Keeping Culture Alive | Annual ReportAlaska Native Corporations. Management still has confidence in this program, but our companies must evolve and adapt to remain competitive and

2015Keeping Culture Alive | Annual Report

President’s Message 01

CEO’s Message 02

Board of Directors 03

A Message from the Board 04

2015 Financials 06

Corporate Profile 40

CONTENTS

I am pleased to present the theme of the 2015 Annual

Meeting…Keeping Culture Alive. The Village Seminar,

Culture Night, Annual Meeting and Banquet will be held

at the Egan Center in the Cook, LaPerouse and Arteaga

Rooms, October 8-10.

As our population ages and we sadly lose fluent Unangam

Tunuu speakers, we recognize the vital importance of

preserving our language and culture. Culture Camps were

developed as a way to preserve and teach the language,

traditional arts, beading, basketry, cooking and dance.

When I was growing up in King Cove there were no

Culture Camps. The first one was held in Unalaska in

1997. Now there are seven every year! Sand Point, King

Cove, Unalaska, St. Paul, Atka, Akutan, Anchorage and,

on occasion, St. George and the Pacific Northwest host

these gatherings that teach our traditions, our language

and keep our heritage alive. Over the years, Culture

Camps have grown in popularity and hundreds of

shareholders and descendants are taking part in them.

With the growing number

of descendants, Culture

Camps have never been more

important than today. The Aleut

Corporation contributes to them

annually, The Aleut Foundation

offers travel scholarships and

a countless number of people

volunteer their talent and time.

Please enjoy the many beautiful photos throughout this

year’s Annual Report showing cultural activities being

performed by our people.

Quyanaa,

Thomas Mack

President

PRESIDENT’S MESSAGE | 1

PRESIDENT’S MESSAGE

AlEuT CORPORATION | 3

Dear Shareholders,

For a corporation’s shareholders, the Annual Report is a very important document. It presents critical information about their company’s performance for the previous year. It is limited however, because it is a look back, not a look forward.

It is no secret that 2015 was a challenging year for the Aleut Corporation. The Board of Directors made dramatic changes to the management team, hiring a new CEO, CFO and Director of Human Resources. This team moved very quickly to understand our operations and the reasons why some TAC subsidiaries had a lackluster performance during the 2015 fiscal year. Compounding this unimpressive performance was the necessary write-off of intangible assets in two of our companies; C&H and Analytica. Though it did not affect our cash position, it did have a nearly $3 million negative impact on our bottom line. An additional blow to the financial statements resulted from the accounting treatment for our Deferred Tax Assets (estimated future tax savings from accumulated net operating losses). This adjustment was over $15 million. This write down of the tax asset did not impact cash nor did it reflect a loss from operations. It is shown solely as an additional income tax expense.

With that said, what are we doing to assure growth and continued improvements to TACs operations? In cooperation with the TAC Board of Directors, we have taken several steps to refocus the company’s efforts. We have

• increased operational scrutiny, review and accountability in our subsidiaries;

• emphasized project profitability among our contracting subsidiaries and reversed a focus on simply revenue;

• instituted an unrelenting focus on profitability, to be achieved through revenue growth, cost management, and improved bidding processes; and

• set benchmarks, strategic plans, and budgets that have allowed us to measure subsidiary progress.

Government Contracting

The primary source of work for AMS and ARS is through federal contracting and working through the Small Business Administration 8(a) program. The government has changed its approach and methodology for federal contracting by Alaska Native Corporations. Management still has confidence in this program, but our companies must evolve and adapt to remain competitive and become more profitable by improving overall gross margin performance, lowering overhead and improving net income.

Other Subsidiaries

C&H Testing continued to struggle in 2015 due the impact of low oil prices. Once oil dropped below $60/bbl much of the company’s work in the Bakersfield market simply dried up. This slowdown was the principal reason for C&H Testing’s 2015 losses. Management has reduced overhead and has shifted resources to its much more successful operations in North Dakota.

TAC’S other major contracting subsidiary, Patrick Mechanical, continues to perform well in its Alaska interior mechanical contracting niche, however it faces challenges related to potential reductions in state-funded projects.

Aleut Enterprise’s fueling operations struggled with diminished volumes and increasing costs. Aleut Real Estate’s investments were modestly profitable and our subsidiary Alaska Instrument, though relatively small, achieved stellar performance in 2015.

We see many areas where performance can be improved in succeeding years. That improvement will not occur overnight. Your new management team is confident and committed to making the changes necessary to assure greater future success.

Sincerely,

Matthew T. FagnaniChief Executive Officer

2 | CEO’S REPORT

CEO’S REPORT

A MESSAGE fROM ThE bOARD | 5

Lorem ipsum dolor sit amet, consectetuer adipiscing elit, sed diam nonummy nibh euismod tincidunt ut laoreet dolore magna aliquam erat volutpat. Ut wisi enim ad minim veniam, quis nostrud exerci tation ullamcorper suscipit lobortis nisl ut aliquip ex ea commodo consequat. Duis autem vel eum iriure dolor in hendrerit in vulputate velit esse molestie consequat, vel illum dolore eu feugiat nulla facilisis at vero eros et accumsan et iusto odio dignissim qui blandit praesent luptatum zzril delenit augue duis dolore te feugait nulla facilisi. Nam liber tempor cum soluta nobis eleifend option congue nihil imperdiet doming id quod mazim placerat facer possim assum. Typi non habent claritatem insitam; est usus legentis in iis qui facit eorum claritatem. Investigationes demonstraverunt lectores legere me lius quod ii legunt saepius. Claritas est etiam processus dynamicus, qui sequitur mutationem consuetudium lectorum. Mirum est notare quam littera gothica, quam nunc putamus parum claram, anteposuerit litterarum formas humanitatis per seacula quarta decima et quinta decima. Eodem modo typi, qui nunc nobis videntur parum clari, fiant sollemnes in futurum.

Lorem ipsum dolor sit amet, consectetuer adipiscing elit, sed diam nonummy nibh euismod tincidunt ut laoreet dolore magna aliquam erat volutpat. Ut wisi enim ad minim veniam, quis nostrud exerci tation ullamcorper consequat, vel illum dolore eu feugiat nulla facilisis at vero eros et accumsan et iusto odio dignissim qui blandit praesent luptatum zzril delenit augue duis dolore te feugait nulla facilisi. Nam liber tempor cum soluta nobis eleifend option congue nihil imperdiet doming id quod mazim placerat facer possim assum. Typi non habent claritatem insitam; est usus legentis in iis qui facit eorum claritatem. Investigationes demonstraverunt lectores legere me lius quod ii legunt saepius. Claritas est etiam processus dynamicus, qui sequitur mutationem consuetudium lectorum. Mirum est notare quam littera gothica, quam nunc putamus parum claram, anteposuerit litterarum formas humanitatis per seacula quarta decima et quinta decima. Eodem modo typi, qui nunc nobis videntur parum clari, fiant sollemnes in futurum.

Lorem ipsum dolor sit amet, consectetuer adipiscing elit, sed diam nonummy nibh euismod tincidunt ut laoreet

minim veniam, quis nostrud exerci tation ullamcorper suscipit lobortis nisl ut aliquip ex ea commodo consequat. Duis autem vel eum iriure dolor in hendrerit in vulputate velit esse molestie consequat, vel illum dolore eu feugiat nulla facilisis at vero eros et accumsan et iusto odio dignissim qui blandit praesent luptatum zzril delenit augue duis dolore te feugait nulla facilisi. Nam liber tempor cum soluta nobis eleifend option congue nihil imperdiet doming id quod mazim placerat facer possim assum. Typi non habent claritatem insitam; est usus legentis in iis qui facit eorum claritatem. Investigationes demonstraverunt lectores legere me lius quod ii legunt saepius. Claritas est etiam processus dynamicus, qui sequitur mutationem consuetudium lectorum. Mirum est notare quam littera gothica, quam nunc putamus parum claram, anteposuerit litterarum formas humanitatis per seacula quarta decima et quinta decima. Eodem modo typi, qui nunc nobis videntur parum clari, fiant sollemnes in futurum.

Lorem ipsum dolor sit amet, consectetuer adipiscing elit, sed diam nonummy nibh euismod tincidunt ut laoreet dolore magna aliquam erat volutpat. Ut wisi enim ad minim veniam, quis nostrud exerci tation ullamcorper etiam processus dynamicus, qui sequitur mutationem consuetudium lectorum. Mirum est notare quam littera gothica, quam praesent luptatum zzril delenit augue duis dolore te feugait nunc putamus parum claram, anteposuerit litterarum formas humanitatis per seacula quarta decima et quinta decima. Eodem modo typi, qui nunc nobis videntur parum clari, fiant sollemnes in futurum.

Dick JacobsenBoard Chair

4 | bOARD Of DIRECTORS

Stanley MackDirector

DIck JacOBSenChair

O. PatRIcIa lekanOFF GReGORySecretary / Treasurer

ShaROn lInDDirector

GaRy FeRGuSOnDirector

taRa BOuRDukOFSkyVice Chair

DeBI SchMIDtDirector

vIncent tutIakOFFDirector

JenIFeR SaMuelSOn nelSOnVice President

A MESSAGE fROM ThE bOARD

fINANCIAlS | 76 | fINANCIAlS

MANAGEMENT’S DISCuSSION AND ANAlySIS Of RESulTS Of OPERATIONS AND fINANCIAl CONDITION

Special note regarding forward-looking statements The statements contained are both historical & forward-looking statements. These statements may include management’s expectations, intentions, plans or strategies regarding the future. All forward-looking statements included in this document are based upon information available to the Company on the date hereof, and the Company assumes no obligation to update any such forward-looking statements. Future revenues and profits are influenced by a number of factors, which are inherently difficult to forecast. It is important to note that the Company’s actual results could differ significantly from those described in, or implied from, such forward-looking statements. Any statements related to future operations and financial conditions are subject to risk that could cause the actual results to vary materially from expectations. However, management believes that it has the competitive and financial resources for continued business success in the markets in which it chooses to operate. The following discussion and analysis has been prepared by management to explain the results of operations and financial condition. The Company

The Aleut Corporation (TAC or Company) is a regional Native corporation formed pursuant to the Alaska Native Claims Settlement Act of 1971 (ANCSA). As of March 31, 2015, there were approximately 3,951 shareholders of the Company. The Company’s primary activity is investing and managing in business ventures principally in the following industry segments:

• Federal government operations & maintenance and information technology contracting• Fuel sales, storage and related services• Rental properties• Natural resources• Industrial instrumentation & process control equipment sales• Oil well-testing services• Mechanical contracting and construction• Water quality testing• Hazardous materials analysis, testing, and decommissioning and remediation services

ResulTs of opeRaTions

The Aleut Corporation is reporting the results of operations for the fiscal year (FY) ended March 31, 2015.

Consolidated gross revenues for FY 2015 totaled $137,942,098 as compared to $120,307,293 and $116,260,627 in FYs 2014 and 2013, respectively. This represents a 14.7% increase in revenues as compared to FY 2014.

Consolidated net loss before taxes for FY 2015 was $(2,188,515) as compared to income of $1,383,930 and $4,774,132 in FY 2014 and 2013, respectively. This represents an earnings decrease of $3,572,445 from FY 2014. Consolidated net loss after taxes for FY 2015 was $(17,439,428) as compared to income of $1,686,621 and $5,422,771 in FYs 2014 and 2013, respectively. The $19,126,049 decrease in net income from FY 2014 to FY 2015 results primarily from (i) $15,250,913 write-down of the deferred tax assets; (ii) impairment of long-lived assets $2,419,435; (iii) lower net incomes from Patrick Mechanical, LLC, Aleut Industrial Services, LLC and Aleut Enterprise, LLC wholly owned subsidiaries; and (iv) lower earnings from certain joint ventures.

The Deferred tax assets were created to reflect the potential tax savings that will result from the use of our Net Operating Losses (NOLS). The NOLs were principally generated by the Adak land transfer of 2004. The larger the income potential of the operations of the Company, the larger will be the potential tax savings from the NOLs and the larger value ascribed to the Deferred Tax Assets. The diminished earnings of the company in 2015 and previous years have required recalculation of the future tax savings and thus the value of the Deferred Tax Assets. This recalculation resulted in the $15,250,913 additional expense recognized in 2015. The Deferred Tax Assets are valued at $49,660,417 in 2015, $64,866,568 in 2014 and $64,545,830 in 2013.

ConTRaCT Revenue

Contract revenue represents the largest share of revenue of the Company’s business lines. Contract revenue comes from: (i) Aleut Management Services, LLC (AMS), which operates in the federal contracting arena; (ii) Aleut Industrial Services, LLC (AIS), which provides oil and well testing services, drinking and wastewater analytical services, and sales of instrumentation and process control products; (iii) Patrick Mechanical, LLC (PM), which provides engineering, design, and construction of complex piping and HVAC systems and (iv) ARS International, LLC (ARS), which provides hazardous and non-hazardous testing, analysis and decommissioning and remediation services.

2015Financials

fINANCIAlS | 98 | fINANCIAlS



CommeRCial and ResidenTial RenTal pRopeRTies (exclusive of fuel storage rental income)

The Company, through its wholly-owned subsidiary, Aleut Real Estate, LLC (ARE), has various real estate (commercial and residential) properties in Alaska (Anchorage, Adak, and Valdez) and Colorado (Colorado Springs).

In FY 2015, ARE had rental income of $2,623,594 as compared to $2,805,685 and $2,769,732 in FYs 2014 and 2013, respectively. This is a decrease of $182,091 or 6% lower compared to the prior year. Also, in FY 2015, ARE generated $24,960 of joint venture and other income as compared to $225,440 in the prior year. In FY 2015, ARE had net income of $85,968 as compared to $211,270 and $1,104,519 in FYs 2014 and 2013 respectively. This is a decrease of $125,302 or 59% lower compared to the prior year. The primary reason for the decrease was a lack of a special dividend from joint ventures in FY 2015; whereas, in FY 2014, a special dividend of $175,500 was declared and paid. Additionally, in FY 2015 a loss of $126,037 was incurred for the sale of vacant lot in Colorado Springs.

The Company also has a 50% interest in Black Brandt, LLC, a real estate holding company that has two real estate property holdings in Colorado and two property holdings in the Seattle, WA area. In FY 2015, Black Brandt generated $348,704 of income as compared to $313,442 and $405,630 in FYs 2014 and 2013, respectively.

naTuRal ResouRCes, invesTmenTs, and oTheR inCome

Natural Resources In FY 2015, 7(i) revenue sharing from the other Alaskan Native Regional Corporations totaled $5,781,246 compared to $4,692,449 and $3,852,583 in FYs 2014 and 2013, respectively. This is an increase of $1,088,797 or 23% higher compared to the prior year. The primary sources of 7(i) revenues come from NANA and ASRC.

In FY 2015, the Company had gravel revenue of $115,010 as compared to $409,846 and $378,493 in FYs 2014 and 2013, respectively. This is a decrease of $294,836 or 72% lower compared to the prior year. Gravel sales are primarily derived from the material management agreements between the Company and four Village Corporations in the Aleut region that have quarry operations (Shumagin Corporation, King

Cove Corporation, Tanadgusix Corporation, and Ounalashka Corporation).

Investment Earnings The Company has investment earnings primarily through money market accounts, bonds, and marketable securities. For FY 2015, investment earnings were $1,766,140 compared to $1,029,832 and $1,375,856 in FYs 2014 and 2013, respectively. This is an increase of $736,308 or 71% higher than the prior year. Investment earnings include income from the Company’s Permanent Fund.

The Company established the Permanent Fund on April 1, 1992. The goal of the Permanent Fund is to provide a cushion and diversification against the occasionally unpredictable operating performance. The Permanent Fund serves as a fund for future use for funding shareholder dividends and charitable contributions to The Aleut Foundation. Earnings of the Permanent Fund are reinvested in the fund. Withdrawals from the Permanent Fund require Board approval.

As of March 31, 2015, the market value of the Permanent Fund was $13,775,474, which is an increase of $807,485 or 6% higher as compared to the market value of $12,967,989 a year ago. In FY 2015, the Permanent Fund was invested with an asset allocation of 49% to fixed income and 51% to equity. The Company also had other marketable securities of $21,300,750 as compared to $20,507,393 in FY 2014. This represents an increase of $793,357 or a 4% increase over the prior year. The other securities are conservatively invested at 66% fixed income and 34% equity. The Company anticipates that the Permanent Fund will continue to grow over the long term. Past performance is, however, no guarantee of future performance.

ChaRiTable ConTRibuTions

The Company made contributions in FY 2015 to charitable and not-for-profit organizations that benefit shareholders and their descendants totaling $1,099,008 compared to $1,432,862 and $1,003,937 in FYs 2014 and 2013, respectively. This is a decrease of $333,854 or 23% lower as compared to the prior year. Of this amount in FY 2015, $900,000 was given to The Aleut Foundation as compared to $1,200,000 and $800,000 given in FYs 2014 and 2013, respectively. These amounts do not include the Company’s burial assistance subsidy program that is run through The Aleut Foundation. The Aleut Foundation also provides scholarships to the Company’s

Aleut Management Services, LLC (AMS) Of the four sources of contract revenue, AMS represents the largest portion. In FY 2015, AMS had contract revenue of $69,568,481 as compared to $52,057,755 and $44,977,707 in FYs 2014 and 2013, respectively. This represents an increase of $17,510,726 or 34% higher than the prior year. In FY 2015 AMS had a net income of $669,460 as compared to $913,291 and $302,544 in FYs 2014 and 2013, respectively. This is a decrease of $243,831 or 27% lower as compared to the prior year.

Aleut Industrial Services, LLC (AIS) In 2009, the Company created Alaska Industrial Services, LLC (AIS) as a wholly-owned subsidiary. AIS is a holding company that serves as the parent company for Alaska Instrument Company, LLC (AIC), C&H Testing Service, LLC (C&H), and Analytica Group, LLC (AG). AIC is a manufacturer’s representative for instrumentation and process control products used in industrial operations (such as oil and gas operations), and is located in Anchorage, Alaska. C&H’s primary operation is well-testing services for the oil industry, and is located in California (Bakersfield and Signal Hill) and Dickinson, North Dakota Analytica Group LLC (AG) is a state certified water testing laboratory with offices in Alaska (Anchorage, Fairbanks, and Wasilla) and Colorado.

After March 31, 2015, the company has ceased using AIS as a holding company for other operating subsidiaries. The operations of AG have been transferred to become part of ARS. C&H and AIC have both become direct subsidiaries of Aleut Corporation. The AIS corporate shell will be retained for possible future use.

For FY 2015, AIS had contract revenues of $12,182,654 as compared to $12,235,664 and $13,764,850 in FYs 2014 and 2013, respectively. This is a decrease of $53,010 or 0.4% lower, as compared to the prior year. In FY 2015, AIS had a net loss of $(4,154,958) as compared to a net loss of $(2,200,128) and a net income of $(590,654) in FYs 2014 and 2013, respectively. This is a decrease of $1,954,830 as compared to the prior year. The primary reason for the decrease is the $1,884,993 impairment of intangible assets expensed in FY 2015.

Patrick Mechanical, LLC (PM) In October 2011, the Company acquired 100% of PM, which is a mechanical contracting company that specializes in engineering, design and construction of complex piping and HVAC systems primarily in and around Fairbanks, Alaska.

For FY 2015, PM had contract revenues of $25,123,269 as compared to $25,246,337 and $33,997,651 in FYs 2014 and 2013, respectively. This is a decrease of $123,068 compared to the prior year. For FY 2015, PM had a net income of $1,461,991 compared to $2,921,715 and $7,169,094 in FYs 2014 and 2013, respectively. This represents a decrease of $1,459,724 or 50% under the prior year. The primary reason for the decrease is the early adoption of ASU No. 2014-02 to amortize Goodwill and an earn-out increase of $209,267 over the increase from FY2014. In FY 2015 $757,407 of Goodwill was amortized which was not done in previous years.

ARS International, LLC (ARS) On June 1, 2014, the Company acquired 100% of ARS, which performs laboratory analysis, field testing, surveys for radioactive materials, decommissioning services for structures containing hazardous and non-hazardous materials, and land remediation and waste disposal project management services. ARS is headquartered in Port Allen, Louisiana.

For FY 2015, ARS had contract revenues of $13,994,224 as compared to $6,685,822 for the 10 months ending FY 2014. This is an increase of $7,308,402 or 109% higher as compared to the prior year. ARS had a net loss of $(997,722) for FY 2015 compared to $(1,610,207) for FY 2014. This represents an improvement of $612,485 from the prior year.

fuel sales, sToRage, and RelaTed aCTiviTies

In FY 2015, through a wholly-owned subsidiary, Aleut Enterprise, LLC (AE), had fuel sales, leasing and other revenues of $10,290,408 compared to $12,063,704 and $13,015,767 in FYs 2014 and 2013, respectively. This is a decrease of $1,773,296 or 15% lower compared to revenues of the prior year. The decrease is primarily coming from lower fuel revenue of $9,849,065 in FY 2015 compared to $10,919,755 in FY 2014. AE had a net loss of $(1,099,565) compared to income of $279,899 and a net loss of $(2,790,622) in FYs 2014 and 2013, respectively. This is a decrease of $1,379,464 compared to the prior year. This decrease is due to (i) the impairment of a long-lived asset in FY 15 of $534,502 of Adak Marine Services Fuel (a wholly-owned subsidiary of AE) (ii) the diminished business volume, (iii) a $198,797 in additional medical insurance costs due to cessation of self-funded plan.

10 | fINANCIAlS


shareholders and descendants, along with career development opportunities, internships, and other programs and services. In FY 2015, The Aleut Foundation awarded 207 scholarships that totaled $708,803. The Aleut Foundation also provided community development training programs for 41 individuals and funded 18 shareholders and descendants to attend culture camps, three individuals to attend AFN, and four high school students to attend the Future Leaders Summit.

disTRibuTions and eldeR benefiTs

In February 2015, the Company declared dividends of $4.00 per share as compared to $7.00 and $6.00 per share in FYs 2014 and 2013, respectively. This is a decrease of $3.00 per share or 43% lower than the prior year. In February 2015, the Company also declared elder benefits of $500 per elder, which was the same amount in FYs 2014 and 2013. As of March 31, 2015, there were 1,001 elders as compared to 959 and 905 in FYs 2014 and 2013, respectively. Thus, the total amount of distributions declared in FY 2015 was $1,800,100 as compared to $2,753,800 and $2,401,900 in FYs 2014 and 2013, respectively.

In FY 2015, the Company also received 7j distributions of $5,781,246or ($17.79 per shareholder) compared to $4,692,449 ($14.44 per shareholder) and $3,852,583 ($11.86 per shareholder) in FYs 2014 and 2013, respectively. This is an increase of $1,088,797 ($3.35 per shareholder) as compared to the prior year.

financial Condition asseTs and liabiliTies

As of March 31, 2015, consolidated assets of the Company were $189,643,713, which is a decrease of $12,689,897 or 6% lower as compared to $202,333,610 as of March 31, 2014. This decline is principally due to the valuation reduction on the deferred tax asset.

As of March 31, 2015, total liabilities of the Company were $41,229,808, which is $6,549,631 or 19% higher compared to total liabilities of $34,680,177 as of March 31, 2014. The increase is primarily related to changes in:

(i) Accounts payable of $15,426,779 as of March 31, 2015 as compared to $10,752,348 a year ago. The increase is primarily related to a larger 7(j) liability and large year-

end fuel purchase.(ii) Accrued expenses of $10,775,253 as of March 31, 2015 as compared to $8,119,459 a year ago. The increase is primarily due to AMS increased contract activity. (iii) Contingent earn-out escrow payable of $5,109,267 as of March 31, 2015 as compared to $4,630,000 as of March 31, 2014. This item is in connection with the acquisition of Patrick Mechanical, LLC and ARS International, LLC.

liquidiTy and CapiTal ResouRCes

Management believes The Aleut Corporation is capable of funding its future cash needs with the cash generated from its operations, and with the careful use of established lines of credit. As of March 31, 2015, the Company maintained two lines of credit: (i) a $10,000,000 secured line of credit with Wells Fargo; and (ii) a $5,000,000 line of credit with Northrim Bank for the purposes of funding fuel purchases by AE.

In FY 2015, net cash provided by operations was $6,103,748 which was $14,037,909 more than 2014 & $4,578,424 in 2013. After investing and financing activities, cash and cash equivalents increased on March 31, 2015 by $4,465,910 from the previous year. The primary driver for the cash movement was operations.

Cash and cash equivalents do not include the Company’s Permanent Fund and other marketable securities. As of March 31, 2015, cash and cash equivalents and marketable securities (not including those in the Company’s Permanent Fund) totaled $43,408,925, which is an increase of $5,259,267 or 14% higher as compared to $38,149,658 as of March 31, 2014. The Company plans to utilize these resources to pay future dividends, fund shareholder programs, and grow the company for future generations by pursuing opportunities that provide a stable and growing stream of income in perpetuity.

fINANCIAlS | 11

INDEPENDENT AuDITOR’S REPORT

To the Board of DirectorsThe Aleut CorporationAnchorage, Alaska

RepoRT on The finanCial sTaTemenTs We have audited the accompanying consolidated financial statements of The Aleut Corporation and its subsidiaries which comprise the consolidated balance sheets as of March 31, 2015 and 2014, and the related consolidated statements of operations, changes in equity and cash flows for the years ended March 31, 2015, 2014 and 2013, and the related notes to the consolidated financial statements.

managemenT’s ResponsibiliTy foR The finanCial sTaTemenTs Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

audiToR’s ResponsibiliTy Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement.

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

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

opinionIn our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of The Aleut Corporation and its subsidiaries as of March 31, 2015 and 2014, and the results of its operations and its cash flows for the years ended March 31, 2015, 2014 and 2013, in accordance with accounting principles generally accepted in the United States of America.

Frederick, MarylandJune 30, 2015

ThE AlEuT CORPORATION AND SubSIDIARIES | 1312 | ThE AlEuT CORPORATION AND SubSIDIARIES

CONSOlIDATED bAlANCE ShEETS March 31, 2015 and 2014

CONSOlIDATED bAlANCE ShEETS Continued March 31, 2015 and 2014

Assets 2015 2014 Current Assets Cash and cash equivalents $ 22,108,175 $ 17,642,265 Investments in trading securities 21,300,750 20,507,393 Accounts receivable, net of allowance for doubtful accounts 28,309,652 23,758,489 Costs and estimated earnings in excess of billings on uncompleted construction contracts 1,190,088 657,597 Inventories 6,944,052 6,302,176 Prepaid expenses and other current assets 1,806,819 906,171 Income tax receivable 65,588 65,588 Deferred tax asset 988,623 1,382,629 Total current assets 82,713,747 71,222,308 Property and Equipment, net 18,645,697 20,303,394 Other Assets Investments in trading securities – restricted escrow 3,963,716 3,836,412 Investments in trading securities - Permanent Fund 13,775,474 12,967,989 Other investments 8,068,507 10,930,072 Deferred leasing incentives 732,304 841,588 Goodwill, net 8,574,357 11,411,997 Intangible assets, net 2,732,478 5,546,422 Deposit 951,970 950,918 Other assets 813,669 838,571 Deferred tax asset 48,671,794 63,483,939 88,284,269 110,807,908

Total Assets $ 189,643,713 $ 202,333,610 See Notes to Consolidated Financial Statements.

See Notes to Consolidated Financial Statements.

Liabilities and Equity 2015 2014

Current Liabilities Lines of credit $ 3,003,206 $ 2,366,907 Current maturities of notes payable 61,202 300,199 Current maturities of notes payable – related party 1,273,489 670,617 Current maturities of capital lease obligations 312,735 267,702 Accounts payable 15,426,779 10,752,348 Billings in excess of costs and estimated earnings on uncompleted construction contracts 205,593 276,333 Deferred revenue 694,161 931,757 Accrued expenses 10,775,253 8,119,459 Dividends payable 2,540,101 3,615,187 Total current liabilities 34,292,519 27,300,509 Long-Term Liabilities Note payable, less current maturities 12,889 55,545 Notes payable – related party, less current maturities 1,355,456 1,963,328 Capital lease obligations, less current maturities 353,137 588,624 Security deposits 106,540 142,171 Contingent earn-out liability 5,109,267 4,630,000 6,937,289 7,379,668 Total liabilities 41,229,808 34,680,177

Commitments and Contingencies (Note 18) Equity Common stock: Class A; no par value; 1,000,000 shares authorized; 236,100 shares issued and outstanding – – Class B; no par value; 1,000,000 shares authorized; 88,800 shares issued and outstanding – – Contributed capital 8,947,000 8,947,000 Retained earnings 139,466,905 158,706,433 148,413,905 167,653,433 Total liabilities and equity $ 189,643,713 $ 202,333,610


CONSOlIDATED STATEMENTS Of OPERATIONSyears ended March 31, 2015, 2014 and 2013

CONSOlIDATED STATEMENTS Of ChANGES IN EquITy years ended March 31, 2015, 2014 and 2013

2015 2014 2013Revenue: Contract revenue $ 116,642,992 $ 95,960,892 $ 92,649,208 Fuel sales 9,766,007 10,803,834 12,466,526 Rental income 2,709,361 3,149,322 2,785,566 Natural resource income 6,026,235 5,172,295 4,296,076 Investment earnings 1,766,140 1,029,832 1,375,856 Earnings from equity investments 593,395 2,415,634 1,236,550 Other 437,968 1,775,484 1,450,845 137,942,098 120,307,293 116,260,627 Expenses: Direct costs: Contract 80,102,869 63,930,797 54,896,311 Fuel 7,346,339 8,130,841 9,798,550 Other 4,492,449 4,652,670 4,937,569 Indirect costs 45,431,140 41,885,338 39,974,125 Impairment of long-lived assets 2,419,435 – 1,785,000 Interest and other 338,381 323,717 94,940 140,130,613 118,923,363 111,486,495 Income (loss) before income taxes (2,188,515) 1,383,930 4,774,132 Provision for Income Taxes (Benefit) 15,250,913 (302,691) (648,639) Net income (loss) $ (17,439,428) $ 1,686,621 $ 5,422,771 Basic and Diluted Income (Loss) Per Share – Based on 324,900 Weighted Average Shares Outstanding in 2015, 2014 and 2013 $ (53.68) $ 5.19 $ 16.69 See Notes to Consolidated Financial Statements.

Contributed Capital Retained Earnings Total Equity

Balance, March 31, 2012 $ 8,947,000 $ 156,752,741 $ 165,699,741

Net income – 5,422,771 5,422,771 Divendends declared – (2,401,900) (2,401,900)

Balance, March 31, 2013 8,947,000 159,773,612 168,720,612

Net Income – 1,686,621 1,686,621 Divendends declared – (2,753,800) (2,753,800)

Balance, March 31, 2014 8,947,000 $ 158,706,433 $ 167,653,433

Net loss – (17,439,428) (17,439,428) Divendends declared – (17,439,428) (1,800,100)

Balance, March 31, 2015 $ 8,947,000 $ 139,466,905 $ 148,413,905



CONSOlIDATED STATEMENTS Of CASh flOwSyears ended March 31, 2015, 2014 and 2013

CONSOlIDATED STATEMENTS Of CASh flOwS Continued

years ended March 31, 2015, 2014 and 2013

2015 2014 2013Cash Flows from Operating Activities Net income (loss) $ (17,439,428) $ 1,686,621 $ 5,422,771 Adjustment to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization 6,769,655 4,534,208 4,221,352 (Gain) loss on disposition of property and equipment 387 (29,453) (816,537) Income from equity investments (593,395) (2,415,634) (1,236,550) Deferred incom e taxes (benefit) 15,206,151 (320,738) (672,620) Allowance for doubtful accounts (100,980) 18,526 349,630 Realized gains on investments (430,034) (786,415) (275,855) Unrealized (gains) losses on investments (432,109) 525,925 (378,331) Impairment losses on long-lived asxsets 2,419,435 – 1,785,000 Deferred leasing incentives 109,284 (392,874) 56,581 Financed interest on notes payable – related party 102,900 57,781 – Increase in contingent earn-out liability 479,267 470,000 1,620,000 Changes in assets and liabilities: (Increase) decrease in: Investments in trading securities (469,991) (4,085,566) (5,360,267) Accounts receivable (4,450,183) (4,308,730) 7,196,615 Costs and estimated earnings in excess of billings on uncompleted construction contracts (532,491) (216,299) 438,210 Inventories (641,876) (996,279) 291,002 Prepaid expenses and other current assets (900,648) (30,078) (36,559) Income tax receivable – – 13,814 Deposit (1,052) (950,918) – Other assets 149,902 – (1,540) Increase (decrease) in: Accounts payable 4,674,431 (904,466) (3,985,666) Billings in excess of costs and estimated earnings on uncompleted construction contracts (70,740) (122,996) (1,061,491) Deferred revenue (237,596) 135,167 390,792 Accrued expenses 2,528,490 193,274 (6,390,889) Security deposits (35,631) 4,783 (44,138) Net cash provided by (used in) operating activities 6,103,748 (7,934,161) 1,525,324 Cash Flows from Investing Activities Proceeds from sale of property and equipment 4,425 778,439 4,836,176 Purchase of property and equipment (1,928,757) (1,788,761) (2,516,789) Distributions from other investments 3,454,960 11,909,107 3,162,987 Proceeds from sale of trading securities – Permanent Fund 2,487,770 4,275,599 2,579,432 Purchase of trading securities – Permanent Fund (2,756,478) (4,544,132) (2,883,913) Purchase of other investments – (2,312,372) (487,500) Net increase in trading securities – restricted escrow – 2,843 (2,843) Acquisition of wholly-owned subsidiary, net of cash acquired – (2,583,728) (199,712) Net cash provided by investing activities 1,261,920 5,736,995 4,487,838

(Continued)

2015 2014 2013Cash Flows From Financing Activities Net borrowings (repayments) on lines of credit 636,299 1,715,483 (1,089,643) Proceeds from long-term borrowings 98,440 106,593 – Principal payments on notes payable (380,093) (351,989) (128,167) Principal payments on notes payable related parties (107,900) (109,736) – Principal payments on capital lease obligations (271,318) (158,128) – Shareholder dividends paid (2,875,186) (2,098,848) (2,092,097) Net cash used in financing activities (2,899,758) (896,625) (3,309,907) Net (decrease) increase in cash 4,465,910 (3,093,791) 2,703,255 Cash and Cash Equivalents: Beginning 17,642,265 20,736,056 18,032,801 Ending $ 22,108,175 $ 17,642,265 $ 20,736,056 Supplemental Disclosures of Cash Flow Information Cash paid for: Interest $ (441,281) $ 265,936 $ 94,940 Income taxes $ 44,762 $ 18,047 $ 45,167 Cash received from: Income taxes $ – $ – $ 35,000 Supplemental Schedule of Noncash Investing and Financing Activities Acquisition of wholly-owned subsidiary: Working capital acquired, net of cash and cash equivalents of $416,272, $90,388 respectively $ – $ (71,526) $ (309,323) Long-term debt assumed – (3,057,406) (357,801) Fair value of other assets acquired: Property and equipment – 867,068 435,533 Other investments – 35,000 – Identifiable intangible assets – 3,267,597 230,000 Goodwill – 1,952,995 201,303 Contingent consideration payable – (410,000) – Cash paid for acquisition of wholly-owned subsidiary, net of cash acquired $ – $ 2,583,728 $ 199,712

Capital lease obligations incurred for purchase of property and equipment $ 80,864 $ 1,014,454 $ – Notes payable – related party incurred to finance interest expense $ 102,900 $ 57,781 $ – Book value of property and equipment transferred to inventory $ – $ 125,833 $ – Book value of property and equipment transferred to assets held for sale $ 659,502 $ 125,833 $ –

Accrued earnings on trading securities – restricted escrow $ 127,304 $ 136,412 $ –


NOTES TO CONSOlIDATED fINANCIAl STATEMENTS | 1918 | NOTES TO CONSOlIDATED fINANCIAl STATEMENTS

NOTES TO CONSOlIDATED fINANCIAl STATEMENTSthe aleut corporation and Subsidiaries

NOTES TO CONSOlIDATED fINANCIAl STATEMENTS Continued

the aleut corporation and Subsidiaries

noTe 1. naTuRe of business and signifiCanT aCCounTing poliCies

nature of business: The Aleut Corporation (the Company) is a regional native corporation formed pursuant to the Alaska Native Claims Settlement Act of 1971 (ANCSA or the Act). The Company operates as a managed holding company with corporate headquarters in Anchorage, Alaska. The Company manages natural resources income received from surface and subsurface rights obtained pursuant to ANCSA, participates in various partnerships, joint ventures and other business investments, including marketable and nonmarketable securities, and operates subsidiaries engaging in a variety of businesses as follows:

aleut Real estate llC (aRe): ARE primarily engages in the business of ownership and management of commercial real estate and the management of assets received under the ANCSA as well as other lands acquired. Real estate properties include commercial holdings in Anchorage, Valdez, and Adak, Alaska, and Colorado Springs, Colorado.

aleut enterprise, llC (ae): AE was formed primarily to assist in the privatization of the former U.S. Navy base on Adak Island, Alaska, and to develop commercial ventures on Adak in anticipation of the transfer of Adak Island land and facilities to the Company. AE conducts a significant portion of its business activity through fuel sales and storage services, port related services, and the rental of a fish processing plant.

aleut management services, llC (ams): AMS operates in the federal contracting arena providing services supporting a variety of Federal Agencies such as Department of Defense, Department of Homeland Security and General Services Administration, as well as civilian customers. Such services include communications, IT, system engineering, base supply, launch support, base operations services, maintenance and repair services, technology and technology support services, facilities management and support services, and other operations and support services.

midtown estates Water utility, llC (meWu): MEWU operates the water utility for a subdivision Midtown Estates in Palmer, Alaska. The subsidiary is considered to be a Class C public utility by the State of Alaska and, as a result, is subject to regulatory reporting, rate approval, and compliance statutes monitored by the Regulatory Commission of Alaska (RCA) (AS 42.05, Public Utilities).

aleut industrial services, llC (ais): AIS was a managed holding company who owned operating subsidiaries through March 31, 2015. On March 31, 2015, AIS was dissolved and ownership of its subsidiaries was transferred directly to the Company who continues to operate as follows:

C&h Testing services llC (C&h): C&H primarily engages in providing oil and well testing services based in Bakersfield, California, and Dickinson, North Dakota.

alaska instrument Company, llC (aiC): AIC is primarily engaged in the retail sales of instrumentation and process control products.

analytica group, llC (ag): Through February 2015, AG was engaged in providing drinking and waste water analytical services. On February 16, 2015, the Company dissolved AG and transferred its assets to another subsidiary, ARS International, LLC.

patrick mechanical, llC (pm): PM is a mechanical contracting company that specializes in engineering, design and construction of complex piping and HVAC systems.

aRs international, llC (aRs): On June 1, 2013, the Company acquired ARS (as further discussed in Note 22) who performs laboratory analysis, field testing and surveys for radioactive materials, and provides decommissioning services for structures containing both hazardous and non-hazardous materials as well as land remediation and waste disposal project management services.

The Company elected to early adopt Financial Accounting Standards Board (FASB) Accounting Standards Update (ASU) No. 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, and has not reported the disposal of AIS and AG as discontinued operations since they do not represent a strategic shift that has a major effect on the Company’s operations and financial results. AG’s gross revenue and net loss for the years ended March 31, 2015 and 2014, was $2,718,305 and $(536,134), $3,061,249 and $(748,678), respectively. AG’s gross revenue and net loss for the period June 15, 2012 (date of acquisition) to March 31, 2013, was $2,453,848 and $(116,134), respectively. As a managed holding company, AIS’s revenue and net loss were eliminated during consolidation.

A summary of the Company’s significant accounting policies follows:

principles of consolidation: The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries – Aleut Real Estate, LLC; Aleut Enterprise, LLC and its wholly-owned subsidiaries; Aleut Management Services, LLC and its wholly-owned subsidiaries; Midtown Estates Water Utility, LLC; Aleut Industrial Services, LLC and its wholly-owned subsidiaries; Patrick Mechanical, LLC, and ARS International, LLC and its wholly-owned subsidiaries. All material intercompany balances and transactions have been eliminated in consolidation.

Revenue and cost recognition: The Company and its subsidiaries are engaged in three types of contracts with the federal government and its prime contractors. Revenue from cost-type contracts is recognized on the basis of reimbursable costs incurred during the period, plus the fee earned. Revenue from time-and-material contracts is recognized on the basis of hours worked, multiplied by billable rates provided, plus other reimbursable contract costs incurred during the period. For revenue from firm-fixed- price contracts, the Company evaluates its contracts for multiple deliverables, which may require segmentation of each deliverable into separate accounting units for proper revenue recognition. On certain firm-fixed-price federal contracts, along with all construction contracts, revenue is recognized under the percentage-of-completion method. Under this method, individual contract revenue earned is based upon the percentage relationship that contract costs incurred bear to management’s estimate of total contract costs. Because of inherent uncertainties in estimating costs, it is at least reasonably possible that the estimates used will change within the near term. On other fixed-price federal contracts, revenue is recognized ratably over the contract term based on proportional performance or straight-line, as appropriate.

Contract costs include direct materials, subcontract costs, direct labor, combined with allocations of operational overhead and other direct costs. The provision for estimated losses on uncompleted contracts is made in the period in which such losses are determined. Changes in job performance, job conditions and estimated profitability may result in revisions to costs and revenue and are recognized in the period in which the revisions are determined.

The asset, costs and estimated earnings in excess of billings on uncompleted construction contracts, represents revenues

recognized in excess of amounts billed. The liability, billings in excess of costs and estimated earnings on uncompleted construction contracts, represents billings in excess of revenues recognized.

Revenue from fuel sales, industrial products, lab testing and other services is recognized at the time the service or fuel is delivered or provided to the customer.

Leasing revenue is recognized on a straight-line basis over the lease term. Recognition of rental income commences when control of the facility has been given to the tenant. Cost reimbursement income from pass-through expenses is recognized on an accrual basis over the periods in which the expenses were incurred. Pass-through expenses are comprised of real estate taxes, operating expenses and common area maintenance costs which are reimbursed by tenants in accordance with specific allowable costs per tenant lease agreements. Revenue is recognized on the sale of real estate at closing only when sufficient down payments have been obtained, possession and other attributes of ownership have been transferred to the buyer and the Company has no significant continuing involvement.

Natural resource revenues distributable to the Company under the terms of the ANCSA are recorded when the amount thereof is determinable and its receipt is reasonably assured.

Water utility revenues are recognized as water services are provided to the customer. Billings are prepared monthly using a flat rate by residence type as determined by the Regulatory Commission of Alaska.

Cash and cash equivalents: For the purposes of reporting consolidated cash flows, the Company considers all highly-liquid investments purchased with a maturity of three months or less to be cash equivalents, except such instruments held in brokerage accounts which are considered investments.

accounts receivable: Accounts receivable are carried at original invoice amount, less an estimate made for doubtful accounts, and primarily consist of contract receivables generated from prime and subcontracting arrangements with U.S. governmental agencies along with commercial construction contracts. Billed amounts represent invoices that have been prepared and sent to the customer. Unbilled costs are comprised principally of amounts of revenue recognized on contracts for which billings had not been presented to the customer at the consolidated balance sheet date.






Billed accounts receivables are considered past due if the invoice has been outstanding for more than 30 days. The Company does not charge interest on accounts receivable; however, U.S. governmental agencies pay interest on invoices outstanding for more than 30 days. The Company records interest income from U.S. governmental agencies when received.

In accordance with industry practices, accounts receivable relating to long-term contracts are classified as current, even though a portion of these accounts, including rate variances and retainages, are not expected to be realized within one year. Retention balances are typically collected within a year of completion of the contract.

Management determines the allowance for doubtful accounts by regularly evaluating individual customer receivables and considering a customer’s financial condition, credit history and current economic conditions. Management has established an allowance of $292,409 and $393,389 at March 31, 2015 and 2014, respectively. Accounts receivable are written off when deemed uncollectible. Recoveries of accounts receivable previously written off are recorded when received.

inventory: Inventory primarily consists of fuel, parts held for resale and excess construction materials from previously completed jobs to be used on future jobs. Inventory is stated at the lower of cost or market, cost being determined on the first-in, first-out basis.

investments in trading securities: The Company’s investments in trading securities primarily consist of equity securities, governmental and corporate bonds and are presented in the consolidated financial statements at fair value based on quoted prices in securities markets and are classified as trading securities. Realized and unrealized gains and losses are included in income.

property, equipment and depreciation: Property and equipment are recorded at cost. Depreciation is computed by use of the straight-line method over the estimated useful lives of the assets for financial reporting purposes. Leasehold improvements are amortized over the shorter of the useful life of the asset or the term of the corresponding lease. Major renewals and improvements are capitalized while maintenance and repairs are charged against income as incurred.other investments: Other investments consist of the Company’s equity ownership in business entities. The Company uses the equity method of accounting for those

investments with ownership interests where the Company exercises significant control or influence in the operations of the investee. Under the equity method, the Company records its proportionate share of earnings or loss. The Company uses the cost method of accounting for all other investments.

deferred leasing incentives: The Company capitalizes leasing incentives associated with the successful negotiation of leases. These incentives are amortized on a straight-line basis over the terms of the respective leases and the applicable amortization is recorded as a reduction of revenue. If a lease terminates prior to the expiration of its initial lease term, the carrying amounts of remaining incentives are written-off as a reduction of revenue.

goodwill and other intangibles: The Company records as goodwill the excess of purchase price over the fair value of identifiable net assets acquired. Under FASB Accounting Standards Codification (ASC) Topic 350 – Intangibles – Goodwill and Other, requires an entity to test goodwill for impairment on at least an annual basis by comparing the fair value of a reporting unit with its carrying amount, including goodwill (step one). If the fair value of a reporting unit is less than its carrying amount, the second step of the test must be performed to measure the amount of the impairment loss, if any. On September 15, 2011, the FASB issued ASU No. 2011-08 – Intangibles – Goodwill and Other (Topic 350): Testing Goodwill for Impairment. ASU No. 2011-08 allows an entity the option in its annual goodwill impairment test to first assess qualitative factors to determine whether it is more likely than not (a likelihood of more than 50%) that the fair value of a reporting unit is less than its carrying amount. If it is more likely than not that the fair value of a reporting unit is less than its carrying amount, an entity must still perform the existing two- step impairment test. Otherwise, an entity would not be required to perform the existing two-step impairment test. The Company has elected to perform its annual analysis during the fourth quarter of each fiscal year.

On January 16, 2014, the FASB further issued ASU No. 2014-02, Intangibles – Goodwill and Other (Topic 350): Accounting for Goodwill, a Consensus of the Private Company Council. ASU No. 2014-02 allows an accounting alternative whereby goodwill should be amortized on a straight-line basis over a period of ten years or less than ten years if the entity demonstrates that another useful life is more appropriate. Additionally, an entity that elects the accounting alternative is further required to make an accounting policy election to test goodwill for impairment at either the entity level or the

reporting unit level. The Company elected to early adopt ASU No. 2014-02 effective April 1, 2014, and began amortizing goodwill on a straight-line basis over ten years. Additionally, the Company has elected to test goodwill for impairment at the reporting unit level.

In March 2015, the Company recognized goodwill impairment losses for its C&H and AG reporting units in the amounts of $1,683,630 and $201,303, respectively. In March 2013, a goodwill impairment loss of $1,785,000 was recognized on the Company’s AE reporting unit. The Company determined the fair value of the reporting units utilizing a multiple of earnings before interest, taxes, depreciation, and amortization and incorporated assumptions that it believes marketplace participants would utilize. No impairment was identified for the year ended March 31, 2014.

Intangible assets include customer relationships, contractual rights, trade name, and non-compete agreements. Contractual rights are being amortized based upon the future discounted cash flows of management’s estimates of when the associated backlog of all contract rights purchased will be converted into delivered services varying from one to two years. The customer relationships, trade name and non-compete agreements are being amortized on a straight-line basis over their estimated useful lives ranging from three to ten years.

valuation of long-lived assets: The Company accounts for the valuation of long-lived assets under Accounting Standards Codification (ASC) 360-10-15, Impairment or Disposal of Long-Lived Assets. This guidance requires that long-lived assets and certain identifiable intangible assets be reviewed for impairment whenever events or circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of the long-lived assets is measured by a comparison of the carrying amount of the asset to future undiscounted net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the estimated fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value, less costs to sell.

In March 2015, AE identified a piece of equipment with a net book value of $659,502 which was no longer being used in operations and was actively marketed for sale. Based on an independent third party appraiser, it was determined the equipment’s fair value was $125,000 resulting in an impairment loss of $534,502 being recognized for the year

ended March 31, 2015. The equipment was transferred out of property equipment and is included in other non-current assets.

deposit: The deposit represents requirements imposed by catastrophic and stop-loss insurance policies associated with the Company’s partially self-insured program.

deferred revenue: Deferred revenue primarily represents rental income and analytical services income received in advance of contractual terms.

income taxes: Deferred income taxes are provided on a liability method, whereby, deferred tax assets are recognized for deductible temporary differences and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

The Company has adopted the accounting standard on accounting for uncertainty in income taxes, which addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under this guidance, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by taxing authorities, based on the technical merits of the position. The tax benefits recognized in the consolidated financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. The guidance on accounting for uncertainty in income taxes also addresses de-recognition, classification, interest and penalties on income taxes and accounting in interim periods.

Management evaluated the Company’s tax positions and concluded that the Company had taken no uncertain tax positions that require adjustment to the consolidated financial statements to comply with the provisions of this guidance. As such, the Company did not recognize any interest or penalties for unrecognized tax benefits for the years ended March 31, 2015, 2014 and 2013.

The Company files income tax returns in the federal and






several state jurisdictions. With few exceptions, the Company is no longer subject to income tax examinations by the U.S. federal, state or local tax authorities for years before 2012. However, the Company’s net operating loss carryovers remain open to adjustment until the year(s) in which they are ultimately utilized are closed by examination or under the statute of limitations.

Monies and properties received from the Alaska Native Fund under provisions of the Act are not subject to any form of federal, state or local taxation at the time of receipt. However, income derived from real property interests, investments and operations are subject to applicable federal and state income taxes.

per share data: Basic earnings per share is generally computed by dividing net income or loss by the weighted average number of common shares outstanding for the period, whereas diluted earnings per share essentially reflects the potential dilution in basic earnings per share that could occur if other contracts to issue common stock were exercised. The Company does not have any stock options issued, and as a result, basic and diluted earnings per share are the same.

fair value of financial instruments: The carrying amounts including cash and cash equivalents, accounts receivable, costs and estimated earnings in excess of billings on uncompleted construction contracts, due from related parties, income tax receivable, accounts payable, accrued expenses, and billings in excess of costs and estimated earnings on uncompleted construction contracts approximate fair value because of the short maturity of these instruments. Investments in trading securities are carried at fair value. The carrying amount of the line of credit approximates fair value because the interest rate on this credit facility fluctuates with market rates. The carrying amount of the notes payable, notes payable – related party and capital lease obligations approximate fair value due to short maturity of these obligations. Contingent earn-out escrow payable is carried at fair value.

self-insurance: The Company is partially self-insured for workers compensation claims up to $250,000 per incident. The Company has catastrophic coverage through a commercial insurance carrier for claims above $250,000. Exposure to risk of these claims will be accrued, by a charge to operations, in the period in which a loss relating to that period, or prior period, becomes payable or the amount can be readily estimated.

Prior to 2015, the Company was also partially self-insured for group medical expenses. The risk of liability had been reduced through the purchase of stop-loss insurance with a $100,000 specific stop-loss limit. Expenses for group medical claims were charged to operations when incurred. Effective April 1, 2014, the Company was no longer self-insured and switched to a federal employee health benefits medical insurance program.

use of estimates: The preparation of consolidated financial statements 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 revenue and expenses during the reporting period. Actual results could differ from those estimates.

financial credit risk: The Company maintains its cash in bank deposit accounts which, at times, may exceed federally insured limits. The Company has not experienced any losses in such accounts. The Company believes it is not exposed to any significant credit risk on cash and cash equivalents. The Company grants credit to its customers in the normal course of business on an unsecured basis.

Recently issued accounting pronouncements: On May 28, 2014, FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). The core principle of this update is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2014-09 is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period and is to be applied retrospectively, with early application not permitted. The Company’s management is evaluating the effect on its consolidated financial statements.

On December 23, 2014, FASB issued ASU No. 2014-18: Business Combinations (Topic 805) – Accounting for Identifiable Intangible Assets in a Business Combination, a Consensus of the Private Company Council. An entity within the scope of this update (all entities except for public business entities and nonprofits) that elects the accounting alternative to recognize or otherwise consider the fair value of intangible assets as a result of any in-scope transactions should no longer recognize separately from goodwill (1) customer-related intangible assets unless they are capable of being sold or

licensed independently from the other assets of the business and (2) noncompetition agreements. An entity that elects the accounting alternative in this update must adopt the private company alternative to amortize goodwill as described in ASU No. 2014-02, Intangibles—Goodwill and Other (Topic 350): Accounting for Goodwill. However, an entity that elects the accounting alternative in Update 2014-02 is not required to adopt the amendments in this update. The decision to adopt the accounting alternative in this Update must be made upon the occurrence of the first transaction within the scope of this accounting alternative in fiscal years beginning after December 15, 2015, with early application permitted.

Reclassifications: Certain amounts in the 2013 and 2014 consolidated financial statements have been reclassified to conform to the 2015 presentation. These reclassifications had no effect on previously reported net income.

subsequent events: The Company has evaluated subsequent events through June 30, 2015, which represents the date the consolidated financial statements were available to be issued.

noTe 2. alaska naTive Claims seTTlemenT aCT

Contributed capital: The Company was incorporated pursuant to ANCSA, which resolved the Alaska Native land claims. Under the terms of the Act (and amendments), the Company was entitled to $19,503,735, which it received in prior years and recorded as contributed capital.

land: Under the terms of the Act (and amendments), the Company also received the surface estate of approximately 66,000 acres of land and approximately 1,572,000 acres of subsurface estate. The Company records all land transferred under the terms of the Act at zero value, unless amounts were paid which directly related to a parcel acquired, as the aggregate fair market value, including the value of resources. The Company expenses costs related to land selections in the year incurred.

Until developed, leased, or sold to third parties, lands conveyed to the Company pursuant to the Act are exempt from adverse possession and similar claims and real property taxes. Except to the extent such lands are expressly pledged as security for a loan or committed to a commercial transaction or to the extent necessary to enforce a judgment pursuant to Section 7(i) or 14(c) of the Act, such lands are also exempt from judgments resulting from claims based on Title II or other laws affecting

creditors’ rights or judgments in any action to recover sums owed by the Company.

Common stock: The Act provided for the issuance of 100 shares of common stock to each eligible Alaska Native as follows:

Class a shares: Class A shares issued to Alaska Natives enrolled pursuant to the Act in the Aleut region who are shareholders in one of the village corporations in the Aleut region. As of March 31, 2015 and 2014, there were 236,100 Class A shares issued and outstanding.

Class b shares: Class B shares issued to Alaska Natives enrolled pursuant to the Act in the Aleut region but who are not shareholders in one of the village corporations in the Aleut region. As of March 31, 2015 and 2014, there were 88,800 Class B shares issued and outstanding.

Individuals certified by the Department of Interior have been recorded as shareholders. All holders of the stock have the same economic rights. Enrollment is now closed.

The Company’s stock, rights thereto, and rights to dividends or distributions declared with respect thereto may not be sold, subjected to a lien or judgment execution, assigned, treated as an asset under Title XI or any successor statute, any insolvency or moratorium law or other laws affecting creditors’ rights, or otherwise alienated, except that the stock may be transferred (i) to a Native or a descendant of a Native in certain circumstances by court decree or inter vivos gift or (ii) by will or the laws of intestate succession.

Until terminated by Amendment to the Articles of Incorporation, the stock will carry voting rights only if the holder thereof is an eligible Native or a descendant of a Native.

natural resource revenues: Section 7(i) of the Act, as amended by the ANCSA Land Bank Protection Act of 1998, requires 70% of the net revenues received from timber resources and subsurface estate patented to the 12 regional corporations, excluding sand and gravel revenues, be divided annually among these 12 regional corporations based on shareholder enrollment subject to certain annual exclusion amounts.

Section 7(j) of the Act requires that 50% of the 70% allocation established by Section 7(i) of the Act be distributed to village corporations and at large shareholders within each region. The amount distributed to village corporations is based on

Additionally, in accordance with the stock purchase agreement for the acquisition of Patrick Mechanical, LLC, the Company deposited $3,700,000 into a separate escrow account to be held for the potential future earn-out payment to the sellers, to be made upon the five-year anniversary of the acquisition by the Company on October 1, 2016. Previously, the escrow account was held in a money market account at a local bank. During 2014, the Company entered in a new escrow account with the former owners giving them the right to invest the escrow funds and be entitled to any earnings an appreciation in value above the original deposit of $3,700,000. On August 9, 2013, the escrow account at the local bank was closed and $3,703,930 was placed into a brokerage account and invested in trading securities. The additional earnings and appreciation of $263,716 and $136,412 due to the former owners has been included in other accrued expenses in the consolidated balance sheets as of March 31, 2015 and 2014, respectively. A summary of the cost basis and fair value of the Company’s investment in trading securities maintained for the escrow account as of March 31, 2015 and 2014, is as follows:

Investment earnings recognized on all trading securities in the consolidated statements of operations for the years ended March 31, 2015, 2014 and 2013, consists of the following:

noTe 5. aCCounTs ReCeivable

Accounts receivable as of March 31, 2015 and 2014, consists of the following:

noTe 6. unCompleTed ConsTRuCTion

ConTRaCTs

Information regarding uncompleted construction contracts as of March 31, 2015 and 2014, is as follows:

The foregoing balances are included in the accompanying consolidated balance sheets under the following captions:






the Company’s Village Series Stock owned by the village shareholders compared to the total stock of the Company. At large shareholders receive payment based on the number of shares owned by each shareholder.

For the years ended March 31, 2015, 2014 and 2013, the Company did not sell any of its interest in subsurface rights.

noTe 3. adak pRopeRTy TRansfeR

On March 17, 2004, the Company received conveyance to approximately 46,000 acres on Adak Island, Alaska, including developed properties and equipment located in the city of Adak in exchange for certain land selection rights received under the Act. The Company simultaneously sold certain properties encompassing the Adak airport footprint and equipment to the state of Alaska and certain properties encompassing municipal activities and equipment to the city of Adak. The Company recorded this transaction at zero value for financial statement purposes, as management does not believe it can estimate fair value for such unique and remote assets. For federal income tax purposes, the Company is entitled to value assets received on Adak at estimated replacement cost. The replacement cost appraisals were completed by the Company in fiscal years 2010, 2005 and 2004. For federal income tax purposes, the sale of the land resulted in a significant tax loss.

noTe 4. invesTmenTs in TRading seCuRiTies

The Company maintains a portfolio of debt and equity securities to be utilized for operations and is reflected in current assets. A summary of the cost basis and fair value of the Company’s investment in trading securities maintained for operations as of March 31, 2015 and 2014, is as follows:

The Company also maintains a portfolio of debt and equity marketable securities held for the Permanent Fund which was established on April 1, 1992. The purpose of the Permanent Fund is to accumulate investments in marketable securities to help fund (i) dividends to be paid to shareholders; and(ii) charitable contributions to The Aleut Foundation (TAF). Distributions from the Permanent Fund shall not be made to allow the fund to go below $10,000,000. As such, the portfolio of investments maintained for the Permanent Fund is reflected in other assets of the consolidated balance sheets. A summary of the cost basis and fair value of the Company’s investment in trading securities maintained for the Permanent Fund as of March 31, 2015 and 2014, is as follows:

During the years ended March 31, 2015, 2014 and 2013, no funds were withdrawn from the Permanent Fund for the purposes of funding the dividends payable to shareholders or charitable contributions to TAF.

Cost Basis Fair ValueCash and cash equivalents $ 878,745 $ 878,745 Domestic equities 2,614,425 3,559,106 International equities 630,137 693,881 Corporate bonds 10,948,392 11,081,533 Government bonds 3,986,639 4,105,079 Fixed income bond funds 1,008,727 982,406 $ 20,067,065 $ 21,300,750

March 31, 2015

Cost Basis Fair ValueCash and cash equivalents $ 1,641,087 $ 1,641,087 Domestic equities 2,439,905 3,203,997 International equities 581,677 688,542 Corporate bonds 10,055,415 10,127,081 Government bonds 3,903,781 3,911,786 Fixed income bond funds 985,038 934,900 $ 19,606,903 $ 20,507,393

March 31, 2014

Cost Basis Fair ValueCash and cash equivalents $ 610,281 $ 610,281 Domestic equities 4,237,226 5,391,979 International equities 1,077,248 1,151,818 Corporate bonds 2,812,290 2,948,456 Government bonds 2,807,030 2,917,984 Fixed income bond funds 758,322 754,956 $ 12,302,397 $ 13,775,474

March 31, 2015

Cost Basis Fair ValueCash and cash equivalents $ 10,065 $ 10,065 Domestic equities 1,133,104 1,265,916 International equities 569,000 587,329 Municipal bonds 835,913 796,021 Fixed income bond funds 559,640 563,126 Other 716,000 741,259 $ 3,823,722 $ 3,963,716

March 31, 2015

Cost Basis Fair ValueCash and cash equivalents $ 691,793 $ 691,793 Domestic equities 2,390,208 3,258,665 International equities 563,281 672,121 Corporate bonds 3,609,409 3,771,875 Government bonds 3,592,316 3,635,633 Fixed income bond funds 976,693 937,902 $ 11,823,700 $ 12,967,989

March 31, 2014

Cost Basis Fair ValueCash and cash equivalents $ 12,815 $ 12,815 Domestic equities 1,825,258 1,877,045 International equities 553,500 572,500 Municipal bonds 831,322 835,730 Fixed income bond funds 530,000 538,322 $ 3,752,895 $ 3,836,412

March 31, 2014

2015 2014 2013Interest $ 629,591 $ 526,564 $ 506,547 Dividends 274,406 242,778 215,123 New realized gains 430,034 786,415 275,855 Net unrealized gains 432,109 (525,925) 378,331 $ 1,766,140 $ 1,029,832 $ 1,375,856

2015 2014Contract receivables: Billed $ 16,509,737 $ 13,829,139 Unbilled 4,145,126 2,148,113 Retainages 284,259 135,867 Trade receivables 1,448,860 1,567,183 Other receivables 6,214,079 6,471,576 28,602,061 24,151,878 Less allowance for doubtful accounts (292,409) (393,389) $ 28,309,652 $ 23,758,489

2015 2014Costs incurred on uncompleted construction contracts $ 15,038,627 $ 23,009,503 Estimated earnings 3,927,984 11,340,617 Total costs and estimated earnings on uncompleted contracts 18,966,611 34,350,120 Less billings to date 17,982,116 33,968,856 Net difference $ 984,495 $ 381,264

2015 2014Costs and estimated earnings in excess of billings on uncompleted construction contracts $ 1,190,088 $ 657,597 Billings in excess of costs and estimated earnings on uncompleted construction contracts (205,593) (276,333) Net difference $ 984,495 $ 381,264






noTe 7. invenToRies

Inventories at March 31, 2015 and 2014, were comprised of the following:

noTe 8. pRopeRTy and equipmenT

Property and equipment as of March 31, 2015 and 2014, consists of the following:

Depreciation expense charged to operations for the years ended March 31, 2015, 2014 and 2013, was $3,003,004, $2,725,662 and $2,142,366, respectively.

During the year ended March 31, 2013, ARE sold its West Center property located at 510 West Tudor Road, Anchorage, Alaska, for $2,950,000 and its property located at 5520 Tech Center Drive, Colorado Springs, Colorado, for $2,453,000. At the time of sale, these properties had gross cost basis of $6,057,390 and accumulated depreciation of $2,316,803 resulting in an overall net gain on disposal of $894,851, which is included in other revenue in the consolidated statement of operations.

noTe 9. oTheR invesTmenTs

The Company has other investments, which primarily consist of ownership interests in various limited liability companies and a joint venture. The following is a summary of such investments as of March 31, 2015 and 2014:

equity method investments:

Combat support associates Joint venture (CsaJv): In August 1998, a subsidiary of AMS (20% ownership) entered into a joint venture with Research Analysis and Maintenance, Inc. (20% ownership) and AECOM Government Services, Inc. (60% ownership – previously known as Holmes & Narver Services, Inc.). Starting in 2011, the subsidiary elected not to contribute additional capital to CSAJV. As a result, the subsidiary’s ownership decreased from 20% to 14.8%, however they still share 20% of any losses. CSAJV’s contract with the United States Army has ended and has been in close-out status since March 2011.

During the years ended March 31, 2015, 2014 and 2013, CSAJV made net distributions to the Company of $1,480,000, $10,952,000 and $2,960,000, respectively. During the years ended March 31, 2015, 2014 and 2013, the Company recorded its proportional share of CSAJV’s net income (loss) of $19,731, $(324,158), and $(372,066), respectively. This proportional share is based on the results of CSAJV’s operations for the 12 months ended March 31, 2015, 2014 and 2013, respectively. Previously, the subsidiary recorded a reserve of $3,000,000 against their investment in CSAJV in response to concerns over the collectability of some of the accounts receivable of CSAJV. During the years ended March 31, 2015, 2014

and 2013, the subsidiary reduced the reserve by $68,152, $1,581,003 and $1,000,000, respectively, as funding was obtained on the previously reserved accounts receivables.

black brandt, llC (black brandt): During the year ended March 31, 2010, the Company acquired a 50% interest in Black Brandt which was formed to acquire interest in real estate ventures as agreed to by the partners. During the years ended March 31, 2015, 2014 and 2013, the Company recorded its proportional share of Black Brandt’s net income of $348,704, $313,442 and $405,630, respectively. During the year ended March 31, 2014, the Company made its proportionate contributions of $2,312,372 into Black Brandt in order to acquire additional real estate. Additionally, the Company received distributions from Black Brandt during the year ended March 31, 2015, of $1,950,000.

Summarized unaudited financial information for the Company’s other investments accounted for under the equity method as of and for the years ended March 31, 2015 and 2014, is as follows:

Cost method investments:

WCpb, llC (WCpb): In 1998, the Company invested

$550,000 for a 16.7% share of WCPB, which was formed for the purpose of making a 60% investment in 925 Park Avenue Associates, LLC (Park Avenue). Park Avenue was formed for the purpose of building, owning and operating the Paramount Hotel in Portland, Oregon. In 2000, the Company contributed an additional $100,000 to WCPB, LLC.

portland dragonfish asian Café, llC (dragonfish): In 2001, the Company invested $100,000 for a 10% interest in Dragonfish, which was formed for the purpose of establishing a restaurant within the Paramount Hotel in Portland, Oregon. In 2002, the Company invested an additional $11,760 in Dragonfish. During the year ended March 31, 2014, the Company recorded a full reserve of $111,760 against its investment as Dragonfish has no remaining assets and the restaurant that it once operated closed its doors. In addition, the Company recorded a full reserve of $24,209 against a note received owed by Dragonfish.

global Chandler i, llC (gCi): In June 2012, the Company invested $487,500 for a 13% ownership interest in GCI which owns and operates a 67,248 square foot commercial real estate building located in Chandler, Arizona. This investment was subsequently contributed by the Company to its wholly-owned subsidiary ARE.

noTe 10. goodWill

As discussed in Note 1, the Company elected to early adopt ASU No. 2014-02 effective April 1, 2014, and began amortizing goodwill on a straight-line basis over ten years. Goodwill as of March 31, 2015 and 2014, consists of the following:

2015 2014Fuel $ 6,043,209 $ 5,520,800 Parts and supplies 286,528 220,377 Construction materials 614,315 560,999 $ 6,944,052 $ 6,302,176

Estimated Useful Lives 2015 2014Assets held for lease: Land N/A $ 3,410,753 $ 3,410,753 Buildings and improvements 3 – 39 years 9,024,846 8,837,764 Land N/A 106,697 106,697 Buildings and improvements 5 – 40 years 2,949,575 2,936,125Software 3 years 3,546,173 3,546,173Furniture and equipment 5 – 30 years 15,363,110 14,973,388Equipment under capital leases 3 – 5 years 1,123,394 1,042,530 35,524,548 34,853,430 Less accumulated depreciation (16,878,851) (14,550,036) $ 18,645,697 $ 20,303,394

Ownership Percentage 2015 2014Equity Method Combat Support Associates Joint Venture 14.8% $ 287,007 $ 1,747,276 Black Brandt, LLC 50.0% 6,644,000 8,045,296 6,931,007 9,792,572Cost Method WCPB, LLC 16.7% 650,000 650,000 Global Chandler I, LLC 13.0% 487,500 487,500 1,137,500 1,137,500 $ 8,068,507 $ 10,930,072

Black CSAJV Brandt TotalTotal assets $ 15,044,327 $ 25,546,682 $ 40,591,009Total liabilities 6,339,572 12,237,960 18,577,532 Equity $ 8,704,755 $ 13,308,722 $ 22,013,477 Revenue $ 9,591,440 $ 2,733,544 $ 12,324,984 Expenses (9,633,332) (2,036,136) (11,669,468) Net income (loss) $ (41,892) $ 697,408 $ 655,516

March 31, 2015 (Unaudited)

Black CSAJV Brandt TotalTotal assets $ 24,014,874 $ 24,960,976 $ 48,975,850Total liabilities 5,268,228 8,868,261 14,136,489 Equity $ 18,746,646 $ 16,092,715 $ 34,839,361 Revenue $ (138,537) $ 2,420,207 $ 2,281,670 Expenses (2,987,684) (1,775,730) (4,763,414) Net income (loss) $ (3,126,221) $ 644,477 $ (2,481,744)

March 31, 2014 (Unaudited)

2015 2014Goodwill $ 9,527,064 $ 11,411,997 Accumulated amortization (952,707) – $ 8,574,357 $ 11,411,997






Changes in the carrying amount of goodwill for the years ended March 31, 2015 and 2014, are as follows:

Estimated aggregate amortization expenses for future years is as follows:

noTe 11. inTangible asseTs

Intangible assets as of March 31, 2015 and 2014, consist of the following:

Amortization expense recognized on amortizable intangibles totaled $2,813,944, $1,808,546 and $2,078,986 for the years

ended March 31, 2015, 2014 and 2013, respectively.

Estimated aggregate amortization expense for future years is as follows:

noTe 12. leasing aRRangemenTs as lessoR

ARE is the lessor of several properties under operating leases. Some of the subsidiary’s leases require rental payments of a fixed amount plus an operational expense that includes maintenance and repair of the leased properties for which the amounts are determined by the lease agreements. The leases expire at various dates through 2025. Several leases include options to extend the lease for an additional 5 to 20 years.

AE is the lessor of a fish processing plant including related property and equipment to a fish processing company. Previously, the lease provided for fixed annual base rent for each calendar year payable quarterly and was subject to an annual escalation clause. Additional rent was payable annually each calendar year based on the weight of various species of fish processed at the plant, as reported on the annual Alaska Fisheries Business Tax Return, and was recorded when additional rents became determinable. The lease provided for the lessee’s preferential use of dock space owned by the Company and discounts on fuel purchased by the lessee from the Company. The leased plant and related property and equipment has no carrying basis recorded in the consolidated financial statements. The lease term was scheduled to expire on December 31, 2016. However, a provision in the lease allowed the lessee to terminate the agreement during any season in which the lessee did not purchase at least 12,000,000 pounds of trawl-caught pacific cod for processing at the plant. During fiscal year 2013, the lessee did not meet this threshold, and as a result notified the subsidiary that it would be exercising its right to terminate the lease. The lease term expired on June 30, 2013.

On October 1, 2013, AE entered into a new lease agreement with a different fish processing company. The terms of the new lease provided for rent to be paid two years in

advance upon execution of the lease and then payable thereafter in installments of $250,000 annually on October 1. The lease expires on September 30, 2020, and can be extended by the lessee for three additional five-year terms. Total rent received in advance and included in deferred revenue as of March 31, 2015 and 2014, was $125,000 and $375,000, respectively.

In addition, AE is the lessor of shop space with rental payments of a fixed amount of $2,000 payable monthly. The rental agreement expires on December 15, 2017, and can be extended by the lessee for one additional five-year term.

The combined future minimum lease payments receivable under these non-cancelable lease agreements are as follows:

noTe 13. lines of CRediT

On November 8, 2012, the Company obtained a $10,000,000 secured line of credit that expires

August 1, 2015. Interest is paid monthly at the one-month LIBOR plus 2.25%. The line is secured by assets of the Company and is co-guaranteed by most of its subsidiaries. As of March 31, 2015 and 2014, there were no outstanding borrowings on the line of credit.

AE maintains a revolving line of credit with a bank. The borrowing limit is the lesser of $5,000,000 or 65% of qualified inventory plus 75% of qualified accounts receivable. Interest accrues at the Prime Rate as published in the Wall Street Journal plus 1%. On December 29, 2014, the terms of the line were changed requiring monthly payments of interest beginning February 10, 2015, instead of accruing interest. The change of terms also extended the maturity of the line until December 15, 2015. The interest rate was 4.25% at March 31, 2015 and 2014. The line is secured by the subsidiary’s inventory and is subject to certain restrictive covenants. The outstanding balance on the line of credit was $3,003,206 and $2,366,907 at March 31, 2015 and 2014, respectively.

noTe 14. aCCRued expenses

Accrued expenses as of March 31, 2015 and 2014, consist of the following:

noTe 15. noTes payable

Notes payable as of March 31, 2015 and 2014, consists of the following:

Maturities of notes payable, as of March 31, 2015, are due in future years as follows:

2015 2014Balance, beginning $ 11,411,997 $ 9,459,002 Acquisition of subsidiary – 1,952,995 Goodwill impairment loss (1,884,933) – Amortization under adoption of ASU 2014-02 (952,707) –Balance, ending $ 8,574,357 $ 11,411,997

Years Ending March 31, 2016 $ 952,707 2017 952,707 2018 952,707 2019 952,707 2020 952,707 Thereafter 3,810,822 $ 8,574,357

Years Ending March 31, 2016 $ 1,999,004 2017 1,974,404 2018 1,958,118 2019 1,788,630 2020 1,294,377 Thereafter 3,744,286 $ 12,758,819

Years Ending March 31, 2016 $ 1,095,519 2017 874,519 2018 653,519 2019 108,921 $ 2,732,478

March 31, 2015 Gross Carrying Accumulated Amount AmortizationSubject to amortization Customer relationships $ 1,711,521 $ 953,043 Contractual rights 2,280,000 2,280,000 Trade name 2,320,000 1,244,000 Non-compete 1,960,000 1,062,000 $ 8,271,521 $ 5,539,043

Gross Carrying Accumulated Amount AmortizationSubject to amortization Customer relationships $ 4,632,400 $ 2,100,942 Contractual rights 2,280,000 2,280,000 Trade name 2,480,000 836,000 Non-compete 2,739,284 1,368,320 $ 12,131,684 $ 6,585,262

March 31, 2014

2015 2014 Payroll, incentive compensation, and related taxes $ 3,161,920 $ 3,224,558 Vacation 1,852,872 1,696,669 Other 5,760,461 3,198,232 $ 10,775,253 $ 8,119,459

2015 2014 Seller financed note payable; payable in monthly installments of $9,303 including interest at 4.75%; paid off March 2015 $ – $ 126,458 Various notes payable to vendors, secured by the equipment purchased; interest rates ranging from 5.47% to 7.09%; monthly principal and interest payments totaling $15,874; due on various dates through April 2017 36,036 181,975 Note payable to First Insurance Funding; payable in monthly installments of $10,659 including interest at 4.35%; paid off August 1, 2014 – 47,311

Note payable to First Insurance Funding; payable in monthly installments of $10,654 including interest at 4.85%; due on August 1, 2015 38,055 – $ 74,091 $ 355,744

Years Ending March 31,2016 $ 61,2022017 12,889 $ 74,091






noTe 16. noTes payable – RelaTed paRTy

Notes payable – related party as of March 31, 2015 and 2014, consists of the following:

Maturities of notes payable – related party, as of March 31, 2015, are due in future years as follows:

noTe 17. inCome Taxes

The components of the provision for income taxes for the years ended March 31, 2015, 2014 and 2013, consist of the following:

The actual income tax benefit from operations for the years ended March 31, 2015, 2014 and 2013, differs from the “expected” tax expense (computed by applying the U.S. federal corporate rate of 35% to income (loss) before income taxes) as follows:

The components of the net deferred tax assets at March 31, 2015 and 2014, are as follows:

2015 2014

Note payable to employee/former subsidiary owner; non-interest bearing; paid off October 30, 2014 $ – $ 107,900 Note payable to employee/former subsidiary owner; conditionally payable in quarterly payments of $74,630, including interest at 4.0%; accrued unpaid interest as of March 31, 2015, of $74,101; due June 1, 2018 1,212,280 1,164,823 Note payable to employee/former subsidiary owner; conditionally payable in quarterly payments of $87,214, including interest at 4.0%; accrued unpaid interest as of March 31, 2015, of $86,595; due June 1, 2018 1,416,665 1,361,222 $ 2,628,945 $ 2,633,945

Years Ending March 31,2016 $ 1,273,489 2017 572,488 2018 595,812 2019 187,156 $ 2,628,945

2015 2014 2013

Current income tax expense State $ 44,762 $ 18,047 $ 23,981

Deferred income tax expense (benefit) Federal 13,255,210 – (588,892) State 1,950,941 (320,738) (83,728) 15,206,151 (320,738) (672,620) $ 15,250,913 $ (302,691) $ (648,639)

2015 2014 2013Computed “expected” income tax expense $ (833,069) $ 485,750 $ 1,693,531State taxes, net of federal effect 28,104 135,521 358,267Change in contingent earn-out liability 148,493 196,000 567,000Change in valuation allowance 15,250,272 (912,396) (5,164,861)Nondeductible expenses and other 89,076 113,172 98,888Change in “expected” tax rate and tax refunds – (320,738) 1,798,536 Charitable contribution expiration 302,945 – –Goodwill amortization – ASU 2014-02 265,092 – – $ 15,250,913 $ (302,691) $ (648,639)

2015 2014

Deferred tax assets Basis difference in ANCSA assets $ 154,769,418 $ 158,552,129 Contribution carryover 1,856,338 1,846,125 Alternative minimum taxes credit (AMT) carryforward 54,781 54,781 Net operating loss carryforwards (NOLs) 198,329,378 195,480,036 Undistributed earnings on unconsolidated subsidiaries 303,199 637,812 Property and equipment 679,129 265,754 UNICAP 812,891 688,553 Excess VEBA contributions 1,306,618 2,040,905 Other 1,364,816 1,574,986 359,476,568 361,141,081 Less valuation allowance (309,417,923) (294,167,652) 50,058,645 66,973,429

Deferred tax liabilities Undistributed earnings on unconsolidated subsidiaries (151,542) – Intangible assets (246,686) (2,106,861) (398,228) (2,106,861) Net deferred tax asset $ 49,660,417 $ 64,866,568

2015 2014 Current asset $ 988,623 $ 1,382,629 Non-current asset 48,671,794 63,483,939 Net deferred tax asset $ 49,660,417 $ 64,866,568

The components giving rise to the net deferred tax assets described above have been included in the accompanying consolidated balance sheets as of March 31, 2015 and 2014, as follows:

The valuation allowance for deferred tax assets as of March 31, 2015 and 2014, was $309,417,923 and $294,167,652, respectively. The net change in the total valuation allowance was an increase of $15,250,271 in 2015 and a decrease of $1,433,887 in 2014. The valuation allowance at March 31, 2015 and 2014, is primarily related to federal and state NOLs and basis difference resulting primarily from the Adak transfers that, in the judgment of management, are more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities (including the impact of available carryback and carryforward periods) and projected future taxable income in making this assessment. Based upon the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax assets are deductible, management believes it is more likely than not that the Company will realize the benefits of these deductible differences, net of the existing valuation allowances at March 31, 2015. The amount of the deferred tax asset considered realizable, however, could be reduced in the near term if estimates of future taxable income during the carryforward period are reduced. At March 31, 2015, the Company has NOLs for federal income tax purposes of approximately $493,000,000 and NOLs for Alaska state income tax purposes of approximately $220,000,000 which are available to offset future taxable income, if any, through 2035.

noTe 18. CommiTmenTs and ConTingenCies

leasing arrangements: Certain subsidiaries of the Company lease office space and equipment under both operating and capital lease agreements with varying terms through October 2027. As of March 31, 2015, total combined monthly lease payments under these arrangements is $83,732. Future minimum lease payments under the terms of these noncancelable leases are as follows:

Rent expense charged to operations for the years ended March 31, 2015, 2014 and 2013, was $1,516,800, $1,352,612 and $919,540, respectively.

litigation: From time to time, the Company and its subsidiaries are subject to various legal proceedings, which are incidental to the ordinary course of business. In the opinion of management and legal counsel, any liability resulting from such proceedings, in the aggregate, will not have a material effect on the Company’s financial position, results of operations or cash flows.

bankruptcy: In July 2012, a wholly-owned subsidiary of AMS filed for Chapter 7 bankruptcy. In July 2014 the Company entered into a settlement agreement with the bankruptcy trustee whereby AMS made an initial deposit with the bankruptcy trustee in the amount of $435,000. All contested claims have been settled and withdrawn from the bankruptcy court. The bankruptcy trustee is in the process of preparing a final accounting of costs prior to making distribution on the uncontested claims. Pursuant to the settlement agreement, AMS may be required to make a supplemental payment sufficient to top off any deficiency in the bankruptcy estate due to higher than estimated fees to be covered by the initial deposit. In the opinion of management, any additional liability resulting from the bankruptcy, in the aggregate, will not have a material effect on AMS’s financial position, results of operations or cash flows.

Cost reimbursable type contracts: In AMS has cost reimbursable type contracts with the federal government. Consequently, the subsidiary is reimbursed based upon their direct expenses attributable to the contract, plus a percentage based upon overhead and general and administrative expenses. The overhead and general and administrative rates are estimates. Accordingly, if the actual rates as determined by the cognizant audit agency were different

Capital Operating Leases Leases

Years Ending March 31, 2016 $ 368,692 $ 633,869 2017 231,051 581,227 2018 121,967 566,873 2019 33,206 371,124 2020 – 166,660 Thereafter – 123,252 $ 754,916 $ 2,443,005 Less amounts representing interest (89,044) Obligations under capital leases $ 665,872






than the subsidiary’s estimates, a refund or balance due for the difference would be due to or payable from the Federal Government. Audits of the subsidiary’s incurred cost submissions through fiscal year 2008 have been finalized. Management does not anticipate a significant refund or payable, beyond amounts included in the consolidated financial statements, for any adjustments by government auditors for unaudited years.

environmental remediation: The Company has property that contains fuel tanks. Federal, state and local regulations require inspection of these tanks to determine the existence of environmental hazards caused by any leaks. Anyone in the chain of title or an operator can be held liable for the costs of environmental cleanup if damage exists. Future liability, if any, for cleanup costs is unknown. Accordingly, these financial statements do not reflect any provision for losses relating to this matter. The Company has obtained pollution insurance to address any exposure associated with the fuel tanks. The Company’s insurance policy covers 100% of costs incurred to clean up any leaks, subject to a policy deductible of $50,000 and maximum coverage of $19,500,000.

The Company records a liability for environmental issues when the likelihood of responsibility for an environmental impact is probable and the cost of mitigating the impact is estimable within reasonable limits. The Company has identified potential environmental issues on its lands in Adak and is in communication with the Department of the Navy as to its responsibilities for the remediation of all environmental issues on Adak Island that were the result of the Navy’s activities. The Company believes that the obligation to remediate any environmental liabilities is that of the Department of the Navy and not the Company’s, as the environmental issues existed prior to the date of conveyance under the Act.

noTe 19. ReTiRemenT plans

defined contribution benefit plans: Full-time employees of the Company and its subsidiaries who are not otherwise covered by a collective bargaining agreement are eligible to participate in The Aleut Corporation’s 401(k) Retirement Plan (the Plan). Participants are immediately fully vested in their account balances. The Company made no contributions to the Plan during the years ended March 31, 2015, 2014 and 2013.

PM previously sponsored a Simple Retirement Plan through

December 31, 2013, that covered employees who were not otherwise covered by a collective bargaining agreement and who met certain eligibility requirements. Employees made voluntarily contributions to the plan, subject to the limits outlined in the Internal Revenue Code. The subsidiary’s contribution was equal to the amount the employee contributed, up to 3% of the employee’s eligible compensation. The subsidiary’s contributions charged to operations for the years ended March 31, 2014 and 2013, was $17,144 and $20,783, respectively. Effective

January 1, 2014, PM’s employees began participating in the Company’s Plan.

multi-employer pension plans: AMS and PM are required to participate in a number of multi-employer, defined benefit and contribution pension plans pursuant to collective bargaining agreements for union labor on a number of federal contracts in the construction and non-construction industries. The agreements provide for required monthly contributions based on a dollar rate per hour in accordance with specified divisions and classes of covered employees. Neither AMS nor PM contributed more than 5% of total plan contributions during any of the years presented. The Company’s participation in multi-employer defined benefit and defined contribution pension plans for the year ended March 31, 2015, is outlined below.

Additionally, the AMS and PM contribute monthly contributions to various health and welfare funds along with other union benefits on a per hour basis for each hour worked. Total contributions to such health and welfare funds and other union benefits were $3,793,385 for the year ended March 31, 2015. Total contributions to defined benefit and contribution pension plans, health and welfare plans and other union benefits totaled $6,281,684 and $7,174,561 for the years ended March 31, 2014 and 2013, respectively. All of the collective bargaining agreements related to defined benefit and defined contribution multi- employer plans specify actual contributions payable on a per hour basis for each hour worked during the term of the collective bargaining agreements.

Under 29 USC Section 1381, an employer withdrawing from a multi-employer pension plan may be liable for withdrawal liabilities to the plan. Therefore, there is a reasonable possibility of the incurrence of a withdrawal liability related to participation in a multi-employer pension plan based on the assumption that a contract may not be renewed. The Company intends to take full advantage of exceptions permitted under the Employment Retirement Security Act (ERISA) to avoid withdrawal liabilities. Where withdrawal liabilities may ultimately exist for both construction and non-construction plans, the Company has determined that

its share of any withdrawal liabilities not covered by safe harbor provisions of the ERISA statutes are not material to the consolidated financial statements due to the percentage of the Company’s overall participation in these plans, plan funding status and the amount of time of its involvement in them compared to the length of time such plans have existed. Additionally, withdrawal liabilities are allowable costs on government contracts and may be billed back to the government either directly through fringe burdens on follow-on contracts in the same pools or allocated to multiple contracts through general and administrative burdens. The Company is not aware of any circumstances where its pension contribution obligation would be increased to make up for any shortfall in the funds necessary to maintain the negotiated level of benefit.

PENSION PROTECTION

ACT ZONE STATUS

ExPIRATION FIP/RP DATE OF EIN/ STATUS COLLECTIVE PENSION PENDING/ SURChARGES BARGAINING PENSION FUND NUMBER IMPLEMENTED IMPOSED AGREEMENT

Alaska Plumbing and Pipefitting Industry Pension Fund 52-6103810 Green No No 06/30/18 $ 662,433

Plumbers and Pipefitters National Pension Fund 52-6152779 Yellow Yes No 06/30/18 73,604U.A. Locals No. 375 and 367 Supplemental Pension Trust 92-0150923 N/A - Defined Contribution Plan N/A N/A 06/30/18 198,730

Alaska Teamster - Employer Pension Plan 92-6003463 Red Yes Yes 9/30/16 229,724

Alaska Carpenters Contribution Trust Plan 92-6003157 N/A - Defined Contribution Plan N/A N/A 9/30/15 37,575

Alaska Laborers-Employers Retirement Fund 91-6028298 Yellow Yes Yes 9/30/15 295,254

Supplemental Income 401(K) Plan 94-2554388 N/A - Defined Contribution Plan N/A N/A 9/30/15 549,988

Painters and Allied Trades Local 1959 Retirement Plan 45-3480450 N/A - Defined Contribution Plan N/A N/A 9/30/15 52,896

Alaska Plumbing and Pipefitting Industry Pension Fund 52-6103810 Green No No 9/30/15 200,477

Central Pension Fund of the International Union of Operating Engineers & Participating Employers 36-6052390 Green No No Varies 299,700

Plumbers & Pipefitters National Pension Fund 401(K) Plan 52-3152779 N/A - Defined Contribution Plan N/A N/A 9/30/15 57,874

Stationary Engineers Local 39 Annuity Trust Fund 94-2787714 N/A - Defined Contribution Plan N/A N/A 2/29/16 149,397 $ 3,161,032

COMPANY CONTRIBUTIONS

2015






noTe 20. RelaTed paRTy TRansaCTions

The Company participates in transactions with entities affiliated with common ownership or common management. A summary of the amounts due to and from those related parties as of March 31, 2015 and 2014, are listed below:

A summary of the related party transactions for the years ended March 31, 2015, 2014 and 2013, are listed below:

noTe 21. faiR value measuRemenTs

The Codification Topic on Fair Value Measurements requires disclosures of fair value in periods subsequent to initial recognition, whether the measurements are made on a recurring basis or a non- recurring basis, establishes a framework for measuring fair value in accordance with generally accepted accounting principles (GAAP), and expands disclosure about fair market value measurements. The Fair Value Topic applies to all assets and liabilities that are being measured and reported on a fair value basis. The Fair Value Topic requires new disclosure that establishes a framework for measuring fair value in GAAP and expands disclosure about fair value measurements. This Topic enables the reader of the financial statements to assess the inputs used to develop those measurements by establishing a hierarchy for ranking the quality and reliability of the information used to determine

fair values.

The Topic requires that assets and liabilities carried at fair value will be classified and disclosed in one of the following three categories:

level 1 Inputs to the valuation methodology are unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.

level 2 Inputs to the valuation methodology include (a) quoted prices for similar assets or liabilities in active markets, (b) quoted prices for identical or similar assets or liabilities in inactive markets, (c) inputs other than quoted prices that are observable for the asset or liability, and (d) inputs that are derived principally from or corroborated by observable market data by correlation or other means. If the asset or liability has a specified (contractual) term, the Level 2 input must be observable for substantially the full term of the asset or liability.

level 3 Inputs to the valuation methodology are unobservable for the asset or liability, significant to the fair value measurement, and include situations where there is little, if any, market activity for the asset or liability. The inputs into the determination of fair value are based upon the best information in the circumstances and may require significant judgment or estimation.

The asset’s or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.

In determining the appropriate levels, the Company performs a detailed analysis of the assets and liabilities that are subject to this Topic. At each reporting period, all assets and liabilities for which the fair value measurement is based on significant unobservable inputs are classified as Level 3.

The table below presents the balances of assets and liabilities measured at fair value on a recurring basis by level within the hierarchy as of March 31, 2015 and 2014:

The table below presents a reconciliation of liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the years ended March 31, 2015 and 2014:

The Company’s marketable equity securities are publicly traded on the open market and are considered Level 1 items and fair value of these securities has been determined by reference to the last reported sales price at year end. The fair value of U.S. Treasury bonds and Government sponsored agency securities have also been determined by reference to the last reported sales price at year end for similar investments but are considered Level 2 items since they are not actively traded. The Company’s investments consisting of cash and cash equivalents of $3,844,786 and $2,345,695 as of March 31, 2015 and 2014, respectively, have been excluded from the tables above since they are carried at cost.

The fair value of the contingent earn-out liability was estimated by applying the income approach on two separate transactions (ARS International, LLC and Patrick Mechanical, LLC acquisitions further discussed in Note 22), each with their own key assumptions. Those measurements are based on significant inputs that are not observable in the market, which the FASB Codification refers to as Level 3 inputs.

noTe 22. business aCquisiTions

aRs international, llC: On June 1, 2013, the Company acquired 100% of the outstanding shares of ARS International, Inc. which was then converted to an Alaska limited liability company and became a wholly-owned subsidiary known as ARS International, LLC (ARS). ARS, who has laboratory operations in Louisiana, South Carolina and New Mexico, was acquired in order to augment the service offerings and capabilities of other subsidiaries of the Company to the federal government and its prime contractors through performing laboratory analysis, field testing and surveys for radioactive materials and providing decommissioning services for structures containing both hazardous and non-hazardous materials as well as land remediation and waste disposal project management services.

2015 2014

Amounts due from related parties Notes payable to employee/former subsidiary owner $ 2,628,945 2,633,945 Capital lease obligations to employee/former subsidiary owner 146,788 108,902 Contingent earn-out liability payable to employees/consultant 5,109,267 4,630,000

2015 2014 2013Income from Interest income on note receivable from Portland Dragonfish Asian Café, LLC $ – $ – $ 986 Expenses incurred for Rent paid to entities owned by related parties 300,000 512,343 120,000 Interest paid to employee/former subsidiary owner 102,900 89,486 – Charitable contribution to The Aleut Foundation 900,000 1,200,000 800,000

Total Level 1 Level 2 Level 3

Assets

Marketable equity securities:

Large cap value $ 2,818,142 $ 2,818,142 $ – $ –

Large cap equity 1,256,912 1,256,912 – –

Large cap growth 2,996,995 2,996,995 – –

Large blended 243,985 243,985 – –

Mid cap 1,391,138 1,391,138 – –

Small cap 73,158 73,158 – –

International equities 2,433,026 2,433,026 – –

Real estate 1,436,665 1,436,665 – –

Fixed income mutual funds 2,300,488 2,300,488 – –

U.S. Treasury bonds 4,238,780 – 4,238,780 –

Government sponsored agency securities 2,784,282 – 2,784,282 –

Municipal bonds 796,021 – 796,021 –

Alternative 741,259 – 741,259 –

Corporate bonds 14,029,998 – 22,590,040 –

$ 37,540,849 $ 14,950,509 $ 8,383,148 $ –

Liability

Contingent earn-out liability $ 5,109,267 $ – $ – $ 5,109,267

March 31, 2015

Total Level 1 Level 2 Level 3

Assets

Marketable equity securities:

Large cap value $ 3,581,358 $ 3,581,358 $ – $ –

Large cap growth 2,545,348 2,545,348 – –

Mid cap 977,125 977,125 – –

Small cap 205,606 205,606 – –

International equities 1,833,742 1,833,742 – –

Real estate 1,129,675 1,129,675 – –

Fixed income mutual funds 2,411,124 2,411,124 – –

U.S. Treasury bonds 4,526,308 – 4,526,308 –

Government sponsored agency securities 3,856,840 – 3,856,840 –

Corporate bonds 13,898,973 – 13,898,973 –

$ 34,966,099 $ 12,683,978 $ 22,282,121 $ –

Liability

Contingent earn-out liability $ 4,630,000 $ – $ – $ 4,630,000

March 31, 2014

2015 2014Balance, beginning $ 4,630,000 $ 3,750,000 Earn-out liability incurred for acquisition of subsidiary – 410,000 Net increase in earn-out liability 479,267 470,000Balance, ending $ 5,109,267 $ 4,630,000






The Company made a cash capital contribution of $1,900,000 into ARS and a cash payment of $1,100,000 to the former owner. Additional purchase consideration of $3,000,000 was in the form of two promissory notes of $1,500,000, each issued by ARS to the former owner, with one of the notes being guaranteed by the Company. In accordance with the terms of the sales purchase agreement, the purchase price was subject to post-closing date adjustments and was decreased by $482,000 for differences by which the final working capital of ARS at the closing date was less than agreed upon levels. As such, the promissory notes (as further discussed in Note 16) were correspondingly reduced to $1,164,000 and $1,354,000, for total additional consideration of $2,518,000. Additionally, in accordance with the terms of the sales purchase agreement, the Company will pay the former owner an earn-out annually during the next five-year period following the closing date equal to 40% of ARS’s increase in cash balances, subject to a maximum earn-out of $2,200,000 each year. The following table summarizes the consideration paid for ARS and the amounts of the assets acquired and liabilities assumed, which were recognized at the acquisition date:

The fair value of the contingent consideration arrangement of $410,000 was estimated by applying the income approach. That measure is based on significant inputs that are not observable in the market, which the FASB Codification refers to as Level 3 inputs. Key assumptions include a discount rate of 15% and a probability-adjusted level of cumulative cash between $295,000 and $6,000,000 as of the date of acquisition.

During the re-measurement of the fair value of the contingent earn-out liability at March 31, 2015 and 2014, management decreased its assumption of the probability-adjusted level of cumulative cash to between $-0- and $3,000,000 and $-0- and $6,000,000, respectively, resulting in a fair value of $30,000 and $320,000 for the contingent earn-out liability. The decrease in liability of $290,000 and $90,000 charged to operations is included in indirect costs in the accompanying consolidated statements of operations.

The goodwill is primarily composed of expected synergies from combining the operations of ARS with those of other subsidiaries of the Company. None of the goodwill recognized is deductible for income tax purposes. The Company incurred acquisition related costs in the amount of $182,965 which were charged to operations for the year ended March 31, 2014.

The amount of ARS’s revenue and loss included in the Company’s consolidated statements of operations for the period from June 1, 2013 (date of acquisition) to March 31, 2014, was $6,686,140 and $(1,610,207), respectively.

analytica group, llC: In June 2012, AIS (Purchaser) formed a wholly-owned subsidiary Aleut Water, Inc. (Merger Sub) and simultaneously entered into an agreement and plan of merger with SP-Analytica, Inc. (Target), a Colorado corporation, to acquire 100% of the outstanding shares of Target for cash consideration and assumption of debt. Following the merger, Target (as the Surviving Corporation) was converted to an Alaska limited liability company and called Analytica Group, LLC. Analytica Group, LLC has analytical laboratories located in Alaska and Colorado, and represents a virtual network of environmental testing laboratories specializing in drinking water and wastewater compliance monitoring. Analytica Group, LLC carries a full suite of microbial, inorganic and organic chemical contaminant certifications and offers extensive analyses in support of all regulatory drinking water and industrial wastewater programs. The following table summarizes the consideration paid for Analytica Group, LLC and the amounts of the assets acquired and liabilities assumed, which were recognized at the acquisition date:

None of the goodwill recognized is deductible for income tax purposes. The Company incurred acquisition related costs in the amount of $39,013 which were charged to operations for the year ended March 31, 2013.

The amount of Analytica Group, LLC’s revenue and loss included in the Company’s consolidated statements of operations for the period from June 15, 2012 (date of acquisition) to March 31, 2013, was $2,453,848 and $(116,134), respectively.

patrick mechanical, llC: On October 1, 2011, the Company acquired a 100% ownership interest in Patrick Mechanical, LLC to become a wholly-owned subsidiary. The acquisition contained a contingent consideration arrangement requiring the Company to pay the former owners an earn-out payment upon the five-year anniversary after the acquisition based upon an agreed upon sharing percentage of cumulative EBITDA greater than $10,000,000. The potential undiscounted amount of all future payments that the Company could be required to make under the contingent consideration arrangement is not limited. At the acquisition date, the fair value of the contingent consideration arrangement of $2,130,000 was estimated by applying the income approach. That measure was based on significant inputs that are not observable in the market, which the FASB Codification refers to as Level 3 inputs. Key assumptions include a discount rate of 15% and a probability-adjusted level of cumulative EBITDA between $10,000,000 and $31,000,000.

During the re-measurement of the fair value of the contingent earn-out liability during the years ended March 31, 2015,

2014 and 2013, management increased its assumption of the probability-adjusted level of cumulative EBITDA to between $12,000,000 and $45,000,000 resulting in a fair value of $5,079,267, and $4,310,000 for the contingent earn-out liability as of March 31, 2015 and 2014, respectively. The increase in liability of $769,267, $560,000 and $1,620,000 charged to operations for the years ended March 31, 2015, 2014 and 2013, respectively, is included in indirect costs in the accompanying consolidated statements of operations.

noTe 23. ConCenTRaTions and Risks

laboR foRCe: Substantially all of PM’s labor force is provided through a contract with U.A. Local 375, Plumbers and Pipefitters Union. Additionally, approximately 71% and 59% of AMS’s employees are represented by various labor unions as of March 31, 2015 and 2014, respectively. These employees are employed under collective bargaining agreements, and as a part of these agreements participate in defined benefit pension and welfare plans, see further details discussed in Note 19.

maJoR CusTomeRs: The majority of AMS’s and ARS’s revenue and accounts receivable are derived from prime contracts or subcontracts with U.S. governmental agencies.

Consideration Cash $ 3,000,000 Contingent consideration arrangement 410,000 Long-term debt 2,518,000 Fair value of total consideration transferred $ 5,928,000 Recognized amounts of identifiable assets acquired and liabilities assumed Financial assets $ 2,660,091 Property and equipment 867,068 Other investment 35,000 Identifiable intangible assets 3,267,597 Financial liabilities (2,854,751) Total identifiable net assets 3,975,005 Goodwill 1,952,995 $ 5,928,000

Consideration Cash $ 290,000 Long-term debt assumed 357,801 Fair value of total consideration transferred $ 647,801 Recognized amounts of identifiable assets acquired and liabilities assumed Financial assets $ 429,068 Inventory 67,145 Property and equipment 435,533 Identifiable intangible assets 230,000 Financial liabilities (715,248) Total identifiable net assets 446,498 Goodwill 201,303 $ 647,801

To the Board of DirectorsThe Aleut CorporationAnchorage, Alaska

We have audited the consolidated financial statements of The Aleut Corporation and its subsidiaries as of March 31, 2015 and 2014, and for the years ended March 31, 2015, 2014 and 2013, and have issued our report thereon which contains an unmodified opinion on those consolidated financial statements. See page 1. Our audits were conducted for the purpose of forming an opinion on the consolidated financial statements as a whole. The consolidating information is presented for purposes of additional analysis rather than to present the financial position and results of operations of the individual companies and is not a required part of the consolidated financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the consolidated financial statements. The consolidating information has been subjected to the auditing procedures applied in the audits of the consolidated financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the consolidated financial statements or to the consolidated financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the consolidated financial statements as a whole.

Frederick, Maryland June 30, 2015

fINANCIAlS | 3938 | NOTES TO CONSOlIDATED fINANCIAl STATEMENTS

CONSOlIDATING bAlANCE ShEETthe aleut corporation and Subsidiaries

INDEPENDENT AuDITOR’S REPORTON ThE SuPPlEMENTARy INfORMATION

march 31, 2015The Aleut Corporation and Subsidiaries

Consolidating Balance SheetMarch 31, 2015

MidtownAleut Aleut Estates Alaska C&H Aleut

The Real Aleut Management Water Instrument Testing Analytica Industrial Patrick ARS ConsolidatedAleut Estate, Enterprise, Services, Utility, Company, Service, Group, Services, Mechanical, International, TB GROUPING Difference

Corporation LLC LLC LLC LLC LLC LLC LLC LLC LLC LLC Eliminations ConsolidatedAssetsCurrent Assets

Cash and cash equivalents 11,746,077 $ 769,679 $ 3,311,012 $ 2,276,760 $ 121,686 $ 375,559 $ 508,115 $ -$ -$ 2,158,291 $ 840,996 $ -$ 22,108,175 $ 22,108,175 $ - Investments in trading securities 21,300,750 - - - - - - - - - - - 21,300,750 21,300,750 - Accounts receivable, net of allowance for -

doubtful accounts 5,996,248 2,162 1,536,205 14,665,416 3,149 637,013 484,810 - - 2,647,600 3,037,810 (700,761) 28,309,652 28,309,652 - Costs and estimated earnings in excess of -

billings on uncompleted construction contracts - - - - - - - - - 1,190,088 - - 1,190,088 1,190,088 - Inventories - - 6,043,209 326,422 - 286,528 - - - 287,893 - - 6,944,052 6,944,052 - Prepaid expenses and other current assets 456,112 242,051 127,912 680,486 - 5,404 55,041 - - 40,770 199,043 - 1,806,819 1,806,819 - Due from related parties 3,541,274 - - - - - - - - - (5,522) (3,535,752) - - - Income tax receivable 65,588 - - - - - - - - - - - 65,588 65,588 - Deferred tax assets 988,623 - - - - - - - - - - - 988,623 988,623 -

Total current assets 44,094,672 1,013,892 11,018,338 17,949,084 124,835 1,304,504 1,047,966 - - 6,324,642 4,072,327 (4,236,513) 82,713,747 82,713,747 -

Property and Equipment, Net 69,704 6,676,720 4,939,682 3,062,154 308,859 4,159 1,376,478 - - 349,134 1,858,807 - 18,645,697 18,645,697 -

Other AssetsInvestments in trading securities –

restricted escrow 3,963,716 - - - - - - - - - - - 3,963,716 3,963,716 - Investments in trading securities – -

Permanent Fund 13,775,474 - - - - - - - - - - - 13,775,474 13,775,474 - Due from related party 1,105,000 - - - - - - - - - - (1,105,000) - - - Other investments 7,294,000 487,500 - 287,007 - - - - - - - - 8,068,507 8,068,507 - Investment in subsidiaries 37,624,011 - - - - - - - - - - (37,624,011) - - - Deferred leasing incentives - 827,493 - - - - - - - - - (95,189) 732,304 732,304 - Goodwill, net - - - - - - - - - 6,816,662 1,757,695 - 8,574,357 8,574,357 - Intangible assets, net - - - - - - - - - 663,000 2,069,478 - 2,732,478 2,732,478 - Deposit 951,970 - - - - - - - - - - - 951,970 951,970 - Other assets 184,855 498,476 125,000 - - - 5,338 - - - - - 813,669 813,669 - Deferred tax assets 48,671,794 - - - - - - - - - - - 48,671,794 48,671,794 -

113,570,820 1,813,469 125,000 287,007 - - 5,338 - - 7,479,662 3,827,173 (38,824,200) 88,284,269 88,284,269 -

Total assets 157,735,196 $ 9,504,081 $ 16,083,020 $ 21,298,245 $ 433,694 $ 1,308,663 $ 2,429,782 $ -$ -$ 14,153,438 $ 9,758,307 $ (43,060,713) $ 189,643,713 $ 189,643,713 $ - Edit Check Total Assets



Liabilities and Equity Corporation LLC LLC LLC LLC LLC LLC LLC LLC LLC LLC Eliminations ConsolidatedCurrent Liabilities

Lines of credit -$ -$ 3,003,206 $ -$ -$ -$ -$ -$ -$ -$ -$ -$ 3,003,206 $ 3,003,206 $ - Current maturities of notes payable - - - - - - - - - - 61,202 - 61,202 61,202 - Current maturities of notes payable – related party - - - - - - - - - - 1,273,489 - 1,273,489 1,273,489 - Current maturites of capital lease obligations - - - 227,911 - - - - - - 84,824 - 312,735 312,735 - Accounts payable 6,092,507 19,953 2,934,113 2,295,668 3,662 395,602 56,526 - - 1,884,203 2,527,942 (783,397) 15,426,779 15,426,779 - Billings in excess of costs and estimated earnings -

on uncompleted construction contracts - - - - - - - - - 205,593 - - 205,593 205,593 - Deferred revenue - 93,780 133,157 - 7,135 - - - - - 460,089 - 694,161 694,161 - Accrued expenses 611,867 144,813 470,941 7,521,416 - 34,335 299,914 - - 837,656 852,269 2,042 10,775,253 10,775,253 - Dividends payable 2,540,101 - - - - - - - - - - - 2,540,101 2,540,101 - Customer deposits - - - - 2,042 - - - - - - (2,042) - - - Due to related parties 56,816 - 8,494 2,500,000 10,600 - 877,206 - - - - (3,453,116) - - -

Total current liabilities 9,301,291 258,546 6,549,911 12,544,995 23,439 429,937 1,233,646 - - 2,927,452 5,259,815 (4,236,513) 34,292,519 34,292,519 -

Long-Term LiabilitiesNotes payable, less current maturities - - - - - - - - - - 12,889 - 12,889 12,889 - Notes payable – related party, less current maturities - - - - - - - - - - 2,460,456 (1,105,000) 1,355,456 1,355,456 - Capital lease obligations, less current maturities - - - 131,320 - - - - - - 221,817 - 353,137 353,137 - Deferred rent - - - 95,189 - - - - - - - (95,189) - - - Security deposits 20,000 86,540 - - - - - - - - - - 106,540 106,540 - Contingent earn-out liability - - - - - - - - - 5,079,267 30,000 - 5,109,267 5,109,267 -

20,000 86,540 - 226,509 - - - - - 5,079,267 2,725,162 (1,200,189) 6,937,289 6,937,289 - Total liabilities 9,321,291 345,086 6,549,911 12,771,504 23,439 429,937 1,233,646 - - 8,006,719 7,984,977 (5,436,702) 41,229,808 41,229,808 - Edit Check Total Liabilities

EquityCommon stock - - - - - - - - - - - - - - - Contributed capital 8,947,000 - - - - - - - - - - - 8,947,000 8,947,000 - Retained earnings 139,466,905 - - - - - - - - - - - 139,466,905 139,466,905 - Memberʼs capital - 9,158,995 9,533,109 8,526,741 410,255 878,726 1,196,136 - - 6,146,719 1,773,330 (37,624,011) - - -

148,413,905 9,158,995 9,533,109 8,526,741 410,255 878,726 1,196,136 - - 6,146,719 1,773,330 (37,624,011) 148,413,905 148,413,905 - Edit Check Total Equity

Total liabilities and equity 157,735,196 $ 9,504,081 $ 16,083,020 $ 21,298,245 $ 433,694 $ 1,308,663 $ 2,429,782 $ -$ -$ 14,153,438 $ 9,758,307 $ (43,060,713) $ 189,643,713 $ 189,643,713 $ - Edit Check Total Liabilities & EquityEDIT CHECK

The Aleut Corporation and Subsidiaries













113,570,820 1,813,469 125,000 287,007 - - 5,338 - - 7,479,662 3,827,173 (38,824,200) 88,284,269 88,284,269 -


The Aleut Corporation and Subsidiaries













113,570,820 1,813,469 125,000 287,007 - - 5,338 - - 7,479,662 3,827,173 (38,824,200) 88,284,269 88,284,269 -


40 | fINANCIAlS & CORPORATE PROfIlE

CONSOlIDATING STATEMENT Of OPERATIONSthe aleut corporation and Subsidiaries

year ended march 31, 2015The Aleut Corporation and Subsidiaries

Consolidating Statement of OperationsYear Ended March 31, 2015

MidtownAleut Aleut Estates Alaska C&H Aleut Aleut Aleut

The Real Aleut Management Water Instrument Testing Analytica Industrial Patrick ARS Consolidated Analytica Industrial Analytica Industrial Aleut Estate, Enterprise, Services, Utility, Company, Service, Group, Services, Mechanical, International, TB GROUPING Difference Group, Services, Group, Services,

Corporation LLC LLC LLC LLC LLC LLC LLC LLC LLC LLC Eliminations Consolidated LLC LLC LLC LLCRevenue

Contract revenue -$ -$ -$ 69,568,481 $ -$ 4,979,990 $ 4,484,385 $ 2,718,279 $ -$ 25,123,269 $ 13,994,224 $ (4,225,636) $ 116,642,992 $ 116,642,992 $ - 3,061,218 $ -$ 2,444,935 $ -$ Fuel sales - - 9,849,065 - - - - - - - - (83,058) 9,766,007 9,766,007 - - - - - Rental income - 2,623,594 296,830 - - - - - - - - (211,063) 2,709,361 2,709,361 - - - - - Natural resource income 6,026,235 - - - - - - - - - - - 6,026,235 6,026,235 - - - - - Investment earnings 1,765,221 - 64 855 - - - - - - - - 1,766,140 1,766,140 - - - 51 - Earnings from equity investments 548,704 24,960 - 19,731 - - - - - - - - 593,395 593,395 - - - - - Loss from subsidiaries (3,944,801) - - - - - - - (4,154,958) - - 8,099,759 - - - - (2,202,646) - (588,556) Other 133,037 (126,037) 144,513 123,892 158,143 4,145 - 26 287,376 - 249 (287,376) 437,968 437,968 - 31 291,618 8,913 291,437

4,528,396 2,522,517 10,290,472 69,712,959 158,143 4,984,135 4,484,385 2,718,305 (3,867,582) 25,123,269 13,994,473 3,292,626 137,942,098 137,942,098 - 3,061,249 (1,911,028) 2,453,899 (297,119)

ExpensesDirect costs:

Contract - - - 46,432,278 - 3,720,472 3,411,626 1,734,382 - 18,932,407 9,929,163 (4,057,459) 80,102,869 - 80,102,869 2,221,928 - 1,610,321 - Fuel - - 7,346,339 - - - - - - - - - 7,346,339 - 7,346,339 - - - - - Other - 2,059,024 2,454,180 - 55,430 - - - - - - (76,185) 4,492,449 91,941,657 (87,449,208) - - - -

Indirect costs 6,716,911 377,525 966,277 22,520,600 12,688 740,805 3,527,089 1,305,359 287,376 4,728,871 4,921,128 (673,489) 45,431,140 45,431,140 - 1,571,790 289,100 946,899 293,535 Impairment of long-lived assets - - 534,502 - - - 1,683,630 201,303 - - - - 2,419,435 2,419,435 - - - - - Interest and other - - 88,739 90,621 - - 3,722 13,395 - - 141,904 - 338,381 338,381 - (16,209) - (12,813) -

6,716,911 2,436,549 11,390,037 69,043,499 68,118 4,461,277 8,626,067 3,254,439 287,376 23,661,278 14,992,195 (4,807,133) 140,130,613 140,130,613 2,221,928 - 1,610,321 -

Income (loss) before income taxes (2,188,515) 85,968 (1,099,565) 669,460 90,025 522,858 (4,141,682) (536,134) (4,154,958) 1,461,991 (997,722) 8,099,759 (2,188,515) (2,188,515) - 839,321 (1,911,028) 843,578 (297,119)

Provision for Income Taxes 15,250,913 - - - - - - - - - - - 15,250,913 15,250,913 - - - - -

Net income (loss) (17,439,428) $ 85,968 $ (1,099,565) $ 669,460 $ 90,025 $ 522,858 $ (4,141,682) $ (536,134) $ (4,154,958) $ 1,461,991 $ (997,722) $ 8,099,759 $ (17,439,428) $ (17,439,428) $ - Edit Check Net Income 839,321 $ (1,911,028) $ 843,578 $ (297,119) $

- - - - - - - - - - - - - - Edit Check Net Income By Sub

2014 2013

Discontinued Operations Note 1 Disclosures

CORPORATE PROfIlE

the aleut corporation (the corporation) was established in 1972 under the terms of the alaska native claims Settlement act (ancSa). this legislation provided land settlements and cash settlements to the 12 ancSa regional corporations formed under the act.

the aleut corporation received a settlement of $19.5 million, and was entitled to 70,789 acres of surface lands and 1.572 million acres of subsurface estate. voting shares of stock were issued to 3,249 shareholders.

Most of the corporation’s ancSa selections are on the alaska Peninsula and aleutian, Shumagin, and Pribilof Islands,

situated between Port Moller and the alaska Peninsula and the western tip of atka Island. the corporation owns the village site of attu as well as numerous historical and cemetery sites between atka and the alaska Peninsula.

the aleut corporation has diverse business lines including government operations and maintenance contracting, fuel delivery, sales and storage, commercial and residential real estate, gravel operations, and an array of industrial services that includes oil field and water testing, instrumentation and controls sales and mechanical contracting. More information about the corporation can be found at www.aleutcorp.com.

One Aleut Plaza 4000 Old Seward Highway, Suite 300 Anchorage, Alaska 99503

Tel: 907.561.4300 Toll-free: 800.232.4882 Fax: 907.563.4328Email: [email protected] www.aleutcorp.com

Shareholder AffairsEmail: [email protected]

Documents

Keeping Culture Alive | Annual ReportAlaska Native Corporations. Management still has confidence in this program, but our companies must evolve and adapt to remain competitive and