United States

Securities and Exchange Commission

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended ~~September~~March 3031, ~~2015~~2016

o Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from to

Commission file number — 333-92445

PERNIX GROUP, INC.

(Exact name of registrant as specified in its charter)




Delaware		36-4025775
(State or other jurisdiction of		(IRS employer identification no.)
Incorporation or organization)


151 E. 22nd Street, Lombard, Illinois		60148
(Address of principal executive offices)		(Zip code)

(630) 620-4787

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes xNo o

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

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




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

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

On ~~November~~May 510, ~~2015~~2016, 9,403,697 shares of our common stock were outstanding.

Table of Contents

PERNIX GROUP, INC.

TABLE OF CONTENTS

		Page No.
	PART I. Financial Information
Item 1.	Financial Statements
	Condensed Consolidated Balance Sheets – September 30, 2015 (unaudited) and December 31, 2014	3
	Condensed Consolidated Balance Sheets - March 31, 2016 (unaudited) and December 31, 2015	3
	Condensed Consolidated Statements of Operations (unaudited) - nine months ended September 30, 2015 and 2014	4
	Condensed Consolidated Statements of Operations (unaudited) - Three Months Ended March 31, 2016 and 2015	4
	Condensed Consolidated Statements of Operations (unaudited) - three months ended September 30, 2015 and 2014	5
	Condensed Consolidated Statements of Comprehensive Income (Loss) (unaudited) – Three Months Ended March 31, 2016 and 2015	5
	Condensed Consolidated Statements of Comprehensive Income (Loss) (unaudited) – nine and three months ended September 30, 2015 and 2014	6
	Condensed Consolidated Statements of Stockholders' Equity (unaudited) - Three Months Ended March 31, 2016 and 2015	6
	Condensed Consolidated Statements of Changes in Stockholder’ Equity (unaudited) - nine months ended September 30, 2015 and 2014	7
	Condensed Consolidated Statements of Cash Flows (unaudited) - Three Months Ended March 31, 2016 and 2015	7
	Condensed Consolidated Statements of Cash Flows (unaudited) - nine months ended September 30, 2015 and 2014	8
	Notes to Condensed Consolidated Financial Statements (unaudited)	8
	Notes to Condensed Consolidated Financial Statements (unaudited)	9
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	26
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	33
Item 3.	Quantitative and Qualitative Disclosure About Market Risk	34
Item 3.	Quantitative and Qualitative Disclosure About Market Risk	44
Item 4.	Controls and Procedures	34
Item 4.	Controls and Procedures	44
	PART II. Other Information
Item 1.	Legal Proceedings	4535
Item 1A.	Risk Factors	4535
Item 2.	Unregistered Sale of Equity Securities and Use of Proceeds	4535
Item 3.	Defaults Upon Senior Securities	4535
Item 4.	Mine Safety Disclosures	4535
Item 5.	Other Information	4535
Item 6.	Exhibits	4535
	Signatures	4636

Table of Contents

ITEM 1: FINANCIAL STATEMENTS

PERNIX GROUP, INC.
AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
		As of
		(Unaudited)September 30, 2015			December 31, 2014
Assets			(Unaudited) March 31, 2016			December 31, 2015
Assets
Current assets:
Cash and cash equivalents	$	$	98,~~233~~374,~~679~~630	$	~~11,169,169~~	18,792,712
Restricted cash			~~505~~979,~~249~~423		~~1,181,735~~	952,502
Accounts receivable, net			52,711,810		7,014,352
Accounts and other receivables			47,140,740			48,219,748
Inventories			1,~~786~~935,~~611~~123		~~1,592,430~~	1,844,953
Cost and estimated earnings in excess billings			3815,~~722~~143,~~641~~193		~~7,539,080~~	16,563,199
Prepaid expenses and other current assets			12,~~626~~364,~~392~~499		~~1,718,569~~	1,453,539
Total current assets			~~104~~75,~~586~~937,~~382~~608		~~30,215,335~~	87,826,653
Property and equipment, net			35,~~824~~408,~~391~~427		~~1,678,438~~	4,069,612
Deferred tax asset			~~317~~5,~~051~~262		—	552,756
Other assets			1786,~~447,801~~202		~~57,741~~	689,323
Goodwill			19,624,839		—
Intangible assets, net:
Customer contract intangibles, net			8,507,708		—
Customer contract backlog			5,504,915			6,248,503
Other intangible assets, net			1,050,000		81,651
Goodwill			20,023,832			19,141,273
Total assets	$		139,358,172	$	32,033,165
Tradename			750,000			900,000
Total assets		$	108,416,246	$		119,428,120
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	$	4748,~~834~~923,~~478~~250	$	~~12,890,164~~	37,757,695
Accrued employee compensation and benefits			1,677,268		958,596
Accrued trade liabilities			12,426,331			32,339,972
Accrued purchase orders			19,290,752		400,619
Billings in excess of costs and estimated earnings			5,733,385			6,399,339
Billings in excess of costs and estimated earnings			19,885,773		3,787,661
Other current liabilities			9,432,876			7,770,659
Dividend payable			847,314		241,387
Current maturities on term loan and line of credit			3,374,040			2,544,959
Other current liabilities			7,231,591		1,564,123
Total current liabilities			79,889,882			86,812,624
Current maturities on term loan and line of credit			1,973,053		—
Other non-current liabilities			377,273			698,867
Total current liabilities			98,740,229		19,842,550
Deferred tax liability			5,262			552,756
Other non-current liabilities			747,598		—
Long-term debt			8,698,217			8,744,686
Deferred tax liability			317,051		—
Total liabilities			88,970,634			96,808,933
Long-term debt			8,792,621		—
Total Liabilities			108,597,499		19,842,550
Commitments and contingencies
Stockholders' equity:
Pernix Group, Inc. and Subsidiaries Stockholders' equity
Series A convertible senior preferred stock, $0.01 par value. Authorized1,000,000 shares, $5,000,000 liquidation preference, 1,000,000 sharesissued and outstanding at September 30, 2015 and December 31, 2014			10,000		10,000
Series A convertible senior preferred stock, $0.01 par value. Authorized 1,000,000 shares, $5,000,000 liquidation preference, 1,000,000 shares issued and outstanding at March 31, 2016 and December 31, 2015			10,000			10,000
Series B convertible senior preferred stock, $0.01 par value. Authorized 400,000 shares, $850,000 liquidation preference, 170,000 shares issued and outstanding at September30, 2015 and December 31, 2014			1,700		1,700
Series B convertible senior preferred stock, $0.01 par value. Authorized 400,000 shares, 170,000 shares issued and outstanding at March 31, 2016 and December 31, 2015, $850,000 involuntary liquidation preference			1,700			1,700
Series C convertible senior preferred stock, $0.01 par value. Authorized 4,000,000 shares, $28,000,000 liquidation preference, 2,800,000 shares issued and outstanding at September 30, 2015 and zero shares at December 31, 2014,			28,000		—
Series C convertible senior preferred stock, $0.01 par value. Authorized 4,000,000 shares, $28,000,000 liquidation preference, 2,800,000 shares issued and outstanding at March 31, 2016 and at December 31, 2015			28,000			28,000
Common stock, $0.01 par value. Authorized 20,000,000 shares, 9,403,697 issued and Outstanding			94,037		~~94,037~~	94,037
Additional paid-in capital			45,~~059~~234,~~450~~377		~~16,137,313~~	45,147,931
Accumulated deficit - since September 30, 2012			(1529,~~916~~431,~~373~~180)		~~(5,581,731)~~	(24,586,359)
Accumulated comprehensive income (loss) - since September 30, 2012			(~~576~~531,~~106~~629)		~~(455,624)~~	(583,408)
Total Pernix Group, Inc. and Subsidiaries Stockholders' equity			2815,~~700~~405,~~708~~305		~~10,205,695~~	20,111,901
Non-controlling interest			24,~~059~~040,~~965~~307		~~1,984,920~~	2,507,286
Total stockholders' equity			3019,~~760~~445,~~673~~612		~~12,190,615~~	22,619,187
Total liabilities and stockholders' equity	$	$	~~139~~108,~~358~~416,~~172~~246	$	~~32,033,165~~	119,428,120
See accompanying notes to the condensed consolidated financial statements.

See accompanying notes to the condensed consolidated financial statements.

PERNIX GROUP, INC.
AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Unaudited)
		Nine Months Ended September 30,
		2015		2014
Revenues:
Construction revenue	$	104,427,164	$	45,229,114
Service fees – power generation plant		4,229,395		5,053,456
Other revenue		79,624		113,306
Gross revenues		108,736,183		50,395,876
Costs and expenses:
Construction costs		100,670,674		35,059,384
Operation and maintenance costs - power generation plant		1,835,937		2,737,831
Cost of revenues		102,506,611		37,797,215
Gross profit		6,229,572		12,598,661
Operating expenses:
Salaries and employee benefits		7,674,561		4,207,251
General and administrative		7,326,061		2,748,685
Total operating expenses		15,000,622		6,955,936
Operating income (loss)		(8,771,050)		5,642,725
Other income (expense):
Interest income (expense), net		(39,926)		2,150
Interest and other expense - related party		(109,311)		(62,157)
Foreign currency exchange loss		(16,195)		(19,984)
Other income, net		80,833		83,663
Total other income (expense)		(84,599)		3,672
Consolidated income (loss) before income tax expense		(8,855,649)		5,646,397
Income tax expense		(495,284)		(415,803)
Consolidated net income (loss)		(9,350,933)		5,230,594
Less: Net income attributable to non-controlling interest		78,632		4,555,572
Consolidated net income (loss) attributable to the stockholders of Pernix Group, Inc. and Subsidiaries		(9,429,565)		675,022
Less: Preferred stock dividends		905,077		342,694
Consolidated net income (loss) attributable to the common stockholders of Pernix Group, Inc. and Subsidiaries	$	(10,334,642)	$	332,328
Earnings (loss)per share attributable to the common stockholders of Pernix Group, Inc. and Subsidiaries:
Basic net earnings (loss) per share	$	(1.10)	$	0.04
Diluted net earnings (loss) per share	$	(1.10)	$	0.03
Weighted average shares outstanding – basic		9,403,697		9,403,697
Weighted average shares outstanding – diluted		9,403,697		11,014,867
See accompanying notes to the condensed consolidated financial statements.

Table of Contents


PERNIX GROUP, INC.
AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Unaudited)

	Three Months Ended March 31,
		2016		2015
Revenues:
Construction revenue	$	75,098,581	$	9,328,570
Service fees – power generation		1,334,997		1,264,087
Other revenue		12,746		18,233
Gross revenues		76,446,324		10,610,890
Costs and expenses:
Construction costs		72,875,985		9,235,379
Operation and maintenance costs - power generation		604,100		519,042
Cost of revenues		73,480,085		9,754,421
Gross profit		2,966,239		856,469
Operating expenses:
Salaries and employee benefits		4,256,341		1,801,257
General and administrative		3,157,526		1,084,645
Total operating expenses		7,413,867		2,885,902
Operating income (loss)		(4,447,628)		(2,029,433)

Other income (expense):
Interest income (expense), net		(36,361)		(69)
Other expense - related party		(118,791)		(21,700)
Foreign currency exchange loss		(35,872)		(42,126)
Other income, net		19,181		13,502
Total other income (expense)		(171,843)		(50,393)

Consolidated income (loss) before income tax expense		(4,619,471)		(2,079,826)

Income tax expense		(15,426)		(17,768)

Consolidated net income (loss)		(4,634,897)		(2,097,954)

Less: Net income (loss) attributable to non-controlling interest		209,924		(30,649)

Consolidated net income (loss) attributable to the stockholders of Pernix Group, Inc. and Subsidiaries		(4,844,821)		(2,066,945)

Less: Preferred stock dividends		—		112,253

Consolidated net income (loss) attributable to the common stockholders of Pernix Group Inc. and Subsidiaries	$	(4,844,821)	$	(2,179,198)

EPS attributable to the stockholders of Pernix Group, Inc. and Subsidiaries:
Basic and diluted net earnings (loss) per share	$	(0.59)	$	(0.23)
Weighted average shares outstanding – basic and diluted		9,403,697		9,403,697

See accompanying notes to the condensed consolidated financial statements.

PERNIX GROUP, INC.
AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Unaudited)
		Three Months Ended September 30,
		2015		2014
Revenues:
Construction revenue	$	85,459,841	$	17,205,898
Service fees – power generation plant		1,560,713		1,916,519
Other revenue		20,852		32,840
Gross revenues		87,041,406		19,155,257
Costs and expenses:
Construction costs		82,217,884		13,138,079
Operation and maintenance costs - power generation plant		706,021		1,230,712
Cost of revenues		82,923,905		14,368,791
Gross profit		4,117,501		4,786,466
Operating expenses:
Salaries and employee benefits		4,195,914		1,642,473
General and administrative		3,363,105		834,463
Total operating expenses		7,559,019		2,476,936
Operating income (loss)		(3,441,518)		2,309,530
Other income (expense):
Interest income (expense), net		(42,275)		864
Interest and other expense - related party		(66,395)		(20,946)
Foreign currency exchange gain		29,193		14,341
Other income, net		40,399		19,837
Total other income (expense)		(39,078)		14,096
Consolidated income (loss) before income tax expense		(3,480,596)		2,323,626
Income tax expense		(368,167)		(133,031)
Consolidated net income (loss)		(3,848,763)		2,190,595
Less: Net income attributable to non-controlling interest		24,941		1,905,468
Consolidated net income (loss) attributable to the stockholders of Pernix Group, Inc. and Subsidiaries		(3,873,704)		285,127
Less: Preferred stock dividends		679,353		114,748
Consolidated net income (loss) attributable to the common stockholders of Pernix Group, Inc. and Subsidiaries	$	(4,553,057)	$	170,379
Earnings (loss) per share attributable to the common stockholders of Pernix Group, Inc. and Subsidiaries:
Basic and diluted net earnings (loss) per share	$	(0.48)	$	0.02
Weighted average shares outstanding – basic		9,403,697		9,403,697
Weighted average shares outstanding – diluted		9,403,697		10,940,399
See accompanying notes to the condensed consolidated financial statements.

Table of Contents


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

		Three Months Ended March 31,
			2016		2015

Consolidated net income (loss)		$	(4,634,897)	$	(2,097,594)
Other comprehensive income (loss):
Foreign currency translation adjustment			46,753		(115,600)

Total comprehensive income (loss)		$	(4,588,144)	$	(2,213,194)

Net income (loss) attributable to non-controlling interests		$	209,924	$	(30,649)
Foreign currency translation attributable to non-controlling interests			(5,026)		229
Total comprehensive income attributable to non-controlling interest		$	204,898	$	(30,420)
Total comprehensive income (loss) attributable to the stockholders of Pernix Group, Inc. and Subsidiaries		$	(4,793,042)	$	(2,182,774)

PERNIX GROUP, INC
AND SUBSIDIARIES
Condensed Consolidated Statements of Comprehensive Income (Loss)
(Unaudited)
	Nine Months Ended September 30,
		2015		2014
Consolidated net income (loss)	$	(9,350,933)	$	5,230,594
Other comprehensive income (loss):
Foreign currency translation adjustment		(142,335)		(140,600)
Total comprehensive income (loss)		(9,493,268)		5,089,994
Net income attributable to non-controlling interests		78,632		4,555,572
Foreign currency translation attributable to non-controlling interests		(21,853)		33,572
Total comprehensive income attributable to non-controlling interest		56,779		4,589,144
Total comprehensive income (loss) attributable to the stockholders of Pernix Group, Inc. and Subsidiaries	$	(9,550,047)	$	500,850

PERNIX GROUP, INC
AND SUBSIDIARIES
Condensed Consolidated Statements of Comprehensive Income (Loss)
(Unaudited)
	Three Months Ended September 30,
		2015		2014
Consolidated net income (loss)	$	(3,848,763)	$	2,190,595
Other comprehensive income (loss):
Foreign currency translation adjustment		110,472		(239,923)
Total comprehensive income (loss)		(3,738,291)		1,950,672
Net income attributable to non-controlling interests		24,941		1,905,467
Foreign currency translation attributable to non-controlling interests		42,140		55,102
Total comprehensive income attributable to non-controlling interest		67,081		1,960,569
Total comprehensive loss attributable to the stockholders of Pernix Group, Inc. and Subsidiaries	$	(3,805,372)	$	(9,897)

See accompanying notes to the condensed consolidated financial statements.

Table of Contents

PERNIX GROUP, INC.
AND SUBSIDIARIES
Condensed Consolidated Statements of Changes in Stockholders' Equity
(Unaudited)

		Total		Accumulated Deficit		Accumulated Other Comprehensive Income (Loss)		Common Stock		Preferred Stock		Additional Paid-In Capital		Non-controlling Interest
Balance at December 31, 2014	$	12,190,615	$	(5,581,731)	$	(455,624)	$	94,037	$	11,700	$	16,137,313	$	1,984,920
Net income (loss)		(2,097,594)		(2,066,945)		—		—		—		—		(30,649)
Foreign currency translation adjustment		(115,600)		—		(115,829)		—		—		—		229
Preferred stock dividends		(112,253)		(112,253)		—		—		—		—		—
Stock compensation expense		125,386		—		—		—		—		125,386		—
Balance at March 31, 2015	$	9,990,554	$	(7,760,929)	$	(571,453)	$	94,037	$	11,700	$	16,262,699	$	1,954,500

Balance at December 31, 2015	$	22,619,187	$	(24,586,359)	$	(583,408)	$	94,037	$	39,700	$	45,147,931	$	2,507,286
Net income (loss)		(4,634,897)		(4,844,821)		—		—		—		—		209,924
Foreign currency translation adjustment		46,753		—		51,779		—		—		—		(5,026)
Partial sale of non-controlling interest in subsidiary		2,343,803		—		—		—		—		—		2,343,803
Stock compensation expense		86,446		—		—		—		—		86,446		—
Distribution to non-controlling interest holders		(1,015,680)		—		—		—		—		—		(1,015,680)
Balance at March 31, 2016	$	19,445,612	$	(29,431,180)	$	(531,629)	$	94,037	$	39,700	$	45,234,377	$	4,040,307

See accompanying notes to condensed consolidated financial statements.

PERNIX GROUP, INC.
AND SUBSIDIARIES
Condensed Consolidated Statements of Changes in Stockholders' Equity
(Unaudited)
		Total		Accumulated Deficit		Accumulated Other Comprehensive Income (Loss)		Common Stock		Preferred Stock		Additional Paid-In Capital		Non-controlling Interest
Balance atDecember 31, 2013	$	11,251,933	$	(3,741,433)	$	(222,469)	$	94,037	$	11,700	$	14,324,683	$	785,415
Net income		5,230,594		675,022		—		—		—		—		4,555,572
Foreign currency translation adjustment		(140,600)		—		(174,172)		—		—		—		33,572
Preferred stock dividends		(342,694)		(342,694)		—		—		—		—		—
Stock compensation expense		138,414		—		—		—		—		138,414		—
Change in deferred tax asset valuation allowance subsequent to quasi-reorganization		241,471		—		—		—		—		241,471		—
Distribution to Non-controlling Interest Holders		(2,311,468)												(2,311,468)
Balance at September 30, 2014	$	14,067,650	$	(3,409,105)	$	(396,641)	$	94,037	$	11,700	$	14,704,568	$	3,063,091
Balance at December 31, 2014	$	12,190,615	$	(5,581,731)	$	(455,624)	$	94,037	$	11,700	$	16,137,313	$	1,984,920
Net income (loss)		(9,350,933)		(9,429,565)		—		—		—		—		78,632
Foreign currency translation adjustment		(142,335)		—		(120,482)		—		—		—		(21,853)
Issuance of Series C convertible senior preferred stock		28,000,000		—		—		—		28,000		27,972,000		—
Preferred stock dividends		(905,077)		(905,077)		—		—		—		—		—
Stock compensation expense		274,197		—		—		—		—		274,197		—
Net acquisition of and distribution to non-controlling interest holders		160,552		—		—		—		—		142,286		18,266
Change in deferred tax asset valuation allowance subsequent to quasi-reorganization		533,654		—		—		—		—		533,654		—
Balance at September 30, 2015	$	30,760,673	$	(15,916,373)	$	(576,106)	$	94,037	$	39,700	$	45,059,450	$	2,059,965
See accompanying notes to condensed consolidated financial statements.

Table of Contents

PERNIX GROUP, INC
AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)


	Three Months Ended March 31,
		2016		2015
Cash flows from operating activities:
Consolidated net loss	$	(4,634,897)	$	(2,097,594)
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:
Depreciation and amortization		1,139,030		54,229
Quasi-Reorganization adjustments		57,636		(35,384)
Stock compensation expense		86,446		125,386
Changes in assets and liabilities:
Accounts receivable		741,847		1,949,606
Inventories		(90,170)		(260,611)
Cost and estimated earnings in excess of billings		888,834		337,358
Prepaid and other current assets		48,774		(578,590)
Accounts payable and accrued expenses		(8,106,322)		(3,488,540)
Billings in excess of cost and estimated earnings		(665,954)		(1,167,017)
Net cash provided by (used in) operating activities		(10,534,776)		(5,161,157)
Cash flows provided by (used in) investing activities:
Capital expenditures		(486,364)		(81,107)
Acquisition		(334,827)		—
Restricted cash		(26,921)		690,322
Net cash provided by (used in) investing activities		(848,112)		609,215
Cash flows provided by (used in) financing activities:
Proceeds from line of credit		1,034,044		—
Distributions to non-controlling interest holders		(1,015,680)		—
Partial sale of non-controlling interest in subsidiary		2,343,803		—
Payment of debt		(1,481,314)		(98,630)
Net cash provided by (used in) financing activities		880,853		(98,630)

Effect of exchange rate changes on cash and cash equivalents		83,953		17,056
Net decrease in cash and cash equivalents		(10,418,082)		(4,633,516)
Cash and cash equivalents at beginning of year		18,792,712		11,169,169
Cash and cash equivalents at end of year	$	8,374,630	$	6,535,653
Cash paid during the period for interest	$	67,202	$	—
Cash paid during the period for interest - related party	$	118,791	$	—
Cash paid during the period for income taxes	$	—	$	70
Supplemental disclosure of non-cash investing and financing transactions:
Accumulated preferred stock dividends	$	671,966	$	13,623
Unpaid equity distributions	$	—	$	119,918

See accompanying notes to the condensed consolidated financial statements.

PERNIX GROUP, INC
AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
	Nine Months Ended September 30,
		2015		2014
Cash flows from operating activities:
Consolidated net income (loss)	$	(9,350,933)	$	5,230,594
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:
Depreciation and amortization		1,153,527		147,836
Quasi-Reorganization adjustments		183,059		268,842
Stock compensation expense		274,197		138,414
Changes in assets and liabilities:
Accounts receivable		(9,542,812)		2,466,452
Inventories		(82,611)		41,591
Cost and estimated earnings in excess of billings		(151,847)		(230,363)
Prepaid and other current assets		1,058,561		(11,989,192)
Accounts payable and accrued expenses		(2,527,965)		(4,934,600)
Billings in excess of cost and estimated earnings		3,640,710		9,417,155
Deferred revenue		—		(30,827)
Net cash (used in) provided by operating activities		(15,346,114)		525,902
Cash flows used in investing activities:
Acquisitions		(24,407,585)		—
Capital expenditures		(1,096,066)		(518,717)
Restricted cash		676,486		(778,096)
Net cash used in investing activities		(24,827,165)		(1,296,813)
Cash flows provided by (used in) financing activities:
Proceeds from sale of preferred stock		28,000,000		—
Proceeds from long-term debt		3,750,506		—
Proceeds from long-term debt, related party		7,402,200		—
Repayment of long-term debt		(379,465)		—
Dividends paid		(299,178)		(301,370)
Distribution to non-controlling interest holders		(93,939)		(2,225,637)
Net cash provided by (used in) financing activities		38,380,124		(2,527,007)
Effect of exchange rate changes on cash and cash equivalents		(142,335)		(65,542)
Net decrease in cash and cash equivalents		(1,935,490)		(3,363,460)
Cash and cash equivalents at beginning of period		11,169,169		19,497,840
Cash and cash equivalents at end of period	$	9,233,679	$	16,134,380
Cash paid during the period for interest	$	34,981	$	—
Cash paid during the period for interest - related party	$	9,666	$	—
Cash paid during the period for income taxes	$	165,724	$	202,807
Supplemental disclosure of non-cash investing and financing transactions:
Accrued preferred stock dividends	$	905,104	$	41,324
See accompanying notes to the condensed consolidated financial statements.

Table of Contents

PERNIX GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. ~~Description of Business~~Background

InPernix ~~this report~~Group, Inc. (the ~~terms~~“Company”, “Pernix Group”, “PGI” or “Pernix,”) ~~“PGI~~is a global company managed from Lombard,” “Illinois and was originally formed in 1995 as Telesource International, Inc. In 2001, the Company was incorporated in Delaware and became an SEC registrant. As of March 31,” ~~are~~2016 ~~used~~and toDecember ~~refer~~31, to2015, Pernix Group, ~~Inc~~is over 96.0% ~~and~~owned ~~its~~by ~~consolidated~~Ernil ~~subsidiaries~~Continental, S.A., ~~Unless~~BVI. ~~otherwise~~(Ernil), ~~noted~~Halbarad Group, ~~references~~Ltd., toBVI, ~~years~~(Halbarad) ~~are~~and ~~for~~Affiliates. ~~calendar~~The ~~years~~Company conducts its operations through the parent and its subsidiaries.

~~Overview~~Pernix is a diversified construction company that is engaged in two primary operating business segments - construction services and power services. Construction services include pre-construction (pre-con) consulting services, construction management, design build and general contracting delivered either in lump-sum, guaranteed maximum cost or cost-plus contract models. Power services include operating and maintenance of power production facilities typically with longer term contracts. Pernix has full-scale construction and management capabilities, with some of the Company’s subsidiaries located in the United States, Guam, Fiji, Vanuatu, South Korea, Africa and Germany. The Company provides services in a broad range of end markets, including construction, construction management, power and facility operations and maintenance services. In addition to these two operating segments, the corporate operations are a separately reported segment.

~~Pernix~~The ~~Group~~Company’s issubsidiaries aand ~~global~~consolidated ~~company~~joint ~~managed from Lombard~~ventures, ~~Illinois~~which ~~and~~include ~~was~~Pernix ~~originally~~Building ~~formed in 1995 as Telesource International~~Group, ~~Inc. In 2001~~LLC, ~~the~~Pernix-Serka ~~Company~~Joint ~~was~~Venture ~~incorporated~~(PSJV), inPernix-SHBC ~~Delaware~~Joint ~~and~~Venture ~~became an SEC registrant. As of September 30~~(SHBC), ~~2015,~~ Pernix ~~Group~~LTC ~~is over 96% owned by Ernil Continental~~ (~~“Ernil”~~PLTC), ~~S.A.,~~Pernix ~~BVI~~Fiji, ~~Halbarad Group,~~ Ltd., ~~BVI~~ (~~“Halbarad”~~PFL), ~~and~~Vanuatu ~~Affiliates.~~Utilities ~~The~~and ~~Company~~Infrastructure ~~conducts~~(VUI), ~~its~~Pernix ~~operations~~Guam ~~through~~LLC ~~its~~(PPG), ~~Corporate~~Pernix ~~office~~Papa inNew ~~Lombard~~Guinea (PPNG) and ~~its~~Pernix ~~subsidiaries.~~Kaseman ~~The~~Joint ~~Company’s~~Venture, ~~two~~LLC ~~primary~~(PKJV) ~~operating~~also ~~business~~bid ~~segments~~on ~~are~~and ~~general~~/or execute construction ~~and~~projects ~~power~~with ~~generation~~support ~~services.~~from Inthe ~~addition~~Pernix tocorporate ~~these~~office. ~~two~~Dck ~~operating~~ecc ~~segments,~~Guam ~~the~~Pacific ~~corporate~~JV ~~operations~~LLC ~~are~~is a ~~separately~~variable ~~reported~~interest ~~segment~~entity ~~that~~for ~~provides~~which ~~administrative support to~~ the ~~operating~~Company ~~segments~~is ~~and manages~~ the ~~Corporate~~primary ~~headquarters building operations~~beneficiary.

Pernix has ~~full-scale~~two ~~construction~~power ~~and~~segment ~~management~~subsidiaries ~~capabilities,~~that ~~with~~manage ~~some~~the ~~our~~construction ~~subsidiaries~~and ~~located~~facilities inoperations ~~the~~and ~~South~~management ~~Pacific~~activities ~~islands~~in of Fiji and Vanuatu, ~~Guam,~~respectively. ~~South~~VUI ~~Korea,~~is ~~Africa,~~wholly-owned ~~Azerbaijan, Kurdistan, United Arab Emirates~~ and inPFL ~~the~~is ~~United~~majority-owned ~~States.~~since WeNovember ~~provide~~25, ~~our~~2014, ~~services~~when inPFL asold ~~broad~~249,999 ~~range~~ of ~~end~~its ~~markets,~~common ~~including~~shares ~~federal~~to ~~government,~~Fijian ~~commercial~~Holdings ~~and~~Limited ~~industrial,~~(FHL) ~~and~~for ~~power. Our~~a ~~services~~25% ~~include~~non-controlling ~~construction,~~interest ~~construction~~for ~~management,~~FJD ~~power~~4.35 ~~and~~million ~~facility~~($2.3 ~~operations~~million ~~and maintenance (O&M~~USD) ~~services~~.

The construction and power segments offer diversified general contracting, design/build and construction management services to public and private agencies.

2. Significant Accounting Policies

~~Basis~~Principles of Consolidation and Presentation—The ~~interim condensed~~ consolidated financial statements ~~and~~include ~~notes~~the ~~thereto~~accounts of ~~Pernix~~all ~~Group~~majority-owned ~~have~~subsidiaries ~~been~~over ~~prepared~~which ~~by management without audit, pursuant to~~ the ~~rules~~Company ~~and~~exercises ~~regulations~~control ~~of the Securities~~ and ~~Exchange~~joint ~~Commission.~~ventures ~~Although~~when ~~certain~~determined ~~information~~to ~~and~~be ~~footnote~~variable ~~disclosures~~interest ~~normally~~entities ~~included~~(VIE) in ~~condensed~~which ~~consolidated financial statements prepared in accordance with accounting principles generally accepted in~~ the ~~United States of America have been omitted pursuant to such rules and regulations, the~~ Company ~~believes~~is ~~that~~ the ~~disclosures~~primary ~~are~~beneficiary. ~~adequate~~During ~~to make~~ the ~~information~~three ~~presented~~months ~~not~~ended ~~misleading.~~March ~~The~~31, ~~financial statements reflect all adjustments which are~~2016, in the ~~opinion~~VIE ofand ~~management,~~related ~~necessary~~financial ~~for a fair presentation of the~~ results ~~for~~primarily ~~the~~relate ~~periods~~to ~~presented.~~our ~~All~~PPG ~~such~~acquisition ~~adjustments~~in ~~are~~June of2015 aas ~~normal~~discussed ~~and~~in ~~recurring~~Note ~~nature~~3. ~~These~~All ~~condensed~~inter-company ~~consolidated~~accounts ~~financial~~have ~~statements~~been ~~should~~eliminated ~~be read~~ in ~~conjunction~~consolidation. ~~with~~The ~~the~~ consolidated financial statements ~~and~~of the ~~notes thereto included in the~~ Company’s ~~2014 Annual Report on Form 10-K. The results of operations~~ for the ~~interim~~three ~~periods~~months ~~are~~ended ~~not~~March ~~necessarily~~31, ~~indicative~~2016 ofand ~~the~~2015 ~~results~~reflect ~~for any subsequent quarter or~~ the ~~entire~~impact ~~fiscal~~of ~~year~~quasi-reorganization ~~ending December 31, 2015~~accounting.

~~Principles~~Use of ~~Consolidation~~Estimates—The preparation of financial statements in conformity with accounting principles generally accepted in the United States (GAAP) requires management to make estimates and ~~Presentation—The~~assumptions ~~condensed~~that ~~consolidated~~affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements ~~include~~and the ~~accounts~~reported amounts of ~~all~~revenues ~~majority~~and expenses during the reporting period. The more significant estimates affecting amounts reported in the consolidated financial statements relate to revenues under long-~~owned~~term ~~subsidiaries~~contracts, including estimates of costs to complete projects and ~~joint~~provisions ~~ventures~~for contract losses, asfair ~~well~~market asvalue ~~variable~~allocation ~~interest~~of ~~entities~~assets purchased in ~~which~~business ~~the~~combinations, ~~Company~~allowances isfor doubtful accounts, reserves for self-insured risk, valuation of options in connection with various share-based compensation plans, insurance accruals, impairment evaluations for goodwill and definite lived intangibles, and the ~~primary~~valuation ~~beneficiary~~allowance against deferred tax assets. ~~All~~Accordingly, ~~intercompany~~there ~~accounts~~can ~~have~~be ~~been~~no ~~eliminated~~assurance that the estimates, assumptions and values reflected in ~~consolidation~~the valuations will be realized. Actual results could vary materially.

Table of Contents

Revenue Recognition— Pernix offers our services through two operating business segments: construction and power services which are supported by the corporate segment. Revenue recognition for each of the non-corporate segments is described by segment below.

Construction Revenue. Revenue from construction contracts is recognized using the percentage-of-completion method of accounting based upon costs incurred and estimated total projected costs. Our current projects with the U.S. Government are design/build and design/bid/build contracts with fixed contract prices and include provisions of termination for convenience by the party contracting with us. Such provisions also allow payment to us for the work performed through the date of termination.

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

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

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

Contract Claims— Sometimes clients, vendors and subcontractors will present claims against us for recovery of costs they incurred in excess of what they expected to incur, or for which they believe they are not contractually responsible. In turn, we may also present claims to our clients, vendors and subcontractors for costs that we believe were not our responsibility or may be beyond our scope of work. The Company records contract revenue related to claims only if it is probable that the claim will result in additional contract revenue and if the amount can be reliably estimated. In such cases, the Company records revenue only to the extent that contract costs relating to the claim have been incurred. As of March 31, 2016 and December 31, 2015, the Company had no significant receivables or payables related to contract claims.

Cash and Cash Equivalents—The Company’s cash equivalents include highly liquid investments which have an initial maturity of three months or less.

Restricted cash— The Company’s restricted cash represents required cash balances maintained in conjunction with PFL’s financing agreements related to ongoing constructions projects.

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

~~Revenue~~Inventory ~~Recognition~~— ~~Pernix~~Inventory ~~offers~~primarily ~~our~~represents ~~services~~the ~~through~~value ~~two~~of ~~operating~~spare ~~business~~parts ~~segments:~~which ~~General~~the ~~Construction~~Company ~~and~~is ~~Power~~required ~~Generation~~to ~~Services~~maintain ~~which~~for ~~are~~use ~~supported~~in the diesel power generators operated and maintained by the ~~Corporate~~Company ~~segment~~in Fiji. ~~Revenue~~Inventories ~~recognition~~are ~~for~~valued ~~each~~at the lower of cost or market, generally using the ~~non~~first-~~corporate~~in, ~~segments~~first-out method, and are primarily homogenous in nature. As of March 31, 2016 and December 31, 2015, the value of the spare parts inventory is ~~described~~$1.9 bymillion ~~segment~~and ~~below~~$1.8 million, respectively.

~~General~~Property ~~Construction~~and ~~Revenue.~~Equipment ~~Revenue~~- ~~from~~Property ~~construction~~and ~~contracts~~equipment isare ~~recognized~~initially recorded at cost and are depreciated over their estimated useful lives using the ~~percentage~~straight-~~of-completion~~line method. ofExpenditures ~~accounting~~for ~~based~~major ~~upon~~additions ~~costs~~and ~~incurred~~improvements are capitalized while maintenance and ~~estimated~~repairs ~~total~~are ~~projected~~expensed ~~costs~~as incurred. ~~Our~~The ~~current~~cost ~~projects~~of ~~include design/build~~property, ~~design/bid/build~~plant ~~contracts~~and ~~with~~equipment ~~fixed~~sold ~~contract~~or ~~prices,~~otherwise ~~guarantee~~disposed ~~maximum~~of ~~price~~and ~~contracts~~the related accumulated depreciation are removed from the accounts and ~~may~~any ~~include~~resulting ~~provisions~~gain ofor ~~termination~~loss ~~for~~is ~~convenience~~included byin ~~the~~operating ~~party~~income ~~contracting~~for ~~with~~the usrespective period. Typically, ~~Such~~estimated ~~provisions~~useful ~~also~~lives ~~allow~~range ~~payment~~from three to usten years for equipment, furniture and fixtures and 39 years for buildings. Leasehold improvements are amortized on a straight-line basis over the ~~work~~lesser ~~performed~~of ~~through~~their estimated useful lives or the ~~date~~remaining terms of ~~termination~~the underlying lease agreement.

~~The~~Long-lived ~~Company~~assets ~~only~~to ~~uses~~be ~~approved~~held ~~contract~~and ~~changes~~used inare ~~its~~reviewed ~~revenue~~for ~~recognition~~impairment ~~calculation.~~whenever ~~The~~events ~~percentage-of~~or ~~completion~~circumstances ~~method~~indicate ~~of revenue recognition requires~~ that the ~~Company~~assets ~~estimate~~may ~~future~~be ~~costs~~impaired. toFor ~~complete~~assets ato ~~project~~be ~~based~~held ~~upon the knowledge~~ and ~~experience of the Company’s engineers~~used, ~~project~~impairment ~~managers~~losses ~~and~~are ~~finance~~recognized ~~professionals.~~based ~~Estimating~~upon ~~future~~the ~~costs~~excess ~~requires judgment~~ of the ~~value~~asset’s ~~and~~carrying ~~timing~~amount ofover ~~material,~~the ~~labor,~~fair ~~scheduling,~~value ~~product deliveries, contractual performance standards, liability claims, impact~~ of ~~change~~the ~~orders, contract disputes as well as productivity~~asset. ~~Amounts~~For ~~billed~~long-lived inassets ~~excess~~to ofbe ~~costs~~disposed, ~~and~~impairment ~~estimated~~losses ~~earnings~~ are recognized asat athe ~~liability.~~lower ~~The Company will record a provision for losses when estimated costs exceed estimated revenues. Contracts generally extend over a period~~ of ~~longer than one year from~~ the ~~date~~carrying onamount ~~which~~or ~~the~~fair ~~Company~~value isless ~~ordered~~cost to ~~proceed with substantial work~~sell. InThere ~~situations~~was ~~where~~no ~~the~~such ~~Company~~impairment ~~is responsible~~ for ~~procurement of construction materials, shipping and handling expenses are included in~~ the ~~contract~~three ~~costs~~months ofended ~~revenue~~March ~~and~~31, ~~in revenue to the extent the contract is complete~~2016.

~~Power~~Goodwill ~~Generation~~and ~~Services~~Other ~~Revenue.~~Intangible ~~The~~Assets ~~Company~~– Goodwill ~~receives~~represents ~~variable~~the ~~monthly~~excess ~~payments~~of aspurchase ~~compensation~~consideration ~~for~~over ~~its~~the ~~production~~fair value of ~~power~~the net assets of businesses acquired. Goodwill ~~The~~is ~~variable~~not ~~payments~~amortized. Instead, ~~are~~goodwill ~~recognized~~is ~~based~~tested ~~upon~~for ~~power~~impairment ~~produced~~at ~~and~~least ~~billed~~annually toor ~~the~~more ~~customer~~frequently if indicators of impairment exist, such as ~~earned~~a ~~during~~significant ~~each~~sustained ~~accounting~~change ~~period~~in the business climate or a current expectation of an impending disposal. The Company ~~also~~conducts ~~received~~its ~~fixed~~annual ~~payments~~impairment evaluation in ~~connection~~the ~~with~~fourth ~~the~~quarter ~~long~~of ~~term~~each ~~concession~~year. ~~deed~~There ~~for~~were ~~Operations~~no ~~and~~impairment ~~Maintenance~~triggering ~~(O&M)~~events ~~services~~identified induring ~~Fiji~~the three months ended March 31, 2016.

~~Cost~~Other ofintangible ~~Construction~~assets ~~Revenue.~~with ~~Cost~~definite oflives ~~revenue~~consist ~~consists~~primarily of ~~direct~~customer ~~costs on~~ contracts,/backlog ~~including labor~~ and materials, amounts payable to subcontractors, direct overhead costs, equipment expense (primarily depreciation, maintenance, and repairs), and interest associated with construction projects, and insurance coststradename. The ~~Company~~customer ~~records~~contracts a/ ~~portion~~backlog ofintangible ~~depreciation~~assets ~~and~~are ~~indirect~~being ~~overhead~~amortized into ~~cost~~costs of construction revenue ~~dependent~~in on the ~~nature~~consolidated statements of ~~charges~~operations ~~and~~on ~~the~~a ~~related~~straight-line ~~project~~basis ~~agreements.~~over Ifa ~~not~~weighted ~~chargeable~~average tolife ~~individual~~ranging ~~projects,~~from ~~overhead~~two ~~costs~~to ~~are~~three ~~expensed in the period incurred~~years. ~~Contracts~~The ~~frequently~~tradename ~~extend~~intangible ~~over~~asset ais ~~period~~being ofamortized ~~more~~to ~~than~~general ~~one year. Revisions in cost~~ and ~~profit~~administrative ~~estimates~~expenses ~~during construction are recognized~~ in the ~~accounting~~consolidated ~~period~~statements inof ~~which~~operations ~~the~~on ~~facts~~a ~~that~~straight-line ~~require~~basis ~~the~~over ~~revision~~2 ~~become known~~years. ~~Losses~~See onNote ~~contracts~~4 ~~are provided~~ for inmore ~~total when determined, regardless of the degree of project completion~~information. ~~Cost of construction revenue also includes amortization expense associated with customer contract / backlog intangible assets.~~

~~Contract~~Construction ~~Claims— Sometimes clients, vendors~~ and ~~subcontractors~~power ~~will~~contract ~~present~~intangibles ~~claims~~– In ~~against~~connection uswith ~~for~~the ~~recovery~~quasi-reorganization ofasset ~~costs~~valuations, ~~they~~$0.3 ~~incurred~~million ~~in excess~~ of ~~what~~contracts ~~they~~were ~~expected~~recognized toas ~~incur,~~intangible orassets ~~for~~and ~~which they believe they~~ are ~~not~~amortized ~~contractually~~in ~~responsible.~~proportion ~~In turn, we may also present claims~~ to ~~our~~the ~~clients,~~anticipated ~~vendors~~completion ~~and~~of ~~subcontractors~~the ~~for~~contracts. ~~costs~~As ~~that~~of weMarch ~~believe~~31, ~~were~~2016 ~~not~~the ~~our~~remaining ~~responsibility~~weighted oraverage ~~may~~life beon ~~beyond our scope of work. The Company records~~ contract ~~revenue~~intangible ~~related~~assets tois ~~claims~~7 ~~only~~years. Amortization ifexpense itof ~~is probable that~~ the ~~claim will result in additional~~ contract ~~revenue~~intangible ~~and~~assets ifwas ~~the~~less ~~amount~~than ~~can be reliably estimated~~$0.1 Inmillion ~~such~~for ~~cases,~~ the ~~Company~~three ~~records~~months ~~revenue~~ended ~~only~~March to31, ~~the~~2016 ~~extent~~and ~~that~~2015 ~~contract~~and ~~costs relating to~~ the ~~claim~~remaining ~~have~~balance ~~been~~as ~~incurred. As~~ of ~~September~~March ~~30, 2015 and December~~ 31, ~~2014,~~2016 ~~the~~was ~~Company~~$0.1 ~~had no significant receivables or payables related to contract claims~~million.

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

~~Fair~~Deferred ~~Value~~income ~~Measurements—Accounting~~taxes ~~Standards~~are ~~Codification~~accounted ~~("ASC")~~for ~~820,~~under ~~“Fair~~the ~~Value~~asset ~~Measurements~~ and ~~Disclosures,”~~liability ~~establishes~~method. aDeferred ~~fair~~tax ~~value~~assets ~~hierarchy~~and ~~that~~liabilities ~~requires~~are recognized for the ~~Company~~estimated future tax consequences attributable to ~~maximize~~differences between the ~~use~~financial statement carrying amounts of ~~observable~~existing ~~inputs~~assets and ~~minimize~~liabilities ~~the~~and ~~use~~their ofrespective ~~unobservable~~income ~~inputs~~tax ~~when~~bases. ~~measuring~~Deferred ~~fair~~tax ~~value.~~assets Aand ~~financial~~liabilities ~~instrument’s~~are ~~categorization~~measured ~~within~~using ~~the~~enacted ~~hierarchy~~tax isrates ~~based~~expected onto apply to taxable income in the ~~lowest~~years ~~level~~in ofwhich ~~input~~those ~~that~~temporary isdifferences ~~significant~~are expected to ~~the~~be ~~fair~~recovered ~~value~~or ~~measurement~~settled. ~~ASC~~The ~~820~~effect ~~establishes~~on ~~three~~deferred ~~levels~~tax assets and liabilities of ~~inputs~~a ~~that~~change ~~may~~in betax ~~used~~rates tois ~~measure~~recognized ~~fair~~in ~~value.~~income in the period that includes the enactment date.

Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2 inputs include inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices in active markets for similar assets and liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of assets or liabilities.

Level 3 inputs are unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.

The carrying values of our accounts including cash and cash equivalents, restricted cash, accounts receivable, inventories, cost in excess of billings, accounts payable, accrued employee compensation, billings in excess of costs, dividends payable and current maturities of long term debt are reasonable estimates of their fair values as of September 30, 2015 and December 31, 2014 due to the short-term nature of these instruments.

Cash and Cash Equivalents—The Company’s cash equivalents include highly liquid investments which have an initial maturity of three months or less and approximates fair value.

Restricted cash— The Company’s restricted cash represents required cash balances maintained in conjunction with PFL’s financing agreements related to ongoing construction projects and certain balances associated with one of our recent acquisitions as described in Note 3.

Inventory — Inventory represents the value of spare parts which the Company is required to maintain for use in the diesel power generators. Inventories are valued at the lower of cost or market, generally using the first-in, first-out method, and are primarily homogenous in nature. As of September 30, 2015 and December 31, 2014, the balance of inventory, consisting primarily of spare parts used for the diesel power generators, totaled $1.6 million for both periods presented.

Property and Equipment - Property and equipment are initially recorded at cost and are depreciated over their estimated useful lives using the straight-line method. Expenditures for maintenance and repairs are expensed as incurred. Typically, estimated useful lives range from three to ten years for equipment, furniture and fixtures and 39 years for buildings. Leasehold improvements are amortized on a straight-line basis over the shorter of their estimated useful lives or the remaining terms of the underlying lease agreement.

Long-lived assets to be held and used are reviewed for impairment whenever events or circumstances indicate that the assets may be impaired. For assets to be held and used, impairment losses are recognized based upon the excess of the asset’s carrying amount over the fair value of the asset. For long-lived assets to be disposed, impairment losses are recognized at the lower of the carrying amount or fair value less cost to sell. There was no such impairment for the periods ended September 30, 2015 and 2014.

Goodwill and Other Intangible Assets – The acquisitions discussed in Note 3 resulted in the recognition of goodwill and certain other intangible assets. Goodwill represents the excess of purchase consideration over the fair value of the net assets of businesses acquired. Goodwill is not amortized. Instead, goodwill is tested for impairment at least annually or more frequently if indicators of impairment exist, such as a significant sustained change in the business climate or a current expectation of an impending disposal. The Company conducts its annual impairment evaluation in the fourth quarter of each year.

Other intangible assets with determinable lives consist primarily of customer contracts/backlog and tradename. The customer contracts / backlog intangible assets are being amortized on a straight-line basis over a 3 year weighted average life and are recorded in construction costs in the statements of operations. The tradename intangible asset is being amortized on a straight-line basis over 2 years and is recorded in general and administrative expenses in the statements of operations.

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

Deferred income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective income tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Effective for the activity commencing on or after January 1, 2015, the state of Illinois has enacted legislation which results in a reduction of the Company’s net deferred tax assets. This impact is offset with a corresponding decrease in valuation allowance, resulting in no impact on net income.

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

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

~~Foreign~~Allowance ~~Currency~~for ~~Translation~~Doubtful Accounts—The ~~functional~~Company ~~currency~~records ofits ~~the~~accounts ~~Company’s~~receivable ~~foreign~~net ~~operations~~of isan ~~the~~allowance ~~applicable~~for ~~local~~doubtful ~~currency~~accounts. The ~~functional~~allowance ~~currency~~for doubtful accounts is ~~translated~~estimated ~~into~~based ~~U.S.~~on ~~dollars~~management’s ~~for~~evaluation ~~balance~~of ~~sheet~~the ~~asset~~contracts involved and ~~liability~~the ~~accounts~~financial ~~using~~condition ~~current~~of ~~exchange~~its ~~rates~~clients. inThe ~~effect~~factors asconsidered ofby the ~~balance~~Company ~~sheet~~in ~~date~~its contract evaluations include, but are not limited to; client type—domestic and ~~for~~foreign, ~~revenue~~federal, state and ~~expense~~local ~~accounts~~government ~~using~~or acommercial ~~weighted-average~~client, ~~exchange~~historical ~~rate~~contract ~~during~~performance, ~~the~~historical ~~period.~~collection ~~The~~and ~~translation~~delinquency ~~adjustments~~trends, ~~are~~client ~~reflected~~credit asworthiness aand ~~separate~~general ~~component~~economic ofconditions. There ~~stockholders’~~was ~~equity~~no ~~captioned~~allowance ~~accumulated~~for ~~other~~doubtful ~~comprehensive~~accounts ~~income~~as ~~(loss).~~of March 31, 2016.

Fair Value of Financial Instruments—The ~~assets~~Company ~~and~~determines ~~liabilities~~the fair values of ~~the~~its ~~entity~~financial ~~which~~instruments ~~are~~based ~~denominated~~on ininputs ~~currencies~~or ~~other~~assumptions ~~than~~that ~~the~~market ~~Company’s~~participants ~~functional~~would ~~currency~~use ~~are~~in ~~re-measured~~pricing ~~into~~an ~~the~~asset or a liability. The Company’s ~~functional~~categorizes ~~currency~~its instruments using ~~end~~a valuation hierarchy for disclosure of ~~period~~the orinputs ~~historical~~used ~~exchange~~to ~~rates~~measure fair value. ~~Gains~~This ~~(losses)~~hierarchy ~~associated~~prioritizes ~~with~~the ~~these~~inputs ~~re-measurements~~into ~~are~~three ~~included~~broad inlevels ~~other~~as ~~income~~follows: Level 1 inputs are quoted prices (~~expense~~unadjusted), ~~net~~ in ~~the~~active ~~consolidated~~markets ~~statement~~for ofidentical ~~operations.~~assets ~~From~~or ~~time~~liabilities; toLevel ~~time,~~2 ~~the~~inputs ~~Company~~are isquoted ~~exposed~~prices tofor ~~foreign~~similar ~~currency~~assets ~~exchange~~and ~~risk~~liabilities onin ~~various~~active ~~foreign~~markets ~~transactions~~or ~~and~~inputs ~~the~~that ~~Company~~are ~~attempts~~observable tofor ~~reduce~~the ~~this~~asset ~~risk~~or ~~and~~liability, ~~manage~~either ~~cash~~directly ~~flow~~or ~~exposure~~indirectly ofthrough ~~certain~~market ~~payables~~corroboration, ~~and~~for ~~anticipated~~substantially ~~transactions~~the byfull ~~entering~~term ~~into~~of ~~forward~~the ~~exchange~~financial ~~contracts.~~instrument; AtLevel ~~September~~3 ~~30,~~inputs ~~2015~~are ~~and~~unobservable ~~December~~inputs ~~31,~~based ~~2014,~~on the ~~foreign~~Company’s ~~currency~~assumptions ~~risk~~used isto ~~not~~measure ~~material~~assets and ~~there~~liabilities ~~were~~at nofair ~~foreign~~value. ~~exchange~~The ~~contracts~~classification ~~outstanding.~~of ~~The~~a ~~Company~~financial ~~historically~~asset ~~has~~or ~~not~~liability ~~applied~~within ~~hedge~~the ~~accounting~~hierarchy ~~treatment~~is determined based on the lowest level input that is significant to ~~its~~the ~~forward~~fair ~~exchange~~value ~~contracts~~measurement.

~~Stock-Based~~The ~~Compensation—Awards~~carrying ~~issued~~amounts ~~under~~of ~~the~~cash ~~Company’s~~and ~~stock-based~~cash ~~compensation~~equivalents, ~~plans~~accounts ~~include~~receivable, ~~qualified~~accounts ~~stock~~payable, ~~options~~accrued toexpenses ~~employees,~~and ~~non~~the short-~~qualified~~term ~~stock~~debt ~~options~~agreements ~~and~~approximate ~~awards,~~fair ~~restricted~~value ~~stock~~because ~~units~~of ~~and~~the ~~other~~short ~~types~~maturities of ~~awards~~these instruments.

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

From time to time, the Company holds financial instruments such as marketable securities, receivables related to sales-type leases, and foreign currency contracts. As of March 31, 2016 and 2015, the Company did not hold any such financial instruments.

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

From time to time, the Company is exposed to foreign currency exchange risk on various foreign transactions and the Company attempts to reduce this risk and manage cash flow exposure of certain payables and anticipated transactions by entering into forward exchange contracts. As of March 31, 2016 and December 31, 2015, the foreign currency risk is not material and there were no foreign exchange contracts outstanding. The Company historically has not applied hedge accounting treatment to its forward exchange contracts.

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

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

Stock option awards for employees and directors are classified as equity instruments and are valued at the grant date and are not subject to re-measurement. The option valuation is performed using the Black Scholes model. Option valuation models require the input of highly subjective assumptions and changes in the assumptions can materially affect fair value estimates. Judgment is required in estimating stock price volatility, forfeiture rates, expected dividends, and the expected terms of options outstanding. 11

12 Table of Contents

3Stock option awards for employees and directors are classified as equity instruments and are valued at the grant date and are not subject to re-measurement. ~~Acquisitions~~The option valuation is performed using a Black Scholes fair value model. Option valuation models require the input of highly subjective assumptions, and changes in the assumptions can materially affect fair value estimates. Judgment is required in estimating stock price volatility, forfeiture rates, expected dividends, and expected terms that options remain outstanding. During the three months ended March 31, 2016 and 2015, compensation expense related to stock options was approximately $0.1 million for both periods.

Reclassification—Certain reclassifications were made to prior year amounts to conform with current year presentation.

3. Acquisitions and Partial Sale to Non-controlling Interest

Papa New Guinea Transactions

On March 31, 2016, PGI and its subsidiary, Pernix Papa New Guinea Ltd. (“PPNG”), consummated two interdependent transactions, the first of which was the sale by PGI of a non-controlling interest in PPNG to FHL for seven million Kina (USD $2,343,803 as of March 31, 2016). The second transaction was the purchase by PPNG of Basic Industries Ltd. (“BIL”), from PHL Holdings Ltd. (“PHL”) for one million Kina (USD $334,827 as of March 31, 2016). FHL, a shareholder of PHL, serves as guarantor, indemnifying PPNG in accordance with the terms of the purchase agreement.

The assets and liabilities of the acquired business are recorded at their estimated fair values at the date of acquisition. The results of operations for BIL during the three months ended March 31, 2016 were insignificant. Transaction costs were nominal and were expensed as incurred. The Company has estimated the fair value of the assets acquired and liabilities assumed for BIL at the date of acquisition based upon information available to the Company at the reporting date. The estimated fair value of the total assets acquired was approximately $1.7 million, consisting primarily of property and equipment ($1.1 million) and prepayments ($0.4 million). The estimated fair value of the total liabilities assumed was $1.3 million, consisting primarily of assumed debt ($1.2 million). The Company is still in the process of finalizing appraisals of tangible and intangible assets in order to complete its purchase price allocation for the acquisition of BIL. As additional information is obtained about these assets and liabilities within the measurement period (not to exceed one year from the date of acquisition), the Company may revise its estimates of fair value to more accurately allocate the purchase price.

BE&K Building Group Acquisition

On June 30, 2015, the Pernix Building Group, LLC (“PBG”), a wholly owned subsidiary of Pernix, acquired a 100% membership interest in KBR Building Group, LLC from BE&K, Inc., a subsidiary of KBR, Inc., ~~pursuant to a definitive Membership Interest Purchase Agreement (the “Purchase Agreement”)~~ for $22.0 million in cash subject to working capital adjustments, of which $0.9 million was paid on the acquisition date, based on a net working capital target of negative $6.0 million. During the fourth quarter, management finalized a $4.0 million working capital adjustment reducing the purchase price to $18.9 million. As discussed in Note 4, the Company returned $0.4 million to the seller in April 2016. The KBR Building Group, LLC, now known as “BE&K Building Group” (“BEK BG”), is a diversified construction services company serving advanced manufacturing, industrial, life sciences, and commercial/mixed-use clients providing comprehensive pre-construction and at-risk construction management services. The addition of BEK BG personnel, resources, past experience and past performance will serve to expand Pernix’s U.S. domestic base and its private sector coverage.

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

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

The JV operates on the island of Guam and holds a Design-Build Multiple Award Construction Contract (the “DB-MACC”) with the United States Naval Facilities Engineering Command (“NAVFAC”). The DB-MACC serves as a pre-qualification for future work issued through NAVFAC task orders. There are four task orders under the DB-MACC. Pursuant to the Agreement, the members of the JV executed an amended and restated operating agreement of the JV (the “Amended JV Agreement”), under which PPG’s membership interest in the JV represents a 96% economic interest in one DB-MACC task order called P-109 for the design and construction of an aircraft maintenance hangar on the island of Guam with a contract value of $53.6 million. In accordance with the Agreement and the Amended JV Agreement, the PPG’s interest, rights and obligations with respect to the JV are limited only to the P-109 task order. dck and the other members of the JV retain all other interests, rights and obligations with respect to the JV. To that end, the JV entered into an agreement with dck for the completion of all remaining work on the non P-109 (“non P-109”) task orders. dck will fully indemnify and hold harmless PPG and its affiliates, including the P-109 assets of the JV and PPG’s rights thereto, from and against any and all damages from any claim, to the extent that such claim arises as a result of, or relates to, any non P-109 task order. PPG and its affiliates are also indemnified through a payment and performance bond on the non P-109 task orders. 12

~~The~~Table ~~Company has determined that the JV is a Variable Interest Entity (“VIE”) in which PPG now holds a 55% membership interest. PPG is the primary beneficiary~~ of the JV and as a result, consolidates the JV in its entirety. PPG controls all activities and has a 96% economic interest in the activities of the P-109 project, which represents the most significant remaining activities of the JV. PPG has no obligation to absorb the expected losses of, nor the right to receive the expected residual returns deriving from non P-109 activity of the JV. It is expected that the JV activity upon which these short-term balance sheet items are based will be concluded by December 31, 2015, or sooner, and will not impact the Company’s consolidated financial statements after the completion of these non P-109 projects. The consolidated financial statements as of September 30, 2015 include the following assets and liabilities of the JV which relate solely to the non P-109 projects and the Company has no rights or obligations with respect to these items:Contents

		Non P-109
Cash and cash equivalents	$	35,704
Cost in excess of billings and estimated earnings on uncompleted contracts		1,362,697
Contract payables and accrued expenses		1,008,255
Billings in excess of costs and estimated earnings on uncompleted contracts	$	242,888

The JV is a variable interest entity (“VIE”) in which PPG holds a 55% membership interest. PPG is the primary beneficiary of the JV and as a result, consolidates the JV in its entirety. PPG controls all activities and has a 96% economic interest in the activities of the P-109 project, which represents the most significant remaining activities of the JV. PPG has no obligation to absorb the expected losses of, nor the right to receive the expected residual returns deriving from non P-109 activity of the JV. It is expected that the non-P109 JV activity will be concluded within the first half of 2016 and will not impact the Company’s consolidated financial statements after the completion of these non P-109 projects. The consolidated financial statements as of March 31, 2016 include the following assets and liabilities of the JV which relate solely to the non P-109 projects and the Company has no rights or obligations with respect to these items:

		Non P-109

Contract receivables	$	181,576
Contract payables and accrued expenses		(772,659)
Billings in excess of costs and estimated earnings on uncompleted contracts		(333,736)

Purchase Price Allocations

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

The Company has estimated the fair value of the assets acquired and liabilities assumed at the date of acquisition based upon information available to the Company at the reporting date. The Company is still in the process of finalizing appraisals of tangible and intangible assets in order to complete its purchase price allocation for the acquisitions. Accordingly, management has used its best estimates in the preliminary purchase price allocation as of the date of these financial statements. As additional information is obtained about these assets and liabilities within the measurement period (not to exceed one year from the date of acquisition), the Company may revise its estimates of fair value to more accurately allocate the purchase price.

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

		BEK BG	PPG	Total
Consideration:
Cash	$ 22,882,585		$ 1,525,000	$ 24,407,585
Contingent consideration	-		300,000	300,000
Fair Value of Non-controlling interest	-		137,205	137,205
Fair Value of Consideration Transferred	22,882,585		1,962,205	24,844,790
Fair Value of Assets Acquired and Liabilities Assumed:
Restricted cash	-		487,363	487,363
Cost and estimated earnings in excess of billings	26,854,436		3,143,008	29,997,444
Accounts receivable	34,200,191		616,317	34,816,508
Inventory	-		111,570	111,570
Other assets	1,564,526		450,033	2,014,559
Fixed assets	-		1,270,761	1,270,761
Intangibles assets	10,400,000		-	10,400,000
Billing in excess of costs and estimated earnings	(11,715,545)		(741,857)	(12,457,402)
Accounts payable and accrued expenses	(54,671,072)		(3,374,990)	(58,046,062)
Other current liabilities	(3,374,790)		-	(3,374,790)
Total Identifiable Net Assets	3,257,746		1,962,205	5,219,951
Goodwill	19,624,839		-	19,624,839
	$ 22,882,585		$ 1,962,205	$ 24,844,790

Acquired intangible assets consist primarily of contract-related intangibles and tradename. The 2015 acquisitions resulted in the recognition of $19.6 million of goodwill. Transaction costs associated with these acquisitions incurred during the nine months ended September 30, 2015 were $1.7 million and were nominal during the three months ended September 30, 2015.

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

		General Construction Segment
Identifiable intangibles:
Goodwill	$	19,624,839
Customer contracts / backlog		9,200,000
Tradename		1,200,000
Total intangible assets	$	30,024,839

Pro Forma Information

The following unaudited pro forma information illustrates the effect on the Company’s revenue and net earnings for the three and nine months ended September 30, 2015 and 2014, assuming that the 2015 acquisitions had taken place on January 1, 2014.

		Nine Months Ended				Three Months Ended
		September 30,				September 30,
		2015		2014		2015		2014
Revenues:
As reported	$	108,736,183	$	50,395,876	$	87,041,406	$	19,155,257
Pro forma	$	239,534,653	$	279,805,566	$	87,041,406	$	83,299,553
Net income (loss) attributable to common stockholders:
As reported	$	(10,334,642)	$	332,328	$	(4,553,057)	$	170,379
Pro forma	$	(9,977,269)	$	2,101,772	$	(3,839,107)	$	1,881,515
Basic earnings per share:
As reported	$	(1.10)	$	0.04	$	(0.48)	$	0.02
Pro forma	$	(1.01)	$	0.22	$	(0.39)	$	0.18
Diluted earnings per share:
As reported	$	(1.10)	$	0.03	$	(0.48)	$	0.02
Pro forma	$	(1.01)	$	0.21	$	(0.39)	$	0.18

These pro forma results of operations have been prepared for comparative purposes only. These pro forma results are based on the actual results of the acquired companies and also include certain adjustments to actual financial results for the periods presented, such as estimated additional amortization and depreciation expense as a result of intangibles and fixed assets acquired, measured at fair value. They do not purport to be indicative of the results of operations that actually would have resulted had the acquisitions occurred on the date indicated or that may result in the future.

The pro forma results include adjustments for non-recurring transaction costs of $1.7 million for the nine months ended September 30, 2015 and $0.8 million of non-recurring professional fees and transition related expenditures for the nine months ended September 30, 2015 and 2014 and for the three months ended September 30, 2015.

Actual acquisition revenue for the three and nine months ended September 30, 2015 were $76.9 million and $78.7 million, respectively. Actual acquisition loss before income taxes for the three and nine months ended September 30, 2015 were $0.3 million and $0.5 million, respectively.

4. Goodwill and Other Intangible Assets

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

		September 30, 2015						December 31, 2014
		March 31, 2016						December 31, 2015
		Gross Carrying Amount		Accumulated Amortization		Net Amount		Gross Carrying Amount		Accumulated Amortization		Net Amount
Other Intangible Assets Subject to Amortization:
Customer Contracts / Backlog	$	7,972,000	$	(2,467,085)	$	5,504,915	$	7,972,000	$	(1,723,497)	$	6,248,503
Customer Contracts / Backlog	$	9,500,000	$	(992,292)	$	8,507,708	$	300,000	$	(218,349)	$	81,651
Tradename		1,200,000		(450,000)		750,000		1,200,000		(300,000)		900,000
Tradename		1,200,000		(150,000)		1,050,000		-		-		-
Total Other Intangible Assets	$	9,172,000	$	(2,917,085)		6.254,915	$	9,172,000	$	(2,023,497)		7,148,503
Total Other Intangible Assets	$	10,700,000	$	(1,142,292)	$	9,557,708	$	300,000	$	(218,349)	$	81,651
Goodwill						20,023,832						19,141,273
Goodwill						19,624,839						-
Total Goodwill and Other Intangible Assets					$	26,278,747					$	26,289,776
Total Goodwill and Other Intangible Assets					$	29,182,547					$	81,651

		General Construction Segment
		Construction Segment
Other Intangible Assets Subject to Amortization:
Balance as of December 31, 2014	$	81,651
Balance as of December 31, 2015	$	7,148,503
Acquisitions		10,400,000
Amortization		(893,588)
Amortization		(923,943)
Balance as of March 31, 2016		6,254,915
Measurement period adjustments		-
Balance as of September 30, 2015		9,557,708
Goodwill:
Balance as of December 31, 2014		-
Balance as of December 31, 2015		19,141,273
Acquisitions		16,576,048
Adjustments		882,559
Measurement period adjustments		3,048,791
Balance as of March 31, 2016		20,023,832
Balance as of September 30, 2015		19,624,839
Goodwill and Other Intangibles as of March 31, 2016	$	26,278,747
Total Goodwill and Other Intangibles as of September 30, 2015	$	29,182,547

~~The~~During ~~Company~~the ~~recognized~~quarter ~~$16.6~~ended ~~million~~March of31, 2016, the Company adjusted goodwill ~~resulting~~to ~~from~~a) correct the ~~June~~December 3031, 2015 ~~acquisition~~classification of ~~BEK BG~~goodwill, ~~all~~resulting in an increase of ~~which~~approximately ~~was~~$531,000 ~~assigned~~and tob) ~~the~~reflect ~~Company’s~~approximately ~~General~~$351,000 ~~Construction~~that ~~segment.~~was ~~During~~erroneously ~~the~~paid ~~three~~to ~~months~~the ~~ended~~Company ~~September~~as ~~30,~~part ~~2015,~~of the ~~Company~~working ~~recognized~~capital anadjustment ~~increase~~for tothe ~~project~~Pernix ~~related~~Building ~~liabilities~~Group, ofLLC ~~$3.0~~acquisition ~~million~~in ~~with~~2015, aas ~~corresponding~~an increase to goodwill.

Amortization of intangible assets for the three ~~and nine~~ months ended ~~September~~March 3031, ~~2015~~2016 was $0.9 million, of which $0.87 million was recorded in construction costs and $0.2 million was recorded in general and administrative expenses on the consolidated ~~Statements~~statements of ~~Operations~~operations. Amortization expense relating to remaining amortizable intangible assets will be $2.7 million in 2016, $2.6 million in 2017, and $1.0 million in 2018.

~~Amortization expense relating to amortizable intangible assets will be $0.9 million for the remainder of 2015, $3.7 million in 2016, $3.4 million in 2017, and $1.5 million in 2018.~~13

16 Table of Contents

5. Recently Issued Accounting Pronouncements

In ~~September 2015~~March 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. ~~2015~~ 2016-1608, ~~“Business~~Revenue ~~Combinations~~from Contracts with Customers (Topic ~~805~~606): ~~Simplifying~~Principal ~~the~~versus ~~Accounting~~Agent ~~for~~Considerations ~~Measurement-Period~~(Reporting ~~Adjustments”~~Revenue Gross versus Net) (“ASU ~~2015~~2016-1608”). ~~The~~ASU ~~main~~2016-08 ~~provisions~~does ofnot ~~this~~change ~~guidance require that an acquirer recognize adjustments to provisional amounts that are identified during~~ the ~~measurement~~core ~~period~~principle inof the ~~reporting~~guidance ~~period~~stated in ~~which~~ASU ~~the~~2014-09; ~~adjustment amounts are determined. The acquirer is further required to record~~instead, in the ~~same~~amendments ~~period’s financial statements, the effect on earnings of changes~~ in ~~depreciation,~~this ~~amortization,~~ASU orare ~~other~~intended ~~income~~to ~~effects,~~improve ~~if any, resulting from~~ the ~~change~~operability toand ~~the~~understandability ~~provisional~~of ~~amounts, calculated as if~~ the ~~accounting~~implementation ~~had~~guidance ~~been~~on ~~completed~~principal atversus ~~the~~agent ~~acquisition~~considerations ~~date. Entities~~and ~~are~~whether ~~required~~an toentity ~~present~~reports ~~separately~~revenue on ~~the~~a ~~face~~gross ~~of the income statement~~ or ~~disclose~~net inbasis. ~~the~~ASU ~~notes the portion of the amount recorded in current~~2016-~~period~~08 ~~earnings~~will ~~by line item that would~~ have ~~been~~the ~~recorded~~same ineffective ~~previous~~date ~~reporting~~and ~~periods~~transition ifrequirements ~~the~~as ~~adjustment to~~ the ~~provisional~~new ~~amounts~~revenue ~~had~~standard ~~been~~issued ~~recognized~~in asASU ~~of the acquisition date~~2014-09. The ~~guidance~~Company is ~~effective~~currently ~~for~~evaluating ~~fiscal~~the ~~years~~impact ~~beginning~~that ~~after~~the ~~December~~adoption ~~15,~~of ~~2015,~~ASU ~~including~~2016-08 ~~interim~~will ~~periods~~have ~~within those fiscal years, applied prospectively with early application permitted~~ on ~~unissued~~the company’s financial ~~statements.~~position, ~~Management~~results ~~has adopted and applied early adoption~~ of ~~ASU~~operations ~~2015-16~~or incash ~~these financial statements~~flows.

In March 2016, the FASB issued ASU 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting (“ASU 2016-09”). ASU 2016-09 simplifies several aspects related to the accounting for share-based payment transactions, including the accounting for income taxes, statutory tax withholding requirements and classification on the statement of cash flows. ASU 2016-09 will be effective for the Company’s fiscal year beginning December 1, 2017 and subsequent interim periods. The Company is currently evaluating the impact that the adoption of ASU 2016-09 will have on the company’s financial position, results of operations or cash flows.

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

In November 2015, the FASB issued ASU No. 2015-17, “Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes” (“ASU 2015-17”). The main provisions of this guidance, which is intended to simplify the presentation of deferred income taxes, require that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. Current GAAP requires an entity to separate deferred income tax liabilities and assets into current and noncurrent amounts in a classified statement of financial position. The current requirement that deferred tax liabilities and assets of a tax-paying component of an entity be offset and presented as a single amount is not affected by the amendments in this Update. This guidance is effective for fiscal years beginning after December 15, 2016, and interim periods within those annual periods. Earlier application is permitted for all entities as of the beginning of an interim or annual reporting period. Adoption of the standard is not expected to have a material impact on the condensed consolidated financial statements.

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

In August 2015, the FASB issued ASU No. 2015-15, “Interest—Imputation of Interest (Subtopic 835-30): Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements—Amendments to SEC Paragraphs Pursuant to Staff Announcement at June 18, 2015 EITF Meeting”. The guidance in update 2015-03 (see paragraph 835-30-45-1A) does not address presentation or subsequent measurement of debt issuance costs related to line-of-credit arrangements. Given the absence of authoritative guidance within Update 2015-03 for debt issuance costs related to line-of-credit arrangements, the SEC staff would not object to an entity deferring and presenting debt issuance costs as an asset and subsequently amortizing the deferred debt issuance costs ratably over the term of the line-of-credit arrangement, regardless of whether there are any outstanding borrowings on the line-of-credit arrangement. The amendments in ASU No. 2015-15 update are effective for interim and annual reporting periods beginning after December14 ~~15, 2015 with early adoption permitted. Adoption of the standard is not expected to have a material impact on the condensed consolidated financial statements.~~

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

17In August 2015, the FASB issued ASU No. 2015-15, “Interest—Imputation of Interest (Subtopic 835-30): Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements—Amendments to SEC Paragraphs Pursuant to Staff Announcement at June 18, 2015 EITF Meeting”, and in April 2015, the FASB issued ASU 2015-03, “Interest — Imputation of Interest (Subtopic 835-30)” (“ASU 2015-03”).The guidance in update 2015-03 (see paragraph 835-30-45-1A) does not address presentation or subsequent measurement of debt issuance costs related to line-of-credit arrangements. Given the absence of authoritative guidance within ASU 2015-03 for debt issuance costs related to line-of-credit arrangements, the SEC staff would not object to an entity deferring and presenting debt issuance costs as an asset and subsequently amortizing the deferred debt issuance costs ratably over the term of the line-of-credit arrangement, regardless of whether there are any outstanding borrowings on the line-of-credit arrangement. ASU 2015-03 requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The discount, premium, or debt issuance costs shall not be classified as a deferred charge or deferred credit. An entity should apply the guidance on a retrospective basis, with applicable disclosures for a change in an accounting principle. ASU 2015-03 and 2015-15 is effective for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years with early adoption permitted and applied on a retrospective basis. Management has adopted ASU 2015-15 in these financial statements and the adoption did not have a material impact on the Company's financial position, results of operations or cash flows.

In April 2015, the FASB issued ASU 2015-03, “Interest — Imputation of Interest (Subtopic 835-30)” (“ASU 2015-03”). This ASU requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The discount, premium, or debt issuance costs shall not be classified as a deferred charge or deferred credit. An entity should apply the guidance on a retrospective basis, with applicable disclosures for a change in an accounting principle. ASU 2015-03 is effective for interim and annual reporting periods beginning after December 15, 2015 with early adoption permitted. Management does not expect the adoption of ASU 2015-03 to have a material impact on the Company's financial position, results of operations or cash flows.

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

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

6. Contract Backlog

Backlog represents the amount of revenue the Company expects to realize from work to be performed on uncompleted construction contracts in progress at ~~September~~March 3031, ~~2015~~2016 and ~~2014.~~2015 Inand ~~addition,~~from ~~backlog also includes~~ construction contractual agreements on which work has not yet begun ~~and~~as well as awarded not booked backlog where a contractual agreement has not ~~yet~~ been signed ~~and~~but ~~for which~~ there is a high degree of certainty ~~where~~that we expect to recognize revenue in the future. The following summarizes changes in backlog on construction contracts during ~~nine~~the three months ended ~~September~~March ~~30, 2015 and 2014~~31:

		September 30, 2015		September 30, 2014
		March 31, 2016		March 31, 2015
Beginning balance	$	21379,~~501~~432,~~972~~495	$	3721,~~125~~501,~~652~~972
New construction contracts / amendments to contracts		~~496~~180,~~288~~411,~~402~~473		6115,~~172~~477,~~615~~730
Less: construction contracts revenue earned		~~104~~75,~~427~~075,~~164~~830		459,~~229~~328,~~114~~570
Ending balance	$	~~413~~484,~~363~~768,~~210~~138	$	5327,~~069~~651,~~153~~132

The table includes $~~141~~51.83 million of awarded not booked associated with BEK BG. ~~The table excludes revenue associated with our long term contract or memorandum of understanding for power operating~~ and ~~maintenance services. The table~~ includes the fees associated with contracts under the cost plus fee contractual arrangement. The ~~Company~~table ~~obtained~~excludes ~~contracts~~our ~~with~~long ~~remaining~~term ~~backlog~~contract ofor ~~approximately~~memorandum ~~$129.1 million and $45.8 million in connection with the acquisitions~~ of ~~BEK~~understanding ~~BG and PPG, respectively. The Company has recorded a provision~~ for ~~losses~~power ofoperating ~~approximately $1.2 million, $1.0 million~~ and ~~$0.7~~maintenance ~~million on three of its projects as of September 30, 2015 based on estimated costs in excess of contract revenue~~services. ~~One~~ project was completed in April 2015, one project is expected to be completed by December 2015 while the other project was completed in September 2015, respectively. The Company assumed three loss contracts in connection with the acquisition of BEK BG. These projects are 32%, 98% and 98% complete with estimated contract costs in excess of contract revenue of approximately $1.2 million on two projects and $0.3 million on the third project.

18 The Company has three loss contracts as of March 31, 2016 of $0.4 million, $0.3 million and $0.1 million which are 95%, 24% and 29% complete, respectively. The Company also assumed three loss contracts in connection with the 2015 acquisition of BEK BG. These projects are 99%, 66% and 46% complete as of March 31, 2016 with estimated contract costs in excess of contract revenue of $1.3 million, $1.3 million and $0.6 million, respectively. The Company recorded a provision for losses of approximately $1.7 million based on estimated costs in excess of contract revenue during the three months ended March 31, 2016 associated with these contracts.

Table of Contents

7. Cost and Estimated Earnings on Uncompleted Contracts

~~Long-term construction contracts in progress use the percentage-of-completion method to recognize revenue.~~ Billings, costs incurred, and estimated earnings on uncompleted contracts as of ~~September~~March 3031, ~~2015~~2016 and December 31, ~~2014~~2015 were as follows:

Cost and Estimated Earnings on Uncompleted Contracts		~~September~~March 3031, ~~2015~~2016		December 31, ~~2014~~2015
Cost incurred on uncompleted contracts	$	~~285~~268,~~890~~018,~~867~~972	$	~~188~~207,~~834~~563,~~649~~345
Estimated earnings		209,~~811~~812,~~825~~364		1810,~~548~~007,~~783~~049
Total cost and estimated earnings on uncompleted contracts		~~306~~277,~~702~~831,~~692~~336		~~207~~217,~~383~~570,~~432~~394
Plus: Acquired net costs and estimated earnings in excess of billings		~~17,540,038~~—		—15,009,186
Less: Billings to date		~~305~~268,~~405~~421,~~862~~528		~~203~~222,~~632~~415,~~013~~720
Net	$	189,~~836~~409,~~868~~808	$	310,~~751~~163,~~419~~860
These amounts are included in the accompanying condensed consolidated balance sheets under the following captions:
Costs and estimated earnings in excess of billings on uncompleted contracts	$	3815,~~722~~143,~~641~~193	$	716,~~539~~563,~~080~~199
Billings in excess of costs and estimated earnings on uncompleted contracts		(195,~~885~~733,~~773~~385)		(36,~~787~~399,~~661~~339)
	$	189,~~836~~409,~~868~~808	$	310,~~751~~163,~~419~~860

8. Short-~~Term~~term and ~~Long~~long-~~Term~~term ~~Borrowings~~borrowings

~~Fair~~The ~~Value~~current and non-current portions of ~~Debt~~the Company’s outstanding borrowings as of March 31, 2016 are as follows:

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

		Current Portion		Non-Current Portion
Term Loans
4.5% 2-year term loan – related party	$	—	$	6,000,000
6.8% 2-year term loan – related party		—		1,462,500
Variable interest rate 5-year term loan		341,180		1,235,717
Total term loans		341,180		8,698,217

Lines of Credit
Variable interest rate $1,500,000 line-of-credit		1,498,816		—
Variable interest rate $750,000 line-of-credit		750,000		—
Variable interest rate $975,000 line-of-credit		784,044
Total lines of credit		3,032,860		—
Total borrowings	$	3,374,040	$	8,698,217

Maturities—The ~~fair values of the~~ Company’s ~~long-term~~debt ~~borrowings,~~as ~~the exit price~~ of ~~which~~March ~~cannot be determined using quoted market prices~~31, is2016 ~~established~~matures ~~using~~as market and income valuation techniques and are considered Level 2 inputs. The aggregate carrying value of the Company’s borrowings is $10.8 million and the estimated aggregate fair value using the income approach is $11.7 million. follows:

2016	$	3,305,405
2017		7,820,049
2018		373,974
2019		391,155
2020		181,674
Total debt	$	12,072,257

~~The~~Total ~~Company~~interest ~~had~~expense noincurred ~~debt~~by ~~outstanding~~the asCompany offor ~~September~~the 30three months ended March 31, ~~2014.~~2016 ~~The~~was ~~current~~$0.1 million, and ~~non-current~~the ~~portions~~interest ofexpense incurred during the three months ended March 31, 2015 was nominal. The Company’s ~~outstanding~~weighted-average interest rate on short-term borrowings outstanding as of ~~September~~March 3031, ~~2015~~2016 ~~are~~was 4.28%. The Company had no outstanding borrowings as ~~follows:~~of March 31, 2015.

	Current Portion		Non-Current Portion
Term Loans
4.5% 2-year term loan – related party	$	—	$	6,000,000
6.8% 2-year term loan – related party		—		1,402,200
Variable interest rate 5-year term loan		345,893		1,390,421
Total term loans	$	345,893	$	8,792,621
Lines of Credit
Variable interest rate $1,500,000 line-of-credit	$	1,328,816	$	—
Variable interest rate $650,000 line-of-credit	298,344			—
Total lines of credit		1,627,160		—
Total borrowings	$	1,973,053	$	8,792,621

~~Maturities—The~~Table ~~Company’s debt as~~ of ~~September 30, 2015 matures as follows:~~Contents

2015	$	389,656
2016		1,671,322
2017		7,759,548
2018		372,835
2019		388,994
Thereafter		183,320
Total debt	$	10,765,674

Total interest expense incurred by the Company for the three and nine months ended September 30, 2015 was $0.1 million and $0.2 million, respectively, and the interest expense incurred during the three and nine months ended September 30, 2014 was nominal.

The Company’s weighted-average interest rate on borrowings outstanding as of September 30, 2015 was 4.72%. The Company had no outstanding borrowings as of December 31, 2014.

Letters of Credit

As of ~~September 30~~March 31, ~~2015~~2016, the Company had FJD 10.5 million ($75.1 million ~~outstanding~~USD) and WST 2.7 million ($1.2 million USD) in outstanding letters of credit and guarantees with financial institutions, which expire at various dates in ~~the last quarter of 2015 through~~ 2016.

Pernix Group, Inc.

On July 14, 2015, the Company entered into a two-year term loan agreement with Bent Marketing Ltd., an affiliate of a major shareholder, for $6.0 million. ~~The loan was granted in two installments, $3.0 million on July 15, 2015 and $3.0 million on August 17, 2015.~~ Interest accrues at 4.5% and ~~will~~is be paid quarterly. The term loan matures on August 15, 2017 at which time the principal and all unpaid interest is due.

Pernix Guam

On ~~July~~November 2124, 2015, ~~PFL~~Pernix Guam, LLC entered into a ~~two-year~~letter ~~working~~of ~~capital~~credit ~~loan~~agreement ~~from~~with ~~Fiji~~Australia ~~Holdings~~New ~~Limited~~Zealand onBanking ~~behalf~~Group ofLimited ~~Pernix~~(ANZ) ~~Guam~~ for ~~FJD 3.~~$0.75 million ~~($1~~.4 ~~million~~The ~~USD~~interest is based on the Asian Prime rate plus 0.50% (4.00% as of ~~September~~March 3031, ~~2015~~2016). ~~Interest~~Principal isand tointerest beare paid monthly. atLoan anorigination ~~annual~~fees ~~rate~~equal 1.00% of 6each loan amount and there are no prepayment penalties.8% The letter of credit is subject to the same covenants as outlined in Pernix Guam LLC term loan with ANZ bank as noted below except that the ~~principal~~“gearing ~~and~~ratio” ~~any~~that ~~unpaid~~limits ~~interest~~net ~~due~~total atliabilities ~~maturity~~to shareholder funds has been adjusted to 2.00:1. ~~There~~The isletter anof ~~interest~~credit ~~prepayment~~has ~~penalty~~been ~~equivalent~~reduced to ~~two~~zero ~~months~~as ~~interest~~$0.75 million was converted to a draw on the line of credit as of March 31, 2016.

On July 621, 2015, ~~Pernix~~PFL ~~Guam, LLC~~ entered into a ~~letter~~two-year ofworking ~~credit~~capital ~~agreement~~loan ~~with~~from ~~Australia~~Fiji ~~New~~Holdings ~~Zealand Banking Group~~ Limited ~~(ANZ)~~on ~~for~~behalf ~~$0.65 million for the importation~~ of ~~equipment~~Pernix ~~relating to a contract with~~ Guam ~~Power~~for ~~Authority~~FJD ~~which matures December 15, 2015~~3.0 ~~The~~million ~~interest is based on the Asian Prime rate plus 0~~($1.5% ~~(3.75%~~million USD as of ~~September~~March 3031, ~~2015~~2016). ~~Principal~~ ~~and~~Interest ~~interest~~is ~~are to be~~ paid monthly. ~~Loan~~at ~~origination~~an ~~fees~~annual ~~equal~~rate ~~1.00%~~ of ~~each loan amount and there are no prepayment penalties~~6.8% ~~The letter of credit is subject to the same covenants as outlined in Pernix Guam LLC term loan~~ with ~~ANZ bank as noted below except that~~ the ~~“gearing~~principal ~~ratio”~~and ~~that~~any ~~limits~~unpaid ~~net~~interest ~~total~~due ~~liabilities~~at tomaturity. ~~shareholder~~There ~~funds~~ is ~~2.00:1.~~an ~~The~~interest ~~letter~~prepayment ofpenalty ~~credit~~equivalent ~~has been reduced~~ to ~~$0.35~~two ~~million~~months ~~as $0~~interest.3 ~~million was converted to a draw on the line of credit as of September 30, 2015.~~

On June 1518, 2015, Pernix Guam, LLC entered into a five year term loan agreement with ANZ in the amount of $1.83 million. The agreement also provides a revolving line of credit of $1.5 million. The term loan interest is based on the Asian Prime rate plus 1.00% (4.2550% atas ~~September~~of 30March 31, ~~2015~~2016). The line of credit matures one year from the date of the note. The interest rate applicable to the line of credit facility is the Asian Prime rate plus 0.5% (34.7500% as of ~~September~~March 3031, ~~2015~~2016). Principal and interest are ~~to be~~ paid monthly for both facilities.

~~Loan origination fees equal 1.00% of each loan amount. Neither facility has prepayment penalties.~~ As of ~~September~~March 3031, ~~2015~~2016, $1.746 million and $1.335 million was outstanding on the term loan and line of credit, respectively. ~~Interest expense for the nine months ended September 30, 2015 was nominal.~~ The term loan and line of credit are subject to annual covenants to be maintained for the term of the loan, which includes maintaining backlog of at least $20.0 million, a “gearing ratio” that limits net total liabilities to shareholder funds to 2.50:1 and a “debt service coverage ratio” of 1.25:1 EBITDA to debt and interest. Pernix Guam, LLC ~~was~~has inreceived a waiver from its annual compliance with all covenants as of ~~September~~and 30for the three months ended March 31, ~~2015~~2016 as the entity has only been operational for nine months.

Pernix Group, Inc. and Pernix RE, LLC

On November 14, 2014, PGI and Pernix RE, LLC entered into loan and security agreement with Barrington Bank & Trust Company, National Association to establish a revolving credit facility and a letter of credit facility, each expiring on November 10, 2016, with an option to extend the term of the agreement. The revolving credit facility provides a borrowing capacity of $5.0 million. Loans under the revolving credit facility will bear interest at the LIBOR rate determined on periodic reset dates, plus an applicable margin ranging from 1.6% to 2.75% based on the Company’s liquidity, as defined. The letter of credit provides up to $10.0 million in aggregate of standby or trade letters of credit which accrue interest at Prime rate (3.25% at September 30, 2015) plus 4% for standby letters of credit and Prime rate plus 0.75% for trade letters of credit. Interest for each facility is payable on the periodic reset dates and borrowings are payable by the maturity of the agreement. Borrowings under each facility are secured by all real and personal property of PGI and Pernix RE, LLC.

The agreement requires the Company to pay a facility fee of 1.6% per annum of the then outstanding undrawn letter of credit and imposes various restrictions on the Company, such as, among others, the requirement to maintain minimum net income of $1.00 and minimum liquidity equal to the amount outstanding on the credit facility, as defined. The Company was in compliance with all covenants as of September 30, 2015 and December 31, 2014, and therefore, the full amount of borrowing capacity was available to be drawn upon.

No amounts were outstanding under the revolving credit facility or letter of credit facility as of September 30, 2015 and December 31, 2014. The Company’s primary use of the revolving credit facility is to fund potential working capital needs.

Pernix Fiji Limited (“PFL”) Debt Agreements

PFL ~~has~~had aan existing letter of credit of FJD 106.80 million ($52.09 million USD) for the establishment of a performance security and indemnity guarantee to facilitate supply of transformers and switchgear for the new Kinoya 33KV Substation project. ~~The~~PFL ~~Company~~increased ~~also~~its ~~established~~letter aof ~~temporary~~credit ~~overdraft~~by ~~facility of~~ FJD 14.05 million ($02.52 million USD) for ~~and~~the establishment of a ~~Euro~~performance ~~letter~~security ofand ~~credit~~indemnity guarantee on behalf of ~~Euro~~Pernix ~~6.1~~Group ~~million~~for ~~($6.9~~the ~~million~~Samoa ~~USD~~Hydro asRehab ofProject ~~September~~established ~~30,~~with ~~2015~~Electric Power Corporation (“EPC”). ~~There~~As of March 31, 2016, the total indemnity guarantee facility was ~~Euro~~FJD 410.65 million ($5.21 million USD) ~~drawn~~and onWST ~~the~~2.7 ~~letter~~million of($1.2 ~~credit~~million asUSD). ofThe ~~September~~Company ~~30,~~also ~~2015~~increased ~~reducing~~its ~~the~~temporary ~~available~~overdraft ~~letter~~facility ofwith ~~credit~~ANZ to ~~Euro~~FJD 12.50 million ($0.7975 million USD). asAs of ~~September~~March 3031, ~~2015~~2016, $0.8 million is outstanding on the temporary overdraft facility with ANZ.

The agreement is secured by all real and personal property of PFL up to FJD 1.0 million ($0.5 million USD as of ~~September~~March 3031, ~~2015~~2016), a corporate guarantee of FJD 4.0 million ($1.9 million USD as of ~~September~~March 3031, ~~2015~~2016) issued by PGI to ANZ, an Unconditional, Irrevocable and On Demand standby letter of credit given by ~~Fiji~~the ~~Electricity Authority (~~FEA) to ANZ, and a restricted cash term deposit of FJD 02.80 million ($0.498 million USD as of ~~September~~March 3031, ~~2015~~2016).

The Company paid a FJD 0.03 million ($0.01million USD) loan approval fee for the increase in the borrowing capacity under the line of credit as well as a commitment fee of 1% per annum when the line of credit is not fully drawn within three months of acceptance of the line of credit offer. The interest rate applicable to the line of credit is the Bank's published Index Rate minus a margin of 4.95% (Interest rate of 5% per annum at September 30, 2015). An establishment fee of 0.9% of the guarantee amount was charged followed by a semi-annual fee of 0.9%. For each bank guarantee, the fee is payable on the date of the drawdown and afterwards semi-annually. Furthermore, Euro 6.1 million ($6.9 million USD as of September 30, 2015) was issued in a documentary letter of credit to Wartsila Finland OY to facilitate the supply of four new heavy fuel generator plants of 35MW to Fiji Electricity Authority, Kinoya Power Station. The fee charged by ANZ was 0.5% of the letter of credit value. The balance of the credit facility was allocated towards the finance operating lease facility and credit card facility. 17

InTable ~~connection with the letter~~ of credit facility, PFL is subject to a “gearing ratio” covenant that limits net total liabilities less non-current subordinated debt to 2.1 times effective equity, as well as other customary covenants. As of September 30, 2015, the PFL gearing ratio is 1.27 and PFL is in compliance with all covenants.Contents

The interest rate applicable to the line of credit is the Bank's published Index Rate minus a margin of 4.95% (Interest rate of 5% per annum as of March 31, 2016). An establishment fee of 0.9% of the guarantee amount was charged followed by a semi-annual fee of 0.9%. For each bank guarantee, the fee is payable on the date of the drawdown and afterwards semi-annually. The fee charged by ANZ was 0.5% of the letter of credit value. The balance of the credit facility was allocated to the finance operating lease facility and credit card facility.

In connection with the letter of credit facility, PFL is subject to a “gearing ratio” covenant that limits net total liabilities less non-current subordinated debt to 2.1 times effective equity, as well as other customary covenants. As of March 31, 2016, the PFL gearing ratio is 1.81 and PFL is in compliance with all covenants.

Pernix MAP Limited

On January 18, 2016, the Company established an unconditional, irrevocable letter of credit with ANZ Bank to meet the security requirements of the EPC Hydro Rehab contract. Pernix MAP has a letter of credit of WST 2.7 million ($1.2 million USD) as an advance payment guarantee for the Samoa Hydro Rehab project with the EPC. An establishment fee of 0.5% of the guarantee amount was charged followed by a semi-annual fee of 1.0%. For each bank guarantee, the fee is payable on the date of the drawdown and afterwards semi-annually. The agreement is secured by all real and personal property of Pernix MAP Limited.

Pernix Group, Inc. and Pernix RE, LLC

On November 14, 2014, PGI and Pernix RE, LLC entered into a loan and security agreement with Barrington Bank & Trust Company, National Association to establish a revolving credit facility and a letter of credit facility, each expiring on November 10, 2016, with an option to extend the term of the agreement. The revolving credit facility provides a borrowing capacity of $5.0 million. Loans under the revolving credit facility will bear interest at the LIBOR rate determined on periodic reset dates, plus an applicable margin ranging from 1.6% to 2.75% based on the Company’s liquidity, as defined. The letter of credit provides up to $10.0 million in aggregate of standby or trade letters of credit which accrue interest at Prime rate (3.50% at March 31, 2016) plus 4% for standby letters of credit and Prime rate plus 0.75% for trade letters of credit. Interest for each facility is payable on the periodic reset dates and borrowings are payable by the maturity of the agreement. Borrowings under each facility are secured by all real and personal property of PGI and Pernix RE, LLC.

The agreement requires the Company to pay a facility fee of 1.6% per annum of the then outstanding undrawn letter of credit and imposes various restrictions on the Company, such as, among others, the requirement to maintain minimum net income of $1.00 and minimum liquidity equal to the amount outstanding on the credit facility, as defined. No amounts were outstanding under the revolving credit or letter of credit facility as of March 31, 2016 or 2015. The Company’s primary use of the credit facility is to fund potential working capital needs.

Fair Value of Debt

The fair values of the Company’s long-term borrowings, the exit price of which cannot be determined using quoted market prices, is established using market and income valuation techniques and are considered Level 2 inputs. The aggregate carrying value of the Company’s borrowings is $12.1 million and the estimated aggregate fair value using the income approach is $13.0 million.

Table of Contents

9. Stockholders’ Equity

~~Preferred~~Certificate ~~Stock—The~~of ~~Company~~Amendment ~~has~~of ~~5,500,000~~the ~~shares~~Corporation’s Restated Certificate of ~~authorized~~Incorporation - In connection with the Series A Preferred Stock. 1sale that was effective on December 30,~~000~~ 2013,~~000~~ ofthe ~~these~~Company ~~shares~~amended ~~have~~its ~~been~~Restated ~~designated~~Certificate asof ~~Series~~Incorporation Aand ~~Cumulative~~its ~~Convertible~~Certificate ~~Preferred~~of ~~Stock~~Designation (for Series A Preferred Stock), ~~400,000~~to increase the total number of shares ~~were~~of ~~designated~~stock aswhich ~~Series~~the BCompany ~~Cumulative~~shall ~~Convertible~~have ~~Preferred~~authority ~~Stock~~to ~~(Series~~issue Bto ~~Preferred~~25,500,000, ~~Stock)~~consisting ~~and~~of 420,000,000 shares ~~have~~of ~~been~~Common ~~designated~~Stock, ~~Series~~par Cvalue ~~Cumulative~~$.01 ~~Convertible~~per share (“Common Stock”), and 5,500,000 shares of Preferred Stock, ~~(Series~~par Cvalue $.01 per share (“Preferred Stock”).

~~Series C~~ Preferred Stock—The ~~- In June, 2015 the~~ Company ~~sold~~has 15,~~540~~500,000 ~~and 1,260,000~~ shares of ~~Series~~authorized C Preferred Stock ~~(par value $0~~.~~01)~~ ~~to Ernil and Halbarad~~1, ~~respectively for $10.00 per share, resulting in proceeds received by the Company of $28.0 million. There were two separate investment transactions for both Ernil and Halbarad. Ernil purchased 550,~~000 ~~and 990~~,000 ~~shares~~of ~~and~~these ~~Halbarad purchased 450,000 and 810,000~~ shares ofhave ~~Series~~been Cdesignated ~~Preferred~~as ~~Stock on June 10, 2015 and June 26, 2015, respectively. The Company used the proceeds to fund the acquisition of the BEK BG and related operating activities. From and after July 1, 2015, holders of~~ Series CA ~~Preferred~~Cumulative ~~Stock~~Convertible ~~are entitled to receive cumulative dividends at the annual rate of 8%. From July 1, 2015 through July 1, 2016, all dividends accrued will be paid to the holder of Series C~~ Preferred Stock ~~in the form of the Company’s common stock valued solely for these purposes at $4.48 per share. Thereafter, such dividends will be payable in cash, bi-annually on January 1 and July 1 in arrears.~~ (Series CA Preferred Stock) ~~have no voting rights~~ and ~~rank~~400,000 ~~senior~~shares towere ~~common~~designated ~~stock~~as ~~and are on parity with~~ Series ~~A and Series~~ B ~~preferred~~Cumulative ~~stock. As~~Convertible ~~of September 30, 2015, 2,800,000 shares of the Series C~~ Preferred Stock ~~were issued and outstanding. The~~ (Series CB Preferred Stock) isand ~~convertible into 2~~4,~~800~~000,000 shares ~~of Pernix Group common stock at the Company’s option and~~ have abeen ~~liquidation~~designated ~~preference of $10.00 per share. No dividends were paid on the~~ Series C Cumulative Convertible Preferred Stock ~~during the three and nine months ended September 30, 2015. During the three months ended and as of September 30, 2015, $564,603 of dividends were accrued. As of December 31, 2014, no~~ (Series C Preferred Stock ~~had been issued~~).

22 In June, 2015 the Company sold 1,540,000 and 1,260,000 shares of Series C Preferred Stock (par value $0.01) to Ernil and Halbarad, respectively for $10.00 per share, resulting in proceeds received by the Company of $28.0 million. There were two separate investment transactions for both Ernil and Halbarad. Ernil purchased 550,000 and 990,000 shares and Halbarad purchased 450,000 and 810,000 shares of Series C Preferred Stock on June 10, 2015 and June 26, 2015, respectively. The Company used the proceeds to fund the acquisition of the BEK BG and related operating activities. From and after July 1, 2015, holders of Series C Preferred Stock are entitled to receive, when, and if declared by the Board of Directors, cumulative dividends at the annual rate of 8%. From July 1, 2015 through July 1, 2016, all dividends accumulated will be paid to the holder of Series C Preferred Stock in the form of the Company’s common stock valued solely for these purposes at $4.48 per share. Thereafter, such dividends will be payable in cash, bi-annually on January 1 and July 1 in arrears. Series C Preferred Stock have no voting rights and rank senior to common stock and are on parity with Series A and Series B preferred stock. As of March 31, 2016, 2,800,000 shares of the Series C Preferred Stock were issued and outstanding. The Series C Preferred Stock is convertible into 2,800,000 shares of Pernix Group common stock at the Company’s option and have a liquidation preference of $10.00 per share. Dividends accumulated for Series C Preferred Stock as of March 31, 2016 were $1.7 million. No dividends were declared or paid on the Series C Preferred Stock during the three months ended March 31, 2016.

~~Series~~On ADecember ~~Preferred~~30, ~~Stock~~2013 -the AsCompany ofsold ~~September 30~~550,000 ~~2015~~ and ~~December 31~~450, ~~2014, 1,~~000~~,000~~ shares of ~~the~~ Series A Preferred Stock ~~were~~to ~~issued~~Ernil and ~~outstanding~~Halbarad, respectively for $5.00 per share, resulting in proceeds received by the Company of $5.0 million. Holders of Series A Preferred Stock are entitled to receive, when and as declared by the Board of Directors, cumulative cash dividends at the annual rate of 8%, payable quarterly, have no voting rights and rank senior to common stock. As ~~and~~of ~~are~~March on31, ~~parity~~2016, ~~with~~1,000,000 ~~Series~~shares Bof ~~and~~the Series CA ~~preferred~~Preferred ~~stock~~Stock were issued and outstanding. The Series A Preferred Stock is convertible into 1,428,572 shares of Pernix common stock computed by multiplying the number of shares to be converted by the purchase price of $5.00 per share and dividing the result by the conversion price of $3.50, which was in excess of the fair value of the Company’s common stock. ~~During~~The ~~the three and nine months ended September 30, 2015 and 2014, the Company issued no Series A Preferred Stock. During the three months ended September 30, 2015, $100,822 of~~ dividends ~~related~~accumulated tobut ~~the~~not ~~Series A Preferred Stock were accrued and $200,548 were~~ paid. ~~No dividends were accrued~~ as of ~~September~~March ~~30, 2015. As of December~~ 31, ~~2014,~~2016 ~~no dividends related to the Series A~~ were ~~accrued~~$99,726. ~~and~~Dividends ~~the dividends incurred and~~ paid ~~were~~ during the three months ended ~~September~~March 3031, ~~2014~~2015 were $~~100~~98,~~822~~630.

~~Series B Preferred Stock -~~ As of ~~September~~March 3031, ~~2015~~2016 and December 31, ~~2014~~2015, 170,000 shares of the Series B Preferred Stock were issued and outstanding and are convertible into 11,334 shares of common stock. Holders of Series B Preferred Stock are entitled to receive, when, as and if declared by the Board of Directors, cumulative dividends at an annual rate of $0.325 per share, have no voting rights, and rank senior to common stock and are on parity with Series A and ~~Series~~ C Preferred Stock with respect to dividends and upon liquidation. ~~During~~As ~~the~~of ~~three~~March ~~and~~31, ~~nine~~2016 ~~months~~and ~~ended~~December ~~September 30~~31, 2015 ~~and 2014~~, ~~the Company issued no~~ Series B Preferred Stock. ~~As of September 30, 2015 and December 31, 2014, preferred stock~~ dividends of $~~282~~310,~~711~~412 and $~~241~~296,~~387,~~637 ~~respectively,~~ were ~~accrued. The dividends for both quarters ended September 30~~accumulated, ~~2015 and 2014 were $13,926~~respectively. No dividends were declared or paid during the ~~quarters~~three months ended ~~September~~March 3031, ~~2015~~2016 and ~~2014~~2015, respectively.

Common Stock —As of ~~September~~March 3031, ~~2015~~2016 and ~~2014~~December 31, 2015, 9,403,697 shares of the Company’s common stock were issued and outstanding and over 96.0% of those shares were owned by Ernil, Halbarad and affiliated companies.

2319

~~10.~~Table ~~Earnings~~of ~~Per Share~~Contents

A10. ~~reconciliation~~Computation of ~~the~~Net ~~numerator~~Earnings ~~and~~Per ~~denominator of basic and diluted earnings per share for the nine months ended September 30, 2015 and 2014 is provided as follows:~~Share

		Nine months ended September 30
		2015		2014
Numerator — Net income (loss) attributable to stockholders	$	(9,429,565)	$	675,022
Less: Preferred stock dividends		905,077		342,694
Basic net income (loss) available to common stockholders	$	(10,334,642)	$	332,328
Denominator:
Weighted average common shares outstanding:
Basic		9,403,697		9,403,697
Diluted		9,403,697		11,014,867
Basic earnings (loss) per share	$	(1.10)	$	0.04
Diluted earnings (loss) per share	$	(1.10)	$	0.03

A reconciliation of the numerator and denominator of basic and diluted earnings per share for the three months ending March 31, 2016 and 2015 is provided as follows:

A reconciliation of the numerator and denominator of basic and diluted earnings per share for the three months ended September 30, 2015 and 2014 is provided as follows:

		March 31, 2016		March 31, 2015
Numerator — Net income (loss) attributable to stockholders	$	(4,844,821)	$	(2,066,945)
Less: Preferred stock dividends, including amounts paid and accumulated		671,966		112,253
Net loss attributable to common stockholders of Pernix		(5,516,787)		(2,179,198)

Denominator:
Weighted average common shares outstanding		9,403,697		9,403,697

Basic and dilutive net earnings (loss) per share	$	(0.59)	$	(0.23)

		Three Months Ended September 30
		2015		2014
Numerator — Net income (loss) attributable to stockholders	$	(3,873,704)	$	285,127
Less: Preferred stock dividends		679,353		114,748
Basic net income (loss) available to common stockholders	$	(4,553,057)	$	170,379
Denominator:
Weighted average common shares outstanding:
Basic		9,403,697		9,403,697
Diluted		9,403,697		10,940,399
Basic and dilutive net earnings (loss) per share	$	(0.48)	$	0.02

Basic and diluted net loss per common share have been computed using the weighted-average number of shares of common stock outstanding during the periods. Diluted earnings per share is computed by dividing earnings by the number of fully diluted shares, which includes the effect of dilutive potential issuances of common shares as determined using earnings from continuing operations. The impact of the potential issuances of common stock related to the Company’s convertible preferred stock and outstanding stock options has been excluded from earnings per share for the three months ended March 31, 2016 and 2015, since inclusion would be anti-dilutive. For the three months ended March 31, 2016, the number of anti-dilutive potential common shares excluded from the computation of diluted earnings per share was 5,199,141.

~~Basic and diluted net income from continuing operations per common share has been computed using the weighted-average number of shares of common stock outstanding during the period~~11. ~~The impact of potential issuances of common shares from the Company’s outstanding stock options and non~~Stock-~~participating~~based ~~convertible~~compensation preferred stock, whose conversion may be in cash or stock at the Company’s option, is excluded from the calculation of diluted earnings per share for all periods since inclusion would be anti-dilutive. For the three and nine months ended September 30, 2015, the number of anti-dilutive potential common shares excluded from the computation of diluted earnings per share were 4,394,416 and 4,866,981, respectively.plans

24 2014 Equity Incentive Plan (EIP) - In late 2013, the Company’s shareholders and board of directors adopted the 2014 Equity Incentive Plan that provides for the issuance of a variety of equity awards to employees, non-employee directors and consultants. Under the terms of this plan, 1.8 million shares are reserved for issuance under the EIP.

~~11.~~Stock ~~Compensation Plans~~Options

2014 Equity Incentive Plan (EIP) - In late 2013, the Company’s shareholders and board of directors adopted the 2014 Equity Incentive Plan that provides for the issuance of a variety of equity awards to employees, non-employee directors and consultants. The options expire 10 years from the grant date or upon plan expiration in late 2023, whichever is earlier. ~~Under~~On ~~the~~February ~~terms~~18, of2016, ~~this plan~~197,500 ~~1.8~~options ~~million~~were ~~shares~~granted ~~are~~to ~~reserved~~employees, ~~for~~all ~~issuance~~of ~~under~~which ~~the~~cliff ~~EIP.~~vest Onin ~~February~~3 8,years ~~2014,~~except ~~375~~for 20,000 options ~~were~~that ~~granted~~cliff ~~and~~vest anin ~~additional~~two ~~1,050,000~~years. The ~~options~~estimated ~~were~~fair ~~granted~~value inof ~~September~~the ~~2014~~197,500 ~~all~~stock ~~with~~options aawarded ~~three~~on ~~year~~February ~~vesting~~18, ~~schedule~~2016 is $0.1 million. As of ~~September~~March 3031, ~~2015~~2016, a total of 1,~~347~~466,~~000~~500 options remain outstanding.

~~2013~~Restricted ~~Long~~Stock Term Incentive Plan (LTIP) - The LTIP is a non-employee Director and Consultant compensation plan. Awards may include stock options, stock awards, restricted stock, restricted stock units, and other stock or cash awards. The options expire 10 years from the grant date or upon plan expiration in late 2022, whichever is earlier. As of September 30, 2015, a total of 78,500 options were outstanding under this plan. No additional shares are anticipated to be awarded under the LTIP. Units

~~2012~~On ~~Employee~~February ~~Incentive~~18, ~~Stock~~2016, ~~Option~~the ~~Plan~~Company ~~(ISOP)~~granted -149,500 ~~The~~restricted ~~2012~~stock ~~Incentive~~units ~~Stock~~to ~~Option~~select ~~Plan~~officers ~~provides~~and ~~for the issuance of qualified stock options to~~ employees. ~~The~~which ~~options~~cliff ~~expire~~vest 10in 5 years from ~~the grant~~ date orof ~~upon plan expiration in late 2021, whichever is earlier~~issuance. AsThe ofestimated ~~September~~fair ~~30,~~value ~~2015, a total~~ of ~~226,000~~the ~~options~~restricted ~~were~~stock ~~outstanding~~awarded ~~under~~is ~~this plan~~$0.3 ~~No additional shares are anticipated to be awarded under the ISOP~~million.

~~Option~~2013 ~~awards~~Long toTerm ~~employees~~Incentive ~~and~~Plan ~~directors~~(LTIP) ~~under~~- ~~the~~The ~~Company’s~~LTIP ~~stock~~is a non-employee Director and Consultant compensation ~~plans~~plan. ~~are~~Awards ~~classified~~may asinclude ~~equity~~stock ~~instruments~~options, ~~and~~stock ~~are~~awards, ~~valued~~restricted atstock, ~~the~~restricted ~~grant~~stock ~~date~~units, ~~using~~and ~~the~~other ~~Black-Scholes~~stock ~~fair~~or ~~value~~cash ~~model~~awards. The options ~~vest~~expire ~~ratably~~10 onyears ~~the~~from ~~anniversary of~~ the grant date ~~over~~or aupon ~~three~~plan toexpiration ~~five~~in ~~year~~late ~~period.~~2022, ~~Pernix~~whichever ~~recognizes~~is ~~the~~earlier. ~~cost~~No ~~over~~additional ~~the~~shares ~~period~~are ~~during~~anticipated ~~which an employee is required~~ to ~~provide~~be ~~services~~awarded inunder ~~exchange for~~ the ~~award, known as the requisite service period (usually the vesting period)~~LTIP. As ~~Cash~~of ~~flows~~March ~~resulting~~31, ~~from~~2016, ~~the~~a ~~exercise~~total of ~~related~~78,500 options ~~are included in financing cash flows. There~~ were nooutstanding ~~options exercised during the three~~ and ~~nine~~vested ~~months~~under ~~ended~~this ~~September 30, 2015 or 2014~~plan. ~~The Company will issue new shares of common stock upon exercise of the options.~~

2012 Employee Incentive Stock Option Plan (ISOP) - The ~~following~~2012 ~~summarizes~~Incentive ~~stock~~Stock ~~option~~Option ~~activity~~Plan provides for the ~~nine~~issuance ~~months~~of ~~ended~~qualified ~~September~~stock ~~30:~~options to employees. The options expire 10 years from the grant date or upon plan expiration in late 2021, whichever is earlier. As of March 31, 2016, a total of 226,000 options were outstanding under this plan. No additional shares are anticipated to be awarded under the ISOP.

	2015			2014
EIP	Number of Options		Weighted Average Exercise Price	Number of Options		Weighted Average Exercise Price
Options outstanding, at beginning of year	1,395,000	$	1.55	—	$	N/A
Granted	—		N/A	1,425,000		1.56
Exercised	—		N/A	—		N/A
Forfeited / expired	48,000		2.07	7,000		2.07
Options outstanding, at September 30	1,347,000		1.53	1,418,000		1.56
Options exercisable, at September 30	564,504	$	2.07	50,000	$	2.07

	2015			2014
LTIP	Number of Options		Weighted Average Exercise Price	Number of Options		Weighted Average Exercise Price
Options outstanding, at beginning of year	78,500	$	2.09	78,500	$	2.09
Granted	—		N/A	—		N/A
Exercised	—		N/A	—		N/A
Forfeited / expired	—		N/A	—		N/A
Options outstanding, at September 30	78,500		2.09	78,500		2.09
Options exercisable, at September 30	70,724	$	2.09	35,166	$	2.09

Table of Contents

25 Option awards to employees and directors under the Company’s stock compensation plans are classified as equity instruments and are valued at the grant date using the Black Scholes fair value model. The options vest ratably on the anniversary of the grant date over a three to five year period, except for the February 18, 2016 option grant which will vest in two to three years. Pernix recognizes the cost over the period during which an employee is required to provide services in exchange for the award, known as the requisite service period (usually the vesting period). Cash flows resulting from the exercise of related options are included in financing cash flows. There were no options exercised during the quarters ended March 31, 2016 or 2015. The Company will issue new shares of common stock upon exercise of the options.

	2015			2014
ISOP	Number of Options		Weighted Average Exercise Price	Number of Options		Weighted Average Exercise Price
Options outstanding, at beginning of year	283,500	$	2.09	379,000	$	2.09
Granted	—		N/A	—		N/A
Exercised	—		N/A	—		N/A
Forfeited / expired	57,500		2.09	5,250		2.09
Options outstanding, at September 30	226,000		2.09	373,750		2.09
Options exercisable, at September 30	174,980	$	2.09	134,166	$	2.09

The following summarizes stock option activity for the quarters ended March 31:

The following table summarizes information about stock options outstanding at September 30, 2015:

	2016			2015
EIP	Number of Options		Weighted Average Exercise Price	Number of Options		Weighted Average Exercise Price

Options outstanding, at beginning of year	1,322,000	$	1.52	1,395,000	$	1.55
Granted	197,500		1.71	—		—
Exercised	—		—	—		—
Forfeited / expired	53,000		2.07	48,000		2.07
Options outstanding, at March 31	1,466,500		1.63	1,347,000		1.53
Options exercisable, at March 31	528,400	$	1.64	132,333	$	2.07

Plan	Number Outstanding		Weighted Average Remaining Contractual Life		Weighted Average Exercise Price		Aggregate Grant Date Intrinsic Value
	2016				2015
EIP	1,347,000		8.3	$	1.53	$	4,284,210
LTIP	Number of Options		Weighted Average Exercise Price		Number of Options		Weighted Average Exercise Price
LTIP	78,500		7.3	$	2.09	$	32,185
Options outstanding, at beginning of year	78,500	$	2.09		78,500	$	2.09
ISOP	226,000		7.1	$	2.09	$	68,060
Granted	—		—		—		—
Exercised	—		—		—		—
Forfeited / expired	—		—		—		—
Options outstanding, at March 31	78,500		2.09		78,500		2.09
Options exercisable, at March 31	78,500	$	2.09		56,833	$	2.09

The weighted average grant date fair value of options outstanding at September 30, 2015 and 2014 was $0.84 and $0.79, respectively. The fair value of each option grant was estimated on the grant date using the Black-Scholes option-pricing model with the following weighted average assumptions:

	2016			2015
ISOP	Number of Options		Weighted Average Exercise Price	Number of Options		Weighted Average Exercise Price

Options outstanding, at beginning of year	226,000	$	2.09	283,500	$	2.09
Granted	—		—	—		—
Exercised	—		—	—		—
Forfeited / expired	—		—	57,500		2.09
Options outstanding, at March 31	226,000		2.09	226,000		2.09
Options exercisable, at March 31	192,745	$	2.09	146,667	$	2.09

		2014 grant
Risk-free interest rate		1.75% - 1.80%
Dividend yield		0.0%
Expected volatility		45.0%
Expected life in years		6.0

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

Total share-based compensation expense for the three and nine months ended September 30, 2015 was $0.1 million and $0.3 million, respectively. Total share-based compensation expense for the three and nine months ended September 30, 2014 was $0.1 million. As of September 30, 2015 and 2014, there was $0.5 million and $0.8 million, respectively of total unrecognized compensation expense related to non-vested share-based awards. The ~~compensation~~following ~~expense~~table issummarizes ~~expected~~information toabout bestock ~~recognized~~options ~~over~~outstanding aat ~~remaining~~March ~~weighted average period of 1.6 years~~31, ~~which is equivalent to the average vesting period.~~2016:

Plan	Number Outstanding	Weighted Average Remaining Contractual Life		Weighted Average Exercise Price		Aggregate Grant Date Intrinsic Value
EIP	1,466,500	9.1	$	1.64	$	4,225,895

LTIP	78,500	6.8	$	2.09	$	32,185

ISOP	226,000	6.6	$	2.09	$	68,060

The ~~Company~~weighted ~~received~~average nogrant ~~cash~~date ~~related~~fair tovalue ~~stock~~per ~~awards~~option ~~exercised~~outstanding ~~during~~at ~~the~~March ~~periods ending September 30~~31, ~~2015~~2016 and ~~2014, respectively, as only 564,504 options were vested as of September 30,~~ 2015 ~~and~~was ~~no options were exercised during the periods. The unvested options at September 30, 2015 have a total intrinsic value of~~ $0.388 ~~million~~ and ~~the vested options have an intrinsic value of~~ $0.284, ~~million~~respectively. ~~based~~The onfair ~~the~~value ~~trading price~~ of ~~the~~each ~~Company’s~~option ~~common~~grant ~~stock~~was onestimated ~~that date~~ on the ~~Over~~grant ~~the~~date ~~Counter~~using ~~Quotation Board. However,~~ the ~~stock~~Black-Scholes ~~has~~option-pricing amodel ~~limited~~with ~~float, is not actively traded, and therefore~~ the ~~trading~~following ~~price is~~weighted ~~not~~average volatile. The Company did not realize any tax deductions for the qualified ISOP plan options as the related expense is not tax deductible. The forfeited or cancelled options during the first nine months of 2015 and 2014 totaled 105,500 and 12,250, respectively.assumptions:

The Company has a 401K matching plan through which it contributes up to 8% of an employee’s salary at a matching rate of 50% of employee contributions, subject to an annual limitation of $5,000 per employee ($4,000 in 2014). The Company incurred $88,345 and $96,354 of expense associated with the 401K match during the nine months ended September 30, 2015 and 2014, respectively and $28,932 and $24,909 of expense during the three months ended September 30, 2015 and 2014, respectively.

		2016 grants

Risk-free interest rate		1.32 - 1.36%
Dividend yield		0.0%
Expected volatility		30.0%
Expected life in years		5.8 - 6.0

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

Total share-based compensation expense for each of the three months ended March 31, 2016 and 2015 was less than $0.1 million and $0.1 million, respectively. As of March 31, 2016 and 2015, there was $0.6 million and $0.7 million, respectively of total unrecognized compensation expense related to non-vested share-based awards. The compensation expense is expected to be recognized over a remaining weighted average period of 1.6 years, which is equivalent to the average vesting period.

The Company received no cash during the periods ending March 31, 2016 and 2015, respectively, related to stock awards exercised as only 799,645 options were vested as of March 31, 2016 and no options were exercised during the periods. The unvested options at March 31, 2016 have no intrinsic value and the vested options also have no intrinsic value based on the trading price of the Company’s common stock on that date on the Over the Counter Quotation Board. However, the stock is not actively traded and the trading price of the stock is volatile. The Company did not realize any tax deductions for the qualified ISOP plan options as the related expense is not tax deductible. 53,000 options and 105,500 options were forfeited or cancelled during the first three months of 2016 and 2015, respectively.

The Company has a 401K matching plan through which it contributes up to 8% of an employee’s salary at a matching rate of 50% of employee contributions, subject to an annual limitation per employee which varies by Company entity. The Company incurred approximately $0.3 million and less than $0.1 million of expense associated with the 401K match during the three months ended March 31, 2016 and 2015, respectively. The increase in 401K matching contributions is primarily attributable to the acquisitions of BEK BG and PPG.

12. Commitments and Contingencies

Pernix’s power generation activities involve significant risks of environmental damage, equipment damage and failures, personal injury and fines and costs imposed by regulatory agencies. Though management believes its safety programs and record is excellent and its insurance programs are adequate, if a liability claim is made against it, or if there is an extended outage or equipment failure or damage at one of the Company’s power plants for which it is inadequately insured or subject to a coverage exclusion, and the Company is unable to defend against these claims successfully or obtain indemnification or warranty recoveries, the Company may be required to pay substantial amounts, which could have a materially adverse effect on its financial condition. In Fiji, the Company is liable for a deductible of FJD 1.3 million (or approx. $0.6 million USD as of September 30, 2015) if found to be negligent or FJD 0.8 million (or approx. $0.4 million USD as of September 30, 2015) if not found to be negligent in accordance with its agreement with the FEA. In Vanuatu, during the Memorandum of Understanding (MOU) period, the insurance deductible is 10 million Vatu (or approx. $0.1 million USD as of September 30, 2015).

Vanuatu Utilities and Infrastructure (VUI) began to manage the power structure on Vanuatu on January 1, 2011 pursuant to a MOU with the government of Vanuatu. The prior concessionaire, UNELCO, filed a claim against the government alleging improper tender of the work. No claims have been filed against VUI but VUI joined the suit as a second defendant in order to protect its interests in the tender. In February 2014, during hearings in the Supreme Court of the Republic of Vanuatu (the Court), the Government of Vanuatu proposed a settlement with UNELCO that would leave VUI without a claim to defend pertaining to the concession and would effectively end the litigation in UNELCO’s favor. The proposed settlement called for a retender of the concession and required that any company who participates in the retender must waive any outstanding claims against the Government of Vanuatu. VUI in response presented its position to the court arguing that VUI should have an opportunity to be heard and that the Court should not accept the proposed settlement. On October 16, 2014 the Court issued its decision in favor of UNELCO and the government has issued a new agreement to VUI to continue to operate the plant under the MOU terms until the retender process is completed. As of the date of this report, VUI continues to operate and maintain the system.22

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there is an extended outage or equipment failure or damage at one of the Company’s power plants for which it is inadequately insured or subject to a coverage exclusion, and the Company is unable to defend against these claims successfully or obtain indemnification or warranty recoveries, the Company may be required to pay substantial amounts, which could have a materially adverse effect on its financial condition. In Fiji, the Company is liable for a deductible of FJD 1.3 million (or approx. $0.6 million USD as of March 31, 2016) if found to be negligent or FJD 0.8 million (or approx. $0.4 million USD as of March 31, 2016) if not found to be negligent in accordance with its agreement with the Fiji Electricity Authority. In Vanuatu, during the Memorandum of Understanding (MOU) period, the insurance deductible is 10 million Vatu (or approx. $0.1 million USD) as of March 31, 2016.

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

On March 17, 2016 UNELCO filed suit against VUI and The Republic of Vanuatu. The suit is an attempt by UNELCO to invalidate the current temporary MOU and force the Government to remove VUI during the pendency of the re-tender that is currently estimated to take at least another year. There are no damages currently claimed by claimant in the lawsuit. VUI has countersued for in excess of $1.3 Billion vatu (approximately $12.0 million USD) for intentional interference with contract, fraudulent misrepresentation, misleading and deceptive conduct among other claims.

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

13. Financial Instruments with Off-Balance Sheet Risk and Concentrations of Credit Risk

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

If the Company extends a significant portion of its credit to clients in a specific geographic area or industry, the Company may experience disproportionately high levels of default if those clients are adversely affected by factors particular to their geographic area or industry. The Company’s customer base includes ~~commercial,~~ governments, government ~~and institutional~~ agencies and quasi-government organizations, ~~and~~which are dispersed across many different industries and geographic locations.

Pernix Group may utilize foreign exchange contracts to reduce exposure to foreign exchange risks associated with payments for services and products related to the various construction and other projects. No such contracts were employed during ~~2015~~2016 or 2014. From time to time, the Company is required to utilize standby letters of credit or similar financial guarantees in the normal course of its business, and this is a typical practice for the industry segments in which the Company operates. The amount, duration, and structure of such standby letters of credit or similar financial instruments varies depending on the nature and scope of the project involved. As of September 30, 2015 ~~the Company had a FJD 4~~.0 million ($1.9 million USD) financial guarantee of PFL’s letter of credit with ANZ. No amounts are outstanding under the ANZ letter of credit and the Company does not anticipate any payment risk under this guarantee as of September 30, 2015. In December 2012, the Company was awarded a $1.6 million project to install 33MW cable in the Solomon Islands and began the execution in 2013. In connection with this award, a performance guarantee was established with ANZ Bank. The project is complete as the 33MW cable has been installed and commissioned as of the first quarter of 2015 and the Company does not anticipate any payment risk under this guarantee as of September 30, 2015.

The Company’s cash balances and short-term investments are maintained in accounts held by major banks and financial institutions located primarily in the U.S., Niger, Sierra Leone, Guam, Fiji and Vanuatu as of September 30, 2015. The Company maintains its cash accounts at numerous financial institutions. Certain accounts covered by the Federal Deposit Insurance Corporation (FDIC) are insured up to $250,000 per institution. As of September 30, 2015 and December 31, 2014, the amount of domestic bank deposits that exceeded or are not covered by the FDIC insurance23 was $7.5 million and $8.6 million, respectively. Certain financial institutions are located in foreign countries which do not have FDIC insurance and as of September 30, 2015 and December 31, 2014, the amount of bank deposits in these financial institutions was $1.0 million and $2.3 million, respectively. These foreign bank deposits include our restricted cash.

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From time to time, the Company is required to utilize standby letters of credit or similar financial guarantees in the normal course of its business, and this is a typical practice for the industry segments in which the Company operates. The amount, duration, and structure of such standby letters of credit or similar financial instruments varies depending on the nature and scope of the project involved. As of March 31, 2016 the Company had a FJD 4.0 million ($2.0 million USD) financial guarantee of PFL’s line of credit with ANZ. No amounts are outstanding under the ANZ line of credit and the Company does not anticipate any payment risk under this guarantee as of March 31, 2016.

The Company’s cash balances and short-term investments are maintained in accounts held by major banks and financial institutions located primarily in the U.S., Niger, Azerbaijan, Sierra Leone, Fiji and Vanuatu as of March 31, 2016. The Company maintains its cash accounts at numerous financial institutions. Certain accounts covered by the Federal Deposit Insurance Corporation (FDIC) are insured up to $250,000 per institution. As of March 31, 2016 and December 31, 2015, the amount of domestic bank deposits that exceeded or are not covered by FDIC insurance was $4.3 million and $4.5 million, respectively. Certain financial institutions are located in foreign countries which do not have FDIC insurance and as of March 31, 2016 and December 31, 2015, the amount of bank deposits in these financial institutions was $3.6 million and $1.6 million, respectively. These foreign bank deposits include our restricted cash.

14. Related Party Transactions — Not Described Elsewhere

The Company’s shareholders include SHBC, which holds less than 6% of Pernix’s stock at ~~September~~March 3031, ~~2015~~2016. SHBC is a civil, electrical and mechanical engineering firm and construction contractor with over 4,000 employees and over fifty (50) years’ experience.

SHBC ~~and Pernix have formed a joint venture (Pernix/SHBC JV). This joint venture~~ was established in part to construct the new U.S. Embassy in Fiji which iswas ~~now~~completed ~~complete~~in 2011. The joint venture limited partnership agreement between SHBC and Pernix also provides for Pernix to make a payment to SHBC of 6.5% per annum of the unreturned capital. No such payments have been made to date though the Company has accrued other expenses of ~~less than~~ $0.1 million during ~~each of~~ the three ~~and~~months ~~nine~~ending ~~month~~March ~~periods ended September 30~~31, ~~2015~~2016 and ~~2014~~2015 ~~under~~for this ~~agreement~~discretionary item.

Computhink is a related party as it is owned by a company related to SHBC. ~~Computhink~~Pernix ~~provided~~is ~~various facility management, computer software and other outside services related to~~ the ~~Corporate~~lessor ~~headquarters prior~~ to ~~the~~a ~~Company’s~~lease ~~purchase~~with ofComputhink ~~the~~for ~~land~~office ~~and~~space ~~building~~ in ~~March 2013. Subsequent to~~ the Company’s ~~purchase of the~~ Corporate ~~headquarter facilities, Pernix assumed as lessor the lease to Computhink~~headquarters. The lease term ends June 30, 2016 and Computhink rent amounts to $2,387 per month. The Company’s charges to Computhink were less than $0.1 million for each of the three ~~and~~months ~~nine periods~~ ended ~~September~~March 3031, ~~2015~~2016 and ~~2014~~2015.

28Total related party accounts receivable and payables, net are summarized as follows for the three months ended March 31:

Total related party accounts receivable and payables, net are summarized as follows:

		2016		2015
Note payable and accrued interest to Bent Marketing Ltd	$	(6,067,315)	$	—
Note payable to FHL		(1,462,500)		—
Accounts receivable from Computhink		2,582		52,736
Accounts payable to SHBC		(4,998)		(829)
Totals	$	(7,532,231)	$	51,907

		September 30, 2015		December 31, 2014
Note payable to Bent Marketing Ltd	$	(6,044,753)	$	—
Note payable to FHL		(1,411,082)		—
Accounts receivable from Computhink		7,256		68,463
Accounts payable to SHBC		—		(13,800)
Totals	$	(7,448,579)	$	54,663

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15. Business Segment Information

Pernix Group has elected to organize its segment information around its products and services. Pernix Group has three segments: General Construction, Power Generation Services and Corporate ~~and continues to evaluate segment reporting in light of recent acquisitions~~. There were no material amounts of transfers between segments. Any inter-segment revenues have been eliminated.

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

Schedule of Segment Reporting, Information by Segment
Nine Months Ended September 30, 2015
Three Months Ended March 31, 2016
		General Construction		Power Generation Services		~~Corporate~~	Corporate	~~Total~~	Total
Revenue	$	~~104~~75,~~427~~098,~~164~~581	$	41,~~229~~334,~~395~~997	$	~~79,624~~	$12,746	~~108,736,183~~$	76,446,324
Interest income (expense), net		(4667,~~975~~267)		730,~~049~~906		—	—	~~(39,926)~~	(36,361)
Interest and other expense- related party		(64,558)		—		(44,753)		(109,311)
Other expense- related party		(50,736)		—			(68,055)		(118,791)
Depreciation and amortization - pre quasi-reorganization		1,006,236		78,430		68,861		1,153,527
Depreciation and amortization		1,081,287		41,176			16,567		1,139,030
Income tax benefit (expense)		(3249,~~100~~597)		7034,~~470~~171		~~(533,654)~~	—	~~(495,284)~~	(15,426)
Net income (loss) attributable to the common stockholders of Pernix Group Inc. and Subsidiaries		(42,~~540~~979,~~625~~937)		1432,~~510,756~~810		~~(7,304,773)~~	(2,297,694)	~~(10,334,642)~~	(4,844,821)
Total capital expenditures		~~784~~319,~~200~~497		~~285~~166,~~171~~867		~~26,695~~	—	~~1,096,066~~	486,364
Total assets	$	~~127~~98,~~505~~856,~~798~~826	$	7,~~767~~375,~~662~~464	$	~~4,084,712~~	$2,183,956	~~139,358,172~~$	108,416,246

Schedule of Segment Reporting, Information by Segment
Nine Months Ended September 30, 2014
Three Months Ended March 31, 2015
		General Construction		Power Generation Services		Corporate		Total
Revenue	$	459,~~229~~328,~~114~~570	$	51,~~053~~264,~~456~~087	$	~~113~~18,~~306~~233	$	5010,~~395~~610,~~876~~890
Interest income (expense), net		—		(~~2,458~~69)		~~4,608~~—		~~2,150~~(69)
Interest and other expense- related party		(62,157)		—		—		(62,157)
Other expense- related party		(21,700)		—		—		(21,700)
Depreciation and amortization - pre quasi-reorganization		27,967		63,537		56,332		147,836
Depreciation and amortization		6,845		21,284		26,100		54,229
Income tax expense		~~(163~~18,~~990)~~936		(~~234~~36,~~276~~704)		~~(17,537)~~—		(~~415~~17,~~803~~768)
Net income (loss) attributable to the common stockholders of Pernix Group Inc. and Subsidiaries		2(1,~~594~~204,~~144~~889)		1306,~~326,718~~219		(31,~~588~~280,~~534~~528)		~~332~~(2,~~328~~179,198)
Total capital expenditures		~~283,672~~—		~~109~~61,~~202~~584		~~125~~19,~~843~~523		~~518~~81,~~717~~107
Total assets	$	1512,~~300~~740,~~048~~660	$	186,~~344~~602,~~220~~762	$	75,~~222~~669,~~893~~675	$	4025,~~867~~013,~~161~~097

Schedule of Segment Reporting, Information by Segment
Three Months Ended September 30, 2015
		General Construction		Power Generation Services		Corporate		Total
Revenue	$	85,459,841	$	1,560,713	$	20,852	$	87,041,406
Interest income (expense), net		(47,046)		4,771		—		(42,275)
Interest and other expense- related party		(21,642)		—		(44,753)		(66,395)
Depreciation and amortization - pre quasi-reorganization		992,546		35,862		19,703		1,048,111
Income tax benefit (expense)		(18,020)		183,507		(533,654)		(368,167)
Net income (loss) attributable to the common stockholders of Pernix Group Inc. and Subsidiaries		(954,335)		908,756		(4,507,478)		(4,553,057)
Total capital expenditures		671,296		177,031		7,172		855,499
Total assets	$	127,505,798	$	7,767,662	$	4,084,712	$	139,358,172

Schedule of Segment Reporting, Information by Segment
Three Months Ended September 30, 2014
		General Construction		Power Generation Services		Corporate		Total
Revenue	$	17,205,898	$	1,916,519	$	32,840	$	19,155,257
Interest income (expense), net		—		(479)		1,343		864
Interest and other expense- related party		(20,946)		—		—		(20,946)
Depreciation and amortization - pre quasi-reorganization		9,898		8,809		13,915		32,622
Income tax expense		(60,070)		(66,575)		(6,386)		(133,031)
Net income (loss) attributable to the common stockholders of Pernix Group Inc. and Subsidiaries		994,280		450,794		(1,274,695)		170,379
Total capital expenditures		—		55,007		47,541		102,548
Total assets	$	15,300,048	$	18,344,220	$	7,222,893	$	40,867,161

Geographical Information

The basis used to attribute revenues to individual countries is based upon the country associated with the contract. (e.g., contract is with a U.S. entity then the revenues are attributed to the U.S.) The basis used to attribute fixed assets to individual countries is based upon the physical location of the fixed asset.

		Total Revenue				Property and Equipment - Net
Location – Revenue and net fixed assets		~~Nine~~March ~~months Ended September 30~~31, ~~2015~~2016		~~Nine~~March ~~months ended September 30~~31, ~~2014~~2015		~~September~~March 3031, ~~2015~~2016		December 31, ~~2014~~2015
United States	$	82,528,231	$	43,669,104	$	2,032,304	$	1,247,444
United States (1)	$	68,908,927	$	6,718,581	$	2,566,904	$	2,412,564
Fiji		121,~~370~~101,~~275~~258		53,~~574~~566,~~950~~775		~~430~~368,~~409~~727		~~136~~353,~~570~~620
Vanuatu		932,682		1,058,583		8,298		2,509
Guam		3,104,370		—		1,309,183		1,288,418
Guam		12,904,995		—		1,324,120		—
Vanuatu		329,629		325,534		2,521		7,239
Other		—3,002,140		~~93,239~~—		291,~~260~~161,092		~~291~~7,~~915~~771
Total revenue and net fixed assets	$	~~108~~76,~~736~~446,~~183~~324	$	5010,~~395~~610,~~876~~890	$	35,~~824~~408,~~391~~427	$	14,~~678~~069,~~438~~612

		Total Revenue
Location – Revenue and net fixed assets		Three months ended September 30, 2015		Three months ended September 30, 2014
United States	$	71,294,619	$	16,411,004
Fiji		4,340,682		2,233,199
Guam		11,085,076		—
Vanuatu and other		321,029		511,054
Total revenue and net fixed assets	$	87,041,406	$	19,155,257

(1)Revenue associated with Department Of State (“DOS”) projects included in the U.S. total.

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Major Customer

~~The FEA is a major customer through a long-term O&M contract and two construction projects awarded in 2015 and 2014.~~ During the ~~nine~~three months ended ~~September~~March 3031, ~~2015 and 2014~~2016, ~~revenues~~revenue ~~generated from FEA were $12.3 million and $5.6 million, respectively or 11%~~ of total revenue for both periods. Revenue from FEA is reported in both the General Construction and Power Generation Services segments based upon the project or service performed. Revenue generated from a second customer was $21.07 million or 1928.4% of ~~total~~consolidated revenue ~~for the nine months ended September 30, 2015, reported in the General Construction segment. No revenue~~ was ~~reported~~generated ~~from~~through ~~this~~one customer ~~in the prior year~~. ~~The~~This ~~Bureau of Overseas Buildings Operations (OBO) is a major~~ customer ~~primarily~~also ~~through~~has ~~the award of six projects since 2011 that generated revenue of~~ $817.25 million ~~and~~or ~~$29~~36.7% ~~million~~of ~~for~~consolidated ~~the~~accounts ~~nine~~receivable ~~months~~outstanding ~~ended~~as ~~September~~of ~~30,~~March ~~2015 and 2014~~31, ~~respectively~~2016. ~~Revenue~~ ~~from~~All ~~the~~amounts ~~OBO~~are isdeemed ~~recorded in the General Construction segment~~collectable.

During the three months ended March 31 , 2015, the Company generated revenue of approximately 89% of consolidated revenue through three major customers. The Bureau of Overseas Building Operations (OBO) is a major customer primarily through the award of five projects since 2011 that generated revenue of $1.7 million or 16% of consolidated revenue for the three months ended March 31, 2015. The FEA is a major customer through two construction projects and O&M agreements. During the three months ended March 31, 2015, $3.6 million or 34% of consolidated revenue was generated from this customer. Revenues generated from a third customer were $4.1 million or 38% of consolidated revenue for the three months ended March 31, 2015.

16. Income taxes

The income tax expense for the ~~nine~~first three months ended ~~September~~March 3031, ~~2015~~2016 of approximately $~~495~~15,~~284~~500 is comprised of a ~~domestic~~foreign ~~current~~deferred ~~federal and state income~~ tax expense of approximately $3221,~~100,~~000 and a current ~~foreign~~state tax benefit of approximately $705,~~470~~500 for ~~PFL and domestic current deferred tax expense of $533,654 associated with the utilization of net operating loss carryforwards (NOL) during a pre quasi-reorganization period~~PGI. The domestic tax was a non-cash expense as NOLs offset the liability. The use of this NOL is recorded as a credit to additional paid in capital in accordance with adopted accounting policy for quasi-reorganization. Net operating loss and deferred tax assets are utilized on a first-in first-out basis. There ~~was~~were no interest or penalties for ~~the~~this ~~nine months ended September 30, 2015 and 2014~~quarter. The $~~415~~18,~~803~~000 income tax expense for the ~~nine~~first three months ended ~~September~~March 3031, ~~2014~~2015 reflects a ~~domestic~~ current ~~deferred tax~~ expense of $~~240~~37,~~057~~000 for PFL and a domestic current ~~expense~~deferred ~~from~~tax ~~PFL~~benefit of approximately $~~175~~19,~~746~~000.

As of ~~September~~March 3031, ~~2015~~2016, the Company has total net operating and capital loss carryforwards from U.S. operations of approximately $7486.13 million. The Company’s deferred tax assets at ~~September~~March 3031, ~~2015~~2016 consist primarily of the deferred tax assets related to those loss carryforwards. The Company evaluates the need to maintain a valuation allowance for deferred tax assets based on the assessment of whether it is more likely than not that deferred tax benefits will be realized through the generation of future taxable income. Appropriate consideration is given to all available evidence, both positive and negative, in assessing the need for a valuation allowance. As of ~~September~~March 3031, ~~2015~~2016 and December 31, ~~2014~~2015, the Company maintained a full valuation allowance on $2831.01 million and $2625.2 million of net deferred tax assets, respectively.

17. Subsequent Events

On October16, 2015, Pernix Guam, LLC entered into a five month line of credit agreement with ANZ in the amount of $0.75 million for working capital requirements. The facility matures five months from the date of the note and the interest is based on the Asian Prime rate plus 0.50% (3.75% as of September 30, 2015). Interest is payable monthly with principal due at maturity. Loan origination fees equal 1.00% of loan amount with no prepayment penalties. The line of credit is subject to the same covenants as outlined in the Pernix Guam LLC term loan with ANZ bank detailed in Note 8 except that the “gearing ratio” that limits net total liabilities to shareholder funds is 2.00:1.

On October 27, 2015, Pernix announced the $9.9 million Electric Power Corporation award for the Engineering, Procurement and Construction for the Rehabilitation of Samasoni, Fale ole Fee and Alaoa Small Hydro Power Stations in Samoa.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You are cautioned that this Quarterly Report on Form 10-Q and, in particular, the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section in Part I, contains forward-looking statements concerning future operations and performance of the Company within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are subject to market, operating and economic risks and uncertainties that may cause the Company’s actual results in future periods to be materially different from any future performance suggested herein. Factors that may cause such differences include, among others: increased competition, increased costs, changes in general market conditions, changes in the regulatory environment, changes in anticipated levels of government spending on infrastructure, and changes in loan relationships or sources of financing, political instability or violence. Such forward-looking statements are made pursuant to the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995.

The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the Company’s unaudited condensed consolidated financial statements and the notes thereto included elsewhere in this report and the ~~2014~~2015 annual consolidated financial statements and notes thereto included in the Company’s ~~Annual Report on~~ Form 10-K Annual Report filed with the Securities and Exchange Commission (SEC).

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The financial information discussed in the MD&A includes amounts that may be derived from utilizing certain accounting estimates and assumptions. The following highlights accounting estimates and assumptions which the Company considers to be critical to the preparation of our financial statements because they inherently involve significant judgments and uncertainties. The Company cautions that these estimates are developed based upon available information at the time that the estimate was developed. However, future events rarely develop exactly as forecast, and the best estimates routinely require adjustment as more current information becomes known.

Construction revenues are determined by applying the ~~Percentage~~percentage of ~~Completion~~completion method. Our current projects are delivered through either construction management, general contracting or design/build methodologies using either lump sum, guaranteed maximum price or cost plus contracts. Revenues recognized under the ~~Percentage~~percentage of ~~Completion~~completion method, require application of a percentage (actual costs incurred through the reporting date divided by the total estimated costs to complete the project) to the fixed contract price. The resultant amount is recorded as revenue for the applicable period. This method of revenue recognition requires us to estimate future costs to complete a project.

Estimating future costs requires judgment of the value and timing of material, labor, scheduling, product deliveries, contractual performance standards, liability claims, impact of change orders, contract disputes, warranty expense, as well as productivity. In addition, sometimes clients, vendors and subcontractors will present claims against us for recovery of costs they incurred in excess of what they expected to incur, or for which they believe they are not contractually responsible. In turn, the Company may present claims to our clients, vendors and subcontractors for costs that management believe were not the Company’s responsibility or may be beyond our scope of work. The Company will include costs associated with these claims in the financial information when such costs can be reliably identified and estimated. Similarly, the Company will include in revenue amounts equal to costs for claims, where the outcome is probable that the claim will be found in the favor of the Company. The Company will record a provision for losses when estimated costs exceed estimated revenues.

Our estimates, assumptions and judgments are continually evaluated based on known information and experience. However, the actual amounts could be significantly different from our estimates.

33In this report, we use the terms “Pernix Group”, “PGI”, “the Company”, ‘we”, “us”, and “our” to refer to Pernix Group, Inc. and its condensed consolidated subsidiaries. Unless otherwise noted, references to years are for calendar years. We refer to the three months ended March 31, 2016 and 2015 as the “first quarter of 2016” and the “first quarter of 2015”, respectively.

In this report, we use the terms “Pernix Group”, “PGI”, “the Company”, ‘we”, “us”, and “our” to refer to Pernix Group, Inc. and its condensed consolidated subsidiaries. Unless otherwise noted, references to years are for calendar years. We refer to the three months ended September 30, 2015 and 2014 as the “third quarter of 2015” and the “third quarter of 2014”, respectively.

Company Overview

Pernix ~~has~~Group ~~full-scale~~is ~~construction~~a ~~and~~global ~~management~~company ~~capabilities,~~operating ~~with~~across ~~some~~multiple industry sectors providing a wide variety of ~~our~~services, ~~subsidiaries~~employing ~~located~~approximately in475 ~~the~~employees ~~United~~across ~~States~~various international and US domestic locations. The Company is over 96.0% owned by Ernil Continental, ~~Guam~~S.A., ~~Fiji~~BVI, ~~Vanuatu~~Halbarad Group, ~~South~~Ltd., ~~Korea~~BVI, and ~~Africa~~Affiliates. ~~With~~The ~~over~~Company ~~400~~conducts ~~employees,~~its weoperations ~~provide~~through ~~construction~~the ~~management,~~parent ~~general~~and ~~contacting~~its subsidiaries. The Company’s two primary operating business segments are construction and ~~design/build~~power services. ~~across~~In ~~multiple~~addition ~~public~~to ~~and~~these ~~private~~two ~~sector~~operating ~~end~~segments, ~~markets~~the ascorporate ~~well~~operations asare ~~power~~a ~~O&M~~separately ~~services~~reported segment that provides administrative support to the operating segments.

WePernix ~~have~~has ~~provided~~full-scale construction and ~~power~~management ~~services~~capabilities, ~~since~~with ~~1995~~some ~~and~~of ~~have established a strong reputation within~~ our ~~markets~~subsidiaries bylocated ~~delivering~~in ~~complex~~the ~~projects~~United ~~and~~States, ~~providing~~Guam, ~~innovative~~Fiji, ~~facility~~Vanuatu, ~~O&M~~South ~~solutions to clients world-wide with an unwavering commitment to safety~~Korea, ~~quality~~Africa, ~~social responsibility~~ and ~~total customer satisfaction~~Germany. We ~~have~~provide ~~established~~our ~~domestic~~services ~~and~~in ~~internationally experienced, high-performance management teams with~~ a ~~proven~~broad ~~track~~range ~~record~~ of ~~successfully~~end ~~completing~~markets, ~~complex~~including ~~projects~~construction, ~~around~~construction ~~the~~management, ~~globe~~ and inpower ~~some~~operations ofand ~~the~~maintenance ~~most~~(“O&M”) ~~remote locations. We have over twenty years of experience providing the majority of our~~ services ~~in international locations~~. ~~We believe that these attributes are the foundation of Pernix’s success.~~

WeConstruction ~~believe~~services ~~the~~include ~~unique~~pre-construction ~~collection~~(pre-con) ofconsulting ~~resources~~services, ~~experience~~construction management, ~~operational~~design build and ~~financial~~general ~~attributes~~contracting ~~that~~delivered ~~Pernix~~either ~~possess~~in ~~properly~~lump-sum, ~~position~~guaranteed ~~the~~maximum ~~Company~~cost ~~for~~or ~~future~~cost-plus ~~growth,~~contract ~~diversification and financial success~~models. ~~This~~Markets isinclude ~~representative~~both byU.S. ~~the~~Department ~~BE&K~~of ~~Building~~State ~~Group~~(“DOS”) and ~~dck~~other ~~Pacific~~government ~~Guam,~~clients ~~LLC~~ and ~~dck-ecc~~private ~~Pacific~~sector ~~Guam~~commercial clients, ~~LLC~~the ~~Joint~~latter ~~Venture~~typically ~~Interest~~in ~~acquisitions~~either astechnically ~~well~~based asor ~~expansion~~commercial ~~of vendors, subcontractors and project partners globally~~facilities.

~~The~~Power ~~Company~~services ~~also~~focus ~~has~~includes ~~$74.1 million of net~~ operating and ~~capital~~maintenance ~~loss~~of ~~carryforwards~~power ~~primarily~~production ~~from~~facilities atypically ~~legacy~~with ~~unrelated~~longer ~~business~~term ~~that may be used to offset future U~~contracts.S. ~~federal and state taxable earnings.~~

Table of Contents

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

We believe the unique collection of resources, experience, operational and financial attributes that Pernix possesses properly positions the Company for future growth, diversification and financial success. The acquisitions of BE&K Building Group (“BE&K BG”) and certain assets of dck Pacific Guam, LLC and dck-ecc Pacific Guam, LLC Joint Venture Interest (collectively, “PPG”), along with our recent transactions with FHL, wherein PGI sold a non-controlling interest in Pernix Papa New Guinea (“PPNG”) for $2.4 million and PPNG acquired Basic Industries Limited (“BIL”) from PHL for $0.3 million, has significantly increased diversification of end markets, services and geographic footprint, increased critical mass, and expanded the subcontractor/vendor base as well as the project partner network globally.

Business Segments

~~General~~ Construction Segment

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

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

34 Our general contracting services are focused on our domestic and international projects where we have developed a global network of suppliers and subcontractors. Together with these strategic partners, we utilize niche capabilities and experience that address customer design, budget and schedule requirements. This not only assists Pernix Group in winning larger projects, but also mitigates cost, design and other risks, provides experience managing larger projects, expands relations with more subcontractors and vendors, and enhances the number and type of contract opportunities that Pernix can qualify for, bid on and win.

~~On June 15~~Additionally, ~~2015,~~most ~~Pernix Guam LLC (“PPG”) a wholly-owned subsidiary~~ of ~~the~~our ~~Company,~~construction ~~acquired~~team ~~certain~~members ~~assets~~have ofworked ~~dck~~on ~~Pacific~~complex ~~Guam~~domestic ~~LLC, including Guam-based experienced operations~~ and ~~sales~~international ~~personnel,~~projects. ~~and~~We ahave ~~55%~~the ~~membership~~expertise ~~interest~~required into ~~dck-ecc~~successfully ~~Pacific~~conduct ~~Guam~~full ~~LLC~~scale ~~joint venture (collectively “PPG acquisitions”). PPG provides design-build, program management,~~ construction ~~management-at-risk~~projects ~~and~~anywhere ~~general~~in ~~construction~~the ~~services~~world. ~~PPG~~We ~~has~~have ~~construction~~demonstrated ~~expertise~~that inwe ~~the~~can ~~military,~~execute ~~retail,~~the ~~hospital,~~most ~~industrial,~~technically ~~commercial~~ and ~~healthcare~~geographically ~~end~~challenging ~~markets.~~projects ~~The~~within ~~PPG~~time ~~acquisition establishes a sizable~~ and ~~reputable~~budget ~~platform~~parameters inwhile ~~the~~meeting ~~region with~~ the ~~ability~~exacting toquality ~~pursue~~and ~~opportunities~~safety ~~across~~requirements ~~the Pacific Rim. As part~~ of the ~~acquisition~~contract, ~~PPG~~thereby ~~obtained~~exceeding ~~rights~~our toclients’ ~~a $53~~expectations.6 ~~million project called P-109 with the Naval Facilities Engineering Command for the design and construction of an aircraft maintenance hangar on the island of Guam.~~ Pernix ~~assumed~~Group ahas ~~96% economic interest in~~ the ~~rights~~ability ~~and obligations of the JV with respect~~ to ~~the~~self-perform ~~aircraft~~multiple ~~maintenance~~trades ~~hangar~~when ~~project,~~doing ~~while~~so ~~the~~brings ~~other~~efficiencies ~~members~~and ofvalue ~~the JV retain the rights~~ to ~~all~~a ~~other projects of the JV. This~~ project isand ~~approximately~~our ~~32% complete as of September 30, 2015~~customers.

~~BE&K~~Construction Building Group (“BEK BG”) was acquired on June 30, 2015. BEK BG is a diversified domestic construction services company serving advanced manufacturing, aerospace, life sciences, food & beverage, healthcare, commercial/mixed-use and institutional clients nationally. BEK BG offers a variety of construction services and project delivery methods including: pre-construction, at-risk and agency construction management, design/build. Headquartered in Greenville, South Carolina, BEK BG has additional regional operations in Chicago, Illinois; Houston, Texas; Washington, D.C.; Research Triangle Park, North Carolina; and Charleston, South Carolina. BEK BG is well-positioned to operate in other parts of the country to accommodate its clients’ building programs. In the last decade alone, BEK BG has executed an impressive list of building programs for major corporations including American Honda Motor Company, BASF, Boeing, Duke Medicine, DuPont, General Mills, Ferguson Enterprises, Gulfstream Aerospace, Novartis Vaccines & Diagnostics, Purdue Pharma, Sysco Foods and Triumph Aerostructures. BEK BG is well-positioned to operate in other parts of the country to accommodate its clients’ building programs. The vast majority of its projects are for repeat clients, and most of its projects are won on the basis of the qualifications, experience and client-driven values of its people. Backlog as of September 30, 2015 is $293.5 million which includes $141.8 million of awarded not booked.Management

InWe ~~addition~~have tosignificant ~~our~~experience ~~construction~~in ~~projects~~providing ~~associated~~at-risk ~~with~~and ~~our~~agency ~~recent~~construction ~~acquisitions,~~management ~~many~~services ofon ~~our~~complex ~~construction~~facility projects ~~are~~typically ~~for~~in the ~~U.S.~~private ~~Federal~~sector ~~Government.~~across Inspecific ~~most~~market ~~instances the bidding process requires an initial pre~~centers-~~qualification~~of-excellence ~~stage,~~including ~~followed~~Advanced by a proposal submission stage for qualified contractors. Pernix focuses its efforts in areas and on projects where we have a competitive advantage that is within our core competencies. We minimize risk and develop winning strategies by thoroughly studying local marketsManufacturing, ~~aligning ourselves with capable local or regional partners~~Food/Beverage, ~~and establishing purchasing and logistics support locally~~Biotech/Pharma, ~~or regionally~~Healthcare, ~~whenever~~Higher ~~possible.~~Education ~~Our performance history~~ and ~~record~~other ofGeneral ~~client~~Commercial ~~retention~~Mixed ~~demonstrate~~use the successful formula Pernix and its partners have developed, allowing for business growth and achievement of customer satisfaction, which is evidenced by the awarded contracts from The Bureau of Overseas Buildings Operations (OBO) to Pernix and our joint venturessectors.

OnOur ~~September~~experience ~~18,~~has ~~2015,~~proven ~~the~~that ~~U.S.~~early ~~Department~~involvement ofin ~~State~~a ~~awarded~~project ~~the~~and ~~Company~~its adesign ~~contract~~is ~~totaling~~one ~~$81.6~~of ~~million~~the ~~for~~keys ~~the~~to Uits success.S. ~~Embassy~~Our ~~Berlin~~proven ~~– Clay~~approach ~~Allee~~works ~~Campus.~~in ~~The~~line ~~contract~~with ~~includes~~our ~~major~~customers’ ~~renovations~~needs and expectations to ~~and~~develop ~~the~~a ~~historical~~plan ~~preservation~~and ofan ~~the~~execution ~~Berlin~~schedule ~~Brigade~~that ~~Headquarters~~saves ~~constructed~~time byand ~~the~~money ~~German~~and ~~Luftwaffe~~ensures ~~prior~~timely tocompletion ~~World~~of ~~War~~our IIprojects. ~~The~~Our ~~contract~~state-of-the-art ~~also~~construction ~~includes~~management anservices ~~upgrade~~provide toa ~~campus~~systematic ~~security~~project review, including a comprehensive construction and start-up schedule. By establishing a ~~Marine~~singular ~~Security~~point ~~Guard~~of ~~Quarters~~responsibility, ~~fit-out~~we provide continuous updates on project. ~~The~~milestones ~~Company~~and ~~received~~ensure athe ~~limited~~safest ~~notice~~working toenvironment ~~proceed~~while inwe ~~October~~deliver ~~2015.~~projects on time and on budget.

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~~Our~~Table ~~recent experiences with the OBO have strategically strengthened our technical and management expertise and developed relationships that enable us to provide our clients with a broad spectrum~~ of ~~services that leverage the expertise and the construction resumes of our staff and our partners.~~ Contents

OnDesign January 22, 2015, the Department of the Army’s U.S. Army Corps of Engineers awarded Pernix-Kaseman JV (a newly formed Limited Liability Company in which the Company owns 51%) a contract totaling $11.6 million to construct a Communications Center Special Area at Camp Humphrey in South Korea. The project is approximately 20% complete as of September 30, 2015.Build

Pernix ~~LTC~~embraces ~~JV (“PLTC”) is a joint venture with LTC Corp (“LTC”) in which Pernix is~~ the ~~majority~~design/build ~~owner.~~model ~~PLTC was formed~~ to ~~pursue~~ensure adesign ~~project~~excellence onand ~~the~~successful ~~campus~~completion of ~~Texas~~construction ~~A&M~~projects ~~University~~from ~~in early 2014. The PLTC awarded project~~analysis, ~~including~~architecture ~~change~~and ~~orders~~permitting, ~~totaled~~through ~~$25.5 million. LTC filed for Chapter 7 bankruptcy protection on May 2~~engineering, ~~2014. In April 2015~~construction, ~~Pernix~~completion ~~became the sole member of the joint venture~~ and ~~individually~~customer ~~performed on the project and all claims against Pernix and PLTC were settled for $0~~acceptance.1 ~~million~~By inestablishing ~~April~~a ~~2015.~~singular ~~The~~point ~~LTC~~of ~~bankruptcy~~responsibility, ~~filing~~we ~~did~~deliver ~~not~~on ~~negatively~~our ~~impacted~~promise ~~Pernix,~~to ~~the~~fulfill ~~venture~~all ~~or the~~ project, ~~which~~requirements ~~was~~and ~~completed~~specifications inon-time ~~June~~and ~~2015~~on-budget.

InWe ~~early~~are ~~2014,~~committed ~~Pernix~~to ~~Fiji~~understanding ~~Limited~~the ~~(“PFL”)~~unique ~~was~~requirements ~~awarded~~and aspecifications ~~$27.4~~of ~~million~~each project to ~~build~~provide a ~~36MW~~comprehensive ~~expansion~~single tosource ~~the Kinoya diesel plant in Fiji~~solution. ~~The~~This ~~project~~value-added ~~scope~~partnership ~~includes~~leverages ~~design~~our ~~expansion,~~ability ~~procurement~~to align and ~~installation. PFL~~manage ~~also~~the ~~received~~best aresources ~~FJD~~for ~~8.4~~all ~~million~~aspects ~~($3.5 million as~~ of ~~September 30, 2015) award in February 2015 for construction of~~ the ~~sub-station to support the newly expanded diesel power station previously awarded to PFL~~project.

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

~~BEK~~Although BGvirtually iseveryone ~~constructing~~in athe ~~new~~world ~~state-of-the-art,~~relies ~~three~~on ~~story~~it, ~~technical~~the ~~services~~needs ~~building~~and ~~site~~resources ~~for~~required ato ~~client~~generate inpower ~~North~~can ~~Carolina~~vary widely from location to location. ~~The~~From ~~60,000~~the ~~plus~~types sfof ~~life~~fuels ~~sciences~~and ~~facility~~technologies ~~will~~employed ~~accommodate~~to ~~both~~the ~~laboratory~~plethora ~~and~~of ~~office~~regulations ~~functions~~governing the development, construction and ~~will~~operation ~~promote~~of ~~the~~power ~~latest~~generation inplants, ~~biotechnology~~Pernix ~~research~~Group ~~and~~understands ~~development.~~the ~~Construction~~unique ~~began~~needs inand ~~December~~requirements ~~2014~~of ~~with~~different ~~completion~~projects ~~scheduled~~in ~~for~~diverse ~~December~~geographic ~~2015~~locations.

InOur ~~March~~Power ~~2015,~~Services ~~BEK~~business ~~BG's~~segment ~~started~~includes ~~construction~~plant ~~project~~Engineering, ~~Gulfstream~~Procurement, ~~Aerospace~~and ~~Corporation’s~~Construction ~~Georgia~~(“EPC”), ~~headquarters~~O&M ~~which~~services, ~~involves~~and aBuild, ~~significant~~Own, ~~expansion to an existing facility~~Operate, ~~also~~Transfer ~~constructed~~(“BOOT”) ~~by BEK BG~~capabilities. Pernix ~~The~~focuses ~~expansion~~its ~~adds~~service ~~110,000~~offerings sfon ofsmall ~~high-bay manufacturing space~~ to ~~the~~mid-size ~~original~~power ~~facility.~~plants ~~Construction~~as ~~began~~well inas ~~March~~transmission ~~2015~~and ~~with~~distribution ~~completion~~grids ~~scheduled~~and ~~for~~underground ~~January~~cable ~~2016~~installation.

BEK BG is providing design-assist and construction services for a new 290,000 sf laboratory facility in Oklahoma for The Boeing Company that expands the client’s operations in the sustainment of defense aircraft. The building will eventually house about 800 employees working in engineering, research and development laboratories, and support areas. Construction began May 2015 with completion scheduled for the summer of 2016.

Power Generation Segment

Our power business segment includes plant construction and O&M services. Specifically, Pernix provides plant engineering, design, procurement, construction, and operations & maintenance services from the power source through the distribution network in global markets. We have the capability to address a variety of power generating requirements from initial conceptual design to construction, through operating and maintaining power facilities. Pernix differentiates itself within the power industry as we can scale to various size projects, ranging from small to mid-sized projects on a stand-alone project basis and large projects in association with our strategic partners. This flexibility in the scale of projects on which we work reflects the well thought out design, agility and efficiency in our operations. Pernix also has a wealth of experience in the upgrade of existing facilities to add additional capacity and to achieve operational efficiency improvements by upgrading and replacing outdated equipment while endeavoring to use existing equipment when possible. These upgrade projects typically produce significant cost savings to our customers and can often be carried out while the power plant continues to operate, resulting in even greater cost savings to our customers. Due to our years of experience, we have developed strong relationships with engine and turbine manufacturers, suppliers of parts for power plants and distribution/ transmission systems, software developers and suppliers for control systems, Customer Information Systems (CIS), and Geographic Information Systems (GIS).

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

Construction

Pernix relies on our construction capability and strong affiliation with world-class design firms, equipment manufactures and subcontractors to provide comprehensive global power EPC solutions. We have the resources to properly fit technology with our customers’ special requirements, budget and environmental considerations and constraints. Power plants are a significant investment and become a crucial part of a community’s survival, hence we take great care to understand what our customer requires to ensure that the end product exceeds their expectations for today and contemplates their needs for the future. As noted in the construction segment discussion above, our state-of-the-art construction management services provide a systematic project review, including a comprehensive construction and start-up schedule. Our power plant construction methodology is not limited to building a facility; we also provide startup and commissioning services to ensure that the equipment is fully integrated with all other operating systems as well the transmission/distribution system and power grid. Furthermore, we provide the appropriate training for start-up as well as future operations and maintenance.

Operations and Maintenance (O&M)

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

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

Engineering, Procurement, and Construction (EPC)

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

Table of Contents

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

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

Build, Own, Operate, Transfer (BOOT)

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

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

Current Power Operations & Maintenance Services

Our power projects to date have been primarily international with specific focus in the North and South Pacific. Our ~~Power~~power ~~Generation~~services ~~Services~~ segment currently operates power plants in the Republic of the Fiji Islands (Fiji) and the Republic of Vanuatu (Vanuatu) ~~and contributed $4~~.2 ~~million of our revenue for the nine months ended September 30, 2015 revenue.~~ Although the revenue from our ~~Power~~power operations ~~has~~represents ~~historically been~~ a ~~smaller~~small ~~portion~~percentage of consolidated revenue, it ~~consistently~~historically accounts for a significant portion of the ~~Company’s~~gross ~~pretax income from continuing operations~~profit. In addition to the fees generated through power generation service, the power segment sourced three construction projects in Fiji and the Solomon Islands that contributed $9.1 million of revenue in the nine months ended September 30, 2015 and $23.8 million of revenue during the year-ended December 31, 2014.

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

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

The ~~Company~~Kinoya ~~operates~~Power ~~two~~Plant, ~~power~~which ~~plants~~consist inof ~~Fiji. The~~three ~~Kinoya~~phased-in ~~Power~~plants ~~Plant,~~ situated near Suva, the capital of Fiji, is part of the FEA grid and is the largest diesel fueled power plant in Fiji with an installed capacity of 5086.~~1MW~~1 MW. The Vuda Power Plant, situated between Nadi and Lautoka is the second largest diesel fueled power plant in Fiji with an installed capacity of 24.~~2MW~~2 MW for a total combined installed capacity of 74110 MW.~~3MW.~~ The Kinoya and Vuda Power Plants are fully compliant with the applicable laws of Fiji ~~relevant~~relative to power plant operations such as the Labor Industrial Act and the Environmental Act, and complies with manufacturers guidelines by applying prudent engineering ~~practices~~practice in the operation and maintenance of the power plant in both locations.

3830

InTable ~~early 2014, PFL was awarded a $30.1 million contract to design, supply, install and commission 36MW~~ of auxiliary power equipment at the Kinoya Power Station. The contract price being denominated in 11.9 million Fijian Dollars for the onshore work and 16.6 million Euro for offshore work. On March 14, 2014, PFL entered into a 15.8 million Euro supply contract with Wartsila Finland Oy, and Wartsila Australia Pty Ltd, collectively referred to as the supplier, to supply and deliver four (4) engines and related equipment (the offshore work) and to provide technical assistance during installation and commission of the engines at the Kinoya power station.Contents

In late 2015, the Company’s existing O&M service agreement was amended to reflect the award of the 36 MW expansion project at Kinoya (as Pernix had been the EPC contractor). The Company’s total operated capacity of 110 MW is inclusive of the 36 MW expansion.

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

Vanuatu Utilities and Infrastructure Limited (VUI)

In late 2010, VUI was selected by the Government of the Republic of Vanuatu to provide O&M services for the Luganville power plant in Vanuatu. VUI earns a monthly fee based on man hours necessary to operate and maintain the facilities. The costs associated with earning the management fee are included in salaries and employee benefits and also in general and administrative expenses in the consolidated statement of operations. ~~The O&M service agreement is subject to the retender. Refer to Note 12 of the condensed consolidated financial statements.~~

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

Corporate Segment

The Corporate segment covers the indirect activities supporting the Company’s construction and power activities. The Corporate segment earnings consist of ~~non-related party~~ rental revenue generated from the Company’s headquarters in Lombard, Illinois.

Executive Summary

The Company is very excited about ~~the~~its transformation and diversification in conjunction with our recent acquisitions. These ~~will~~diversify ~~strengthen~~ our ~~Department~~customer ofbase, ~~State~~strengthen (our DOS) and commercial businesses including our work in the Pacific Rim region, which positions us for ~~significant~~continued ~~organic and inorganic~~ growth.

We have successfully completed ~~two~~ projects for ~~Novartis,~~The ~~Purdue~~Boeing ~~Pharma~~Company, ~~Texas~~FUJIFILM ~~A&M~~Diosynth ~~University~~Biotechnologies USA, ~~DOS / Niger~~ and ~~FEA~~Ferguson /Enterprises ~~Kinoya~~ during the ~~nine~~three months ended ~~September~~March 3031, ~~2015~~2016. WeIn ~~are~~March ~~also~~2016, ~~planning~~the toDOS ~~complete~~awarded ~~three additional projects in~~ the ~~fourth~~Company ~~quarter of 2015 along with~~ a ~~number~~contract ofvalued ~~newly~~at ~~acquired~~$181.2 ~~BEK~~million ~~BG projects~~($169.2 Inmillion ~~September~~net ~~2015, the Department~~ of ~~State~~Value ~~awarded~~Added ~~the~~Tax) ~~Company a contract~~ for ~~$81.6 million for~~ the new U.S. Embassy ~~Berlin~~Compound asin ~~well~~Maputo, ~~as several large technical market projects at BEK BG~~Mozambique. We are actively pursuing additional DOS projects as, well as large commercial and advanced manufacturing opportunities in North America, ~~and~~along awith other large ~~project~~projects in Guam with potential award ~~expectation~~expectations in ~~the fourth quarter of 2015~~mid-2016.

InManagement ~~relation~~continues to ~~our~~focus ~~recent~~on ~~BEK~~bidding BG and ~~dck~~winning ~~acquisitions~~new contracts on a stand-alone basis as well as with our strategic partners, wepursuing ~~retained~~both ~~the~~existing ~~leadership~~as well as new customers. In addition, ~~operational~~management ~~and~~continues ~~functional~~to ~~teams~~integrate its acquisitions to capture synergies amongst its operations. The Company maintains the benefit of ~~both~~having ~~acquisitions~~$86.3 ~~They~~million ~~will~~of ~~continue~~net operating and capital loss carryforwards that may be used to ~~serve,~~offset ~~grow~~future U.S. federal and ~~utilize~~state ~~customer~~taxable ~~and~~earnings. ~~supplier~~These ~~relationships~~benefits ~~which~~are ~~will~~potentially ~~provide~~advantageous ~~the~~to ~~Company~~our ~~with~~existing ~~the~~business ~~capabilities~~and could be enhanced by our plan to ~~further~~grow ~~strengthen~~through ~~and~~acquisitions ~~leverage~~that ~~global~~are ~~opportunities~~accretive to earnings.

During the first nine months of 2015 and 2014, the Company generated revenues of $108.7 million and $50.4 million, respectively. Construction revenue increased $59.2 million primarily attributable to our recent acquisitions, while Power Generation revenue decreased $0.8 million. Excluding our recent acquisitions, new awards and related change orders with contract value in excess of $83.7 million were granted to the Company in the first nine months of 2015 and with the completion of two acquisitions in June 2015, backlog is $413.4 million as of September 30, 2015.31

39 Table of Contents

~~Gross~~During ~~profit for~~ the ~~first~~three ~~nine~~ months ofended ~~2015~~March ~~was~~31, ~~$6.2~~2016 ~~million~~and or2015, ~~$6.4 million lower than~~ the ~~prior~~Company ~~year~~generated ~~period~~revenues ~~driven primarily by completion~~ of ~~the~~$76.4 ~~Sather~~million and ~~Baku~~$10.6 ~~projects~~million, inrespectively. ~~2014~~Construction ~~which~~revenue ~~carried~~increased ~~higher recognized margins,~~ $065.8 million ofprimarily ~~amortization~~attributable ~~expense related~~ to our ~~acquisition~~recent ofacquisitions, ~~BEK~~while BGpower ~~and~~services ~~recognition~~revenue ofincreased ~~additional costs of approximately~~ $30.1 million ~~associated with three loss contracts in 2015~~. ~~Gross~~Excluding ~~profit from~~ our ~~Power~~recent ~~Generation~~acquisitions, ~~business~~new ~~was~~awards ~~$2.4 million~~ and ~~$2.3~~related ~~million~~change ~~for~~orders ~~nine~~with ~~months~~contract ~~ended~~value ~~September~~in ~~30,~~excess ~~2015~~of ~~and 2014, respectively, or~~ $0179.17 million ~~higher~~were ingranted ~~the first nine months of 2015 compared~~ to the ~~prior~~Company ~~year~~during ~~period. Although~~ the ~~revenue~~three ~~from~~months ~~our~~ended ~~Power~~March ~~Generation segment has historically been a smaller portion of consolidated revenue~~31, it2016 ~~accounts~~and ~~for~~our abacklog ~~significant~~is ~~portion of the Company’s pretax income from continuing operations~~$484.8 ~~Loss~~million ofas ~~revenue from either~~ of ~~our~~March ~~two operating and maintenance agreements could have a material and negative impact on the Company’s income~~31, ~~cash flows and financial condition~~2016. One of these agreements (Pernix Fiji Limited) is a 20 year concession deed with Fiji Electricity Authority (FEA) that expires in 2023 while the other VUI is considered temporary until VUI completes its retendering process as previously discussed.

~~Management~~“It’s ~~continues~~a ~~to focus on bidding and winning~~ new ~~contracts~~era onfor aPernix,” ~~stand-alone~~said ~~basis~~Nidal ~~as well as with our strategic partners~~Zayed, ~~pursuing~~Pernix’s ~~both~~CEO ~~existing~~& ~~as well as new customers. Meanwhile~~President, ~~the~~“this ~~Company~~last ~~enjoys~~year ~~the~~has ~~benefit~~been oftransformative ~~having~~for ~~$74~~us.1 ~~million~~Our ofteam ~~net~~is ~~operating~~stronger, and ~~capital~~our ~~loss~~capabilities ~~carryforwards~~and ~~that~~technical ~~may~~capacity behave ~~used~~greatly toincreased. ~~offset~~We’re ~~future~~improving ~~U.S.~~efficiencies ~~federal~~ and ~~state~~developing ~~taxable~~stronger ~~earnings~~relationships. ~~These~~Our ~~benefits~~backlog ~~are~~is ~~potentially~~the ~~advantageous~~highest toit’s ~~our~~ever ~~existing~~been, ~~business~~ and ~~could~~we becontinue ~~enhanced~~setting bythe ~~our~~stage ~~plan~~for tolarger ~~grow through acquisitions that are accretive to earnings~~growth.”

Results of Operations for the ~~nine~~three months ended ~~September~~March 3031, ~~2015~~2016 compared to the ~~nine~~three months ended ~~September~~March 3031, ~~2014~~2015

Revenues

Total revenues increased $5865.38 million to $~~108~~76.74 million for the ~~first~~three ~~nine~~ months ofended ~~2015~~March 31, 2016 compared to ~~the first nine months of 2014~~2015. This increase is comprised of $7865.74 million of revenue associated with the Pernix Guam and BEK BG acquisitions, ~~offset~~an byincrease ~~a reduction~~ in organic construction revenue of $190.63 million and aan ~~reduction~~increase of $0.81 million in power ~~generation~~services and other revenue. This decrease in construction revenue was driven by the continued completion of existing projects previously awarded and the delay of expected awards, which was partially offset by four newly awarded contracts in 2015 and the second half of 2014.

~~General~~ Construction – Including recent acquisitions, construction revenues infor the ~~first~~three ~~nine~~ months ofended ~~2015~~March 31, 2016 were $~~104~~75.41 million compared to $459.23 million in the prior ~~year~~period. Excluding our recent acquisitions, construction revenues for the ~~first~~three ~~nine~~ months ofended ~~2015~~March 31, 2016 compared to the prior ~~year~~period ~~decreased~~increased $190.63 million primarily ~~attributable~~driven toby the ~~substantial~~timing ~~project completion~~ of ~~Sather~~newly ~~Containerized~~awarded ~~Housing~~contracts ~~Units, Niger Embassy rehabilitation, Azerbaijan Security Upgrade, Freetown Embassy and a nanotechnology laboratory which started~~ in ~~early~~2016 ~~2014~~offset ~~and~~by ~~was~~the ~~completed~~completion inof ~~August~~previously ~~2015~~awarded projects. The top five BEK BG projects accounted for approximately 5652% of the revenue generated during the first quarter, which were in the life ~~science~~sciences, higher education and aerospace industries located in the south, mid-Atlantic and south east region onof the United States.

~~The~~Service ~~scope~~Fees of— Power ~~projects~~plant ~~generating~~service ~~revenue~~revenues inwere ~~the~~approximately ~~first~~$1.3 ~~nine~~million ~~months~~for ofthe ~~2015~~three ~~include~~months ~~upgrades~~ended orMarch ~~rehabilitations of several U.S. Embassies~~31, ~~design~~2016 and ~~construction~~2015, ~~of a 36MW power generation facility expansion~~respectively, a ~~nanotechnology~~$0.1 ~~laboratory,~~million anincrease ~~engineering~~over ~~activities building,~~ the ~~design~~prior ~~and~~period. ~~construction~~The ofincrease anis ~~aircraft~~due ~~maintenance~~to ~~hangar,~~an ~~and~~increase ~~the~~in ~~completion~~fixed offees ~~Containerized~~associated ~~Housing~~with ~~Units.~~the Innew ~~addition,~~O&M ~~BEK~~award BGin ~~contracts~~Kinoya ~~include~~post ~~advance~~completion ~~manufacturing, industrial, life sciences, commercial/mixed-used and institutional projects. The diversification~~ of ~~our customer base and~~ the ~~scope~~power ofplant ~~our~~construction ~~projects~~in ~~are consistent with our strategic plan~~2015.

Service Fees — Power Generation Plant. Service fees — power generation plant service revenues were $4.2 million and $5.1 million for the first nine months of 2015 and 2014, respectively, a $0.8 million decrease over the prior year, primarily due to lower diesel power usage due to higher water levels in Fiji driving lower diesel demand, higher planned and unplanned maintenance and the strengthening of the USD dollar against the FJD dollar.

Costs and Expenses

~~General~~ Construction Costs. - Total construction costs increased $6563.6 million to $~~100~~72.79 million as compared to the prior ~~year~~period. Costs associated with ~~Pernix~~the ~~Guam and~~ BEK BG and PPG acquisitions were $7463.86 million ~~and~~while ~~non-acquisition~~organic construction costs were ~~$25.9~~essentially ~~million~~unchanged. InConstruction ~~addition,~~costs ~~construction~~in ~~costs~~2016 include amortization expense of $0.87 million related to customer contracts / backlog in connection with our June ~~30,~~ 2015 ~~acquisition of BEK BG~~acquisitions.

Operations and Maintenance Costs — Power ~~Generation Plant. Operations and maintenance costs — power generation~~ plant costs ~~decreased~~increased $0.91 million to $10.86 million for the ~~first~~three ~~nine~~ months ofended ~~2015~~March 31, 2016 compared to $20.75 million for the prior ~~year~~period, reflecting ~~lower~~higher labor and maintenance expense incurred induring the ~~first~~three ~~nine~~ months ofended ~~2015~~March in31, ~~Kinoya~~2016 ~~(major scheduled overhaul~~ in ~~2014) partially offset by higher maintenance activities expense in the first nine months of 2015 in Vuda~~Kinoya.

Gross Profit

Gross profit ~~decreased~~increased $62.41 million to $63.20 million, for the ~~first~~three ~~nine~~ months ofended ~~2015~~March 31, 2016 from $120.69 million in the prior ~~year~~period. Gross profit associated with our recent acquisitions ~~were~~was $31.9 million and ~~non-acquisition~~organic gross profit was $20.32 million ~~compared to the prior year~~. ~~Specific~~ ~~drivers~~The ~~to the~~ non-acquisition ~~decrease~~increase inis ~~gross~~primarily ~~profit~~due ~~were~~to ~~substantial~~the ~~completion~~prior ofyear ~~Sather~~completion ~~in 2014, the timing~~ of ~~Baku~~an ~~and~~older ~~Freetown~~OBO ~~all~~project of which had higher recognized ~~margins~~margin in ~~2014,~~2015 ~~and~~partially ~~recognition~~offset ofby ~~$3.1~~a ~~million~~reduction ofin ~~additional~~provision ~~costs~~for ~~associated with three~~ loss contracts recognized in 2016 compared to 2015.

Operating Expenses

Salaries and Employee Benefits increased $32.5 million to $74.73 million for the ~~first~~three ~~nine~~ months ofended ~~2015~~March 31, 2016 compared to the prior ~~year~~period reflecting $2.6 million of costs associated with ~~Pernix~~the ~~Guam and~~ BEK BG and PPG acquisitions.

General and Administrative Expenses increased $4.6 million to $7.3 million for the first nine months of 2015 compared to the prior year. This increase includes $2.5 million of additional costs reflecting $1.7 million of non-recurring transaction costs and $0.8 million of non-recurring professional and integration costs associated with Pernix Guam and BEK BG acquisitions in addition to higher travel costs associated with increased project bids. 32

Table of Contents

General and Administrative expenses increased $2.1 million to $3.2 million for the three months ended March 31, 2016 compared to the prior period. This increase includes higher professional fees as well as $1.2 million of general and administrative costs associated with the BEK BG and PG acquisitions.

Other Income (Expense)

Other income (expense) ~~decreased~~increased from ($0.1) million to ($0.12) million offor ~~expense~~the three months ended March 31, 2016 primarily attributable to interest expense associated with debt obligations.

Pretax Income (Loss)

Consolidated pretax ~~income (~~loss) ~~decreased~~increased ($142.5) million to a pretax loss of ($84.96) million for the ~~first~~three ~~nine~~ months ofended ~~2015~~March 31, 2016 compared to pretax ~~income~~loss of ($52.61) million for the prior ~~year~~period, primarily due to ~~reduced gross profit on lower non~~pre-~~acquisition~~tax ~~revenue,~~loss of ($32.10) million ofrelated ~~additional~~to ~~costs~~our ~~recognized~~recent onacquisitions ~~loss contracts,~~ and ~~$1.7~~an ~~million~~increase ~~non-recurring~~in ~~transaction~~general and ~~$0.8~~administrative ~~million~~expenses ~~of non-recurring integration costs associated with our recent acquisitions~~.

Consolidated Net Income (Loss) Attributable to Common Stockholders

Consolidated net income (loss) was ($104.38) million and ($02.32) million for the ~~first~~three ~~nine~~ months ofended ~~2015~~March 31, 2016 and ~~2014~~2015, respectively, ~~reflecting~~an ~~lower~~increase ~~non-acquisition~~in ~~construction~~net ~~revenue~~loss ~~and~~of ~~gross~~($2.7) ~~profit,~~million ~~and~~for ~~higher~~the ~~general~~reasons ~~and~~noted ~~administrative~~above ~~expenses~~as well as ~~described~~an ~~above~~increase asin ~~well~~non-controlling asinterest net income, ~~tax~~partially ~~expense~~offset ~~and~~by a reduction in preferred stock dividends.

Results of Operations for the three months ended September 30, 2015 compared to the three months ended September 30, 2014

Revenues

Total revenues increased $67.9 million to $87.0 million for the third quarter of 2015 compared to the third quarter of 2014. This increase is comprised of $76.9 million of revenue associated with Pernix Guam and BEK BG acquisitions, offset by an $8.7 million reduction in construction revenue and a $0.3 million decrease in power generation and other revenue. This reduction in construction revenue was driven by the continued completion of existing projects previously awarded and the delay of expected awards, which was partial offset by the award of four new contracts in 2015 and early 2014.

General Construction – Including recent acquisitions, construction revenues were $85.4 million and $17.2 million for the third quarter of 2015 and 2014, respectively. Excluding our recent acquisitions, construction revenues for the third quarter of 2015 compared to the prior year decreased $8.7 million attributable to the substantial project completion of Sather Containerized Housing Unit, Niger Embassy rehabilitation, Azerbaijan Security Upgrade, and a nanotechnology laboratory in the third quarter of 2015. The top five BEK BG projects accounted for approximately 56% of the revenue generated during the quarter, in the life science and aerospace industries located in the south and south east region on the United States.

The scope of the projects generating revenue in the third quarter of 2015 involves upgrades or rehabilitations of U.S. Embassies, communication center in South Korea for the Army Corps of Engineers, design and construction of a 36MW expansion of a power generation facility and substation, a nanotechnology laboratory and an engineering activities building, and the design and construction of an aircraft maintenance hangar. BEK BG construction projects include advance manufacturing, industrial, life sciences, commercial/mixed-used and institutional clients. The diversification of our customer base and the scope of our projects are consistent with our strategic plan.

Service Fees — Power Generation Plant. Service fees — power generation plant service revenues were $1.6 million and $1.9 million for the third quarter of 2015 and 2014, respectively, a $0.3 million decrease, due to lower diesel power usage due to higher water levels in Fiji driving lower diesel demand, higher planned maintenance and the strengthening of the USD dollar against the FJD dollar.

Costs and Expenses

General Construction Costs. Total construction costs increased $69.1 million to $82.2 million for third quarter of 2015 compared to $13.1 million for the prior year. Costs associated with the acquisition of Pernix Guam and BEK BG acquisitions were $74.8 million. In addition, construction costs include $0.8 million of amortization expense related to customer contracts / backlog in connection with our June 30, 2015 acquisition of BEK BG.

Operations and Maintenance Costs — Power Generation Plant. Operations and maintenance costs — power generation plant costs were $0.7 million for the third quarter of 2015 compared to $1.2 million for the prior year period primarily reflecting lower maintenance expense incurred at Kinoya in 2015 (major scheduled overhaul in 2014), partially offset by higher maintenance expense in Vuda.

Gross Profit

Gross profit decreased $0.7 million to $4.1 million for the third quarter of 2015, from $4.8 million in the prior year. Gross profit associated with our recent acquisitions was $3.9 million and non-acquisition gross profit was $0.2 million. Specific drivers to the decrease in non-acquisition gross profit were substantial completion of Sather in 2014, and recognition of $1.3 million of additional costs associated with a loss contract.

Operating Expenses

Salaries and Employee Benefits increased $2.6 million to $4.2 million for the third quarter of 2015 compared to the prior year primarily reflecting $2.5 million of expenses associated with Pernix Guam and BEK BG.

General and Administrative Expenses were $3.4 million for the third quarter of 2015 compared to $0.8 million for the third quarter of 2014. The increase of $2.6 million includes non-recurring professional and integration costs of $0.8 million and higher travel costs associated with project bids. General and administrative expenses associated with our recent acquisitions were $1.7 million.

Other Income (Expense)

Other income (expense) decreased $0.1 million to less than ($0.1) million of expense primarily attributable to interest expense associated with debt obligations.

Pretax Income (Loss)

Consolidated pretax income (loss) decreased $5.8 million to a pretax loss of ($3.5) million for the third quarter of 2015 compared to pretax income of $2.3 million for the prior year period, primarily due to lower gross profit on lower non-acquisition revenue and costs associated with a loss contract, and higher operating expenses as noted above.

Consolidated Net Income (Loss) Attributable to Common Stockholders

Consolidated net income (loss) was ($4.6) million and $0.2 million for the third quarter of 2015 and 2014, respectively, reflecting lower non-acquisition construction revenue and gross profit and higher general and administrative expenses as described above as well as income tax expense and preferred stock dividends.

Liquidity and Capital Resources

		September 30, 2015		December 31, 2014
		March 31, 2016		December 31, 2015
Cash and cash equivalents	$	98,~~233~~374,~~679~~630	$	1118,~~169~~792,~~169~~712
		Nine Months Ended September 30, 2015		Nine Months EndedSeptember 30, 2014
		Quarter Ended March 31, 2016		Quarter Ended March 31, 2015
Cash (used in) proved by operating activities	$	(15,346,114)	$	525,902
Cash (used in) provided by operating activities	$	(10,534,776)	$	(5,161,157)
Cash used in investing activities		(24,827,165)		(1,296,813)
Cash (used in) provided by investing activities		(848,112)		609,215
Cash proved by (used in) financing activities		38,380,124		(2,527,007)
Cash (used in) provided by financing activities		880,853		(98,630)
Effect of exchange rates on cash		~~(142~~83,~~335)~~953		~~(65~~17,~~542)~~056
(Decrease) increase in cash and cash equivalents	$	(1,935,490)	$	(3,363,460)
Increase (decrease) in cash and cash equivalents	$	(10,418,082)	$	(4,633,516)

Cash Requirements

We generate cash flows primarily from serving as the general contractor on construction projects for ~~the~~our ~~U.S.~~global ~~Government and various domestic~~ customers, through the operation and maintenance of power ~~generation~~ plants, ~~from~~ financing obtained from third party banks and affiliated parties, and ~~through~~ sales of common and preferred stock.

During the three months ended ~~September~~March 3031, ~~2015~~2016, the ~~Company~~$10.4 ~~assumed~~million ~~additional~~decrease ~~borrowings~~in tothe ~~assist~~cash ~~with~~balance ~~working~~is ~~capital~~most ~~needs~~significantly ~~(as~~related ~~described~~to inthe ~~Note~~Company’s 8)$10.5 ~~These~~million ~~borrowings~~cash ~~include~~used ~~PFL’s~~in ~~working~~operating ~~capital~~activities. ~~loan~~The ~~from~~cash ~~Fiji~~used ~~Holdings~~in ~~Limited~~operating onactivities ~~behalf~~is oflargely ~~Pernix~~attributable ~~Guam~~to ~~for~~the ~~$1.4~~consolidated ~~million~~net ~~and~~loss, ~~Pernix~~material ~~Guam’s~~purchases ~~interchangeable~~made ~~letter~~on ofactive ~~credit~~contracts ~~with~~and ~~ANZ~~the ~~for~~timing ~~$0.7~~of ~~million.~~accounts ~~PGI~~payable ~~also~~and ~~entered~~accrual ~~into~~activity. The anet ~~two~~cash ~~year~~used ~~term~~in ~~loan~~investing ~~with~~activities ~~Bent~~is ~~Marketing~~offset ~~Limited,~~by anthe ~~affiliate~~net ofcash aprovided ~~major~~by ~~shareholder,~~financing ~~for~~activities. Financing activities include $62.03 million. ~~These~~of ~~borrowings~~cash ~~were~~received ~~incremental~~related to ~~Pernix~~the ~~Guam’s~~partial ~~five~~sale ~~year~~of ~~term~~equity ~~loan~~to ~~with~~a ~~ANZ~~non-controlling ~~for~~interest and $1.830 million ~~and~~of ~~line~~proceeds from debt which were offset by $1.0 million of ~~credit~~distributions ~~for~~to non-controlling interests and $1.35 million of debt repayment. Total outstanding debt as of ~~September~~March 3031, ~~2015~~2016 was $1012.81 million.

43 Although the Company’s positive working capital position at year-end changed to a negative position as of March 31, 2016, it is our opinion that, in the absence of significant unanticipated cash demands, current and forecasted cash flow from our operations, combined with equity and debt financing capability will provide sufficient funds to meet anticipated operating requirements and capital expenditures. We also believe that collections on the outstanding receivables with a timely payment history as well as funds available from various funding sources will permit the construction operations to meet the payment obligations to vendors and subcontractors.

During the first nine months of 2015, the $1.9 million decrease in the cash balance is most significantly related to the Company’s two acquisitions totaling $24.4 million and $15.3 million used in operating activities, which were primarily funded by the issuance of $28 million in preferred stock and $10.8 million of proceeds from debt. The cash used in operating activities relates to subcontract and material purchases made on active contracts and timing of accounts receivable and payable activity, as well as on non-recurring transaction and professional costs associated with our June 2015 acquisitions. 33

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

As of ~~September~~March 3031, ~~2015~~2016, the Company’s total assets exceeded total liabilities by $3019.84 million. ~~and~~The ~~the~~ Company has $1086.83 million in net operating loss carryforwards that it may utilize in the future to offset future taxable income. The Company does not currently have material commitments for capital expenditures as of ~~debt~~March 31, 2016.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

Not Applicable.

ITEM 4. CONTROLS AND PROCEDURES

(a) Evaluation of disclosure controls and procedures.

Under the supervision and with the participation of management, including the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), the Company conducted an evaluation of its disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) as of ~~September~~March 3031, ~~2015~~2016. Based on this evaluation, its CEO and CFO concluded the Company’s disclosure controls and procedures are effective to ensure that information we are required to disclose in our reports filed or submitted under the Securities Exchange Act of 1934, as amended, is accumulated and communicated to management as appropriate to allow timely decisions regarding required disclosures and that such information is recorded, processed, summarized and reported within the time periods required by the Exchange Act.

(b) Changes in internal controls over financial reporting.

There were no changes in our internal control over financial reporting that occurred during the ~~nine~~three month period ended ~~September~~March 3031, ~~2015~~2016 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting. However, BE&K BG has transitioned onto a new ERP platform as of the beginning of the year for which management has implemented new processes and established new internal controls. Management is continuing to assess, document and implement new controls to enhance the internal control environment over financial reporting.

Inherent Limitations on Effectiveness of Controls.

Because of the inherent limitations in all control systems, no control system can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected. These inherent limitations include the realities that judgments in decision making can be faulty and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of a person, by collusion of two or more people or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and may not be detected. Notwithstanding these limitations, with the changes referenced above, we believe that our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives.

4434

Table of Contents

PART II — OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

~~The~~From ~~Company~~time isto ~~involved~~time, ~~from~~we ~~time~~may tobecome ~~time,~~involved in various lawsuits and legal proceedings ~~arising~~which arise in the ordinary course of business. ~~Although~~However, ~~the~~litigation ~~outcome~~is ofsubject ~~lawsuits~~to orinherent ~~other~~uncertainties, ~~proceedings~~and ~~cannot~~an beadverse ~~predicted~~result ~~with~~in ~~certainty~~these ~~and~~or ~~the~~other ~~amount~~matters ofmay ~~any liability that could~~ arise ~~with~~from ~~respect~~time to ~~such~~time ~~lawsuits~~that ormay ~~other~~harm ~~proceedings~~our ~~cannot~~business. beWe ~~predicted~~are ~~accurately,~~currently ~~the Company’s management, after consultation with counsel, does~~ not ~~expect~~aware of any ~~currently~~ pending ~~matters~~legal toproceedings ~~have~~which ainvolve ~~material~~us ~~adverse~~or ~~effect~~any ~~on the Company’s consolidated financial position, results~~ of ~~operations,~~our orproperties ~~cash flows,~~ or ~~the Company’s ability to conduct business~~subsidiaries.

ITEM 1A. RISK FACTORS

Not Applicable.

ITEM 2. UNREGISTERED SALE OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not Applicable.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS



Exhibit 31.1		Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) of the Exchange Act of 1934
Exhibit 31.2		Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) of the Exchange Act of 1934
Exhibit 32.1		Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2004.
Exhibit 32.2		Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2004.


(101.INS)*	XBRL Instance Document	N/A
(101.SCH)*	XBRL Taxonomy Extension Schema Document	N/A
(101.CAL)*	XBRL Taxonomy Extension Calculation Linkbase Document	N/A
(101.LAB)*	XBRL Taxonomy Extension Label Linkbase Document	N/A
(101.PRE)*	XBRL Taxonomy Extension Presentation Linkbase Document	N/A
(101.DEF)*	XBRL Taxonomy Extension Definition Linkbase Document	N/A

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	Pernix Group, Inc.
	(Registrant)
Dated: November 6, 2015	/s/ Nidal Zayed
Dated: May 13, 2016	/s/ Nidal Zayed
	Nidal Z. Zayed
	President and Chief Executive Officer
	/s/ Patrick Gainer
	/s/ Marco A. Martinez
	Patrick J. Gainer
	Marco A. Martinez
	Chief Financial Officer
	Senior Vice President and Chief Financial Officer

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Filing Compare · Pernix Group, Inc.