveries, contractual performance standards, liability claims, impact of change orders, contract disputes as well as productivity. Certain unapproved change orders may be accounted for based on probability of cost recovery. For those change orders, if it is not probable that costs will be recovered through a change in the contract price, the costs attributable to such pending change orders are treated as contract costs without incremental revenue. For contracts where it is probable that the costs will be recovered through a change order, total estimated contract revenue is increased by the lesser of the amount expected to be recovered or the costs expected to be incurred. Revenues recognized in excess of amounts billed and the associated costs are classified as current assets, since it is anticipated that these earnings and costs will be billed and collected. Amounts billed in excess of costs and estimated earnings are recognized as a liability. The Company will record a provision for losses when estimated costs exceed estimated revenues. Contracts are generally completed in 24 months on average from the date on which the Company is ordered to proceed with substantial work. In situations where the Company is responsible for procurement of construction materials, shipping and handling expenses are included in the contract costs of revenue and in revenue to the extent the contract is complete.

~~See~~Power ~~Note~~Services 15Revenue. inThe ~~the~~Company ~~notes~~receives toa ~~our~~combination ~~consolidated~~of ~~financial~~fixed ~~statements~~and variable monthly payments as compensation for ~~additional~~its ~~information~~production ~~pertaining~~of power. The variable payments are recognized based upon power produced and billed to the ~~stock~~customer ~~based~~as ~~compensation~~earned ~~plans~~during each accounting period.

Income Taxes

Valuation Allowance. Deferred income taxes are recorded using the asset and liability method whereby deferred tax assets and liabilities are established for the difference between the financial reporting and income tax basis of assets and liabilities, as well as operating loss and tax credit carry forwards. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment of such changes to laws and rates. In accordance with the quasi-reorganization requirements tax benefits that existed at the date of the quasi-reorganization but that were not recognized at the date of the quasi-reorganization will be recorded directly to equity.

Deferred tax assets are reduced by a valuation allowance when, in our opinion, it is more likely than not that some portion or all of the deferred tax assets may not be realized. Whether a deferred tax asset may be realized requires considerable judgment. In considering the need for a valuation allowance, we consider a number of factors including the future reversal of existing temporary differences, future taxable income exclusive of reversing temporary differences and carry forwards, taxable income in carry-back years if carry-back is permitted under tax law, and prudent and feasible tax planning strategies that would normally be taken by management, in the absence of the desire to realize the deferred tax asset. Whether a deferred tax asset will ultimately be realized is also dependent on varying factors, including, but not limited to, changes in tax laws and audits by tax jurisdictions in which we operate.

WeUndistributed ~~review~~Non-U.S. Earnings. The results of our operations outside of the ~~need~~United States are consolidated for afinancial ~~valuation~~reporting; ~~allowance~~however, atearnings ~~least~~from ~~quarterly~~investments in non-U.S. Ifoperations weare ~~determine~~included wein ~~will~~domestic ~~not~~U.S. ~~realize~~taxable ~~all~~income only when actually or ~~part~~constructively ofreceived. ~~our~~No U.S. Federal or State deferred ~~tax~~taxes ~~asset~~have inbeen provided on the ~~future,~~undistributed weearnings ~~will~~of ~~record~~non-U.S. anoperations ~~additional~~of ~~valuation~~approximately ~~allowance~~$3.6 ~~Conversely~~million through September 30, if2014 abecause ~~valuation~~we ~~allowance~~made ~~exists~~the election to permanently reinvest these earnings overseas to fund growth and weoperations. ~~determine~~The Company determined that ~~all~~we orwill ~~part~~no oflonger ~~the~~permanently ~~net~~reinvest ~~deferred~~its ~~tax~~PFL ~~asset~~earnings isoverseas ~~more~~effective ~~likely~~October ~~than~~1, ~~not~~2014 in conjunction with its partial sale of PFL to beFijian ~~realized,~~Holdings ~~then~~Limited ~~the~~(FHL) ~~amount~~for a 25% interest. Upon repatriation of ~~the~~these ~~valuation~~earnings, ~~allowance~~those ~~will~~earnings would be ~~reduced.~~included ~~This~~in ~~adjustment~~taxable ~~will~~income ~~increase~~at orthat ~~decrease~~time. However, any additional U.S. income ~~tax~~taxes ~~expense~~may be offset in part by the ~~period~~use of ~~such~~foreign ~~determination~~tax credits. U.S. income tax liabilities are recorded from our earnings due to operations in Vanuatu as there are no income taxes in Vanuatu and Pernix Group repatriates these earnings on a monthly basis.

Undistributed Non-U.S. Earnings. The results of our operations outside of the United States are consolidated for financial reporting; however, earnings from investments in non-U.S. operations are included in domestic U.S. taxable income only when actually or constructively received. No U.S. Federal or State deferred taxes have been provided on the undistributed earnings of non-U.S. operations of approximately $3.6 million and $3.2 million for the period January 1, 2014 through September 30, 2014 and for the year ended December 31, 2013, respectively because we made the election to permanently reinvest these earnings overseas to fund growth and operations. The Company determined that we will no longer permanently reinvest its PFL earnings overseas effective October 1, 2014 in conjunction with its partial sale of PFL to Fijian Holdings Limited (FHL) for a 25% interest. Upon repatriation of these earnings, those earnings would be included in taxable income at that time. However, these additional U.S. income taxes may be offset in part by the use of foreign tax credits. U.S. income tax liabilities are recorded from our earnings due to operations in Vanuatu as there are no income taxes in Vanuatu and Pernix Group repatriates these earnings on a monthly basis.

Foreign Currency Translation

The functional currency of the Company’s foreign operations is the applicable local currency. The functional currency is translated into U.S. dollars for balance sheet asset and liability accounts using current exchange rates in effect as of the balance sheet date and for revenue and expense accounts using a weighted-average exchange rate during the fiscal year. The translation adjustments are reflected as a separate component of stockholders’ equity captioned accumulated other comprehensive income (loss). The assets and liabilities of the entity that are denominated in currencies other than the Company’s functional currency, are re-measured into the Company’s functional currency using end of period or historical exchange rates. Gains and (losses) associated to these re-measurements are included in other income (expense), net in the consolidated statement of operations.

From time to time, the Company is exposed to foreign currency exchange risk on various foreign transactions and the Company attempts to reduce this risk and manage cash flow exposure of certain payables and anticipated transactions by entering into forward exchange contracts. At December 31, 2014 and 2013, the foreign currency risk is not material and there were no foreign exchange contracts outstanding. The Company historically has not applied hedge accounting treatment to its forward exchange contracts.

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Results of Operations

Results of Operations for the year ended December 31, ~~2014~~2015 compared to the year ended December 31, ~~2013~~2014

Revenues

Total revenues increased $11110.52 million ~~or 16%~~ to $85195.35 million infor ~~2014~~the ~~compared~~year toended ~~$73.8~~December ~~million~~31, ~~for~~2015 ~~2013~~compared to 2014. This increase is comprised of a $10159.89 million ~~increase~~of ~~in construction~~ revenue ~~and~~associated awith ~~$0.7~~the ~~million~~Pernix ~~increase~~Guam ~~in power generation~~ and ~~other~~BEK ~~revenue.~~BG ~~The~~acquisitions, ~~construction~~offset ~~revenue~~by ~~increase~~a ~~was~~reduction ~~driven~~in byorganic ~~the~~construction ~~timing~~revenue of ~~new~~$49.1 ~~projects,~~million ~~including projects that significantly ramped up in 2014~~ and ~~the~~a ~~substantial~~reduction ~~completion~~ of a$0.6 ~~large~~million ~~project~~ in ~~January 2014. The~~ power ~~generation~~services ~~revenue~~and ~~increase~~other ~~was driven by higher than normal power demand due to lower water levels in Fiji resulting in reduced hydro generation power~~revenue.

~~General~~ Construction – -Including ~~Construction~~recent ~~revenues~~acquisitions, ~~are recorded using the percentage of completion method and in 2014 relate to ten~~ construction ~~contracts~~revenues for ~~six~~the ~~customers~~year ~~while~~ended ~~construction~~December ~~revenue~~31, ~~related~~2015 towere ~~six contracts for two customers in 2013. Construction revenue increased~~ $10189.84 million orcompared ~~15.9%~~ to $78.6 million in ~~2014,~~the ~~from~~prior ~~$67~~year.8 ~~million~~Excluding inour ~~2013.~~recent ~~The~~acquisitions, ~~increase~~construction ~~was~~revenues ~~primarily~~for ~~attributable~~the toyear ~~$46.1~~ended ~~million~~December of31, ~~revenue~~2015 ~~increases~~compared ~~associated~~to ~~with~~the ~~three~~prior ~~new~~year ~~contracts~~decreased ~~awarded~~$49.1 inmillion ~~2014.~~primarily ~~The~~driven ~~scope~~by the completion of ~~these~~existing projects ~~involves~~previously ~~design~~awarded and ~~construction~~the delay of aexpected 36awards, MWwhich ~~expansion~~was ofpartially ~~the~~offset ~~Kinoya~~by ~~power~~four ~~generation~~newly ~~facility,~~awarded acontracts ~~nanotechnology~~in ~~laboratory~~2015 and ~~other~~the ~~classrooms~~second athalf ~~Texas~~of ~~A&M University~~2014. The ~~2014~~top ~~revenue~~five ~~generated~~BEK ~~from~~BG ~~these~~ projects ~~was~~accounted ~~$23.5~~for ~~million,~~approximately ~~$19.7~~50% ~~million,~~of ~~and~~the ~~$2.9 million, respectively. The increase in~~ revenue ~~related~~generated toduring ~~these~~the ~~projects~~year ~~was~~which ~~partially~~were ~~offset~~in ~~primarily~~the bylife ascience ~~$39.4~~and ~~million~~aerospace ~~reduction~~industries located in ~~revenue~~the ~~reflecting~~south ~~the~~and ~~substantial~~south ~~completion~~east region of the ~~Sather~~United ~~CHU in January 2014~~States.

Service ~~fees—~~Fees ~~Total~~ — Power ~~Generation~~plant ~~revenue~~service ~~increased~~revenues were $06.80 million, orand ~~13.3% to~~ $6.6 million infor the years ended December 31, 2015 and 2014, ~~compared~~respectively, toa $50.86 million indecrease over the prior year. The ~~increase~~decrease ~~primarily~~is ~~reflects~~due ~~the~~to higher ~~use~~water oflevels ~~PFL Kinoya plant generated diesel power~~ in Fiji ~~due~~which todrove lower ~~water~~diesel power demand, ~~which~~higher isplanned anand ~~alternate~~unplanned ~~power~~maintenance ~~source~~and inthe ~~Fiji.~~strengthening ~~VUI~~of ~~revenue~~the ~~also~~USD ~~decreased~~dollar ~~$0.1~~against ~~million~~the ~~from~~FJD $1dollar.~~5 million in 2013 to $1.4 million in 2014.~~

Costs and Expenses

~~General~~ Construction Costs —- ~~including Construction Costs — Related Party.~~ Total construction costs increased $4116.12 million ~~from 2013~~ to $68184.02 million ~~for~~as ~~2014,~~compared ~~primarily~~to ~~reflecting~~ the ~~additional~~prior ~~costs~~year. Costs associated with ~~three~~the ~~additional~~BEK ~~projects. These~~BG ~~additional~~and ~~costs~~PPG ofacquisitions ~~approximately~~were $46154.07 million ~~were~~and ~~offset~~organic bycosts ~~the~~were $4429.05 million. ~~decrease~~In inaddition, construction costs ~~associated~~include ~~with~~amortization ~~the~~expense ~~substantial~~of ~~completion~~$1.5 ofmillion ~~the~~related ~~CHU~~to ~~project~~customer contracts / backlog in ~~2013~~connection with our June 2015 acquisitions.

Operations and Maintenance Costs — Power ~~Generation~~plant ~~Plant. Operations and maintenance~~ costs ~~— power generation plant~~ increased $0.73 million ~~(27.1%)~~ to $3.47 million infor ~~2014~~the ~~from~~year ended December 31, 2015 compared to $23.74 million infor ~~2013,~~the ~~primarily~~prior year, reflecting higher ~~major planned~~ maintenance atexpense ~~Kinoya~~incurred ~~versus~~during the ~~comparable prior~~ year ~~period~~ended ~~when~~December no31, ~~major~~2015 ~~planned~~in ~~maintenance~~Kinoya ~~occurred~~and Vuda.

Gross Profit

Gross profit ~~increased~~decreased by $6.73 million ~~(93.3%)~~ to $137.96 million, for ~~2014~~the asyear ~~compared~~ended toDecember 31, 2015 from $713.29 million ~~for~~in the prior year,. ~~due~~Gross ~~primarily~~profit toassociated ~~improved~~with ~~results~~our ~~through~~recent ~~project~~acquisitions ~~cost~~was ~~savings~~$5.2 inmillion ~~the~~and ~~construction~~organic ~~segment~~gross profit was $2.4 ~~The~~million. Specific ~~increase~~drivers into the ~~construction~~non-acquisition ~~segment~~decrease in gross profit ~~reflects~~were ~~the~~ substantial completion of ~~the~~certain ~~Sather and Baku~~ projects which ~~are~~had ~~99% and 89.5% complete, coupled with~~ higher ~~margin~~recognized ~~projects~~margins ~~that~~in ~~were~~2014, ~~awarded~~and atrecognition ~~the end~~ of ~~2013~~$2.5 ~~Power~~million ~~segment~~of ~~margin~~additional ~~was~~costs ~~slightly~~associated ~~lower~~with ~~reflecting~~three ~~higher~~loss ~~planned~~contracts ~~maintenance~~in ~~expenses that more than offset higher power generation fees for 2014 compared to 2013~~2015.

Operating Expenses

Salaries and Employee Benefits. ~~Salaries and employee benefits~~ increased $38.03 million ~~(107%)~~ to $514.~~9 million for 2014 from $~~2.9 million for ~~2013. The increase was partially due to salaries and benefits for key hires into new positions including~~ the ~~construction~~year ~~business~~ended ~~development~~December ~~and estimating~~31, ~~power~~2015 ~~business~~compared ~~development, procurement and accounting personnel necessary~~ to ~~continue~~the ~~growing~~prior ~~our~~year ~~power~~reflecting ~~and construction businesses~~$6.6 ~~Additionally,~~million ~~there~~of ~~were~~costs noassociated ~~indirect~~with ~~project~~the ~~management~~BEK ~~office~~BG ~~(PMO)~~ and ~~Lombard~~PPG ~~office project support cost allocation to projects in 2014 as compared to $1~~acquisitions.~~6 million allocated to projects in 2013.~~

General and Administrative expenses increased $7.3 million to $11.4 million for the year ended December 31, 2015 compared to the prior year. This increase includes $1.7 million of non-recurring transaction costs and $1.9 million of non-recurring professional and integration costs, and $3.8 million of general and administrative costs associated with the BEK BG and PG acquisitions as well as higher travel costs and professional fees.

Other Income (Expense)

Other income (expense) increased $0.1 million to ($0.2) million of expense primarily attributable to interest expense associated with debt obligations.

~~Table~~Pretax ofIncome ~~Contents~~(Loss)

~~General~~Consolidated ~~and~~pretax ~~Administrative~~income ~~and~~(loss) ~~Other~~decreased ~~Operating Expenses. General and administrative expenses totaled~~ $121.9 million ~~and~~to ~~were~~a pretax loss of ($018.71) million ~~higher~~for inthe ~~2014~~year ~~compared~~ended toDecember ~~2013~~31, ~~primarily~~2015 ~~due~~compared to ~~higher~~pretax ~~power~~income ~~and~~of ~~construction~~$3.8 ~~business~~million ~~development~~for ~~consulting~~the ~~and~~prior ~~travel~~year, ~~expense~~primarily ~~coupled~~due ~~with~~to anreduced ~~increase~~gross inprofit ~~professional~~on ~~fees~~lower ~~associated~~organic ~~with transition from our predecessor accounting firm~~revenue, as$2.5 ~~well~~million asof ~~investment~~additional ~~banking~~costs ~~and~~recognized ~~marketing~~on ~~fees~~loss ~~associated~~contracts, ~~with the Company’s efforts to expand the customer base~~ and ~~financing sources~~$3.6 ~~Finally,~~million ~~higher costs~~ of ~~owning~~non-recurring ~~the~~transaction ~~corporate~~and ~~headquarters~~integration ~~building~~costs ~~for~~associated ~~the~~with ~~full~~our ~~twelve~~recent ~~months in 2014 compared to six months during 2013 also contributed to the increase in general and administrative expenses~~acquisitions.

~~Total~~Consolidated ~~Other~~Net Income (~~Expense~~Loss) Attributable to Common Stockholders

~~Total~~Consolidated ~~other~~net ~~expense,~~income ~~net~~(loss) was ~~stable~~($19.0) atmillion ~~less~~and ~~than~~ ($0.1.8) million for the ~~years~~year ended December 31, 2015 and 2014, respectively, for the reasons noted above as well as decreases in income tax expense, non-controlling interest net income, and ~~2013~~preferred stock dividends.

Income Tax Benefit (Expense)

The income tax expense decreased by $4.5 million during 2014 to $0.5 million, from a 2013 income tax expense of $5.0 million. The decrease primarily reflects the deferred income tax expense of $4.9 million for 2013, which consists of $4.1 million of federal deferred expense and $0.8 million of deferred state expense resulting from an increase in the valuation allowance on deferred tax assets. This expense was a non-cash expense and had no impact on the Company's liquidity, cash flows, or its ability to execute projects or conduct ongoing operations. As a result of the increase in the valuation allowance, the deferred tax assets were fully reserved as of December 31, 2013, and remain fully reserved at December 31, 2014. U.S. net operating and capital loss carryforwards totaling approximately $70.4 million are available to Pernix Group, Inc. as of December 31, 2014.

Consolidated Net Loss Attributable to Common Shareholders

Net loss attributable to Pernix common shareholders was ($1.8) million and ($4.7) million in 2014 and 2013, respectively. The decrease in net loss most significantly relates to the $4.9 million deferred income tax expense related to management’s third quarter 2013 decision to record an increase in the valuation allowance on deferred tax assets. In 2014 the increase in gross profit as discussed above was offset by the increase in operating expenses due to the Company trying to grow and expand its business operations through new contract awards and potential acquisitions.

Liquidity and Capital Resources

		December 31, 2014		December 31, 2013
		December 31,
Cash and cash equivalents	$	11,169,169	$	19,497,840
		2015		2014
		December 31, 2014		December 31, 2013
Cash and cash equivalents	$	18,792,712	$	11,169,169
Cash (used in) provided by operating activities	$	(4,650,272)	$	3,996,884
		2015		2014
Cash used in investing activities		(1,271,553)		(1,487,604)
Cash used in operating activities	$	(9,786,596)	$	(4,650,272)
Cash used in financing activities		(2,232,481)		(4,242,754)
Cash used in investing activities		(21,271,368)		(1,271,553)
Effect of exchange rates on cash		(174,365)		(175,584)
Cash (used in) provided by financing activities		38,823,492		(2,232,481)
Decrease in cash and cash equivalents	$	(8,328,671)	$	(1,909,058)
Effect of exchange rates on cash		(141,985)		(174,365)
Increase (decrease) in cash and cash equivalents	$	7,623,543	$	(8,328,671)

Cash Requirements

We generate cash flows primarily from serving as the general contractor on construction projects for ~~the~~our ~~U.S.~~global ~~Government and various domestic~~ customers, through the operation and maintenance of power ~~generation~~ plants, ~~from~~ financing obtained from third party banks and affiliated parties, and ~~through~~ sales of common and preferred stock. In November 2014, PGI and Pernix RE, LLC entered into a loan and security agreement with Barrington Bank & Trust Company to establish a revolving line of credit facility and a letter of credit facility. The revolving credit facility provides a borrowing capacity of $5 million and the letter of credit facility provides up to $10 million in aggregate standby or trade letters of credit. The facilities require the Company to comply with various covenants including, among others, to maintain minimum liquidity of up to the amount outstanding on the borrowing capacity. The Company’s primary uses of the revolving credit facility are to fund potential working capital needs.

InDuring the year ended December ~~2013~~31, 2015, the Company ~~repaid~~received ~~the~~additional ~~remaining~~borrowings to assist with working capital needs (as described in Note 11). These borrowings include PFL’s working capital loan from Fiji Holdings Limited on behalf of Pernix Guam for $21.34 million and Pernix Guam’s interchangeable letter of ~~debt~~credit towith aANZ ~~related~~for ~~party~~$1.5 ~~resulting~~million. inPGI also entered into a ~~debt~~two ~~free~~year ~~balance~~term ~~sheet~~loan aswith Bent Marketing Limited, an affiliate of ~~December~~a 31major shareholder, ~~2013~~for $6.0 ~~The~~million. ~~Company~~These ~~also~~borrowings ~~sold~~were ~~Series~~incremental Ato ~~Preferred~~Pernix ~~Stock~~Guam’s tofive ~~its~~year ~~majority~~term ~~shareholders~~loan inwith ~~late~~ANZ ~~December~~of ~~2013,~~$1.7 ~~resulting~~million inand anline ~~inflow~~of credit of $5.0.5 million. ofTotal ~~proceeds~~outstanding ~~available~~debt toas ~~the~~of ~~Company~~December ~~for~~31, 2015 was $11.3 million.

During the year ended December 31, 2015, the $7.6 million increase in the cash balance is most significantly related to the Company’s $9.8 million cash used in operating activities, $20.4 million used for acquisitions which were primarily funded by the issuance of $28.0 million in preferred stock (see Note 14) and $12.2 million of proceeds from debt. The cash used in operating activities is largely attributable to subcontractor and material purchases made on active contracts and timing of accounts receivable and payable activity, as well as non-recurring transaction and professional costs associated with our BE&K BG and PPG acquisitions.

~~Table~~It is our opinion that, in the absence of ~~Contents~~significant unanticipated cash demands, current and forecasted cash flow from our operations, combined with equity and debt financing capability will provide sufficient funds to meet anticipated operating requirements, capital expenditures, equity investments, and strategic acquisitions. We also believe that collections on the outstanding receivables with a timely payment history as well as funds available from various funding sources will permit the construction operations to meet the payment obligations to vendors and subcontractors.

~~future~~As ~~acquisitions~~of ~~and~~December ~~operations as needed. On May 12~~31, ~~2014~~2015, the Company’s ~~current~~total ~~Registration~~assets ~~Statement~~exceeded ~~became~~total ~~effective~~liabilities ~~with~~by ~~the SEC thereby registering 5,000,000 shares of previously unissued stock in a primary fixed price offering and~~ $22.6~~,236,185~~ ~~shares on behalf of selling stockholders under a secondary offering~~million. The Company ~~anticipates~~has ~~this registration will augment our current sources of capital~~$80.2 ~~Beyond~~million ~~the~~in ~~cash~~net ~~expected~~operating toloss becarryforwards ~~generated~~that byit ~~operations,~~may ~~from~~utilize ~~third~~in ~~party banks and~~ the ~~issuance~~future ofto ~~additional~~offset ~~shares,~~future ~~the~~taxable ~~Company may seek debt financing or equity based support from its principal stockholders, Ernil and Halbarad, on an as-needed basis only~~income.

WeThe ~~also~~Company ~~believe~~does ~~that~~not ~~collections~~currently onhave ~~the~~material ~~outstanding~~commitments ~~receivables~~for ~~which~~capital ~~are~~expenditures ~~primarily U.S. Government or a major public university based receivables with a timely payment history~~ as ~~well as funds available from various funding sources will permit the construction operations to meet the payment obligations to vendors and subcontractors. Distribution~~ of ~~the PSJV accumulated earnings are made on a quarterly basis and all such distributions have been made to Serka as of~~ December 31, ~~2014~~2015. It is our opinion that, in the absence of significant unanticipated cash demands, current and forecasted cash flow from our operations, combined with equity and debt financing capacity, will provide sufficient funds to meet anticipated operating requirements, capital expenditures, equity investments, and strategic acquisitions.

The Company has significant operating loss carryforwards that it may utilize in the future that could be used to offset future taxable income.

As of December 31, 2014, the Company’s total assets exceeded total liabilities by $12.0 million. This remained fairly consistent between 2014 and 2013. The biggest driver of the excess in 2014 was the cost in excess of project billings incurred on the Niger and Kinoya Expansion projects. These costs will be recaptured in 2015 which will also increase the cash and cash equivalents balance.

The $8.3 million decrease in cash during 2014 includes cash used in operating activities of $4.7 million which is a result of costs in excess of billings of $7.7 million as of December 31, 2014. Management believes these negative cash flows will be short term as the costs incurred on projects will be recaptured in the short term once billings to customers are made. Additionally, the decrease in total cash was a result of cash used in financing activities of $2.2 million which was primarily a result of non-controlling interest payments to JV partners of $4.1 million. These payments were partially offset by $2.3 million of cash proceeds received on the sale of a partial interest in PFL.

The Company does not currently have material commitments for capital expenditures as of December 31, 2014.

Recent Accounting Pronouncements

In January 2014, the FASB issued ASU 2014-05, ‘‘Service Concession Arrangements.’’ This ASU clarifies that, unless certain circumstances are met, operating entities should not account for certain concession arrangements with public-sector entities as leases and should not recognize the related infrastructure as property, plant and equipment. This ASU is effective for interim and annual reporting periods beginning after December 15, 2014. For the year ended December 31, 2014, Management has elected to early adopt the standard making it effect for the full year 2014. The Company has completed its evaluation of this pronouncement and has determined that the Company’s current accounting method for its concession agreements is proper and should not account for them as leases.

In May 2014, the FASB issued ASU 2014-09, ‘‘Revenue from Contracts with Customers.’’ The amendments in this update establish a comprehensive revenue recognition standard for virtually all industries under U.S. GAAP, including those that previously followed industry-specific guidance such as the real estate, construction and software industries. The revenue standard’s core principle is built on the contract between a vendor and a customer for the provision of goods and services. It attempts to depict the exchange of rights and obligations between the parties in the pattern of revenue recognition based on the consideration to which the vendor is entitled. To accomplish this objective, the standard requires five basic steps: i) identify the contract with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract, and (v) recognize revenue when (or as) the entity satisfies a performance obligation. This ASU is effective for annual reporting periods beginning after December 15, 2016 for publicly traded companies. Management is in the process of determining the impact, if any, on the Company’s financial position, results of operations and cash flows.

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In June 2014, the FASB issued ASU 2014-12 “Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period.” The amendments require that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. As such, the performance target should not be reflected in estimating the grant-date fair value of the award. Compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the period(s) for which the requisite service has already been rendered. If the performance target becomes probable of being achieved before the end of the requisite service period, the remaining unrecognized compensation cost should be recognized prospectively over the remaining requisite service period. The total amount of compensation cost recognized during and after the requisite service period should reflect the number of awards that are expected to vest and should be adjusted to reflect those awards that ultimately vest. The requisite service period ends when the employee can cease rendering service and still be eligible to vest in the award if the performance target is achieved. The stated vesting period (which includes the period in which the performance target could be achieved) may differ from the requisite service period. For all entities, the amendments in this update are effective for annual periods and interim periods within those annual periods beginning after December 15, 2015. Management does not anticipate a material impact, if any, on the company’s financial position, results of operations or cash flows related to implementation of this guidance.

In August 2014, the FASB issued ASU 2014-15, “Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern”. Currently, there is no guidance in GAAP about management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern or to provide related footnote disclosures. The amendments in this Update provide that guidance. In doing so, the amendments should reduce diversity in the timing and content of footnote disclosures. The amendments require management to assess an entity’s ability to continue as a going concern by incorporating and expanding upon certain principles that are currently in U.S. auditing standards. The amendments in this Update are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Management is in the process of determining the impact, if any, on the Company’s financial position, results of operations and cash flows.

In January 2015, the FASB issued ASU 2015-01, "Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items." Under this ASU, an entity will no longer be allowed to separately disclose extraordinary items, net of tax, in the income statement after income from continuing operations if an event or transaction is unusual in nature and occurs infrequently. ASU 2015-01 is effective for interim and annual reporting periods beginning after December 15, 2015 with early adoption permitted. Upon adoption, the company may elect prospective or retrospective application. Management does not expect the adoption of ASU 2015-01 to have a material impact on the company's financial position, results of operations or cash flows.

In February 2015, the FASB issued ASU No. 2015-02, “Consolidation — Amendments to the Consolidation Analysis.” ASU No. 2015-02 eliminates the deferral of the requirements of ASU No. 2009-17, “Consolidations — Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities” for certain interests in investment funds and provides a scope exception from Topic 810 for certain investments in money market funds. The ASU also makes several modifications to the consolidation guidance for VIEs and general partners’ investments in limited partnerships, as well as modifications to the evaluation of whether limited partnerships are VIEs or voting interest entities. ASU No. 2015-02 is effective for interim and annual reporting periods beginning after December 15, 2015. Early adoption is permitted. Management does not expect the adoption of ASU 2015-02 to have a material impact on the company's financial position, results of operations or cash flows.

Off-Balance Sheet Arrangements

The Company does not have any off-balance sheet arrangements as defined by Regulation S-K 303. However, we enter into various arrangements not recognized in our consolidated balance sheets that have or could have an effect on our financial condition, results of operations, liquidity, capital expenditures, or capital resources.

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ANZ line of credit and the Company does not anticipate any payment risk under this guarantee as of December 31, 2014. No such guarantees were outstanding as of December 31, 2013. In December 2012, the Company was awarded a $1.6 million project to install 33MW cable in the Solomon Islands and began the execution of this project in 2013. In connection with this award, a performance guarantee was established with ANZ Bank. The project is substantially complete as the 33MW cable has been installed but not yet commissioned as of December 31, 2014.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

2523

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

PERNIX GROUP, INC. Index to Consolidated Financial StatementsDecember 31, ~~2014~~2015 and ~~2013~~2014

Report of Independent Registered Public Accounting Firm	2724
Consolidated Balance Sheets as of December 31, 2014 and 2013	28
Consolidated Balance Sheets as of December 31, 2015 and 2014	25
Consolidated Statements of Operations for the Years Ended December 31, 2014 and 2013	29
Consolidated Statements of Operations for the Years Ended December 31, 2015 and 2014	26
Consolidated Statements of Comprehensive Income (Loss) for the Years Ended December 31, 2014 and 2013	30
Consolidated Statements of Comprehensive Income (Loss) for the Years Ended December 31, 2015 and 2014	27
Consolidated Statements of Changes in Stockholders’ Equity for the Years Ended December 31, 2014 and 2013	31
Consolidated Statements of Changes in Stockholders’ Equity for the Years Ended December 31, 2015 and 2014	28
Consolidated Statements of Cash Flows for the Years Ended December 31, 2014 and 2013	32
Consolidated Statements of Cash Flows for the Years Ended December 31, 2015 and 2014	29
Notes to Consolidated Financial Statements	3330

2624

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Report of Independent Registered Public Accounting Firm

Board of Directors and Stockholders’

Pernix Group, Inc.

Lombard, Illinois

We have audited the accompanying consolidated balance sheets of Pernix Group, Inc. as of December 31, ~~2014~~2015 and ~~2013~~2014 and the related consolidated statements of operations, comprehensive income (loss), changes in stockholders’ equity, and cash flows for ~~each of~~ the ~~two~~ years inthen ~~the period~~ ended ~~December 31, 2014~~. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Pernix Group, Inc. at December 31, ~~2014~~2015 and ~~2013~~2014, and the results of its operations and its cash flows for ~~each of~~ the ~~two~~ years inthen ~~the period~~ ended ~~December 31~~, ~~2014,~~ in conformity with accounting principles generally accepted in the United States of America.

/s/ BDO USA, LLP

Chicago, Illinois

March 2029, ~~2015~~2016

PERNIX GROUP, INC.
AND SUBSIDIARIES
Consolidated Balance Sheets
		As of December 31,
Assets			2015		2014
Current assets:
Cash and cash equivalents	$		18,792,712	$	11,169,169
Restricted cash			952,502		1,181,735
Accounts and other receivables			48,219,748		7,014,352
Inventories			1,844,953		1,592,430
Cost and estimated earnings in excess billings			16,563,199		7,539,080
Prepaid expenses and other current assets			1,453,539		1,718,569
Total current assets			87,826,653		30,215,335
Property and equipment, net			4,069,612		1,678,438
Deferred tax asset			552,756		—
Other assets			689,323		57,741
Intangible assets, net:
Customer contract backlog			6,176,553		—
Goodwill			19,141,273		—
Customer contract intangibles			71,950		81,651
Tradename			900,000		—
Total assets	$		119,428,120	$	32,033,165
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$		37,757,695	$	12,890,164
Accrued purchase orders			32,339,972		400,619
Billings in excess of costs and estimated earnings			6,399,339		3,787,661
Other current liabilities			7,770,659		2,764,106
Current maturities on term loan and line of credit			2,544,959		—
Total current liabilities			86,812,624		19,842,550

Other non-current liabilities			698,867		—
Deferred tax liability			552,756		—
Long-term debt			8,744,686		—
Total Liabilities			96,808,933		19,842,550

Commitments and contingencies
Stockholders' equity:
Pernix Group, Inc. and Subsidiaries Stockholders' equity
Series A convertible senior preferred stock, $0.01 par value. Authorized 1,000,000 shares, $5,000,000 liquidation preference, 1,000,000 shares issued and outstanding at December 31, 2015 and 2014			10,000		10,000
Series B convertible senior preferred stock, $0.01 par value. Authorized 400,000 shares, $850,000 liquidation preference, 170,000 shares issued and outstanding at December 31, 2015 and 2014			1,700		1,700
Series C convertible senior preferred stock, $0.01 par value. Authorized 4,000,000 shares, $28,000,000 liquidation preference, 2,800,000 shares issued and outstanding at December 31, 2015 and zero shares at December 31, 2014,			28,000		—
Common stock, $0.01 par value. Authorized 20,000,000 shares, 9,403,697 issued and outstanding			94,037		94,037
Additional paid-in capital			45,147,931		16,137,313
Accumulated deficit - since September 30, 2012			(24,586,359)		(5,581,731)
Accumulated comprehensive income (loss) - since September 30, 2012			(583,408)		(455,624)
Total Pernix Group, Inc. and Subsidiaries Stockholders' equity			20,111,901		10,205,695
Non-controlling interest			2,507,286		1,984,920
Total stockholders' equity			22,619,187		12,190,615
Total liabilities and stockholders' equity	$		119,428,120	$	32,033,165

See accompanying notes to the consolidated financial statements.

PERNIX GROUP, INC.
AND SUBSIDIARIES
Consolidated Statements of Operations

		Year Ended December 31,
		2015		2014
Revenues:
Construction revenue	$	189,415,888	$	78,573,035
Service fees – power plant		5,987,511		6,583,394
Other revenue		87,925		144,310
Gross revenues		195,491,324		85,300,739
Costs and expenses:
Construction costs		184,178,422		68,010,862
Operation and maintenance costs - power plant		3,695,246		3,389,160
Cost of revenues		187,873,668		71,400,022
Gross profit		7,617,656		13,900,717
Operating expenses:
Salaries and employee benefits		14,183,510		5,904,756
General and administrative		11,401,084		4,094,030
Total operating expenses		25,584,594		9,998,786
Operating income (loss)		(17,966,938)		3,901,931

Other income (expense):
Interest income (expense), net		(73,414)		3,243
Interest and other expense - related party		(247,090)		(83,103)
Foreign currency exchange loss		(29,022)		(128,039)
Other income, net		178,353		117,254
Total other income (expense)		(171,173)		(90,645)

Consolidated income (loss) before income tax expense		(18,138,111)		3,811,286

Income tax expense		(194,178)		(481,638)

Consolidated net income (loss)		(18,332,289)		3,329,648

Less: Net income attributable to non-controlling interest		513,752		4,712,504

Consolidated net income (loss) attributable to the stockholders of Pernix Group, Inc. and Subsidiaries		(18,846,041)		(1,382,856)

Less: Preferred stock dividends		158,587		457,442

Consolidated net income (loss) attributable to the common stockholders of Pernix Group, Inc. and Subsidiaries	$	(19,004,628)	$	(1,840,298)

Earnings (loss)per share attributable to the common stockholders of Pernix Group, Inc. and Subsidiaries:
Basic and diluted net earnings (loss) per share	$	(2.17)	$	(0.20)
Weighted average shares outstanding – basic and diluted		9,403,697		9,403,697

See accompanying notes to consolidated financial statements.

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PERNIX GROUP, INC AND SUBSIDIARIES Consolidated Statements of Comprehensive Income (Loss)

		Years Ended December 31,
		2015		2014

Consolidated net income (loss)	$	(18,332,289)	$	3,329,648
Other comprehensive income (loss):
Foreign currency translation adjustment		(165,222)		(199,946)

Total comprehensive income (loss)	$	(18,497,511)	$	3,129,702
Net income attributable to non-controlling interests	$	513,752	$	4,712,504
Foreign currency translation attributable to non-controlling interests		(37,438)		33,209
Total comprehensive income attributable to non-controlling interest	$	476,314	$	4,745,713
Total comprehensive loss attributable to the stockholders of Pernix Group, Inc. and Subsidiaries	$	(18,973,825)	$	(1,616,011)

PERNIX GROUP, INC.
AND SUBSIDIARIES
Consolidated Balance Sheets
	As of December 31,
Assets		2014		2013
Current assets:
Cash and cash equivalents	$	11,169,169	$	19,497,840
Restricted cash		1,181,735		458,919
Accounts receivable, net		7,014,352		9,223,230
Inventories		1,592,430		1,626,003
Cost and estimated earnings in excess billings		7,539,080		56,679
Prepaid expenses and other current assets		1,718,569		1,066,747
Total current assets		30,215,335		31,929,418
Property and equipment, net		1,678,438		1,282,899
Other assets		57,741		260,712
Intangible assets, net		81,651		157,934
Total assets	$	32,033,165	$	33,630,963
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	12,890,164	$	7,143,870
Accrued employee compensation and benefits		958,596		1,453,967
Accrued unbilled job costs		685,196		4,183,244
Accrued expenses - related party		612,569		529,466
Billings in excess of costs and estimated earnings		3,787,661		8,407,187
Dividend payable		241,387		186,137
Other current liabilities		666,977		475,159
Total current liabilities		19,842,550		22,379,030
Commitments and contingencies
Stockholders' Equity:
Pernix Group, Inc. and Subsidiaries Stockholders' equity
Series A convertible senior preferred stock, $0.01 par value. Authorized 1,000,000 shares, $5,000,000 liquidation preference, 1,000,000 shares issued and outstanding at December 31, 2014 and 2013		10,000		10,000
Series B convertible senior preferred stock, $0.01 par value. Authorized 400,000 Shares, $850,000 involuntary liquidation preference, 170,000 shares issued and outstanding at December 31, 2014 and 2013		1,700		1,700
Common stock, $0.01 par value. Authorized 20,000,000 shares, 9,403,697 issued and outstanding		94,037		94,037
Additional paid-in capital		16,137,313		14,324,683
Retained deficit - since September 30, 2012		(5,581,731)		(3,741,433)
Accumulated comprehensive income (loss) - since September 30, 2012		(455,624)		(222,469)
Total Pernix Group, Inc. and Subsidiaries Stockholders' equity		10,205,695		10,466,518
Non-controlling interest		1,984,920		785,415
Total Stockholders' equity		12,190,615		11,251,933
Total liabilities and Stockholders' equity	$	32,033,165	$	33,630,963

See accompanying notes to consolidated financial statements.

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PERNIX GROUP, INC. AND SUBSIDIARIES Consolidated Statements of Changes in Stockholders’ Equity

		Total		Accumulated Deficit		Accumulated Other Comprehensive Income (Loss)		Common Stock		Preferred Stock		Additional Paid- In Capital		Non-controlling Interest
Balance at December 31, 2013	$	11,251,933	$	(3,741,433)	$	(222,469)	$	94,037	$	11,700	$	14,324,683	$	785,415

Net income (loss)		3,329,648		(1,382,856)		—		—		—		—		4,712,504
Foreign currency translation adjustment		(199,946)		—		(233,155)		—		—		—		33,209
Preferred stock dividends		(457,442)		(457,442)		—		—		—		—		—
Additional paid in capital from:
Stock compensation expense		216,630		—		—		—		—		216,630		—
Partial sale of non-controlling interest in subsidiary		2,254,605		—		—		—		—		1,596,000		658,605
Distribution to non-controlling interest holders		(4,204,813)		—		—		—		—		—		(4,204,813)
Balance at December 31, 2014	$	12,190,615	$	(5,581,731)	$	(455,624)	$	94,037	$	11,700	$	16,137,313	$	1,984,920

Net income (loss)		(18,332,289)		(18,846,041)		—		—		—		—		513,752
Foreign currency translation adjustment		(165,222)		—		(127,784)		—		—		—		(37,438)
Preferred stock dividends		(158,587)		(158,587)		—		—		—		—		—
Change in deferred tax asset valuation allowance subsequent to quasi-reorganization		533,654		—		—		—		—		533,654		—
Stock compensation expense		362,678						—		—		362,678		—
Issuance of Series C convertible senior preferred stock		28,000,000		—		—		—		28,000		27,972,000		—
Net acquisition of and distribution to non-controlling interest holders		188,338		—		—		—		—		142,286		46,052
Balance at December 31, 2015	$	22,619,187	$	(24,586,359)	$	(583,408)	$	94,037	$	39,700	$	45,147,931	$	2,507,286

PERNIX GROUP, INC.
AND SUBSIDIARIES
Consolidated Statements of Operations
	Years Ended December 31,
		2014		2013
Revenues:
Construction revenue	$	78,573,035	$	67,776,314
Service fees – power generation plant		6,583,394		5,810,652
Other income – related party		4,860		33,344
Other revenue		139,450		141,838
Gross revenues		85,300,739		73,762,148
Costs and expenses:
Construction costs		68,010,862		63,904,627
Operation and maintenance costs - power generation plant		3,389,160		2,665,869
Cost of revenues		71,400,022		66,570,496
Gross profit		13,900,717		7,191,652
Operating expenses:
Salaries and employee benefits		5,904,756		2,854,889
Professional fees		1,377,296		598,545
Travel and entertainment		833,748		526,365
General and administrative		1,882,986		1,203,090
Total operating expenses		9,998,786		5,182,889
Operating income		3,901,931		2,008,763
Other income (expense):
Interest income (expense), net		3,243		(69)
Other expense - related party		(83,103)		(136,589)
Foreign currency exchange loss		(128,039)		(16,639)
Other income, net		117,254		70,239
Total other income (expense)		(90,645)		(83,058)
Consolidated income before income taxes		3,811,286		1,925,705
Income tax expense		(481,638)		(5,041,514)
Consolidated net income (loss)		3,329,648		(3,115,809)
Less: Net income attributable to non-controlling interest		4,712,504		1,509,184
Consolidated net loss attributable to the stockholders of Pernix Group, Inc. and Subsidiaries		(1,382,856)		(4,624,993)
Less: Preferred stock dividends		457,442		55,250
Consolidated net loss attributable to the common stockholders of Pernix Group Inc. and Subsidiaries	$	(1,840,298)	$	(4,680,243)
EPS attributable to the stockholders of Pernix Group, Inc. and Subsidiaries:
Basic and diluted net loss per share	$	(0.20)	$	(0.50)
Weighted average shares outstanding – basic and diluted		9,403,697		9,403,697

See accompanying notes to consolidated financial statements.

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PERNIX GROUP, INC
AND SUBSIDIARIES
Consolidated Statements of Cash Flows


		Year Ended December 31,
		2015		2014
Cash flows from operating activities:
Consolidated net income (loss)	$	(18,332,289)	$	3,329,648
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization		2,237,507		191,606
Quasi-Reorganization adjustments		183,059		150,738
Stock compensation expense		362,678		216,630
Loss on disposal of assets		(64,666)		—
Changes in assets and liabilities:
Accounts receivable		(8,066,816)		2,171,527
Inventories		(140,953)		(83,981)
Cost and estimated earnings in excess of billings		11,942,121		(7,650,057)
Prepaid and other current assets		2,938,310		(503,794)
Accounts payable and accrued expenses		2,544,000		2,146,927
Billings in excess of cost and estimated earnings		(3,389,547)		(4,619,516)
Net cash used in operating activities		(9,786,596)		(4,650,272)
Cash flows used in investing activities:
Acquisitions		(20,407,585)		—
Capital expenditures		(1,323,843)		(548,737)
Proceeds from the sale of assets		230,827		—
Restricted cash		229,233		(722,816)
Net cash used in investing activities		(21,271,368)		(1,271,553)
Cash flows provided by (used in) financing activities:
Proceeds from sale of preferred stock		28,000,000		—
Proceeds from partial sale of subsidiary		—		2,254,605
Proceeds from long-term debt		4,797,570		—
Proceeds from long-term debt, related party		7,425,300		—
Repayment of short and long-term debt		(933,225)		—
Preferred dividends paid		(400,000)		(402,192)
Distribution to non-controlling interest holders		(66,153)		(4,084,894)
Net cash provided by (used in) financing activities		38,823,492		(2,232,481)
Effect of exchange rate changes on cash and cash equivalents		(141,985)		(174,365)
Net increase (decrease) in cash and cash equivalents		7,623,543		(8,328,671)
Cash and cash equivalents at beginning of period		11,169,169		19,497,840
Cash and cash equivalents at end of period	$	18,792,712	$	11,169,169
Cash paid during the period for interest	$	66,102	$	—
Cash paid during the period for interest - related party	$	43,384	$	—
Cash paid during the period for income taxes	$	132,724	$	514,149
Supplemental disclosure of non-cash investing and financing transactions:
Accumulated preferred stock dividends	$	1,425,843	$	55,250
Unpaid equity distributions	$	—	$	119,918

See accompanying notes to consolidated financial statements.

	PERNIX GROUP, INC
	AND SUBSIDIARIES
	Consolidated Statements of Comprehensive Income (Loss)
		Years Ended December 31,
			2014		2013
Consolidated net income (loss)		$	3,329,648	$	(3,115,809)
Other comprehensive income (loss):
Foreign currency translation adjustment			(199,946)		(262,806)
Total comprehensive income (loss)		$	3,129,702	$	(3,378,615)
Net income attributable to non-controlling interests		$	4,712,504	$	1,509,184
Foreign currency translation attributable to non-controlling interests			33,209		(28,154)
Total comprehensive income attributable to non-controlling interest		$	4,745,713	$	1,481,030
Total comprehensive loss attributable to the stockholders of Pernix Group, Inc. and Subsidiaries		$	(1,616,011)	$	(4,859,645)

See accompanying notes to consolidated financial statements.

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PERNIX GROUP, INC.
AND SUBSIDIARIES
Consolidated Statements of Changes in Stockholders' Equity
		Total		Retained Earnings / (Accumulated Deficit)		Accumulated Other Comprehensive Income (Loss)		Common Stock		Preferred Stock		Additional Paid-In Capital		Non-controlling Interest
Balance at December 31, 2012	$	16,038,414	$	938,810	$	12,183	$	94,037	$	1,700	$	9,148,757	$	5,842,927
Net income (loss)		(3,115,809)		(4,624,993)		—		—		—		—		1,509,184
Foreign currency translation adjustment		(262,806)		—		(234,652)		—		—		—		(28,154)
Preferred stock dividends		(55,250)		(55,250)		—		—		—		—		—
Preferred stock sale		5,000,000		—		—		—		10,000		4,990,000		—
Additional paid in capital from:
Stock compensation expense		185,926		—		—		—		—		185,926		—
Distribution to non-controlling interest holders		(6,538,542)		—		—		—		—		—		(6,538,542)
Balance atDecember 31, 2013	$	11,251,933	$	(3,741,433)	$	(222,469)	$	94,037	$	11,700	$	14,324,683	$	785,415
Net income (loss)		3,329,648		(1,382,856)		—		—		—		—		4,712,504
Foreign currency translation adjustment		(199,946)		—		(233,155)		—		—		—		33,209
Preferred stock dividends		(457,442)		(457,442)		—		—		—		—		—
Additional paid in capital from:
Stock compensation expense		216,630		—		—		—		—		216,630		—
Partial sale of non-controlling interest in subsidiary		2,254,605		—		—		—		—		1,596,000		658,605
Distribution to non-controlling interest holders		(4,204,813)		—		—		—		—		—		(4,204,813)
Balance at December 31, 2014	$	12,190,615	$	(5,581,731)	$	(455,624)	$	94,037	$	11,700	$	16,137,313	$	1,984,920

See accompanying notes to consolidated financial statements.

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PERNIX GROUP, INC
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
	Years Ended December 31,
		2014		2013
Cash flows from operating activities:
Consolidated net income (loss)	$	3,329,648	$	(3,115,809)
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:
Depreciation		191,606		241,874
Quasi-Reorganization adjustments		150,738		(194,579)
Stock compensation expense		216,630		185,926
Deferred income tax assets and liabilities, net of valuation allowance		—		4,883,935
Changes in assets and liabilities:
Accounts receivable		2,171,527		(827,575)
Inventories		(83,981)		82,063
Cost in excess of billings		(7,650,057)		(56,679)
Prepaid and other current assets		(503,794)		(299,876)
Accounts payable and accrued expenses		2,146,927		3,607,800
Billings in excess of cost and estimated earnings		(4,619,516)		(510,196)
Net cash (used in) provided by operating activities		(4,650,272)		3,996,884
Cash flows used in investing activities:
Capital expenditures		(548,737)		(1,028,685)
Restricted cash		(722,816)		(458,919)
Net cash used in investing activities		(1,271,553)		(1,487,604)
Cash flows used in financing activities:
Payments on borrowings - related party		—		(2,664,552)
Proceeds from preferred stock sale		—		5,000,000
Proceeds from partial sale of subsidiary		2,254,605		—
Repayment of borrowings - bank vehicle loan		—		(39,660)
Dividends paid		(402,192)		—
Distribution to non-controlling interest holders		(4,084,894)		(6,538,542)
Net cash used in financing activities		(2,232,481)		(4,242,754)
Effect of exchange rate changes on cash and cash equivalents		(174,365)		(175,584)
Net decrease in cash and cash equivalents		(8,328,671)		(1,909,058)
Cash and cash equivalents at beginning of year		19,497,840		21,406,898
Cash and cash equivalents at end of year	$	11,169,169	$	19,497,840
Cash paid during the period for interest	$	—	$	196,437
Cash paid during the period for interest - related party	$	—	$	192,946
Cash paid during the period for income taxes	$	514,149	$	102,144
Supplemental disclosure of non-cash investing and financing transactions:
Preferred stock dividends	$	55,250	$	55,250
Unpaid equity distributions	$	119,918	$	—

See accompanying notes to consolidated financial statements.

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Pernix Group Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Background

Pernix Group, Inc. (the “Company”, “Pernix Group” or “Pernix”) is a global company managed from Lombard, Illinois and was originally formed in 1995 as Telesource International, Inc. In 2001, the Company was incorporated in Delaware and became an SEC registrant. As of December 31, ~~2014~~2015 and ~~2013~~2014, Pernix Group is over 96.0% owned by Ernil Continental, S.A., BVI. (Ernil), Halbarad Group, Ltd., BVI, (Halbarad) and Affiliates. The Company conducts its operations through the parent and its ~~fifteen~~ subsidiaries.

Pernix is a diversified contractor that is engaged in two primary operating business segments: ~~Construction~~construction ~~Services~~services as a design-build general contractor in the public and private markets and ~~Power~~power ~~Generation~~services ~~Services~~ as a builder, manager and investor in power projects operating as an independent power producer ~~and as a general contractor~~. Pernix has full-scale construction and management capabilities, with ~~subsidiaries~~some inof the ~~South~~Company’s ~~Pacific~~subsidiaries ~~islands~~located ofin ~~Fiji~~the ~~and~~United ~~Vanuatu~~States, inGuam, ~~Niger~~Fiji, ~~in United Arab Emirates~~Vanuatu, inSouth ~~Azerbaijan~~Korea, inAfrica ~~Sierra Leone~~ and ~~in the U~~Germany.S. WeThe ~~provide~~Company ~~our~~provides services in a broad range of end markets, including construction, construction management, power and facility operations and maintenance services. In addition to these two operating segments, the ~~Corporate~~corporate operations are a separately reported segment.

The Company’s subsidiaries and consolidated joint ventures, which include Pernix Building Group, LLC, Pernix-Serka Joint Venture (PSJV), Pernix/-SHBC Joint Venture (SHBC), Pernix ~~Niger LLC (Niger), Pernix Kurdistan, LLC, Pernix –Serka Azerbaijan, LLC, Pernix-Serka LLC, Sierra Leone, Pernix~~ LTC JV (PLTC), Pernix Fiji, Ltd. (PFL), Vanuatu Utilities and Infrastructure (VUI), Pernix Guam LLC, ~~Pernix Real Estate, LLC, Pernix DCK, LLC~~ (~~inactive~~PPG), ~~Pernix Solomon Island Limited, Pernix Tishman LLC, (inactive)~~ and Pernix ~~Technical~~Kaseman ~~Works~~Joint ~~Co.~~Venture, LLC (~~PTW~~PKJV) ~~located in Dubai,~~ also bid on and /or execute construction projects with support from the Pernix corporate office. ~~PTW~~Dck ecc Guam Pacific JV LLC is a variable interest entity for which the Company is the primary beneficiary. ~~The~~ ~~related financial results of PTW are not material.~~

~~PSJV~~Pernix has ~~been~~two ~~awarded~~power ~~four~~segment ~~significant~~subsidiaries ~~projects~~that ~~from~~manage ~~its~~the ~~primary~~construction ~~customer~~and facilities operations and ~~has~~management ~~funded~~activities ~~its~~in ~~operations~~Fiji ~~since~~and ~~its~~Vanuatu, ~~inception~~respectively. ~~Cash~~VUI ofis ~~PSJV~~wholly-owned and PFL is ~~not~~majority-owned ~~available~~since ~~for~~November ~~other~~25, ~~purposes~~2014, ~~unless~~when ~~distributions~~PFL ~~are~~sold ~~made~~249,999 of its common shares to ~~the~~Fijian ~~partners.~~Holdings AsLimited of(FHL) ~~December~~for ~~31,~~a ~~2014~~25% ~~and~~non-controlling ~~2013,~~interest ~~PSJV~~for ~~has~~FJD $4.035 million ~~and~~ ($102.13 million USD). The transaction resulted in ~~cash,~~approximately $0.67 million and $61.56 million recorded in ~~other~~non-controlling ~~assets,~~interest ~~$3.1 million~~ and ~~$8.3~~additional ~~million billings~~ paid-in ~~excess~~capital as of ~~cost~~December ~~and~~31, $02014, respectively.7 ~~million~~Prior ~~and~~to ~~$8.8~~November ~~million~~25, of2014, ~~other~~PFL ~~liabilities,~~was ~~respectively~~wholly-owned.

Pernix has two power segment subsidiaries that manage the construction and facilities operations and management activities in Fiji and Vanuatu, respectively. VUI is wholly-owned and PFL is majority-owned since November 25, 2014, when PFL sold 249,999 of its common shares to Fijian Holdings Limited (Fijian Holdings a.k.a. FHL) for a 25% non-controlling interest for FJD 4.35 million ($2.3 million USD). The transaction resulted in approximately $0.1 million and $1.6 million recorded in non-controlling interest and additional paid-in capital as of December 31, 2014. Prior to November 25, 2014, PFL was wholly-owned.

The Company generates cash flows primarily from serving as the general contractor on construction projects for the United States of America (U.S.) Government and various domestic customers, through the operation and maintenance of power generation plants, from financing obtained from third party banks and affiliated parties and through sales of common and preferred stock. The Company anticipates its open registration statements, as it relates to primary fixed price offerings, will augment our current sources of capital. Beyond the cash expected to be generated by operations, from third party banks, and the issuance of additional shares, the Company may seek debt financing or equity based support from its principal stockholders, Ernil and Halbarad, on an as-needed basis only.

2. Quasi-Reorganization

In accordance with quasi-reorganization requirements, the Company elected to effect a quasi-reorganization after assessing as of September 30, 2012, that it had reached a turning point in its operations and future profitable operations were reasonably assured. The management team transformed the Company through the 2012 disposition of unprofitable business entities and through implementation of efforts to become leaner in terms of leverage and stronger in formation of strategic relationships with customers, vendors and key government agencies.

33In connection with the application of quasi-reorganization accounting, the Company applied Accounting Standard Codification (ASC) 852, Reorganizations, to restate assets and liabilities at fair value. The Company, with the assistance of a third-party valuation firm, performed the fair value assessment and computed the estimated fair value of the business enterprise as of September 30, 2012 based on the market and income approaches, the results of which approximated one another. In applying quasi-reorganization accounting as of September 30, 2012, the Company obtained approval from its shareholders and its Board of Directors to implement a quasi-reorganization.

Table of Contents

of unprofitable business entities and through implementation of efforts to become leaner in terms of leverage and stronger in formation of strategic relationships with customers, vendors and key government agencies. Since 2005 management has significantly reduced debt, significantly increased equity, improved the profitability of its continuing operations, built its contract backlog and expanded its customer base.

In connection with the application of quasi-reorganization accounting, the Company applied Accounting Standard Codification (ASC) 805, Business Combinations, to restate assets and liabilities at fair value. The Company with the assistance of a third-party valuation firm performed the fair value assessment and computed the estimated fair value of the business enterprise as of September 30, 2012 based on the market and income approaches, the results of which approximated one another. In applying quasi-reorganization accounting as of September 30, 2012, the Company obtained approval from its shareholders and its Board of Directors to implement a quasi-reorganization.

The impact on earnings, accumulated deficit and accumulated other comprehensive income (loss) was as follows:

•The Company’s accumulated deficit and accumulated other comprehensive income (loss) accounts of $68.6 million and ($0.1) million, respectively, as of September 30, 2012 were eliminated, with a commensurate reduction in additional paid-in capital.

•The Company’s earnings and accumulated other comprehensive income (loss) subsequent to September 30, 2012 are separately presented as “Retained (Deficit) - since September 30, 2012” on the face of the consolidated balance sheets and this presentation will be carried forward for ten years until 2022.31

The Company’s earnings and accumulated other comprehensive income (loss) subsequent to September 30, 2012 are separately presented as “Accumulated deficit - since September 30, 2012” on the face of the consolidated balance sheets and this presentation will be carried forward for ten years until 2022.

3. Significant Accounting Policies

Principles of Consolidation and Presentation—The consolidated financial statements include the accounts of all majority-owned subsidiaries over which the Company exercises control and joint ventures when determined to be variable interest entities (VIE) in which the Company is the primary beneficiary. During ~~2014~~2015, the VIE and ~~2013,~~related ~~the~~financial ~~variable~~results ~~interest~~primarily ~~entities~~relate to our recent PPG acquisition (refer to Note 4). In 2014, the VIE and related financial results are not material. All inter-company accounts have been eliminated in consolidation. The ~~2014~~2015 and ~~2013~~2014 consolidated financial statements of the Company reflect the impact of quasi-reorganization accounting. See Notes 1 and 2 ~~in the notes~~ to our consolidated financial statements for more information regarding joint ventures and the quasi-reorganization.

Use of Estimates—The preparation of financial statements in conformity with accounting principles generally accepted in the United States (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The more significant estimates affecting amounts reported in the consolidated financial statements relate to revenues under long-term contracts, including estimates of costs to complete projects and provisions for contract losses, fair market value allocation of assets purchased in business combinations, allowances for doubtful accounts, reserves for self-insured risk, valuation of options in connection with various share-based compensation plans, insurance accruals, goodwill impairment evaluations, and the valuation allowance against deferred tax assets. Accordingly, there can be no assurance that the estimates, assumptions and values reflected in the valuations will be realized. Actual results could vary materially.

~~Reclassification~~Revenue Recognition— ~~Certain~~Pernix ~~reclassifications~~offers ~~were~~our ~~made~~services tothrough ~~prior~~two ~~years’~~operating ~~amounts~~business tosegments: ~~conform~~construction toand power services which are supported by the ~~2014~~corporate ~~presentation~~segment. Revenue recognition for each of the non-corporate segments is described by segment below.

Construction Revenue. ~~Recognition—~~Revenue ~~Pernix~~from ~~offers~~construction ~~our~~contracts ~~services~~is ~~through~~recognized ~~two~~using ~~operating~~the ~~business~~percentage-of-completion ~~segments:~~method ~~General~~of ~~Construction~~accounting based upon costs incurred and ~~Power~~estimated ~~Generation~~total ~~Services~~projected ~~which~~costs. Our current projects with the U.S. Government are ~~supported~~design/build and design/bid/build contracts with fixed contract prices and include provisions of termination for convenience by the ~~Corporate~~party ~~segment~~contracting with us. ~~Revenue~~Such ~~recognition~~provisions ~~for~~also ~~each~~allow ofpayment to us for the ~~non-corporate~~work ~~segments~~performed isthrough ~~described~~the bydate ~~segment~~of ~~below~~termination.

~~General~~Revenues ~~Construction~~and ~~Revenue.~~gross ~~Revenue~~profit ~~from~~on ~~construction~~ contracts iscan ~~recognized~~be ~~using~~significantly affected by change orders and claims that may not have been approved by the ~~percentage-~~customer until the later stages of- a contract or subsequent to project completion. This method of ~~accounting~~revenue ~~based~~recognition ~~upon~~requires that we estimate future costs ~~incurred~~to ~~and~~complete ~~estimated~~a ~~total~~project. ~~projected~~Estimating future costs requires judgment of the value and timing of material, labor, scheduling, product deliveries, contractual performance standards, liability claims, impact of change orders, contract disputes as well as productivity. ~~Our~~Certain ~~current~~change ~~projects~~orders ~~with~~may ~~the~~be Uaccounted for based on probability of cost recovery.S. ~~Government~~For these change orders if it is not probable that costs will be recovered through a change in the contract price, the costs attributable to such pending change orders are ~~design/build~~treated ~~and~~as ~~design/bid/build~~contract costs without incremental revenue. For contracts ~~with~~where ~~fixed~~it is probable that the costs will be recovered through a change order, total estimated contract ~~prices~~revenue ~~and~~is ~~include~~increased ~~provisions~~by the lesser of ~~termination~~the ~~for~~amount ~~convenience~~expected byto be recovered or the ~~party~~costs ~~contracting~~expected ~~with~~to usbe incurred. ~~Such~~Revenues ~~provisions~~recognized ~~also~~in ~~allow~~excess ~~payment~~of toamounts usbilled ~~for~~and the ~~work~~associated ~~performed~~costs ~~through~~are classified as current assets, since it is anticipated that these earnings and costs will be billed and collected in the ~~date~~next fiscal year. Amounts billed in excess of ~~termination~~costs and estimated earnings are recognized as a liability. ~~Our~~The ~~design/build~~Company ~~capacity~~will ~~expansion~~record ~~project~~a provision for ~~Fiji~~losses ~~Electricity~~when ~~Authority~~estimated ~~(FEA)~~costs ~~and~~exceed ~~our~~estimated ~~greenhouse~~revenues. ~~project~~Contracts atare generally completed in approximately 24 months from the ~~Texas~~date ~~A&M~~on ~~University~~which ~~are~~the ~~also~~Company ~~fixed~~is ~~price~~ordered ~~contracts~~to ~~while~~proceed ~~our~~with ~~design~~substantial /work. ~~build~~In ~~contract~~situations ~~pertaining~~where tothe Company is responsible for procurement of construction materials, shipping and handling expenses are included in the ~~nanotechnology~~contract ~~lab~~costs atof ~~Texas~~revenue ~~A&M~~and ~~University~~in isrevenue ato ~~cost~~the ~~plus~~extent ~~fee~~the contract is complete.

The Company only uses approved contract changes in its revenue recognition calculation. This method of revenue recognition requires that the Company estimate future costs to complete a project based upon the knowledge and experience of the Company’s engineers, project managers and finance professionals. Estimating future costs requires 32

34Power Services Revenue. The Company receives variable monthly payments as compensation for its production of power. The variable payments are recognized based upon power produced and billed to the customer as earned during each accounting period. The Company also receives fixed payments in connection with the long term concession deed for O&M services in Fiji.

~~Table~~Cost of ~~Contents~~Construction Revenue. Cost of revenue consists of direct costs on contracts, including labor and materials, amounts payable to subcontractors, direct overhead costs, equipment expense (primarily depreciation, maintenance, and repairs), interest associated with construction projects, and insurance costs. The Company records a portion of depreciation and indirect overhead in cost of construction revenue dependent on the nature of charges and the related project agreements. If not chargeable to individual projects, overhead costs are expensed in the period incurred. Contract duration typically extends beyond one year. Revisions in cost and profit estimates during construction are recognized in the accounting period in which the facts that require the revision become known. Losses on contracts are provided for in total when determined, regardless of the degree of project completion.

~~judgment~~Contract ofClaims— ~~the~~Sometimes ~~value~~clients, vendors and ~~timing~~subcontractors ofwill ~~material,~~present ~~labor,~~claims ~~scheduling,~~against ~~product~~us ~~deliveries,~~for ~~contractual~~recovery ~~performance~~of ~~standards,~~costs ~~liability~~they ~~claims,~~incurred ~~impact~~in excess of ~~change~~what ~~orders~~they expected to incur, ~~contract~~or ~~disputes~~for aswhich ~~well~~they asbelieve ~~productivity~~they are not contractually responsible. ~~Amounts~~In ~~billed~~turn, inwe ~~excess~~may ofalso ~~costs~~present ~~and~~claims ~~estimated~~to ~~earnings~~our ~~are~~clients, ~~recognized~~vendors asand asubcontractors ~~liability.~~for ~~The~~costs ~~Company~~that ~~will~~we ~~record~~believe awere ~~provision~~not ~~for~~our ~~losses~~responsibility ~~when~~or ~~estimated~~may ~~costs~~be ~~exceed~~beyond ~~estimated~~our ~~revenues~~scope of work. ~~Contracts~~The ~~are~~Company ~~generally~~records ~~completed~~contract inrevenue ~~approximately~~related 18to ~~months~~claims ~~from~~only ~~the~~if ~~date~~it onis ~~which~~probable that the ~~Company~~claim iswill ~~ordered~~result toin ~~proceed~~additional ~~with~~contract ~~substantial~~revenue ~~work~~and if the amount can be reliably estimated. In ~~situations~~such ~~where~~cases, the Company isrecords ~~responsible~~revenue ~~for~~only ~~procurement~~to ofthe ~~construction~~extent ~~materials,~~that ~~shipping~~contract ~~and~~costs ~~handling~~relating ~~expenses~~to ~~are~~the ~~included~~claim inhave ~~the~~been ~~contract~~incurred. ~~costs~~As of ~~revenue~~December ~~and~~31, in2015 ~~revenue~~and to2014, the ~~extent~~Company ~~the~~had ~~contract~~no issignificant ~~complete~~receivables or payables related to contract claims.

~~Power~~Cash ~~Generation~~and ~~Services~~Cash ~~Revenue.~~ Equivalents—The Company’s ~~receives~~cash ~~variable~~equivalents ~~monthly~~include ~~payments~~highly asliquid ~~compensation~~investments ~~for~~which ~~its~~have ~~production~~an ofinitial ~~power.~~maturity ~~The~~of ~~variable~~three ~~payments~~months ~~are~~or ~~recognized~~less. See ~~based~~Note ~~upon~~13 ~~power produced and billed~~ to the ~~customer~~consolidated asfinancial ~~earned during each accounting period~~statements. ~~The Company also received fixed payments in connection with the long term concession deed for Operations and Maintenance (O&M) services in Fiji.~~

~~Cost~~Restricted ofcash— Construction Revenue. Cost of revenue consists of direct costs on contracts, including labor and materials, amounts payable to subcontractors, direct overhead costs, equipment expense (primarily depreciation, maintenance, and repairs), interest associated with construction projects, and insurance costs. The Company’s ~~records~~restricted acash ~~portion~~represents ofrequired ~~depreciation~~cash ~~and~~balances ~~indirect~~maintained ~~overhead~~ in ~~cost~~conjunction ofwith ~~construction~~PFL’s ~~revenue~~financing ~~dependent~~agreements ~~on the nature of charges and the~~ related ~~project agreements. If not chargeable~~ to ~~individual~~ongoing constructions projects, ~~overhead costs are expensed in the period incurred. Contracts frequently extend over a period of more than one year. Revisions in cost~~ and ~~profit~~non ~~estimates~~P-109 ~~during~~cash ~~construction~~related ~~are~~to ~~recognized~~our inPPG ~~the accounting period in which the facts that require the revision become known~~acquisition. ~~Losses~~See onNote ~~contracts~~4 ~~are provided~~ for infurther ~~total when determined, regardless of the degree of project completion~~disclosure.

~~Contract~~Inventory ~~Claims~~— ~~Sometimes~~Inventory ~~clients,~~primarily ~~vendors~~represents ~~and~~the ~~subcontractors~~value ~~will present claims against us for recovery~~ of ~~costs~~spare ~~they~~parts ~~incurred~~which inthe ~~excess~~Company ofis ~~what~~required ~~they expected~~ to ~~incur,~~maintain or for ~~which~~use ~~they~~in ~~believe~~the ~~they~~diesel ~~are~~power ~~not contractually responsible~~generators. InInventories ~~turn,~~are wevalued ~~may~~at ~~also~~the ~~present~~lower ~~claims~~of tocost ~~our~~or ~~clients~~market, ~~vendors~~generally ~~and~~using ~~subcontractors for costs that we believe were not our responsibility or may be beyond our scope of work. The Company records contract revenue related to claims only if it is probable that~~ the ~~claim will result~~ first-in, ~~additional~~first-out ~~contract~~method, ~~revenue~~ and ifare ~~the~~primarily ~~amount~~homogenous ~~can~~in ~~be reliably estimated~~nature. ~~In such cases, the Company records revenue only to the extent that contract costs relating to the claim have been incurred.~~ As of December 31, ~~2014~~2015 and ~~2013~~2014, the ~~Company~~value ~~had~~of nothe ~~significant~~spare ~~receivables~~parts ~~related~~inventory tois ~~contract~~$1.6 ~~claims~~million and $1.4 million, respectively.

~~Cash~~Property and ~~Cash~~Equipment ~~Equivalents—The~~- ~~Company’s~~Property ~~cash~~and ~~equivalents~~equipment ~~include~~are ~~highly~~initially ~~liquid~~recorded ~~investments~~at ~~which~~cost ~~have~~and anare ~~initial~~depreciated ~~maturity~~over their estimated useful lives using the straight-line method. Expenditures for major additions and improvements are capitalized while maintenance and repairs are expensed as incurred. The cost of ~~three~~property, ~~months~~plant and equipment sold or ~~less~~otherwise disposed of and the related accumulated depreciation are removed from the accounts and any resulting gain or loss is included in operating income for the respective period. ~~See~~Typically, ~~Note~~estimated 12useful lives range from three to ten years for equipment, furniture and fixtures and 39 years for buildings. Leasehold improvements are amortized on a straight-line basis over the ~~consolidated~~lesser ~~financial~~of ~~statements~~their estimated useful lives or the remaining terms of the underlying lease agreement.

~~Restricted~~Long-lived ~~cash—~~assets ~~The~~to ~~Company’s~~be ~~restricted~~held ~~cash~~and ~~represents~~used ~~required~~are ~~cash~~reviewed ~~balances~~for ~~maintained~~impairment inwhenever ~~conjunction~~events ~~with~~or ~~PFL~~circumstances indicate that the assets may be impaired. For assets to be held and used, impairment losses are recognized based upon the excess of the asset’s ~~financing~~carrying ~~agreements~~amount ~~related~~over the fair value of the asset. For long-lived assets to ~~ongoing~~be ~~constructions~~disposed, ~~projects~~impairment losses are recognized at the lower of the carrying amount or fair value less cost to sell. There was no such impairment for the years ended December 31, 2015 and 2014.

Inventory — The inventory represents the value of spare parts which the Company is required to maintain for use in the diesel power generators. Inventories are valued at the lower of cost or market, generally using the first-in, first-out method, and are primarily homogenous in nature. As of December 31, 2014 and 2013, the inventories consists of spare parts used for the diesel power generators of $1.5 million and $1.6 million, respectively33

~~Property~~Goodwill and ~~Equipment~~Other -Intangible ~~Property~~Assets ~~and~~– The ~~equipment~~acquisitions ~~are~~discussed ~~initially~~in ~~recorded~~Note at4 ~~cost~~resulted ~~and~~in ~~are~~the ~~depreciated~~recognition ~~over~~of ~~their~~goodwill ~~estimated~~and ~~useful~~certain ~~lives~~other ~~using~~intangible assets. Goodwill represents the ~~straight-line~~excess ~~method.~~of ~~Expenditures~~purchase ~~for~~consideration ~~maintenance~~over ~~and~~the ~~repairs~~fair ~~are~~value ~~expensed~~of asthe ~~incurred.~~net ~~Typically,~~assets ~~estimated~~of ~~useful~~businesses ~~lives~~acquired. Goodwill ~~range~~is ~~from~~not ~~three~~amortized. Instead, togoodwill ~~ten~~is ~~years~~tested for ~~equipment,~~impairment ~~furniture~~at ~~and~~least ~~fixtures~~annually ~~and~~or 39more ~~years~~frequently ~~for~~if ~~buildings.~~indicators ~~Leasehold~~of ~~improvements~~impairment ~~are~~exist, ~~amortized~~such onas a ~~straight-line~~significant ~~basis~~sustained ~~over~~change in the ~~shorter~~business climate or a current expectation of ~~their~~an ~~estimated~~impending ~~useful~~disposal. ~~lives~~The orCompany ~~the~~conducts ~~remaining~~its ~~terms~~annual ofimpairment evaluation in the ~~underlying~~fourth ~~lease~~quarter ~~agreement~~of each year. No impairment charges have been recorded in 2015 or 2014.

~~Long-lived~~Other intangible assets towith bedeterminable ~~held~~lives ~~and~~consist ~~used~~primarily ~~are~~of ~~reviewed~~customer ~~for~~contracts/backlog ~~impairment~~and ~~whenever~~tradename. The ~~events~~customer orcontracts ~~circumstances~~/ ~~indicate~~backlog ~~that~~intangible ~~the~~ assets ~~may~~are bebeing ~~impaired.~~amortized ~~For~~on ~~assets~~a tostraight-line bebasis ~~held~~over ~~and~~a ~~used,~~2 ~~impairment~~to ~~losses~~3 ~~are~~year ~~recognized~~weighted ~~based~~average ~~upon~~life ~~the~~and ~~excess~~are ofrecorded ~~the~~in ~~asset’s~~construction ~~carrying~~costs ~~amount~~in ~~over~~ the ~~fair~~statements ~~value~~ of ~~the asset~~operations. ~~For~~The ~~long-lived~~tradename ~~assets~~intangible toasset beis ~~disposed,~~being ~~impairment~~amortized ~~losses~~on ~~are~~a ~~recognized~~straight-line atbasis ~~the~~over ~~lower~~2 ofyears ~~the~~and ~~carrying~~is ~~amount~~recorded orin ~~fair~~general ~~value~~and ~~less~~administrative ~~cost~~expenses toin ~~sell.~~the ~~There~~statements ~~was~~of nooperations. ~~such~~See ~~impairment~~Note ~~for~~5 ~~the~~to ~~years~~our ~~ended~~consolidated ~~December~~financial ~~31,~~statements ~~2014~~for ~~and~~more ~~2013~~information.

35Construction and power contract intangibles – In connection with the quasi-reorganization asset valuations, $0.3 million of contracts were recognized as intangible assets and will be amortized in proportion to the anticipated completion of the contracts. As of December 31, 2015 the remaining weighted average life on contract intangible assets is 8 years. Amortization expense of the contract intangible assets was less than $0.1 million for the years ended December 31, 2015 and 2014 and the remaining balance as of December 31, 2015 was $0.1 million.

~~Table~~Income Taxes—Pernix Group, Inc. is a U.S. corporation that files a separate U.S. corporate income tax return, which includes its respective share of ~~Contents~~earnings from its U.S. subsidiaries. PFL is a Fijian corporation and files a Fijian corporate tax return. PPG is a wholly owned Guam limited liability company which does not file a separate Guam tax return as it is a disregarded entity included in the U.S. corporate tax return.

Construction and power contract intangibles – In connection with the quasi-reorganization asset valuations, $0.3 million of contracts were recognized as intangible assets and will be amortized in proportion to the anticipated completion of the contracts. As of December 31, 2014 the remaining weighted average life on contract intangible assets is 9 years. Amortization expense of the contract intangible assets was less than $0.1 million for the years ended December 31, 2014 and 2013 and the remaining balance as of December 31, 2014 was $0.1 million. In response to the retendering of the operation and maintenance of the Vanuatu power operations the Company has accelerated the amortization period of the related power contract.

Income Taxes—Pernix Group, Inc. is a U.S. corporation that files a separate U.S. corporate income tax return, which includes its respective share of earnings from its U.S. subsidiaries. PFL is a Fijian corporation and files a Fijian corporate tax return.

Deferred income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective income tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

A valuation reserve is recorded to offset the deferred tax benefit if management has determined it is more likely than not that the deferred tax assets will not be realized. The need for a valuation allowance is assessed each quarter.

At the date of the quasi-reorganization, deferred taxes were reported in conformity with applicable income tax accounting standards, net of applicable valuation allowances. Deferred tax assets and liabilities were recognized for differences between the assigned values and the tax basis of the recognized assets and liabilities. In accordance with the quasi-reorganization requirements, tax benefits realized in periods after the quasi-reorganization that were not recognized at the date of the quasi-reorganization will be recorded directly to equity.

Allowance for Doubtful Accounts—The Company records its accounts receivable net of an allowance for doubtful accounts. ~~This~~The allowance for doubtful accounts is estimated based on management’s evaluation of the contracts involved and the financial condition of its clients. The factors considered by the Company in its contract evaluations include, but are not limited to; client type—domestic and foreign, federal, state and local government or commercial client, historical contract performance, historical collection and delinquency trends, client credit worthiness and general economic conditions.

~~general economic conditions.~~34

~~During~~Fair ~~2014~~Value ~~and~~of ~~2013,~~Financial ~~there~~Instruments—The ~~were~~Company nodetermines ~~bad~~the ~~debt~~fair ~~write-offs~~values of ~~accounts~~its ~~receivable~~financial instruments based on inputs or assumptions that market participants would use in pricing an asset or a liability. AsThe Company categorizes its instruments using a valuation hierarchy for disclosure of ~~December,~~the ~~31,~~inputs ~~2014~~used to measure fair value. This hierarchy prioritizes the inputs into three broad levels as follows: Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities; Level 2 inputs are quoted prices for similar assets and ~~2013~~liabilities in active markets or inputs that are observable for the asset or liability, ~~there~~either ~~was~~directly noor ~~allowance~~indirectly through market corroboration, for ~~doubtful~~substantially ~~accounts~~the ~~deemed~~full ~~necessary~~term of the financial instrument; Level 3 inputs are unobservable inputs based on the Company’s assumptions used to measure assets and liabilities at fair value. The classification of a financial asset or liability within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.

~~Fair Value of Financial Instruments—~~The ~~Company~~carrying ~~determines~~amounts ~~the~~of ~~fair~~cash ~~values~~and ofcash ~~its~~equivalents, ~~financial~~accounts ~~instruments~~receivable, ~~including~~accounts ~~short-term investments~~payable, ~~debt~~accrued ~~instruments~~expenses and derivative instruments based on inputs or assumptions that market participants would use in pricing an asset or a liability. The Company categorizes its instruments using a valuation hierarchy for disclosure of the ~~inputs~~short-term ~~used~~debt toagreements ~~measure~~approximate fair value. ~~This~~because hierarchy prioritizes the inputs into three broad levels as follows: Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities; Level 2 inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the ~~financial~~short ~~instrument;~~maturities ~~Level 3 inputs are unobservable inputs based on the Company’s assumptions used to measure assets and liabilities at fair value. The classification~~ of athese ~~financial asset or liability within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement~~instruments.

The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable, accrued expenses and the debt agreements approximate fair value because of the short maturities of these instruments.

The Company’s fair value measurement methods may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Although the Company believes its valuation methods are appropriate and consistent with those used by other market participants, the use of different methodologies or assumptions to determine fair value could result in a different fair value measurement at the reporting date.

36From time to time, the Company holds financial instruments such as marketable securities, receivables related to sales-type leases, and foreign currency contracts. As of December 31, 2015 and 2014, the Company did not hold any such financial instruments.

~~Table~~Foreign Currency Translation—Assets and liabilities of ~~Contents~~non-U.S. subsidiaries, where the functional currency is not the U.S. dollar, have been translated at year-end exchange rates and profit and loss accounts have been translated using weighted-average yearly exchange rates. Foreign currency translation gains and losses are included as a component of Accumulated Other Comprehensive Earnings (Loss). Assets and liabilities of an entity that are denominated in currencies other than an entity’s functional currency are re-measured into the functional currency using end of period exchange rates or historical rates where applicable to certain balances. Gains and losses related to these re-measurements are recorded within the statement of operations as a component of other expense (income), net.

From time to time, the Company ~~holds~~is ~~financial~~exposed ~~instruments~~to ~~such~~foreign ascurrency ~~marketable~~exchange ~~securities,~~risk ~~receivables~~on ~~related~~various foreign transactions and the Company attempts to ~~sales-type~~reduce ~~leases,~~this risk and ~~foreign~~manage ~~currency~~cash ~~contracts.~~flow Asexposure of certain payables and anticipated transactions by entering into forward exchange contracts. At December 31, ~~2014~~2015 and ~~2013~~2014, the foreign currency risk is not material and there were no foreign exchange contracts outstanding. The Company ~~did~~historically has not ~~hold~~applied ~~any~~hedge ~~such~~accounting ~~financial~~treatment ~~instruments~~to its forward exchange contracts.

Foreign Currency Translation—The functional currency of the Company’s foreign operations is the applicable local currency. The functional currency is translated into U.S. dollars for balance sheet asset and liability accounts using current exchange rates in effect as of the balance sheet date and for revenue and expense accounts using a weighted-average exchange rate during the fiscal year. The translation adjustments are reflected as a separate component of stockholders’ equity captioned accumulated other comprehensive income (loss). The assets and liabilities of the entity are denominated in currencies other than the Company’s functional currency, are re-measured into the Company’s functional currency using end of period or historical exchange rates. Gains and (losses) associated to these re-measurements are included in other income (expense), net in the consolidated statement of operations.

Stock-Based Compensation—Principle awards issued under the Company’s stock-based compensation plans include qualified stock options to employees, non-qualified stock options and awards, restricted stock units and other types of awards.

The Company recognizes the expense associated with stock option awards over the period during which an employee, director or consultant is required to provide services in exchange for the award, known as the requisite service period (usually the vesting period).

Stock option awards for employees and directors are classified as equity instruments and are valued at the grant date and are not subject to ~~remeasurement~~re-measurement. The option valuation is performed using a fair value Black Scholes model. Option valuation models require the input of highly subjective assumptions, and changes in the assumptions can materially affect fair value estimates. Judgment is required in estimating stock price volatility, forfeiture rates, expected dividends, and expected terms that options remain outstanding. During ~~2014~~2015 and ~~2013~~2014 the compensation expense related to the stock options was approximately $0.24 million ~~each~~and ~~year~~$0.2 million, respectively.

4.Reclassification— ~~Recent~~Certain ~~Accounting~~reclassifications ~~Pronouncements~~were made to prior years’ amounts to conform to the 2015 presentation.

~~In May 2014, the FASB issued ASU 2014-09, ‘‘Revenue from Contracts with Customers~~4.’’ The amendments in this update establish a comprehensive revenue recognition standard for virtually all industries under U.S. GAAP, including those that previously followed industry-specific guidance such as the real estate, construction and software industries. The revenue standard’s core principle is built on the contract between a vendor and a customer for the provision of goods and services. It attempts to depict the exchange of rights and obligations between the parties in the pattern of revenue recognition based on the consideration to which the vendor is entitled. To accomplish this objective, the standard requires five basic steps: i) identify the contract with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract, and (v) recognize revenue when (or as) the entity satisfies a performance obligation. This ASU is effective for annual reporting periods beginning after December 15, 2016 for publicly traded companies. Management is in the process of determining the impact, if any, on the Company’s financial position, results of operations and cash flows.Acquisitions

BE&K Building Group Acquisition

On June 30, 2015, the Pernix Building Group, LLC (“PBG”), a wholly owned subsidiary of Pernix, acquired a 100% membership interest in KBR Building Group, LLC from BE&K, Inc., a subsidiary of KBR, Inc. pursuant to a definitive Membership Interest Purchase Agreement (the “Purchase Agreement”) for $22.0 million in cash subject to working capital adjustments, of which $0.9 million was paid on the acquisition date, based on a net working capital target of negative $6.0 million. During the fourth quarter, management finalized a $4.0 million working capital adjustment reducing the final purchase price to $18.9 million. The KBR Building Group, LLC, now known as “BE&K Building Group” (“BEK BG”), is a diversified construction services company serving advanced manufacturing, industrial, life sciences, and commercial/mixed-use clients providing comprehensive pre-construction and at-risk construction management services. The addition of BEK BG personnel, resources, past experience and past performance will serve to expand Pernix’s U.S. domestic base and its private sector coverage.

dck Pacific Guam LLC & dck-ecc Pacific Guam LLC Acquisition

On June 15, 2015, Pernix Guam, LLC (“PPG”), a wholly owned subsidiary of Pernix, acquired certain assets of dck Pacific Guam LLC (the “LLC”) and a 55% membership interest in dck-ecc Pacific Guam LLC joint venture (the “JV”), (collectively the “PPG Acquisition”) pursuant to a definitive purchase agreement (“the Agreement”) among the Company and dck worldwide Holdings Inc. and dck worldwide, LLC (collectively “dck”) for a purchase price of $1.8 million, of which $0.3 million is subject to certain terms and conditions.

The JV operates on the island of Guam and holds a Design-Build Multiple Award Construction Contract (the “DB-MACC”) with the United States Naval Facilities Engineering Command (“NAVFAC”). The DB-MACC serves as a pre-qualification for future work issued through NAVFAC task orders. There are four task orders under the DB-MACC. Pursuant to the Agreement, the members of the JV executed an amended and restated operating agreement of the JV (the “Amended JV Agreement”), under which PPG’s membership interest in the JV represents a 96% economic interest in one DB-MACC task order called P-109 for the design and construction of an aircraft maintenance hangar on the island of Guam with a contract value of $53.6 million. In accordance with the Agreement and the Amended JV Agreement, the PPG’s interest, rights and obligations with respect to the JV are limited only to the P-109 task order. dck and the other members of the JV retain all other interests, rights and obligations with respect to the JV. To that end, the JV entered into an agreement with dck for the completion of all remaining work on the non P-109 (“non P-109”) task orders. dck will fully indemnify and hold harmless PPG and its affiliates, including the P-109 assets of the JV and PPG’s rights thereto, from and against any and all damages from any claim, to the extent that such claim arises as a result of, or relates to, any non P-109 task order. PPG and its affiliates are also indemnified through a payment and performance bond on the non P-109 task orders.

The Company has determined that the JV is a variable interest entity (“VIE”) in which PPG now holds a 55% membership interest. PPG is the primary beneficiary of the JV and as a result, consolidates the JV in its entirety. PPG controls all activities and has a 96% economic interest in the activities of the P-109 project, which represents the most significant remaining activities of the JV. PPG has no obligation to absorb the expected losses of, nor the right to receive the expected residual returns deriving from non P-109 activity of the JV. It is expected that the JV activity upon which these short-term balance sheet items are based will be concluded within the first half of 2016, or sooner, and will not impact the Company’s consolidated financial statements after the completion of these non P-109 projects. The consolidated financial statements as of December 31, 2015 include the following assets and liabilities of the JV which relate solely to the non P-109 projects and the Company has no rights or obligations with respect to these items:

		Non P-109
Cash and cash equivalents	$	217,985
Cost in excess of billings and estimated earnings on uncompleted contracts		78,134
Contract payables and accrued expenses		812,846
Billings in excess of costs and estimated earnings on uncompleted contracts		233,711

Purchase Price Allocations

Both the Company’s 2015 acquisitions were accounted for as business combinations under Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) Topic 805 - Business Combinations (“ASC 805”). Accordingly, the assets and liabilities of the acquired businesses are accounted for under the purchase method of accounting and recorded at their fair values at the dates of acquisition. The results of operations of acquired businesses have been included in the Company’s consolidated statement of operations from their respective dates of acquisition. In accordance with ASC 805, all direct transaction costs relating to the acquisitions were expensed as incurred.

The Company has estimated the fair value of the assets acquired and liabilities assumed at the date of acquisition based upon information available to the Company at the reporting date. Management has used its best estimates in the purchase price allocation as of the date of these financial statements.

The following presents the estimated fair value of the assets acquired and liabilities assumed in the BEK BG and PPG acquisitions, and the resulting goodwill recognized totaling $19.1 million:

Purchase Price Allocation
		BE&K		PPG		Total
Consideration:
Cash	$	18,882,585	$	1,525,000	$	20,407,585
Contingent consideration		-		300,000		300,000
Fair Value of Non-controlling interest		-		164,991		164,991
Fair Value of Consideration Transferred		18,882,585		1,989,991		20,872,576

Fair Value of Assets Acquired and Liabilities Assumed:
Cash and cash equivalents		-		551,663		551,663
Cost and estimated earnings in excess of billings		19,817,677		1,148,563		20,966,240
Accounts receivable		32,532,263		616,317		33,148,580
Inventory		-		111,570		111,570
Other assets		1,593,881		1,826,470		3,420,351
Fixed assets		-		1,458,261		1,458,261
Intangibles assets		8,400,000		472,000		8,872,000
Billing in excess of costs and estimated earnings		(5,098,767)		(902,458)		(6,001,225)
Accounts payable and accrued expenses		(55,694,457)		(3,439,290)		(59,133,747)
Other current liabilities		(1,662,390)		-		(1,662,390)
Total Identifiable Net Assets		(111,793)		1,843,096		1,731,303
Goodwill		18,994,378		146,895		19,141,273
Fair Value of Consideration Transferred	$	18,882,585	$	1,989,991	$	20,872,576

Acquired intangible assets consist primarily of contract-related intangibles and tradename. Transaction costs associated with these acquisitions incurred during the year ended December 31, 2015 was $1.7 million.

The amounts assigned to goodwill and intangible asset classifications for the 2015 acquisitions are all recorded in the construction segment as follows:

		Construction Segment
Identifiable intangibles:
Customer contracts / backlog	$	7,672,000
Tradename		1,200,000
Total identifiable intangible assets		8,872,000
Goodwill		19,141,273
Total Goodwill and identifiable intangibles assets	$	28,013,273

~~Table~~Pro ofForma ~~Contents~~Information

~~In June 2014, the FASB issued ASU 2014-12 “Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period.”~~ The ~~amendments~~following ~~require~~unaudited ~~that~~pro aforma ~~performance~~information ~~target~~illustrates ~~that affects vesting and that could be achieved after~~ the ~~requisite~~effect ~~service~~on ~~period be treated as a performance condition. As such,~~ the ~~performance~~Company’s ~~target~~revenue should not be reflected in estimating the grant-date fair value of the award. Compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved and ~~should~~net ~~represent~~earnings ~~the compensation cost attributable to the period(s)~~ for ~~which~~ the ~~requisite~~years ~~service~~ended ~~has~~December ~~already been rendered. If the performance target becomes probable of being achieved before the end of the requisite service period~~31, ~~the~~2015 ~~remaining unrecognized compensation cost should be recognized prospectively over the remaining requisite service period. The total amount of compensation cost recognized during~~ and ~~after~~2014, ~~the~~assuming ~~requisite~~that ~~service period should reflect~~ the ~~number~~2015 ofacquisitions ~~awards~~had ~~that~~taken ~~are~~place ~~expected~~on toJanuary 1, ~~vest~~ 2014.

and should be adjusted to reflect those awards that ultimately vest. The requisite service period ends when the employee can cease rendering service and still be eligible to vest in the award if the performance target is achieved. The stated vesting period (which includes the period in which the performance target could be achieved) may differ from the requisite service period. For all entities, the amendments in this update are effective for annual periods and interim periods within those annual periods beginning after December 15, 2015. Management does not anticipate a material impact, if any, on the company’s financial position, results of operations or cash flows related to implementation of this guidance.

		Year ended December 31,
		2015		2014
Revenues:
As reported	$	195,491,324	$	85,300,739
Pro forma	$	325,562,498	$	405,688,886

Net income (loss) attributable to common stockholders:
As reported	$	(19,004,628)	$	(1,840,298)
Pro forma	$	(16,536,125)	$	7,169,621

Basic and diluted earnings per share:
As reported	$	(2.17)	$	(0.20)
Pro forma	$	(1.93)	$	0.52

InThese ~~August~~pro ~~2014,~~forma ~~the~~results ~~FASB issued ASU 2014-15, “Disclosure~~ of ~~Uncertainties~~operations ~~about~~have anbeen ~~Entity’s~~prepared ~~Ability~~for tocomparative ~~Continue~~purposes ~~as a Going Concern”~~only. ~~Currently,~~These ~~there~~pro isforma noresults ~~guidance~~are inbased ~~GAAP~~on ~~about~~the ~~management’s~~actual ~~responsibility~~results toof ~~evaluate~~the ~~whether~~acquired ~~there~~companies isand ~~substantial~~also ~~doubt~~include ~~about~~certain anadjustments ~~entity’s ability~~ to ~~continue~~actual asfinancial aresults ~~going~~for ~~concern~~the orperiods ~~to provide related footnote disclosures. The amendments in this Update provide that guidance. In doing so~~presented, ~~the~~such ~~amendments~~as ~~should~~estimated ~~reduce~~additional ~~diversity~~amortization ~~in the timing~~ and ~~content~~depreciation ofexpense ~~footnote disclosures. The amendments require management to assess an entity’s ability to continue~~ as a ~~going~~result ~~concern~~of byintangibles ~~incorporating~~ and ~~expanding~~fixed ~~upon~~assets ~~certain~~acquired, ~~principles~~measured ~~that~~at ~~are~~fair ~~currently in U~~value.S. ~~auditing~~They ~~standards.~~do ~~The~~not ~~amendments~~purport into ~~this~~be ~~Update~~indicative ~~are~~of ~~effective for~~ the ~~annual~~results ~~period~~of ~~ending~~operations ~~after~~that ~~December~~actually ~~15,~~would ~~2016,~~have ~~and~~resulted ~~for~~had ~~annual periods and interim periods thereafter. Management is in~~ the ~~process~~acquisitions ofoccurred ~~determining the impact, if any,~~ on the ~~Company’s~~date ~~financial~~indicated ~~position,~~or ~~results~~that ofmay ~~operations~~result ~~and~~in ~~cash~~the ~~flows~~future.

InThe ~~January~~pro ~~2015,~~forma ~~the~~results ~~FASB~~include ~~issued~~adjustments ~~ASU~~for ~~2015~~non-~~01,~~recurring ~~"Simplifying~~transaction ~~Income~~costs ~~Statement~~of ~~Presentation~~$1.7 bymillion ~~Eliminating~~for the ~~Concept~~year ofended ~~Extraordinary~~December ~~Items." Under this ASU~~31, an2015 ~~entity~~and ~~will~~$1.9 nomillion ~~longer be allowed to separately disclose extraordinary items, net~~ of ~~tax,~~non-recurring inprofessional ~~the~~fees ~~income statement after income from continuing operations if an event or transaction is unusual in nature~~ and ~~occurs~~transition ~~infrequently.~~related ~~ASU~~expenditures ~~2015-01 is effective~~ for ~~interim~~the ~~and~~year ~~annual~~ended ~~reporting periods beginning after~~ December ~~15,~~ ~~2015 with early adoption permitted. Upon adoption~~31, ~~the company may elect prospective or retrospective application. Management does not expect the adoption of ASU~~ 2015~~-01~~ toand ~~have a material impact on the company's financial position, results of operations or cash flows~~2014.

InActual ~~February~~acquisition ~~2015,~~revenue for the ~~FASB~~year ~~issued~~ended ~~ASU~~December ~~No. 2015-02~~31, ~~“Consolidation — Amendments to the Consolidation Analysis.” ASU No.~~ 2015~~-02~~ ~~eliminates~~was ~~the deferral of the requirements of ASU No~~$159.9 ~~2009-17,~~million ~~“Consolidations — Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities” for certain interests in investment funds~~ and ~~provides~~loss abefore ~~scope~~income ~~exception~~taxes ~~from Topic 810~~ for ~~certain investments in money market funds. The ASU also makes several modifications to~~ the ~~consolidation~~year ~~guidance~~ended for VIEs and general partners’ investments in limited partnerships, as well as modifications to the evaluation of whether limited partnerships are VIEs or voting interest entities. ASU No. 2015-02 is effective for interim and annual reporting periods beginning after December 1531, 2015. ~~Early~~was ~~adoption is permitted~~$(5.2) ~~Management does not expect the adoption of ASU 2015-02 to have a material impact on the company's financial position, results of operations or cash flows~~million.

~~Other~~5. ~~pronouncements~~Goodwill ~~issued~~and ~~recently~~Other ~~are~~Intangible ~~not expected to have a material impact on the company’s financial position, results of operations or cash flows.~~Assets

Goodwill and other intangible assets subject to amortization consisted of the following as of December 31:

		2015						2014
		Gross Carrying Amount		Accumulated Amortization		Net Amount		Gross Carrying Amount		Accumulated Amortization		Net Amount

Customer Contracts / Backlog	$	7,972,000	$	(1,723,497)	$	6,248,503	$	300,000	$	(218,349)	$	81,651
Tradename		1,200,000		(300,000)		900,000		-		-		-
Total Other Intangible Assets	$	9,172,000		(2,023,497)		7,148,503		300,000		(218,349)		81,651
Goodwill						19,141,273						-
Total Goodwill and Other Intangible Assets					$	26,289,776					$	81,651

Table of Contents

		Construction Segment
Other Intangible Assets Subject to Amortization:
Balance as of December 31, 2014	$	81,651
Acquisitions		10,400,000
Amortization		(1,805,148)
Measurement period adjustments		(1,528,000)
Balance as of December 31, 2015		7,148,503

Goodwill:
Balance as of December 31, 2014		-
Acquisitions		16,576,048
Measurement period adjustments		2,565,225
Balance as of December 31, 2015		19,141,273
Total Goodwill and Other Intangibles as of December 31, 2015	$	26,289,776

5The Company recognized $16.6 ~~Contract~~million ~~Backlog~~of goodwill resulting from the June 2015 acquisitions of BEK BG and PPG, all of which was assigned to the Company’s construction segment. During the year ended December 31, 2015, the Company recognized a decrease in project related net assets of $2.6 million with a corresponding increase to goodwill.

~~Backlog~~Amortization ~~represents~~of intangible assets for the ~~amount~~year ofended ~~revenue~~December ~~the~~31, ~~Company~~2015 ~~expects~~was to$1.8 ~~realize~~million, ~~from~~of ~~work~~which to$1.5 bemillion ~~performed~~was onrecorded ~~uncompleted~~in construction ~~contracts~~costs inand ~~progress~~$0.3 atmillion ~~December~~was ~~31,~~recorded ~~2014~~in general and ~~2013~~administrative ~~and~~expenses ~~from~~on ~~construction~~the ~~contractual~~consolidated ~~agreements~~Statements onof ~~which~~Operations. ~~work~~Amortization ~~has~~expense ~~not~~relating ~~yet~~to ~~begun~~amortizable intangible assets will be $3.6 ~~The~~million ~~following~~in ~~summarizes~~2016, ~~changes~~$2.6 million in 2017, and $1.0 million in 2018. A nominal amount of backlog onamortization ~~construction~~expense ~~contracts~~was ~~during~~recognized in the ~~years~~fourth ~~ended~~quarter ~~December~~of ~~31,~~2015 ~~2014~~as a measurement period adjustment that relate to the third and ~~2013:~~fourth quarters of 2015.

~~Contract~~6. ~~Backlog~~Recent ~~Schedule~~Accounting Pronouncements

Balance at December 31, 2012	$	67,901,575
New Construction Contracts / Amendments to contracts in 2013		37,000,391
Less: Construction contract revenue earned as of December 31, 2013		(67,776,314)
Balance at December 31, 2013	$	37,125,652
Balance at December 31, 2013	$	37,125,652
New Construction Contracts / Amendments to contracts in 2014		62,949,355
Less: Construction contract revenue earned as of December 31, 2014		(78,573,035)
Balance at December 31, 2014	$	21,501,972

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842) (“ASU 2016-02”). The guidance in this ASU supersedes the leasing guidance in Topic 840, Leases. Under the new guidance, lessees are required to recognize lease assets and lease liabilities on the balance sheet for those leases previously classified as operating leases. The amendments in ASU No. 2016-02 are effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period with early adoption permitted. The Company is evaluating the impact of adopting this ASU on its consolidated financial position and results of operations.

~~Management~~In ~~anticipates~~November ~~that~~2015, the ~~full~~FFASB ~~backlog~~issued ofASU ~~$21~~No.5 ~~million~~2015-17, as“Income ofTaxes ~~December~~(Topic ~~31,~~740): ~~2014~~Balance ~~will~~Sheet beClassification ~~recognized~~of asDeferred ~~revenue~~Taxes” ~~during~~(“ASU 2015-17”). The ~~table~~main ~~does~~provisions ~~not~~of ~~include~~this ~~$15.8~~guidance, ~~million~~which is intended to simplify the presentation of ~~new~~deferred ~~awards~~income ~~and~~taxes, ~~modifications~~require ~~received~~that indeferred ~~early~~tax ~~2015.~~liabilities ~~The~~and ~~new~~assets ~~awards~~be ~~include~~classified ~~the~~as ~~$11.6~~noncurrent ~~million~~in ~~contract~~a ~~awarded~~classified tostatement ~~Pernix~~of ~~Kaseman~~financial JVposition. inCurrent ~~January~~GAAP ~~2015~~requires an entity to ~~construct~~separate adeferred ~~communication~~income ~~center~~tax ~~special~~liabilities ~~area~~and onassets ~~Camp~~into ~~Humphrey~~current inand ~~South~~noncurrent ~~Korea~~amounts ~~and~~in a $4classified statement of financial position.2 ~~million~~The ~~contract~~current ~~for~~requirement ~~the~~that ~~construction~~deferred tax liabilities and assets of a 33tax-paying MWcomponent ~~substation~~of ~~related~~an toentity ~~the~~be ~~Kinoya~~offset ~~Expansion~~and ~~project.~~presented ~~The~~as ~~table~~a ~~also~~single ~~does~~amount is not ~~include~~affected ~~revenue~~by ~~associated~~the ~~with~~amendments ~~our~~in ~~long~~this ~~term~~Update. ~~contract~~This orguidance ~~memo~~is ofeffective ~~understanding~~ for ~~power~~fiscal ~~operating~~years ~~and~~beginning ~~maintenance~~after ~~services~~December or15, ~~construction~~2016, ~~segment~~and ~~stipend~~interim ~~income~~periods ~~that~~within isthose ~~related~~annual toperiods. Earlier ~~contracts~~application ~~that~~is ~~were~~permitted ~~not~~for ~~ultimately~~all ~~awarded~~entities toas of the ~~Company~~beginning asof ~~they~~an ~~are~~interim ~~not~~or ~~directly~~annual ~~related~~reporting toperiod. ~~core~~Adoption ~~construction~~of ~~work.~~the ~~The~~standard ~~table~~is ~~includes~~not ~~the~~expected ~~fees~~to ~~associated~~have ~~with~~a ~~contracts~~material ~~under~~impact on the ~~cost~~condensed ~~plus~~consolidated ~~fee~~financial ~~contractual arrangement~~statements.

In February 2014, a “Certificate of Substantial Completion” effective January 14, 2014 was received related to the Sather project and approximately $1.5 million remains in the backlog as of December 31, 2014 and is related to estimated close out and project management work through January 2015 when the warranty period expires. Additionally, a “Certificate of Substantial Completion” was received in September 2014 related to the Baku project and approximately $0.9 million remains in the backlog as of December 31, 2014 related to the estimated close out costs on the project. The Company has recorded a provision for losses of approximately $1.0 million on one of its projects as of December 31, 2014 based on estimated costs in excess of contract revenue. The project is expected to be completed by April 2015.

6. Accounts Receivable—Net

Receivables on construction contracts completed and in progress include amounts billed but not yet received from contract customers. Trade and other accounts receivable primarily arise from construction contract related sales to commercial and governmental customers in the normal course of business. Accounts receivable consist of the following at December 31, 2014 and 2013:

Gross Trade Receivable by Major Customers		December 31,2014		December 31,2013
OBO	$	638,919	$	8,255,970
Government of Vanuatu (VUI)		202,854		266,258
Fiji Electricity Authority (FEA)		1,406,653		374,591
All others		3,436,396		575
Total		5,684,822		8,897,394
Less: Allowance for doubtful accounts		—		—
Total accounts receivable trade, net	$	5,684,822	$	8,897,394
Retainage receivables		1,149,632		200,000	(1)
Accounts receivable - related party		68,463		39,447
Other receivables		111,435		86,389
Total accounts receivable - net	$	7,014,352	$	9,223,230

~~Table~~In September 2015, the FASB issued ASU No. 2015-16, “Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments” (“ASU 2015-16”). The main provisions of ~~Contents~~this guidance require that an acquirer recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. The acquirer is further required to record, in the same period’s financial statements, the effect on earnings of changes in depreciation, amortization, or other income effects, if any, resulting from the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date. Entities are required to present separately on the face of the income statement or disclose in the notes the portion of the amount recorded in current-period earnings by line item that would have been recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized as of the acquisition date. The guidance is effective for fiscal years beginning after December 15, 2015, including interim periods within those fiscal years, applied prospectively with early application permitted on unissued financial statements. Management has adopted ASU 2015-16 in these financial statements and provided the required disclosures.

		December 31, 2014		December 31, 2013
Trade construction contracts completed and in progress	$	5,047,888	$	8,255,970
Trade other (Power Generation receivables)		636,934		641,424
Less: allowance for doubtful accounts		—		—
Total accounts receivable trade, net	$	5,684,822	$	8,897,394

In August 2015, the FASB issued ASU No. 2015-14, “Revenue from Contracts with Customers (Topic 606)” (“ASU 2015-14”), which deferred the effective date of ASU 2014-09 (“ASU 2014-09”) issued in May 2014. ASU 2014-09 supersedes the revenue recognition requirements in Topic 605, Revenue Recognition, including most industry-specific requirements. ASU 2014-09 establishes a five-step revenue recognition process in which an entity will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. ASU 2014-09 also requires enhanced disclosures regarding the nature, amount, timing and uncertainty of revenues and cash flows from contracts with customers. With the issuance of ASU 2015-14, the FASB delayed the effective date for implementation of ASU 2014-09. Deferral of the effective date requires the Company to adopt the new standard not later than January 1, 2018. Management is currently evaluating the impact the adoption of ASU 2014-09 will have on the Company’s consolidated financial position, results of operations or cash flows and the method of retrospective application, either full or modified.

In August 2015, the FASB issued ASU No. 2015-15, “Interest—Imputation of Interest (1Subtopic 835-30): ~~Includes~~Presentation ~~$200,000~~and ~~retainage~~Subsequent ~~receivable~~Measurement ~~from~~of USDebt ~~Department~~Issuance Costs Associated with Line-of-Credit ~~State’s~~Arrangements—Amendments ~~Bureau~~to SEC Paragraphs Pursuant to Staff Announcement at June 18, 2015 EITF Meeting”, and in April 2015, the FASB issued ASU 2015-03, “Interest — Imputation of ~~Overseas~~Interest ~~Buildings~~(Subtopic ~~Operations~~835-30)” (~~OBO~~“ASU 2015-03”).The guidance in update 2015-03 (see paragraph 835-30-45-1A) does not address presentation or subsequent measurement of debt issuance costs related to line-of-credit arrangements. Given the absence of authoritative guidance within ASU 2015-03 for debt issuance costs related to line-of-credit arrangements, the SEC staff would not object to an entity deferring and presenting debt issuance costs as an asset and subsequently amortizing the deferred debt issuance costs ratably over the term of the line-of-credit arrangement, regardless of whether there are any outstanding borrowings on the line-of-credit arrangement. ASU 2015-03 requires that debt issuance costs related to a recognized debt liability be presented in the ~~Company~~balance ~~received~~sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The discount, premium, or debt issuance costs shall not be classified as a deferred charge or deferred credit. An entity should apply the guidance on a retrospective basis, with applicable disclosures for a change in an accounting principle. ASU 2015-03 and 2015-15 is effective for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years with early ~~2014~~adoption ~~upon~~permitted and applied on a retrospective basis. Management does not expect the ~~final~~adoption ~~Shield~~of ~~project~~ASU ~~close~~2015-~~out~~03 or 2015-15 to have a material impact on the Company's financial position, results of operations or cash flows.

7In July 2015, the FASB issued ASU 2015-11, “Inventory (Topic 330) – Simplifying the Measurement of Inventory” (“ASU 2015-11”). The ~~Cost~~main provision of ASU 2015-11 is that an entity should measure inventory at the lower of cost and ~~Estimated~~net ~~Earnings~~realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. This guidance does not apply to inventory that is being measured using Last-In, First-Out (LIFO) or the retail inventory method. The guidance is effective for financial statements issued for annual and interim periods beginning after December 15, 2016 on ~~Uncompleted~~a ~~Contracts~~prospective basis. Early adoption is permitted. Management does not expect the adoption of ASU 2015-11 to have a material impact on the Company's financial position, results of operations or cash flows.

Long-term construction contracts in progress are accounted for using the percentage-of-completion method. Billings, costs incurred, and estimated earnings on uncompleted contracts as of December 31, 2014 and 2013 are as follows:

Cost and Estimating Earnings on Uncompleted Contracts		December 31, 2014		December 31, 2013
Cost incurred on uncompleted contracts	$	188,834,649	$	211,750,908
Estimated earnings		18,548,783		18,207,952
Total cost and estimated earnings		207,383,432		229,958,860
Less: Billings to date		203,632,013		238,309,368
Net	$	3,751,419	$	(8,350,508)
These amounts are included in the accompanying consolidated balance sheets under the following captions:
Costs and estimated earnings in excess of billings on uncompleted contracts	$	7,539,080	$	56,679
Billings in excess of costs and estimated earnings on uncompleted contracts		(3,787,661)		(8,407,187)
	$	3,751,419	$	(8,350,508)

8. Property and Equipment

During the first quarter of 2013, the Company purchased the building and land on which its corporate headquarters are now located for $1.1 million from Baron Real Estate Holdings, Inc. (“Baron”), a related party. Prior to the purchase Pernix leased its corporate headquarters from Baron. In accordance with the applicable accounting rules for such a transaction between related parties with the same parent, the assets acquired were recorded at the carrying value utilized by Baron at the date of the acquisition, which approximated the amount paid by Pernix for the assets.

The property and equipment as of December 31, 2014 and 2013 is as follows:

		December 31, 2014		December 31, 2013
Building/leasehold improvements	$	770,456	$	785,240
Land		420,000		420,000
Construction equipment		273,172		—
Office furniture and equipment		305,233		121,693
Computer, software and communication equipment		89,928		8,920
		1,858,789		1,335,853
Less accumulated depreciation		(180,351)		(52,954)
Net property and equipment	$	1,678,438	$	1,282,899

Total depreciation expense was $191,606 for 2014 ($127,397 after the quasi-reorganization impact) and $241,874 for 2013 ($49,138 after the quasi-reorganization impact). Depreciation for construction machinery and equipment is recognized as a project expense when appropriate.

~~Table~~In February 2015, the FASB issued ASU No. 2015-02, “Consolidation (Topic 810)”. The guidance contains changes to the analysis that a reporting entity must perform to determine whether it should consolidate certain types of ~~Contents~~legal entities. The amendments in this update are effective for interim and annual reporting periods beginning after December 15, 2016. Early adoption is permitted, including adoption in an interim period. Adoption of the standard is not expected to have a material impact on the condensed consolidated financial statements.

9In January 2015, the FASB issued ASU 2015-01, "Income Statement – Extraordinary and Unusual Items (Subtopic 225-20): Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items." ~~Short~~Under this ASU, an entity will no longer be allowed to separately disclose extraordinary items, net of tax, in the income statement after income from continuing operations if an event or transaction is unusual in nature and occurs infrequently. ASU 2015-~~term~~01 is effective for interim and ~~long~~annual reporting periods beginning after December 15, 2015 with early adoption permitted. Upon adoption, the company may elect prospective or retrospective application. Management does not expect the adoption of ASU 2015-~~term~~01 ~~borrowings~~to have a material impact on the company's financial position, results of operations or cash flows.

~~Pernix~~Other ~~Group~~pronouncements issued recently are not expected to have a material impact on the Company’s financial position, ~~Inc.~~results ~~debt~~of ~~agreements~~operations or cash flows.

~~As of December 31, 2013 short-term and long-term debt agreement with Bent Marketing Ltd~~7., aContract ~~related party, were fully repaid. The interest expense during 2013 amounted to approximately $43,000.~~ Backlog

InBacklog ~~connection~~represents ~~with~~ the ~~purchase~~amount of revenue the ~~land~~Company ~~and~~expects ~~building~~to ~~for~~realize ~~the~~from ~~Company’s~~work ~~corporate~~to ~~headquarters~~be ~~during~~performed ~~March~~on ~~2013~~uncompleted construction contracts in progress at December 31, ~~Pernix~~2015 ~~borrowed~~and ~~$0.5~~2014 ~~million~~and ~~under~~from anconstruction ~~agreement~~contractual ~~with~~agreements ~~Baron,~~on awhich ~~related~~work ~~party,~~has ~~with~~not ~~interest~~yet ~~accruing~~begun atand awarded not booked backlog where a ~~rate~~contractual ofagreement ~~4.0%~~has ~~per~~not ~~annum.~~been ~~The~~signed ~~note~~but ~~was~~there ~~payable~~is ina ~~twelve~~high ~~monthly~~degree ~~installments~~of ~~beginning~~certainty inwhere ~~March~~we ~~2013.~~expect Onto ~~December~~recognize ~~23,~~revenue ~~2013~~in the ~~outstanding~~future. ~~balance~~The offollowing ~~the~~summarizes ~~note~~changes ~~was~~in ~~fully~~backlog ~~repaid~~on ~~with~~construction ~~accrued~~contracts ~~interest.~~during the years ended December 31:

OnContract ~~November~~Backlog 14, 2014, PGI and Pernix RE, LLC entered into loan and security agreement with Barrington Bank & Trust Company, National Association to establish a revolving credit facility and a letter of credit facility, each expiring on November 10, 2016, with an option to extend the term of the agreement. The revolving credit facility provides a borrowing capacity of $5.0 million. Loans under the revolving credit facility will bear interest at the LIBOR rate determined on periodic reset dates, plus an applicable margin ranging from 1.6% to 2.75% based on the Company’s liquidity, as defined. The letter of credit provides up to $10.0 million in aggregate of standby or trade letters of credit which accrue interest at a rate of Prime plus 4% for standby letters of credit and Prime plus 0.75% for trade letters of credit. Interest for each facility is payable on the periodic reset dates and borrowings are payable by the maturity of the agreement. Borrowings under each facility are secured by all real and personal property of PGI and Pernix RE, LLC. The agreement requires the Company to pay a facility fee of 1.6% per annum of the then outstanding undrawn letter of credit and imposes various restrictions on the Company, such as, among other things, the requirement of the Company to maintain minimum net income of $1.00 and minimum liquidity equal to the amount outstanding on the credit facility, as defined. The Company was in compliance with all covenants as of December 31, 2014, and therefore, the full amount of borrowing capacity was available to be drawn upon. No amounts were outstanding under the revolving credit facility or line of credit facility as of December 31, 2014. The Company’s primary uses of the revolving credit facility are to fund potential working capital needs. Schedule

PFL debt agreements

		Year ended December 31,
		2015		2014
Balance at beginning of year	$	21,501,972	$	37,125,652
New Construction contracts / amendments to contracts during the year		547,346,411		62,949,355
Less: Construction contract revenue earned		(189,415,888)		(78,573,035)
Balance at end of year	$	379,432,495	$	21,501,972

AsThe table includes $88.1 million of ~~December~~awarded ~~31,~~not ~~2013,~~booked ~~PFL~~associated ~~had~~with aBEK ~~line~~BG ofand ~~credit~~includes ~~agreement~~the fees associated with ~~Australia~~contracts ~~and~~under ~~New~~the ~~Zealand~~cost ~~Banking~~plus ~~Group~~fee ~~Limited~~contractual ~~(ANZ)~~arrangement. ~~which~~The ~~provided~~table ~~borrowing~~excludes ~~capacity~~$169.2 upmillion of revenue associated with our recent OBO award to ~~FJD~~construct 2the ~~million~~new U. OnS. ~~March~~Embassy 12Compound in Maputo, ~~2014~~Mozambique (disclosed as a subsequent event in Note 21), ~~PFL~~and ~~modified~~it ~~its~~also ~~line~~excludes ofour ~~credit~~long ~~agreement~~term ~~with~~contract ~~ANZ~~or tomemorandum ~~increase~~of ~~the~~understanding ~~available~~for ~~line~~power tooperating ~~FJD~~and 6maintenance services.9 ~~million~~The ~~and~~Company anobtained ~~additional~~contracts ~~Euro~~with 17remaining backlog of approximately $129.31 million toand ~~facilitate~~$45.8 million in connection with the ~~Kinoya~~acquisitions ~~plant~~of ~~expansion~~BEK ~~project~~BG ~~financing~~and ~~needs~~PPG, respectively. The ~~line~~Company ofhas ~~credit~~three ~~was~~loss ~~further~~contracts ~~modified~~which onare ~~May~~substantially 6,complete ~~2014~~as toof ~~reduce~~December ~~their~~31, ~~FJD~~2015 ~~facility~~of ~~limit~~$1.2 tomillion, ~~FJD 5~~$1.6 million and $0.2 million. (The Company recorded a provision for losses of approximately $2.5 million ~~USD~~based ason ofestimated ~~December~~costs ~~31,~~in ~~2014),~~excess ~~increase~~of ~~their~~contract ~~Euro~~revenue ~~facility~~during ~~limit~~the toyear ~~Euro~~associated ~~17.7~~with ~~million~~these ~~($21~~contracts.5 ~~million~~The ~~USD~~Company asalso assumed three loss contracts in connection with the acquisition of ~~December~~BEK 31BG. These projects are 99%, ~~2014)~~49% and to18% ~~extend~~complete ~~the~~with ~~maturity~~estimated ~~date~~contract tocosts ~~July~~in 21excess of contract revenue of $1.3 million, ~~2015~~$1. 2 million and $0.3 million, respectively.

The agreement is secured by all real and personal property of PFL up to FJD 1.0 million ($0.5 million USD as of December 31, 2014), a corporate guarantee of FJD 4.0 million ($2.0 million USD as of December 31, 2014) issued by Pernix to ANZ, an Unconditional, Irrevocable and On Demand Stand by Letter of Credit given by Wartsila and Fiji Electricity Authority to ANZ, and a restricted cash term deposit of FJD 2.3 million ($1.2 million USD as of December 31, 2014). The remaining terms and conditions of the line of credit agreement remain substantially the same after the amendment.

The Company paid a FJD 100,000 ($0.05 million USD) loan approval fee for the increase in the borrowing capacity under the line of credit as well as a commitment fee of 1% per annum when the line of credit is not fully drawn within three months of acceptance of the line of credit offer. The interest rate applicable to the line of credit is the Bank's published Index Rate minus a margin of 3.70% (Interest rate of 6.25% per annum at December 31, 2014).

As of December 31, 2014, FJD 5.0 million ($2.5 million USD) and Euro 17.7 million ($21.5 million USD) of the line of credit was allocated to facilitate the performance security, advance payment guarantee, lease finance facility for motor vehicles, visa credit card facility and documentary letter of credit. PFL allocated Euro 11.6 million ($13.1 million USD as of December 31, 2014) and FJD 3.6 million ($1.8 million USD as of December 31, 2014) from the line of credit to facilitate the issuance of the performance and advance payment guarantees to Fiji Electricity Authority for the design, build, supply and install of 35MW Heavy Fuel Oil Wartsila Diesel Engines. An establishment fee of 0.9% of the guarantee amount was charged followed by a semi-annual fee of 0.9%. For each

~~Table~~8. ofAccounts ~~Contents~~and Other Receivables

~~bank~~Receivables ~~guarantee,~~on ~~the~~construction ~~fee~~contracts iscompleted ~~payable~~and onin ~~the~~progress ~~date~~include ofamounts ~~the~~billed ~~drawdown~~but ~~and~~not ~~afterwards~~yet ~~semi-annually.~~received ~~Furthermore,~~from ~~PFL~~contract ~~allocated~~customers. ~~Euro~~Trade ~~6.1~~and ~~million~~other ~~($6.94~~accounts ~~million~~receivable ~~USD~~primarily asarise offrom ~~December~~construction ~~31,~~contract ~~2014)~~related insales ato ~~documentary~~commercial ~~letter~~and ofgovernmental ~~Credit~~customers toin ~~Wartsila~~the ~~Finland~~normal OYcourse toof ~~facilitate~~business. During 2015, the ~~supply~~Company ofhad ~~four~~one ~~new~~major ~~Heavy~~customer ~~Fuel~~with ~~generator~~trade ~~plants~~accounts ofreceivable 35totaling MW$13.2 tomillion ~~Fiji~~or ~~Electricity~~29% ~~Authority,~~of ~~Kinoya~~the ~~Power~~Company’s ~~Station.~~total ~~The~~trade ~~fee~~receivables ~~charged~~for byyear ~~ANZ~~ended ~~was~~December 031, 2015.5% ofDuring 2014, the ~~Letter~~Company ofhad ~~credit~~three ~~value.~~major ~~The~~customers ~~balance~~with oftrade ~~the~~accounts ~~credit~~receivable ~~facility~~of ~~was~~$2.5 ~~allocated~~million, ~~towards~~$1.9 ~~the~~million ~~finance~~and ~~operating~~$1.5 ~~lease~~million ~~facility~~representing ~~and~~36%, ~~credit~~27% ~~card~~and ~~facility.~~22% ~~There~~of ~~were~~total notrade ~~amounts~~receivables, ~~drawn~~respectively. onAccounts ~~the~~receivable ~~line~~consisted of ~~credit~~the asfollowing ofat December 31~~, 2014.~~:

In connection with the line of credit, PFL is subject to a “gearing ratio” covenant that limits net total liabilities less non-current subordinated debt to 2.1 times effective equity, as well as other customary covenants. As of December 31, 2014, the PFL gearing ratio is 2.01 and PFL is in compliance with all covenants.

		2015		2014
Total accounts receivable trade, gross	$	31,690,833	$	5,684,822
Retainage receivables		13,846,047		1,149,632
Accounts receivable - related party		2,384		68,463
Other receivables		2,680,484		111,435
Total accounts receivable - net	$	48,219,748	$	7,014,352

10. Fair Value Measurements

		2015		2014
Trade construction contracts completed and in progress	$	30,122,840	$	5,047,888
Trade other (Power Services receivables)		1,567,993		636,934
Total accounts receivable trade, net	$	31,690,833	$	5,684,822

~~The Company adopted the fair value measurement guidance for all nonfinancial assets and liabilities recognized or disclosed at fair value in the financial statements on a nonrecurring basis~~9. ~~These~~Cost ~~assets~~ and ~~liabilities~~Estimated ~~include~~Earnings items such as customer relationships and trademarks and long lived assets that are measured at fair value resulting from impairment, if deemed necessary. Management reviews the recoverability of the assessed value of the intangibles, for impairment, whenever events or changes in circumstances indicate that the carrying value may not be recoverable. When the recovery is reviewed, if the carrying amounts of the assets are determined to be unrecoverable, an impairment loss would be recorded. The Company does not have any nonfinancial assets and liabilities recognized or disclosed at fair value on aUncompleted ~~non-recurring basis as of December 31, 2014.~~Contracts

11Long-term construction contracts in progress are accounted for using the percentage-of-completion method. ~~Leases~~Billings, costs incurred, and estimated earnings on uncompleted contracts as of December 31 are as follows:

The Company and its subsidiaries are lessees in non-cancelable leasing agreements for office buildings, equipment and vehicles which expire at various dates. The related lease payments are expensed on a straight-line basis over the lease term, including, as applicable, any free-rent period during which the Company has the right to use the asset. For leases with renewal options where the renewal is reasonably assured, the lease term, including the renewal period is used to determine the appropriate lease classification and to compute periodic rental expense. None of the Company’s current lease agreements have been determined to be capital leases.

Cost and Estimating Earnings on Uncompleted Contracts		2015		2014
Cost incurred on uncompleted contracts	$	207,563,345	$	188,834,649
Estimated earnings		10,007,049		18,548,783
Total cost and estimated earnings		217,570,395		207,383,432
Plus: Acquired net costs and estimated earnings in excess of billings		15,009,185		—
Less: Billings to date		(222,415,720)		(203,632,013)
Net	$	10,163,860	$	3,751,419

In April 2011, Pernix leased its corporate headquarters at 151 E. 22nd Street in Lombard, Illinois under a five year operating lease with Baron, a related party, commencing May 1, 2011 and expiring on April 30, 2016. In the first quarter of 2013, the Company purchased the land and building in which the corporate headquarters are located and in connection with this purchase the lease was terminated and no further commitment exists.

These amounts are included in the accompanying consolidated balance sheets under the following captions:

Costs and estimated earnings in excess of billings on uncompleted contracts	$	16,563,199	$	7,539,080
Billings in excess of costs and estimated earnings on uncompleted contracts		(6,399,339)		(3,787,661)
	$	10,163,860	$	3,751,419

Future minimum lease payments at December 31, 2014 for all leases having an initial or remaining non-cancelable lease term in excess of one year, are as follows:

Year Ending December 31,
2015	$		301,194
2016		128,148
2017		35,347
2018		4,802
2019		2,401
	$		471,892

Lease expense was approximately $0.4 million and $0.3 million for the years ended December 31, 2014 and 2013, respectively.

~~Table~~10. ofProperty ~~Contents~~and Equipment, net

~~12.~~The ~~Financial~~property ~~Instruments~~and ~~with~~equipment ~~Off-Balance~~as ~~Sheet~~of ~~Risk~~December ~~and~~31 ~~Concentration~~is ofas ~~Credit Risk~~follows:

Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of restricted cash term deposits, trade receivables and financial guarantees.

		2015		2014
Building/leasehold improvements	$	1,251,991	$	1,020,308
Land		420,000		420,000
Construction equipment		1,327,036		437,738
Office furniture and equipment		862,055		707,001
Computer, software and communication equipment		1,798,936		314,958
Gross property and equipment		5,660,018		2,900,005
Less accumulated depreciation		(1,590,406)		(1,221,567)
Net property and equipment	$	4,069,612	$	1,678,438

IfFor ~~the~~years ~~Company~~ended ~~extends~~December a31, ~~significant~~2015 ~~portion~~and ~~of its credit to clients in a specific geographic area or industry~~2014, ~~the~~depreciation ~~Company~~expense ~~may~~was experience disproportionately high levels of default if those clients are adversely affected by factors particular to their geographic area or industry. The Company’s customer base includes governments$432,359 ~~government agencies~~ and ~~quasi-government organizations~~$191,606, ~~which~~respectively. ~~are~~Depreciation ~~dispersed~~for ~~across~~construction ~~many~~machinery ~~different industries~~ and ~~geographic~~equipment ~~locations.~~is ~~See~~recognized ~~Note~~as 6a inproject ~~the~~expense ~~notes~~when ~~to our consolidated financial statements~~appropriate.

~~From~~11. ~~time~~Short-term ~~to time, Pernix Group utilizes foreign exchange contracts to reduce exposure to foreign exchange risks associated with payments for services~~ and ~~products~~long-term ~~related to the various construction and other projects. No such contracts were employed during 2014 or 2013.~~ borrowings

From time to time, the Company is required to utilize standby letters of credit or similar financial guarantees in the normal course of its business, and this is a typical practice for the industry segments in which the Company operates. The ~~amount,~~current ~~duration,~~ and ~~structure~~non-current ofportions ~~such standby letters~~ of ~~credit or similar financial instruments varies depending on~~ the ~~nature and scope of the project involved. As of December 31, 2014 the~~ Company ~~had a FJD 4.0 million ($2.0 million USD) financial guarantee of PFL~~’s ~~line of credit with ANZ. No amounts are~~ outstanding ~~under~~borrowings ~~the ANZ line of credit and the Company does not anticipate any payment risk under this guarantee~~ as of December 31, ~~2014. No~~2015 ~~such~~are ~~guarantees were outstanding~~ as of December 31, 2013. In December 2012, the Company was awarded a $1.6 million project to install 33MW cable in the Solomon Islands and begun the execution in 2013. In connection with this award, a performance guarantee was established with ANZ Bank. The project is substantially complete as the 33MW cable has been installed but not yet commissioned as of December 31, 2014 and the Company does not anticipate any payment risk under this guarantee as of December 31, 2014.follows:

The Company’s cash balances and short-term investments are maintained in accounts held by major banks and financial institutions located primarily in the U.S., Niger, Azerbaijan, Sierra Leone, Fiji and Vanuatu as of December 31, 2014 and 2013. The Company maintains its cash accounts at numerous financial institutions. Certain accounts covered by the Federal Deposit Insurance Corporation (FDIC) are insured up to $250,000 per institution. As of December 31, 2014 and 2013, the amount of domestic bank deposits that exceeded or are not covered by the FDIC insurance was $8.6 million and $17.9 million, respectively. Certain financial institutions are located in foreign countries which do not have FDIC insurance and, as of December 31, 2014 and 2013, the amount of bank deposits in these financial institutions was $2.3 million and $1.4 million, respectively.

		Current Portion		Non-Current Portion
Term Loans
4.5% 2-year term loan – related party	$	—	$	6,000,000
6.8% 2-year term loan – related party		—		1,425,300
Variable interest rate 5-year term loan		341,180		1,319,386
Short-term debt		204,963		—
Total term loans		546,143		8,744,686

Lines of Credit
Variable interest rate $1,500,000 line-of-credit		1,498,816		—
Variable interest rate $750,000 line-of-credit		500,000		—
Total lines of credit		1,998,816		—
Total borrowings	$	2,544,959	$	8,744,686

~~13.~~Maturities—The ~~Stockholders~~Company’s ~~Equity~~debt as of December 31, 2015 matures as follows:

Certificate of Amendment of the Corporation’s Restated Certificate of Incorporation - In connection with the Series A Preferred Stock sale that was effective on December 30, 2013, the Company amended its Restated Certificate of Incorporation and its Certificate of Designation for Series A Preferred Stock to increase the total number of shares of stock which the Company shall have authority to issue to 25,500,000, consisting of 20,000,000 shares of Common Stock, par value $.01 per share (“Common Stock”), and 5,500,000 shares of Preferred Stock, par value $.01 per share (“Preferred Stock”).

2016	$	2,544,959
2017		7,782,158
2018		373,252
2019		390,399
2020		198,877
Total debt	$	11,289,645

~~Preferred~~Total ~~Stock—The~~interest ~~Company~~expense ~~has~~incurred ~~5,500,000~~by ~~shares~~the ofCompany ~~authorized~~for ~~Preferred~~the ~~Stock.~~year 1ended December 31,~~000,000~~ of2015 ~~these~~was ~~shares~~$0.4 ~~have~~million, ~~been~~and ~~designated~~the asinterest ~~Series~~expense Aincurred ~~Cumulative~~during ~~Convertible~~the ~~Preferred~~year ~~Stock~~ended ~~(Series~~December ~~A Preferred Stock) and 400~~31,~~000~~ ~~shares~~2014 ~~were~~was ~~designated as Series B Cumulative Convertible Preferred Stock (Series B Preferred Stock)~~nominal. ~~During~~The ~~the third quarter of 2014, the~~ Company’s ~~Board~~weighted-average ofinterest ~~Directors~~rate ~~corrected~~on ashort-term ~~clerical~~borrowings ~~error~~outstanding inas ~~the Series A and Series B Preferred Stock certificates to reflect the originally intended liquidation preferences~~ of ~~$5.00~~December ~~per share~~31, ~~which~~2015 ~~has~~was ~~always~~4.19%. ~~been~~The ~~used by the~~ Company inhad ~~the~~no ~~consolidated~~outstanding ~~financial~~borrowings ~~statements when recording related transactions, such~~ as ~~dividend payments and the repurchase~~ of ~~the~~December ~~related~~31, ~~preferred stock~~2014.

On December 30, 2013 the Company sold 550,000 and 450,000 shares of Series A Preferred Stock to Ernil and Halbarad, respectively for $5.00 per share, resulting in proceeds received by the Company of $5.0 million. Holders of Series A Preferred Stock are entitled to receive cumulative cash dividends at the annual rate of 8%, payable quarterly, have no voting rights and rank senior to common stock. As of December 31, 2014, 1,000,000 shares of the Series A Preferred Stock were issued and outstanding. The Series A Preferred Stock is convertible into

~~Table~~Letters of ~~Contents~~Credit

~~1,428,572~~As ~~shares~~ of ~~Pernix~~December 31, ~~common~~2015, ~~stock computed by multiplying~~ the ~~number~~Company ofhad ~~shares~~FJD to10.5 bemillion ~~converted by the purchase price of~~ ($5.000 ~~per~~million ~~share~~USD) ~~and dividing the result by the conversion price of $3.50, which was~~ in ~~excess~~outstanding ofletters ~~the fair value~~ of ~~the~~credit ~~Company’s common stock. As of December 31, 2014~~ and ~~2013,~~guarantees nowith ~~dividends~~financial ~~related to the Series A were accrued and the dividends incurred and paid for the year ended December 31~~institutions, ~~2014~~which ~~and~~expire ~~2013~~at ~~were~~various ~~$402,192~~dates ~~and~~in ~~$0, respectively~~2016.

AsPernix ~~of December 31~~Group, ~~2014 and 2013, 170,000 shares of the Series B Preferred Stock were issued and outstanding and are convertible into 11,334 shares of common stock~~Inc. Holders of Series B Preferred Stock are entitled to receive cumulative dividends at an annual rate of $0.325 per share, have no voting rights, and rank senior to common stock and are on parity with Series A Preferred Stock with respect to dividends and upon liquidation. During 2014 and 2013, the Company issued no Series B Preferred Stock. As of December 31, 2014 and 2013, preferred stock dividends of $241,387 and $186,137, respectively, were accrued. The dividends for the years ended December 31, 2014 and 2013 were $55,250, respectively. No dividends were paid during 2014 and 2013, respectively.

~~Common~~On ~~Stock~~July ~~—As~~14, 2015, the Company entered into a two-year term loan agreement with Bent Marketing Ltd., an affiliate of ~~December~~a 31major shareholder, ~~2014~~for ~~and~~$6.0 ~~2013~~million. The loan was granted in two installments, 9$3.0 million on July 15,~~403,697~~ ~~shares~~2015 ofand ~~the~~$3.0 ~~Company’s~~million ~~common~~on ~~stock~~August ~~were~~17, ~~issued~~2015. ~~and~~Interest ~~outstanding~~accrues at 4.5% and ~~over~~is 96paid quarterly.0% ofThe ~~those~~term ~~shares~~loan ~~were~~matures ~~owned~~on byAugust ~~Ernil~~15, ~~Halbarad~~2017 at which time the principal and ~~affiliated~~all ~~companies~~unpaid interest is due.

~~14.~~Pernix ~~Earnings per share~~Guam

AOn ~~reconciliation~~November 24, 2015, Pernix Guam, LLC entered into a letter of credit agreement with Australia New Zealand Banking Group Limited (ANZ) for $0.75 million. The interest is based on the ~~numerator~~Asian Prime rate plus 0.50% (4.00% as of December 31, 2015). Principal and ~~denominator~~interest are paid monthly. Loan origination fees equal 1.00% of ~~basic~~each loan amount and ~~diluted~~there ~~earnings~~are ~~per~~no ~~share~~prepayment penalties. The letter of credit is ~~provided~~subject to the same covenants as ~~follows~~outlined in Pernix Guam LLC term loan with ANZ bank as noted below except that the “gearing ratio” that limits net total liabilities to shareholder funds has been adjusted to 2.00:1. The letter of credit has been reduced to $0.25 million as $0.5 million was converted to a draw on the line of credit as of December 31, 2015.

		December 31, 2014		December 31, 2013
Numerator — Net loss	$	(1,382,856)	$	(4,624,993)
Less: Preferred stock dividends		457,442		55,250
Basic net loss from continuing operations available to common stockholders		(1,840,298)		(4,680,243)
Denominator
Weighted average common shares outstanding:
Basic and diluted		9,403,697		9,403,697
Basic and diluted net loss per share	$	(0.20)	$	(0.50)

On July 21, 2015, PFL entered into a two-year working capital loan from Fiji Holdings Limited on behalf of Pernix Guam for FJD 3.0 million ($1.4 million USD as of December 31, 2015). Interest is paid monthly at an annual rate of 6.8% with the principal and any unpaid interest due at maturity. There is an interest prepayment penalty equivalent to two months interest.

~~Basic~~On ~~and~~June ~~diluted~~18, ~~net~~2015, ~~loss~~Pernix ~~per~~Guam, ~~common~~LLC ~~share~~entered ~~have~~into ~~been~~a ~~computed~~five ~~using~~year ~~the~~term ~~weighted-average~~loan ~~number~~agreement ofwith ~~shares~~ANZ ofin ~~common~~the ~~stock~~amount ~~outstanding~~of ~~during~~$1.83 ~~the periods~~million. The ~~Diluted~~agreement ~~earnings~~also ~~per~~provides ~~share~~a isrevolving ~~computed~~line byof ~~dividing~~credit ~~earnings~~of by$1.5 ~~the~~million. The ~~number~~term ofloan ~~fully~~interest ~~diluted~~is ~~shares,~~based ~~which~~on ~~includes~~ the ~~effect~~Asian ofPrime ~~dilutive~~rate ~~potential~~plus ~~issuances~~1.00% of(4.50% ~~common shares~~ as ~~determined~~of ~~using~~December ~~earnings~~31, ~~from continuing operations~~2015). The ~~impact~~line of ~~the~~credit ~~potential~~matures ~~issuances~~one ofyear ~~common~~from ~~stock~~the ~~related~~date toof the ~~Company’s~~note. The ~~convertible~~interest ~~preferred~~rate ~~stock~~applicable ~~and~~to ~~outstanding~~the ~~stock~~line ~~options~~of ~~has~~credit ~~been~~facility ~~excluded~~is ~~from~~the ~~earnings~~Asian ~~per~~Prime ~~share~~rate ~~for~~plus ~~the~~0.5% ~~years~~(4.00% ~~ended~~as of December 31, ~~2014 and 2013, since inclusion would be anti-dilutive~~2015). ~~See~~Principal ~~Note~~and 15interest toare ~~the~~paid ~~notes~~monthly ~~to our consolidated financial statements~~ for ~~discussion~~both ~~of stock option plans~~facilities.

15Loan origination fees equal 1.00% ~~Stock~~of ~~Compensation~~each ~~Plans~~loan amount. Neither facility has prepayment penalties. As of December 31, 2015, $1.7 million and $1.5 million was outstanding on the term loan and line of credit, respectively. Interest expense for the year ended December 31, 2015 was nominal. The term loan and line of credit are subject to annual covenants to be maintained for the term of the loan, which includes maintaining backlog of at least $20.0 million, a “gearing ratio” that limits net total liabilities to shareholder funds to 2.50:1 and a “debt service coverage ratio” of 1.25:1 EBITDA to debt and interest. Pernix Guam, LLC has received a waiver from compliance with all covenants as of and for the year ended December 31, 2015 as the entity has only been operational for six months.

~~2014~~Pernix ~~Equity~~Limited ~~Incentive~~(“PFL”) ~~Plan-~~Debt In late 2013, the Company’s shareholders and board of directors adopted the 2014 Equity Incentive Plan that provides for the issuance of a variety of equity awards to employees, non-employee directors and consultants. The options expire 10 years from the grant date or upon plan expiration in late 2023, whichever is earlier. Under the terms of this plan, 1.8 million shares, which were previously allocated for issuance under the LTIP and ISOP, are reserved for issuance under the EIP. On February 8, 2014, 375,000 options were granted and an additional 1,050,000 options were granted in September 2014, all with a three year vesting schedule. As of December 31, 2014, a total of 1,395,000 options remain outstanding.Agreements

~~2013~~PFL ~~Long~~has ~~Term~~a ~~Incentive~~letter ~~Plan-~~of ~~During~~credit ~~late~~of ~~2012~~FJD ~~the~~6.0 ~~Company’s~~million ~~shareholders~~($2.9 ~~approved~~million USD) for the ~~Long-Term~~establishment ~~Incentive~~of ~~Plan.~~a ~~The~~performance ~~LTIP~~security isand aindemnity ~~non-employee~~guarantee ~~Director~~to facilitate supply of transformers and ~~Consultant~~switchgear ~~compensation~~for ~~plan~~the new Kinoya 33KV Substation project. ~~Awards~~PFL ~~may~~increased ~~include~~its ~~stock~~letter ~~options,~~of ~~stock~~credit ~~awards,~~by ~~restricted~~FJD ~~stock,~~4.5 ~~restricted~~million ~~stock~~($2.1 ~~units,~~million USD) for the establishment of a performance security and ~~other~~indemnity ~~stock~~guarantee oron ~~cash~~behalf ~~awards~~of Pernix Group for the Samoa Hydro Rehab Project established with Electric Power Corporation (“EPC”). The ~~options~~total ~~expire~~indemnity guarantee facility increased to FJD 10.5 ~~years~~million ~~from~~($5 ~~the~~million ~~grant~~USD). ~~date~~The orCompany ~~upon~~also ~~plan~~reduced ~~expiration~~its intemporary ~~late~~overdraft ~~2022~~facility by FJD 0.5 million ($0.2 million USD), ~~whichever~~while isthe ~~earlier~~Euro 6.1 ~~785~~million letter of credit ($6.6 million USD as of December 31,~~000~~ ~~shares~~2015) was surrendered as all amounts outstanding for Wartsila Finland OY were ~~allocated~~paid inas ~~total~~of December 31, 2015.

The agreement is secured by all real and personal property of PFL up to FJD 1.0 million ($0.5 million USD as of December 31, 2015), a corporate guarantee of FJD 4.0 million ($1.9 million USD as of December 31, 2015) issued by PGI to ANZ, an Unconditional, Irrevocable and On Demand standby letter of credit given by the FEA to ANZ, and a restricted cash term deposit of FJD 2.0 million ($0.95 million USD as of December 31, 2015).

~~Table~~The Company paid a FJD 0.03 million ($0.01million USD) loan approval fee for the increase in the borrowing capacity under the line of ~~Contents~~credit as well as a commitment fee of 1% per annum when the line of credit is not fully drawn within three months of acceptance of the line of credit offer. The interest rate applicable to the line of credit is the Bank's published Index Rate minus a margin of 4.95% (Interest rate of 5% per annum as of December 31, 2015). An establishment fee of 0.9% of the guarantee amount was charged followed by a semi-annual fee of 0.9%. For each bank guarantee, the fee is payable on the date of the drawdown and afterwards semi-annually. The fee charged by ANZ was 0.5% of the letter of credit value. The balance of the credit facility was allocated to the finance operating lease facility and credit card facility.

toIn ~~cover~~connection ~~any~~with ~~and all award types under~~ the ~~LTIP.~~letter Onof ~~February~~credit 8facility, ~~2013,~~PFL ~~78,500~~is ~~options~~subject ~~were granted~~ to ~~six~~a ~~non-employee~~“gearing ~~directors~~ratio” ~~with~~covenant athat ~~three~~limits ~~year~~net ~~vesting~~total ~~schedule.~~liabilities Asless ofnon-current ~~December~~subordinated ~~31,~~debt ~~2013,~~to ~~the~~2.1 ~~vesting~~times ofeffective 13equity,~~500~~ ~~options~~as ~~was~~well ~~accelerated~~as inother ~~connection~~customary ~~with~~covenants. ~~the~~As ~~retirement~~ of aDecember ~~board~~31, ~~member. The remaining 706~~2015,~~500~~ ~~shares were transferred to~~ the ~~EIP~~PFL asgearing ~~described~~ratio ~~above~~is ~~during late 2013~~1.98 Noand ~~additional~~PFL ~~shares~~is ~~are~~in ~~anticipated~~compliance towith beall ~~awarded under the LTIP~~covenants.

~~2012~~Pernix ~~Employee Incentive Stock Option Plan — In late 2011~~Group, ~~the~~Inc. ~~Company’s shareholders~~ and ~~board~~Pernix ~~of directors adopted the 2012 Incentive Stock Option Plan that provides for the issuance of qualified stock options to employees. Under the terms of this plan~~RE, 1.5 million shares were reserved for issuance. The options expire 10 years from the grant date or upon plan expiration in late 2021, whichever is earlier. As of December 31, 2014, a total of 283,500 options were outstanding under this plan. The remaining 1,121,000 shares available to be awarded were transferred to the EIP as described above during late 2013. No additional shares are anticipated to be awarded under the ISOP.LLC

~~Option~~On ~~awards~~November to14, ~~employees~~2014, PGI and ~~directors~~Pernix ~~under~~RE, ~~the~~LLC ~~Company’s~~entered ~~stock~~into ~~compensation~~loan ~~plans~~and ~~are~~security ~~classified~~agreement aswith ~~equity~~Barrington ~~instruments~~Bank ~~and~~& ~~are~~Trust ~~valued~~Company, atNational ~~the~~Association ~~grant~~to ~~date~~establish ~~using~~a ~~the~~revolving ~~Black~~credit ~~Scholes~~facility ~~fair~~and ~~value~~a ~~model.~~letter ~~The~~of ~~options~~credit ~~vest~~facility, ~~ratably~~each expiring on November 10, 2016, with an option to extend the ~~anniversary~~term of the ~~grant~~agreement. ~~date~~The ~~over~~revolving credit facility provides a ~~three~~borrowing tocapacity ~~five~~of ~~year~~$5.0 ~~period~~million. ~~Pernix~~Loans ~~recognizes~~under the ~~cost~~revolving ~~over~~credit facility will bear interest at the ~~period~~LIBOR ~~during~~rate ~~which~~determined on periodic reset dates, plus an ~~employee~~applicable ismargin ~~required~~ranging tofrom ~~provide~~1.6% ~~services~~to in2.75% ~~exchange~~based ~~for~~on the ~~award~~Company’s liquidity, ~~known~~ as ~~the~~defined. ~~requisite~~The ~~service~~letter ~~period~~of ~~(usually~~credit ~~the~~provides ~~vesting~~up ~~period)~~to $10.0 ~~Cash~~million ~~flows~~in ~~resulting~~aggregate ~~from~~of ~~the~~standby ~~exercise~~or trade letters of ~~related~~credit ~~options~~which ~~are~~accrue ~~included~~interest inat ~~financing~~Prime ~~cash~~rate ~~flows~~(3. ~~There~~25% ~~were~~at noDecember ~~options~~31, ~~exercised~~2015) ~~during~~plus ~~2014~~4% orfor ~~2013.~~standby ~~The~~letters ~~Company~~of ~~will~~credit ~~issue~~and ~~new~~Prime ~~shares~~rate plus 0.75% for trade letters of ~~common~~credit. ~~stock~~Interest ~~upon~~for ~~exercise~~each facility is payable on the periodic reset dates and borrowings are payable by the maturity of the ~~options~~agreement. Borrowings under each facility are secured by all real and personal property of PGI and Pernix RE, LLC.

The ~~following~~agreement ~~summarizes~~requires ~~stock~~the ~~option~~Company ~~activity~~to ~~for~~pay a facility fee of 1.6% per annum of the ~~years~~then ~~ended~~outstanding undrawn letter of credit and imposes various restrictions on the Company, such as, among others, the requirement to maintain minimum net income of $1.00 and minimum liquidity equal to the amount outstanding on the credit facility, as defined. No amounts were outstanding under the revolving credit or letter of credit facility as of December 31:, 2015 or 2014. The Company’s primary use of the credit facility is to fund potential working capital needs.

	2014			2013
EIP	Number of Options		Weighted Average Exercise Price	Number of Options		Weighted Average Exercise Price
Options outstanding, at beginning of year	—	$	N/A	—	$	N/A
Granted	1,425,000		1.56	—		N/A
Exercised	—		N/A	—		N/A
Forfeited / expired	30,000		2.07	—		N/A
Options outstanding, at December 31	1,395,000		1.55	—		N/A
Options exercisable, at December 31	50,000	$	2.07	—	$	N/A

Fair Value of Debt

	2014			2013
LTIP	Number of Options		Weighted Average Exercise Price	Number of Options		Weighted Average Exercise Price
Options outstanding, at beginning of year	78,500	$	2.09	—	$	N/A
Granted	—		N/A	78,500		2.09
Exercised	—		N/A	—		N/A
Forfeited / expired	—		N/A	—		N/A
Options outstanding, at December 31	78,500		2.09	78,500		2.09
Options exercisable, at December 31	35,166	$	2.09	13,500	$	2.09

In accordance with ASC 820 – Fair Value Measurements, the fair values of the Company’s short-term borrowings are based on quoted market prices at the date of measurement. The Company’s credit facilities approximate fair value as they bear interest rates that approximate market. These inputs used to determine fair value are considered Level 2 inputs.

	2014			2013
ISOP	Number of Options		Weighted Average Exercise Price	Number of Options		Weighted Average Exercise Price
Options outstanding, at beginning of year	379,000	$	2.09	152,500	$	2.09
Granted	—		N/A	347,500		2.09
Exercised	—		N/A	—		N/A
Forfeited / expired	95,500		2.09	121,000		2.09
Options outstanding, at December 31	283,500		2.09	379,000		2.09
Options exercisable, at December 31	134,166	$	2.09	23,500	$	2.09

The fair values of the Company’s long-term borrowings, the exit price of which cannot be determined using quoted market prices, is established using market and income valuation techniques and are considered Level 2 inputs. The aggregate carrying value of the Company’s borrowings is $11.3 million and the estimated aggregate fair value using the income approach is $12.2 million.

12. Leases

~~Table~~Future minimum lease payments at December 31, 2015 for all leases having an initial or remaining non-cancelable lease term in excess of ~~Contents~~one year, are as follows:

The following table summarizes information about stock options outstanding at December 31, 2014:

Year Ended December 31,
2016	$	1,438,219
2017		941,541
2018		670,496
2019		593,214
2020		551,065
	$	4,194,535

Plan	Number Outstanding	Weighted Average Remaining Contractual Life		Weighted Average Exercise Price		Aggregate Grant Date Intrinsic Value
EIP	1,395,000	9.1	$	1.55	$	4,317,750
LTIP	78,500	8.1	$	2.09	$	32,185
ISOP	283,500	7.8	$	2.09	$	142,475

Lease expense was approximately $0.4 million for the years ended December 31, 2015 and 2014, respectively.

~~The~~13. ~~weighted~~Financial ~~average~~Instruments ~~grant~~with ~~date~~Off-Balance ~~fair~~Sheet ~~value~~Risk ~~of options outstanding during 2014~~ and ~~2013~~Concentration ~~was $0.84 and $1.01, respectively. The fair value~~ of ~~each~~Credit ~~option grant was estimated on the grant date using the Black-Scholes option-pricing model with the following weighted average assumptions:~~Risk

	2014 grant	2013 grant
Risk-free interest rate	1.75-1.8 %	1.1 %
Dividend yield	0.0 %	0.0 %
Expected volatility	45.0 %	50.0 %
Expected life in years	6.0	6.0

Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of restricted cash term deposits, trade receivables and financial guarantees.

~~The~~If ~~use of~~ the ~~Black-Scholes~~Company ~~option-pricing~~extends ~~model~~a ~~requires~~significant usportion toof ~~make~~its ~~certain~~credit ~~estimates~~to ~~and~~clients ~~assumptions.~~in ~~The risk-free interest rate utilized is the implied yield on U.S. Treasury zero-coupon issues with~~ a ~~remaining~~specific ~~term~~geographic ~~equal~~area toor ~~the expected term assumption on the grant date~~industry, ~~rounded to~~ the ~~nearest half year. A dividend yield assumption of 0% is used for all grants based on the~~ Company’s ~~history~~may ofexperience ~~not~~disproportionately ~~paying~~high alevels ~~dividend to any common class~~ of ~~stock.~~default ~~Expected~~if ~~volatility~~those isclients ~~based on volatilities of publicly traded competitors and companies from our peer group as 96% of our shares~~ are ~~held~~adversely affected by ~~four~~factors ~~owners~~particular ~~and~~to ~~therefore,~~their ~~there~~geographic isarea ~~limited~~or ~~trading volume~~industry. The ~~weighted~~Company’s ~~average~~customer ~~expected~~base ~~life~~includes inprivate ~~years~~sector ~~for~~commercial ~~all~~clients, ~~grants is calculated for each year. During 2013~~governments, ~~the~~government ~~forfeiture~~agencies ~~rate utilized was zero as the plans were relatively new~~ and noquasi-government ~~significant~~organizations, ~~and~~which ~~reliable~~are ~~history~~dispersed ~~regarding~~across ~~share~~many ~~option~~different ~~exercise~~industries and ~~employee~~geographic ~~termination patterns to estimate forfeiture rates existed until late 2013~~locations. ~~Based~~See onNote ~~the~~19 ~~data available late in 2013, the Company estimated a forfeiture rate of 25% and will use this rate going forward subject~~ to ~~refinement~~our asconsolidated ~~experience~~financial ~~changes~~statements.

~~Total~~From ~~share-based~~time ~~compensation~~to ~~expense~~time, ~~for~~Pernix ~~each~~Group ofutilizes ~~the~~foreign ~~years~~exchange ~~ended~~contracts ~~December~~to ~~31,~~reduce ~~2014~~exposure ~~and~~to ~~2013~~foreign ~~was~~exchange ~~$0.2~~risks ~~million.~~associated Aswith ofpayments ~~December~~for ~~31,~~services ~~2014~~ and ~~2013,~~products ~~there was $0.7 million and $0.3 million, respectively of total unrecognized compensation expense~~ related to ~~non-vested~~the ~~share-based~~various ~~awards.~~construction ~~The~~and ~~compensation~~other ~~expense is expected to be recognized over a remaining weighted average period of 3~~projects.5 ~~years,~~No ~~which~~such iscontracts ~~equivalent~~were toemployed ~~the~~during ~~average~~2015 ~~vesting~~or ~~period~~2014.

~~The~~From ~~Company~~time ~~received~~to notime, ~~cash during~~ the ~~year~~Company ~~ended~~is ~~December~~required ~~31, 2014 and 2013, respectively, related~~ to ~~stock~~utilize ~~awards~~standby ~~exercised~~letters ~~as only 219,332 options were vested as~~ of ~~December~~credit ~~31,~~or ~~2014~~similar ~~and~~financial noguarantees ~~options~~in ~~were exercised during~~ the ~~periods.~~normal ~~The~~course ~~unvested~~of ~~options~~its ~~at December 31~~business, ~~2014 have a total intrinsic value of $3.2 million~~ and ~~the~~this ~~vested~~is ~~options have~~ a ~~total~~typical ~~intrinsic~~practice ~~value~~for ofthe ~~$0.3~~industry ~~million~~segments ~~based~~in onwhich the ~~trading price of the~~ Company’s ~~common~~operates. ~~stock~~The onamount, ~~that date on the Over the Counter Quotation Board. However~~duration, ~~the stock is not actively traded~~ and ~~the~~structure ~~trading price~~ of ~~the~~such ~~stock~~standby isletters ~~volatile. The~~of ~~Company~~credit ~~did~~or ~~not~~similar ~~realize~~financial ~~any~~instruments ~~tax~~varies ~~deductions~~depending ~~for~~on ~~this qualified ISOP plan options as~~ the ~~related~~nature ~~expense is not tax deductible. 125,500 options~~ and ~~121,000~~scope ~~options~~of ~~were~~the ~~forfeited~~project ~~or cancelled during 2014 and 2013, respectively~~involved.

The Company’s ~~has~~cash abalances ~~401K~~and ~~matching~~short-term ~~plan~~investments ~~through~~are ~~which~~maintained itin ~~contributes~~accounts upheld toby 8%major ofbanks anand ~~employee’s~~financial ~~salary~~institutions atlocated aprimarily ~~matching~~in ~~rate~~the ofU.S., ~~50%~~Sierra Leone, and Fiji as of ~~employee~~December ~~contributions~~31, ~~subject~~2015 toand an2014. ~~annual~~The ~~limitation~~Company ofmaintains its cash accounts at numerous financial institutions. Certain accounts covered by the Federal Deposit Insurance Corporation (FDIC) are insured up to $4250,000 per ~~employee~~institution. ~~The~~As ~~Company~~of ~~incurred~~December ~~$111~~31,~~581~~ 2015 and ~~$91~~2014,~~567~~ the amount of ~~expense~~domestic ~~associated~~bank ~~with~~deposits that exceeded or are not covered by the ~~401K~~FDIC ~~match~~insurance ~~during~~was $17.6 million and $8.6 million, respectively. Certain financial institutions are located in foreign countries which do not have FDIC insurance and as of December 31, 2015 and 2014, the amount of bank deposits in these financial institutions was $0.7 million and ~~2013~~$2.3 million, respectively.

14. Stockholders’ Equity

Certificate of Amendment of the Corporation’s Restated Certificate of Incorporation - In connection with the Series A Preferred Stock sale that was effective on December 30, 2013, the Company amended its Restated Certificate of Incorporation and its Certificate of Designation for Series A Preferred Stock to increase the total number of shares of stock which the Company shall have authority to issue to 25,500,000, consisting of 20,000,000 shares of Common Stock, par value $.01 per share (“Common Stock”), and 5,500,000 shares of Preferred Stock, par value $.01 per share (“Preferred Stock”).

~~Table~~Preferred Stock—The Company has 5,500,000 shares of ~~Contents~~authorized Preferred Stock. 1,000,000 of these shares have been designated as Series A Cumulative Convertible Preferred Stock (Series A Preferred Stock) and 400,000 shares were designated as Series B Cumulative Convertible Preferred Stock (Series B Preferred Stock) and 4,000,000 shares have been designated Series C Cumulative Convertible Preferred Stock (Series C Preferred Stock).

16In June, 2015 the Company sold 1,540,000 and 1,260,000 shares of Series C Preferred Stock (par value $0.01) ~~Income~~to ~~Taxes~~Ernil and Halbarad, respectively for $10.00 per share, resulting in proceeds received by the Company of $28.0 million. There were two separate investment transactions for both Ernil and Halbarad. Ernil purchased 550,000 and 990,000 shares and Halbarad purchased 450,000 and 810,000 shares of Series C Preferred Stock on June 10, 2015 and June 26, 2015, respectively. The Company used the proceeds to fund the acquisition of the BEK BG and related operating activities. From and after July 1, 2015, holders of Series C Preferred Stock are entitled to receive, when, and if declared by the Board of Directors, cumulative dividends at the annual rate of 8%. From July 1, 2015 through July 1, 2016, all dividends accumulated will be paid to the holder of Series C Preferred Stock in the form of the Company’s common stock valued solely for these purposes at $4.48 per share. Thereafter, such dividends will be payable in cash, bi-annually on January 1 and July 1 in arrears. Series C Preferred Stock have no voting rights and rank senior to common stock and are on parity with Series A and Series B preferred stock. As of December 31, 2015, 2,800,000 shares of the Series C Preferred Stock were issued and outstanding. The Series C Preferred Stock is convertible into 2,800,000 shares of Pernix Group common stock at the Company’s option and have a liquidation preference of $10.00 per share. Dividends accumulated for Series C Preferred Stock during the year ended December 31, 2015 were $1.1 million. No dividends were declared or paid on the Series C Preferred Stock during the year ended December 31, 2015. As of December 31, 2014, no Series C Preferred Stock had been issued.

~~The~~On ~~components~~December 30, 2013 the Company sold 550,000 and 450,000 shares of ~~consolidated~~Series ~~net~~A ~~income~~Preferred ~~(loss)~~Stock ~~before~~to ~~income~~Ernil ~~taxes~~and Halbarad, respectively for $5.00 per share, resulting in proceeds received by the ~~periods~~Company ~~indicated~~of $5.0 million. Holders of Series A Preferred Stock are entitled to receive, when and as ~~follows:~~declared by the Board of Directors, cumulative cash dividends at the annual rate of 8%, payable quarterly, have no voting rights and rank senior to common stock. As of December 31, 2015, 1,000,000 shares of the Series A Preferred Stock were issued and outstanding. The Series A Preferred Stock is convertible into 1,428,572 shares of Pernix common stock computed by multiplying the number of shares to be converted by the purchase price of $5.00 per share and dividing the result by the conversion price of $3.50, which was in excess of the fair value of the Company’s common stock. The dividends incurred and paid for the year ended December 31, 2015 and 2014 were $400,000 and $402,192, respectively.

		2014		2013
Domestic	$	(3,088,157)	$	(1,124,557)
Foreign		2,186,939		1,541,078
Total	$	(901,218)	$	416,521

As of December 31, 2015 and 2014, 170,000 shares of the Series B Preferred Stock were issued and outstanding and are convertible into 11,334 shares of common stock. Holders of Series B Preferred Stock are entitled to receive, when, as and if declared by the Board of Directors, cumulative dividends at an annual rate of $0.325 per share, have no voting rights, and rank senior to common stock and are on parity with Series A Preferred Stock with respect to dividends and upon liquidation. During 2015 and 2014, the Company issued no Series B Preferred Stock. As of December 31, 2015 and 2014, Series B Preferred Stock dividends of $296,637 and $241,387, respectively, were accumulated. The dividends accumulated for each of the years ended December 31, 2015 and 2014 were $55,250, respectively. No dividends were declared or paid during 2015 and 2014, respectively.

Common Stock —As of December 31, 2015 and 2014, 9,403,697 shares of the Company’s common stock were issued and outstanding and over 96.0% of those shares were owned by Ernil, Halbarad and affiliated companies.

15. Earnings per share

A reconciliation of the numerator and denominator of basic and diluted earnings per share is provided as follows:

		Year ended December 31,
		2015		2014
Numerator:
Net loss attributable to stockholders of Pernix	$	(18,846,041)	$	(1,382,856)
Less: Preferred stock dividends, including amounts paid and accumulated		1,584,430		457,442
Net loss attributable to common stockholders of Pernix		(20,430,471)		(1,840,298)

Denominator:
Weighted average basic and diluted common shares outstanding		9,403,697		9,403,697

Basic and diluted net loss per share	$	(2.17)	$	(0.20)

Basic and diluted net loss per common share have been computed using the weighted-average number of shares of common stock outstanding during the periods. Diluted earnings per share is computed by dividing earnings by the number of fully diluted shares, which includes the effect of dilutive potential issuances of common shares as determined using earnings from continuing operations. The impact of the potential issuances of common stock related to the Company’s convertible preferred stock and outstanding stock options has been excluded from earnings per share for the years ended December 31, 2015 and 2014, since inclusion would be anti-dilutive. For the year ended December 31, 2015, the number of anti-dilutive potential common shares excluded from the computation of diluted earnings per share was 4,609,334.

16. Stock Compensation Plans

2013 Equity Incentive Plan- The 2013 EIP provides for the issuance of a variety of equity awards to employees, non-employee directors and consultants. The options expire 10 years from the grant date or upon plan expiration in late 2023, whichever is earlier. Under the terms of this plan, 1.8 million shares, which were previously allocated for issuance under the LTIP and ISOP, are reserved for issuance under the EIP. As of December 31, 2015, a total of 1,322,000 options remain outstanding.

2013 Long Term Incentive Plan- The LTIP is a non-employee Director and Consultant compensation plan. Awards may include stock options, stock awards, restricted stock, restricted stock units, and other stock or cash awards. The options expire 10 years from the grant date or upon plan expiration in late 2022, whichever is earlier. On February 8, 2013, 78,500 options were granted to six non-employee directors with a three year vesting schedule. No additional shares are anticipated to be awarded under the LTIP.

2012 Employee Incentive Stock Option Plan —The 2012 ISOP Plan provides for the issuance of qualified stock options to employees. Under the terms of this plan, 1.5 million shares were reserved for issuance. The options expire 10 years from the grant date or upon plan expiration in late 2021, whichever is earlier. As of December 31, 2015, a total of 226,000 options were outstanding under this plan. The remaining 1,121,000 shares available to be awarded were transferred to the EIP during late 2013. No additional shares are anticipated to be awarded under the ISOP.

Option awards to employees and directors under the Company’s stock compensation plans are classified as equity instruments and are valued at the grant date using the Black Scholes fair value model. The options vest ratably on the anniversary of the grant date over a three to five year period. Pernix recognizes the cost over the period during which an employee is required to provide services in exchange for the award, known as the requisite service period (usually the vesting period). Cash flows resulting from the exercise of related options are included in financing cash flows. There were no options exercised during 2015 or 2014. The Company will issue new shares of common stock upon exercise of the options.

The following summarizes stock option activity for the years ended December 31:

	2015			2014
EIP	Number of Options		Weighted Average Exercise Price	Number of Options		Weighted Average Exercise Price

Options outstanding, at beginning of year	1,395,000	$	1.55	—	$	N/A
Granted	—		N/A	1,425,000		1.56
Exercised	—		N/A	—		N/A
Forfeited / expired	73,000		2.07	30,000		2.07
Options outstanding, at December 31	1,322,000		1.52	1,395,000		1.55
Options exercisable, at December 31	657,540	$	2.07	50,000	$	2.07

	2015			2014
LTIP	Number of Options		Weighted Average Exercise Price	Number of Options		Weighted Average Exercise Price

Options outstanding, at beginning of year	78,500	$	2.09	78,500	$	2.09
Granted	—		N/A	—		N/A
Exercised	—		N/A	—		N/A
Forfeited / expired	—		N/A	—		N/A
Options outstanding, at December 31	78,500		2.09	78,500		2.09
Options exercisable, at December 31	76,185	$	2.09	35,166	$	2.09

	2015			2014
ISOP	Number of Options		Weighted Average Exercise Price	Number of Options		Weighted Average Exercise Price

Options outstanding, at beginning of year	283,500	$	2.09	379,000	$	2.09
Granted	—		N/A	—		N/A
Exercised	—		N/A	—		N/A
Forfeited / expired	57,500		2.09	95,500		2.09
Options outstanding, at December 31	226,000		2.09	283,500		2.09
Options exercisable, at December 31	188,389	$	2.09	134,166	$	2.09

The following table summarizes information about stock options outstanding at December 31, 2015:

Plan	Number Outstanding	Weighted Average Remaining Contractual Life		Weighted Average Exercise Price		Aggregate Grant Date Intrinsic Value
EIP	1,322,000	8.1	$	1.52	$	4,273,460

LTIP	78,500	7.1	$	2.09	$	32,185

ISOP	226,000	6.8	$	2.09	$	68,060

The weighted average grant date fair value of options outstanding during 2015 and 2014 was $0.84 and $0.84, respectively. The fair value of each option grant was estimated on the grant date using the Black-Scholes option-pricing model with the following weighted average assumptions:

		2014 grant

Risk-free interest rate		1.72-1.8 %
Dividend yield		0.0 %
Expected volatility		45.0 %
Expected life in years		6.0

The use of the Black-Scholes option-pricing model requires us to make certain estimates and assumptions. The risk-free interest rate utilized is the implied yield on U.S. Treasury zero-coupon issues with a remaining term equal to the expected term assumption on the grant date, rounded to the nearest half year. A dividend yield assumption of 0% is used for all grants based on the Company’s history of not paying a dividend to any common class of stock. Expected volatility is based on volatilities of publicly traded competitors and companies from our peer group as 96% of our shares are held by four owners and therefore, there is limited trading volume. The weighted average expected life in years for all grants is calculated for each year. The Company estimated a forfeiture rate is 25% on all employees except for a forfeiture rate of 5% for one executive employee. These rates are subject to refinement as experience changes.

Total share-based compensation expense for the years ended December 31, 2015 and 2014 was $0.4 million and $0.2 million, respectively. As of December 31, 2015 and 2014, there was $0.4 million and $0.7 million, respectively of total unrecognized compensation expense related to non-vested share-based awards. The compensation expense is expected to be recognized over a remaining weighted average period of 3.5 years, which is equivalent to the average vesting period.

The Company received no cash during the year ended December 31, 2015 and 2014, respectively, related to stock awards exercised as only 922,114 options were vested as of December 31, 2015 and no options were exercised during the periods. The unvested options at December 31, 2015 have a total intrinsic value of $3.2 million and the vested options have a total intrinsic value of $0.3 million based on the trading price of the Company’s common stock on that date on the Over the Counter Quotation Board. However, the stock is not actively traded and the trading price of the stock is volatile. The Company did not realize any tax deductions for the qualified ISOP plan options as the related expense is not tax deductible. 130,500 options and 125,500 options were forfeited or cancelled during 2015 and 2014, respectively.

The Company has a 401K matching plan through which it contributes up to 8% of an employee’s salary at a matching rate of 50% of employee contributions, subject to an annual limitation per employee which varies by Company entity. The Company incurred $559,472 and $111,581 of expense associated with the 401K match during 2015 and 2014, respectively. The increase in 401K matching contributions is primarily attributable to the acquisitions of BEK BG and PPG.

17. Income Taxes

The components of consolidated net income (loss) before income taxes attributable to the company for the periods indicated are as follows:

		2015		2014
Domestic	$	(14,701,113)	$	(3,088,157)
Foreign		(3,950,750)		2,186,939
Total	$	(18,651,863)	$	(901,218)

Income tax expense (benefit) consists of:

Year ended December 31, 2015		Current			Deferred			Total
Federal tax expense	$	17,974		$	533,654		$	551,628
State and local tax expense (benefit)		33,000			—			33,000
Foreign tax expense		(390,450)						(390,450)
Total tax expense	$	(339,476)		$	533,654		$	194,178
Year ended December 31, 2014		Current			Deferred			Total
Federal tax expense	$		—	$		—	$		—
Federal tax (benefit)	$	—		$	—		$	—
State and local tax expense (benefit)			—			—			—
State and local tax (benefit)		—			—			—
Foreign tax expense		481,638	~~481,638~~		—	—		481,638	~~481,638~~
Total tax expense	$	481,638	~~481,638~~	$	—	—	$	481,638	~~481,638~~
Year ended December 31, 2013		Current			Deferred			Total
Federal tax (benefit)	$		—	$		4,043,260	$		4,043,260
State and local tax (benefit)		(21,894)			840,675			818,781
Foreign tax expense		179,473			—			179,473
Total tax expense	$		157,579	$		4,883,935	$		5,041,514

Current Tax Expense

The Company’s major tax jurisdictions for 2015 include: Illinois, Georgia, North Carolina, Oklahoma, South Carolina, Virginia, the United States, Guam and Fiji. The related tax returns are examined by the ~~Illinois~~respective states Department of Revenue, the ~~Virginia~~Internal ~~Department of~~ Revenue Service, the ~~Internal~~Guam Department of Revenue ~~Service~~and Taxation and the Fiji Islands Revenue and Customs Authority.

InThe ~~2014 and 2013, the~~ Company had a U.S. taxable loss, ~~primarily~~in ~~reflecting~~2015 ~~the~~and ~~fact~~taxable ~~that PFL~~ income which was ~~permanently~~fully ~~reinvested~~offset ~~overseas~~by ~~through~~loss ~~September~~carryforwards for regular tax purposes in 2014. ~~coupled~~Due ~~with~~to alternative minimum tax limiting the ~~impact~~available portion of ~~various~~net ~~timing~~operating ~~and~~loss, ~~permanent~~a ~~differences~~federal income tax expense of $17,974 was recorded in 2015. Additionally, ~~Therefore~~states in which Pernix is active require a franchise tax payment which amounted to $33,000 noin 2015. No U.S. federal, ~~Illinois~~ or ~~Virginia~~state current income tax expense has been recorded in the accompanying consolidated statements of operations related to 2014 ~~or 2013~~. A current foreign tax ~~expense~~benefit of $0.54 million ~~and $0.2 million~~ was recorded in connection with the Company’s PFL operations in Fiji and Guam for ~~2014~~2015 and ~~2013,~~foreign ~~respectively,~~tax ~~and~~expense of $0.5 million was recorded solely for Fiji in 2014. This is based upon the taxable income within Fiji at a tax rate of 20% and Guam at a rate of 30%.

Deferred Tax Expense or Benefit

During ~~2014~~2015 the Company ~~did~~incurred ~~not~~federal ~~incur any~~ deferred income tax expense. ~~The deferred income tax expense~~ of $~~4.9~~533,654 ~~million for 2013 consists of $4.1 million of federal deferred tax expense~~ and ~~$0.8~~none ~~million of deferred state tax expense, reflecting management's decision to record an increase~~ in ~~the valuation allowance on deferred tax assets~~2014. This expense is a non-cash expense and has no impact on the Company'’s liquidity, cash flows, or its ability to execute projects or conduct ongoing operations.

The Company evaluated the need to maintain a valuation allowance for deferred tax assets on a jurisdictional basis based on our assessment of whether it is more likely than not that deferred tax benefits will be realized through the generation of future taxable income. Appropriate consideration is given to all available evidence, both positive and negative, in assessing the need for a valuation allowance. The evidence includes an estimate of future taxable income that is heavily reliant upon construction contract backlog and power facility operation and maintenance activities. Management also considers historical taxable income and losses as well as other factors including expirations and the Company’s inability to utilize the net operating losses in carryback periods. Management believes that the valuation allowance reduces the recognition of deferred tax assets to a level that reflects the amount that is more likely than not to be realized in light of all available evidence analyzed. All net deferred tax assets are fully reserved for as of December 31, ~~2014~~2015 and ~~2013~~2014.

4751

~~Table~~At the date of ~~Contents~~the quasi-reorganization, deferred taxes were reported in conformity with applicable income tax accounting standards described above, net of applicable valuation allowances. Deferred tax assets and liabilities were recognized for differences between the assigned values and the tax basis of the recognized assets and liabilities. In accordance with the quasi-reorganization requirements, the tax benefits that existed as of the date of the quasi-reorganization that are realized in periods after the quasi-reorganization and were not recognized at the date of the quasi-reorganization will be recorded directly to equity. In connection with the quasi-reorganization, the valuation allowance at that point was netted against the deferred tax assets and as mentioned above, any related tax benefits that existed as of that date but were not realized as of that date, may be realized in periods after the quasi-reorganization and will be recorded directly to equity rather than to income if and when realized. During 2015, a deferred tax expense of $533,654 was recorded in connection with the utilization of prior net operating losses associated with losses incurred prior to the quasi-reorganization.

AtThe ~~the date of the quasi-reorganization, deferred taxes were reported in conformity with applicable income~~ tax ~~accounting~~effects ~~standards described above, net~~ of ~~applicable~~temporary ~~valuation allowances. Deferred tax assets and liabilities were recognized for~~ differences ~~between the assigned values and the tax basis of the recognized assets and liabilities. In accordance with the quasi-reorganization requirements, the tax benefits~~ that ~~existed~~give asrise ofto ~~the~~significant ~~date~~portions of the quasi-reorganization that are realized in periods after the quasi-reorganization and were not recognized at the date of the quasi-reorganization will be recorded directly to equity. In connection with the quasi-reorganization, the valuation allowance at that point was netted against the deferred tax assets and asdeferred ~~mentioned above, any related~~ tax ~~benefits~~liabilities ~~that~~at ~~existed~~December ~~as of that date but were not realized as of that date~~31, ~~may~~2015 ~~be realized in periods after the quasi-reorganization~~ and ~~will~~2014 beare ~~recorded~~presented ~~directly to equity rather than to income if and when realized.~~ below:

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2014 and 2013 are presented below:

		2015		2014
Deferred tax assets:
Net operating and capital loss carry forwards – federal	$	25,153,270	$	21,055,483
Net operating and capital loss carry forwards – state		2,910,864		5,459,257
Other deferred tax assets		1,390,686		7,523
Total gross deferred tax assets		29,454,820		26,522,263
Deferred tax liabilities:
Undistributed foreign earnings		—		(227,981)
Other deferred tax liabilities		(509,990)		(76,277)
Total gross deferred tax liabilities		(509,990)		(304,258)
Total net deferred tax asset		28,944,830		26,218,005
Less valuation allowance		28,944,830		26,218,005
Net deferred tax asset	$	—	$	—

		December 31, 2014		December 31, 2013
Deferred tax assets:
Net operating and capital loss carry forwards –federal	$	21,055,483	$	21,723,553
Net operating and capital loss carry forwards – state		5,459,257		4,505,669
Other deferred tax assets		7,523		185,913
Total gross deferred tax assets		26,522,263		26,415,135
Deferred tax liabilities:
Undistributed foreign earnings		(227,981)		—
Other deferred tax liabilities		(76,277)		—
Total gross deferred tax liabilities		(304,258)		—
Total net deferred tax asset		26,218,005		26,415,135
Less valuation allowance		26,218,005		26,415,135
Net deferred tax asset	$	—	$	—

At December 31, 2015 and 2014, the Company has total net operating and capital loss carry forwards from U.S. operations of approximately $80.2 million and $70.4 million, respectively. The net operating loss carry forwards expire in the years 2021 through 2034. The capital loss carryforwards expire in 2017. Certain of these net operating losses may be subject to a limitation on future utilization due to ownership changes, foreign and / or other tax laws.

AtA ~~December~~reconciliation ~~31,~~of ~~2014 and 2013,~~ the ~~Company~~differences ~~has~~between ~~total~~income ~~net~~taxes ~~operating~~from ~~and~~continuing ~~capital~~operations ~~loss~~computed ~~carry~~at ~~forwards~~the ~~from~~ U.S. ~~operations~~federal ofstatutory ~~approximately~~rate ~~$70.4~~of ~~million and $69.9 million~~34%, ~~respectively. The net operating loss carry forwards expire in~~ the ~~years~~Fiji ~~2021~~tax ~~through~~rate ~~2034. The capital loss carryforwards expire in 2017. Certain~~ of ~~these~~20% ~~net~~for ~~operating~~2015 ~~losses~~and ~~may~~2014, beand ~~subject~~the toCompany’s areported ~~limitation~~provision onfor ~~future~~income ~~utilization~~taxes ~~due~~is toas ~~ownership changes, foreign and / or other tax laws.~~follows:

A reconciliation of the differences between income taxes from continuing operations computed at the U.S. federal statutory rate of 34%, the Fiji tax rate of 20% for 2014 and 2013, and the Company’s reported provision for income taxes is as follows:

		Years Ended December 31,
		2015		2014
Federal income tax benefit at statutory rate	$	(6,196,494)	$	(306,414)
State and local taxes		(656,099)		(69,844)
Foreign income taxes		313,404		(55,421)
Change in federal and state valuation allowance		2,726,825		(197,130)
Capital gains tax paid in foreign jurisdiction		—		134,562
Return to provision true up		670,673		104,256
Permanent items, net		498,235		858,281
Effective state rate changes on DTA		2,890,771		—
Other		(53,137)		13,348
Income tax expense	$	194,178	$	481,638

		Years Ended December 31,
		2014		2013
Federal income tax benefit at statutory rate	$	(306,414)	$	141,617
State and local taxes		(69,844)		(21,894)
Foreign income taxes		(55,421)		(126,142)
Change in federal and state valuation allowance		(197,130)		5,047,933
Capital gains tax paid in foreign jurisdiction		134,562		—
Return to provision true up		104,256		—
Permanent items, net		858,281		—
Other		13,348		—
Income Tax Expense	$	481,638	$	5,041,514

There were no material interest expenses or penalties for the year to date. If there were material interest expenses or penalties they would be reflected in the consolidated statement of operations as interest expense and general and administrative expenses, respectively. The Company has analyzed filing positions in all of the federal, foreign and state jurisdictions where it is required to file income tax returns, as well as all open tax years in these jurisdictions. The statute of limitations for the Company’s U.S. federal asreturn ~~well~~are asopen ~~Illinois~~for ~~and~~the ~~Virginia~~2012 through 2014 tax years, while the state tax returns, depending on the jurisdiction, are open for the 2011 through 2014 tax years. The statute of limitations for the Company’s Fijian tax return is open for the ~~2007~~2008 through 2014 tax years. The Company believes that its income tax filing positions and deductions would be sustained on audit and does not anticipate any adjustments that would result in a material change to its financial position within the next twelve months.

48No U.S. federal or state deferred taxes have been provided on the undistributed earnings of non-U.S. operations of approximately $3.6 million through September 30, 2014, because we elected to permanently reinvest these earnings overseas. The Company no longer reinvests PFL’s current earnings overseas effective October 1, 2014 in conjunction with its partial sale of PFL to Fijian Holdings Limited (FHL) for a 25% ownership interest. If we were to repatriate the earnings generated prior to October 1, 2014, those earnings would be included in taxable income at that time. However, any additional U.S. taxes may be offset in part by the use of foreign tax credits. U.S. income tax liabilities are recorded from our earnings due to operations in Vanuatu as there are no income taxes in Vanuatu. Pernix Group repatriates these earnings on a monthly basis.

~~Table~~18. ofCommitments ~~Contents~~and Contingencies

NoThe ~~U.S.~~Company’s ~~Federal~~power orservice ~~State~~activities ~~deferred~~involve ~~taxes~~significant ~~have~~risks ~~been~~of ~~provided~~environmental ondamage, ~~the~~equipment ~~undistributed~~damage ~~earnings~~and offailures, ~~non-U.S.~~personal ~~operations~~injury ofand ~~approximately~~fines ~~$3.6~~and ~~million~~costs ~~and~~imposed $3by regulatory agencies.2 ~~million~~Though inmanagement ~~for~~believes ~~the~~its ~~period~~safety ~~January~~programs 1,and ~~2014~~record ~~through~~is ~~September~~excellent 30and its insurance programs are adequate, ~~2014~~if ~~and~~a ~~for~~liability ~~the~~claim ~~year~~is ~~ended~~made ~~December~~against 31it, ~~2013,~~or ~~respectively~~if ~~because~~there weis ~~elected~~an toextended ~~permanently~~outage ~~reinvest~~or ~~these~~equipment ~~earnings~~failure ~~overseas.~~or ~~The~~damage ~~Company~~at ~~will~~one noof ~~longer~~the ~~reinvest PFL~~Company’s ~~current~~power ~~earnings~~plants ~~overseas~~for ~~effective~~which ~~October~~it 1,is ~~2014~~inadequately ininsured ~~conjunction~~or ~~with~~subject ~~its~~to ~~partial~~a ~~sale~~coverage ofexclusion, ~~PFL~~and tothe ~~Fijian~~Company ~~Holdings~~is ~~Limited~~unable ~~(FHL)~~to ~~for~~defend aagainst ~~25%~~these ~~ownership~~claims ~~interest.~~successfully Ifor weobtain ~~were~~indemnification toor ~~repatriate~~warranty recoveries, the ~~earnings~~Company ~~generated~~may ~~prior~~be required to ~~October~~pay 1,substantial ~~2014~~amounts, ~~those~~which ~~earnings~~could ~~would~~have bea ~~included~~materially inadverse ~~taxable~~effect ~~income~~on atits ~~that~~financial ~~time~~condition. ~~However~~In Fiji, ~~any~~the ~~additional~~Company Uis liable for a deductible of FJD 1.S3 million (or approx. ~~taxes~~$0.6 ~~may~~million beUSD ~~offset~~as inof ~~part~~December by31, ~~the~~2015) ~~use~~if offound ~~foreign~~to ~~tax~~be ~~credits~~negligent or FJD 0.8 Umillion (or approx.S $0.4 ~~income~~million ~~tax~~USD ~~liabilities~~as ~~are~~of ~~recorded~~December ~~from~~31, ~~our~~2015) ~~earnings~~if ~~due~~not found to ~~operations~~be negligent in ~~Vanuatu~~accordance aswith ~~there~~its ~~are~~agreement nowith ~~income~~the ~~taxes~~FEA. inIn Vanuatu., ~~Pernix~~during ~~Group~~the ~~repatriates~~Memorandum ~~these~~of ~~earnings~~Understanding on(MOU) aperiod, ~~monthly~~the ~~basis~~insurance deductible is 10 million Vatu (or approx. $0.1 million USD) as of December 31, 2015.

17. Commitments and Contingencies

Pernix’s power generation activities involve significant risks of environmental damage, equipment damage and failures, personal injury and fines and costs imposed by regulatory agencies. Though management believes its safety programs and record is excellent and its insurance programs are adequate, if a liability claim is made against it, or if there is an extended outage or equipment failure or damage at one of the Company’s power plants for which it is inadequately insured or subject to a coverage exclusion, and the Company is unable to defend against these claims successfully or obtain indemnification or warranty recoveries, the Company may be required to pay substantial amounts, which could have a materially adverse effect on its financial condition. In Fiji, the Company is liable for a deductible of FJD 1.3 million (or approx. $0.7 million USD as of December 31, 2014) if found to be negligent or FJD 0.8 million (or approx. $0.4 million USD as of December 31, 2014) if not found to be negligent in accordance with its agreement with the Fiji Electricity Authority. In Vanuatu, during the Memorandum of Understanding (MOU) period, the insurance deductible is 10 million Vatu (or approx. $0.1 million USD) as of December 31, 2014.

VUI began to manage the power structure on Vanuatu on January 1, 2011 pursuant to a MOU with the government of Vanuatu. The prior concessionaire, UNELCO, filed a claim against the government alleging improper tender of the work. No claims have been filed against VUI but VUI joined the suit as a second defendant in order to protect its interests in the tender. In February 2014, during hearings in the Supreme Court of the Republic of Vanuatu (the Court), the Government of Vanuatu proposed a settlement with UNELCO that would leave VUI without a claim to defend pertaining to the concession and would effectively end the litigation in UNELCO’s favor. The proposed settlement called for a retender of the concession and required that any company who participates in the retender must waive any outstanding claims against the Government of Vanuatu. VUI in response presented its position to the court arguing that VUI should have an opportunity to be heard and that the Court should not accept the proposed settlement. On October 16, 2014 the Court issued its decision in favor of UNELCO and the government has issued a new agreement to VUI to continue to operate the plant under the MOU terms until the retender process is completed. As of the date of this report, VUI continues to operate and maintain the system.

The Company offers warranties on its construction services and power generating plants. The Company usually has warranties from its vendors. If warranty issues remain on projects that are substantially complete, revenue is not recognized to the extent of the estimated exposure. Should the Company be required to cover the cost of repairs not covered by the warranties of the Company’s vendors or should one of the Company’s major vendors be unable to cover future warranty claims, the Company could be required to expend substantial funds, which could harm its financial condition. See Note 11 to the consolidated financial statements for discussion of financial and performance guarantees.

~~See Note 12 of the notes to the consolidated financial statements for discussion of financial and performance guarantees.~~53

1819. Reportable Segments and Geographic Information

Pernix has elected to organize its segment information around its products and services. Pernix has three segments: ~~General Construction~~construction, ~~Power~~power ~~Generation~~services ~~Services~~and ~~(including~~Corporate. ~~power~~There ~~related~~were ~~construction~~no ~~activities)~~material ~~and~~amounts ~~Corporate~~of transfers between segments. Any inter-segment revenues have been eliminated.

There were no material amounts of transfers between segments. Any inter-segment revenues have been eliminated.

The following table sets forth certain segment information for the periods indicated:

Table of Contents

Schedule of Segment Reporting, Information by Segment

For Year Ended December 31, 2015

		Construction		Power Services		Corporate		Total
Revenue	$	189,415,888	$	5,987,511	$	87,925	$	195,491,324
Interest income (expense)		(126,291)		52,877		—		(73,414)
Other expense - related party		(134,282)		—		(112,808)		(247,090)
Depreciation and amortization (1)		2,020,315		107,596		109,596		2,237,507
Income tax benefit (expense)		(35,543)		375,019		(533,654)		(194,178)
Net income (loss) attributable to the stockholders of Pernix Group Inc. and Subsidiaries		(10,401,265)		1,193,653		(9,797,016)		(19,004,628)
Total capital expenditures		1,044,165		253,355		26,323		1,323,843
Total assets		106,858,878		6,918,121		5,651,121		119,428,120

For Year Ended December 31, 2014

		General Construction		Power Generation Services		Corporate		Total
		Construction		Power Services		Corporate		Total
Revenue	$	78,573,035	$	6,583,394	$	144,310	$	85,300,739
Interest income (expense)		—		(2,277)		5,520		3,243
Other expense - related party		(83,103)		—		—		(83,103)
Depreciation and amortization (1)		2910,~~200~~239		45104,~~544~~294		5277,~~653~~073		~~127~~191,~~397~~606
Income tax benefit (expense)		(93,230)		(378,520)		(9,888)		(481,638)
Net income (loss) attributable to the stockholders of Pernix Group Inc. and Subsidiaries		1,909,811		1,544,472		(5,294,581)		(1,840,298)
Total capital expenditures		283,672		118,411		146,654		548,737
Total assets		15,041,221		6,507,172		10,484,772		32,033,165

~~For~~(1)Depreciation ~~Year~~and ~~Ended~~amortization ~~December~~excludes 31quasi-reorganization related adjustments for 2015 and 2014 of $115,973 ~~2013~~and $64,209, respectively.

		General Construction		Power Generation Services		Corporate		Total
Revenue	$	67,776,314	$	5,810,652	$	175,182	$	73,762,148
Interest income (expense)		—		(2,828)		2,759		(69)
Other expense - related party		(81,975)		—		(54,614)		(136,589)
Depreciation and amortization (1)		19,743		10,109		19,286		49,138
Income tax benefit (expense)		(4,883,935)		(179,473)		21,894		(5,041,514)
Net income (loss) attributable to the stockholders of Pernix Group Inc. and Subsidiaries		(5,405,761)		1,719,312		(993,794)		(4,680,243)
Total capital expenditures (2)		68,094		74,131		1,174,328		1,316,553
Total assets		16,986,992		3,974,398		12,669,573		33,630,963

(1)Depreciation and amortization is shown net of quasi-reorganization related adjustments for 2014 and 2013 of $64,209 and $192,736, respectively.

(2)Total Capital Expenditures for 2013 as presented in the segment table above includes the entire purchase price of the Corporate headquarters land and building, $287,868 of which is reflected as a financing activity on the statement of cash flows due to repayment of the related loan more than 90 days after the building and land purchase.

Geographical Information

~~The~~Revenues ~~basis~~are ~~used~~attributed to ~~attribute revenues to~~ individual countries is based upon the country associated with the contract (e.g. If the contract is with a U.S. entity, ~~then~~ the revenues are attributed to the U.S.).

		Total Revenue				Property, Plant and Equipment - Net	~~Property and Equipment - Net~~
Location – Revenue and net property and equipment from continuing operations		Year ended December 31, 2014		Year ended December 31, 2013			December 31, 2014				December 31, 2013
Location – Revenue and net property and equipment from continuing operations:		Year ended December 31, 2015		Year ended December 31, 2014		Year ended December 31, 2015			Year ended December 31, 2014
United States	$	55,042,945	$	66,686,485		$	1,247,444			$	1,144,747
United States (1)	$	173,480,811	$	55,042,945	$	2,412,564		$	1,247,444
Fiji		2814,~~720~~074,~~631~~890		428,~~339~~720,~~976~~631		353,620	~~136,570~~		136,570		~~93,012~~
Vanuatu		1,361,799		1,470,676			2,509				6,966
Guam		6,539,383		—		1,288,418			—
Other		175,364		1,265,011			291,915				38,174
Vanuatu		1,238,853		1,361,799		7,239			2,509
Total Revenue and net fixed assets	$	85,300,739	$	73,762,148		$	1,678,438			$	1,282,899
Other		157,387		175,364		7,771			291,915
Total Revenue and net fixed assets	$	195,491,324	$	85,300,739	$	4,069,612		$	1,678,438
(1)Revenue associated with Department Of State (“DOS”) projects are included in the U.S. total

Major Customers

During ~~2014~~2015, the Company generated approximately 95$51.1 million or 26% of its total revenue through ~~three~~one major ~~customers~~customer. ~~The~~ During 2014, the OBO iswas a major customer primarily through the award of ~~five~~four projects since 2011 that generated revenue of $32.2 million ~~and $66.5 million for the years ended December 31, 2014 and 2013, respectively,~~ accounting for 38% ~~and 90%~~ of total revenue ~~from continuing operations for the respective periods~~. The FEA iswas a major customer through a construction project awarded in 2014 for ~~the~~O&M ~~Company’s ongoing power generation agreement~~services. During 2014, revenue generated from FEA was $28.7 million or 34% of total revenues. In ~~2013 FEA was not considered a major customer as total revenues generated were $4.3 million.~~ Total revenues generated in 2014 from the third major customer were $19.7 million or 23% of total revenue.

5020. Related Party Transactions — Not Described Elsewhere

~~Table~~The Company’s shareholders include SHBC, which holds less than 6% of ~~Contents~~Pernix’s stock at December 31, 2015. SHBC is a civil, electrical and mechanical engineering firm and construction contractor with over 4,000 employees and over fifty (50) years’ experience.

19SHBC was established in part to construct the new U.S. ~~Related~~Embassy ~~Party~~in ~~Transactions~~Fiji ~~— Not~~which ~~Described~~was ~~Elsewhere~~completed in 2011. The joint venture limited partnership agreement between SHBC and Pernix also provides for Pernix to make a payment to SHBC of 6.5% per annum of the unreturned capital. No such payments have been made to date though the Company has accrued other expenses of $0.1 million during the twelve month periods ending December 31, 2015 and 2014 for this discretionary item.

~~The~~Computhink ~~Company’s~~is ~~shareholders~~a ~~include~~related ~~SHBC,~~party ~~which~~as ~~holds~~it ~~less~~is ~~than~~owned 6%by ofa company related to SHBC. Pernix is the lessor to a lease with Computhink for office space in the Company’s ~~stock~~Corporate atheadquarters. ~~December~~The 31lease term ends June 30, ~~2014.~~2016 ~~SHBC~~and isComputhink arent ~~civil~~amounts to $2,387 ~~electrical~~per ~~and~~month. ~~mechanical~~The ~~engineering~~Company’s ~~firm~~charges ~~and~~to ~~construction~~Computhink ~~contractor~~were ~~with~~less ~~over~~than ~~4,000~~$0.1 ~~employees~~million ~~and~~for ~~over~~each ~~fifty~~year ~~(50)~~ended ~~years’~~December ~~experience~~31, 2015 and 2014.

AsTotal ~~noted~~related ~~earlier,~~party ~~SHBC~~accounts receivable and ~~Pernix~~payables, ~~have~~net ~~formed~~are asummarized ~~joint~~as ~~venture~~follows (Pernix/SHBC JV). This joint venture was established in part to construct the new U.S. Embassy in Fiji which is now complete. The joint venture limited partnership agreement between SHBC and Pernix also provides for ~~Pernix to make a payment to SHBC of 6.5% per annum of~~ the ~~unreturned~~years ~~capital.~~ended ~~No such payments have been made to date though the Company has accrued other expenses of $0.1 million during the twelve month periods ending~~ December 31~~, 2014 and 2013 for this discretionary item.~~ :

Computhink is a related party as it is owned by a company related to SHBC. Computhink provided various facility management, computer software and other outside services related to the Corporate headquarters prior to the Company’s purchase of the land and building in March 2013. Charges from Computhink were less than $0.1 million for the year ended December 31, 2013 and there were no such expenses in 2014 because no such services were provided by Computhink. Subsequent to the Company’s purchase of the Corporate headquarter facilities, Pernix assumed as lessor the lease to Computhink. The lease term ends April 30, 2016 and Computhink rent amounts to $6,361 per month, with a 3% rent escalation clause. The Company’s charges to Computhink were less than $0.1 million for the twelve months ended December 31, 2014 and 2013.

		2015		2014
Note payable to Bent Marketing Ltd	$	(6,000,000)	$	—
Note payable to FHL		(1,425,300)		—
Accounts receivable from Computhink		2,384		68,463
Accounts payable to SHBC		—		(13,800)
Totals	$	(7,422,916)	$	54,663

Future minimum lease payments atfor ~~December~~2016 ~~31, 2014,~~ from Computhink under the non-cancelable lease as of December 31, ~~are~~2015 asis ~~follows:~~$14,322.

Years Ended December 31,
2015	$	65,622
2016		22,089
Total	$	87,117

21. Subsequent Events

~~Total~~On ~~related~~March ~~party~~7, ~~accounts~~2016, ~~receivable~~Pernix received an OBO award to construct the new U.S. Embassy Compound in Maputo, Mozambique for $169.2 million. The project will include the construction and ~~payables~~commissioning of the Marine Security Guard Quarters, ~~net~~and ~~are~~various asbuildings ~~follows:~~and facilities.

		December 31, 2014		December 31, 2013
Accounts receivable from Computhink	$	68,463	$	39,447
Accounts payable to SHBC		(13,800)		(4,860)

20. Subsequent Events

On January 22, 2015 the Department of the Army’s U.S. Army Corps of Engineers awarded Pernix-Kaseman JV (a newly formed Limited Liability Company in which the Company owns 51%) a contract award totaling $11.6 million to construct a Communication Center Special Area at Camp Humphrey in South Korea.

In January 2015, PFL entered into a ten year lease agreement for its primary office space. The lease begins March 1, 2015 and provides a monthly charge of approximately $6,600 with an escalation clause during the lease term.

During February 2015 the Company received a contract with a total value of FJD $8.4 million (or $4.2 million USD) to complete the construction of a 33 MW substation which relates to the Kinoya Expansion project previously awarded to PFL in 2013.

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Not Applicable.

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports that the Company files or submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

The Company carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the Company’s most recent fiscal year. Based upon this evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of December 31, ~~2014~~2015.

Management’s Annual Report on Internal Control over Financial Reporting

The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Exchange Act Rule 13a-15(f). Under the direction of the Company’s Chief Executive Officer and Chief Financial Officer, management has assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, ~~2014~~2015. The Company’s management conducted an evaluation of the effectiveness of the Company’s internal control over financial reporting based on the framework in Internal Control — Integrated Framework (~~1992~~2013) issued by the Committee of Sponsoring Organizations (COSO) of the Treadway Commission. Based on this evaluation, the Company’s management concluded that the Company’s internal control over financial reporting was effective as of December 31, ~~2014~~2015.

This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. ~~As a smaller reporting company, management~~Management’s report was not subject to attestation by our independent registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit us to provide only management’s report in this annual report on Form 10-K.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during our ~~quarter~~year ended December 31, ~~2014~~2015 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B. OTHER INFORMATION

None.

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PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE

Directors are elected for one-year terms and are elected at each annual meeting of stockholders. Executive officers serve at the discretion of the Board of Directors. As of the date of this report Pernix’s Board of Directors and executive officers are:

Name and Age;Years Served as Director		Principal Occupation for Past Five Years; Other Directorships
Don Gunther Age 76 Chairman of the BoardDirector Since 2012		Mr. Gunther, was appointed as a Director of Pernix Group, Inc. and was appointed to the Compensation Committee on December 12, 2012. Effective December 31, 2013, Mr. Gunther was also appointed Chairman of the Board for Pernix Group, Inc. Mr. Gunther also served as Chairman of the Board of INgage Networks until late 2014, a high-tech company that is a leading enterprise networking organization and he is a director of WPX Energy, Inc., an oil and gas exploration and production company. Previously, until his retirement in 1999, Mr. Gunther was President, Vice Chairman and Director of the Bechtel Group, where he had responsibility for all of the global industry units and all corporate functions, including project management, engineering, procurement, construction, information services, information technology and contracts. Mr. Gunther’s 38-year career with Bechtel provided him with experience as a field engineer and he ultimately became a driving force behind Bechtel’s work processes, marketing strategies, organizational structure and leadership development efforts. He served as project manager and held various positions of leadership both domestically and internationally. Mr. Gunther received a bachelor’s degree in civil engineering, and an honorary doctorate, from Missouri University of Science and Technology, and served as a trustee and advisor to the University.
Don Gunther Age 77 Director Since 2012		Mr. Gunther, was appointed as a Director of Pernix Group, Inc. and was appointed to the Compensation Committee on December 12, 2012. Mr. Gunther also served as Chairman of the Board of INgage Networks until late 2014, a high-tech company that is a leading enterprise networking organization and he is a director of WPX Energy, Inc., an oil and gas exploration and production company. Previously, until his retirement in 1999, Mr. Gunther was President, Vice Chairman and Director of the Bechtel Group, where he had responsibility for all of the global industry units and all corporate functions, including project management, engineering, procurement, construction, information services, information technology and contracts. Mr. Gunther’s 38-year career with Bechtel provided him with experience as a field engineer and he ultimately became a driving force behind Bechtel’s work processes, marketing strategies, organizational structure and leadership development efforts. He served as project manager and held various positions of leadership both domestically and internationally. Mr. Gunther received a bachelor’s degree in civil engineering, and an honorary doctorate, from Missouri University of Science and Technology, and served as a trustee and advisor to the University.
Nidal Zayed Age 54 Director Since 1998 Chief Executive Officer since 2005		Mr. Zayed, as our Chief Executive Officer is the executive holding the most knowledge about, and primary responsibility for the success of, our Company’s strategies and operations. He brings to our Board the critical link between management and our Board, enabling our Board to perform its oversight function with the benefit of management’s perspective on the business. Independently, Mr. Zayed also brings to the Board particular strengths in all of the executive management skills needed for his position. Mr. Zayed, joined the Company in January 1996. He received a law degree from Loyola University School of Law in 1985 and a B.A. in Accounting from Loyola University of Chicago in 1982.
Nidal Zayed Age 55 Director Since 1998 Interim Chairman of the Board, President and Chief Executive Officer since 2005		Mr. Zayed, as our Chief Executive Officer, is the executive holding the most knowledge about, and primary responsibility for the success of our Company’s strategies and operations. He brings to our Board the critical link between management and our Board, enabling our Board to perform its oversight function with the benefit of management’s perspective on the business. Independently, Mr. Zayed also brings to the Board particular strengths in all of the executive management skills needed for his position. Mr. Zayed, joined the Company in January 1996. He received a law degree from Loyola University School of Law in 1985 and a B.A. in Accounting from Loyola University of Chicago in 1982.
C. Robert Campbell Age 70 Director Since 2013		Mr. Campbell, was appointed as a Director of Pernix Group, Inc. and was appointed to the Compensation Committee and as Chairman of the Audit Committee effective December 31, 2013. Bob brings a vast amount of financial management experience gained through his time serving in various executive level positions for several publically traded companies. Prior to his retirement, Mr. Campbell served as Executive Vice President and Chief Financial Officer of MasTec, an infrastructure construction company based in Coral Gables, Florida. Prior to joining MasTec, Mr. Campbell served in many roles including Chief Executive Officer, Chief Financial Officer, Chief Administrative Officer and Head of Planning and Development at TIMCO Aviation, BAX Global, Ryder System and Flagstar Restaurants. He received an MBA degree from Columbia University, an MS in accounting from Florida International University and a BS in industrial relations from the University of North Carolina-Chapel Hill. Currently Bob serves as a Director and Audit Committee Chairman of Forward Air, a NASDAQ-listed company.
C. Robert Campbell Age 71 Director Since 2013		Mr. Campbell, was appointed as a Director of Pernix Group, Inc. and was appointed to the Compensation Committee and as Chairman of the Audit Committee effective December 31, 2013. Bob brings a vast amount of financial management experience gained through his time serving in various executive level positions for several publically traded companies. Prior to his retirement, Mr. Campbell served as Executive Vice President and Chief Financial Officer of MasTec, an infrastructure construction company based in Coral Gables, Florida. Prior to joining MasTec, Mr. Campbell served in many roles including Chief Executive Officer, Chief Financial Officer, Chief Administrative Officer and Head of Planning and Development at TIMCO Aviation, BAX Global, Ryder System and Flagstar Restaurants. He received an MBA degree from Columbia University, an MS in accounting from Florida International University and a BS in industrial relations from the University of North Carolina-Chapel Hill. Currently Bob serves as Lead Director of Forward Air, a NASDAQ-listed company.
Max Engler Age 65 Director Since 1997		Mr. Engler brings to the Board particular strength with regard to leadership skills, international business and financial management and reporting skills, and corporate governance skills. From 1988 to present Mr. Engler has been an independent Financial Consultant and is also on the Board of Directors of various companies in Switzerland and abroad. From 1984 to 1988 Mr. Engler headed the Private Banking desk (Middle East and Far East) of Bank Leu as Vice President. He is a director of Computhink Incorporated, Belmoral S.A., Computhink Ltd., Retsa Development Inc., FSD Holdings PLC, Litra Holdings AG, Linos Consulting AG, Trafex Ltd., R.C.W. Enterprises S.A., and TransRadio SenderSysteme Berlin AG.

~~Table of Contents~~57

Ibrahim M. Ibrahim Age 67 Director Since 1999		Mr. Ibrahim brings to the Board particular strength with regard to financial skills, international business skills and corporate governance skills. Mr. Ibrahim has recently retired after working for more than 40 years in leading positions for major banks in the United States and abroad. He was a Vice President and General Manger of Continental Bank in Chicago, Lebanon and Bahrain (1969 — 1984). He also worked for First National Bank Chicago as Vice President and Head of Credit and Marketing for their Middle East head-quarter in Dubai (1984-1986). Then he moved to Kuwait in 1986 and had been there for more than 23 years. He was the General Manager & Head of International Business at The Gulf Bank (1986 — 2001), and General Manger, Head of International Group at Commercial Bank of Kuwait (2001 — 2004). His last position before retirement was General Manager of Al Ahli Bank of Kuwait (2004 — 2009). Mr. Ibrahim received his M.B.A. in International Business from De Paul University in Chicago; his M.S. in Taxation from University of Alexandria and his B.A. in Accounting from the University of Alexandria.
Max Engler Age 66 Director Since 1997		Mr. Engler brings to the Board particular strength with regard to leadership skills, international business and financial management and reporting skills, and corporate governance skills. From 1988 to present Mr. Engler has been an independent Financial Consultant and is also on the Board of Directors of various companies in Switzerland and abroad. From 1984 to 1988 Mr. Engler headed the Private Banking desk (Middle East and Far East) of Bank Leu as Vice President. He is a director of Computhink Incorporated, Belmoral S.A., Computhink Ltd., Retsa Development Inc., FSD Holdings PLC, Litra Holdings AG, Linos Consulting AG, Trafex Ltd., R.C.W. Enterprises S.A., and TransRadio SenderSysteme Berlin AG.
Ibrahim M. Ibrahim Age 68 Director Since 1999		Mr. Ibrahim brings to the Board particular strength with regard to financial skills, international business skills and corporate governance skills. Mr. Ibrahim has recently retired after working for more than 40 years in leading positions for major banks in the United States and abroad. He was a Vice President and General Manger of Continental Bank in Chicago, Lebanon and Bahrain (1969 — 1984). He also worked for First National Bank Chicago as Vice President and Head of Credit and Marketing for their Middle East head-quarter in Dubai (1984-1986). Then he moved to Kuwait in 1986 and had been there for more than 23 years. He was the General Manager & Head of International Business at The Gulf Bank (1986 — 2001), and General Manger, Head of International Group at Commercial Bank of Kuwait (2001 — 2004). His last position before retirement was General Manager of Al Ahli Bank of Kuwait (2004 — 2009). Mr. Ibrahim received his M.B.A. in International Business from De Paul University in Chicago; his M.S. in Taxation from University of Alexandria and his B.A. in Accounting from the University of Alexandria.
Trudy Clark Age 66 Director Since 2007		Major General (Ret.) Clark brings to the Board particular strength with respect to leadership skills, crisis management skills, and strategic planning skills, as well as significant insight into procurement activities with the U.S. government and management and oversight of classified projects. General Clark has over twenty years of experience in innovative delivery of support services at worldwide locations in units of 60-2000 members and budgets from $1 million - $2.9 billion. General Clark is an experienced leader with exceptional organizational and facilities management skills. She served as the Deputy Director of the Defense Threat Reduction Agency, directing approximately 4,000 government and contractor personnel at 30 locations worldwide dealing with threats of weapons of mass destruction (WMD), and conducting international and homeland security exercises for the Department of Defense. Additionally, while serving as the Chief Information Officer and Director for Command, Control, Communications and Computers, US Strategic Command, General Clark supported the government and contractors to develop software, lifecycle management and strategic planning for modernization of over $5 billion of nuclear decision support systems. General Clark has a Masters in Guidance and Counseling from Troy State University in Alabama and has completed executive seminars at Syracuse, John Hopkins and Harvard Universities.
Carl Smith Age 66 Director Since 2007		Mr. Smith brings to the Board particular strength with regard to leadership skills, crisis management skills, and strategic planning skills, as well as significant insight into the Company’s obligations with the U.S. government and for the management and oversight of classified projects. Mr. Smith, a graduate of the University of Hawaii, obtained his Juris Doctorate at University of California Law School and has over thirty years of experience in government contracting, defense acquisition, international agreements, telecommunication regulations, information security and is an expert in Cyber Law/Information Assurance, Fiscal Law, FOIA, Privacy Act and the Ethics in Government Act. Mr. Smith served as the General Counsel for the Defense Information Systems Agency, offering advice and guidance to the Agency Director and the Senior Executive Team on a full spectrum of legal issues, including government contracting. While serving as the Chief Regulatory Counsel-Telecommunications for the Department of Defense, Mr. Smith was responsible for advising the Office of Science and Technology Policy and the Assistant Secretary of Defense in Telecommunication Regulatory matters that affected national security, emergency preparedness as well as the Department of Defense’s commercial interests. He is a member of the Hawaiian and D.C. Bar Associations.

~~Table of Contents~~58

Patrick J. GainerAge 54Chief Financial Officer Since September, 2014 Mr. Gainer joined Pernix Group, Inc. (the Company) in September 2014. Mr. Gainer is an accomplished senior financial executive with more than 25 years of multi-industry experience. He most recently served as a managing partner and CFO for two private equity portfolio companies where his responsibilities included finance, controls, audit, tax, treasury, accounting, information technology and operations. Prior to that Mr. Gainer had a twenty plus year accomplished career with Motorola in Schaumburg, Illinois where he held progressive positions with his most recent assignment being Vice President and Director of Finance of a global automotive business unit. Mr. Gainer is a proven professional, with deep knowledge of operations, international finance, expertise in driving profitability and is skilled in identifying acquisition targets, negotiating, structuring and closing transactions and related financing as well as company reorganization. Mr. Gainer also worked for several years in public accounting at the beginning of his career. He is a Certified Public Accountant and graduated from Loyola University of Chicago (B.S, Accounting) and University of Chicago, Booth School of Business (MBA, Finance and International Business).


Carl Smith Age 67 Director Since 2007		Mr. Smith brings to the Board particular strength with regard to leadership skills, crisis management skills, and strategic planning skills, as well as significant insight into the Company’s obligations with the U.S. government and for the management and oversight of classified projects. Mr. Smith, a graduate of the University of Hawaii, obtained his Juris Doctorate at University of California Law School and has over thirty years of experience in government contracting, defense acquisition, international agreements, telecommunication regulations, information security and is an expert in Cyber Law/Information Assurance, Fiscal Law, FOIA, Privacy Act and the Ethics in Government Act. Mr. Smith served as the General Counsel for the Defense Information Systems Agency, offering advice and guidance to the Agency Director and the Senior Executive Team on a full spectrum of legal issues, including government contracting. While serving as the Chief Regulatory Counsel-Telecommunications for the Department of Defense, Mr. Smith was responsible for advising the Office of Science and Technology Policy and the Assistant Secretary of Defense in Telecommunication Regulatory matters that affected national security, emergency preparedness as well as the Department of Defense’s commercial interests. He is a member of the Hawaiian and D.C. Bar Associations.

Marco A. Martinez Age 50 Senior Vice President and Chief Financial Officer Since 2015		Marco Martinez joined Pernix Group in November 2015 as Senior Vice President & Chief Financial Officer. In this role, Mr. Martinez is responsible for managing all of Pernix’s finance activities, including supervising the accounting and finance functions. He has a background in private and publicly-held multi-unit companies in the electrical transmission & distribution and commercial & industrial construction markets. Mr. Martinez brings 25 years of experience in executive leadership, financial controls, and contract performance. Most recently, he spent 18 years at MYR Group Inc., a national electrical contractor headquartered in Rolling Meadows, IL. He received both his B.S. in Accounting and Masters in Finance degree from Loyola University of Chicago. Mr. Martinez also is a Certified Public Accountant.

Code of Ethics

Our Code of Ethics sets a high standard for honesty and ethical behavior by every employee, including our principal executive officer and principal financial officer. The Code is posted on our website at http://www.pernixgroup.com/ethics-compliance.asp. To obtain a copy of the Code at no charge, submit a written request to the Corporate Secretary at 151 E. 22nd Street, Lombard, Illinois 60148. We will post on our website any required amendments to or waivers granted under our Code pursuant to SEC rules.

ITEM 11. EXECUTIVE COMPENSATION

The table below summarizes the total compensation earned by each of our Officers for the calendar years ended December 31, ~~2014~~2015 and ~~2013~~2014:

SUMMARY COMPENSATION TABLE

	Year	Salary	Bonus	Options Awards	All other Compensation	Total
Name and Principal Position	($) (1)	($)(1)	($)(1)	($)(3)	($)	($)
Nidal Zayed (2)	~~2014~~2015	~~373~~389,~~789~~537	—	~~703,700~~—	2326,~~738~~313	1415,~~101,227~~850
Chief Executive Officer	2013	330,009	75,000	120,000	32,495	557,504
President and Chief Executive Officer	2014	373,789	—	703,700	23,738	1,101,227
Patrick Gainer (4)	2014	62,500	14,425	31,000	224	108,149
Grant G. McCullagh (4)	2015	153,461	—	—	8,904	162,365
Chief Financial Officer	2013	—	—	—	—	—
Executive Vice President and Chairman of BEK BG	2014	—	—	—	—	—
Gregg Pollack (5)	2014	214,236	—	18,600	19,402	252,238
Marco A. Martinez (8)	2015	25,721	—	—	—	25,721
Chief Financial Officer and VP Administration	2013	207,020	25,000	50,000	19,883	301,903
Senior Vice President and Chief Financial Officer	2014	—	—	—	—	—
Carol Groeber (6)	2014	163,356	—	18,600	5,028	186,983
Patrick Gainer (5)	2015	273,918	—	—	3,855	277,773
Controller & Principal Accounting Officer	2013	165,090	35,000	35,000	4,944	240,034
Chief Financial Officer	2014	62,500	14,425	31,000	224	108,149
Gregg Pollack (6)	2015	—	—	—	—	—
Chief Financial Officer and VP Administration	2014	214,236	—	18,600	19,402	252,238
Carol Groeber (7)	2015	—	—	—	—	—
Controller & Principal Accounting Officer	2014	163,356	—	18,600	5,028	186,984

(1) Includes salary paid by Pernix during ~~2014~~2015 and ~~2013~~2014, before any deductions for contributions to Pernix’s 401(k) Savings Plan. Bonuses included are presented in the year for which they were earned but were paid during the first quarter of the subsequent year.

(2) Pernix provided a vehicle to Mr. Zayed at a cost of $2,331 in ~~2014~~2015 and ~~$11,304 in 2013~~2014. Pernix provided Mr. Zayed with health insurance for him and his family at a cost of $18,~~027~~982 in ~~2014~~2015 and $1718,~~191~~027 in ~~2013~~2014. The Company contributed $35,~~380~~000 during ~~2014~~2015 and $43,~~000~~380 during ~~2013~~2014 to Mr. Zayed’s 401K account.

(3) The amounts reported in this column reflect the aggregate fair value of stock options granted in the year computed in accordance with FASB ASC Topic 718. These amounts are not paid to or realized by the Officers. Assumptions used in the calculation of these values are included in Note 16 along with a description of equity compensation plans. ~~Additional options awarded in early 2015 are excluded from this table and valuation of the 2015 option awards is in process and will be computed in accordance with ASC 718.~~

(4) OnMr. ~~September~~McCullagh ~~22,~~joined ~~2014,~~the ~~Mr.~~Company ~~Gainer~~on ~~joined~~July ~~Pernix~~1, 2015 as ~~the~~its ~~Chief~~Executive ~~Financial~~Vice ~~Officer.~~President ~~Prior~~and toChairman ~~joining,~~of BEK BG. Salary represents the ~~Company~~pro ~~did~~rata ~~not~~portion ~~issue~~of Mr. ~~Gainer~~McCullagh’s ~~any~~annual ~~compensation~~base salary.

(5) Mr. ~~Pollack~~Gainer is no longer with the Company as of ~~September~~November 1930, ~~2014~~2015. As part of Mr. ~~Pollack~~Gainer’s separation agreement he received a severance payout, of which $5219,~~500~~231 ~~which~~ was included in his salary amount above. Pernix provided Mr. ~~Pollack~~Gainer with health and life insurance for him and his family at a cost of $152,~~402~~461 in ~~2014~~2015 and $~~15,883~~224 in ~~2013~~2014. The Company contributed $41,~~000~~394 during ~~2014~~2015 and ~~2013,~~zero ~~respectively,~~during 2014 to Mr. ~~Pollack~~Gainer’s 401K account.

5560

~~Table~~(6) Mr. Pollack is no longer with the Company as of ~~Contents~~September 19, 2014. As part of Mr. Pollack’s separation agreement he received a severance payout of $52,500 which was included in his salary amount above. Pernix provided Mr. Pollack with health and life insurance for him and his family at a cost of $15,402 in 2014. The Company contributed $4,000 during 2014 to Mr. Pollack’s 401K account.

(67) Ms. Groeber is no longer with the Company as of November 14, 2014. The Company contributed $4,000 during 2014 ~~and 2013, respectively,~~ to Ms. Groeber’s 401K account. Pernix provided Ms. Groeber with life insurance for her family at a cost of $1,028 in 2014 ~~and $944 in 2013~~.

(8) Mr. Martinez joined the Company on November 30, 2015 as its Senior Vice President and Chief Financial Officer. Salary represents the pro rata portion of Mr. Martinez’s annual base salary.

Stock Options

Officer Employee Awards

InThe ~~late~~ 2013, ~~the Company’s shareholders and board of directors adopted the 2014 Equity Incentive Plan (~~EIP) ~~that~~ provides for the issuance of a variety of equity awards to employees, non-employee directors and consultants. Under the terms of this plan, 1.8 million shares, which were previously allocated for issuance under the LTIP and ISOP, are reserved for issuance under the EIP. On February 8, 2014, 222,000 options were granted to employees under the EIP, all with a three year vesting schedule. In September 2014, an additional 1,050,000 options were awarded to officers of the Company, all with a three year vesting schedule. As of December 31, ~~2014~~2015, a total of 1,~~242~~172,000 options remain outstanding under the EIP to employees.

InThe ~~December 2011, the Company’s board of directors adopted and shareholders approved the~~ 2012 ~~Incentive~~ISOP ~~Stock Option Plan that~~ provides for the issuance of qualified stock options to employees. Under the terms of the ISOP, 1.5 million shares were originally reserved for issuance, however with the approval of the 2013 Equity Incentive Plan the remaining 977,500 unawarded shares were transferred to the EIP. Options to purchase common stock are granted at not less than fair market value and vest ratably on the anniversary of each award grant date as defined by the individual award agreements. The options expire 10 years from the grant date or upon expiration of the plan under which they were granted, whichever is earlier. A total of 522,500 options to buy shares were granted between 2012 and 2013, ~~283~~226,~~500~~000 of these options remain outstanding as of December 31, ~~2014~~2015, with a strike price equal to the fair market value of the Company’s common stock as of the grant date ~~($2.09 per share)~~ and a vesting schedule of five years.

~~The following summarizes stock option activity for employees for the years ended December 31, 2014 and 2013:~~61

	2014			2013
EIP	Number of Options		Weighted Average Exercise Price	Number of Options		Weighted Average Exercise Price
Options outstanding, at beginning of year	—	$	N/A	—	$	N/A
Granted	1,272,000		1.56	—		N/A
Exercised	—		N/A	—		N/A
Forfeited / expired	30,000		2.07	—		N/A
Options outstanding, at December 31	1,242,000		1.55	—		N/A
Options exercisable, at December 31	—		N/A	—		N/A
	2014			2013
ISOP	Number of Options		Weighted Average Exercise Price	Number of Options		Weighted Average Exercise Price
Options outstanding, at beginning of year	379,000	$	2.09	152,500	$	2.09
Granted	—		N/A	347,500		2.09
Exercised	—		N/A	—		N/A
Forfeited / expired	95,500		2.09	121,000		2.09
Options outstanding, at December 31	283,500		2.09	379,000		2.09
Options exercisable, at December 31	134,166	$	2.09	23,500	$	2.09

The following summarizes stock option activity for officer employees for the years ended December 31:

	2015			2014
EIP	Number of Options		Weighted Average Exercise Price	Number of Options		Weighted Average Exercise Price

Options outstanding, at beginning of year	1,242,000	$	1.55	—	$	N/A
Granted	—		N/A	1,272,000		1.56
Exercised	—		N/A	—		N/A
Forfeited / expired	70,000		2.07	30,000		2.07
Options outstanding, at December 31	1,172,000		1.55	1,242,000		1.55
Options exercisable, at December 31	657,540	$	N/A	—	$	N/A

	2015			2014
ISOP	Number of Options		Weighted Average Exercise Price	Number of Options		Weighted Average Exercise Price

Options outstanding, at beginning of year	283,500	$	2.09	379,000	$	2.09
Granted	—		N/A	—		N/A
Exercised	—		N/A	—		N/A
Forfeited / expired	57,500		2.09	95,500		2.09
Options outstanding, at December 31	226,000		2.09	283,500		2.09
Options exercisable, at December 31	188,389	$	2.09	134,166	$	2.09

The following table summarizes information about employee stock options outstanding at December 31, ~~2014~~2015:

	Number of shares tobeissued upon exerciseof outstandingoptions		Weighted averageexercise price ofoutstandingoptions	Number of sharesremaining availablefor future issuanceunder equitycompensation plans
	Number of shares to be issued upon exercise of outstanding options		Weighted average exercise price of outstanding options	Number of sharesremaining available for future issuance under equity compensation plans
Equity compensation plans approved by shareholders	1,~~525~~374,~~500~~000	(1)	1.6663	1,407,750

(1) Includes the number of shares that may be issued upon the exercise of outstanding options to purchase shares of Common Stock under the Company’s stock option plan. The Officer awardees were Mr. Nidal Zayed (1,270,000 options), and Mr. Patrick Gainer (50,000 options) ~~and Ms~~. ~~Carol Groeber (77,500 options).~~

Outstanding Equity Awards as of December 31, ~~2014~~2015

The following table provides information on the holdings of stock options by our Officers as of December 31, ~~2014~~2015. The option awards granted in 2012 vest one-fifth per year beginning on the first anniversary of the grant date or on January 26, 2013. The option awards granted on February 8, 2013, February 1, 2014, September 8, 2014 and September 22, 2014 all vest one-third per year beginning on the first anniversary of the grant date. The market value of the stock awards is based on a valuation of the stock as of the grant date as the shares are not actively traded on an exchange at this time. For additional information about the stock option awards see Note 16 in the notes to our consolidated financial statements.

	Number of Securities	Number of Securities
	Underlying Unexercised	Underlying Unexercised	Option Exercise	Option Expiration
Name	Options – Exercisable	Options – Not Exercisable	Price	Dates
Nidal Z. Zayed	64,000	1,206,000	2.09	(1)
Patrick J. Gainer	—	50,000	2.09	(1)
Carol J. Groeber	20,666	56,834	2.09	(2)

(1)180,000 options expire for Mr. Zayed upon expiration of the ISOP in December 2021. 1,090,000 and 50,000 options expire for Mr. Zayed and Mr. Gainer upon expiration of the EIP in January 2024.

	Number of Securities	Number of Securities
	Underlying Unexercised	Underlying Unexercised	Option	Option
Name	Options – Exercisable	Options – Not Exercisable	Exercise Price	Expiration Dates
Nidal Z. Zayed	64,000	1,206,000	2.09	(1)
Patrick J. Gainer	—	50,000	2.09	(2)

(21)Ms180,000 options expire for Mr. ~~Groeber~~Zayed ~~options~~upon ~~expired~~expiration of the ISOP in ~~February~~December ~~2015~~2021. 1,090,000 asoptions ~~she~~expire ~~has~~for ~~left~~Mr. ~~company~~Zayed ~~and~~upon ~~had~~expiration 90of ~~days~~the toEIP ~~execute~~in ~~her~~January ~~vested options~~2024.

(2)Mr. Gainer’s options expire in February 2016, as he is no longer with the company and has 90 days to execute his vested options.

Directors Compensation

~~During~~Each ~~mid~~non-~~2012,~~employee ~~during~~director ~~our~~earned ~~review~~an ofaverage annual director ~~compensation,~~fee ~~our analysis~~ of ~~competitive~~$29,000 ~~survey~~in ~~data~~2015. ~~and~~Mr. ~~peer~~Gunther ~~group~~received ~~proxy information~~$50,000 ~~confirmed~~as ~~that our non-employee~~ director ~~pay~~fees ~~was~~for ~~below~~his ~~median~~role inas ~~total~~Chairman ~~compensation,~~of ~~including~~the ~~cash~~Board ~~and equity compensation~~ in ~~comparison to our peer group of companies~~2015. ~~Based~~A ~~upon~~director ~~these~~acting ~~findings,~~as ~~management~~Chairman ~~presented~~of torespective ~~the~~sub-committee ~~Board~~received ~~and~~an ~~the~~additional ~~Board~~$5,500 ~~approved~~in a2015 ~~Board~~for ~~recommendation~~their ~~that~~role. ~~the~~During ~~Stockholders~~2015, ~~approve~~each ~~the~~participating ~~Proposed~~Director ~~Long-Term~~received ~~Incentive~~an ~~Plan~~additional ~~(the “LTIP”). 706~~$1,500 ~~unused~~for ~~shares~~their ~~allocated~~participation toon the ~~LTIP~~Government ~~were~~Security ~~transferred~~Committee, toAudit ~~the~~Committee ~~EIP~~or asthe ~~authorized~~Compensation byCommittee. ~~the~~Director ~~Board~~fees ofare ~~Directors~~paid in ~~late 2013, for future grants to directors under the EIP~~cash.

Each non-employee director earned an average annual director fee of $29,000 in 2014. Mr. Gunther received $50,000 as director fees for his role as Chairman of the Board in 2014. A director acting as Chairman of respective sub-committee received an additional $5,500 in 2014 for their role. During 2014, each participating Director received an additional $1,500 for their participation on the Government Security Committee, Audit Committee or the Compensation Committee. Director fees are paid in cash.

Directors		2015 Director’s Fees		2015 Options Awards		2015 Other Compensation		2015 Total Compensation
Max Engler	$	29,000	$	—	$	—	$	29,000
Ibrahim Ibrahim		29,000		—		—		29,000
Trudy Clark		30,500		—		—		30,500
Carl Smith		37,500		—		—		37,500
Don J. Gunther		58,500		—		13,000		71,500
C. Robert Campbell		37,500		—		25,000		62,500
TOTAL	$	222,000	$	—	$	38,000	$	260,000

Directors		2014 Director’s Fees		2014 Options Awards		2014 Other Compensation		2014 Total Compensation
Max Engler	$	29,000	$	12,090	$	—	$	41,090
Ibrahim Ibrahim		29,000		12,090		—		41,090
Ralph Beck		—		34,000		—		34,000
Trudy Clark		30,500		12,090		—		42,590
Carl Smith		37,500		12,090		—		49,590
Don J. Gunther		58,500		23,250		11,500		93,250
C. Robert Campbell		37,500		24,180		20,000		81,680
TOTAL	$	222,000	$	129,790	$	31,500	$	383,290

Stock Options

Non-Employee Directors Awards

On February 8, 2014, 153,000 options were granted to non-employee directors under the EIP, all with a three year vesting schedule. As of December 31, ~~2014~~2015, the total award of 153,000 options remains outstanding under the EIP.

The LTIP is a non-employee director and consultant compensation plan. The purpose of the Plan is to advance the interests of the Company and its Stockholders by providing an incentive to attract, retain and reward persons performing services as Directors and Consultants for the Company, to provide a means by which such eligible recipients may be given an opportunity to benefit from increases in value of the Common Stock through the granting of Awards, and by motivating such persons to contribute to the long-term growth and profitability of the Company. Awards may include stock options, stock awards, restricted stock, restricted stock units, and other stock or cash awards. 785,000 shares were allocated in total to cover any and all award types under the LTIP. On February 8, 2013, 78,500 option awards with a vesting period of three years were granted to six non-employee Directors.

~~The following summarizes stock option activity for non-employee directors for the years ended December 31, 2014 and 2013:~~63

	2014			2013
EIP	Number of Options		Weighted Average Exercise Price	Number of Options		Weighted Average Exercise Price
Options outstanding, at beginning of year	—	$	N/A	—	$	N/A
Granted	153,000		2.07	—		N/A
Exercised	—		N/A	—		N/A
Forfeited / expired	—		N/A	—		N/A
Options outstanding, at December 31	153,000		2.07	—		N/A
Options exercisable, at December 31	50,000	$	2.07	—	$	N/A

The following summarizes stock option activity for non-employee directors for the years ended December 31:

	2014			2013
	2015			2014
LTIP	Number of Options		Weighted Average Exercise Price	Number of Options		Weighted Average Exercise Price
EIP	Number of Options		Weighted Average Exercise Price	Number of Options		Weighted Average Exercise Price
Options outstanding, at beginning of year	78153,~~500~~000	$	2.0907	—	$	N/A
Granted	—		N/A	78153,~~500~~000		2.0907
Exercised	—		N/A	—		N/A
Forfeited / expired	—		N/A	—		N/A
Options outstanding, at December 31	78153,~~500~~000		2.0907	78153,~~500~~000		2.0907
Options exercisable, at December 31	3584,~~166~~333	$	2.0907	1350,~~500~~000	$	2.0907

	2015			2014
LTIP	Number of Options		Weighted Average Exercise Price	Number of Options		Weighted Average Exercise Price

Options outstanding, at beginning of year	78,500	$	2.09	78,500	$	2.09
Granted	—		N/A	—		N/A
Exercised	—		N/A	—		N/A
Forfeited / expired	—		N/A	—		N/A
Options outstanding, at December 31	78,500		2.09	78,500		2.09
Options exercisable, at December 31	56,833	$	2.09	35,166	$	2.09

The following table summarizes information about stock options outstanding for non-employee directors at December 31, ~~2014~~2015:

	Number of shares tobeissued upon exerciseof outstandingoptions		Weighted averageexercise price ofoutstandingoptions	Number of sharesremaining availablefor future issuanceunder equitycompensation plans
	Number of shares to be issued upon exerciseof outstanding options		Weighted average exercise price of outstanding options	Number of shares remaining available for future issuance under equity compensation plans
Equity compensation plans approved by shareholders	231,500	(1)	2.08	—	(2)

(1) Includes the number of shares that may be issued upon the exercise of outstanding options to purchase shares of Common Stock under the EIP and LTIP. The non-employee Director awardees were Mr. Ralph Beck (63,500 options), Mr. Don Gunther (38,000 options), Ms. Trudy Clark, Mr. Max Engler, Mr. Ibrahim Ibrahim, Mr. C. Robert Campbell and Mr. Carl Smith (26,000 options, respectively).

(2) Includes shares available for future issuance under the LTIP, excluding shares quantified under Column 1. As ~~noted above the all unawarded options as of December 31, 2013 were transferred to EIP for future issuances.~~

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The following table contains information as of December 31, ~~2014~~2015 regarding the ownership of the Common Stock of the Company by: (i) all persons who, to the knowledge of the Company, were the beneficial owners of 5% or more of the outstanding shares of Common Stock of the Company, (ii) each director and director nominee of the Company, (iii) the Chief Executive Officer and the other most highly compensated executive officers of the Company whose salary and bonus for the fiscal year ended December 31, ~~2014~~2015 exceeded $100,000 and are still actively employed with the Company, and (iv) all current executive officers and directors of the Company as a group:

		Amount and Nature of	Percent of Common
		Beneficial Ownership	Stock Outstanding
Name	Address	(1)	(2)
Ernil Continental Sa Bvi	European ~~OfficeHerrengasse~~Office ~~5PO~~Herrengasse 5 PO Box ~~1155FL~~1155 FL-9490 ~~VaduzPrincipality~~Vaduz Principality of Lichtenstein	4,~~386~~401,~~313~~702	46.68	%
Halbarad Group Ltd Bvi	European ~~OfficeHerrengasse~~Office ~~5PO~~Herrengasse 5 PO Box ~~1155FL~~1155 FL-9490 ~~VaduzPrincipality~~Vaduz Principality of Lichtenstein	3,~~626~~639,~~643~~234	38.67	%
Al Amal Investment Co. KSCC	Dasman Complex Block #2 FL #~~3Ahmed~~3 Ahmed Al Jabar St Sharq ~~13031Kuwait~~13031 Kuwait	549,396	5.8	%
Sayed Hamid Behbehani & Sons Co. and Family Members	PO Box ~~3065Safat~~3065 ~~13031Kuwait~~Safat 13031 Kuwait	527,936	5.6	%
Max Engler (3)		3,334	*
Ibrahim Ibrahim		1,040	*
Ralph Beck		*	*
C. Robert Campbell		*	*
Trudy Clark		*	*
Don Gunther		*	*
Carl Smith		*	*
Nidal Z. Zayed		*	*
Marco A. Martinez		*	*
Patrick Gainer		*	*
Nidal Z. Zayed		800	*
All Executive Officers and Directors as a Group (8 Persons)		5,174	*
Total beneficially owned outstanding shares of common stock		9,123,442	97.0	%
Outstanding shares of common stock of other stockholders		280,255	3.0	%
Total shares of common stock outstanding		9,403,697	100.0	%

* Less than 0.1%

(1) Except as indicated below, the persons named in the table have sole voting and investment power with respect to all shares of Common Stock shown as beneficially owned by them, subject to community property laws where applicable.

Name of Legal Entity Name of Natural Person(s) having sole or shared voting ~~andinvestment~~and investment control over Pernix Group, Inc. shares held by the ~~namedlegal~~named legal entity Al Amal Investment Company KSCC Nasrallah Behbehani Ernil Continental SA BVI Mrs. Vanessa Cosi, Mrs. Sandra A. Marc-Büchel and Fidu-Finanz Trustee Services Est., Halbarad Group Limited BVI Mrs. Vanessa Cosi, Mrs. Sandra A. Marc-Büchel and Fidu-Finanz Trustee Services Est., Sayed Hamed Behbehani and Sons Co. Fouad Behbehani and Nasrallah Behbehani

(2) Calculated on a basis of 9,403,697 shares of Common Stock outstanding as of December 31, 2014. On various dates over the past several years, options were granted to Mr. Zayed (1,270,000 options) and Mr. Gainer (50,000 options) under the Incentive Stock Option Plan and the Equity Incentive Plan that were implemented by the Company in December 2011 and December 2013. The table excludes the options outstanding under the ISOP and EIP which are not exercised as of December 31, 2014. During 2012, the Company established a long term incentive plan for non-employee directors and consultants. During 2013 the Company awarded options under the LTIP to Mr. Beck (13,500), General Clark, Mr. Engler, Mr. Gunther, Mr. Ibrahim and Mr. Smith (all received 13,000 options, respectively). Additionally, the non-employee Directors receive awards from the EIP grant on February 8, 2014. Under the EIP grant Mr. Gunther received 25,000 options, Mr. Campbell received 26,000 options and the remaining Directors received 13,000 options each. The table excludes the options outstanding under the LTIP and EIP which are not exercised as of December 31, 2014.65

(2) Calculated on a basis of 9,403,697 shares of Common Stock outstanding as of December 31, 2015. On various dates over the past several years, options were granted to Mr. Zayed (1,270,000 options) and Mr. Gainer (50,000 options) under the Incentive Stock Option Plan and the Equity Incentive Plan. The table excludes the options outstanding under the ISOP and EIP which are not exercised as of December 31, 2015. During 2013 the Company awarded options under the LTIP to Mr. Beck (13,500), General Clark, Mr. Engler, Mr. Gunther, Mr. Ibrahim and Mr. Smith (all received 13,000 options, respectively). Additionally, the non-employee Directors received awards from the EIP grant on February 8, 2014. Under the EIP grant, Mr. Gunther received 25,000 options, Mr. Campbell received 26,000 options and the remaining Directors received 13,000 options each. The table excludes the options outstanding under the LTIP and EIP which are not exercised as of December 31, 2015.

(3) Max Engler serves as a director for Litra Holding AG. Litra Holding AG owns directly 33,000 shares of Pernix Group’s common stock. Based upon information provided to Pernix Group, Pernix Group does not consider these shares to be beneficially owned by Mr. Engler.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTORS INDEPENDENCE

Certain of the Company’s executive officers, directors, and major stockholders are also owners, officers, and/or directors of SHBC located in Kuwait. SHBC is a civil, electrical, and mechanical engineering firm and construction contractor with over 4,000 employees and over 50 years of experience. Ernil, Halbarad and affiliated companies hold over 96.0% of the common stock outstanding, of Pernix Group, Inc. SHBC and Pernix bid and compete within the same industries; however, SHBC has agreed, in writing, not to bid on projects within the United States and its possessions.

During the first quarter of 2013, the Company purchased for $1.1 million, the building and land on which the Company’s corporate headquarters are located. These assets were purchased from Baron Real Estate Holdings, a related party. See Note 11 in the notes to our consolidated financial statements.

As of December 31, 2013 short-term and long-term debt agreements and associated accrued interest with Bent Marketing Ltd., a related party, were fully repaid.

Director Independence

The Company is a “Controlled Company” as that term is defined by the Listing Requirements of NASDAQ. As such, if the Company were a company listed on the NASDAQ trading market, it would not be required to comply with the director independence guidelines established thereby.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The Audit Committee pre-approves all audit services and permitted non-audit services (including the fees and terms thereof) to be performed for the Company by its independent registered accountants. ~~In late 2013, the Company terminated CohnReznick LLP as its principal accountant and in January 2014 the Company engaged BDO USA, LLP as its new principal accountant.~~ The following table presents fees for professional services rendered by BDO USA, LLP, the principal accountant for the respective periods indicated:

Services Performed		~~2014~~2015		~~2013 (4)~~2014
Audit Fees (1)	$	~~335~~533,~~828~~850	$	~~209~~335,~~436~~828
Audit-related fees (2)		3420,~~816~~000		—34,816
Tax Fees (3)		68129,~~345~~983		2768,~~759~~345
Total Fees	$	~~438~~683,~~989~~833	$	~~237~~438,~~195~~989

(1.) Audit fees represent fees for professional services provided in connection with the audit of our annual financial statements and certain transition procedures as well as audit services provided in connection with statutory filings. These fees also include amounts related to the filing of the Company’s 2014 Registration Statements and related amendments.

(2.) Audit-related fees represent due diligence services related to potential acquisitions.

(3.) Tax fees principally represent fees for tax preparation.

4.Included in the fees above for the year ended December 31, 2013 are fees paid to BDO USA, LLP. Excluded from the table above are fees relating to services performed by CohnReznick LLP related to the year ended December 31, 2013 in the amounts of $138,500 for audit services, $1,560 for tax services and $9,012 of other accounting services.66

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

See the audited financial statements for the year ended December 31, ~~2014~~2015, presented in Item 8 above.

EXHIBITNUMBER		EXHIBIT DESCRIPTION
3.1		Certificate of Incorporation of Pernix Group (Incorporated by reference from Exhibit 3.01 to the Form S-4 filed on 7/July 2/, 2001)
3.2		~~By-laws~~Amendment ofto ~~Pernix~~Certificate ~~Group~~of Incorporation (Incorporated by reference from Exhibit 3.0203 to the Form ~~S-4~~10KSB filed on 7/April 2~~/2001~~, 2007)
3.3		Certificate of Amendment to the Restated Certificate of Incorporation of Pernix Group (Incorporated by reference from ~~Exhibit~~Appendix ~~3.03~~A toof ~~the~~Schedule ~~Form~~14C ~~10KSB~~ filed on ~~4/2/2007~~October 1, 2012)
3.4		Certificate of Amendment to the Restated Certificate of Incorporation of Pernix Group, ~~Inc.~~ (Incorporated by reference from ~~Appendix~~Exhibit A3.05 ofto ~~Schedule~~the ~~14C~~Form 10-K filed on ~~October~~March 128, ~~2012~~2014)
3.5		~~Certificate~~By-laws of ~~Amendment to the Restated Certificate of Incorporation of~~ Pernix Group, ~~Inc.~~ (Incorporated by reference from Exhibit 3.0502 to the Form 10S-K4 filed on ~~3/28/2014~~July 2, 2001)
4.1		Certificate of Designations- Series A Preferred Stock of Pernix Group (Incorporated by reference from Exhibit 3.1 to the Form 10-Q filed on August 12, 2011)
4.2		Certificate of Designations- Series B Cumulative Convertible Preferred Stock of Pernix Group (Incorporated by reference from Exhibit 3.2 to the Form 10-Q filed on August 12, 2011)
4.3		Certificate of Amendment to the Certificate of Designation of Series A Preferred Stock of Pernix Group, ~~Inc.~~ (Incorporated by reference from Appendix B of Schedule 14C filed on October 1, 2012)
4.4		Certificate of Amendment to the Certificate of Designation of Series B Preferred Stock of Pernix Group, ~~Inc.~~ (Incorporated by reference from Appendix C of Schedule 14C filed on October 1, 2012)
4.5		Certificate of Amendment to the Certificate of Designation of Series A Preferred Stock of Pernix Group, Inc. (Incorporated by reference from Exhibit 4.05 to the Form 10-K filed on 3/March 28/, 2014)
10.01		Pernix Group , Inc. 2012 Incentive Stock Option Plan (Incorporated by reference from Appendix A to the PRE14A Proxy filing with the SEC on October 27, 2011)*
4.6		Amended and Restated Certificate of Designation- Series C Preferred Stock of Pernix Group (Incorporated by reference from Exhibit 3.1 to the Form 8-K filed on July 1, 2015)
10.02		Form of Incentive Stock Option Award Notice and Agreement (Incorporated by reference from Exhibit 10.2 to the Form 8-K filed on January 31, 2012)
10.01		Pernix Group 2012 Incentive Stock Option Plan (Incorporated by reference from Appendix A to the PRE14A Proxy filing with the SEC on October 27, 2011)
10.03		Pernix Group , Inc. 2013 Long Term Incentive Plan (Incorporated by reference form Exhibit 10.4 to the Form 8-K filed on February 14, 2013)*
10.02		Form of Stock Option Award Notice and Agreement (Incorporated by reference from Exhibit 10.2 to the Form 8-K filed on February 14, 2013)
10.04		Form of LTIP Stock Option Award Notice and Agreement (Incorporated by reference from Exhibit 10.2 to the Form 8-K filed on February 14, 2013)*
10.03		Pernix Group 2013 Long Term Incentive Plan (Incorporated by reference from Appendix A to the DEF 14A Proxy filing with the SEC on October 16, 2012)
10.05		Pernix Group , Inc. 2014 Equity Incentive Plan (Incorporated by reference from Appendix A to the PRE14A Proxy filing with the SEC on October 3, 2013)*
10.04		Form of LTIP Stock Option Award Notice and Agreement (Incorporated by reference from Exhibit 10.4 to the Form 8-K filed on February 14, 2013)
10.06		Form of EIP Award Notice and Agreement ((Incorporated by reference from appendix to the PRE14A Proxy filing with the SEC on October 3, 2013)*
10.07		Preferred Stock Purchase Agreement between Pernix Group, Inc. and Ernil Continental S.A., BVI dated December 30, 2013 (Incorporated by reference from Exhibit 16.1 to the Form 8-K filed on December 23, 2013)
10.08		Preferred Stock Purchase Agreement between Pernix Group, Inc. and Halbarad Group, LTD., BVI dated December 30, 2013 (Incorporated by reference from Exhibit 16.2 to the Form 8-K filed on December 23, 2013)
10.09		Pernix Group , Inc. LTC Corporation, Joint Venture, Agreement**
10.10		Loan and Security Facility Agreement dated as of November 10, 2014, among Pernix Group, Inc. and Pernix RE LLC, the Borrowers and a Lender, Barrington Bank & Trust Company, National Association. **
10.11		Revolving Note dated as of November 10, 2014, among Pernix Group, Inc. and Pernix RE LLC, the Borrowers and a Lender, Barrington Bank & Trust Company, National Association. **
14.0		Code of Ethics (Incorporated by reference from Exhibit 99.1 to the Form 10KSB filed on 7/31/2006)
16.0		Letter to the Securities and Exchange Commission from CohnReznick LLP, dated December 10, 2013 regarding Change in Certifying Accountant (Incorporated by reference from Exhibit 16.1 to the Form 8-K filed on December 10, 2013)
21.0		List of Subsidiaries and their jurisdictions**
23.0		Consent of Independent Registered Public Accounting Firm
24.0		Unanimous Written Consent of the Board of Directors of Pernix Group, Inc. to Approve The Registration and Sale of Common Shares (Incorporated by reference from Exhibit 24.1 to the Form S-1 filed on March 28, 2014)
31.1		Rule 13a-14(a)/15d-14(a) Certification of CEO**
31.2		Rule 13a-14(a)/15d-14(a) Certification of CFO**
32.1		Section 1350 Certification — Chief Executive Officer**
32.2		Section 1350 Certification Chief Financial Officer**

(101.INS)***		XBRL Instance Document		N/A
(101.SCH)***		XBRL Taxonomy Extension Schema Document		N/A

(101.CAL)***	XBRL Taxonomy Extension Calculation Linkbase Document	N/A
10.05	Pernix Group 2013 Equity Incentive Plan (Incorporated by reference from Appendix A to the PRE14A Proxy filing with the SEC on October 3, 2013)
(101.LAB)***	XBRL Taxonomy Extension Label Linkbase Document	N/A
10.06	Form of EIP Award Notice and Agreement (Incorporated by reference from Appendix A to the PRE14A Proxy filing with the SEC on October 3, 2013)
(101.PRE)***	XBRL Taxonomy Extension Presentation Linkbase Document	N/A
10.07	Joint Venture Agreement, dated February 7, 2014, by and between Pernix Group and LTC Corp Inc. (Incorporated by reference from Exhibit 10.09 to the Form 10-K filed on March 20, 2015)
(101.DEF)***	XBRL Taxonomy Extension Definition Linkbase Document	N/A
10.08	Loan and Security Facility Agreement, dated as of November 10, 2014, among Pernix Group and Pernix RE LLC, as borrowers, and Barrington Bank & Trust Company, National Association, as lender (Incorporated by reference from Exhibit 10.10 to the Form 10-K filed on March 20, 2015)
10.09	Revolving Note, made on November 10, 2014, by Pernix Group and Pernix RE LLC in favor of Barrington Bank & Trust Company, National Association, as lender (Incorporated by reference from Exhibit 10.11 to the Form 10-K filed on March 20, 2015)
10.10	Series C Preferred Stock Purchase Agreements between Pernix Group, Inc. and Ernil Continental S.A., BVI dated June 26, 2015 (Incorporated by reference from Exhibit 10.1 to the Form 8-K filed on July 1, 2015) and dated June 10, 2015 (Incorporated by reference from Exhibit 10.1 to the Form 8-K filed on June 16, 2015)
10.11	Series C Preferred Stock Purchase Agreements between Pernix Group, Inc. and Halbarad Group, LTD., BVI dated June 26, 2015 (Incorporated by reference from Exhibit 10.2 to the Form 8-K filed on July 1, 2015) and dated June 10, 2015 (Incorporated by reference from Exhibit 10.2 to the Form 8-K filed on June 16, 2015)
10.12	Purchase Agreement, dated June 9, 2015, by and among Pernix Guam, LLC, Pernix Group, dck Pernix Guam, LLC, dck worldwide, LLC, dck worldwide Holdings, Inc. and dck pacific region, LLC (Incorporated by reference from Exhibit 2.1 to the Form 8-K filed on June 15, 2015)
10.13	Membership Interest Purchase Agreement between BE&K Inc. and Pernix Building Group, LLC, dated June 4, 2015 (Incorporated by reference from Exhibit 2.1 to the Form 8-K filed on June 10, 2015)
14.0	Code of Ethics (Incorporated by reference from Exhibit 99.1 to the Form 10KSB filed on July 31, 2006)
21.0	List of Subsidiaries and their jurisdictions*
23.0	Consent of BDO USA, LLP, the Independent Registered Public Accounting Firm of Pernix Group
31.1	Rule 13a-14(a)/15d-14(a) Certification of CEO*
31.2	Rule 13a-14(a)/15d-14(a) Certification of CFO*
32.1	Section 1350 Certification — Chief Executive Officer*
32.2	Section 1350 Certification Chief Financial Officer*

6368

* Management contracts and compensatory plans and arrangements required to be filed as exhibits pursuant to item 15(b) of this report.


(101.INS)**	XBRL Instance Document	N/A

(101.SCH)**	XBRL Taxonomy Extension Schema Document	N/A

** Filed herewith


(101.CAL)**	XBRL Taxonomy Extension Calculation Linkbase Document	N/A

(101.LAB)**	XBRL Taxonomy Extension Label Linkbase Document	N/A

(101.PRE)**	XBRL Taxonomy Extension Presentation Linkbase Document	N/A

(101.DEF)**	XBRL Taxonomy Extension Definition Linkbase Document	N/A

*** ~~Pursuant~~Filed to Rule 406T of Regulation S-T, the interactive data files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Exchange Act and otherwise are not subject to liability under those sectionsherewith.

~~All~~** ~~exhibits~~Pursuant ~~other~~to ~~than~~Rule ~~those~~406T ~~indicated~~of ~~above~~Regulation S-T, the interactive data files on Exhibit 101 hereto are ~~omitted~~deemed ~~because~~not offiled ~~the~~or ~~absence~~part of ~~the~~a ~~conditions~~registration ~~under~~statement ~~which~~or ~~they~~prospectus ~~are~~for ~~required~~purposes of Sections 11 or ~~because~~12 of the ~~information~~Securities ~~called~~Act ~~for~~of is1933, ~~shown~~as inamended, ~~the~~are ~~consolidated~~deemed ~~financial~~not ~~statements~~filed ~~and~~for ~~notes~~purposes ~~thereto~~of inSection 18 of the ~~Annual~~Exchange ~~Report~~Act onand ~~Form~~otherwise ~~10-K~~are ~~for~~not ~~the~~subject ~~period~~to ~~ended~~liability ~~December~~under ~~31,~~those ~~2014~~sections.

64All exhibits other than those indicated above are omitted because of the absence of the conditions under which they are required or because the information called for is shown in the consolidated financial statements and notes thereto in the Annual Report on Form 10-K for the period ended December 31, 2015.

SIGNATURES

PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED THEREUNTO DULY AUTHORIZED.

	PERNIX GROUP, INC.
		(Registrant)
Dated: March 20, 2015		/s/ Nidal Zayed
Dated: March 29, 2016		/s/ Nidal Zayed
		Nidal Zayed
		President and Chief Executive Officer

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE REGISTRANT AND IN THE CAPACITIES INDICATED ON MARCH 2029, ~~2015~~2016.

/s/ ~~Don~~Nidal ~~Gunther~~Z. Zayed Interim Chairman of the Board of Directors ~~Don Gunther /s/ Nidal Z. Zayed Director~~, President, and Chief Executive Officer Nidal Z. Zayed (Principal Executive Officer) /s/ Max Engler Director Max Engler /s/ Don Gunther Director Don Gunther /s/ C. Robert Campbell Director C. Robert Campbell /s/ Trudy Clark Director Trudy Clark /s/ Carl Smith Director Carl Smith /s/ Ibrahim Ibrahim Director Ibrahim Ibrahim /s/ ~~Patrick~~Marco ~~Gainer~~A. Martinez Senior Vice President and Chief Financial Officer ~~Patrick~~Marco ~~Gainer~~A. Martinez (Principal ~~Chief~~ Financial Officer)

6570

Filing Compare · Pernix Group, Inc.