Opus Inspection Cost Response~1.pdf

RFR: Vehicle Inspection and Maintenance Program Cost Response

1 Cost Response

Contents

1 COST RESPONSE

1.1 ATTACHMENT G: PROGRAM COSTS (RFR SECTION 3.3.1)

1.2 ATTACHMENT H: INSPECTION STATION COSTS (RFR SECTION 3.3.2)

1.3 ATTACHMENT I – BREAKDOWN OF BIDDER’S COSTS FOR BASE BID (SEE RFR SECTION 3.3.3

FOR BIDDER’S INSTRUCTIONS)

1.4 COSTS ASSOCIATED WITH OUTSIDE EQUIPMENT VENDORS (RFR 3.3.4)

1.5 ATTACHMENT J - BIDDER’S FINANCIAL PLAN FOR THE BASE BID (SEE RFR SECTION 3.3. 5)

1.6 FINANCIAL QUALIFICATIONS (RFR 3.3.6) (50 PAGES)

1.6.1 No bankruptcy statement

1.6.2 No adverse effect statement

1.6.3 Subsidiaries or affiliated companies

1.6.4 Work the parent or subsidiary plans to perform

1.6.5 No conflict of interest statement

1.6.6 Dun & Bradstreet's Comprehensive Report

1.6.7 Audited financial statements

1.6.8 Corporate tax filings for the last 3 years, and the most recent 10-K and 8-K statements and prospectuses over the last 12 Months

1.7 PART 2: BIDDER’S DETAILED RESPONSE ELEMENT CHECKLIST

1.1 Attachment G: Program Costs (RFR

Section 3.3.1)

Attachment G is on the follow pages.

Per Inspection Fee Base Bids (RFR Section 3.3.1.1)

$32,120,000.00

Per Inspection Fee = ————————————————————————

4,400,000 inspections per Program Year 5 years where: $costs = total program costs over the life of the initial 5 year Contract term

$costs shall include: costs for Workstation consumables, shipping, network management, database, inspector orientation, program communications work (except that specified in

RFR Section 6.8.6; see next box), covert auditing, Workstations and auditing equipment for Agencies, field investigator tablets w/data plan, VMI (including repairer training), Motorist Assistance Centers, fee collection, and any other items that RFR Section 6 instructs Bidders to include in their costs

$costs shall NOT include: the capital cost, financing, installation or maintenance of the

Workstations; specific public communications work specified in RFR Section 6.8.6, software revisions beyond 5,000 hours; Inspector training costs; VISITS application, field investigator printers/mobile printing solution, and any other items that RFR Section 6 instructs Bidders NOT to include in their costs

Base Bid Assumptions (as provided in RFR Section 3.3.1):

4,400,000 Initial Inspections per year

1,650 public stations

150 fleet stations

300 motorcycle stations

RFR

Section

3.3.1.1:

Base Bids: [Complete the Gray Boxes] NOTE to Bidders: Bidders may provide additional sheets, if necessary, to address RFR Section 3.3.1.1, item C, parts a. through d. provided that Bidders complete at least the information required for RFR Sections 3.3.1.1, items A. and B. here.

A

Base Bid for initial 4.4 million inspections per year

$costs = $32,120,000 Per

Inspection

Fee =

$1.46

B. Base Bid for additional inspections beyond 4.4 million per year

Additional Per Inspection

Fee =

$0.73

C Increase(s) to Base Bid (if any) for each additional 100 Light-Duty

Inspection Stations, up to 2,200

Inspection Stations. (If no increase, please enter $0.00.)

$costs increase =

$0.00 Per

Inspection

Fee increase

$0.00

Additional Per Inspection

Fee increase =

VISITS and Field Investigator Equipment Costs (RFR Section 3.3.1.2)

Bidders shall present, at a minimum, the following costs:

A. Tablet Computers for Field Investigators (as described in RFR Section 6.6.3)as:

1. Price for 50 tablets (including any batteries and/or chargers):

$100,000.00

2. Cost to replace a single tablet (including any battery and/or charger)

$2,500.00

3. Battery Replacement cost $95.00

B. Cost for Unlimited Data Plan for Tablet Computers for up to 40 Field Investigators (as described in

RFR Section 6.6.3) = $19,200.00 per year

C. Mobile Printers for Field Investigators (as described in RFR Section 6.6.4) as:

1. Price for 35 printers, and $10,500.00

2. Cost to replace a single printer $300.00

D. The cost for Bidders’ proposed VISITS application (separate from the TABLETS and PRINTERS).

Costs shall include initial migration of data from the existing VISITS system and any other requirements found in RFR Section 6.6. = $220,000.00

Additional Program Costs – Per Hour Rates (RFR Section 3.3.1.3)

Specify the per hour rates for each contractor/subcontractor proposed.

A. For developing specific communications services (identified in RFR Section 6.8.6)on an “as needed” or contingency basis

Contractor/Subcontractor(s): Rate(s)

Any $125.00

B. For additional software programming after the allotted 5,000 hours have been expended (identified in

RFR Section 6.3.6)

Contractor/Subcontractor(s):

Any

Rate(s)

1.2 Attachment H: Inspection Station Costs

(RFR Section 3.3.2)

Workstation Costs (RFR Section 3.3.2.1)

NOTE to Bidders: Bidders may provide additional sheets or a different type of table, if necessary, to address

RFR Section 3.3.2.1 requirements, provided that the Bidders’ Response includes at least the information required here. (See RFR Section 6.3)

A. Workstation Costs for:

1. Light-Duty Workstation $3,775.00

2.a. Heavy-Duty Workstation (with Opacity Meter) $6,975.00

2.b. Heavy-Duty Workstation (without Opacity Meter) $3,775.00

B. Optional Workstation Equipment Costs for:

1. Wireless OBD Scan Tool $150.00

2. Wireless OBD Scan Tool – Battery Replacement $100.00

3. Wireless Bar-Code Reader $250.00

4. Wireless Bar-Code Reader – Battery Replacement $100.00

Workstation Monthly Fees (RFR Section 3.3.2.2)

NOTE to Bidders: Bidders may provide additional sheets or a different type of table, if necessary, to address

RFR Section 3.3.2.2 provided that the Bidder’s Response includes at least the information required here. (See

RFR Section 6.3 )

A. Monthly Maintenance Fees for:

1. Light-Duty Workstation $49.50

2. Heavy-Duty Workstation $49.50

3. Wireless Equipment, by item (if any fees are proposed) $0.00

B. Installment Fee to be charged to provide a 24-month financing option to the Inspection Stations.

We will not charge installment fees to administer payments.

Inspector Training Costs (RFR Section 3.3.2.3)

NOTE to Bidders: Bidders may provide additional sheet s or a different type of table, if necessary, to address

RFR Section 3.3.2.3 provided that the Bidder’s Response includes at least the information required here.

Bidders should also note that NO fees may be charged for Orientation Training. (See RFR Section 6.7)

A. Inspector Initial Certification Training Cost for each of the following classes of Inspector:

1. Non-Commercial Inspector; $120.00

2. Commercial Inspector; $120.00

3. 7D Inspector; and $120.00

4. Motorcycle Inspector. $90.00

B. Inspector Recertification Training Cost for each of the following classes of Inspector:

1. Non-Commercial Inspector; $80.00

2. Commercial Inspector; $80.00

3. 7D Inspector; and $80.00

4. Motorcycle Inspector. $60.00

1.3 Attachment I – Breakdown of Bidder’s

Costs for Base Bid (see RFR Section 3.3.3

For Bidder’s Instructions) Base Bid

Total Contractor Cost (over initial term of contract with 4.4 million Inspection per Program Year) $39,883,010

Total Cost Breakdown (below are the major headings; Bidders shall add further levels of sub-headings to provide additional detail)

Inspection Station Network & Workstations $5,946,194

Capital and Financing (Light Duty) $0

Capital and Financing (Heavy Duty with Opacity) $0

Capital and Financing (Heavy Duty) $0

Installation and Maintenance (Light Duty) $952,884

Installation and Maintenance (Heavy Duty with Opacity) $0

Installation and Maintenance (Heavy Duty) $144,376

Consumables cost (itemized) $4,848,934

Light Duty

Toner $1,389,603

Inspection Sticker $1,473,821 other $1,347,493

Heavy Duty with Opacity

Toner $0

Inspection Sticker $0 other $0

Heavy Duty

Toner $210,546

Inspection Sticker $223,306 other $204,166

Network and Sticker Management $2,081,111

Database and Software $7,633,112

Inspection Database $5,597,594

ALARS Modernization $365,775

Management, Motorcycle & Other Apps $1,669,743

Field Inspector Tablets with Data Plan $398,830

Inspector Training $1,602,238

Inspector Orientation for Startup

Motorist and Industry Communications $3,339,486

Help Desk $1,908,278

Communications Materials $1,431,208

Auditing $3,768,849

Covert Vehicle Auditing $3,530,314

Cover Visual (Video) Auditing $238,535

Vehicle Maintenance Initiative $1,574,329

Training of Registered Repairers $1,455,062

Repair Shop Listing and Rating System $119,267

Motorist Assistance Centers $13,357,946

Buildings and Equipment $5,724,834

MAC Staff $7,633,112

Fee Collection $180,914

Total Expenses (without VISITS or Printers or Mobile Printing Solution) $39,883,010

VISITS Application $220,000

Field Inspector Printers and/or Mobile Printing Solution $10,500

Total Expenses (with VISITS and Printers or Mobile Printing Solution) $40,113,510

1.4 Costs Associated with Outside Equipment

Vendors (RFR 3.3.4) The most advantageous equipment provision strategy for this program is to have the

Contractor, Opus Inspection, Inc. exclusively provide test equipment to the Massachusetts

Vehicle Network. Equipment procured and maintained by Opus Inspection will be guaranteed to meet all of the specifications for operational accuracy, connectivity, and reliability. While equipment from third party vendors will be required to meet the same connectivity standards and protocols listed above for Opus Inspection supplied equipment, reliability for third party equipment cannot be ensured.

Cost Implication: Third party equipment prices will be 15% - 25% higher due to the smaller volume expectations.

In addition, authorized third party equipment vendors will be required to design their software according to detailed functional and technical specifications developed by Opus

Inspection. Those specifications will include a communication protocol for connecting to the network and securely communicating with the VID. If the Agencies wish to delegate the responsibility, Opus Inspection will offer ATP services for a fee to third party vendors as a requirement for certification to allow connectivity to the network. If not, the Agencies will incur additional expense in managing third party equipment vendors due to testing and certification compliance, specification interpretations, and oversight of software upgrades.

Cost Implication: Increased cost to the Commonwealth of $60,000 – $75,000 for

ATP/Compliance Certification services per third-party vendor.

Opus Inspection has agreed to several SLA’s associated with timely response for service issues which third party vendors may have difficulty meeting which will burden the Agencies with administrative actions. The larger concern is the impact that poor service from the third party vendor will have on the program.

Cost Implication: Poor service performance from a third-party vendor can have irreparable impact on the Program and Contractor’s reputation outside of the Contractor’s control.

In order to keep equipment costs low, a Contractor will amortize all of its associated equipment development over the entire network rather than an anticipated subset of that network.

Any uncertainty in the Contractor’s market share of the network will result in pushing those costs to the inspection fee or making assumptions in the Workstation pricing that dictate contingency which in either case, increases the price.

Cost Implication: The Contractor equipment cost will increase by approximately 10% -

15%.

To keep maintenance costs as low as possible, a Contractor will want to leverage a larger purchasing base for not only for the hardware components but any spare parts and consumable supplies needed for maintenance and service activities. It’s important to also recognize that consumables from third party vendors will most certainly be more expensive to the inspection station since the Contractor will provide those consumables as part of its monthly maintenance fee.

Cost Implication: The Contractor will need to amortize its maintenance costs over a smaller network due to non-variable costs such as field service techs, vehicles, etc. Potential impact is approximately 10 – 15% increase in maintenance fee to stations. Stations that purchase third-party equipment will now have to pay for consumables directly.

1.5 Attachment J - Bidder’s Financial Plan for the Base Bid (see

RFR Section 3.3. 5)

4.4 million inspection fees per year Startup Year 1 Year 2 Year 3 Year 4 Year 5 Total

Revenue

Per inspection fees $6,424,000.00 $6,424,000.00 $6,424,000.00 $6,424,000.00 $6,424,000.00 $32,120,000.00

Monthly fees (if any) $1,128,600.00 $1,128,601.00 $1,128,602.00 $1,128,603.00 $1,128,604.00 $5,643,010.00

Inspector Training fees $424,000.00 $424,000.00 $424,000.00 $424,000.00 $424,000.00 $2,120,000.00

Total Revenue $7,976,600.00 $7,976,601.00 $7,976,602.00 $7,976,603.00 $7,976,604.00 $39,883,010.00

Expenses

Expenses

Inspection Station Network &

Workstations $1,189,238.84 $1,189,238.84 $1,189,238.84 $1,189,238.84 $1,189,238.84 $5,946,194.22

Capital and Financing (Light Duty) $0.00 $0.00 $0.00 $0.00 $0.00 $0.00

Capital and Financing (Heavy Duty with

Opacity) $0.00 $0.00 $0.00 $0.00 $0.00 $0.00

Capital and Financing (Heavy Duty) $0.00 $0.00 $0.00 $0.00 $0.00 $0.00

Installation and Maintenance (Light Duty) $190,576.71 $190,576.71 $190,576.71 $190,576.71 $190,576.71 $952,883.55

Installation and Maintenance (Heavy Duty with Opacity) $0.00 $0.00 $0.00 $0.00 $0.00 $0.00

Installation and Maintenance (Heavy Duty) $28,875.26 $28,875.26 $28,875.26 $28,875.26 $28,875.26 $144,376.30

Consumables cost (itemized) $969,786.87 $969,786.87 $969,786.87 $969,786.87 $969,786.87 $4,848,934.37

Light Duty

Toner $277,920.50 $277,920.50 $277,920.50 $277,920.50 $277,920.50 $1,389,602.51

Inspection Sticker $294,764.17 $294,764.17 $294,764.17 $294,764.17 $294,764.17 $1,473,820.84 other $269,498.67 $269,498.67 $269,498.67 $269,498.67 $269,498.67 $1,347,493.34

Heavy Duty with Opacity

Toner $0.00 $0.00 $0.00 $0.00 $0.00 $0.00

Inspection Sticker $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 other $0.00 $0.00 $0.00 $0.00 $0.00 $0.00

Heavy Duty

Toner $42,109.17 $42,109.17 $42,109.17 $42,109.17 $42,109.17 $210,545.83

Inspection Sticker $44,661.24 $44,661.24 $44,661.24 $44,661.24 $44,661.24 $223,306.19 other $40,833.13 $40,833.13 $40,833.13 $40,833.13 $40,833.13 $204,165.66

Network and Sticker Management $416,222.15 $416,222.15 $416,222.15 $416,222.15 $416,222.15 $2,081,110.73

Database and Software $1,526,622.39 $1,526,622.39 $1,526,622.39 $1,526,622.39 $1,526,622.39 $7,633,111.96

Inspection Database $1,119,518.74 $1,119,518.74 $1,119,518.74 $1,119,518.74 $1,119,518.74 $5,597,593.72

ALARS Modernization $0.00 $0.00 $0.00 $0.00 $0.00 $0.00

Management, Motorcycle & Other Apps $333,948.65 $333,948.65 $333,948.65 $333,948.65 $333,948.65 $1,669,743.24

Field Inspector Tablets with Data Plan $79,766.02 $79,766.02 $79,766.02 $79,766.02 $79,766.02 $398,830.10

Inspector Training $320,447.58 $320,447.58 $320,447.58 $320,447.58 $320,447.58 $1,602,237.91

Inspector Orientation for Startup $0.00 $0.00 $0.00 $0.00 $0.00 $0.00

Motorist and Industry Communications $667,897.30 $667,897.30 $667,897.30 $667,897.30 $667,897.30 $3,339,486.48

Help Desk $381,655.60 $381,655.60 $381,655.60 $381,655.60 $381,655.60 $1,908,277.99

Communications Materials $286,241.70 $286,241.70 $286,241.70 $286,241.70 $286,241.70 $1,431,208.49

Auditing $753,769.81 $753,769.81 $753,769.81 $753,769.81 $753,769.81 $3,768,849.03

Covert Vehicle Auditing $706,062.86 $706,062.86 $706,062.86 $706,062.86 $706,062.86 $3,530,314.28

Cover Visual (Video) Auditing $47,706.95 $47,706.95 $47,706.95 $47,706.95 $47,706.95 $238,534.75

Vehicle Maintenance Initiative $314,865.87 $314,865.87 $314,865.87 $314,865.87 $314,865.87 $1,574,329.34

Training of Registered Repairers $291,012.39 $291,012.39 $291,012.39 $291,012.39 $291,012.39 $1,455,061.97

Repair Shop Listing and Rating System $23,853.47 $23,853.47 $23,853.47 $23,853.47 $23,853.47 $119,267.37

Motorist Assistance Centers $2,671,589.19 $2,671,589.19 $2,671,589.19 $2,671,589.19 $2,671,589.19 $13,357,945.93

Buildings and Equipment $1,144,966.79 $1,144,966.79 $1,144,966.79 $1,144,966.79 $1,144,966.79 $5,724,833.97

MAC Staff $1,526,622.39 $1,526,622.39 $1,526,622.39 $1,526,622.39 $1,526,622.39 $7,633,111.96

Fee Collection $36,182.86 $36,182.86 $36,182.86 $36,182.86 $36,182.86 $180,914.29

Total Expenses (without VISITS or

Printers or Mobile Printing Solution) $7,976,602 $7,976,602 $7,976,602 $7,976,602 $7,976,602 $39,883,010

VISITS Application $44,000.00 $44,000.00 $44,000.00 $44,000.00 $44,000.00 $220,000.00

Field Inspector Printers and/or Mobile

Printing Solution $2,100.00 $2,100.00 $2,100.00 $2,100.00 $2,100.00 $10,500.00

Total Expenses (with VISITS and

Printers or Mobile Printing Solution) $8,022,702 $8,022,702 $8,022,702 $8,022,702 $8,022,702 $40,113,510

1.6 Financial Qualifications (RFR 3.3.6) (50

pages)

1.6.1 No bankruptcy statement

Opus Inspection, Inc. has never been in bankruptcy and has no present intent to file for bankruptcy.

1.6.2 No adverse effect statement

Opus Inspection, Inc. has sufficient financial capability to ensure our resources will not be adversely affected by any other existing or potential inspection and maintenance contracts we currently hold or by any other major business commitment(s) including senior liens and other financial pledges. Opus Inspection is the largest provider of motor vehicle inspection services in the North American market with 26 programs in 21 jurisdictions utilizing 1,100 employees. As such Opus Inspection has sufficient cash flow and access to lines of credit through its US-based banking institutions.

1.6.3 Subsidiaries or affiliated companies

Drew Technologies, Inc. is a wholly-owned subsidiary of Opus Inspection, Inc.

Envirotest Corp. is a wholly-owned subsidiary of Opus Inspection, Inc.

1.6.4 Work the parent or subsidiary plans to

perform

Opus Inspection, Inc. is a wholly-owned subsidiary of Opus Group AB, a Swedish public company. Envirotest Corp is a wholly-owned subsidiary of Opus Inspection, Inc. It is not currently anticipated that Opus Group or Envirotest Corp. will provide any work specific to this project. Drew Technologies, Inc. is a wholly-owned subsidiary of Opus Inspection, Inc. and will provide its DAD certified OBD tool, repair diagnostics and advanced vehicle communications expertise to the project.

1.6.5 No conflict of interest statement

Opus Inspection, Inc. has no direct and indirect business activities or contractual obligations that may pose a potential conflict or otherwise affect or influence our ability to fulfill the

Contract in full accordance with the requirements of this RFR.

1.6.6 Dun & Bradstreet's Comprehensive Report

A comprehensive D&B report on Opus Inspection is on the following pages.

1.6.7 Audited financial statements

Opus Inspection’s audited financial statement for 2013, 2014, and 2015 are on the following pages.

Opus Inspection, Inc.

Consolidated Financial Statements and Independent Auditor's Report

December 31, 2015

Independent Auditor's Report 3

Consolidated Balance Sheet 4

Consolidated Statement of Operations 5

Consolidated Statement of Comprehensive Income (Loss) 6

Consolidated Statement of Equity 7

Consolidated Statement of Cash Flows 8

Notes to Consolidated Financial Statements 9

To the Board of Directors

Report on the Financial Statements

Management's Responsibility for the Financial Statements

Auditor's Responsibility

Opinion

March 30, 2016

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

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

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

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Opus Inspection, Inc. as of December 31, 2015, and the results of its operations and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America.

Salt Lake City, Utah

INDEPENDENT AUDITOR'S REPORT

Opus Inspection, Inc.

We have audited the accompanying consolidated financial statements of Opus Inspection, Inc. (the Company), which comprise the consolidated balance sheet as of December 31, 2015, and the related consolidated statements of operations, comprehensive income (loss), statement of equity, and cash flows for the year then ended, and the related notes to the consolidated financial statements.

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

OPUS INSPECTION, INC.

CONSOLIDATED BALANCE SHEET

December 31, 2015

(US dollars in thousands)

ASSETS

Current assets:

Cash and cash equivalents 13,513$ Restricted cash 2,101 Contract and trade accounts receivable, net 8,753 Other receivables 495

Costs and Estimated earnings in excess of billings on uncompleted contracts and unbilled accounts receivable 1,645

Related parties accounts receivable 318 Related companies accounts receivable 162 Sales-type lease receivables, net 167 Inventories 9,702

Prepaid expenses and other 2,824 Income tax receivable 12,305 Deferred taxes 3,403

Total current assets 55,388 Property, plant, and equipment, net 76,200 Assets held under capital leases 9 Intangible assets, net 50,157 Goodwill 62,002 Long-term sales-type lease receivables, net 89 Other assets 167

Total assets 244,012$

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Current portion of capital leases obligations 11$ Accounts payable 1,486

Accrued expenses and other 10,790 Customer deposits 6,634 Warranty reserve 84 Income taxes payable 9,018 Current portion debt, net 300 Other liabilities 4,030

Total current liabilities 32,353 Long-term debt, net 300 Deferred taxes 25,642 Other long-term liabilities 5,175 Related companies long-term liabilities 156,948

Total liabilities 220,418 Stockholders’ equity:

Additional paid-in capital 21,419 Retained earnings 2,251 Accumulated other comprehensive income (66)

Total stockholders’ equity - parent 23,604 Total noncontrolling interest (10) Total stockholders’ equity 23,594 Total liabilities and stock-holders' equity 244,012$

See accompanying notes to consolidated financial statements 4

CONSOLIDATED STATEMENT OF OPERATIONS

Year ended December 31, 2015

(US dollars in thousands)

Total revenues 117,720$

Cost of revenues 10,926

Gross profit 106,794

Operations expenses 81,731

Gross Income 25,063

Amortization of intangibles 7,289

Depreciation of assets 9,328

Other loss on facilities/asset disposals 88

Income from operations 8,358

Other income (expense):

Interest income 114

Interest expense (19)

Interest expense - intercompany (10,447)

Other expense (636)

Loss before provision for income taxes (2,630)

Benefit from income taxes 1,733

Net loss (897)

Net loss attributable to noncontrolling interest (4)

Net loss attributable to Opus Inspection, Inc. (893)$

See accompanying notes to consolidated financial statements 5

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS)

Year ended December 31, 2015

(US dollars in thousands)

Net loss (897)$ Other comprehensive loss:

Foreign currency translation adjustment (105) Comprehensive loss (1,002) Comprehensive loss attributable to noncontrolling interest (4) Comprehensive loss attributable to Opus Inspection, Inc. (998)$

See accompanying notes to consolidated financial statements 6

CONSOLIDTED STATEMENT OF EQUITY

Year ended December 31, 2015

(US dollars in thousands)

Accumulated

Additional Other Total

Paid-in Retained Comprehensive Noncontrolling Stockholders' Capital Earnings Income (Loss) Interest Equity

Balance at January 1, 2015 21,419$ 3,144$ 39$ (6)$ 24,596$ Net loss - (893) - (4) (897) Currency translation adjustment - - (105) - (105) Balance at December 31, 2015 21,419$ 2,251$ (66)$ (10)$ 23,594$

Equity Attributed to Opus Inspection, Inc.

See accompanying notes to consolidated financial statements 7

CONSOLIDATED STATEMENT OF CASH FLOWS

Year ended December 31, 2015

(US dollars in thousands)

Cash flows from operating activities:

Net loss (897)$

Adjustments to reconcile net loss to net cash provided by operating activities:

Depreciation 9,328 Amortization of goodwill (380) Goodwill additions or write-down (1,086) Amortization of intangibles 7,289 Provision for losses on receivables 146 Loss on disposal of property & equipment 88 Provision for losses on assets held for sale 183 Deferred taxes (1,127)

Change in assets and liabilities:

Increase in accounts and contracts receivable (849) Increase in costs and earnings in excess of billings on uncompleted contracts (91) Decrease in other receivables 40 Increase in related parties receivable (106) Decrease in inventories 663 Decrease in prepaid expenses and other 762 Increase in income tax receivable (8,720) Decrease in other assets 29 Decrease in accounts payable (318) Decrease in accrued expenses and other (855) Decrease in warranty reserve (221) Decrease in customer deposits (460) Increase in income taxes payable 3,876 Increase in other liabilities 1,487

Total adjustments 9,678 Net cash provided by operating activities 8,781

Cash flows from investing activities:

Purchases of property, plant and equipment (9,171) Proceeds from sale of property, plant and equipment 70 Proceeds from sale of assets held for sale 375 Proceeds from lease contracts 198 Cash paid for acquisition of Drew Technologies (24,817)

Net cash used in investing activities (33,345)

Cash flows from financing activities:

Repayment of capital lease obligation (20) Repayments of other long-term debt (300) Change in intergroup receivable/payable 26,663

Net cash provided by financing activities 26,343

Effect of exchange rate changes on cash (105) Net increase in cash and cash equivalents 1,779 Cash and cash equivalents, beginning of period 13,940

Cash and cash equivalents, end of period 15,614$

See accompanying notes to consolidated financial statements 8

NOTES TO CONSOLIDATED FINANCIAL STATEMEMTS

(US dollars in thousands)

Note 1 -

Organization

Note 2 - Significant accounting policies

Opus Inspection, Inc. acquired all of the outstanding stock of Envirotest Systems Holdings Corp. ("Envirotest Corp.") on February 28, 2014. Assets acquired and liabilities assumed in the transaction were recorded at their acquisition-date fair values in accordance with accounting standards for business combinations.

Principles of consolidation - The consolidating financial statements include the accounts and operations of Opus Inspection, Inc., and its wholly owned subsidiaries Envirotest Corp., Drew Technologies, Inc., and Trilen, LLC, as well as its wholly owned and majority owned foreign subsidiaries. All intercompany balances and transactions have been eliminated upon consolidation. The Financial Accounting Standards Board ASC 810-10-65 requires consolidated net income to be reported at amounts that include the amounts attributable to both the parent and the noncontrolling interest. Noncontrolling interest pertaining to the Company's majority-owned entities has been recorded on the consolidated financial statements as the Company owns 99.09% of SysTech Chile, Ltda and 99.97% of SysTech Peruana, SRL.

Opus Inspection, Inc., Envirotest Corp, Drew technologies, Inc., Trilen LLC, and our foreign subsidiaries will hereinafter collectively be referred to as "the Company."

Established in 1974, East Granby, Connecticut based Opus Inspection is the leader in vehicle emissions testing, equipment sales and program management services in North America and in Remote Sensing equipment and services globally. Opus Inspection currently has 26 contracted vehicle inspection programs in North America which conduct 25 million inspections a year at over 25,000 stations. The company is exclusively dedicated to meeting the needs of our clients to improve road worthiness and reduce emissions of in-use vehicles, and operates centralized and decentralized vehicle emissions testing programs in 21 States, Mexico, Bermuda, Peru, and Chile. In February 2015, we ended our operations in Canada.

As discussed in Note 3, Opus Inspection, Inc. acquired all of the outstanding stock of Drew Technologies, Inc. on March 23, 2015. Assets acquired and liabilities assumed in the transaction were recorded at their acquisition-date fair values in accordance with accounting standards for business combinations.

We are the sole owners of a subsidiary named Trilen, LLC, which began operations in 2006 and was formed as a Florida limited liability company. Trilen owns and leases buildings to Opus Inspection, Inc. under month-to-month operating lease agreements.

Opus Inspection, Inc. is the majority owner of three foreign subsidiaries, SysTech Peruana, SRL, SysTech Chile, Ltda., and ESP Mexico. All related party transactions have been eliminated upon consolidation, and the balances of Systech Peruana SRL, Systech Chile Ltda and ESP Mexico are included within the consolidated financial statements. Foreign operations are not a significant portion of the Company's operations.

Opus Inspection, Inc., (Opus Inspection or "Company) formerly Opus US, Inc., was formed April 16, 2008. Opus Inspection Inc. has 1,000 shares of outstanding common stock that is 100% owned by Opus Group AB. Opus Group AB is registered in Sweden as a public limited liability company that is traded on the NASDAQ OMX Stockholm exchange under the ticker symbol "OPUS". On January 1, 2014, The Company restructured it's legal business entities.

The two subsidiaries of Opus Inspection, Inc., SysTech International, LLC (SysTech), and Environmental Systems Products Inc. (ESP) were merged into one legal entity with Opus Inspection, Inc. being the surviving legal entity.

(US dollars in thousands)

Note 2 - Significant accounting policies

(continued)

Income taxes - Income taxes are accounted for under the asset and liability method.

Deferred tax assets and liabilities are recognized for the future tax consequences of the differences between the financial statement carrying amounts of assets and liabilities and their respective tax bases and net operating loss carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the year in which those temporary differences are expected to be recovered or settled

Basis of presentation - The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"). References to GAAP in the footnotes are to the Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC" or "the Codification").

Basis of accounting - The consolidating financial statements of the Company have been prepared on the accrual basis of accounting and accordingly reflect all significant receivables, payables and other liabilities.

Use of estimates - The preparation of the consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.

Estimates are used in determining amounts reported in the financial statements including allowances for accounts receivable and inventories, and valuation allowances for deferred tax assets. Other significant estimates include fixed asset lives, intangible asset lives, goodwill and intangible asset recoverability, warranty accruals, deferred revenue recoverability, self-insurance claims and others.

Risks and uncertainties - Operating performance may be affected by prevailing economic conditions, governmental regulations regarding vehicle emissions, business conditions and other factors. The market for the Company's services is substantially dependent on state and federal legislation and regulations mandating air pollution controls and vehicle emissions testing. In order to retain its market share, the Company must continue to successfully compete for new contracts and renewal of existing contracts.

Cash and cash equivalents - The Company considers all highly liquid investments with an original maturity of three months or less to be cash and cash equivalents.

Marketing Expenses - Marketing costs are expensed as incurred and totaled $1,128 for the year ended December 31, 2015.

The Company follows the provision of Accounting for Uncertainty in Income Taxes from FASB Accounting Standards Codification. This requires the evaluation of tax positions taken or expected to be taken in the course of preparing the entity’s tax returns to determine whether the tax positions are “more-likely-than-not” of being sustained “when challenged” or “when examined” by the applicable taxing authority.

For 2015, management has determined that there are no material uncertain income tax positions. Tax years that remain subject to examination are years 2012 and forward.

(US dollars in thousands)

Note 2 - Significant accounting policies

(continued)

Accounts receivable and allowance for doubtful accounts - The Company considers receivables that are aged less than sixty days to be current due to the nature of their contract billings. Accounts past sixty days are considered past due, and those past ninety days are considered to be delinquent. Management pursues overdue accounts on a case by case basis depending on various criteria such as the nature of the contract, previous payment history and other factors. The Company does not accrue interest on accounts receivable or require collateral. Management only writes off accounts when all possibilities for collection have been exhausted. Accounts receivable are stated net of an allowance for doubtful accounts of $504 at December 31, 2015.

Revenue for fixed price contracts are recognized on the percentage-of-completion method based on the proportion of total cost incurred on a contract to total estimated cost. Revenue from services provided in advance of billings is included in unbilled accounts receivable. We anticipate all of the amounts on the balance sheet will be collected during the 2016 fiscal year. As of December 31, 2015 costs in excess of billings totaled $1,333 and unbilled accounts receivable totaled $312.

Inventories - The Company states inventories at the lower of cost or market on the average cost basis. An allowance is provided for obsolete and slow-moving inventory to write costs down to net realizable value.

Revisions in contract revenue and cost estimates are reflected in the accounting period they become known. The Company evaluates both revenue and cost projections based on evolving business conditions to refine estimates used in profit recognition. As events evolve, it is reasonably possible that a change in estimate may occur.

Revenue recognition - Revenue for equipment sales are recognized upon shipment provided that persuasive evidence of an arrangement exists, payment terms are fixed and determinable, and collection of the related receivable is considered probable. Revenue from rentals are recognized monthly, as payments are received, over the life of the contracts.

Revenue from vehicle test fees is recognized in the period in which applicable test and other services are performed. Payments received in advance for test fees are deferred and recognized in income when the tests are performed. Revenue for warranty and services contracts is recognized ratably over the contract period.

Property and equipment - Fixed assets are recorded at cost. Major renewals and improvements are capitalized, while replacements, maintenance and repairs, which do not materially extend the useful lives of the assets, are expensed.

Shipping and handling - The Company includes the cost of shipping and handling in the price to customers and includes the amounts billed in sales. Shipping and handling costs incurred by the Company are included in cost of goods sold. Fees for rental units shipped are added to the capitalized asset value.

Long-lived assets including property, plant, equipment, and intangibles 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. When determined necessary, this evaluation is performed to record impairment for the amount of carrying value in excess of fair value. Fair value is determined through various valuation techniques including discounted cash flow models, appraisals, and quoted marked prices.

(US dollars in thousands)

Software 3-7 years

Computer hardware 3-7 years

Machinery and equipment 5-7 years

Buildings 15-30 years

Leasehold improvements 28.5 years or lease term

Depreciation - Depreciation of fixed assets is computed on straight-line method over the estimated useful lives of the related assets or lease terms.

The Company has elected to perform an annual impairment test for goodwill at the end of each year. Additionally, the Company reviews goodwill for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable.

For the year ended December 31, 2015, no impairment loss has been recorded.

Note 2 - Significant accounting policies

(continued)

Goodwill and intangible assets - According to Generally Accepted Accounting Standards, management reviews goodwill for impairment at least annually or sooner if a specific triggering event occurs. Other finite intangible assets are amortized over their estimated useful lives.

Loan origination fees - The Company capitalizes loan origination fees and amortizes them over the life of the loan. Amortization of loan fees for the year ended December 31, 2015 was $1. Estimated amortization for each the next 5 years is $1.

Deferred warranty revenue - Contracts may include provisions obligating the Company to provide programming support after installation is complete. In addition, hardware provided as a part of certain contracts and equipment sales carries a warranty which is also included as a warranty reserve. The warranty revenue is amortized over the life of the warranty period, usually 12 months. Costs incurred for warranty repairs are expensed in the period incurred.

Changes in the deferred warranty reserve are reported in the results of operations in the year in which they occur.

Amortization expense related to intangible assets totaled $7,289 as of December 31, 2015.

Foreign currency transactions - Opus Inspection, Inc., the parent company of the subsidiaries, makes its principal investing and financing transactions in United States Dollars (USD), which is also its functional currency. Transactions and balances denominated in other currencies have been translated into USD using historical exchange rates. Exchange gains and losses from holding foreign currencies and having liabilities payable in foreign currencies are included in the results of operations.

The Mexican Peso (MXN) is the functional currency of the operating subsidiary ESP Mexico, the Chilean Peso (CLP) is the functional currency of the operating subsidiary SysTech Chile, Ltda., and the Peruvian Nuevo Sol (PEN) is the functional currency of the operating subsidiary Systech Peruana, SRL. Their respective balance sheets have been translated into USD at the exchange rates prevailing at each balance sheet date. Their respective statements of operations have been translated into USD using the average exchange rates prevailing during the periods of each statement. The corresponding translation adjustments are part of accumulated other comprehensive income and are shown as part of members’ equity.

(US dollars in thousands)

Note 2 - Significant accounting policies

(continued)

Note 3 -

Acquisitions

In July 2015 the FASB issued guidance on the measurement of inventory which changes the measurement principle of inventory from the lower of cost or market to the lower of cost and net realizable value. Net realizable value is estimated selling prices less reasonably predictable cots of completion, disposal and transportation. The guidance is effective for periods beginning after December 15, 2016

In November 2015 the FASB issued guidance which simplifies the presentation of deferred income taxes by eliminating the separate classification of deferred income tax liabilities and assets into current and noncurrent amounts in the consolidated balance sheet. The guidance require all differed tax liabilities and assets be classified as noncurrent in the consolidated balance sheet, and is effective for periods beginning after December 15, 2017.

In February 2016 the FASB issued lease guidance which requires that lease arrangements longer than 12 months result in an entity recognizing an asset and liability. The guidance is effective for periods beginning after December 15, 2019.

The Company is currently evaluating the requirements of these new accounting pronouncements and have not yet determined the impact on the consolidated financial statements.

On March 23, 2015, the Company completed its acquisition of 100% of the shares of Drew Technologies, Inc. The financing for the acquisition was from an internal loan of $30,000 from the Company's parent, Opus Group AB. The aggregate purchase price for the shares was $30,215 plus an earn-out agreement up to $4,426. Drew Technologies, Inc. will continue to operate as an independent subsidiary that financially reports through Opus Inspection, Inc.

Research and development - Research and development costs are charged to operations as incurred and are included in operating expenses.

Recent Accounting Pronouncements - In May 2014 the FASB issued amended accounting guidance on revenue recognition that will be applied to all contracts with customers. The object of the new guidance is to improve comparability of revenue recognition practices across entities and to provide more useful information to users of the financial statements.

This guidance is effective for periods beginning after December 15, 2018.

The translation of MXN, CLP and PEN denominated assets and liabilities into USD for the purpose of these consolidated financial statements does not necessarily mean the Company could realize or settle, in USD, the reported values of these assets and liabilities in USD.

Likewise it does not mean the Company could return or distribute the reported USD value of its foreign subsidiaries’ equity to its members’.

Comprehensive income - Total comprehensive income consists of net income and changes in accumulated other comprehensive income. Accumulated other comprehensive income is presented in the consolidated statement of comprehensive income and consists of foreign currency translation adjustments.

(US dollars in thousands)

Note 3 -

Acquisitions

(continued)

Cash paid to owners $ 25,215

Opus Group AB Stock paid to owners 5,000

Contingent consideration 4,426

Total consideration paid $ 34,641

Cash and cash equivalents $ 398

Accounts receivable, net 311

Inventories 919

Prepaid expenses and other current asset 15

Property and equipment 210

Intangibles 24,695

Goodwill 17,759

Deferred tax liability (9,408)

Accounts payable (198)

Accrued expenses (60)

Fair value of net assets acquired $ 34,641

Note 4 -

Restructuring charges

Note 5 - Restricted cash

Note 6 - Inventories

December 31 2015

Finished Units 2,243$

Component parts 10,362

Reserve for obsolescence (2,903)

Inventories, net 9,702$

Inventories consist of the following:

The fair value of accounts receivable acquired represents contractual amounts receivable.

The Company expects to collect all accounts receivable acquired. Acquisition costs have been expensed as incurred and totaled to $240 for the year ended December 31, 2015.

The Company has a material contract with a state agency whereby they are required to establish a reserve trust fund for contract costs and equipment upgrades that the state may request. The agreement calls for a reserve equal to $.5 for each unit in use under the contract, with specified funding amounts each month until fully funded. As of December 31, 2015 the Company had reserved $2,101 in accordance with this agreement. These amounts are included in restricted cash, and any amounts not used when the contract terminates, by expiration of the 7 year contract term or otherwise, will be remitted to the State.

This transaction qualified as a business combination under ASC 805 Business Combinations ("ASC 805"). Accordingly, the Company has recorded all assets acquired and liabilities assumed at their acquisition-date fair values, with any excess recognized as goodwill. The following table represents the estimated fair values of consideration paid and net assets acquired on the acquisition date:

On December 31, 2014, Envirotest shut down their operations in British Columbia due to the program being cancelled by the local government. The restructuring activities, which the Company completed during 2015 resulted in costs of $467 which includes severance costs of $43 for the year ended December 31, 2015.

(US dollars in thousands)

December 31 2015

Contract and trade accounts receivable 9,257$

Less allowance for doubtful accounts (504)

Contract and trade accounts receivable, net 8,753

Other receivables 495

$ 9,248

December 31 2015

Buildings 68,044$

Land 20,262

Furniture and fixtures 1,814

Equipment 93

Leasehold improvements 1,408

Computers 5,675

Software 10,101

Vehicles and machines 50,356

Construction in progress 3,154

Property and equipment, gross 160,907

Less accumulated depreciation (84,707)

Property, plant and equipment, net 76,200$

Weighted Gross Net

Average Carrying Accumulated Carrying

Useful Life Value Amortization Amount

Indefinite intangible assets:

Drew- brand name Indefinite 12,745$ -$ 12,745$

Finite-lived intangible assets:

Client relationships 14 years 7,774 (429) 7,345

Product Rights CarDAQ 15 years 2,314 (119) 2,195

Product Rights Mongoose 17 years 1,862 (84) 1,778

$ 24,695 $ (632) $ 24,063

Goodwill Indefinite $ 17,759 $ - $ 17,759

Accounts receivable consists of the following:

Note 9 - Goodwill and intangibles

Note 7 - Accounts receivable

Property and equipment consists of the following:

As part of the acquisition of Drew Technologies, Inc., discussed in Note 3, the Company acquired intangible assets for customer relationships, customer backlog, patents, warranty and service plans. The weighted average useful life for intangible assets acquired from Drew Technologies, Inc. is listed below as of December 31, 2015.

Depreciation expense for the current year was $9,328.

Accounts receivable, net

Note 8 - Property, plant and equipment

(US dollars in thousands)

Years ending December 31, 2016 7,371$

2017 6,820

2018 6,690

2019 4,181

2020 2,901

Thereafter 9,448

Total 37,411$

Note 10 - Assets held for sale

December 31 2015

Balance at January 1, 2015 558$

2015 impairment (183)

2015 property sales (375)

Balance at December 31, 2015 -$

December 31 2015

Beginning balance 305$

Reductions in estimates due to passage of time (485)

Accruals for warranties issued in the current period 264

Warranty reserve, ending balance 84$

Note 9 - Goodwill and intangibles

(continued)

Note 11 - Deferred warranty reserves Changes in balances of warranty reserves are as follows:

The write-downs of assets held for sale were based upon fair value estimates from property appraisals and listing prices less selling costs. These fair values are considered to be Level 2, other observable inputs are defined under accounting standards for fair value measurements.

The estimated aggregated amortization expense for intangible assets over the next five years and thereafter is as follows:

At December 31, 2015, There are no assets held for sale. The last property related to the Wisconsin emissions testing program previously operated by Envirotest Corp. was sold during 2015. The Wisconsin properties were added to Envirotest Corp. assets held for sale in 2012 as a result of the end of the Company's emissions testing contract. The properties were added to assets held for sale at the lower of the projected net sale proceeds or the net book vale at the time the program was shut down. Subsequent impairment for the facility was recorded in prior periods.

The activity in assets held for sale is as follows:

(US dollars in thousands)

Note 13 -

Concentrations

Note 14 - Lease commitments

December 31 2015

2016 1,977$

2017 1,226

2018 889

2019 617

2020 254

Thereafter -

Total 4,963$

December 31

2016 29$

2017 32

2018 32

2019 32

2020 32

Thereafter 32

Total 189$

The Company sponsors a 401(k) retirement plan ("the Plan") for its employees through Opus Inspection, Inc., and a separate plan through Drew Technologies, Inc., whereby qualified employees may elect to defer a portion of their compensation, subject to Internal Revenue Code limitations. The Company matches up to 3% or 4% of contributing participant's elective deferral, depending on the plan, and not to exceed the maximum amount allowed by the Internal Revenue Code. During the year ended December 31, 2015 the Company contributed $768 to the Plans.

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