EFTA01078055.pdf

IGY-AYH St. Thomas Holdings, LLC (A Limited Liability Company) Financial Statements for the years ended December 31, 2014 and 2013 (With Independent Auditor's Report Thereon) EFTA01078055  Contents Pages) Independent Auditor's Report 1-2 Financial Statements: Balance Sheets 3 Statements of Operations 4 Statements of Changes in Members' Equity 5 Statements of Cash Rows 6 Notes to Financial Statements 7-14 EFTA01078056 SCOTT aCOMPANY • not join gr mounting firm COLUMBIA • GREENVILLE Independent Auditor's Report The Members IGY-AYH St. Thomas Holdings, LLC (A Limited Liability Company): We have audited the accompanying financial statements of IGY-AYH St. Thomas Holdings, LLC (the "Company"), which comprise the balance sheets as of December 31, 2014 and 2013, and the related statements of operations, changes in members' equity, and cash flows for the years then ended and the related notes to the financial statements. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United Sates of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibility Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the ascrssment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Scott and Company tic 144: Main Street, Suite Boo 220 N. Main Street CERTIFIED PUBLIC ACCOUNTANTS Post Office Box 8g88 Suite 500 Columbia, South Carolina 29202 Greenville, South Carolina 29601 TEL (103)156- 6021 I FAX (803) 256.8346 TEL 0364 660-204S EFTA01078057 Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of IGY-AYH St. Thomas Holdings, LLC as of December 31, 2014 and 2013, and the results of its operations and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America. „Liet at:4 e&t,itadv/ Columbia, South Carolina March 4, 2015 2 EFTA01078058  IGY-AYH St. Thomas Holdings, LLC (A Limited Liability Company) Balance Sheets as of December 31, 2014 and 2013 2014 2013 Assets Current assets: Restricted cash $ 1,856,705 $ 1,238,200 Accounts receivable, net of allowance of $84,482 and $219,592 in 2014 and 2013, respectively 216,059 249,770 Prepaid expenses and other current assets 257,469 264,412 Inventories 82,679 89,308 Total current assets 2,412,912 1,841,690 Land 1,847,000 1,847,000 Property and equipment, net 14,977,203 15,486,420 Deferred financing costs, net 85,153 117,097 Intangible assets, net 357,802 461,906 Deferred rent receivable 89,986 37,928 Total assets $ 19,770 056 $ 19,792,041 Liabilities and Members' Equity Current liabilities: Accounts payable $ 91,133 $ 90,330 Accrued expenses 201,910 195,828 Customer deposits 277,410 385,510 Deferred revenue 3,299 Due to Parent 82,816 42,099 Current maturities of note payable 373,500 346,200 Total current liabilities 1,030,068 1,059,967 Note payable less current maturities 12,913,200 13,286,700 Asset retirement obligation 594,492 566,183 Total liabilities 14,537,760 14,912,850 Members' equity 5,232,296 4,879,191 Total liabilities and members' equity $ 19,770,056 $ 19,792,041 The accompanying notes are an integralpart ofthesefinancial statements. 3 EFTA01078059  IGY-AYH St. Thomas Holdings, LLC (A Limited Liability Company) Statements of Operations for the years ended December 31, 2014 and 2013 2014 2013 Revenues: Marina facilities $ 4,825,916 $ 4,672,919 Upland facilities 2,784,901 2,734,440 Total revenues 7,610,817 7,407,359 Costs and expenses: Fuel 1,938,634 2,127,836 Utilities 1,230,878 1,213,413 Personnel 1,069,840 1,011,662 Depreciation and amortization 959,742 926,304 Management fee 410,051 548,220 Insurance 327,649 353,258 Professional fees 179,619 222,056 Gross receipt taxes 174,533 169,681 Rent 159,123 189,370 Credit card commissions 141,985 141,291 Repairs and maintenance 101,145 85,981 Bad debt expense 70,982 87,734 Supplies 52,236 53,077 Advertising and marketing 50,979 43,718 Other 41,354 208,176 Total costs and expenses 6,908,750 7,381,777 Operating income 702,067 25,582 Other expenses (income): Interest expense 352,386 367,053 Interest income (35,368) (12,301) Amortization of deferred financing costs 31,944 31,944 Net income (loss) $ 353,105 $ (361,114) The accompanying notes are an integralpart ofthesefinancial statements. 4 EFTA01078060  IGY-AYH St. Thomas Holdings, LLC (A Limited Liability Company) Statements of Changes in Members' Equity Balance at December 31, 2012 $ 5,240,305 Net loss (361,114) Balance at December 31, 2013 4,879,191 Net income 353,105 Balance at December 31, 2014 $ 5,232,296 The accompanying notes are an integralpart ofthesefinancial statements. EFTA01078061  IGY-AYH St. Thomas Holdings, LLC (A Limited Liability Company) Statements of Cash Flows for the years ended December 31, 2014 and 2013 2014 2013 Cash flows from operating activities: Net income (loss) $ 353,105 $ (361,114) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization expense 959,742 926,304 Amortization of deferred financing costs 31,944 31,944 Accretion of asset retirement obligation 28,309 26,961 Decrease in provision for doubtful accounts (135,110) (94,816) Changes in operating assets and liabilities: Accounts receivable 168,821 217,342 Prepaid expenses and other current assets 6,943 (85,944) Inventories 6,629 19,601 Deferred rent receivable (52,058) 105,234 Accounts payable 803 (80,086) Accrued expenses 6,082 (98,932) Customer deposits (108,100) 13,535 Deferred revenue 3,299 Due to Parent 40,717 3,438 Net cash provided by operating activities 1,311,126 623,467 Cash flows used in investing activities: Purchases of property and equipment (346,421) (123,746) Net cash used in investing activities (346,421) (123,746) Cash flows used in financing activities: Principal payments on note payable (346,200) (321,150) Net cash used in financing activities (346,200) (321,150) Net increase in restricted cash 618,505 178,571 Restricted cash at beginning of year 1,238,200 1,059,629 Restricted cash at end of year $ 1 856 705 $ 1,238,200 Supplemental disclosure of cash flow information: Cash paid for interest $ 353,311 $ 369,085 The accompanying notes are an integralpart ofthesefinancial statements. 6 EFTA01078062  IGY-AYH St. Thomas Holdings, LLC Notes to Financial Statements Note 1. Summary of Significant Accounting Policies Description of Business and Organization - IGY-AYH St. Thomas Holdings, LLC ("AYH" or the "Company") was formed as an indirect wholly owned subsidiary of Island Global Yachting Ltd. ("IGY" or the "Parent") on December 5, 2006. The Company had no activities until its January 18, 2007 acquisition of American Yacht Harbor. The Company is primarily engaged in the business of owning and operating a marina and commercial retail facility located in St. Thomas, United States Virgin Islands ("USVI"). It is comprised of a 109-slip marina and seven buildings with 47,344 square feet of rentable retail space. AYH is managed by IGY. The marina is located on 3.2 acres of submerged land leased from the St. Thomas Department of Planning and Natural Resources ("DPNR"). The retail complex is located on 2.12 acres of adjacent waterfront land. On May 29, 2007, a 50% passive member interest in the Company was sold to an outside investor. The Company is controlled by the Parent and the members' liability is limited to their respective capital investments in the Company. Restricted Cash - At various times throughout the year, the Company maintains cash balances in excess of federally insured limits. The Company's management believes it mitigates custodial risk by banking with major financial institutions. As of December 31, 2014 and 2013, $1,856,705 and $1,238,200, respectively, of the Company's cash is restricted under the terms of its loan agreement (See Note 5). These cash balances serve as collateral for the outstanding loan but are available to the Company for use in operations provided that no event of default exists under the loan agreement. Accounts Receivable • Accounts receivable are recorded at the invoiced amount and do not bear interest. Amounts collected on accounts receivable are included in net cash flows from operating activities in the statements of cash flows. The allowance for doubtful accounts is management's best estimate of the amount of probable credit losses in the Company's existing accounts receivable. The Company determines the allowance based on specific account analysis. Past-due balances over 90 days and over specified amounts are reviewed individually for collectability. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. The Company does not have any off-balance-sheet credit exposure related to its customers. As of December 31, 2014 and 2013, substantially all of the Company's accounts receivable serves as collateral for the loan outstanding. Prepaid Expenses and Other Current Assets • Prepaid expenses and other current assets consist primarily of prepaid insurance and security deposits. Inventories - Inventories, which consist primarily of fuel, are stated at the lower of cost or market. Cost is determined using the first-in, first-out ("FIFO") method for all inventories. Deferred Financing Costs - Costs incurred to obtain financing are being amortized using the straight-line method, which approximates the effective-interest method, over the term of the related debt. Deferred financing costs at December 31, 2014 and 2013 of $85,153 and $117,097 are net of accumulated amortization of $230,810 and $198,866, respectively. Advertising and Marketing Costs - Advertising and marketing costs are expensed as incurred. Advertising and marketing costs amounted to $50,979 and $43,718 for the years ended December 31, 2014 and 2013, respectively. 7 EFTA01078063  IGY-AYH St. Thomas Holdings, LLC Notes to Financial Statements Note 1. Summary of Significant Accounting Policies (continued) Income Taxes - The Company is not subject to U.S. federal and state income taxes as the tax effects of the Company's activities are reported directly by the members on their respective income tax returns. The Company is required to pay USVI withholding taxes on behalf of all non-USVI members. Management of the Company has decided that Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") topic 740, Income Taxes, which relates to uncertain tax positions, does not have a material effect on the financial statements. Land - The Company owns 2.12 acres of waterfront land in St. Thomas, USVI, which it carries at cost and leases 3.2 acres of submerged land from the DPNR. Property and Equipment - Property and equipment are stated at cost. Depreciation on property and equipment is calculated using the straight-line method over the estimated useful lives of the assets. The estimated useful lives of the Company's assets are as follows: Buildings 40 years Marina building and structure 20 years Equipment 3-7 years Vehicles 5 years Furniture and fixtures 5-10 years Intangible Assets - In accordance with the provisions of ASC subtopic 350-30, General Intangibles Other Than Goodwill, intangible assets determined to have a definite life are amortized using the straight-line method over the useful life. Costs incurred to renew or extend intangible assets are capitalized and amortized over the extended useful life. Impairment of Long-Lived Assets - In accordance with ASC topic 360, Property, Plant and Equipment, long-lived assets, such as land, property and equipment, and intangible assets subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed of would be separately presented in the balance sheets and reported at the lower of the carrying amount or fair value less costs to sell, and are no longer depreciated. For the years ended December 31, 2014 and 2013, the Company determined that it did not have an impairment loss relating to its property and equipment. Revenue Recognition - Revenues are recognized primarily at the time services are performed or products are sold and consist of amounts earned from marina and upland operations. Revenues from leases are recognized over the term of the lease. The Company recognizes minimum rental starting when possession is taken. When a lease contains a predetermined fixed escalation of the minimum rental, the Company recognizes the related rental income on a straight-line basis and records the difference between the recognized rent income and the amount billed and collectable under the lease as straight-line rent receivable. These amounts are classified as deferred rent receivable on the balance sheet. The Company is also required to pay a gross receipts tax on certain revenue producing activities. These taxes are presented in costs and expenses on the Statements of Operations while revenues are presented at a gross amount not reduced by these taxes. 8 EFTA01078064  IGY-AYH St. Thomas Holdings, LLC Notes to Financial Statements Note 1. Summary of Significant Accounting Policies (continued) Deferred Revenue - The Company receives payment in advance of performing the services related to renting boat slips and dockage space. These amounts are shown on the balance sheets as deferred revenue and are recognized as revenue when the Company performs the services. Customer Deposits - The Company receives deposits from its retail tenants in accordance with the lease agreements. It also receives deposits from customers for slip rentals. These deposits are accounted for as customer deposits in the balance sheet. Revenues related to these deposits are recognized when earned. Major Maintenance Activities - The Company incurs maintenance costs on all its major property and equipment. Repair and maintenance costs are expensed as incurred. Commitments and Contingencies - Liabilities for loss contingencies, including environmental remediation costs not within the scope of ASC topic 410, Asset Retirement and Environmental Obligations, arising from claims, assessments, litigation, fines and penalties, and other sources are recorded when it is probable that a liability has been incurred and the amount of the assessment and/or remediation can be reasonably estimated. Legal costs incurred in connection with loss contingencies are expensed as incurred. Use of Estimates - The preparation of financial statements requires management of the Company to make a number of estimates and assumptions relating to the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. Significant items subject to such estimates and assumptions include the allowance for doubtful accounts and the carrying amount of land, property and equipment, intangible assets, and the liability for asset retirement obligation. Actual results could differ from those estimates. Fair Value Measurements - ASC subtopic 820-10, Fair Value Measurement, defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC subtopic 820.10 also establishes a framework for measuring fair value and expands disclosures about fair value measurements. The Company applies the provisions of ASC subtopic 820-10 to fair value measurements of nonfinancial assets and nonfinancial liabilities that are recognized or disclosed at fair value in the financial statements on a nonrecurring basis. The Company currently has no assets or liabilities carried at fair value in the financial statements. Recently Issued Accounting Standards — In May 2014, the FASB issued Accounting Standards Update ("ASU") 2014-09, "Revenue from Contracts with Customers (Topic 606)," which can be implemented by nonpublic companies for fiscal periods beginning after December 15, 2016 at the earliest and for fiscal periods beginning after December 15, 2017 at the latest. The provisions of the ASU aim to remove inconsistencies and weaknesses in revenue requirements and improve comparability of revenue recognition practices across entities, industries, jurisdictions, and capital markets. This ASU will supersede the existing Topic 605, Revenue Recognition. The Company does not anticipate a material impact on its financial statements when this ASU is implemented. 9 EFTA01078065  IGY-AYH St. Thomas Holdings, LLC Notes to Financial Statements Note 1. Summary of Significant Accounting Policies (continued) In October 2012, the FASB issued ASU 2012-04, 'Technical Corrections and Improvements," which is effective for nonpublic companies for fiscal periods beginning after December 15, 2013. However, provisions of this ASU that did not have transition guidance became effective immediately. The amendments in this ASU cover a wide range of topics in the FASB ASC and are categorized in two sections, "Technical Corrections and Improvements," and "Conforming Amendments Related to Fair Value Measurements." The first section created source literature amendments, clarified guidance and corrected references, and relocated guidance throughout the ASC. The second section conformed terminology and clarified guidance in various topics of the ASC to fully reflect the fair value measurement and disclosure requirements of ASC Topic 820. No new fair value measurements were introduced and the application of the requirements of ASC Topic 820 is not anticipated to change. The new guidance did not have a material impact on the Company's financial statements. In July 2013, the FASB issued ASU 2013-11, "Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When Net Operating Loss Carryforward or Tax Credit Carryforward Exists, which is effective prospectively." This guidance provides that an entity's unrecognized tax benefit, or portion thereof, should be presented in its financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward unless 1) the deferred tax asset is not available at the reporting date to settle any additional income taxes that would result from the disallowance of a tax provision or 2) the tax law of the applicable jurisdiction does not require and the entity does not intend to use the deferred tax asset for such purpose. The guidance in ASU 2013-11 will become effective for the Company on January I, 2015 and is not expected to have a material impact on the Company. Reclassifications — Certain prior year amounts have been reclassified in accordance with current year presentation. As a result of these reclassifications, there was no effect on members' equity. Note L Related-Party Transactions The Company earns marina revenue from six slips leased by a passive member and its affiliates of the Company on an annual basis at a 10% discount and fuel sales to the passive member and its affiliates at a 20% discount. The Company also leases two office spaces totaling approximately 3,200 square feet to the passive member. The following is a summary of related-party transactions for the years ended December 31, 2014 and 2013: 2014 2013 Included in revenues: Marina facilities revenue earned from passive member $ 152,820 $ 148,393 Upland facilities revenue earned from passive member 139,451 151,975 Included in costs and expenses: Management fees incurred to IGY 410,051 548,220 Management fees incurred to IGY were 7.5% of revenues for the year ended December 31, 2013. During the year end December 31, 2014, management fees were renegotiated and reduced. Management fees incurred to IGY were 7.5% of revenues for the period January 1, 2014 through February 28, 2014 and were 5% of revenues for the period March 1, 2014 through December 31, 2014. 10 EFTA01078066  IGY-AYH St. Thomas Holdings, LLC Notes to Financial Statements Note 2. Related-Party Transactions (continued) Due to Parent of $82,816 and $42,099 at December 31, 2014 and 2013, respectively, consist primarily of accrued management fees of $52,233 and $37,363 at December 31, 2014 and 2013. Included in accounts receivable are $6,716 and $6,611 due from the passive member as of December 31, 2014 and 2013, respectively. The Company also pays lease commissions to IGY for new leases or extensions of existing leases. These commissions represent 5% of the expected total rent revenue under lease term. The Company paid approximately $74,000 and $0 during the years ended December 31, 2014 and 2013 for these commissions. Approximately $21,500 was included in Due to Parent as of December 31, 2014 for these commissions. These fees are amortized over the term of each lease as a reduction of rental revenue. Note 3. Intangible Assets The following table presents certain information regarding the Company's intangible assets as of December 31.: 2014 Gross Amortization carrying Accumulated Net period amount amortization balance Amortizable intangible assets: Business permit costs 10 years $ 20,390 $ 6,599 $ 13,791 Favorable fuel contract 11.3 years 1,156,000 811,989 344,011 Total $ 1,176,390 $ 818,588 $ 357,802 2013 Gross Amortization carrying Accumulated Net period amount amortization balance Amortizable intangible assets: Business permit costs 10 years $ 20,390 $ 4,525 $ 15,865 Favorable fuel contract 11.3 years 1,156,000 709,959 446,041 Total $ 1.176,390 $ 714.484 $ 461,906 Amortization expense related to intangible assets was $104,104 for the years ended December 31, 2014 and 2013. The estimated amortization expense for the next five years is approximately $104,000 per year for three years and $40,000 in the fourth year, and $2,000 in the fifth year. Business permits will need to be renewed in approximately seven years. 11 EFTA01078067  IGY-AYH St. Thomas Holdings, LLC Notes to Financial Statements Note 4. Property and Equipment Property and equipment consisted of the following at December 31,: 2014 2013 Buildings $ 18,014,440 $ 17,783,321 Marina structure and equipment 4,188,522 4,188,522 Other equipment 375,305 260,003 Total property and equipment 22,578,267 22,231,846 Accumulated depreciation (7,601,064) (6,745,426) Property and equipment, net $ 14 977 203 $ 15,486,420 Depreciation expense related to property and equipment was $855,638 and $822,201 for the years ended December 31, 2014 and 2013, respectively. The Company leases commercial real estate, which is included in buildings in the schedule above, that had a gross book value of $12,868,991 for the years ended December 31, 2014 and December 31, 2013, and accumulated depreciation of $3,986,614 and $3,537,224 at December 31, 2014 and 2013, respectively (see Note 6). Note 5. Note Payable The Company obtained a $15,300,000 loan facility from a bank on August 23, 2007. Interest accrues at LIBOR plus 2.35%. Principal and interest are due monthly and the loan matures on September 1, 2017. At December 31, 2014 and 2013, the principal amount outstanding under the loan was $13,286,700 and $13,632,900, respectively. The interest rate in effect at December 31, 2014 was 2.58% (calculated based on a blended LIBOR rate of 0.23% plus 2.35%). The interest rate in effect at December 31, 2013 was 2.60% (calculated based on a blended LIBOR rate of .25% plus 2.35%). The loan is collateralized by the real property and improvements thereon, the Company's rights under its retail leases, certain cash accounts, and accounts receivable of the Company. As part of a security agreement with the bank, the bank has required that certain cash accounts of the Company be pledged to the bank. This amount is shown as restricted cash on the balance sheets in the amount of $1,856,705 and $1,238,200 at December 31, 2014 and 2013, respectively. The terms of the loan contain certain financial covenants, negative covenants, and other terms and conditions customarily found in loan agreements of this type. The Company has complied with the covenants and terms in all material respects. Future payments of the balance outstanding on December 31, 2014 are due as follows: Year ending December 31,: 2015 $ 373,500 2016 405,000 2017 12,508,200 Total $ 13,286,700 12 EFTA01078068  IGY-AYH St. Thomas Holdings, LLC Notes to Financial Statements Note 6. Lease Agreements Coastal Zone Management ("CZM") Permits - The Company is party to two CZM permits with the DPNR. These permits provide the Company the use of submerged land and upland at the marina site. The permits were negotiated with a fee of $100,000 per year and a term of 20 years. The permits expire in 2032. The Company has the option to renew the permits within 90 days before the permits expire with the renewal terms subject to negotiation. Annual fees incurred under the permits during 2014 and 2013 totaled $100,000 and $84,970, respectively. Retail Leases - The Company leases its upland building spaces to retail operations under operating leases. The leases have remaining terms of up to 3 years and contain standard renewal options. Base rentals are subject to escalation based upon scheduled rent increases within individual leases. The company recognized revenue related to these leases of approximately $1,376,926 and $1,324,400 for the years ended December 31, 2014 and 2013, respectively. A schedule of approximate minimum future base rentals on noncancelable operating leases as of December 31, 2014 is as follows: Year ending December 31,: 2015 $ 882,704 2016 640,821 2017 448,667 2018 366,825 2019 217,960 Total $ 2,556,977 The upland facilities revenues include charges to the tenants in addition to base lease payments under the lease agreements, such as utilities and common area charges. These additional charges account for the significant difference between lease related revenue and the amounts reported on the income statements. Note 7. Asset Retirement Obligation The CZM permits that provide the Company use of the submerged land and upland at the marina site require that, upon expiration, the permitted area be restored to its original condition. Upon acquisition of the assets of American Yacht Harbor in 2007, the Company recorded an obligation and corresponding asset of $402,376, in accordance with the provisions of ASC topic 410, Asset Retirement and Environmental Obligations, for its obligation under these permits. The obligation will increase with annual accretion expense and, ultimately, the obligation will reach approximately $3.4 million in 2050. The following schedule summarizes the Company's asset retirement obligation activity for the years ended December 31, 2014 2013 Balance at beginning of year $ 566,183 $ 539,222 Accretion expense 28,309 26,961 Balance at end of year $ 594,492 $ 566,183 13 EFTA01078069  IGY-AYH St. Thomas Holdings, LLC Notes to Financial Statements Note 8. Commitments Retirement Plan • The Company sponsors a Simple IRA Plan ("SEP") on behalf of substantially all of its employees as required by the Economic Development Benefits package it was granted by the Economic Development Commission of the USVI. Employees are eligible for the program after one year of service. The Company contributes 3% of employees' gross wages into individual employee accounts and all amounts are immediately vested. Employees are not allowed to contribute to the SEP. The related expense for the years ended December 31, 2014 and 2013 was $22,082 and $21,078, respectively. Fuel Purchase Contract - The Company is party to a fuel purchase agreement under which it has committed to buy its gasoline and diesel fuel from one vendor at a fixed differential above a common index. The Company is required to purchase a minimum of 65,000 gallons per month of diesel and gasoline combined. There is no limit to the quantity the Company can purchase. The agreement expires May 31, 2018 and the Company can renew for an additional three years, although either party can terminate any time after 2014. During 2014 and 2013, the Company purchased $1,930,851 and $2,107,833, respectively, of fuel under the agreement. Note 9. Subsequent Events The Company has evaluated all events subsequent to the balance sheet date of December 31, 2014, through the date these financial statements are available to be issued, March 4, 2015, in accordance with ASC subtopic 855-10. Management has determined that there are no subsequent events that require disclosure under ASC subtopic 855-10. 14 EFTA01078070