NV5 Global Annual Report 2013

Plain-text annual report

CONSTRUCTION QUALITY ASSURANCE INFRASTRUCTURE ENGINEERING ENERGY SERVICES PROGRAM MANAGEMENT ENVIRONMENTAL SERVICES Annual Report 2013 NV5 Holdings, Inc. 200 South Park Road, Suite 350 Hollywood, Florida 33021 Tel 954.495.2112 / Fax 954.495.2102 ___________________________________________________________________ Dear Stockholder, I am happy to report that NV5 had a promising and transformational fiscal year in 2013. It was characterized by strong organic growth across our five service verticals as well as growth generated through the completion of our IPO and several accretive acquisitions. We grew gross revenues to $68.2 million in 2013, an increase of 13% over $60.6 million in 2012. We ended the year on a high note with double-digit growth in the fourth quarter and an expanded backlog of $60.2 million at December 31, 2013, compared to the $45 million we reported at December 31, 2012. We are pleased with the strength of our balance sheet, and we are optimistic about reaching our goal of $300 million in revenue by 2016 through solid EBITDA margins and excellence in performance. We approached a head count of approximately 440 employees in 2013, including approximately 130 licensed professionals. The American Society of Civil Engineers estimates that a minimum investment of $3.6 trillion will be required by 2020 to improve the ailing condition of our nation’s roads and bridges. We are well positioned to capitalize on these needs at the federal and state levels and continue to enhance our senior management team with seasoned industry executives who will help us solidify growth in our infrastructure vertical. We received a number of substantial multi-year project awards and contract expansions in 2013, including a $6 million project award from the County of Merced in California to provide construction management services for the Atwater-Merced Expressway, and contract extensions at the Hollywood-Fort Lauderdale International Airport. Our San Diego Gas & Electric contract continues to grow as they request more of the services we provide through our five verticals. Acquisitions continue to play a significant role in our growth plan. We operate in a highly fragmented market ripe with potential acquisition candidates, and we are presented with many opportunities. We have an established track record of introducing efficiencies and operational best practices to our partners, and were recognized for these strong M&A capabilities in 2013 with the Environmental Business Journal’s Business Achievement Award in the area of mergers and acquisitions, alongside larger, multi-national industry giants. In 2014, we have already made two acquisitions. We are excited to welcome Air Quality Consulting (AQC) and AK Environmental to the NV5 family. AQC provides professional and technical engineering and consulting solutions and are experts in occupational health and safety and environmental services. AQC will be instrumental in the growth of our environmental vertical and will allow us to offer environmental services on a broader scale within our existing business network. AK Environmental is an inspection construction management and environmental consulting company with approximately $25 million in annual revenue for its most recently completed fiscal year, and an established presence in the natural gas pipeline space. AK Environmental’s approximately 125 professionals will help NV5 build our national footprint, particularly on the East Coast. On behalf of NV5, I want to thank our employees, clients and stockholders for sharing in our vision for the future and for their continued commitment to NV5. We are optimistic about the year ahead and plan to maintain our focus on organic growth while executing our acquisition strategy. Sincerely, Dickerson Wright, P.E. Chairman and CEO UNITED STATES SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549 FORM 10K [X]ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2013 or [ ]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 00135849 NV5 Holdings, Inc.(Exact name of registrant as specified in its charter) Delaware 453458017 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) 200 South Park Road, Suite 350Hollywood, Florida 33021(Address of principal executive offices) (Zip Code) (954) 4952112 Registrant’s telephone number, including area code Securities Registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registeredCommon Stock, $0.01 par valueWarrants to Purchase Common Stock The NASDAQ Capital MarketThe NASDAQ Capital Market Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if the registrant is a wellknown seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒ Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during thepreceding 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 past90 days. Yes ☒ No ☐ Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to besubmitted and posted pursuant to Rule 405 of Regulation ST (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrantwas required to submit and post such files). Yes ☒ No ☐ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation SK (§229.405 of this chapter) is not contained herein, and will not becontained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10K or any amendmentto this Form 10K. ☐ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a nonaccelerated filer, or a smaller reporting company. See thedefinitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b2 of the Exchange Act. (Check one): Large accelerated filer ☐Accelerated filer ☐Nonaccelerated filer ☐Smaller reporting company ☒ (Do not check if a smaller reporting company) Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b2 of the Act). Yes ☐ No ☒ The aggregate market value of the voting and nonvoting common equity held by nonaffiliates based on the closing sales price of the registrant’s units (whichwere the registrant’s only trading voting and nonvoting common equity as of June 28, 2013), as reported on The NASDAQ Capital Market on June 28 2013 (thelast business day of the registrant’s most recently completed second fiscal quarter), was approximately $14.7 million. For purposes of this computation, allofficers, directors, and 10% beneficial owners of the registrant are deemed to be affiliates. Such determination should not be deemed to be an admission that suchofficers, directors, or 10% beneficial owners are, in fact, affiliates of the registrant. As of March 25, 2014, there were 5,535,962 shares outstanding of the registrant’s common stock, $0.01 par value. DOCUMENTS INCORPORATED BY REFERENCE Portions of the definitive Proxy Statement for the registrant’s 2014 Annual Meeting of Stockholders are incorporated herein by reference in Part III of this Form10K to the extent stated herein. NV5 HOLDINGS, INC. FORM 10K ANNUAL REPORT TABLE OF CONTENTS Page PART I ITEM 1BUSINESS5ITEM 1ARISK FACTORS15ITEM 1BUNRESOLVED STAFF COMMENTS28ITEM 2PROPERTIES29ITEM 3LEGAL PROCEEDINGS29ITEM 4MINE SAFETY DISCLOSURES29 PART II ITEM 5MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITYSECURITIES30ITEM 6SELECTED FINANCIAL DATA31ITEM 7MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS31ITEM 7AQUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK42ITEM 8FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA43ITEM 9CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE67ITEM 9ACONTROLS AND PROCEDURES67ITEM 9BOTHER INFORMATION67 PART III ITEM 10DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE68ITEM 11EXECUTIVE COMPENSATION68ITEM 12SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS68ITEM 13CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE68ITEM 14PRINCIPAL ACCOUNTING FEES AND SERVICES68 PART IV ITEM 15EXHIBITS AND FINANCIAL STATEMENT SCHEDULES69 2 Cautionary Statement about Forward Looking Statements Our disclosure and analysis in this Annual Report on Form 10K and in our 2013 Annual Report to Stockholders contain “forwardlooking” statements withinthe meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), Section 21E of the Securities Exchange Act of 1934, as amended (the“Exchange Act”), and the Private Securities Litigation Reform Act of 1995. From time to time, we also provide forwardlooking statements in other materials we releaseto the public, as well as oral forwardlooking statements. Forwardlooking statements include, but are not limited to, statements regarding our “expectations,” “hopes,”“beliefs,” “intentions,” or “strategies” regarding the future. In addition, any statements that refer to projections, forecasts, or other characterizations of future eventsor circumstances, including any underlying assumptions, are forwardlooking statements. We have tried, wherever possible, to identify such statements by usingwords such as, but not limited to, “anticipate,” “believe,” “expect,” “intend,” “estimate,” “predict,” “project,” “may,” “might,” “should,” “would,” “will,” “likely,” “willlikely result,” “continue,” “could,” “future,” “plan,” “possible,” “potential,” “target,” “forecast,” “goal,” “observe,” “seek,” “strategy” and other words and terms ofsimilar meaning, but the absence of these words does not mean that a statement is not forward looking. The forwardlooking statements in this Annual Report on Form10K reflect the Company’s current views with respect to future events and financial performance. Forwardlooking statements are not historical factors and should not be read as a guarantee or assurance of future performance or results, and will notnecessarily be accurate indications of the times at, or by, or if which such performance or results will be achieved. Forwardlooking statements are based oninformation available at the time those statements are made or management’s good faith beliefs, expectations and assumptions as of that time with respect to futureevents. Because forwardlooking statements relate to the future, they are subject to risks and uncertainties that could cause actual performance or results to differmaterially from those expressed in or suggested by the forwardlooking statements. Important factors that could cause such differences include, but are not limited to: ●our ability to retain the continued service of our key professionals and to identify, hire and retain additional qualified professionals; ●changes in demand from the local and state government and private clients that we serve; ●general economic conditions, nationally and globally, and their effect on the demand and market for our services; ●fluctuations in our results of operations; ●the government’s funding and budgetary approval process; ●the possibility that our contracts may be terminated by our clients; ●our ability to win new contracts and renew existing contracts; ●our dependence on a limited number of clients; ●our ability to complete projects timely, in accordance with our customers’ expectations, or profitability; ●our ability to successfully execute our mergers and acquisitions strategy, including the integration of new companies into our business; ●our ability to successfully manage our growth strategy; ●our ability to raise capital in the future; ●competitive pressures and trends in our industry and our ability to successfully compete with our competitors; ●our ability to avoid losses under fixedprice contracts; ●the credit and collection risks associated with our clients; ●our ability to comply with procurement laws and regulations; ●changes in laws, regulations, or policies; 3 ●the enactment of legislation that could limit the ability of local, state and federal agencies to contract for our privatized services; ●our ability to complete our backlog of uncompleted projects as currently projected; ●the risk of employee misconduct or our failure to comply with laws and regulations; ●our ability to control, and operational issues pertaining to, business activities that we conduct with business partners and other third parties; ●significant influence by our principal stockholder and the existence of certain antitakeover measures in our governing documents; and ●other factors identified throughout this Annual Report on Form 10K, including those discussed under the headings “Risk Factors,” “Management’sDiscussion and Analysis of Financial Condition and Results of Operations,” and “Business.” There can be no assurance that future developments affecting us will be those that we have anticipated. These forwardlooking statements involve a numberof risks, uncertainties, or assumptions, many of which are beyond our control, that may cause actual results or performance to be materially different from thoseexpressed or implied by these forwardlooking statements. In light of these risks and uncertainties, there can be no assurance that the forwardlooking informationcontained in this Annual Report on Form 10K will in fact transpire or prove to be accurate. Readers are cautioned to consider the specific risk factors described hereinand in “Item 1A. Risk Factors” of this Annual Report on Form 10K, and not to place undue reliance on the forwardlooking statements contained herein, which speakonly as of the date hereof. The Company undertakes no obligation to update or publicly revise any forwardlooking statement, whether as a result of new information, futuredevelopments or otherwise, except as may be required under applicable securities laws. All subsequent written or oral forwardlooking statements attributable to theCompany or persons acting on its behalf are expressly qualified in their entirety by this paragraph. You are advised, however, to consider any further disclosures wemake on related subjects in our Quarterly Reports on Form 10Q, Current Reports on Form 8K and our other filings with the Securities and Exchange Commission (the“SEC”). Also note that we provide a cautionary discussion of risks, uncertainties and possibly inaccurate assumptions relevant to our business under “Item 1A. RiskFactors” of this Form 10K. We note these factors for investors as permitted by the Private Securities Litigation Reform Act of 1995. You should understand it is notpossible to predict or identify all such factors. References in this Annual Report on Form 10K to (i) “NV5 Holdings, the “Company,” “we,” “us,” and “our” refer to NV5 Holdings, Inc., a Delawarecorporation, its consolidated subsidiaries, and the business of Nolte Associates, Inc. as our historical accounting predecessor, (ii) “NV5” refers to NV5 Global, Inc.(formerly known as NV5, Inc.), a Delaware corporation and a wholly owned subsidiary of ours, and (iii) “Nolte” refers to Nolte Associates, Inc., a California corporationand a wholly owned subsidiary of ours. 4 PART I ITEM 1. BUSINESS Overview We are a provider of professional and technical engineering and consulting solutions to public and private sector clients. We focus on the infrastructure,construction, real estate, and environmental markets. The scope of our projects includes planning, design, consulting, permitting, inspection and field supervision, andmanagement oversight. We also provide forensic engineering, litigation support, condition assessment, and compliance certification. As the needs of our clients have evolved, we have grouped our specialized engineering service capabilities across the following five verticals: ●infrastructure, engineering, and support services; ●construction quality assurance; ●program management; ●energy services; and ●environmental services. Historically, substantially all of our services were concentrated on the first two service sectors listed above. We believe, however, that our three newerservice offerings are becoming increasingly important to our business as we continue to grow through organic growth, crossselling opportunities and makingstrategic acquisitions. We identify operating segments at the subsidiary entity level. However, each entity’s operating performance has been aggregated into one reportablesegment. We operate our business through a network of 25 locations in California, Colorado, Florida, Pennsylvania, New Jersey, and Utah. All of our offices utilize ourshared services platform, which consists of human resources, marketing, finance, information technology, legal, and other resources at our corporate headquarters.Our shared services platform is intended to optimize the performance of our business as we increase our scale and scope. By maintaining a centralized, shared servicesplatform, we believe we can better manage our business, apply universal financial and operational controls and procedures, increase efficiencies, and drive lowercostsolutions. Our public sector clients include U.S. federal, state, municipal, and local governments; military and defense clients; and public agencies. We also serve quasipublic and private sector clients from the education, healthcare, energy, and utilities fields, including schools, universities, hospitals, health care providers, insuranceproviders, large utility service providers, and large and small energy producers. During our 60 years in the engineering and consulting business, we have worked with such clients and on such wellknown projects as (in alphabeticalorder): ● Atlantic City Tunnel Connection, NJ;● Miami International Airport, FL; ● Balboa Naval Hospital, CA● Miramar Marine Corps Air Station, CA; ● Borgata Hotel and Casino, NJ;● Mojave Water Agency, CA; ● Caldecott Tunnel, CA;● Peterson Air Force Base, CO; ● California Public Employees’ Retirement System, CA;● Port of Miami, Tunnel and Capital Improvement to Pier Wharfs, FL; ● Colorado Department of Transportation, CO;● San Diego Chargers Qualcomm Football Stadium, CA; 5 ● Colorado Rockies, Coors Field Baseball Stadium, CO;● San Diego Zoo and Wild Animal Park, CA; ● Equatorial Guinea LNG (Liquefied Natural Gas) Facility, Africa;● SeaWorld, San Diego, CA; ● Fort Irwin Military Housing, CA;● South Florida Water Management District, FL; and ● Fort Lauderdale Hollywood International Airport, FL;● Stanford University, CA. ● Los Angeles Community College, CA; Our current representative clients and project portfolio include (in alphabetical order): ● Broward County, FL;● Rose Bowl Stadium, CA; ● California Department of Transportation, or Caltrans, CA;● Rutgers University, NJ; ● City of Colorado Springs, CO;● San Diego Gas & Electric, CA; ● City of Sacramento, CA;● San Diego International Airport, CA; ● Contra Costa County, CA;● Santa Clara County Government, CA; ● Florida Power and Light, FL;● University of California San Diego, CA; ● Metropolitan Water District of Southern California, CA;● University of Miami, FL; ● MiamiDade County, FL;● University of Utah, UT; and ● Princeton University, NJ;● Utah Department of Transportation, UT. Our History We conduct our operations through two primary operating subsidiaries: (i) Nolte, which began operations in 1949 and was incorporated as a Californiacorporation in 1957, and (ii) NV5, which was incorporated as a Delaware corporation in 2009. In March 2010, NV5 acquired the construction quality assuranceoperations of Bureau Veritas North America. In August 2010, NV5 acquired a majority of the outstanding shares of Nolte and succeeded to substantially all of Nolte’sbusiness. In October 2011, NV5 and Nolte completed a reorganization transaction in which NV5 Holdings, Inc. was incorporated as a Delaware corporation, acquired allof the outstanding shares of NV5 and Nolte, and, as a result, became the holding company under which NV5 and Nolte conduct operations. 6 Recent Developments Initial public offering and warrant exercise. We completed the initial public offering of our units in April 2013. On September 27, 2013, the common stock andwarrants comprising the Company’s units began trading separately on Nasdaq under the symbols “NVEE” and “NVEEW”, respectively. In connection with theseparate trading of the common stock and warrants, the Company’s units ceased trading under the symbol “NVEEU” on the close of the markets on September 26,2013 and the units were delisted from Nasdaq. On September 27, 2013, the warrants became exercisable at an exercise price of $7.80 per share, except as provided below.The warrant exercise period expires on March 27, 2018 or earlier upon redemption. On September 27, 2013 and continuing until October 11, 2013 (the “Temporary Reduction Expiration Time”), we temporarily reduced the exercise price of all ofour outstanding public warrants from $7.80 per share to $6.00 per share. All such warrants properly exercised in accordance with their respective terms prior to theTemporary Reduction Expiration Time were accepted by the Company at the reduced $6.00 per share exercise price and one share of the Company’s registered commonstock per warrant was issued to the exercising warrant holder. After the Temporary Reduction Expiration Time, the exercise price of the public warrants automaticallyreverted to the warrant exercise price of $7.80 per share included in the original terms of the public warrants and the reduced exercise price was no longer in effect.Except for the reduced $6.00 per share exercise price of the warrants during the Temporary Reduction Expiration Time, the terms of the public warrants remainunchanged. During the Temporary Reduction Expiration Time, 1,196,471 public warrants, or approximately 74% of the outstanding public warrants, were exercised atthe reduced exercise price of $6.00 per share. The temporary reduction in the warrant exercise price generated net cash proceeds to the Company of approximately $6.6million after fees associated with the temporary reduction in the warrant exercise price. Acquisitions. One of our growth strategies is to focus on strategic acquisitions that enhance or expand our service offerings. For information on our recentacquisitions, please refer to the “Recent Acquisitions” section included under “Item 7. Management’s Discussion and Analysis of Financial Condition and Results ofOperations” of this Annual Report on Form 10K and such information is incorporated into this Item by reference. Subsidiary name changes. In January 2014, we changed the names of certain of our subsidiaries, all of which remained Delaware corporations, as follows: Current Subsidiary NameFormer Subsidiary Name NV5 Global, Inc.NV5, Inc. NV5, Inc.Vertical V Southeast, Inc. NV5 Northeast, Inc.Vertical V Northeast, Inc. NV5 West, Inc.Testing Engineers Southwest, Inc. Competitive Strengths We believe we have the following competitive strengths: Organizational structure that enhances client service. We operate our business using a vertical structure grouped by service offerings rather than thegeographybased structure utilized by many of our competitors. This structure ensures that clients engaging our services in any given sector, regardless of thelocation of the project, have access to the services of our most highly qualified professionals. Our most skilled engineers and professionals in each service sector workdirectly with the clients engaging those services, which facilitates relationshipbased interactions between our key employees and clients and assists in developinglongterm client relationships. In addition, this structure encourages an entrepreneurial spirit among our professionals. Expertise in local markets. To complement our vertical service model, we maintain a network of 25 locations on both the west and east coasts of the U.S.Each of our offices is staffed with quality professionals who understand the local and regional markets in which they serve. Our local professionals are allowed toconcentrate entirely on their local market client engagements while being supported by our shared services platform, under which we perform various back officefunctions on a centralized basis. Strong, longterm client relationships. Our combination of local market experience and professionals with expertise in multiple vertical service sectors hasenabled us to develop strong relationships with our core clients. Some of our professionals have worked with our key clients for decades. For example, we haveworked with San Diego Gas & Electric for over 30 years and are recognized as a preferred source of expertise by Princeton University and Caltrans. By serving as alongterm partner with our clients, we are able to gain a deep understanding of their overall business needs as well as the unique technical requirements of theirprojects. This increased understanding gives us the opportunity to provide superior value to our clients by allowing us to more fully assess and better manage therisks inherent in their projects. 7 Experienced, talented, and motivated employees. We employ seasoned professionals with a broad array of specialties and a strong customer serviceorientation. Our executive officers have an average of more than 20 years of operating and management experience in or supporting the engineering and consultingindustry and in analyzing potential acquisition transactions. We place a high priority on attracting, motivating and retaining top professionals to serve our clients, andour compensation system emphasizes the use of performancebased incentives, including opportunities for stock ownership, to achieve this objective. Industryrecognized quality of service. We believe that we have developed a strong reputation for quality service based upon our industryrecognized depthof experience, ability to attract and retain quality professionals, and expertise across multiple service sectors. During the past several years, we received many industrycertificates, awards, and national rankings, including: ● 2013 Environmental Business Journal Achievement Award inMergers & Acquisitions; ● Engineering NewsRecord Top 100 Construction ManagementforFee Firms (ranked by constructionspecific revenue); ● 2013/2012 Advisory Board at Harvard Graduate School of Design forSustainable Infrastructure; ● 2011 Sacramento Regional Transit District: Transit Oriented Designof the Year; and ● 2013/2012 Northwestern Kellogg Graduate School – Visiting Faculty; ● 2010 Engineering NewsRecord: Best of the Best GovernmentBuilding Award. ● 2011 Engineering NewsRecord Top 500 Design Firms (ranked bydesignspecific revenue); Growth Strategies We intend to pursue the following growth strategies as we seek to expand our market share and position ourselves as a preferred, singlesource provider ofprofessional and technical consulting and certification services to our clients: Seek strategic acquisitions to enhance or expand our services offerings. We seek acquisitions that allow us to expand or enhance our capabilities in ourexisting service offerings. In analyzing new acquisitions, we pursue opportunities that provide critical mass to function as a profitable standalone operation, aregeographically situated to be complementary to our existing operations, and profitable with strong potential for organic growth. We believe that expanding ourbusiness through strategic acquisitions will enable us to exploit economies of scale in the areas of finance, human resources, marketing, administration, informationtechnology, and legal, while also providing crossselling opportunities among our vertical service offerings. Continue to focus on public sector clients while building private sector client capabilities. We have historically derived the majority of our revenue frompublic and quasipublic sector clients. For the years ended December 31, 2013 and 2012, approximately 67% and 66%, respectively, of our gross revenues wereattributable to public and quasipublic sector clients. Even during unsteady economic periods, we have capitalized on public sector business opportunities resultingfrom outsourcing initiatives, continued efforts to address the challenges presented by the nation’s aging infrastructure system, and the need to provide solutions fortransportation, energy, water, and waste water requirements. However, we also seek to obtain additional clients in the private sector, which typically experiencesgreater growth during times of economic expansion, by networking, participating in certain organizations, and monitoring private project databases. We will continueto pursue private sector clients when such opportunities present themselves. We believe our ability to service the needs of both public and private sector clients givesus the flexibility to seek and obtain engagements regardless of the current economic conditions. Strengthen and support our human capital. Our experienced employees and management team are our most valuable resources. Attracting, training, andretaining key personnel have been and will remain critical to our success. To achieve our human capital goals, we intend to remain focused on providing our personnelwith entrepreneurial opportunities to increase client contact within their areas of expertise and to expand our business within our service offerings. We will alsocontinue to provide our personnel with training, personal and professional growth opportunities, performancebased incentives, including opportunities for stockownership, and other competitive benefits. 8 Description of Services Infrastructure, Engineering, and Support Services We provide our clients with a broad array of services in the area of infrastructure, engineering, and support services. We possess the professional andtechnical expertise necessary to design and manage clients’ infrastructure projects from start to finish. This integrated approach provides our clients with consistencyand accountability across the life of their projects and allows us to create value by maximizing efficiencies of scale. The specific infrastructure, engineering, and support services we offer fall into three phases of project development: Site selection. The site selection phase includes access assessment, parcel identification, easement descriptions, land use permitting, pipeline routinganalysis, site constraints analysis, surveying and mapping, and regulatory compliance. Design. The design phase includes road design, grading design, alignment design, laydown design, station pad design, storm drain design, storm watermanagement, water supply engineering, site planning and profile drawings, and construction cost estimating. Construction and program management. The construction and program management phase includes plan review, bid and award assessment, monitoringservices for active construction sites, scheduling assistance, drawing review, permit, approval and review processing, contractor, designer and agency coordination,cost control management, progress payment management, change order administration, compliance inspections, and evaluation of cost reduction methods. Our specialty areas within our infrastructure, engineering, and support service offering include: Water resources. We assist our clients with a variety of projects related to water supply and distribution (such as designing water treatment plants and pilottesting), water treatment (including designing and implementing water reclamation, recycling, and reuse projects), and wastewater engineering (including wastewaterfacility master planning and treatment, designing and implementing collection, treatment and disposal systems, and water quality investigations). Transportation. We provide our clients with services related to street and roadway construction (including alignment studies, roadway inspections, andtraffic control planning), the construction of highways, bridges and tunnels, and the development of rail and light rail systems. Structural engineering. From elaborate office and industrial facilities to major highway and railroad crossings to complex rail and light rail structures to avariety of water related facilities, our structural team provides design, inspection, rehabilitation, and seismic upgrade services that include structural analysis anddesign, plans, specifications and estimates, structural construction management, conceptual design studies, cost studies, seismic analysis, design and retrofit,structural evaluations, earthquake damage assessments, structural repair design, and regulatory agency permitting services. Land development. We assist our clients with many of the frontend challenges associated with private and public land development, including planning,public outreach, sustainability, flood control, drainage, and landscaping. Surveying. We are equipped to provide our clients with a full suite of traditional surveying techniques as well as cutting edge technology services, includinghighdefinition surveying services using threedimensional Light Detection and Ranging (LIDAR) point clouds. Our services can be used to determine current sitecondition, provide realtime infrastructure measuring and mapping, preserve historic sites, aide in forensic and accident investigations, determine volume calculations,and conduct surveys for project progress. Other services. Through our Geographic Information System services, we can provide clients with other ancillary services that include infrastructuremanagement, property management, asset inventory, landscape maintenance, webbased mapping services, land use analysis, terrain analysis and visualization,suitability and constraints analysis, hydrology analysis, biological, agricultural and cultural inventories, population and demographic analysis, shortest path analysis,street grid density, transportation accessibility analysis, watershed analysis, floodplain mapping, groundwater availability modeling, flood insurance studypreparation, risk and HAZUS mitigation assessment and analysis, mapping, data tracking, and data hosting. 9 Construction Quality Assurance We provide construction quality assurance services with respect to such diverse projects as professional sports stadiums, military facilities, cultural andperforming arts centers, airports, hotels, hospitals and health care facilities, fire stations, major public and private universities, and K12 school districts. We offer theseservices on an “a la carte” or integrated starttofinish basis that is intended to guide a client through each phase of a construction project. Our construction qualityassurance services generally include site inspections, audits, and evaluations of materials and workmanship necessary to determine and document the quality of theconstructed facility. Before a project commences, we offer our clients a variety of assessment services, including environmental, geotechnical, and structuralsuitability. We perform these preconstruction evaluations in order to help detect any potential problems with the proposed site that could prevent or complicate thesuccessful completion of the project. In addition, we evaluate the onsite building conditions and recommend the best methods and materials for site preparation,excavation, and building foundations. During development, we assist our clients in designing a comprehensive construction plan, including a summary of planned construction activities,sequence, critical path elements, interrelationships, durations, and terminations. Construction planning services may also include developing procedures for projectmanagement, the change order process, and technical records handling methodology to be employed. We offer inspection services for each phase of a project,including excavation, foundations, structural framing, mechanical heating and air conditioning systems, electrical systems, underground utilities, and building waterproofing systems. Where applicable, we employ additional methods to test materials and building quality. We maintain contact with our clients’ managers and, asissues are detected or anticipated, assist them in determining appropriate, costeffective solutions. We periodically provide construction progress inspections andassessment reports. When a project is complete, we prepare an evaluation report of the project and certify the inspections for the client. After construction, we offerperiodic building inspection services to ensure that the building is maintained in accordance with applicable building codes and other local ordinances to maximize thelife of the project. We also offer indoor environmental quality testing during this period. Our specialty areas within our construction quality assurance service offering include: Construction materials testing and engineering services. We provide materials testing services related to concrete, steel, and other structural materials usedin construction. We are equipped to provide these services in fabrication plants, in our laboratories, and at the project or construction site itself. Our field personnelwork directly under the supervision of licensed engineers and maintain individual licenses and certifications in their respective areas of expertise. All of our inhouselaboratories are inspected routinely by the Cement and Concrete Reference Laboratory (“CCRL”) of the National Institute of Standards and Measures. In addition, ourlaboratories participate in proficiency programs conducted by the CCRL and the American Association of State Highway & Transportation Officials. Geotechnical engineering and consulting services. We provide a wide variety of geotechnical engineering and consulting services. These services assistour clients to determine whether sites are suitable for proposed projects and to design foundation plans that are compatible with project site and use conditions. Wehave experienced geotechnical engineers, geologists, and earth scientists focused on providing services primarily in the southeast, northeast, and western regions ofthe U.S. Forensic consulting. In the event of damage to a structure by natural or manmade causes, our professional staff is qualified to provide forensic consultingand analysis as well as expert witness services. We provide a wide variety of forensic consulting services, including studies related water intrusion, building codecompliance, and claims involving insurance. Program Management We provide program management services, which primarily consist of providing a wide variety of governmental outsourcing services and consulting servicesthat assist organizations in complying with technical government regulations and industry standards. We offer a broad array of technical outsourcing services,including traffic studies, building code plan review, code enforcement, permitting and inspections, and the administration of public works projects, buildingdepartments, and safety departments. Our program management service is a not atrisk service, is performed under a unit price fee arrangement and not outcomebased. Program management also includes project administration, including bid and award assessment, monitoring services for active projects, schedulingassistance, drawing review, permit, approval and review processing, contractor, designer and agency coordination, cost control management, progress paymentmanagement, change order administration, compliance inspections, constructability review, as needed, and evaluation of cost reduction methods. 10 The trend towards increased privatization of U.S. federal, state, and local governmental services presents an opportunity for us in this service offering. Facedwith increased budgetary constraints and economic challenges, many governmental agencies are now seeking to outsource various services, including the running oftheir building departments. For building departments specifically, we typically provide a turnkey solution in exchange for a percentage of the building permit feescollected or a minimum monthly retainer. The governmental agency retains any overage without any overhead costs associated with the fee charged. Outsourcingprovides a positive source of revenue for us, while simultaneously increasing the efficiency and quality of service to the public. The governmental agency also gainsflexibility to control service levels without the challenges of government bureaucracy. Although we plan to grow our program management services organicallythrough the numerous contacts and client relationships we have with U.S. federal, state and local governments, tribal nations, and educational institutions, we are alsoactively pursuing acquisition opportunities that provide services in this sector. Energy Services Our energy services include the management of existing infrastructure assets as well as capital expenditure projects. Within energy services we provideinspection, program management and assistance in permitting in accordance with requirements of the Federal Energy Regulatory Commission. We also providetraditional engineering services for energy providers, including energy transmission and distribution; underground transmission and distribution; substationengineering; power generation facility design services and surveying. We assist major utilities and energy providers in assessing potential sites for a wide variety ofnew energy infrastructure projects, and operations and maintenance for existing energy infrastructure assets. Our services are provided to energy generation andtransmission clients for various types of energy source producers (i.e., natural gas, oil, coal and renewables). Environmental Services Our environmental services include occupational health, safety and environmental consulting and testing, which consists of investigating and analyzingenvironmental conditions both outside and inside a building, recommending corrective measures and procedures needed to comply with work place occupationalhealth and safety programs. Our occupational health and safety services include workplace safety audits, ergonomics studies, plans for emergency preparedness, andworkplace monitoring in regulated industries. We assist our clients with compliance of regulatory requirements and industrial air and water quality standards. Ourenvironmental services also include hydrogeological modeling and environmental programs that assist our public agencies and private industry clients withcompliance of state, federal, and local requirements for groundwater resource assessments; water resource planning, monitoring and environmental management ofwastewater facilities; solid waste landfill investigations; permitting and compliance; storm water pollution; environmental impact statement support; agricultural wastemanagement and permitting; and wetland evaluations. Strategic Acquisitions We maintain a fulltime merger and acquisitions (“M&A”) initiative with executive personnel specifically dedicated to identifying acquisition targets,exploring acquisition opportunities, negotiating terms, and overseeing the acquisition and postacquisition integration. From 1993 to the present, across various priorcompany employment, our M&A team has completed over 45 transactions in the engineering and consulting industry. Over the course of these transactions, ourM&A team has established extensive relationships throughout the industry and continues to maintain an established pipeline of potential acquisition opportunities. We seek acquisitions that allow us to expand or enhance our capabilities in our existing service offerings. In analyzing new acquisitions, we pursueopportunities that provide critical mass to function as a profitable standalone operation, are geographically situated to be complementary to our existing operations,and are profitable with strong potential for organic growth. Acquisition targets must include an experienced management team that is compatible with our culture andthoroughly committed to our strategic direction. We believe we add value to the operations of our acquisitions by providing superior corporate marketing and salessupport, cash management, financial controls, information technology, risk management and human resources support through a performance optimization process.Our performance optimization process, which was developed by our executives through their extensive experience in acquiring and integrating these types ofcompanies, entails a review of both back office and operational functions to, among other things, identify how to improve (i) inefficiencies related to the delivery of ourservices to customers, (ii) the performance of a new acquisition through the integration of personnel into our organization, (iii) the risk management of a newacquisition, (iv) the integration of technology and shared services platforms, and (v) crossselling opportunities to create synergies with in our service offerings. For information on our recent acquisitions, please refer to the “Recent Acquisitions” section included under “Item 7. Management’s Discussion and Analysisof Financial Condition and Results of Operations” of this Annual Report on Form 10K. 11 Key Clients and Projects We currently serve over 800 different clients. While our ten largest clients accounted for approximately 46% and 49% of our gross revenues during the yearsended December 31, 2013 and 2012, respectively, approximately 28% and 27% of gross revenues for the years ended December 31, 2013 and 2012, respectively, are fromtwo clients. Although we serve a highly diverse client base, for the years ended December 31, 2013 and 2012 approximately 67% and 66%, respectively, of our grossrevenues were attributable to public and quasipublic sector clients. In this regard, public sector clients include U.S. federal, state, and local government departments,agencies, systems, and authorities, including the U.S. Department of Defense, transportation agencies, educational systems, and public housing authorities, whilequasipublic sector clients include utility service providers, energy producers, and healthcare providers. Of our private sector clients, our largest clients arecontractors, construction engineering firms, and institutional property owners. Although we anticipate public and quasipublic sector clients to represent the majority of our revenues for the foreseeable future, we intend to continueexpanding our service offerings to private sector clients. Historically, public and quasipublic sector clients have demonstrated greater resilience during periods ofeconomic downturns, while private sector clients have offered higher gross profit margin opportunities during periods of economic expansion. Marketing and Sales We strive to position ourselves as a preferred, singlesource provider of professional and technical consulting and certification services to our clients. Weobtain client engagements primarily through business development efforts, crossselling of our services to existing clients, and maintaining client relationships, as wellas referrals from existing and former clients. Our business development efforts emphasize lead generation, industry group networking, and corporate visibility. Most of our business development effortsare led by members of our engineering and other professional teams, who are also responsible for managing projects. Our business development efforts are furthersupported by our shared services marketing group, which consists of a seasoned marketing team and marking support personnel located at our corporate headquartersas well as our operating units. As our service offerings become more expansive, we anticipate increasing our crossselling opportunities. Currently, we are often able to offer ourconstruction quality assurance services in conjunction with our infrastructure, engineering, and support services to the same clients. In our experience, there has been a recent trend in the engineering and consulting industry in which client relationships have shifted away from projectspecific engagements and toward longterm, multiproject relationships. This shift requires that service providers commit considerable resources toward maintainingclient relationships, including dedicating both technical and marketing resources tailored to the specific client’s needs. We are committed to maintaining our clientrelationships by, among other things, remaining responsive to our clients’ needs and continuing to offer a broad range of quality service offerings and value addedsolutions. Employees As of December 31, 2013, we had approximately 436 employees, including approximately 371 fulltime employees, which include approximately 126 licensedengineers and other professionals. We have been able to locate and engage highly qualified employees as needed and do not expect our growth efforts to beconstrained by a lack of qualified personnel. We consider our employee relations to be good. Backlog As of December 31, 2013, we had approximately $60.2 million of gross revenue backlog expected to be recognized over the next 12 months, compared to grossrevenue backlog of approximately $45 million as of December 31, 2012. We include in backlog only those contracts for which funding has been provided and workauthorizations have been received. We cannot guarantee that the revenue projected in our backlog will be realized in its entirety or, if realized, will result in profits. Inaddition, project cancellations or scope adjustments may occur, from time to time, with respect to contracts reflected in our backlog. For example, certain of ourcontracts with the U.S. federal government and other clients are terminable at the discretion of the client, with or without cause. These types of backlog reductionscould adversely affect our revenue and margins. Accordingly, our backlog as of any particular date is an uncertain indicator of our future earnings. Most of our government contracts are multiyear contracts for which funding is appropriated on an annual basis. With respect to such government contracts,our backlog includes only those amounts that have been funded and authorized and does not reflect the full amounts we may receive over the term of such contracts.In the case of nongovernment contracts, our backlog includes future revenue at contract rates, excluding contract renewals or extensions that are at the discretion ofthe client. For contracts with a nottoexceed maximum amount, we include revenue from such contracts in backlog to the extent of the remaining estimated amount. Wecalculate backlog without regard to possible project reductions or expansions or potential cancellations until such changes or cancellations occur. 12 Backlog is expressed in terms of gross revenue and, therefore, may include significant estimated amounts of thirdparty or passthrough costs tosubcontractors and other parties. Moreover, our backlog for the period beyond 12 months may be subject to variations from yeartoyear as existing contracts arecompleted, delayed, or renewed or new contracts are awarded, delayed, or cancelled. As a result, we believe that yeartoyear comparisons of the portion of backlogexpected to be performed more than one year in the future are difficult to assess and not necessarily indicative of future revenues or profitability. Because backlog isnot a defined accounting term, our computation of backlog may not necessarily be comparable to that of our industry peers. Competition We believe that the engineering and consulting industry is highly fragmented, characterized by many smallscale companies that focus their operations onregional markets or specialized niche activities. As a result, we compete with a large number of regional, national, and global companies. Certain of these competitorshave broader service offerings and greater financial and other resources than we do. Others are smaller, more specialized, and concentrate their resources in particularareas of expertise. The extent of our competition varies according to the particular markets and geographic area. The degree and type of competition we face is alsoinfluenced by the type and scope of a particular project. We believe the providers of engineering and consulting services primarily compete on the quality of service, relevant experience, staffing capabilities,reputation, geographic presence, stability, and price. Price differentiation remains an important element in competitive tendering and is the most significant factor inbidding for public sector consultancy contracts. The importance of the foregoing factors varies widely based upon the nature, location, and size of the project. Webelieve that certain economies of scale can be realized by service providers that establish a national reputation for providing engineering and consulting services in allfive of the service verticals in which we do business. Since the demand for engineering and consulting services within each service offering is viewed as onlymoderately correlated with the demand for services within the other service offerings, we are of the view that engineering and consulting firms can benefitconsiderably from diversified service offerings. The number of competitors for any procurement can vary widely, depending upon technical qualifications, the relative value of the project, geographiclocation, the financial terms, the risks associated with the work, and any restrictions placed upon competition by the client. Our ability to compete successfully willdepend upon the effectiveness of our marketing efforts, the strength of our client relationships, our ability to accurately estimate costs, the quality of the work weperform, our ability to hire and train qualified personnel, and our ability to obtain insurance. We believe our principal competitors include the following firms (in alphabetical order): AECOM Technology Corporation (NYSE: ACM), AMEC plc (LSE:AMEC), Bureau Veritas (PAR: BVI), Intertek Group plc (LSE:ITRK), Jacobs Engineering Group Inc. (NYSE: JEC), Kleinfelder & Associates, Professional ServiceIndustries, Inc., Terracon Consultants, Inc., Tetra Tech, Inc. (NASDAQ: TTEK), TRC Companies, Inc. (NYSE: TRR), URS Corporation (NYSE: URS), Willdan Group(NASDAQ: WLDN), and WS Atkins plc (LSE:ATK). Seasonality Due primarily to inclement weather conditions, which lead to project delays and slower completion of contracts, and a higher number of holidays, ouroperating results during the months of December, January, and February are generally lower than our operating results during other months. As a result, our grossrevenues and net income for the first and fourth quarters of a fiscal year may be lower than our results for the second and third quarters of a fiscal year. Insurance and Risk Management We maintain insurance covering professional liability and claims involving bodily injury, property and economic loss. We consider our present limits ofcoverage, deductibles, and reserves to be adequate. Wherever possible, we endeavor to eliminate or reduce the risk of loss on a project through the use of qualityassurance and control, risk management, workplace safety, and other similar methods. 13 Risk management is an integral part of our project management approach for fixedprice contracts and our project execution process. We have a riskmanagement process group that reviews and oversees the risk profile of our operations. We also evaluate risk through internal risk analyses in which our managementreviews higherrisk projects, contracts, or other business decisions that require corporate legal and risk management approval. Regulation We are regulated in a number of fields in which we operate. We contract with various U.S. governmental agencies and entities. When working with U.S.governmental agencies and entities, we must comply with laws and regulations relating to the formation, administration, and performance of contracts. These laws andregulations contain terms that, among other things: ●require certification and disclosure of all costs or pricing data in connection with various contract negotiations; ●impose procurement regulations that define allowable and unallowable costs and otherwise govern our right to reimbursement under various costbased U.S. government contracts; and ●restrict the use and dissemination of information classified for national security purposes and the exportation of certain products and technical data. Internationally, we are subject to various government laws and regulations (including the Foreign Corrupt Practices Act (“FCPA”) and similar nonU.S. lawsand regulations), local government regulations, procurement policies and practices, and varying currency, political, and economic risks. To help ensure compliance with these laws and regulations, our employees are sometimes required to complete tailored ethics and other compliance trainingrelevant to their position and our operations. Access to Information Our Internet address is www.nv5.com. We make available at this address, free of charge, our Annual Reports on Form 10K, Quarterly Reports on Form 10Q,Current Reports on Form 8K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, as soon as reasonablypracticable after we electronically file such material with, or furnish it to, the SEC. In this Annual Report on Form 10K, we incorporate by reference as identified hereincertain information from parts of our proxy statement for our 2014 Annual Meeting of Stockholders, which we will file with the SEC and will be available, free of charge,on our website. Reports of our executive officers, directors and any other persons required to file securities ownership reports under Section 16(a) of the Exchange Actare also available through our website. Information contained on our website is not part of this Annual Report on Form 10K. You may also read and copy any materials we file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. You mayobtain information on the operation of the Public Reference Room by calling the SEC at 1800SEC0330. The SEC also maintains an Internet website located athttp://www.sec.gov that contains the information we file or furnish electronically with the SEC. 14 ITEM 1A. RISK FACTORS. We operate in a changing environment that involves numerous known and unknown risks and uncertainties that could materially adversely affect ouroperations. The risks described below highlight some of the factors that have affected, and in the future could affect our operations and financial condition.Additional risks we do not yet know of or that we currently think are immaterial may also affect our business operations. If any of the events or circumstancesdescribed in the following risks actually occur, our business, financial condition or results of operations could be materially adversely affected. The loss of key personnel or our inability to attract and retain qualified personnel could significantly disrupt our business. As a professional and technical engineering and consulting solutions provider, our business is labor intensive and, therefore, our ability to attract, retain,and expand our senior management, sales personnel, and professional and technical staff is an important factor in determining our future success. The market forqualified scientists, engineers, and sales personnel is competitive and we may not be able to attract and retain such professionals. It may also be difficult to attractand retain qualified individuals in the timeframe demanded by our clients. Furthermore, some of our government contracts may require us to employ only individualswho have particular government security clearance levels. Our failure to attract and retain key individuals could impair our ability to provide services to our clientsand conduct our business effectively. In addition, with the exception of certain of our executive officers, we do not have employment agreements with any of ouremployees. The loss of the services of any key personnel could adversely affect our business. We do not maintain keyman life insurance policies on any of ourexecutive officers. We depend on the continued services of Mr. Dickerson Wright, our Chairman, Chief Executive Officer, and President. We cannot assure you that we will beable to retain the services Mr. Wright. We are dependent upon the efforts and services of Mr. Dickerson Wright, our Chairman, Chief Executive Officer, and President, because of his knowledge,experience, skills, and relationships with major clients and other members of our management team. The loss of the services of Mr. Wright for any reason could havean adverse effect on our operations. Demand from our state and local government and private clients is cyclical and vulnerable to economic downturns. If the economy weakens or client spendingdeclines further, then our revenue, profits, and financial condition may deteriorate. Demand for services from our state and local government and private clients is cyclical and vulnerable to economic downturns, which may result in clientsdelaying, curtailing, or canceling proposed and existing projects. Our business traditionally lags the overall recovery in the economy. Therefore, our business maynot recover immediately when the economy improves. If the economy remains weak or client spending declines further, then our revenue, profits, and overallfinancial condition may deteriorate. Our state and local government clients may face budget deficits that prohibit them from funding new or existing projects. Inaddition, our existing and potential clients may either postpone entering into new contracts or request price concessions. Difficult financing and economicconditions may cause some of our clients to demand better pricing terms or delay payments for services we perform, thereby increasing the average number of daysour receivables are outstanding and the potential of increased credit losses on uncollectible invoices. Further, these conditions may result in the inability of some ofour clients to pay us for services that we have already performed. If we are not able to reduce our costs quickly enough to respond to the revenue decline from theseclients, our operating results may be adversely affected. Accordingly, these factors affect our ability to forecast our future revenue and earnings from business areasthat may be adversely impacted by market conditions. Our operating results may be adversely impacted by worldwide economic uncertainties and specific conditions in the markets we address. Over the past several years, the general worldwide economy has experienced a downturn due, at various times, to the lack of available credit, slowereconomic activity, concerns about inflation and deflation, increased energy costs, decreased consumer confidence, reduced corporate profits and capital spending,and adverse business conditions. These conditions make it extremely difficult for our clients and vendors to accurately forecast future business activities, whichcould cause businesses to slow spending on services. Such conditions have also made it very difficult for us to predict the shortterm and longterm impacts on ourbusiness. We cannot predict the timing, strength or duration of any economic slowdown or subsequent economic recovery worldwide or in our industry, and anysuch economic slowdown could have any adverse effect on our results of operations. 15 Our revenue, expenses, and operating results may fluctuate significantly. Our revenue, expenses, and operating results may fluctuate significantly because of numerous factors, some of which may contribute to more pronouncedfluctuations in an uncertain global economic environment. In addition to the other risks described in this “Risk Factors” section, the following factors could causeour operating results to fluctuate: ●delays, increased costs, or other unanticipated changes in contract performance that may affect profitability, particularly with contracts that arefixedprice or have funding limits; ●seasonality of the spending cycle of our public sector clients, notably the U.S. federal government, the spending patterns of our private sectorclients, and weather conditions; ●budget constraints experienced by our federal, state, and local government clients; ●our ability to integrate any companies that we acquire; ●the number and significance of client contracts commenced and completed during a quarter; ●the continuing creditworthiness and solvency of clients; ●reductions in the prices of services offered by our competitors; and ●legislative and regulatory enforcement policy changes that may affect demand for our services. As a consequence, operating results for a particular future period are difficult to predict and, therefore, prior results are not necessarily indicative of resultsto be expected in future periods. Any of the foregoing factors, or any other factors discussed elsewhere herein, could have a material adverse effect on our business,results of operations and financial condition that could adversely affect our stock price. We derive a majority of our gross revenues from government agencies, and any disruption in government funding or in our relationship with those agenciescould adversely affect our business. For the years ended December 31, 2013 and 2012, approximately 67% and 66%, respectively, of our gross revenues were attributable to public and quasipublic sector clients, of which approximately 81% and 84% for the years ended December 31, 2013 and 2012, respectively, were attributable to public and quasipublicsector clients in California. A significant amount of our revenues are derived under multiyear contracts, many of which are appropriated on an annual basis. As aresult, at the beginning of a project, the related contract may be only partially funded, and additional funding is normally committed only as appropriations are madein each subsequent year. These appropriations, and the timing of payment of appropriated amounts, may be influenced by numerous factors as noted below. Ourbacklog includes only the projects that have had funding appropriated. The demand for our governmentrelated services is generally driven by the level of government program funding. Accordingly, the success and furtherdevelopment of our business depends, in large part, upon the continued funding of these government programs, and upon our ability to obtain contracts andperform well under these programs. There are several factors that could materially affect our government contracting business, including the following: ●uncertainty surrounding how any remaining funds are being distributed under the American Recovery and Reinvestment Act of 2009 (“ARRA”)and into what governmental areas such funds are being used, and how much funding may remain available; ●changes in and delays or cancellations of government programs, requirements, or appropriations; ●budget constraints or policy changes resulting in delay or curtailment of expenditures related to the services we provide; ●recompetes of government contracts; 16 ●the timing and amount of tax revenue received by federal, state, and local governments, and the overall level of government expenditures; ●curtailment in the use of government contracting firms; ●delays associated with insufficient numbers of government staff to oversee contracts; ●the increasing preference by government agencies for contracting with small and disadvantaged businesses, including the imposition of setpercentages of prime and subcontracts to be awarded to such businesses for which we would not qualify; ●competing political priorities and changes in the political climate with regard to the funding or operation of the services we provide; ●the adoption of new laws or regulations affecting our contracting relationships with the federal, state, or local governments; ●a dispute with, or improper activity by, any of our subcontractors; and ●general economic or political conditions. These and other factors could cause government agencies to delay or cancel programs, to reduce their orders under existing contracts, to exercise theirrights to terminate contracts, or not to exercise contract options for renewals or extensions. Any of these actions could have a material adverse effect on our revenueor timing of contract payments from these agencies. Each year, client funding for some of our government contracts may rely on government appropriations or publicsupported financing. If adequate publicfunding is delayed or is not available, then our profits and revenue could decline. Each year, client funding for some of our government contracts may directly or indirectly rely on government appropriations or publicsupported financingsuch as the ARRA. It is possible that such appropriated funding will never be allocated to projects that represent opportunities for us to the extent that weanticipate, if at all. Legislatures may appropriate funds for a given project on a yearbyyear basis, even though the project may take more than one year to perform.In addition, publicsupported financing such as state and local municipal bonds may be only partially raised to support existing projects. Public funds and the timingof payment of these funds may be influenced by, among other things, the state of the economy, competing political priorities, curtailments in the use of governmentcontracting firms, increases in raw material costs, delays associated with insufficient numbers of government staff to oversee contracts, budget constraints, thetiming and amount of tax receipts, and the overall level of government expenditures. If adequate public funding is not available or is delayed, then our profits andrevenue could decline. A delay in the completion of the budget process of the U.S. government could delay procurement of our services and have an adverse effect on our futurerevenue. When the U.S. government does not complete its budget process before its fiscal yearend on September 30 in any year, government operations aretypically funded by means of a continuing resolution. Under a continuing resolution, the government essentially authorizes agencies of the U.S. government tocontinue to operate and fund programs at the prior year end but does not authorize new spending initiatives. When the U.S. government operates under a continuingresolution, government agencies may delay the procurement of services, which could reduce our future revenue. California state budgetary constraints may have a material adverse impact on us. The state of California has experienced, and is continuing to experience, a significant budget shortfall and other related budgetary issues and constraints.The state of California has historically been and is considered to be a key geographic region for our business, as approximately 65% and 74% of our gross revenuesfor the years ended December 31, 2013 and 2012, respectively, came from Californiabased projects. Ongoing uncertainty as to the timing and accessibility ofbudgetary funding, changes in state funding allocations to local agencies and municipalities, or other delays in purchasing for, or commencement of, projects havehad and may continue to have a negative impact on our gross revenues and net income. 17 Governmental agencies may modify, curtail, or terminate our contracts at any time prior to their completion and, if we do not replace them, we may suffer adecline in revenue. Most government contracts may be modified, curtailed, or terminated by the government either at its discretion or upon the default of the contractor. If thegovernment terminates a contract at its discretion, then we typically are able to recover only costs incurred or committed, settlement expenses, and profit on workcompleted prior to termination, which could prevent us from recognizing all of our potential revenue and profits from that contract. In addition, the U.S. governmenthas announced its intention to scale back outsourcing of services in favor of “insourcing” jobs to its employees, which could reduce the number of contractsawarded to us. The adoption of similar practices by other government entities could also adversely affect our revenues. If a government terminates a contract due toour default, we could be liable for excess costs incurred by the government in obtaining services from another source. Our failure to win new contracts and renew existing contracts with private and public sector clients could adversely affect our profitability. Our business depends on our ability to win new contracts and renew existing contracts with private and public sector clients. Contract proposals andnegotiations are complex and frequently involve a lengthy bidding and selection process, which is affected by a number of factors. These factors include marketconditions, financing arrangements, and required governmental approvals. For example, a client may require us to provide a bond or letter of credit to protect theclient should we fail to perform under the terms of the contract. If negative market conditions arise, or if we fail to secure adequate financial arrangements or therequired government approval, we may not be able to pursue particular projects, which could adversely affect our profitability. Our inability to win or renew government contracts during regulated procurement processes or preferences granted to certain bidders for which we would notqualify could harm our operations and significantly reduce or eliminate our profits. Government contracts are awarded through a regulated procurement process. The U.S. federal government has increasingly relied upon multiyear contractswith preestablished terms and conditions, such as indefinite delivery/indefinite quantity (“IDIQ”) contracts, which generally require those contractors who havepreviously been awarded the IDIQ to engage in an additional competitive bidding process before a task order is issued. The increased competition, in turn, mayrequire us to make sustained efforts to reduce costs in order to realize revenue and profits under government contracts. If we are not successful in reducing theamount of costs we incur, our profitability on government contracts will be negatively impacted. The U.S. federal government has also increased its use of IDIQs inwhich the client qualifies multiple contractors for a specific program and then awards specific task orders or projects among the qualified contractors. As a result,new work awards tend to be smaller and of shorter duration, since the orders represent individual tasks rather than large, programmatic assignments. In addition, theU.S. government has announced its intention to scale back outsourcing of services in favor of “insourcing” jobs to its employees, which could reduce our revenue.Moreover, even if we are qualified to work on a government contract, we may not be awarded the contract because of existing government policies designed toprotect small businesses and underrepresented minority contractors, which would not apply to us. The federal government has announced specific statutory goalsregarding awarding prime and subcontracts to small businesses, womenowned small businesses, and small disadvantaged businesses, with the result that we maybe obligated to involve such businesses as subcontractors with respect to these contracts at lower margins than when we use our own professionals. While we areunaware of any reason why our status as a public company would negatively impact our ability to compete for and be awarded government contracts, our inability towin or renew government contracts during regulated procurement processes or as a result of the policies pursuant to which these processes are implemented couldharm our operations and significantly reduce or eliminate our profits. If we fail to complete a project in a timely manner, miss a required performance standard, or otherwise fail to adequately perform on a project, then we mayincur a loss on that project, which may reduce or eliminate our overall profitability. Our engagements often involve largescale, complex projects. The quality of our performance on such projects depends in large part upon our ability tomanage the relationship with our clients and our ability to effectively manage the project and deploy appropriate resources, including thirdparty contractors and ourown personnel, in a timely manner. We may commit to a client that we will complete a project by a scheduled date. We may also commit that a project, whencompleted, will achieve specified performance standards. If the project is not completed by the scheduled date or fails to meet required performance standards, wemay either incur significant additional costs or be held responsible for the costs incurred by the client to rectify damages due to late completion or failure to achievethe required performance standards. The uncertainty of the timing of a project can present difficulties in planning the amount of personnel needed for the project. Ifthe project is delayed or canceled, we may bear the cost of an underutilized workforce that was dedicated to fulfilling the project. In addition, performance of projectscan be affected by a number of factors beyond our control, including unavoidable delays from government inaction, public opposition, inability to obtain financing,weather conditions, unavailability of vendor materials, changes in the project scope of services requested by our clients, industrial accidents, environmental hazards,labor disruptions, and other factors. To the extent these events occur, the total costs of the project could exceed our estimates and we could experience reducedprofits or, in some cases, incur a loss on a project, which may reduce or eliminate our overall profitability. Further, any defects or errors, or failures to meet our clients’expectations, could result in claims for damages against us. Our contracts generally limit our liability for damages that arise from negligent acts, errors, mistakes, oromissions in rendering services to our clients. However, we cannot be sure that these contractual provisions will protect us from liability for damages in the event weare sued. 18 We depend on a limited number of clients for a significant portion of our business. Our ten largest clients accounted for approximately 46% and 49% of our consolidated revenue in for the years ended December 31, 2013 and 2012,respectively, whereby two clients represents approximately 28% and 27% of our gross revenue for the years ended December 31, 2013 and 2012, respectively. Theloss of, or reduction in orders from, these clients could have a material adverse effect on our business, financial condition, and results of operations. We have made and expect to continue to make acquisitions that could disrupt our operations and adversely impact our business and operating results. Ourability to successfully integrate acquisitions could impede us from realizing all of the benefits of the acquisitions, which could weaken our results of operations. A key part of our growth strategy is to acquire other companies that complement our service offerings or broaden our technical capabilities and geographicpresence. Acquisitions involve certain known and unknown risks that could cause our actual growth or operating results to differ from our expectations or theexpectations of securities analysts. For example: ●we may not be able to identify suitable acquisition candidates or acquire additional companies on acceptable terms; ●we may pursue international acquisitions, which inherently pose more risk than domestic acquisitions; ●we compete with others to acquire companies, which may result in decreased availability of, or increased price for, suitable acquisitioncandidates; ●we may not be able to obtain the necessary financing on favorable terms, or at all, to finance any of our potential acquisitions; ●we may ultimately fail to consummate an acquisition even if we announce that we plan to acquire a company; and ●acquired companies may not perform as we expect, and we may fail to realize anticipated revenue and profits. In addition, our acquisition strategy may divert management’s attention away from our existing businesses, resulting in the loss of key clients or keyemployees, and expose us to unanticipated problems or legal liabilities, including responsibility as a successorininterest for undisclosed or contingent liabilities ofacquired businesses or assets. If we are not able to integrate acquired businesses successfully, our business could be harmed. Our inability to successfully integrate future acquisitions could impede us from realizing all of the benefits of those acquisitions and could severely weakenour business operations. The integration process may disrupt our business and, if implemented ineffectively, may preclude realization of the full benefits expected byus and could harm our results of operations. In addition, the overall integration of the combining companies may result in unanticipated problems, expenses,liabilities, and competitive responses, and may cause our stock price to decline. The difficulties of integrating an acquisition include, among others: ●unanticipated issues in integration of information, communications, and other systems; 19 ●unanticipated incompatibility of logistics, marketing, and administration methods; ●maintaining employee morale and retaining key employees; ●integrating the business cultures of both companies; ●preserving important strategic client relationships; ●consolidating corporate and administrative infrastructures and eliminating duplicative operations; and ●coordinating geographically separate organizations. In addition, even if the operations of an acquisition are integrated successfully, we may not realize the full benefits of the acquisition, including thesynergies, cost savings, or growth opportunities that we expect. These benefits may not be achieved within the anticipated time frame, or at all. Further, acquisitions may also cause us to: ●issue securities that would dilute our current stockholders’ ownership percentage; ●use a substantial portion of our cash resources; ●increase our interest expense, leverage, and debt service requirements if we incur additional debt to pay for an acquisition; ●assume liabilities, including environmental liabilities, for which we do not have indemnification from the former owners, as was the case in ouracquisition of Nolte, or have indemnification that may be subject to dispute or concerns regarding the creditworthiness of the former owners; ●record goodwill and nonamortizable intangible assets that are subject to impairment testing on a regular basis and potential impairment charges; ●experience volatility in earnings due to changes in contingent consideration related to acquisition liability estimates; ●incur amortization expenses related to certain intangible assets; ●lose existing or potential contracts as a result of conflict of interest issues; ●incur large and immediate writeoffs; or ●become subject to litigation. Finally, acquired companies that derive a significant portion of their revenue from the U.S. federal government and that do not follow the same costaccounting policies and billing practices that we follow may be subject to larger cost disallowances for greater periods than we typically encounter. If we fail todetermine the existence of unallowable costs and do not establish appropriate reserves in advance of an acquisition, we may be exposed to material unanticipatedliabilities, which could have a material adverse effect on our business. If we are not able to successfully manage our growth strategy, our business and results of operations may be adversely affected. Our expected future growth presents numerous managerial, administrative, operational, and other challenges. Our ability to manage the growth of ouroperations will require us to continue to improve our management information systems and our other internal systems and controls. In addition, our growth willincrease our need to attract, develop, motivate, and retain both our management and professional employees. The inability of our management to effectively manageour growth or the inability of our employees to achieve anticipated performance could have a material adverse effect on our business. Our ability to raise capital in the future may be limited, and our failure to raise capital when needed could prevent us from achieving our growth objectives. We may in the future be required to raise capital through public or private financing or other arrangements. Such financing may not be available onacceptable terms, or at all, and our failure to raise capital when needed could harm our business. Additional equity financing may dilute the interests of ourstockholders, and debt financing, if available, may involve restrictive covenants and could reduce our profitability. If we cannot raise funds on acceptable terms, wemay not be able to grow our business or respond to competitive pressures. 20 Our industry is highly competitive, and we may not be able to compete effectively with competitors. Our industry is highly fragmented and intensely competitive. Our competitors are numerous, ranging from small private firms to multibillion dollar publiccompanies. Contract awards are based primarily on quality of service, relevant experience, staffing capabilities, reputation, geographic presence, stability, and price.In addition, the technical and professional aspects of our services generally do not require large upfront capital expenditures and provide limited barriers against newcompetitors. Many of our competitors have achieved greater market penetration in some of the markets in which we compete and have more personnel, technical,marketing, and financial resources or financial flexibility than we do. As a result of the number of competitors in the industry, our clients may select one of ourcompetitors on a project due to competitive pricing or a specific skill set. These competitive forces could force us to make price concessions or otherwise reduceprices for our services. If we are unable to maintain our competitiveness, our market share, revenue, and profits could decline. Our business and operating results could be adversely affected by losses under fixedprice contracts. Fixedprice contracts require us to either perform all work under the contract for a specified lump sum or to perform an estimated number of units of work atan agreed price per unit, with the total payment determined by the actual number of units performed. For the years ended December 31, 2013 and 2012, approximately11% and 7%, respectively, of our revenue was recognized under fixedprice contracts. Fixedprice contracts expose us to a number of risks not inherent in costplusand time and material contracts, including underestimation of costs, ambiguities in specifications, unforeseen costs or difficulties, problems with new technologies,delays beyond our control, failures of subcontractors to perform, and economic or other changes that may occur during the contract period. Losses under fixedpricecontracts could be substantial and adversely impact our results of operations. If our clients delay in paying or fail to pay amounts owed to us, it could have a material adverse effect on our liquidity, results of operations, and financialcondition. Accounts receivable represent the largest asset on our balance sheet. While we take steps to evaluate and manage the credit risks relating to our clients,economic downturns or other events can adversely affect the markets we serve and our clients ability to pay, which could reduce our ability to collect all amountsdue from clients. If our clients delay in paying or fail to pay us a significant amount of our outstanding receivables, it could have a material adverse effect on ourliquidity, results of operations, and financial condition. If we extend a significant portion of our credit to clients in a specific geographic area or industry, we may experience disproportionately high levels ofcollection risk and nonpayment if those clients are adversely affected by factors particular to their geographic area or industry. Our clients include public and private entities that have been, and may continue to be, negatively impacted by the changing landscape in the globaleconomy. We face collection risk as a normal part of our business where we perform services and subsequently bill our clients for such services. For the years endedDecember 31, 2013 and 2012, approximately 28% and 27% of gross revenues are from two clients. In the event that we have concentrated credit risk from clients in aspecific geographic area or industry, continuing negative trends or a worsening in the financial condition of that specific geographic area or industry could make ussusceptible to disproportionately high levels of default by those clients. Such defaults could materially adversely impact our ability to collect our receivables and,ultimately, our revenues and results of operations. 21 As a government contractor, we must comply with various procurement laws and regulations and are subject to regular government audits. A violation of anyof these laws and regulations or the failure to pass a government audit could result in sanctions, contract termination, forfeiture of profit, harm to ourreputation or loss of our status as an eligible government contractor and could reduce our profits and revenue. We must comply with and are affected by U.S. federal, state, local, and foreign laws and regulations relating to the formation, administration, andperformance of government contracts. For example, we must comply with defectivepricing clauses found within the Federal Acquisition Regulation (“FAR”), theTruth in Negotiations Act, Cost Accounting Standards (“CAS”), the ARRA, the Services Contract Act, and the U.S. Department of Defense security regulations, aswell as many other rules and regulations. In addition, we must also comply with other government regulations related to employment practices, environmentalprotection, health and safety, tax, accounting, and antifraud measures, as well as many others regulations in order to maintain our government contractor status.These laws and regulations affect how we do business with our clients and, in some instances, impose additional costs on our business operations. Although wetake precautions to prevent and deter fraud, misconduct, and noncompliance, we face the risk that our employees or outside partners may engage in misconduct,fraud, or other improper activities. Government agencies routinely audit and investigate government contractors. These government agencies review and audit agovernment contractor’s performance under its contracts and cost structure and evaluate compliance with applicable laws, regulations, and standards. In addition,during the course of its audits, such agencies may question our incurred project costs. If such agencies believe we have accounted for such costs in a mannerinconsistent with the requirements for FAR or CAS, the agency auditor may recommend to our U.S. government corporate administrative contracting officer that itdisallow such costs. Historically, we have not experienced significant disallowed costs as a result of government audits. However, we can provide no assurance thatsuch government audits will not result in a material disallowance for incurred costs in the future. In addition, government contracts are subject to a variety of otherrequirements relating to the formation, administration, performance and accounting for these contracts. We may also be subject to qui tam litigation brought byprivate individuals on behalf of the government under the Federal Civil False Claims Act, which could include claims for treble damages. Government contractviolations could result in the imposition of civil and criminal penalties or sanctions, contract termination, forfeiture of profit, or suspension of payment, any of whichcould make us lose our status as an eligible government contractor. We could also suffer serious harm to our reputation. Any interruption or termination of ourgovernment contractor status could reduce our profits and revenue significantly. State and other public employee unions may bring litigation that seeks to limit the ability of public agencies to contract with private firms to performgovernment employee functions in the area of public improvements. Judicial determinations in favor of these unions could affect our ability to compete forcontracts and may have an adverse effect on our revenue and profitability. Over at least the last 20 years, state and other public employee unions have challenged the validity of propositions, legislation, charters, and othergovernment regulations that allow public agencies to contract with private firms to provide services in the fields of engineering, design, and construction of publicimprovements that might otherwise be provided by public employees. These challenges could have the affect of eliminating or severely restricting the ability ofmunicipalities to hire private firms for the purpose of designing and constructing public improvements, and otherwise require them to use union employees toperform the services. If a state or other public employee union is successful in its challenge and as a result the ability of state agencies to hire private firms isseverely limited, such a decision would likely lead to additional litigation challenging the ability of the state, counties, municipalities, and other public agencies tohire private engineering, architectural, and other firms, the outcome of which could affect our ability to compete for contracts and may have an adverse effect on ourrevenue and profitability. Our use of the percentageofcompletion method of revenue recognition could result in a reduction or reversal of previously recorded revenue and profits. We account for some of our contracts on the percentageofcompletion method of revenue recognition. These contracts accounted for approximately 11%and 7% of our revenue for the years ended December 31, 2013 and 2012, respectively. Generally, our use of this method results in recognition of revenue and profitratably over the life of the contract based on the proportion of costs incurred to date to total costs expected to be incurred for the entire project. The effects ofrevisions to revenue and estimated costs, including the achievement of award fees as well as the impact of change orders and claims, are recorded when the amountsare known and can be reasonably estimated. Such revisions could occur in any period and their effects could be material. Although we have historically madereasonably reliable estimates of the progress towards completion of longterm contracts, the uncertainties inherent in the estimating process make it possible foractual costs to vary materially from estimates, including reductions or reversals of previously recorded revenue and profit. 22 Our actual business and financial results could differ from the estimates and assumptions that we use to prepare our financial statements, which maysignificantly reduce or eliminate our profits. To prepare financial statements in conformity with generally accepted accounting principles in the U.S. (“GAAP”), management is required to makeestimates and assumptions as of the date of the financial statements. These estimates and assumptions could affect the reported values of assets, liabilities, revenue,and expenses as well as disclosures of contingent assets and liabilities. For example, we recognize revenue over the life of a contract based on the proportion ofcosts incurred to date compared to the total costs estimated to be incurred for the entire project. Areas requiring significant estimates by our management include: ●the application of the percentageofcompletion method of accounting and revenue recognition on contracts, change orders, and contract claims; ●provisions for uncollectible receivables and client claims and recoveries of costs from subcontractors, vendors, and others; ●provisions for income taxes, research, and experimentation credits and related valuation allowances; ●value of goodwill and recoverability of other intangible assets; ●valuations of assets acquired and liabilities assumed in connection with business combinations; ●valuation of stockbased compensation expense; and ●accruals for estimated liabilities, including litigation and insurance reserves. Our actual business and financial results could differ from those estimates, which may significantly reduce or eliminate our profits. If we fail to maintain an effective system of internal controls, we may not be able to accurately report our financial results or prevent fraud. As a result,current and potential stockholders could lose confidence in our financial reporting, which would harm our business and the trading price of our securities. Management continues to review and assess our internal controls to ensure we have adequate internal financial and accounting controls. Failure tomaintain new or improved controls, or any difficulties we encounter in their implementation, could result in material weaknesses, and cause us to fail to meet ourperiodic reporting obligations or result in material misstatements in our financial statements. Any such failure could also adversely affect the results of periodicmanagement evaluations (and, once we no longer qualify as an “emerging growth company” under the JOBS Act or a “smaller reporting company” as defined underrelated SEC rules, annual audit attestation reports) regarding the effectiveness of our internal control over financial reporting that will be required under Section 404of the SarbanesOxley Act of 2002 (the “SarbanesOxley Act”) with respect to annual reports that we will file as a public company. The existence of a materialweakness could result in errors in our financial statements that could cause us to fail to meet our reporting obligations and cause investors to lose confidence in ourreported financial information, leading to a decline in our stock price. For so long as we qualify as an “emerging growth company” under the JOBS Act, which may be up to five years following our initial public offering, weintend to take advantage of certain exemptions from various reporting requirements that are applicable to public companies that are not emerging growth companies,including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404. Once we are no longer an emerging growthcompany or, if prior to such date, we opt to no longer take advantage of the applicable exemption, we will be required to include an opinion from our independentregistered public accounting firm on the effectiveness of our internal controls over financial reporting. Our profitability could suffer if we are not able to maintain adequate utilization of our workforce. The cost of providing our services, including the extent to which we utilize our workforce, affects our profitability. The rate at which we utilize our workforceis affected by a number of factors, including: ●our ability to transition employees from completed projects to new assignments and to hire and assimilate new employees; ●our ability to forecast demand for our services and thereby maintain an appropriate headcount in each of our geographies and workforces; ●our ability to manage attrition; ●our need to devote time and resources to training, business development, professional development, and other nonchargeable activities; and ●our ability to match the skill sets of our employees to the needs of the marketplace. 23 If we over utilize our workforce, our employees may become disengaged, which will impact employee attrition. If we underutilize our workforce, our profitmargin and profitability could suffer. Our backlog is subject to cancellation and unexpected adjustments, and is an uncertain indicator of future operating results. As of December 31, 2013, we had approximately $60.2 million of gross revenue backlog expected to be recognized over the next 12 months. We include inbacklog only those contracts for which funding has been provided and work authorizations have been received. We cannot guarantee that the revenue projected inour backlog will be realized or, if realized, will result in profits. In addition, project cancellations or scope adjustments may occur, from time to time, with respect tocontracts reflected in our backlog. For example, certain of our contracts with the U.S. federal government and other clients are terminable at the discretion of theclient, with or without cause. These types of backlog reductions could adversely affect our revenue and margins. Accordingly, our backlog as of any particular dateis an uncertain indicator of our future earnings. Employee, agent or partner misconduct or our overall failure to comply with laws or regulations could harm our reputation, reduce our revenue and profits,and subject us to criminal and civil enforcement actions. Misconduct, fraud, noncompliance with applicable laws and regulations, or other improper activities by one of our employees, agents, or partners couldhave a significant negative impact on our business and reputation. Such misconduct could include the failure to comply with government procurement regulations,regulations regarding the protection of classified information, regulations prohibiting bribery and other foreign corrupt practices, regulations regarding the pricing oflabor and other costs in government contracts, regulations on lobbying or similar activities, regulations pertaining to the internal controls over financial reporting,environmental laws, and any other applicable laws or regulations. For example, the FCPA, and similar antibribery laws in other jurisdictions generally prohibitcompanies and their intermediaries from making improper payments to nonU.S. officials for the purpose of obtaining or retaining business. Our policies mandatecompliance with these regulations and laws, and we take precautions to prevent and detect misconduct. However, since our internal controls are subject to inherentlimitations, including human error, it is possible that these controls could be intentionally circumvented or become inadequate because of changed conditions. As aresult, we cannot assure that our controls will protect us from reckless or criminal acts committed by our employees and agents. Our failure to comply with applicablelaws or regulations or acts of misconduct could subject us to fines and penalties, loss of security clearances, and suspension or debarment from contracting, any orall of which could harm our reputation, reduce our revenue and profits, and subject us to criminal and civil enforcement actions. Historically, we have not had anymaterial cases involving misconduct or fraud. If our contractors and subcontractors fail to satisfy their obligations to us or other parties, or if we are unable to maintain these relationships, our revenue,profitability, and growth prospects could be adversely affected. We depend on contractors and subcontractors in conducting our business. There is a risk that we may have disputes with our subcontractors arising from,among other things, the quality and timeliness of work performed by the subcontractor, client concerns about the subcontractor, or our failure to extend existing taskorders or issue new task orders under a subcontract. In addition, if any of our subcontractors fail to deliver on a timely basis the agreedupon supplies, fail to performthe agreedupon services, go out of business, or fail to perform on a project, then our ability to fulfill our obligations as a prime contractor may be jeopardized and wemay be contractually responsible for the work performed by those contractors or subcontractors. The absence of qualified subcontractors with which we have asatisfactory relationship could adversely affect the quality of our service and our ability to perform under some of our contracts. Historically, our relationship withour contractors and subcontractors has been good, and we have not experienced any material failure of performance by our contractors and subcontractors. Duringthe years ended December 31, 2013 and 2012, the utilization of contractors or subcontractors generated approximately 18% and 16%, respectively, of our grossrevenues. We also rely on relationships with other contractors when we act as their subcontractor or joint venture partner. Our future revenue and growth prospectscould be adversely affected if other contractors eliminate or reduce their subcontracts or teaming arrangement relationships with us or if a government agencyterminates or reduces these other contractors’ programs, does not award them new contracts, or refuses to pay under a contract. 24 Changes in resource management or infrastructure industry laws, regulations, and programs could directly or indirectly reduce the demand for our serviceswhich could in turn negatively impact our revenue. Some of our services are directly or indirectly impacted by changes in U.S. federal, state, local, or foreign laws and regulations pertaining to resourcemanagement, infrastructure, and the environment. Accordingly, a relaxation or repeal of these laws and regulations, or changes in governmental policies regardingthe funding, implementation, or enforcement of these programs, could result in a decline in demand for our services, which could in turn negatively impact ourrevenue. Legal proceedings, investigations, and disputes, including those assumed in acquisitions of other businesses for which we may not be indemnified, could resultin substantial monetary penalties and damages, especially if such penalties and damages exceed or are excluded from existing insurance coverage. We engage in professional and technical consulting and certification services that can result in substantial injury or damages that may expose us to legalproceedings, investigations, and disputes. For example, in the ordinary course of our business, we may be involved in legal disputes regarding personal injuryclaims, employee or labor disputes, professional liability claims, and general commercial disputes involving project cost overruns and liquidated damages as well asother claims. In addition, in the ordinary course of our business, we frequently make professional judgments and recommendations about environmental andengineering conditions of project sites for our clients. We may be deemed to be responsible for these judgments and recommendations if they are later determined tobe inaccurate. Any unfavorable legal ruling against us could result in substantial monetary damages or even criminal violations. In this regard, the agreement pursuant to which we acquired Nolte did not include representations and warranties regarding the business being acquired orany indemnification provisions or other assurances from the seller regarding Nolte. In the event any unforeseen matters arise, whether regarding the permits andauthorizations required to run the Nolte business, filing of tax returns and payment of associated taxes, or the existence or extent of any contingent liabilities of theNolte business (including thirdparty claims to which Nolte may be subject in the future including regarding professional liability for work performed prior to ouracquisition of Nolte), we would be materially adversely affected if we were required to pay damages or incur defense costs in connection with a claim for which nosuch indemnity has been provided. In this regard, in 2011, the California Franchise Tax Board (“CFTB”) initiated an examination of Nolte’s state of California taxfilings and raised various questions about approximately $0.7 million of research and development tax credits generated and included in Nolte’s tax returns for theyears 20052010. We responded to these inquiries, but in the fourth quarter of 2012, the California Franchise Tax Board denied these credits in full. In early 2013, theCFTB assigned a new examiner. The CFTB examiner conducted a field visit in order to understand our design activities associated with these qualified researchactivities as the CFTB is reconsidering and reevaluating its position. Nolte believes it has appropriate qualified research activities, qualified research expenses anddocumentation to support the credits and believes this position meets the recognition criteria under Accounting Standards Codification (“ASC”) 74010.Accordingly, we have not recorded a liability for uncertain tax benefits related to these state or federal research and development credits. An adverse outcome couldhave an adverse impact on our financial position, results of operations and cash flows. We maintain insurance coverage as part of our overall legal and risk management strategy to minimize our potential liabilities; however, insurance coveragecontains exclusions and other limitations that may not cover our potential liabilities. Generally, our insurance program covers workers’ compensation and employer’sliability, general liability, automobile liability, professional errors and omissions liability, property, and contractor’s pollution liability (in addition to other policies forspecific projects). Our insurance program includes deductibles or selfinsured retentions for each covered claim. In addition, our insurance policies containexclusions that insurance providers may use to deny or restrict coverage. Specialty liability and professional liability insurance policies provide for coverages on a“claimsmade” basis, covering only claims actually made and reported during the policy period currently in effect. Our insurance programs provide coverage for actsor omissions associated with the Nolte business prior to our acquisition. If we sustain liabilities that exceed or that are excluded from our insurance coverage or forwhich we are not insured, it could have a material adverse impact on our results of operations and financial condition, including our profits and revenue. Unavailability or cancellation of thirdparty insurance coverage would increase our overall risk exposure as well as disrupt the management of our businessoperations. We maintain insurance coverage from thirdparty insurers as part of our overall risk management strategy and some of our contracts require us to maintainspecific insurance coverage limits. If any of our thirdparty insurers fail, suddenly cancel our coverage, or otherwise are unable to provide us with adequateinsurance coverage, then our overall risk exposure and our operational expenses would increase and the management of our business operations would be disrupted.In addition, there can be no assurance that any of our existing insurance coverage will be renewable upon the expiration of the coverage period or that futurecoverage will be affordable at the required limits. 25 Our failure to implement and comply with our safety program could adversely affect our operating results or financial condition. Our safety program is a fundamental element of our overall approach to risk management, and the implementation of the safety program is a significant issuein our dealings with our clients. We maintain an enterprisewide group of health and safety professionals to help ensure that the services we provide are deliveredsafely and in accordance with standard work processes. Unsafe job sites and office environments have the potential to increase employee turnover, increase the costof a project to our clients, expose us to types and levels of risk that are fundamentally unacceptable, and raise our operating costs. The implementation of our safetyprocesses and procedures are monitored by various agencies and rating bureaus, and may be evaluated by certain clients in cases in which safety requirements havebeen established in our contracts. If we fail to meet these requirements or do not properly implement and comply with our safety program, there could be a materialadverse effect on our business, operating results, or financial condition. We may be subject to liabilities under environmental laws and regulations, including liabilities assumed in acquisitions for which we may not be indemnified. We must comply with a number of laws that strictly regulate the handling, removal, treatment, transportation and disposal of toxic and hazardoussubstances. Under the Comprehensive Environmental Response Compensation and Liability Act of 1980, as amended (“CERCLA”), and comparable state laws, wemay be required to investigate and remediate regulated hazardous materials. CERCLA and comparable state laws typically impose strict joint and several liabilitieswithout regard to whether a company knew of or caused the release of hazardous substances. The liability for the entire cost of cleanup could be imposed upon anyresponsible party. Other principal federal environmental, health, and safety laws affecting us include, among others, the Resource Conversation and Recovery Act,the National Environmental Policy Act, the Clean Air Act, the Occupational Safety and Health Act, the Toxic Substances Control Act, and the SuperfundAmendments and Reauthorization Act. Our business operations may also be subject to similar state and international laws relating to environmental protection.Liabilities related to environmental contamination or human exposure to hazardous substances, or a failure to comply with applicable regulations, could result insubstantial costs to us, including cleanup costs, fines and civil or criminal sanctions, thirdparty claims for property damage or personal injury, or cessation ofremediation activities. Our continuing work in the areas governed by these laws and regulations exposes us to the risk of substantial liability. Weather conditions and seasonal revenue fluctuations could have an adverse impact on our results of operations. Due primarily to inclement weather conditions, which lead to project delays and slower completion of contracts, and a higher number of holidays, ouroperating results during December, January, and February are generally lower in comparison to other months. As a result, our revenue and net income for the firstand fourth quarters of a fiscal year may be lower than our results for the second and third quarters of a fiscal year. If we were to experience lowerthanexpectedrevenue during any such periods, our expenses may not be offset, which could have an adverse impact on our results of operations. Catastrophic events may disrupt our business. Force majeure or extraordinary events beyond the control of the contracting parties, such as natural and manmade disasters as well as terrorist actions,could negatively impact the economies in which we operate by causing the closure of offices, interrupting projects, and forcing the relocation of employees. Wetypically remain obligated to perform our services after a terrorist action or natural disaster unless the contract contains a force majeure clause that relieves us of ourcontractual obligations in such an extraordinary event. If we are not able to react quickly to force majeure, our operations may be affected significantly, which wouldhave a negative impact on our financial condition, results of operations, or cash flows. Further, we rely on our network and thirdparty infrastructure and enterprise applications, internal technology systems, and our website for ourdevelopment, marketing, operational, support, hosted services, and sales activities. Despite our implementation of network security measures, we are vulnerable todisruption, infiltration, or failure of these systems or thirdparty hosted services in the event of a major earthquake, fire, power loss, telecommunications failure,cyberattack, war, terrorist attack, or other catastrophic event could cause system interruptions, reputational harm, loss of intellectual property, lengthy interruptionsin our services, breaches of data security, and loss of critical data and could harm our future operating results. 26 We have only a limited ability to protect our intellectual property rights, and our failure to protect our intellectual property rights could adversely affect ourcompetitive position. Our success depends, in part, upon our ability to protect our proprietary information and other intellectual property. We rely principally on trade secrets toprotect much of our intellectual property where we do not believe that patent or copyright protection is appropriate or obtainable. However, trade secrets are difficultto protect. Although our employees are subject to confidentiality obligations, this protection may be inadequate to deter or prevent misappropriation of ourconfidential information. In addition, we may be unable to detect unauthorized use of our intellectual property or otherwise take appropriate steps to enforce ourrights. Failure to obtain or maintain trade secret protection would adversely affect our competitive business position. In addition, if we are unable to prevent thirdparties from infringing or misappropriating our trademarks or other proprietary information, our competitive position could be adversely affected. We rely on thirdparty internal and outsourced software to run our critical accounting, project management, and financial information systems. As a result,any sudden loss, disruption, or unexpected costs to maintain these systems could significantly increase our operational expense and disrupt the managementof our business operations. We rely on thirdparty software to run our critical accounting, project management, and financial information systems. We also depend on our softwarevendors to provide longterm software maintenance support for our information systems. Software vendors may decide to discontinue further development,integration, or longterm software maintenance support for our information systems, in which case we may need to abandon one or more of our current informationsystems and migrate some or all of our accounting, project management, and financial information to other systems, thus increasing our operational expense as wellas disrupting the management of our business operations. Our Chairman, Chief Executive Officer and President owns a large percentage of our voting stock, which may allow him to have a significant influence on allmatters requiring stockholder approval. Mr. Dickerson Wright, our Chairman, Chief Executive Officer, and President, beneficially owns 2,164,940 shares, or approximately 39% of our common stockon a fully diluted basis as of December 31, 2013. Accordingly, Mr. Wright has the power to significantly influence the outcome of important corporate decisions ormatters submitted to a vote of our stockholders, including decisions regarding mergers, going private transactions, and other extraordinary transactions, and tosignificantly influence the terms of any of these transactions. Although Mr. Wright owes us and our stockholders certain fiduciary duties as a director and anexecutive officer, Mr. Wright could take actions to address his own interests, which may be different from those of our other stockholders. As an emerging growth company within the meaning of the Securities Act, we will utilize certain modified disclosure requirements, and we cannot be certainwhether these reduced requirements will make our securities less attractive to investors. We are an emerging growth company within the meaning of the rules under the Securities Act. We plan in current and future filings with the SEC to utilize,the modified disclosure requirements available to emerging growth companies, including reduced disclosure about our executive compensation and omission ofcompensation discussion and analysis, and an exemption from the requirement of holding a nonbinding advisory vote on executive compensation. In addition, wewill not be subject to certain requirements of Section 404 of the SarbanesOxley Act, including the additional testing of our internal control over financial reporting asmay occur when outside auditors attest as to our internal control over financial reporting. For example, we will not have to provide an auditor’s attestation report onour internal controls in future annual reports on Form 10K as otherwise required by Section 404(b) of the SarbanesOxley Act. As a result, our stockholders may nothave access to certain information they may deem important. We could remain an “emerging growth company” for up to five years, or until the earliest of (i) the last day of the first fiscal year in which our annual grossrevenue exceed $1 billion, (ii) the date that we become a “large accelerated filer” as defined in Rule 12b2 under the Exchange Act, which would occur if the marketvalue of our common stock that is held by nonaffiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter or (iii) thedate on which we have issued more than $1 billion in nonconvertible debt during the preceding threeyear period. 27 We will incur increased costs as a result of being a public company, and the requirements of being a public company may divert management attention fromour business. As a result of our initial public offering, we became a public company and our securities are listed on Nasdaq. As such, we are required to comply with laws,regulations, and requirements that we did not need to comply with as a private company, including certain provisions of the SarbanesOxley Act and related SECregulations, as well as the requirements of Nasdaq. Compliance with the requirements of being a public company have required us to increase our operating expensesin order to pay our employees, legal counsel, and accountants to assist us in, among other things, external reporting, instituting and monitoring a morecomprehensive compliance and board governance function, establishing and maintaining internal control over financial reporting in accordance with Section 404 ofthe SarbanesOxley Act, and preparing and distributing periodic public reports in compliance with our obligations under the federal securities laws. In addition, inconnection with Section 404(a) of the SarbanesOxley Act, management was required to deliver a report that assessed the effectiveness of our internal control overfinancial reporting beginning with this Annual Report on Form 10K for the year ending December 31, 2013, and, in connection with Section 404(b) of the SarbanesOxley Act, our auditors are not required to attest to our internal controls over financial reporting until we no longer qualify as an emerging growth company underthe JOBS Act or as a smaller reporting company, as defined in Exchange Act Rule 12b2. In order to maintain and improve the effectiveness of our disclosure controlsand procedures and internal control over financial reporting, significant resources and management oversight will be required. As a result, our management’sattention might be diverted from other business concerns, which could have a material adverse effect on our business, prospects, financial condition, and results ofoperations. Furthermore, we might not be able to retain our independent directors or attract new independent directors for our committees. Provisions in our charter documents and the Delaware General Corporation Law could make it more difficult for a third party to acquire us and coulddiscourage a takeover and adversely affect existing stockholders. Antitakeover provisions in our certificate of incorporation and bylaws, and in the Delaware General Corporation Law, could diminish the opportunity forstockholders to participate in acquisition proposals at a price above the thencurrent market price of our common stock. For example, while we have no present plansto issue any preferred stock, our board of directors, without further stockholder approval, will be able to issue Shares of undesignated preferred stock and fix thedesignation, powers, preferences, and rights and any qualifications, limitations, and restrictions of such class or series, which could adversely affect the votingpower of your Shares. In addition, our bylaws will provide for an advance notice procedure for nomination of candidates to our board of directors that could have theeffect of delaying, deterring, or preventing a change in control. Further, as a Delaware corporation, we are subject to provisions of the Delaware General CorporationLaw regarding “business combinations,” which can deter attempted takeovers in certain situations. We may, in the future, consider adopting additional antitakeovermeasures. The authority of our board of directors to issue undesignated preferred or other capital stock and the antitakeover provisions of the Delaware GeneralCorporation Law, as well as other current and any future antitakeover measures adopted by us, may, in certain circumstances, delay, deter, or prevent takeoverattempts and other changes in control of our company not approved by our board of directors. See “Description of Capital Stock” for further information. We currently do not intend to pay dividends on our shares of Common Stock and, consequently, your only current opportunity to achieve a return on yourinvestment is if the price of our shares appreciates. We do not expect to pay dividends on our shares of common stock in the foreseeable future and intend to use cash to grow our business. The payment ofcash dividends in the future, if any, will be at the discretion of our board of directors and will depend upon such factors as the extent to which our financingarrangements permit the payment of dividends, earnings levels, capital requirements, our overall financial condition, and any other factors deemed relevant by ourboard of directors. Consequently, your only current opportunity to achieve a return on your investment in us will be if the market price of our common stockappreciates. ITEM 1B. UNRESOLVED STAFF COMMENTS. Not applicable. 28 ITEM 2. PROPERTIES. Our principal executive offices are located in approximately 4,600 square feet of office space that we lease at 200 South Park Road, Suite 350, Hollywood,Florida. In addition, we lease office space in 25 other locations in California, Colorado, Florida, Pennsylvania, New Jersey, and Utah. In total, our facilities containapproximately 150,000 square feet of office space and are subject to leases that expire through 2018. We do not own any real property. Our lease terms vary frommonthtomonth to multiyear commitments. We do not consider any of these leased properties to be materially important to us. While we believe it is necessary tomaintain offices through which our services are coordinated, we feel there are an ample number of available office rental properties that could adequately serve ourneeds should we need to relocate or expand our operations. ITEM 3. LEGAL PROCEEDINGS. From time to time, we are subject to various legal proceedings that arise in the normal course of our business activities. As of the date of this Annual Reporton Form 10K, we are not a party to any litigation the outcome of which, if determined adversely to us, would individually or in the aggregate be reasonably expectedto have a material adverse effect on our results of operations or financial position. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 29 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Our units, each of which consisted of one share of our common stock, par value $0.01 per share, and one warrant to purchase one share of our common stock,traded on Nasdaq under the symbol “NVEEU” until September 26, 2013. On September 27, 2013 (the “Separation Date”), the common stock and warrants underlyingour units automatically separated from the units and began trading separately on Nasdaq under the symbols “NVEE” and “NVEEW”, respectively. Each warrantentitles the holder to purchase from us one share of our common stock at an exercise price of $7.80 beginning on the Separation Date, provided that there is aneffective registration statement in effect covering the shares of common stock underlying the warrants. Our warrants will expire on March 27, 2018 at 5:00 p.m., NewYork City time, or earlier upon redemption. The following table sets forth, for the calendar quarter indicated, the high and low sales prices per unit as reported on the Nasdaq for the period from March27, 2013 (the first day on which our units began trading) through September 26, 2013 (the day on which our units ceased trading), and our common stock and warrantsfor the period from September 27, 2013 (the first day on which our common stock and warrants began trading) through December 31, 2013. Units Common Stock Warrants Fiscal 2013: High Low High Low High Low First Quarter (1) $6.42 $6.09 N/A N/A N/A N/A Second Quarter $8.49 $5.90 N/A N/A N/A N/A Third Quarter (2) $9.60 $7.90 $7.70 $7.70 $2.25 $2.25 Fourth Quarter N/A N/A $9.03 $7.00 $3.75 $1.00 “N/A” means not applicable.(1) Beginning on March 27, 2013 with respect to the Company’s units.(2) Ending on September 26, 2013 with respect to the Company’s units and beginning on September 27, 2013 with respect to the Company’s common stock andwarrants. Holders As of March 14, 2014, there are 131 holders of record of our common stock and one holder of record of our warrants. These numbers do not include beneficialowners whose shares are held in “street name.” Dividends We have not paid cash dividends on our common stock and do not expect to do so in the foreseeable future, as we intend to retain all earnings to provide fundsfor the operation and expansion of our business. Recent Sales of Unregistered Securities During fiscal year 2013, we issued the following securities that were not registered under the Securities Act: In October 2013, we issued 5,952 shares of our common stock as partial consideration for our August 2013 acquisition of Dunn as disclosed elsewhere in thisAnnual Report on Form 10K. We issued these shares in reliance upon Section 4(a)(2) of the Securities Act as a transaction by an issuer not involving a publicoffering. We did not, nor do we plan to, pay or give, directly or indirectly, any commission or other remuneration, including underwriting discounts or commissions, inconnection with the issuance of securities listed above. In addition, each of the certificates issued or to be issued representing the securities in the transaction listedabove bears or will bear a restrictive legend permitting the transfer thereof only in compliance with applicable securities laws. The recipients of securities in thetransaction listed above represented to us or will be required to represent to us their intention to acquire the securities for investment only and not with a view to or forsale in connection with any distribution thereof. All recipients had or have adequate access, through their employment or other relationship with our Company orthrough other access to information provided by our Company, to information about our Company. 30 Issuer Purchase of Equity Securities None. Use of Proceeds from our Initial Public Offering and Warrant Exercise On March 26, 2013, our registration statement on Form S1 (File No. 333186229) was declared effective for our initial public offering. To the extent any netproceeds are used to repay any debt obligations, the aggregate outstanding balance of our notes payable to banks and former owners of acquired companies as ofDecember 31, 2013 was approximately $6.8 million with interest rates ranging from 3.0% to 5.0%. Except as disclosed in the previous sentence, there have been nochanges regarding the use of proceeds from our initial public offering and warrant exercise from the disclosure in our Quarterly Report on Form 10Q for the quarterlyperiod ended September 30, 2013. ITEM 6. SELECTED FINANCIAL DATA. Not applicable. ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. The following discussion of our financial condition and results of operations should be read together with the consolidated financial statements and theaccompanying notes included elsewhere in this Annual Report on Form 10K. This discussion contains forwardlooking statements that involve risks anduncertainties. Our actual results may differ materially from those anticipated in those forwardlooking statements as a result of certain factors, including, but notlimited to, those described under “Item 1A. Risk Factors.” Overview We are a provider of professional and technical engineering and consulting solutions to public and private sector clients. We focus on the infrastructure,construction, real estate, and environmental markets. The scope of our projects includes planning, design, consulting, permitting, inspection and field supervision, andmanagement oversight. We also provide forensic engineering, litigation support, condition assessment, and compliance certification. Our primary clients include U.S.federal, state, municipal, and local governments; military and defense clients; and public agencies. We also serve quasipublic and private sector clients from theeducation, healthcare, energy, and utilities fields, including schools, universities, hospitals, health care providers, insurance providers, large utility service providers,and large and small energy producers. We conduct our operations through two primary operating subsidiaries: (i) Nolte, which began operations in 1949 and was incorporated as a Californiacorporation in 1957, and (ii) NV5, which was incorporated as a Delaware corporation in 2009. In March 2010, NV5 acquired the construction quality assuranceoperations of Bureau Veritas North America, Inc. In August 2010, NV5 acquired a majority of the outstanding shares of Nolte and succeeded to substantially all ofNolte’s business. In October 2011, NV5 and Nolte completed a reorganization transaction in which NV5 Holdings, Inc. was incorporated as a Delaware corporation,acquired all of the outstanding shares of NV5 and Nolte, and, as a result, became the holding company under which NV5 and Nolte conduct operations. Recent Acquisitions The aggregate value of all consideration for our acquisitions consummated during the years ended December 31, 2013 and 2012 was approximately $3.3 millionand approximately $3.5 million, respectively. On July 27, 2012, we acquired certain assets and assumed certain liabilities of Kaderabek Company (“Kaco”), a 30person engineering firm headquartered inMiami, Florida. Kaco began operations in 1984 and over the years has become recognized for its technical expertise on development and engineering teams for some ofthe most challenging projects in South Florida, the Caribbean, and Central America. The purchase price was approximately $3.5 million, consisting of $1.0 million incash, a $2.0 million promissory note, and $0.5 million of our common stock valued at $7.21 per share issued on December 28, 2012. 31 On April 30, 2013, we acquired certain assets and assumed certain liabilities of Consilium Partners (“Consilium” or Consilium Partners”), a 20person owner’srepresentation and program management firm that serves both public and private clients, such as municipalities, major hospitality firms and institutional real estateowners. Consilium Partners possesses specialized expertise in managing technically demanding projects, while having an affinity for leading teams and cultivatingteamwork with the people who ultimately determine a project’s success. The purchase price was approximately $1.1 million, consisting of cash, notes and our commonstock, plus an earnout of up to $1.0 million payable in three annual installments in cash and/or our common stock, in the Company’s sole discretion, based on theachievement of a certain agreed upon metric for calendar year 2013, and, if achieved, is payable in three annual installments beginning in January 31, 2014 in cashand/or our common stock. For the year ended December 31, 2013, the agreed upon metric was met and, therefore, the earnout was achieved. On January 31, 2014, wepaid the first annual installment of approximately $0.3 million, of which approximately $0.2 was paid in cash and the remaining $0.1 million was paid by issuing 12,987shares of our common stock. On July 8, 2013, we acquired certain assets and assumed certain liabilities of the Tampa, Florida division of PitmanHartenstein & Associates (“PH&A”). PH&Aspecializes in transportation infrastructure engineering. The purchase price was approximately $1.0 million of cash and notes. On August 12, 2013, we acquired certain assets and assumed certain liabilities of Dunn Environmental, Inc. (“Dunn”). Dunn specializes in environmental andhydrogeology sciences in Northern California. The purchase price was approximately $0.3 million, consisting of cash, notes and our common stock. On January 31, 2014, we acquired certain assets and assumed certain liabilities of Air Quality Consulting, Inc. (“AQC”), which specializes in occupational healthsafety and environmental consulting. AQC adds growth in our environmental vertical and also allows us to offer these services to a broader scale within our existingnetwork. The purchase price was up to approximately $1 million consisting of cash, notes and our common stock. On March 21, 2014, we acquired AK Environmental, LLC (“AK”), a natural gas pipeline inspection, construction management and environmental consulting firm,primarily servicing the Northeast, MidAtlantic and Southeast United States. The purchase price was approximately $7 million consisting of cash, notes and ourcommon stock. Key Trends, Developments and Challenges Initial public offering. On March 26, 2013, the Company priced its initial public offering of 1,400,000 units. Each unit was sold at an offering price of $6.00 perunit and consisted of one share of the Company’s common stock and one warrant to purchase one share of the Company’s common stock at an exercise price of $7.80per share. The units began trading on Nasdaq on March 27, 2013 and traded solely as units through September 26, 2013. The units sold in our initial public offeringwere registered under the Securities Act on a registration statement on Form S1 (No. 333186229), which was declared effective by the SEC on March 26, 2013. OnMarch 28, 2013, the underwriter of the offering exercised its option to purchase up to an additional 210,000 units, solely to cover overallotments. The closing of theoffering occurred, and was recorded, on April 2, 2013, upon which we received net proceeds of approximately $8.1 million after deducting fees associated with theinitial public offering and issued 1,610,000 units. In addition, upon closing, the underwriter received a warrant to acquire up to 140,000 units at an exercise price of $7.20per unit. The underwriter can begin to exercise these warrants on March 26, 2014 and such exercise expires on March 26, 2016. Each of these units consist of one shareof the Company’s common stock and one warrant to purchase one share of the Company’s common stock at an exercise price of $7.80 per share. Separation of the Company’s units and warrant exercises. On September 27, 2013, the common stock and warrants comprising the Company’s units begantrading separately on Nasdaq under the symbols “NVEE” and “NVEEW”, respectively. In connection with the separate trading of the common stock and warrants, theCompany’s units ceased trading under the symbol “NVEEU” on the close of the markets on September 26, 2013 and the units were delisted from Nasdaq. On September 27, 2013, the warrants became exercisable at an exercise price of $7.80 per share, except as provided. The warrant exercise period expires on March27, 2018 or earlier upon redemption. On September 27, 2013 and continuing until October 11, 2013 (the “Temporary Reduction Expiration Time”), we temporarily reduced the exercise price of all of ouroutstanding public warrants from $7.80 per share to $6.00 per share. All such warrants properly exercised in accordance with their respective terms prior to theTemporary Reduction Expiration Time were accepted by the Company at the reduced $6.00 per share exercise price and one share of the Company’s registered commonstock per warrant was issued to the exercising warrant holder. After the Temporary Reduction Expiration Time, the exercise price of the public warrants automaticallyreverted to the warrant exercise price of $7.80 per share included in the original terms of the public warrants and the reduced exercise price was no longer in effect.Except for the reduced $6.00 per share exercise price of the warrants during the Temporary Reduction Expiration Time, the terms of the public warrants remainunchanged. During the Temporary Reduction Expiration Time, 1,196,471 public warrants, or approximately 74% of the outstanding public warrants were exercised at thereduced exercise price of $6.00 per share. The temporary reduction in the warrant exercise price generated net cash proceeds to the Company of approximately $6.6million after fees associated with the temporary reduction in the warrant exercise price and offering expenses. 32 Shift in service mix. We group our capabilities into five core vertical service offerings. Historically, we have concentrated on the verticals of (i) infrastructure,engineering and support services and (ii) construction quality assurance. We believe, however, that further development of three additional service offerings of (i)program management, (ii) energy services, and (iii) environmental services will become increasingly important to our business as we continue to grow organically andthrough strategic acquisitions. Gross revenues derived from these three types of services offerings are mostly generated under costreimbursable contacts. Themethods of billing for these three services are expected to include both time and materials or costplus basis. Tax credit dispute. In 2011, the California Franchise Tax Board (“CFTB”) initiated an examination of Nolte’s state of California tax filings and raised variousquestions about approximately $0.7 million of research and development tax credits generated and included in Nolte’s tax returns for the years 20052010. Weresponded to these inquiries, but in the fourth quarter of 2012, the California Franchise Tax Board denied these credits in full. In early 2013, the CFTB assigned a newexaminer. The CFTB examiner conducted a field visit in order to understand our design activities associated with these qualified research activities as the CFTB isreconsidering and reevaluating its position. Nolte believes it has appropriate qualified research activities, qualified research expenses and documentation to supportthe credits and believes this position meets the recognition criteria under Accounting Standards Codification (“ASC”) 74010. Accordingly, we have not recorded aliability for uncertain tax benefits related to these state or federal research and development credits. An adverse outcome could have an adverse impact on our financialposition, results of operations and cash flows. Components of Income and Expense Revenues We enter into contracts with our clients that contain two principal types of pricing provisions: costreimbursable and fixedprice. The majority of our contractsare costreimbursable contracts that fall under the relatively lowrisk subcategory of time and materials contracts. Costreimbursable contracts. Costreimbursable contracts consist of two similar contract types: time and materials contracts and costplus contracts. •Time and materials contracts are common for smaller scale professional and technical consulting and certification services projects. Under thesetypes of contracts, there is no predetermined fee. Instead, we negotiate hourly billing rates and charge our clients based upon actual hoursexpended on a project. In addition, any direct project expenditures are passed through to the client and are typically reimbursed. These contractsmay have a fixedprice element in the form of an initial nottoexceed or guaranteed maximum price provision. •Costplus contracts are the predominant contracting method used by U.S. federal, state, and local governments. These contracts provide forreimbursement of the actual costs and overhead (predetermined rates) we incur, plus a predetermined fee. Under some costplus contracts, our feemay be based on quality, schedule, and other performance factors. For the years ended December 31, 2013 and 2012, costreimbursable contracts represented approximately 89% and 93%, respectively, of our total revenues. Fixedprice contracts. Fixedprice contracts also consist of two contract types: lumpsum contracts and fixedunit price contracts. •Lumpsum contracts typically require the performance of all of the work under the contract for a specified lumpsum fee, subject to priceadjustments if the scope of the project changes or unforeseen conditions arise. Many of our lumpsum contracts are negotiated and arise in thedesign of projects with a specified scope and project deliverables. •Fixedunit price contracts typically require the performance of an estimated number of units of work at an agreed price per unit, with the totalpayment under the contract determined by the actual number of units performed. For the years ended December 31, 2013 and 2012, fixedprice contracts represented approximately 11% and 7%, respectively, of our total revenues. 33 Revenues from engineering services are recognized in accordance with the accrual basis of accounting. Revenues under costreimbursable contracts arerecognized when services are performed and revenues from fixedprice contracts are recognized on the percentageofcompletion method, generally measured by thedirect costs incurred to date as compared to the estimated total direct costs for each contract. See “– Critical Accounting Policies and Estimates – RevenueRecognition.” Direct Costs of Revenues (excluding depreciation and amortization) Direct costs of revenues consist primarily of that portion of technical and nontechnical salaries and wages incurred in connection with fee generating projects.Direct costs of revenues also include production expenses, subconsultant services, and other expenses that are incurred in connection with our fee generatingprojects. Direct costs of revenues exclude that portion of technical and nontechnical salaries and wages related to marketing efforts, vacations, holidays, and othertime not spent directly generating fees under existing contracts. Such costs are included in operating expenses. Additionally, payroll taxes, bonuses, and employeebenefit costs for all of our personnel, facilities costs, and depreciation and amortization are included in operating expenses since no allocation of these costs is made todirect costs of revenues. We expense direct costs of revenues when incurred. Operating Expenses Operating expenses include the costs of the marketing and support staffs, other marketing expenses, management and administrative personnel costs, payrolltaxes, bonuses and employee benefits for all of our employees and the portion of salaries and wages not allocated to direct costs of revenues for those employees whoprovide our services. Operating expenses also include facility costs, depreciation and amortization, professional services, legal and accounting fees, and administrativeoperating costs. We expense operating costs when incurred. Factors Affecting Comparability We have set forth below selected factors that we believe have had, or can be expected to have, a significant effect on the comparability of recent or future resultsof operations: Recent Acquisitions On July 27, 2012, we acquired certain assets and assumed certain liabilities of Kaco, a 30person engineering firm headquartered in Miami, Florida. As a result ofthis acquisition in 2012, we commenced recognizing revenues and amortizing intangible assets during the third quarter of 2012, primarily affecting the comparability offiscal year 2013 to fiscal year 2012. On April 30, 2013, we acquired certain assets and assumed certain liabilities of Consilium Partners, a 20person owner’s representation and program managementfirm that serves both public and private clients, such as municipalities, major hospitality firms and institutional real estate owners. As a result of this acquisition in2013, we commenced recognizing revenues and amortizing intangible assets during the second quarter of 2013, primarily affecting the comparability of fiscal year 2013to fiscal year 2012. On July 8, 2013, we acquired certain assets and assumed certain liabilities of the Tampa, Florida division of PH&A, which specializes in transportationinfrastructure engineering. As a result of this acquisition in 2013, we commenced recognizing revenues and amortizing intangible assets during the third quarter of2013, primarily affecting the comparability of fiscal year 2013 to fiscal year 2012. On August 12, 2013, the Company acquired certain assets and assumed certain liabilities of Dunn. Dunn specializes in environmental and hydrogeology sciencesin Northern California. As a result of this acquisition in 2013, we commenced recognizing revenues and amortizing intangible assets during the third quarter of 2013,primarily affecting the comparability of fiscal year 2013 to fiscal year 2012. Public Company Expenses As a result of our initial public offering, we became a public company and our securities are listed on Nasdaq. As such, we are required to comply with laws,regulations, and requirements that we did not need to comply with as a private company, including certain provisions of the SarbanesOxley Act and related SECregulations, as well as the requirements of Nasdaq. Compliance with the requirements of being a public company have required us to increase our operating expensesin order to pay our employees, legal counsel, and accountants to assist us in, among other things, external reporting, instituting and monitoring a more comprehensivecompliance and board governance function, establishing and maintaining internal control over financial reporting in accordance with Section 404 of the SarbanesOxley Act, and preparing and distributing periodic public reports in compliance with our obligations under the federal securities laws. In addition, being a publiccompany has made it more expensive for us to obtain director and officer liability insurance. We estimate that incremental annual public company costs will be between$0.5 million and $1.0 million. 34 StockBased Compensation In 2010, prior to the inception of our 2011 Equity Plan, we issued 377,104 restricted shares of common stock to management and employees with an aggregatedeferred compensation amount of approximately $765,000. Each award is service based, and vests after five years or upon certain other events, subject to each awardagreement. The fair value of these shares was calculated based on the estimated fair value of our equity as of the grant date, which was approximately $2.03 per share. The 2011 Equity Plan was initially approved in October 2011 and subsequently amended and restated in March 2013 (as amended, the “2011 Equity Plan”). As ofDecember 31, 2013, 453,416 shares of common stock are authorized and reserved for issuance under the 2011 Equity Plan. This reserve automatically increases on eachJanuary 1 from 2014 through 2023, by an amount equal to the smaller of (i) 3.5% of the number of shares issued and outstanding on the immediately precedingDecember 31, or (ii) an amount determined by our board of directors. The 2011 Equity Plan is intended to make available incentives that will assist us to attract, retain,and motivate employees, officers, consultants, and directors by allowing them to acquire an ownership interest in our business, and, as a result, encouraging them tocontribute to our success. We may provide these incentives through the grant of stock options, stock appreciation rights, restricted stock, restricted stock units,performance shares and units, and other cashbased or stockbased awards. As a result, we may incur material noncash, stockbased compensation expenses in futureperiods. During the year ended December 31, 2013, we granted from the 2011 Equity Plan 96,406 restricted shares of common stock to management and employees and8,508 restricted stock units to nonemployee directors with an aggregate deferred compensation amount of approximately $827,000. The fair value of these shares andunits are based on the quoted market values of the Company’s equity as of the grant dates, which is a weightedaverage of $7.88 per share. The restricted sharesgranted provide for service based vesting after three years following the grant date and the restricted stock units granted provide for service based vesting as of theday immediately preceding the first annual meeting of the stockholders of the Company following the grant date. During April 2012, we granted from the 2011 Equity Plan 39,657 restricted shares of common stock to management and employees of which 2,565 shares wereforfeited during 2012 with an aggregate deferred compensation amount of approximately $268,000. During the year ended December 31, 2013, there were 5,058 restrictedshares of common stock forfeited. The fair value of these shares is based on the estimated fair value of the Company’s equity as of the grant date, which was estimatedat $7.21 per share. These awards provide for service based vesting after three years. Sharebased compensation expense relating to restricted shares and units during the years ended December 31, 2013 and 2012 was approximately $365,000 and$217,000, respectively. As of December 31, 2013, no shares or units have vested since the 2011 Equity Plan inception, and approximately $1,024,000 of deferredcompensation, which is expected to be recognized over the remaining weighted average vesting period of 1.6 years, is unrecognized at December 31, 2013. Jumpstart Our Business Startups Act of 2012 We are an emerging growth company within the meaning of the rules under the Securities Act, and we will utilize certain exemptions from various reportingrequirements that are applicable to public companies that are not emerging growth companies. For example, we will not have to provide an auditor’s attestation reporton our internal controls in future annual reports on Form 10K as otherwise required by Section 404(b) of the SarbanesOxley Act. The JOBS Act also permits us, as an“emerging growth company,” to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies.We are choosing to “opt out” of this provision and, as a result, we will comply with new or revised accounting standards when they are required to be adopted byissuers. This decision to opt out of the extended transition period under the JOBS Act is irrevocable. Critical Accounting Policies and Estimates The discussion of our financial condition and results of operations is based upon our financial statements, which have been prepared in accordance with GAAP.During the preparation of these financial statements, we are required to make estimates and assumptions that affect the reported amounts of assets, liabilities,revenues, costs and expenses, and related disclosures. On an ongoing basis, we evaluate our estimates and assumptions, including those discussed below. We baseour estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances. The results of our analysis form thebasis for making assumptions about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from theseestimates under different assumptions or conditions, and the impact of such differences may be material to our financial statements. Our estimates and assumptions areevaluated periodically and adjusted when necessary. The more significant estimates affecting amounts reported in our consolidated financial statements relate to therevenue recognition on the percentageofcompletion method, reserves for professional liability claims, allowances for doubtful accounts, valuation of our intangibleassets, contingent consideration and income taxes. 35 We believe that the following critical accounting policies involve our more significant judgments and estimates used in the preparation of our financialstatements. For further information on all of our significant policies, see Note 2 to our consolidated financial statements included elsewhere in this Annual Report onForm 10K. Revenue Recognition Revenues from engineering services are recognized in accordance with the accrual basis of accounting. Revenues under costreimbursable contracts arerecognized when services are performed and revenues from fixedprice contracts are recognized on the percentageofcompletion method, generally measured by thedirect costs incurred to date as compared to the estimated total direct costs for each contract. We include other direct costs (for example, thirdparty field labor,subcontractors, or the procurement of materials or equipment) in revenues and cost of revenue when the costs of these items are incurred and we are responsible forthe ultimate acceptability of such costs. Recognition of revenue under this method is dependent upon the accuracy of a variety of estimates, including engineeringprogress, materials quantities, achievement of milestones, labor productivity, and cost estimates. Due to uncertainties inherent in the estimation process, it is possiblethat actual completion costs may vary from estimates. If estimated total costs on contracts indicate a loss or reduction to the percentage of revenue recognized to date, these losses or reductions are recognized in theperiod in which the revisions are determined. The cumulative effect of revisions to revenues, estimated costs to complete contracts, including penalties, incentiveawards, change orders, claims, anticipated losses and others are recorded in the period in which the revisions are identified and the loss can be reasonably estimated.Such revisions could occur in any reporting period and the effects on the results of operation for that reporting period may be material depending on the size of theproject or the adjustment. Change orders and claims typically result from changes in scope, specifications, design, performance, materials, sites, or period of completion. Costs related tochange orders and claims are recognized when incurred. Change orders are included in total estimated revenue when it is probable that the change order will result inan addition to the contract value and can be reliably estimated. Federal Acquisition Regulations (“FAR”), which are applicable to our federal government contracts and may be incorporated in local and state agency contracts,limit the recovery of certain specified indirect costs on contracts. Costplus contracts covered by FAR or certain state and local agencies also may require an audit ofactual costs and provide for upward or downward adjustments if actual recoverable costs differ from billed recoverable costs. Unbilled work results when the appropriate revenue has been recognized when services are performed or based on the percentageofcompletion accountingmethod but the revenue recorded has not been billed due to the billing terms defined in the contract. Unbilled amounts as of the reporting date are included withinaccounts receivable in the accompanying consolidated balance sheets. In certain circumstances, the contract may allow for billing terms that result in the cumulativeamounts billed being in excess of revenues recognized. The liability “Billings in excess of costs and estimated earnings on uncompleted contracts” represents billingsin excess of revenues recognized on these contracts as of the reporting date. Professional Liability Expense We maintain insurance for business risks, including professional liability. For professional liability risks, our retention amount under our claimsmade insurancepolicies includes an accrual for claims incurred but not reported for any potential liability, including any legal expenses, to be incurred for such claims if they occur.Our accruals are based upon historical expense and management’s judgment. We maintain insurance coverage for various aspects of our business and operations;however, we have elected to retain a portion of losses that may occur through the use of deductibles, limits and retentions under our insurance programs. Ourinsurance coverage may subject us to some future liability for which we are only partially insured or completely uninsured. Management believes its estimated accrualfor errors, omissions, and professional liability claims is sufficient and any additional liability over amounts accrued is not expected to have a material adverse effect onour results of operations or financial position. Allowance for Doubtful Accounts We record billed and unbilled receivables net of an allowance for doubtful accounts. The allowance is estimated based on management’s evaluation of thecontracts involved and the financial condition of clients. Factors considered include, among other things, client type (federal government or private client), historicalperformance, historical collection trends, and general economic conditions. The allowance is increased by our provision for doubtful accounts, which is chargedagainst income. All recoveries on receivables previously charged off are credited to the accounts receivable recovery account are included in income, while directchargeoffs of receivables are deducted from the allowance. Although we believe the allowance for doubtful accounts is sufficient, a decline in economic conditionscould lead to the deterioration in the financial condition of our customers, resulting in an impairment of their ability to make payments, and additional allowances maybe required that could materially impact our consolidated results of operations. Trade receivable balances carried by us are comprised of accounts from a diverse clientbase across a broad range of industries; however, there are concentrations of revenues and accounts receivable from Californiabased projects, government andgovernmentrelated contracts, and one customer within the government sector. 36 Goodwill and Related Intangible Assets Goodwill is the excess of consideration paid for an acquired entity over the amounts assigned to assets acquired, including other identifiable intangible assets,and liabilities assumed in a business combination. To determine the amount of goodwill resulting from a business combination, the Company performs an assessmentto determine the fair value of the acquired company’s tangible and identifiable intangible assets and liabilities. Goodwill is required to be evaluated for impairment on an annual basis or whenever events or changes in circumstances indicate the asset may be impaired. Anentity has the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely thannot that the fair value of a reporting unit is less than its carrying amount. These qualitative factors include: macroeconomic and industry conditions, cost factors,overall financial performance and other relevant entityspecific events. If the entity determines that this threshold is met, then performing the twostep quantitativeimpairment test is unnecessary. The twostep impairment test requires a comparison of the carrying value of the assets and liabilities associated with a reporting unit,including goodwill, with the fair value of the reporting unit. The Company determines fair value through multiple valuation techniques, and weights the resultsaccordingly. We are required to make certain subjective and complex judgments in assessing whether an event of impairment of goodwill has occurred, includingassumptions and estimates used to determine the fair value of our reporting units. If the carrying value of the reporting unit exceeds the fair value of the reporting unit,the Company would calculate the implied fair value of its reporting unit goodwill as compared to the carrying value of its reporting unit goodwill to determine theappropriate impairment charge, if any. We have elected to perform our annual goodwill impairment review on August 1 of each year. On August 1, 2013 and 2012, weconducted our annual impairment tests using the quantitative method of evaluating goodwill. Based on these quantitative analyses we determined the fair value ofeach of our reporting units exceeded the carrying value of the reporting unit. Therefore, the goodwill was not impaired and the Company did not recognize animpairment charge relating to goodwill as of August 1, 2013 and 2012. No indicators, events or changes in circumstances indicated that goodwill was impaired duringthe period from August 2 through December 31 of each of fiscal year 2013 and 2012. There were no indicators, events or changes in circumstances to indicate thatgoodwill is impaired during the years ended December 31, 2013 and 2012. Identifiable intangible assets primarily include customer backlog, customer relationships, tradenames and noncompete agreements. Amortizable intangibleassets are amortized over their estimated useful lives and reviewed for impairment whenever events or changes in circumstances indicate that the assets may beimpaired. If an indicator of impairment exists, the Company compares the estimated future cash flows of the asset, on an undiscounted basis, to the carrying value ofthe asset. If the undiscounted cash flows exceed the carrying value, no impairment is indicated. If the undiscounted cash flows do not exceed the carrying value, thenimpairment is measured as the difference between fair value and carrying value, with fair value typically based on a discounted cash flow model. The Company has notrecognized an impairment charge relating to amortizable intangible assets during the years ended December 31, 2013 and 2012. An adjustment to the carrying value of goodwill and/or identifiable intangible assets could materially impact the consolidated results of operations. Contingent Consideration The fair values of earnout arrangements are included as part of the purchase price of the acquired companies on their respective acquisition dates. Weestimated the fair value of contingent earnout payments as part of the initial purchase price of Consilium and record the estimated fair value of contingentconsideration as a liability on the consolidated balance sheet as of the acquisition date. We consider several factors when determining that contingent earnoutliabilities are part of the purchase price, including the following: (i) the valuation of our acquisitions is not supported solely by the initial consideration paid, and thecontingent earnout formula is a critical and material component of the valuation approach to determining the purchase price; and (ii) the former owners of acquiredcompanies that remain as key employees receive compensation other than contingent earnout payments at a reasonable level compared with the compensation of ourother key employees. The contingent earnout payments are not affected by employment termination. We measure our earnout (contingent consideration) liabilities recognized in connection with business combinations at fair value on a recurring basis usingsignificant unobservable inputs classified within Level 3 of the fair value hierarchy. We use a probabilityweighted approach as a valuation technique to determine thefair value of the contingent consideration on the acquisition date and at each reporting period until the contingency is ultimately resolved. The significantunobservable inputs used in the fair value measurements are projections over the earnout period (generally one year), and the probability outcome percentages weassign to each scenario. Significant increases or decreases to either of these inputs in isolation could result in a significantly higher or lower liability with a higherliability capped by the contractual maximum of the contingent earnout obligation. Ultimately, the liability will be equivalent to the amount paid, and the differencebetween the fair value estimate and amount paid will be recorded in earnings. The amount paid that is less than or equal to the contingent earnout liability on theacquisition date is reflected as cash used in financing activities in our consolidated statements of cash flows. Any amount paid in excess of the contingent earnoutliability on the acquisition date is reported in operating income. 37 We review and reassess the estimated fair value of contingent consideration on a quarterly basis, and the updated fair value could differ materially from theinitial estimates. Adjustments to the estimated fair value related to changes in all other unobservable inputs are reported in operating income. Income Taxes We account for income taxes in accordance with ASC Topic No. 740 “Income Taxes” (“Topic No. 740”). Deferred income taxes reflect the impact of temporarydifferences between amounts of assets and liabilities for financial reporting purposes and such amounts as measured by tax laws. A valuation allowance against ourdeferred tax assets is recorded when it is more likely than not that some portion or all of the deferred tax assets will not be realized. In determining the need for avaluation allowance, management is required to make assumptions and to apply judgment, including forecasting future earnings, taxable income, and the mix ofearnings in the jurisdictions in which we operate. Management periodically assesses the need for a valuation allowance based on our current and anticipated results ofoperations. The need for and the amount of a valuation allowance can change in the near term if operating results and projections change significantly. The Company recognizes the consolidated financial statement benefit of a tax position only after determining that the relevant tax authority would more likelythan not sustain the position following an audit. For tax positions meeting the more likelythannot threshold, the amount recognized in the consolidated financialstatements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority. In evaluating theamount, if any, of the consolidated financial statement benefit of a tax position, management is also required to make assumptions and to apply judgment. TheCompany applies the uncertain tax position guidance to all tax positions for which the statute of limitations remains open. Generally, we remain subject to income taxexaminations by our major taxing authorities from 2010 to 2013. Our policy is to classify interest accrued as interest expense and penalties as operating expenses. Results of Operations The following table represents our condensed results of operations for the periods indicated (in thousands of dollars and as of a percentage of gross revenues): Years Ended December 31, 2013 2012 $ %of grossrevenues $ %of grossrevenuesGross revenues $68,232 100.0% $60,576 100.0% Direct costs 33,416 49.0% 28,908 47.7% Gross profit 34,816 51.0% 31,668 52.3%Gross profit 34,816 51.0% 31,668 52.3% Operating expenses 30,920 45.3% 29,311 48.4% Income from operations 3,896 5.7% 2,357 3.9% Other expense, net (263) (0.4%) (389) (0.7%) Income tax expense (874) (1.3%) (675) (1.1%) Comprehensive income $2,759 4.0% $1,293 2.1% 38 Year ended December 31, 2013 compared to year ended December 31, 2012 Gross revenues. Our revenues increased approximately $7.7 million, or approximately 12.6%, for the year ended December 31, 2013, compared to the same periodin 2012. The increase in revenues is due to organic growth from our existing platform as well as the contribution from our acquisitions in 2013. We are currentlyunaware of delays in current projects and therefore are not anticipating such to influence future revenues. Such revenues could be affected by changes in economicconditions and the impact thereof on our public and quasipublic sector funded projects. Direct costs. Our direct costs increased approximately $4.5 million for the year ended December 31, 2013, compared to the same period in 2012. The increase indirect costs is primarily due to an increase in our utilization of billable employees in 2013 compared to the same period last year. Direct costs of contracts include directlabor and all costs incurred in connection with and directly for the benefit of client contracts. The level of direct costs of contracts may fluctuate between reportingperiods due to a variety of factors including the amount of subconsultant costs we incur during a period. On those projects where we are responsible for subcontractlabor or thirdparty materials and equipment, we reflect the amounts of such items in both revenues and costs. To the extent that we incur a significant amount of passthrough costs in a period, our direct costs of contracts are likely to increase as well. As a percentage of revenues, direct costs of contracts were 49.0% for the year ended December 31, 2013, compared to 47.7% for the year ended December 31,2012. The relationship between direct costs of contracts and revenues will fluctuate between reporting periods depending on a variety of factors including the mix ofbusiness during the reporting periods being compared as well as the level of margins earned from the various types of services provided. As revenues from subconsultant costs typically have lower margin rates associated with them, it is not unusual for us to experience an increase or decrease in such revenues withoutexperiencing a corresponding increase or decrease in our gross margins and income from operations. Operating expenses. Our operating expenses increased approximately $1.6 million for the year ended December 31, 2013, compared to the same period in 2012.The increase in operating expenses was due to additional administrative expenses as a result of becoming a public company in March 2013 and acquisition relatedexpenses however this increase was partially offset by a reduction in our indirect compensation expense due to the increased utilization from our professional staff.Operating expenses include the costs of the marketing and support staffs, other marketing expenses, management and administrative personnel costs, payroll taxes,bonuses and all employee benefits and the portion of salaries and wages not allocated to direct costs of revenues. Operating expenses also include facility costs,depreciation and amortization, professional services, legal and accounting fees, and administrative operating costs. We expense operating costs when incurred.Operating expenses typically fluctuate as a result of changes in headcount (both corporate and field locations) and the amount of spending required to support ourprofessional services activities, which normally require additional overhead costs. Therefore, when our professional services revenues increase or decrease, it is notunusual to see a corresponding change in operating expenses. As a percentage of revenues, operating expenses were 45.3% for the year ended December 31, 2013 compared to 48.4% for the year ended December 31, 2012.These decreases were the result of the increase in utilization of our professional staff compared to the same period last year, internal focus on performance optimizationand the scalability of operations. Other expenses, net. Our other expenses decreased approximately $0.1 million for the year ended December 31, 2013, compared to the same period in 2012. Otherexpenses include primarily interest expense on our outstanding debt. The decrease in other expenses is primarily due to a reduction in the principal amount ofoutstanding debt during 2013. Income taxes. Our consolidated effective income tax rate was 24.1% for the year ended December 31, 2013. The difference between the effective tax rate and thecombined statutory federal and state tax rate of approximately 39.0% for 2013 is principally due to the domestic production activities deduction and research anddevelopment credits as well as higher tax deductions realized on our 2012 federal and state tax returns filed during the third quarter of 2013. The effective tax rate for theyear ended December 31, 2013 also includes the discrete federal tax benefit of approximately $168,000 (4.6%) related to the retroactive legislative reinstatement onJanuary 2, 2013 of the research and development tax credit for the year ended December 31, 2012, which is required to be included in the period the reinstatement wasenacted into law. Our consolidated effective income tax rate was 34.3% for the year ended December 31, 2012. The difference between the effective tax rate compared tothe combined statutory federal and state tax rate of approximately 39.0% for 2012 is due primarily to the domestic production activities deduction during 2012. Liquidity and Capital Resources Our principal sources of liquidity are our cash and cash equivalents balances, cash flow from operations, our lines of credit, and access to financial markets. Ourprincipal uses of cash are operating expenses, working capital requirements, capital expenditures, repayment of debt, and acquisition expenditures. An additional useof cash during 2013 and 2012 was for the payment of income taxes as a result of our acquisition of Nolte during 2010, whereby Nolte was required to switch from a cashbasis taxpayer to an accrual basis taxpayer. We believe our sources of liquidity, including cash flow from operations, existing cash and cash equivalents, proceedsfrom our recent initial public offering, proceeds from the exercise of warrants issued in connection therewith, and borrowing capacity under our credit facilities will besufficient to meet our projected cash requirements. This includes the increased operating expenses we began to incur in April 2013 and will continue to incur inconnection with our change in status to a publicly traded company, such as financial and accounting personnel we have hired or will hire and our planned strategicacquisition activity for at least the next twelve months. We will monitor our capital requirements thereafter to ensure our needs are in line with available capitalresources. 39 We believe our experienced employees and management team are our most valuable resources. Attracting, training, and retaining key personnel have been andwill remain critical to our success. To achieve our human capital goals, we intend to remain focused on providing our personnel with entrepreneurial opportunities toincrease client contact within their areas of expertise and to expand our business within our service offerings. Cash Flows As of December 31, 2013, our cash and cash equivalents totaled $13.9 million and accounts receivable, net of allowance for doubtful accounts, totaled $16.7million, compared to $2.3 million and $15.1 million, respectively, on December 31, 2012. As of December 31, 2013, our accounts payable and accrued liabilities were $3.8million and $4.2 million, respectively, compared to $3.3 million and $3.1 million, respectively, on December 31, 2012. Also, as of December 31, 2013, we had notespayable, stock repurchase obligations and contingent consideration of $4.2 million, $1.6 million, and $1.0 million, respectively, compared to $7.4 million, $2.4 million and$0, respectively, on December 31, 2012. Operating activities For the year ended December 31, 2013, net cash provided by operating activities amounted to $3.4 million primarily attributable to net income of $2.8 millionwhich included noncash charges of $1.5 million from depreciation and amortization, and increases of $1.0 million in accounts payable and accrued liabilities partiallyoffset by decreases of $1.8 million in deferred and income taxes payable. During 2013, we made income tax payments of approximately $2.4 million, which includedpayment of 2012 income taxes as a result of our acquisition of Nolte during 2010 whereby Nolte was required to switch from a cash basis taxpayer to an accrual basistaxpayer. The phasein period for this required tax accounting method change was completed in 2012. For the year ended December 31, 2012, net cash provided by operating activities amounted to $1.5 million primarily attributable to net income of $1.3 millionwhich included noncash charges of $1.5 million from depreciation and amortization and a decrease of $0.9 million in accounts receivable partially offset by decreasesof $1.3 million in deferred and income taxes payable and $0.9 million in accounts payable and accrued liabilities. During 2012, we made income tax payments ofapproximately $2.0 million which included payment of 2011 income taxes as a result of our acquisition of Nolte during 2010 whereby Nolte was required to switch from acash basis taxpayer to an accrual basis taxpayer. Investing activities For the year ended December 31, 2013, net cash used in investing activities amounted to $2.1 million primarily resulting from cash used for our acquisitionsduring fiscal year 2013 and the purchase of property and equipment for our ongoing operations. For the year ended December 31, 2012, net cash used in investingactivities amounted to $1.6 million primarily resulting from cash used for our acquisition of Kaco of $1.0 million and for the purchase of property and equipment for ourongoing operations of $0.6 million. Financing activities For the year ended December 31, 2013, net cash provided by financing activities amounted to $10.3 million primarily attributable to gross proceeds of $9.7 millionreceived from our initial public offering (as discussed elsewhere in this Annual Report on Form 10K), which was partially offset by initial public offering costs paid of$1.6 million. Contributing to the net cash provided by financing activities was gross proceeds of $7.1 million received from the exercise of our public warrants due toour temporary reduction in the exercise price of such warrants (as discussed elsewhere in this Annual Report on Form 10K), which was partially offset by costsassociated with the exercise of such warrants of $0.6 million. Also contributing to the net cash provided by financing activities were borrowings of $0.5 million from theLine Facilities (defined below), offset by scheduled repayments of $4.1 million towards longterm debt and $0.8 million in stock repurchase obligations. For the year ended December 31, 2012, net cash used by financing activities amounted to $0.5 million, primarily attributable to proceeds from borrowings of $2.2million from the Line Facilities, offset by scheduled repayments of $1.8 million in longterm debt and $0.8 million in stock repurchase obligations. In addition, we madepayments of $0.1 million for the repurchase of our common stock. 40 Financing We had two credit facilities totaling $4.0 million (the “Line Facilities”) each with a maturity date of October 30, 2013. During the fourth quarter of 2013, weextended the maturity dates of the Line Facilities to December 31, 2013 as we worked with our lender on our Credit Facility (defined and described below). The interestrate on the Lines Facilities was prime rate plus 1% with a minimum of 4.50%. Mr. Dickerson Wright, our Chairman, Chief Executive Officer and President, and theWright Family Trust, of which Mr. Wright is the trustee, had provided guarantees to our lender in connection with our Line Facilities and Term Loan (as definedbelow). Mr. Wright’s guarantee remains in effect for the term of the Line Facilities and Term Loan, regardless of his continuing employment. The Line Facilitiescontained cross default provisions with each other as well as cross default provisions with the note payable described below. In addition, the Line Facilities containedan annual maximum debt to tangible net worth covenant ratio of 2.30:1 and financial reporting covenant provisions which we were in compliance with this covenantand all other covenant provisions of the Line Facilities as of December 31, 2013. As of December 31, 2013 and 2012, the outstanding balance on the Line Facilities wasapproximately $0 and $2.0 million, respectively. On January 31, 2014, we entered into a Business Loan Agreement with Western Alliance Bank, an Arizona corporation (“Western Alliance”), as lender, whichprovides for a twoyear, $8 million revolving credit facility with a maturity date of January 31, 2016 (the “Credit Facility”). The interest rate is prime rate plus 0.50%, witha minimum of 3.75%. The Credit Facility contains a cross default and cross collateralization provision with the Term Loan (as defined below). The Credit Facilitycontains certain financial covenants, including an annual maximum debt to tangible net worth ratio of 4.00:1.00 as of December 31, 2013 and 8.5:1 for each annual periodending on the last day of each fiscal year thereafter. In addition, the Credit Facility contains an annual minimum debt service coverage ratio equal to 1.50:1.00 for eachannual period ending on the last day of the fiscal year beginning December 31, 2013. The Credit Facility also contains financial reporting covenant provisions andother covenants, representations, warranties, indemnities, and events of default that are customary for facilities of this type. The Credit Facility is guaranteed by (i)NV5, (ii) Nolte, and (iii) Mr. Dickerson Wright. The Credit Facility is secured by a first priority lien on substantially all of the assets of the Company, NV5, and Nolte. Inconnection with entering into the Credit Facility, on January 31, 2014, the Company terminated the Line Facilities. As of January 31, 2014, the outstanding balance onthe Line Facilities was $0. We have a note payable to Western Alliance (the “Term Loan”) with a maturity date of February 1, 2015. The interest rate on the Term Loan is at prime with aminimum of 5.0%. However, on January 31, 2014, the Term Loan was amended to lower the minimum interest rate to 4.50%. The Term Loan is payable in monthlyprincipal installments of $46,000 with a lump sum of the remaining principal balance outstanding due at maturity. The Term Loan is collateralized by substantially all ofour assets and is guaranteed by certain of our stockholders, NV5 Holdings, and Nolte, which guarantee in the case of Mr. Wright remains in effect for the term of theTerm Loan regardless of Mr. Wright’s continuing employment. As of December 31, 2013 and 2012, we had outstanding balances of approximately $1.1 million and $1.7million, respectively, in connection with the Term Loan. The note held by the seller of the Nolte business (the “Nolte Note”) is currently outstanding with a maturity date of July 29, 2017. The Nolte Note bears interestat the prime rate plus 1%, subject to a maximum rate of 7.0%. Under the terms of the Nolte Note, as amended, we pay quarterly principal installments of approximately$0.1 million plus interest. The Nolte Note is unsecured and is subordinated to our bank note, although we are permitted to make our periodic principal and interestpayments. The outstanding balance of the Nolte Note was approximately $1.7 million and $2.2 million as of December 31, 2013 and 2012, respectively. As of December 31, 2013 and 2012 there are stock repurchase obligations which represents notes payable for the repurchase of common stock of certain formerstockholders noncontrolling interest in Nolte. These notes are unsecured and subordinated to bank debt and the maintenance of related debt covenants, and bearinterest from 3.25% to 4.25%. The rates adjust annually based on the prime rate. The notes require quarterly interest and principal payments though their maturitydates which range between 2014 and 2019. The outstanding balance of the stock repurchase obligation was $1.6 million and $2.4 million as of December 31, 2013 and2012, respectively. On July 27, 2012, we acquired certain assets and assumed certain liabilities of Kaco. The purchase price was $3.5 million, consisting of $1.0 million in cash; a notein the aggregate principal amount of $2.0 million (the “Kaco Note”) (bearing interest at 3.0% for the first year and 200 basis points over the oneyear LIBOR for theyears thereafter), which is payable as follows: $0.5 million due by (and paid on) December 28, 2012 and three equal payments of $0.5 million each due on the first,second and third anniversaries of the effective date of July 27, 2012; and 69,330 shares of common stock with an agreed value of $0.5 million, or $7.21 per share. Theoutstanding balance of the Kaco Note was $1.0 million and $1.5 million as of December 31, 2013 and 2012, respectively. 41 On April 30, 2013, we acquired certain assets and assumed certain liabilities of Consilium Partners. The purchase price was approximately $1.1 million, consistingof cash, notes and our common stock, plus an earnout of up to $1.0 million payable in cash and/or our common stock, in the Company’s sole discretion. Payment ofthe $1.0 million earnout was based on the achievement of a certain agreed upon metric for calendar year 2013, which was achieved, and is payable in three annualinstallments beginning in January 31, 2014. The earnout payment of $1.0 million is noninterest bearing. Therefore, we have discounted the $1.0 million paymentobligation for imputed interest. As of December 31, 2013, we had contingent consideration obligations of approximately $1.0 million. On January 31, 2014, we paid thefirst annual installment of $333,333, of which $233,333 was in cash and $100,000 was paid in 12,987 shares of our common stock. Furthermore, the purchase priceconsisted of an uncollateralized promissory note in the aggregate principal amount of $200,000 (bearing interest at 4.0%), payable in three equal payments of $66,666each due on the first, second and third anniversaries of the effective date of April 30, 2013. The outstanding balance of this note was $200,000 as of December 31, 2013. On July 8, 2013, we acquired certain assets and assumed certain liabilities of the Tampa, Florida division of PH&A. The purchase price was approximately$980,000, consisting of cash and notes. The note is an uncollateralized promissory note in the aggregate principal amount of $168,000 (bearing interest at 4.0%),payable in two equal payments of $84,000 each due on December 31, 2013 and December 31, 2014. The outstanding balance of this note was $84,000 as of December 31,2013. On August 12, 2013, the Company acquired certain assets and assumed certain liabilities of Dunn. The purchase price was approximately $250,000, consisting ofcash, a note and our common stock. The note is an uncollateralized promissory note in the aggregate principal amount of approximately $92,000 (bearing interest at4.0%), payable in two equal payments of approximately $46,000 each due on the first and second anniversaries of the effective date of August 12, 2013. Theoutstanding balance of this note was $92,000 as of December 31, 2013. OffBalance Sheet Arrangements We did not have any offbalance sheet arrangements as of December 31, 2013 and 2012. Effects of Inflation Based on our analysis of the periods presented, we believe that inflation has not had a material effect on our operating results. There can be no assurance thatfuture inflation will not have an adverse impact on our operating results and financial condition. Recent Accounting Pronouncement In July 2012, the FASB issued ASU 201202, “Intangibles – Goodwill and Other (Topic 350): Testing IndefiniteLived Intangible Assets for Impairment” inAccounting Standards Update No. 201202. This update amends ASU 201108, Intangibles – Goodwill and Other (Topic 350): Testing IndefiniteLived IntangibleAssets for Impairment and permits an entity first to assess qualitative factors to determine whether it is more likely than not that an indefinitelived intangible asset isimpaired as a basis for determining whether it is necessary to perform the quantitative impairment test in accordance with Subtopic 35030, Intangibles Goodwill andOther General Intangibles Other than Goodwill. The amendments are effective for annual and interim impairment tests performed for fiscal years beginning afterSeptember 15, 2012. Early adoption is permitted, including for annual and interim impairment tests performed as of a date before July 27, 2012, if a public entity’sfinancial statements for the most recent annual or interim period have not yet been issued or, for nonpublic entities, have not yet been made available for issuance. Asthe Company does not currently have indefinitelived intangible assets, the adoption of ASU 201202 did not impact our financial position or results of operations. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Not applicable. 42 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Audited Consolidated Financial Statements: Report of Independent Registered Public Accounting Firm44Consolidated Balance Sheets as of December 31, 2013 and 201245Consolidated Statements of Comprehensive Income for the years ended December 31, 2013 and 201246Consolidated Statements of Changes in Stockholders’ Equity for the years ended December 31, 2013 and 201247Consolidated Statements of Cash Flows for the years ended December 31, 2013 and 201248Notes to Consolidated Financial Statements50 43 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Board of Directors and StockholdersNV5 Holdings, Inc. We have audited the accompanying consolidated balance sheets of NV5 Holdings, Inc. (a Delaware Corporation) and subsidiaries (the “Company”) as ofDecember 31, 2013 and 2012, and the related consolidated statements of comprehensive income, changes in stockholders' equity, and cash flows for each of the twoyears in the period ended December 31, 2013. These financial statements are the responsibility of the Company’s management. Our responsibility is to express anopinion on these financial statements based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require thatwe plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged toperform an audit of the Company's internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis fordesigning audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internalcontrol over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts anddisclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overallfinancial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of NV5 Holdings, Inc. andsubsidiaries as of December 31, 2013 and 2012, and the results of their operations and their cash flows for each of the two years in the period ended December 31, 2013in conformity with accounting principles generally accepted in the United States of America. /s/ GRANT THORNTON LLP Fort Lauderdale, FloridaMarch 28, 2014 44 NV5 Holdings, Inc. and SubsidiariesCONSOLIDATED BALANCE SHEETS(in thousands, except share data) December 31, 2013 December 31, 2012 Assets Current assets: Cash and cash equivalents $13,868 $2,294 Accounts receivable, net of allowance for doubtful accounts of $1,320 and $1,631 as of December 31, 2013 and2012, respectively 16,722 15,052 Prepaid expenses and other current assets 509 311 Deferred income tax assets 1,004 543 Total current assets 32,103 18,200 Property and equipment, net 1,310 1,273 Intangible assets, net 2,993 2,758 Goodwill 7,106 5,857 Cash surrender value of officers’ life insurance 521 656 Other assets 118 600 Deferred income tax assets 724 619 Total Assets $44,875 $29,963 Liabilities and Stockholders’ Equity Current liabilities: Accounts payable $3,780 $3,261 Accrued liabilities 4,189 3,082 Income taxes payable 765 1,992 Billings in excess of costs and estimated earnings on uncompleted contracts 401 430 Client deposits 111 47 Current portion of contingent consideration 333 Current portion of stock repurchase obligation 687 772 Current portion of notes payable 1,725 3,538 Total current liabilities 11,991 13,122 Contingent consideration, less current portion 638 Stock repurchase obligation, less current portion 935 1,621 Notes payable, less current portion 2,502 3,851 Total liabilities 16,066 18,594 Commitments and contingencies Stockholders’ equity: Preferred stock, $0.01 par value; 5,000,000 shares authorized, no shares issued and outstanding Common stock, $0.01 par value; 45,000,000 shares authorized, 5,504,236 and 2,600,000 shares issued andoutstanding as of December 31, 2013 and 2012, respectively 55 26 Additional paidin capital 23,717 9,065 Retained earnings 5,037 2,278 Total stockholders’ equity 28,809 11,369 Total liabilities and stockholders’ equity $44,875 $29,963 See accompanying notes to consolidated financial statements. 45 NV5 Holdings, Inc. and SubsidiariesCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME(in thousands, except share data) Year Ended December 31, 2013 December 31, 2012 Gross revenues $68,232 $60,576 Direct costs (excluding depreciation and amortization): Salaries and wages 19,619 17,041 Subconsultant services 12,337 9,846 Other direct costs 1,460 2,021 Total direct costs 33,416 28,908 Gross Profit 34,816 31,668 Operating Expenses: Salaries and wages, payroll taxes and benefits 19,373 18,348 General and administrative 6,708 6,105 Facilities and facilities related 3,325 3,390 Depreciation and amortization 1,514 1,468 Total operating expenses 30,920 29,311 Income from operations 3,896 2,357 Other expense: Interest expense, net (263) (389)Total other expense (263) (389) Income before income tax expense 3,633 1,968 Income tax expense (874) (675)Comprehensive income $2,759 $1,293 Earnings Per Share: Basic $0.75 $0.58 Diluted $0.70 $0.52 Weighted average shares outstanding: Basic 3,660,289 2,244,737 Diluted 3,967,056 2,485,031 See accompanying notes to consolidated financial statements. 46 NV5 Holdings, Inc. and SubsidiariesCONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY(in thousands, except share data) Common Stock AdditionalPaidIn Retained Shares Amount Capital Earnings Total Balance, January 1, 2012 2,698,195 $27 $9,510 $985 $10,522 Stock compensation 217 217 Stock issuance for acquisitions 69,330 1 499 500 Restricted stock issuance 37,092 Repurchase of common stock (204,617) (2) (1,161) (1,163)Comprehensive income 1,293 1,293 Balance, December 31, 2012 2,600,000 $26 $9,065 $2,278 $11,369 Stock compensation 365 365 Proceeds from initial public offering, net of offering costs 1,610,000 16 7,638 7,654 Proceeds from exercise of warrants, net of costs 1,196,986 12 6,604 6,616 Restricted stock issuance, net 91,298 1 (1) Stock issuance for acquisition 5,952 46 46 Comprehensive income 2,759 2,759 Balance, December 31, 2013 5,504,236 $55 $23,717 $5,037 $28,809 See accompanying notes to consolidated financial statements. 47 NV5 Holdings, Inc. and SubsidiariesCONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) Years Ended December 31,2013 December 31,2012 Cash Flows From Operating Activities: Comprehensive income $2,759 $1,293 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,514 1,468 Provision for doubtful accounts 22 234 Stock compensation 365 217 Change in fair value of contingent consideration 22 Deferred income taxes (benefit) (566) (1,474)Changes in operating assets and liabilities, net of impact of acquisitions: Accounts receivable (426) 942 Prepaid expenses and other current assets (136) (140)Net change in cash surrender value of officers’ life insurance 135 (6)Accounts payable 133 (383)Accrued liabilities 875 (564)Income taxes payable (1,227) 181 Billings in excess of costs and estimated earnings on uncompleted contracts (29) (98)Client deposits (20) (134)Net cash provided by operating activities 3,421 1,536 Cash Flows From Investing Activities: Cash paid for acquisitions (1,617) (1,000)Purchase of property and equipment (533) (554)Net cash used in investing activities (2,150) (1,554) Cash Flows From Financing Activities: Proceeds from initial public offering 9,660 Proceeds from exercise of warrants 7,183 Initial public offering costs (1,580) Exercise of warrants costs (567) Borrowings on notes payable 518 2,250 Payments on notes payable (4,139) (1,796)Payments on stock repurchase obligation (772) (803)Payments made for repurchase of common stock (101)Net cash provided by (used in) financing activities 10,303 (450) Net Increase (Decrease) in Cash and Cash Equivalents 11,574 (468)Cash and cash equivalents beginning of year 2,294 2,762 Cash and cash equivalents – end of year $13,868 $2,294 See accompanying notes to consolidated financial statements. 48 NV5 Holdings, Inc. and SubsidiariesCONSOLIDATED STATEMENTS OF CASH FLOWS(in thousands) Years Ended December 31,2013 December 31,2012 Supplemental disclosures of cash flow information: Cash paid for interest $280 $363 Cash paid for income taxes $2,416 $1,969 Noncash investing and financing activities: Contingent consideration (earnout) $948 $ Notes payable issued for stock repurchase $ $1,062 Notes and stock payable for acquisitions $651 $2,500 Stock issuance for acquisition $46 $ Reclassification of previously capitalized initial public offering costs from other assets to additionalpaidin capital upon completion of initial public offering (including costs incurred prior to 2013) $426 $ See accompanying notes to consolidated financial statements. 49 NV5 Holdings, Inc. and SubsidiariesNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except shares data) Note 1 Organization and Nature of Business Operations Business NV5 Holdings, Inc. and its subsidiaries (collectively, the “Company”, “we” or “our”) is a provider of professional and technical consulting and certificationservices to public and private sector clients. We focus on the infrastructure, construction, real estate and environmental markets. The scope of our projects includesplanning, design, consulting, permitting, inspection and field supervision, and management oversight. We also provide forensic engineering, litigation support,condition assessment and compliance certification. We operate our business through a network of 25 locations in California, Colorado, Florida, Pennsylvania, NewJersey, and Utah. We conduct our operations through two primary operating subsidiaries: (i) Nolte Associates, Inc. (“Nolte”), which began operations in 1949 and wasincorporated as a California corporation in 1957 and was acquired by us in 2010, and (ii) NV5 Global, Inc. (formerly known as NV5, Inc.) (“NV5”), which wasincorporated as a Delaware corporation in 2009. Significant Transactions On July 27, 2012, the Company acquired certain assets and assumed certain liabilities of Kaderabek Company (“Kaco”), a 30person engineering firmheadquartered in Miami, Florida. Kaco commenced operations in 1984 and its development and engineering teams have worked on projects in South Florida, theCaribbean and Central America. On April 30, 2013, the Company acquired certain assets and assumed certain liabilities of Consilium Partners (“Consilium” or “Consilium Partners”), a 20personowner’s representation and program management firm that serves both public and private clients, such as municipalities, major hospitality firms and institutional realestate owners (see Note 4). On July 8, 2013, the Company acquired certain assets and assumed certain liabilities of the Tampa, Florida division of PitmanHartenstein & Associates(“PH&A”). PH&A specializes in transportation infrastructure engineering (see Note 4). On August 12, 2013, the Company acquired certain assets and assumed certain liabilities of Dunn Environmental, Inc. (“Dunn”). Dunn specializes inenvironmental and hydrogeology sciences in Northern California (see Note 4). The acquisitions referenced above were accounted for as business combinations under the acquisition method of accounting. Under this method, the assetsacquired, liabilities assumed and noncontrolling interest, if any, were recorded in the Company’s consolidated financial statements at their respective fair values as ofthe acquisition dates, and the results of these acquisitions are included in the Company’s consolidated results from the respective dates of acquisition. On March 7, 2013, the Company’s Board of Directors approved a 1.3866for1 forward stock split of its outstanding common shares, to be effected immediatelyprior to the consummation of the Company’s initial public offering. The stock split resulted in the issuance of 724,916 additional shares of common stock. Allinformation presented in the accompanying consolidated financial statements has been retroactively adjusted to reflect this stock split. On March 26, 2013, the Company priced its initial public offering of 1,400,000 units. Each unit was sold at an offering price of $6.00 per unit and consisted of oneshare of the Company’s common stock and one warrant to purchase one share of the Company’s common stock at an exercise price of $7.80 per share. The units begantrading on The Nasdaq Capital Market (“Nasdaq”) on March 27, 2013 and traded solely as units through September 26, 2013. The units sold in our initial publicoffering were registered under the Securities Act of 1933, as amended, on a registration statement on Form S1 (No. 333186229), which was declared effective by theSecurities Exchange Commission (“SEC”) on March 26, 2013. On March 28, 2013, the underwriter of the offering exercised its option to purchase up to an additional210,000 units, solely to cover overallotments. The closing of the offering occurred, and was recorded, on April 2, 2013, upon which we received net proceeds ofapproximately $8.1 million after fees associated with the initial public offering and issued 1,610,000 units. In addition, upon closing, the underwriter received a warrantto acquire up to 140,000 units at an exercise price of $7.20 per unit. The underwriter can begin to exercise these warrants on March 26, 2014 and such exercise expires onMarch 26, 2016. Each of these units consist of one share of the Company’s common stock and one warrant to purchase one share of the Company’s common stock atan exercise price of $7.80 per share. On September 27, 2013, the common stock and warrants comprising the Company’s units began trading separately on Nasdaq under the symbols “NVEE” and“NVEEW”, respectively. In connection with the separate trading of the common stock and warrants, the Company’s units ceased trading under the symbol “NVEEU”on the close of the markets on September 26, 2013 and the units were delisted from Nasdaq. 50 NV5 Holdings, Inc. and SubsidiariesNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except share data) On September 27, 2013, the warrants became exercisable at an exercise price of $7.80 per share (see exception below). The warrant exercise period expires onMarch 27, 2018 or earlier upon redemption. We may call the warrants for redemption as follows: (i) at a price of $0.01 for each warrant at any time while the warrants areexercisable, so long as a registration statement relating to the common stock issuable upon exercise of the warrants is effective and current: (ii) upon not less than 30days prior written notice of redemption to each warrant holder; and (iii) if, and only if, the reported last sale price of the common stock equals or exceeds $12.00 pershare for the 20tradingday period ending on the third business day prior to the notice of redemption to warrant holders. On September 27, 2013 and continuing until October 11, 2013 (the “Temporary Reduction Expiration Time”), the Company temporarily reduced the exercise priceof all of its outstanding public warrants from $7.80 per share to $6.00 per share. All such warrants properly exercised in accordance with their respective terms prior tothe Temporary Reduction Expiration Time were accepted by the Company at the reduced $6.00 per share exercise price and one share of the Company’s registeredcommon stock per warrant was issued to the exercising warrant holder. After the Temporary Reduction Expiration Time, the exercise price of the public warrantsautomatically reverted to the warrant exercise price of $7.80 per share included in the original terms of the public warrants and the reduced exercise price was no longerin effect. Except for the reduced $6.00 per share exercise price of the warrants during the Temporary Reduction Expiration Time, the terms of the public warrants remainunchanged. During the Temporary Reduction Expiration Time, 1,196,471 warrants, or approximately 74% of the outstanding public warrants were exercised at thereduced exercise price of $6.00 per share. The temporary reduction in the warrant exercise price generated net cash proceeds to the Company of approximately $6.6million after fees associated with the temporary reduction in the warrant exercise price. All such proceeds were received in October 2013. The temporary reduction ofthe exercise price did not have any impact on the accompanying consolidated financial statements. Note 2 Summary of Significant Accounting Policies Basis of Presentation and Principles of Consolidation The consolidated financial statements of the Company are presented in U.S. dollars in conformity with accounting principles generally accepted in the UnitedStates (“GAAP”) and have been prepared pursuant to the rules and regulations of the SEC. The consolidated financial statements include the accounts of theCompany and its subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts ofassets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expensesduring the reporting period. These estimates and assumptions are based on management’s most recent assessment of underlying facts and circumstances using themost recent information available. Actual results could differ significantly from these estimates and assumptions, and the differences could be material. Estimates and assumptions are evaluated periodically and adjusted when necessary. The more significant estimates affecting amounts reported in theconsolidated financial statements relate to the fair value estimates used in accounting for business combinations including the valuation of identifiable intangibleassets and contingent consideration, fair value estimates in determining the fair value of our reporting units for goodwill impairment assessment, revenue recognitionon the percentageofcompletion method, allowances for uncollectible accounts, and reserves for professional liability claims. Cash and Cash Equivalents Cash and cash equivalents include cash on deposit with financial institutions and investments in high quality overnight money market funds, all of which havematurities of three months or less when purchased. The Company from time to time may be exposed to credit risk with its bank deposits in excess of the FederalDeposit Insurance Corporation insurance limits and with uninsured money market investments. Management believes cash and cash equivalent balances are notexposed to significant credit risk due to the financial position of the depository institutions in which those deposits are held. 51 NV5 Holdings, Inc. and SubsidiariesNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except share data) Concentration of Credit Risk Trade receivable balances carried by the Company are comprised of accounts from a diverse client base across a broad range of industries and are notcollateralized. However, approximately 65% and 74% of our gross revenues for the years ended December 31, 2013 and 2012, respectively, are from Californiabasedprojects and approximately 28% and 27% of revenues for the years ended December 31, 2013 and 2012, respectively, are from two clients. Furthermore, approximately40% and 45% of our accounts receivable as of December 31, 2013 and 2012, respectively, is from government and governmentrelated contracts. As managementcontinually evaluates the creditworthiness of these and future clients, the risk of credit default is considered limited. Fair Value of Financial Instruments A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair valuemeasurement. The three levels of valuation hierarchy are defined as follows: Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets. Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for theasset or liability, either directly or indirectly, for substantially the full term of the financial instrument. Level 3 inputs to the valuation methodology are unobservable and significant to the fair value measurement. The Company considers cash, cash equivalents, accounts receivable, cash surrender value of officers’ life insurance, accounts payable, income taxes payable,accrued liabilities and debt obligations to meet the definition of financial instruments. The carrying amount of cash, cash equivalents, accounts receivable, cashsurrender value of officers’ life insurance, accounts payable, income taxes payable and accrued liabilities approximate their fair value due to the relatively short periodof time between their origination and their expected realization or payment. The carrying amounts of debt obligations approximate their fair values as the terms arecomparable to terms currently offered by local lending institutions for arrangements with similar terms to industry peers with comparable credit characteristics. The Company measures contingent consideration liabilities recognized in connection with business combinations at fair value on a recurring basis usingsignificant unobservable inputs classified within Level 3 of the fair value hierarchy. We use a probabilityweighted approach as a valuation technique to determine thefair value of the contingent consideration on the acquisition date and at each reporting period. The significant unobservable inputs used in the fair valuemeasurements are projections over the earnout period (generally one year), and the probability outcome percentages we assign to each scenario. Significantincreases or decreases to either of these inputs in isolation could result in a significantly higher or lower liability with a higher liability capped by the contractualmaximum of the contingent earnout obligation. As such, the contingent consideration is classified within Level 3. Items classified as Level 3 within the valuationhierarchy, consisting of contingent consideration liabilities related to recent acquisitions, were valued based on various estimates, including probability of success,discount rates and amount of time until the conditions of the contingent payments are achieved. Property and Equipment Property and equipment is stated at cost. Property and equipment acquired in a business combination is stated at fair value at the acquisition date. The Companycapitalizes the cost of improvements to property and equipment that increase the value or extend the useful lives of the assets. Normal repair and maintenance costsare expensed as incurred. Depreciation and amortization is computed on a straightline basis over the following estimated useful lives of the assets. Leaseholdimprovements are amortized on a straightline basis over the lesser of their estimated useful lives or the remaining terms of the related lease agreement. Asset Depreciation Period (years)Office furniture and equipment 5Computer equipment 3Survey and field equipment 5Leasehold improvements Lesser of the estimated useful lives or remaining term of thelease 52 NV5 Holdings, Inc. and SubsidiariesNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except share data) Property and equipment balances are periodically reviewed by management for impairment whenever events or changes in circumstances indicate that thecarrying value of the asset may not be recoverable. If an indicator of impairment exists, the Company compares the estimated future cash flows of the asset, on anundiscounted basis, to the carrying value of the asset. If the undiscounted cash flows exceed the carrying value, no impairment is indicated. If the undiscounted cashflows do not exceed the carrying value, then impairment is measured as the difference between fair value and carrying value, with fair value typically based on adiscounted cash flow model. The Company has not recognized an impairment charge relating to property and equipment during the years ended December 31, 2013and 2012. Goodwill and Intangible Assets Goodwill is the excess of consideration paid for an acquired entity over the amounts assigned to assets acquired, including other identifiable intangible assets,and liabilities assumed in a business combination. To determine the amount of goodwill resulting from a business combination, the Company performs an assessmentto determine the fair value of the acquired company’s tangible and identifiable intangible assets and liabilities. Goodwill is required to be evaluated for impairment on an annual basis or whenever events or changes in circumstances indicate the asset may be impaired. Anentity has the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely thannot that the fair value of a reporting unit is less than its carrying amount. These qualitative factors include: macroeconomic and industry conditions, cost factors,overall financial performance and other relevant entityspecific events. If the entity determines that this threshold is met, then performing the twostep quantitativeimpairment test is unnecessary. The twostep impairment test requires a comparison of the carrying value of the assets and liabilities associated with a reporting unit,including goodwill, with the fair value of the reporting unit. The Company determines fair value through multiple valuation techniques, and weights the resultsaccordingly. We are required to make certain subjective and complex judgments in assessing whether an event of impairment of goodwill has occurred, includingassumptions and estimates used to determine the fair value of our reporting units. If the carrying value reporting unit exceeds the fair value of the reporting unit, theCompany would calculate the implied fair value of its reporting unit goodwill as compared to the carrying value of its reporting unit goodwill to determine theappropriate impairment charge, if any. We have elected to perform our annual goodwill impairment review on August 1 of each year. On August 1, 2013 and 2012, weconducted our annual impairment tests using the quantitative method of evaluating goodwill. Based on these quantitative analyses we determined the fair value ofeach of our reporting units exceeded the carrying value of the reporting unit. Therefore, the goodwill was not impaired and the Company did not recognize animpairment charge relating to goodwill as of August 1, 2013 and 2012. No indicators, events or changes in circumstances indicated that goodwill was impaired duringthe period from August 2 through December 31 of each of fiscal year 2013 and 2012. There were no indicators, events or changes in circumstances to indicate thatgoodwill is impaired during the years ended December 31, 2013 and 2012. Identifiable intangible assets primarily include customer backlog, customer relationships, tradenames and noncompete agreements. Amortizable intangibleassets are amortized over their estimated useful lives and reviewed for impairment whenever events or changes in circumstances indicate that the assets may beimpaired. If an indicator of impairment exists, the Company compares the estimated future cash flows of the asset, on an undiscounted basis, to the carrying value ofthe asset. If the undiscounted cash flows exceed the carrying value, no impairment is indicated. If the undiscounted cash flows do not exceed the carrying value, thenimpairment is measured as the difference between fair value and carrying value, with fair value typically based on a discounted cash flow model. The Company has notrecognized an impairment charge relating to amortizable intangible assets during the years ended December 31, 2013 and 2012. See Note 7 for further information on goodwill and identified intangibles. Earnings per Share Basic earnings per share is calculated by dividing net income attributable to the Company available to common stockholders by the weighted average number ofcommon shares outstanding for the years ended December 31, 2013 and 2012. Diluted earnings per share reflects the potential dilution that could occur if securities orother contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings ofthe Company. In accordance with Accounting Codification Standards (“ASC”) 260, the effect of potentially dilutive securities is not considered during periods of lossor if the effect is antidilutive. The weighted average number of shares outstanding in calculating basic earnings per share for the years ended December 31, 2013 and2012 exclude 505,544 and 414,195 nonvested restricted shares, respectively, issued since 2010. These nonvested restricted shares are not included in basic earningsper share until the vesting requirement is met. The weighted average number of shares outstanding in calculating diluted earnings per share for the year endedDecember 31, 2013 includes nonvested restricted shares and units, issuable shares related to acquisitions, and the warrants associated with our initial public offering.The warrants were dilutive for only a portion of the period then ended. As discussed in Note 1, the Company received cash proceeds from the exercise of a portion ofthese warrants, and issued 1,196,471 additional shares of common stock, all of which was considered in the calculation of basic weighted average shares outstandingfor the year ended December 31, 2013. 53 NV5 Holdings, Inc. and SubsidiariesNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except share data) The following table represents a reconciliation of the net income and weighted average shares outstanding for the calculation of basic and dilutedearnings per share for the years ended December 31, 2013 and 2012: Years Ended December 31,2013 December 31,2012 Numerator: Net income – basic and diluted $2,759 $1,293 Denominator: Basic weighted average shares outstanding 3,660,289 2,244,737 Effect of dilutive nonvested restricted shares and units 265,514 211,281 Effect of dilutive issuable shares related to acquisitions 19,594 29,013 Effect of warrants 21,659 Diluted weighted average shares outstanding 3,967,056 2,485,031 Revenue Recognition We enter into contracts with our clients that contain two principal types of pricing provisions: costreimbursable and fixedprice. The majority of our contractsare costreimbursable contracts that fall under the subcategory of time and materials contracts. Costreimbursable contracts. Costreimbursable contracts consist of two similar contract types: time and materials contracts and costplus contracts. •Time and materials contracts are common for smaller scale professional and technical consulting and certification services projects. Under thesetypes of contracts, there is no predetermined fee. Instead, we negotiate hourly billing rates and charge our clients based upon actual hoursexpended on a project. In addition, any direct project expenditures are passed through to the client and are typically reimbursed. These contractsmay have a fixedprice element in the form of an initial nottoexceed or guaranteed maximum price provision. •Costplus contracts are the predominant contracting method used by U.S. federal, state, and local governments. These contracts provide forreimbursement of the actual costs and overhead (at predetermine rates) we incur, plus a predetermined fee. Under some costplus contracts, our feemay be based on quality, schedule, and other performance factors. Fixedprice contracts. Fixedprice contracts also consist of two contract types: lumpsum contracts and fixedunit price contracts. •Lumpsum contracts typically require the performance of all of the work under the contract for a specified lumpsum fee, subject to priceadjustments if the scope of the project changes or unforeseen conditions arise. Many of our lumpsum contracts are negotiated and arise in thedesign of projects with a specified scope and project deliverables. •Fixedunit price contracts typically require the performance of an estimated number of units of work at an agreed price per unit, with the totalpayment under the contract determined by the actual number of units performed. 54 NV5 Holdings, Inc. and SubsidiariesNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except share data) Revenues from engineering services are recognized in accordance with the accrual basis of accounting. Revenues under costreimbursable contracts arerecognized when services are performed and revenues from fixedprice contracts are recognized on the percentageofcompletion method, generally measured by thedirect costs incurred to date as compared to the estimated total direct costs for each contract. The Company includes other direct costs (for example, third party fieldlabor, subcontractors, or the procurement of materials or equipment) in revenues and cost of revenue when the costs of these items are incurred, and the Company isresponsible for the ultimate acceptability of such costs. Recognition of revenue under this method is dependent upon the accuracy of a variety of estimates, includingengineering progress, materials quantities, achievement of milestones, labor productivity and cost estimates. Due to uncertainties inherent in the estimation process, itis possible that actual completion costs may vary from estimates. If estimated total costs on contracts indicate a loss or reduction to the percentage of total contract revenues recognized to date, these losses or reductions arerecognized in the period in which the revisions are known. The cumulative effect of revisions to revenues, estimated costs to complete contracts, including penalties,incentive awards, change orders, claims, anticipated losses and others are recorded in the period in which the revisions are identified and the loss can be reasonablyestimated. Such revisions could occur in any reporting period and the effects on the results of operations for that reporting period may be material depending on thesize of the project or the adjustment. Change orders and claims typically result from changes in scope, specifications, design, performance, materials, sites, or period of completion. Costs related tochange orders and claims are recognized when incurred. Change orders are included in total estimated contract revenues when it is probable that the change order willresult in an addition to the contract value and can be reliably estimated. Federal Acquisition Regulations (“FAR”), which are applicable to the Company’s federal government contracts and may be incorporated in local and stateagency contracts, limit the recovery of certain specified indirect costs on contracts. Costplus contracts covered by FAR or certain state and local agencies also mayrequire an audit of actual costs and provide for upward or downward adjustments if actual recoverable costs differ from billed recoverable costs. Unbilled work results when the appropriate contract revenues has been recognized when services are performed or based on the percentageofcompletionaccounting method but the revenue recorded has not been billed due to the billing terms defined in the contract. Unbilled amounts as of the reporting date are includedwithin accounts receivable in the accompanying consolidated balance sheets. In certain circumstances, the contract may allow for billing terms that result in thecumulative amounts billed in excess of revenues recognized. The liability “Billings in excess of costs and estimated earnings on uncompleted contracts” representsbillings in excess of revenues recognized on these contracts as of the reporting date. Advertising Advertising costs are charged to expense in the period incurred and amounted to $104 and $185 for the years ended December 31, 2013 and 2012, respectively. Allowance for Doubtful Accounts The Company records billed and unbilled receivables net of an allowance for doubtful accounts. The allowance is estimated based on management’s evaluationof the contracts involved and the financial condition of clients. Factors the Company considers include, but are not limited to: client type (federal government orcommercial client), historical performance, historical collection trends and general economic conditions. The allowance is increased by the Company’s provision fordoubtful accounts which is charged against income. All recoveries on receivables previously charged off are credited to the accounts receivable recovery account areincluded in income, while direct chargeoffs of receivables are deducted from the allowance. Professional Liability Expense The Company maintains insurance for business risks including professional liability. For professional liability risks, the Company’s retention amount under itsclaimsmade insurance policies includes an accrual for claims incurred but not reported for any potential liability, including any legal expenses, to be incurred for suchclaims if they occur. The Company’s accruals are based upon historical expense and management’s judgment. The Company maintains insurance coverage for variousaspects of its business and operations; however the Company has elected to retain a portion of losses that may occur through the use of deductibles, limits andretentions under our insurance programs. Our insurance coverage may subject the Company to some future liability for which it is only partially insured or completelyuninsured. Management believes its estimated accrual for errors, omission and professional liability claims is sufficient and any additional liability over amountsaccrued is not expected to have a material effect on the Company’s consolidated results of operations or financial position. 55 NV5 Holdings, Inc. and SubsidiariesNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except share data) Leases The Company’s office leases are classified as operating leases and rent expense is included in facilities and facilities related expense in the Company’sconsolidated statements of comprehensive income. Some lease terms include rent and other concessions and rent escalation clauses which are included in computingminimum lease payments. Minimum lease payments are recognized on a straightline basis over the minimum lease term. The variance of rent expense recognized fromthe amounts contractually due pursuant to the underlying leases is included in accrued liabilities in the Company’s consolidated balance sheets. Segment Information The Company reports segment information in accordance with ASC Topic No. 280 “Segment Reporting” (“Topic No. 280”). The Company has identifiedoperating segments at the subsidiary entity level. However, each entity’s operating performance has been aggregated into one reportable segment. Each entity’soperations meet the aggregation criteria set forth in Topic No. 280. The Company’s operating segments are aggregated for financial reporting purposes because theyare similar in each of the following areas: economic characteristics, class of customer, nature of service and distribution methods. Income Taxes The Company accounts for income taxes in accordance with ASC Topic No. 740 “Income Taxes” (“Topic No. 740”). Deferred income taxes reflect the impact oftemporary differences between amounts of assets and liabilities for financial reporting purposes and such amounts as measured by tax laws. A valuation allowanceagainst the Company’s deferred tax assets is recorded when it is more likely than not that some portion or all of the deferred tax assets will not be realized. Indetermining the need for a valuation allowance, management is required to make assumptions and to apply judgment, including forecasting future earnings, taxableincome, and the mix of earnings in the jurisdictions in which the Company operates. Management periodically assesses the need for a valuation allowance based onthe Company’s current and anticipated results of operations. The need for and the amount of a valuation allowance can change in the near term if operating results andprojections change significantly. The Company recognizes the consolidated financial statement benefit of a tax position only after determining that the relevant tax authority would more likelythan not sustain the position following an audit. For tax positions meeting the more likelythannot threshold, the amount recognized in the consolidated financialstatements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority. The Companyapplies the uncertain tax position guidance to all tax positions for which the statute of limitations remains open. Generally, the Company remains subject to income taxexaminations by our major taxing authorities from 2010 to 2013. The Company’s policy is to classify interest accrued as interest expense and penalties as operatingexpenses. Note 3 –Recent Accounting Pronouncement In July 2012, the FASB issued ASU 201202, “Intangibles – Goodwill and Other (Topic 350): Testing IndefiniteLived Intangible Assets for Impairment” inAccounting Standards Update No. 201202. This update amends ASU 201108, Intangibles – Goodwill and Other (Topic 350): Testing IndefiniteLived IntangibleAssets for Impairment and permits an entity first to assess qualitative factors to determine whether it is more likely than not that an indefinitelived intangible asset isimpaired as a basis for determining whether it is necessary to perform the quantitative impairment test in accordance with Subtopic 35030, Intangibles Goodwill andOther General Intangibles Other than Goodwill. The amendments are effective for annual and interim impairment tests performed for fiscal years beginning afterSeptember 15, 2012. Early adoption is permitted, including for annual and interim impairment tests performed as of a date before July 27, 2012, if a public entity’sfinancial statements for the most recent annual or interim period have not yet been issued or, for nonpublic entities, have not yet been made available for issuance. Asthe Company does not currently have any indefinitelived intangible assets, the adoption of ASU 201202 did not impact our financial position or results of operations. 56 NV5 Holdings, Inc. and SubsidiariesNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except share data) Note 4 – Business Acquisitions On July 27, 2012, we acquired certain assets and assumed certain liabilities of Kaco, a 30person firm headquartered in Miami, Florida. Kaco began operations in1984 and over the years has become recognized for its technical expertise on development and engineering teams for some of the most challenging projects in SouthFlorida, the Caribbean, and Central America. The purchase price was $3,500 in cash, notes and our common stock, consisting of $1,000 in cash, a $2,000 promissorynote (bearing interest at 3.0% for the first year and 200 basis points over the oneyear LIBOR for the years thereafter) that is payable as follows: $500 due on December28, 2012 and three equal payments of $500 each due on the first, second and third anniversaries of the effective date of July 27, 2012 (see Note 9), and $500 of ourcommon stock valued at $7.21 per share issued on December 28, 2012. On April 30, 2013, we acquired certain assets and assumed certain liabilities of Consilium Partners, a 20person owner’s representation and program managementfirm that serves both public and private clients, such as municipalities, major hospitality firms and institutional real estate owners. Consilium Partners possessesspecialized expertise in managing technically demanding projects, while having an affinity for leading teams and cultivating teamwork with the people who ultimatelydetermine a project’s success. The purchase price was $1,083, consisting of cash, notes (see Note 9) and our common stock plus an earnout of up to $1,000 in cashand/or our common stock in the Company’s sole discretion. Payment of the maximum $1,000 earnout is based on the achievement of a certain agreed upon metric forcalendar year 2013, and, if achieved, is payable in three annual installments beginning in January 31, 2014 in cash and/or our common stock. The maximum earnoutpayment of $1,000 is noninterest bearing. Therefore, we have discounted the $1,000 payment obligation for imputed interest. For the year ended December 31, 2013,the agreed upon metric was met and, therefore, the earnout was achieved. As of December 31, 2013, we had contingent consideration obligations of $971. On January31, 2014, we paid the first annual installment of $333, of which $233 was paid in cash and the remaining $100 was paid by issuing 12,987 shares of our common stock. On July 8, 2013, we acquired certain assets and assumed certain liabilities of the Tampa, Florida division of PH&A. PH&A specializes in transportationinfrastructure engineering. The purchase price was $980, consisting of cash and notes (see Note 9). On August 12, 2013, the Company acquired certain assets and assumed certain liabilities of Dunn. Dunn specializes in environmental and hydrogeology sciencesin Northern California. The purchase price was $250, consisting of cash, notes (see Note 9) and our common stock. Under the acquisition method of accounting, the Company recognized the assets acquired and the liabilities assumed at their fair values and recorded anallocation of the purchase price to the tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values as of theacquisition dates. Goodwill was recorded based on the amount by which the purchase prices exceeded the fair value of the net assets acquired and the amountattributable to the reputation of the businesses acquired, the workforces in place and the synergies to be achieved from these acquisition. The allocation of thepurchase prices to identifiable intangible assets (customer relationships, customer backlog, trade name and noncompete) are based on valuations performed todetermine the fair values of such assets as of the acquisition dates. The fair values of earnout arrangements are included as part of the purchase price of the acquired companies on their respective acquisition dates. Weestimated the fair value of contingent earnout payments as part of the initial purchase price of Consilium and record the estimated fair value of contingentconsideration as a liability on our consolidated balance sheet as of the date of acquisition. We consider several factors when determining that contingent earnoutliabilities are part of the purchase price, including the following: (i) the valuation of our acquisitions is not supported solely by the initial consideration paid, and thecontingent earnout formula is a critical and material component of the valuation approach to determining the purchase price; and (ii) the former owners of acquiredcompanies that remain as key employees receive compensation other than contingent earnout payments at a reasonable level compared with the compensation of ourother key employees. The contingent earnout payments are not affected by employment termination. We measure our earnout (contingent consideration) liabilities at fair value on a recurring basis using significant unobservable inputs classified within Level 3 ofthe fair value hierarchy. We use a probabilityweighted approach as a valuation technique to determine the fair value of the contingent consideration on theacquisition date and at each reporting period until the contingency is ultimately resolved. The significant unobservable inputs used in the fair value measurements areprojections over the earnout period (generally one year), and the probability outcome percentages we assign to each scenario. Significant increases or decreases toeither of these inputs in isolation could result in a significantly higher or lower liability with a higher liability capped by the contractual maximum of the contingentearnout obligation. Ultimately, the liability will be equivalent to the amount paid, and the difference between the fair value estimate and amount paid will be recorded inearnings. During the year ended December 31, 2013, we recorded a change in fair value of $22 related to contingent consideration obligations. 57 NV5 Holdings, Inc. and SubsidiariesNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except share data) We review and reassess the estimated fair value of contingent consideration on a quarterly basis, and the updated fair value could differ materially from theinitial estimates. Adjustments to the estimated fair value related to changes in all other unobservable inputs are reported in operating income. The following table summarizes the fair values of the assets acquired and liabilities assumed as of the acquisition dates for acquisitions closed during 2013: Accounts receivable $1,266 Property and equipment 38 Other assets 4 Intangible assets: Customer relationships 724 Trade name 106 Customer backlog 269 Noncompete 115 Total Assets 2,522 Liabilities (508)Net assets acquired $2,014 Consideration paid (Cash, Notes and stock) $2,315 Contingent earnout liability (Cash and stock) 948 Total Consideration $3,263 Excess consideration over the amounts assigned to the net assets acquired (Goodwill) $1,249 For income tax purposes, goodwill from these acquisitions is deductible over a fifteenyear period. The consolidated financial statements of the Company for the year ended December 31, 2013 include the results of operations from the businesses acquiredduring 2013 from their respective dates of acquisition to December 31, 2013 and include gross revenues and pretax income of approximately $3.7 million and $0.6million, respectively. The consolidated financial statements of the Company for the year ended December 31, 2012 include the results of operations from the businessacquired in 2012 from the date of acquisition to December 31, 2012 and include gross revenues and pretax income of approximately $1,931 and $356, respectively.Included in general and administrative expense for each of the years ended December 31, 2013 and 2012 is $30 of acquisitionrelated costs pertaining to our acquisitionactivities. The Company determined that the acquisitions during 2013 and 2012, individually and in the aggregate do not constitute significant business combinationsand, therefore, historical financial statements and related pro forma financial statements are not required to be disclosed. Note 5 – Accounts Receivable, net Accounts receivable, net consists of the following: December 31,2013 December 31,2012 Billed $12,301 $11,907 Unbilled 5,118 4,270 Contract retentions 623 506 18,042 16,683 Less: allowance for doubtful accounts (1,320) (1,631)Accounts receivable, net $16,722 $15,052 58 NV5 Holdings, Inc. and SubsidiariesNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except share data) Billed accounts receivable represent amounts billed to clients that remain uncollected as of the balance sheet date. Unbilled accounts receivable representrecognized revenues pending billing pursuant to contract terms or accounts billed after period end, and are expected to be billed and collected within the next 12months. Activity in the allowance for doubtful accounts consisted of the following: December 31,2013 December 31,2012 Balance as of the beginning of the year $1,631 $1,284 Provision for doubtful accounts 22 234 Writeoffs of uncollectible accounts (290) (124)Provision from acquisitions 3 142 Other, net (46) 95 Balance as of the end of the year $1,320 $1,631 Note 6 – Property and Equipment, net Property and equipment, net consists of the following: December 31,2013 December 31,2012 Office furniture and equipment $224 $255 Computer equipment 1,013 861 Survey and field equipment 1,067 898 Leasehold improvements 1,032 1,032 3,336 3,046 Accumulated depreciation (2,026) (1,773)Property and equipment – net $1,310 $1,273 Depreciation expense for the years ended December 31, 2013 and 2012 was $536 and $611, respectively. Note 7 – Goodwill and Intangible Assets Goodwill The table set forth below shows the change in goodwill during fiscal 2013 and 2012: December 31,2013 December 31,2012 Balance as of the beginning of the year $5,857 $4,336 Acquisitions 1,249 1,521 Balance as of the end of the year $7,106 $5,857 59 NV5 Holdings, Inc. and SubsidiariesNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except share data) Intangible assets Intangible assets, net, at December 31, 2013 and 2012 consist of the following: December 31, 2013 December 31, 2012 GrossCarryingAmount AccumulatedAmortization Net Amount GrossCarryingAmount AccumulatedAmortization NetAmount Customer relationships $4,275 $(1,653) $2,622 $3,551 $(1,093) $2,458 Trade names 858 (813) 45 752 (581) 171 Customer backlog 885 (720) 165 616 (572) 44 Noncompete agreements 207 (46) 161 92 (7) 85 Total $6,225 $(3,232) $2,993 $5,011 $(2,253) $2,758 Trade names are amortized on a straightline basis over their estimated lives ranging from one to three years. Customer backlog and customer relationships areamortized based on the future expected revenues, with weighted average amortization periods ranging from 1 to 9 years. Noncompete agreements are amortized overtheir contractual lives ranging from 4 to 5 years. Amortization expense for the years ended December 31, 2013 and 2012 was $978 and $857, respectively. As of December 31, 2013, the future estimated aggregate amortization related to intangible assets is as follows: Period ending December 31,2014 $807 2015 630 2016 471 2017 354 2018 245 Thereafter 486 Total $2,993 Note 8 – Accrued Liabilities Accrued liabilities consist of the following: December 31,2013 December 31,2012 Stock payable for acquisitions $192 $ Deferred rent 486 614 Payroll and related taxes 864 632 Professional liability reserve 248 235 Benefits 916 294 Accrued vacation 1,088 1,054 Other 395 253 Total $4,189 $3,082 60 NV5 Holdings, Inc. and SubsidiariesNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, excpet share data) Note 9 – Notes Payable Notes payable consists of the following: December 31,2013 December 31,2012 Two line of credit facilities totaling $4,000 (the “Line Facilities”), due October 30, 2013, interest payablemonthly at prime rate plus 1% with a minimum of 4.50% until maturity, collateralized by substantially allCompany assets, guaranteed by certain stockholders and a wholly owned subsidiary, and contain crossdefault provisions with each other and with the note payable described below (1) $— $1,983 Note payable to bank (the “Term Loan”), interest at prime rate (minimum 5.0%; effective January 31, 2014the minimum was lowered to 4.5%), due February 1, 2015, payable in monthly installments of $46 and a lumpsum of the remaining principal balance outstanding at maturity, collateralized by substantially all Companyassets, guaranteed by certain stockholders 1,144 1,696 Note payable to former stockholder of Nolte, interest at prime rate plus 1% (maximum 7.0%), due July 29,2017, payable in quarterly principal installments of $119. Unsecured and subordinated to the Credit Facilityand the Term Loan (2). 1,707 2,184 $2,000 uncollateralized promissory note issued to the former owner of Kaco (bearing interest at 3.0% for thefirst year and 200 basis points over the oneyear LIBOR for the years thereafter), $500 payable in December2012, and payable in three equal payments of $500 each due on the first, second and third anniversaries ofthe effective date of July 27, 2012 1,000 1,500 $200 uncollateralized promissory note issued to the former owners of Consilium (bearing interest at 4.0%),payable in three equal payments of $66 each due on the first, second and third anniversaries of the effectivedate of April 30, 2013 200 — $168 uncollateralized promissory note issued in conjunction with the PH&A acquisition (bearing interest at4.0%), payable in two equal payments of $84 each due on December 31, 2013 and December 31, 2014 84 — $92 uncollateralized promissory note issued to the former owner of Dunn (bearing interest at 4.0%), payablein two equal payments of $46 each due on the first and second anniversaries of the effective date ofAugust 12, 2013 92 — Other 26 Total debt 4,227 7,389 Less: current maturities (1,725) (3,538)Longterm debt, net of current maturities $2,502 $3,851 (1)During the first quarter of 2013, we borrowed an additional $517 under the Line Facilities; however, on April 4, 2013, we repaid the entire outstandingprincipal balance of $2,500 to the bank. As of December 31, 2013, our capacity to borrow under the Line Facilities was $4,000. On January 31, 2014, weentered into a Business Loan Agreement with Western Alliance Bank, an Arizona corporation (“Western Alliance”), as lender, which provides for a twoyear,$8 million revolving credit facility with a maturity date of January 31, 2016 (the “Credit Facility”). The interest rate is prime rate plus 0.50% with a minimumof 3.75%. The Credit Facility contains a cross default and cross collateralization provision with the Term Loan. The Credit Facility contains certain financialcovenants, including an annual maximum debt to tangible net worth ratio of 4.00:1.00 as of December 31, 2013 and 8.5:1 for each annual period ending onthe last day of each fiscal year thereafter. In addition, the Credit Facility contains an annual minimum debt service coverage ratio equal to 1.50:1.00 for eachannual period ending on the last day of the fiscal year beginning December 31, 2013. The Credit Facility also contains financial reporting covenantprovisions and other covenants, representations, warranties, indemnities, and events of default that are customary for facilities of this type. The Credit Facilityis guaranteed by (i) NV5, (ii) Nolte, and (iii) Mr. Dickerson Wright. The Credit Facility is secured by a first priority lien on substantially all of the assets of theCompany, NV5, and Nolte. In connection with entering into the Credit Facility, on January 31, 2014, the Company terminated the Line Facilities. As ofJanuary 31, 2014, the outstanding balance on the Credit Facilities was $0. (2)Upon issuance in 2010, a portion of this note payable was convertible into shares of common stock of the Company. On March 12, 2013, the note holderprovided his irrevocable confirmation that he will not elect to convert any portion of this note into common stock of the Company now or in the future. 61 NV5 Holdings, Inc. and SubsidiariesNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except share data) Future contractual maturities of longterm debt as of December 31, 2013 are as follows: Period ending December 31,2014 $1,725 2015 1,681 2016 543 2017 278 Total $4,227 Note 10 – Stock Repurchase Obligation The stock repurchase obligation at December 31, 2013 and 2012 represents notes payable for the repurchase of common stock of certain former stockholders’noncontrolling interest in Nolte. These notes are unsecured and subordinated to bank debt and the maintenance of related debt covenants, and bear interest from3.25% to 4.25%. The rates adjust annually based on the prime rate. The notes require quarterly interest and principal payments though their maturity dates, whichrange between 2014 and 2019. The outstanding balance of the stock repurchase obligation was $1,622 and $2,393 as of December 31, 2013 and 2012, respectively. Future maturities of these notes as of December 31, 2013 are as follows: Period ending December 31,2014 $687 2015 372 2016 164 2017 133 2018 133 Thereafter 133 Total $1,622 Note 11 – Leases The Company leases various office facilities from unrelated parties. These leases expire through 2018 and, in certain cases, provide for escalating rentalpayments and reimbursement for operating costs. The Company also leases office space from a stockholder on a monthtomonth basis and the former owner of Kaco,who became a stockholder on December 28, 2012 in conjunction with the Kaco acquisition. The Company recognized lease expense of $2,863 and $2,887 during theyears ended December 31, 2013 and 2012, respectively, which is included in “Facilities and facilities related” in the consolidated statements of comprehensive income.Included in these amounts are $223 and $150 for the years ended December 31, 2013 and 2012, respectively, for office leases with stockholders of the Company. 62 NV5 Holdings, Inc. and SubsidiariesNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except share data) Future minimum payments under the noncancelable operating leases as of December 31, 2013 are as follows: Period ending December 31, Amount 2014 $2,775 2015 2,184 2016 1,540 2017 712 Total minimum lease payments $7,211 Note 12 – Commitments and Contingencies Litigation, Claims and Assessments From time to time the Company may become subject to threatened and/or asserted claims arising in the ordinary course of business. Management is not awareof any matters, either individually or in the aggregate, that are reasonably possible to have a material adverse effect on the Company’s consolidated financialcondition, results of operations or liquidity. Note 13 – Officers’ Life Insurance Investments in life insurance policies were made with the intention of utilizing them as a longterm funding source for postretirement benefits. However, theydo not represent a committed funding source for these obligations and are subject to claims from creditors. This plan was terminated in conjunction with theacquisition of Nolte in 2010, and the Company has no further financial obligations under these policies as of December 31, 2013. The net cash surrender value of these policies at December 31, 2013 and 2012 was $521 and $656, respectively. Note 14 – StockBased Compensation During September and October 2011, we adopted, and our stockholders approved, respectively, our 2011 Equity Incentive Plan, which was subsequentlyamended and restated in March 2013 (as amended, the “2011 Equity Plan”), which provides our directors, executive officers, and other employees with additionalincentives by allowing them to acquire an ownership interest in our business and, as a result, encouraging them to contribute to our success. We may provide theseincentives through the grant of stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares and units, and other cashbased orstockbased awards. As of December 31, 2013, 453,416 shares of common stock are authorized and reserved for issuance under the 2011 Equity Plan. This reserveautomatically increases on each January 1 from 2014 through 2023, by an amount equal to the smaller of (i) 3.5% of the number of shares issued and outstanding on theimmediately preceding December 31, or (ii) an amount determined by our Board of Directors. During the year ended December 31, 2013, we granted from the 2011 Equity Plan 96,406 restricted shares of our common stock to management and employeesand 8,508 restricted stock units to nonemployee directors with an aggregate deferred compensation amount of approximately $827. The fair value of these shares andunits are based on the quoted market values of the Company’s equity as of the grant dates, which is a weightedaverage of $7.88 per share. The restricted shares ofour common stock granted provide for service based vesting after three years following the grant date and the restricted stock units granted provide for service basedvesting as of the day immediately preceding the first annual meeting of the stockholders of the Company following the grant date. During April 2012, we granted from the 2011 Equity Plan 39,657 restricted shares to management and employees of which 2,565 restricted shares were forfeitedduring 2012 with an aggregate deferred compensation amount of approximately $268. During the year ended December 31, 2013, there were 5,058 restricted sharesforfeited. The fair value of these shares is based on the estimated fair value of the Company’s equity as of the grant date, which was estimated at $7.21 per share.These awards provide for service based vesting after three years. 63 NV5 Holdings, Inc. and SubsidiariesNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except share data) In 2010, prior to the inception of the 2011 Equity Plan, the Company issued 377,104 restricted shares of our common stock to management and employees of theCompany with an aggregate deferred compensation amount of approximately $765. This grant was not part of the 2011 Equity Plan. Each award is service based, andvests after five years or upon certain other events, subject to each award agreement. The fair value of these shares was calculated based on the estimated fair value ofthe Company’s equity as of the grant date, which was approximately $2.03 per share. Sharebased compensation expense relating to restricted stock awards during the years ended December 31, 2013 and 2012 was $365 and $217, respectively. Asof December 31, 2013, no shares or units have vested since the 2011 Equity Plan inception, and approximately $1,024 of deferred compensation, which is expected to berecognized over the remaining weighted average vesting period of 1.6 years, is unrecognized at December 31, 2013. Note 15 – Employee Benefit Plan The Company sponsors a 401(k) Profit Sharing and Savings Plan (the “401(k) Plan”). Employees meeting certain age and length of service requirements maycontribute up to the defined statutory limit into the 401(k) Plan. The 401(k) Plan allows for the Company to make matching contributions into the 401(k) Plan and profitsharing contributions in such amounts as may be determined by the Board of Directors. The Company assesses its matching contributions on a quarterly basis basedprimarily on Company performance in previous periods. The Company contributed $232 and $107, respectively, to the 401(k) Plan for the years ended December 31, 2013 and 2012, respectively. Note 16 – Income Taxes Income tax expense (benefit) for the years ended December 31, 2013 and 2012 consisted of the following: Year endedDecember 31,2013 Year endedDecember 31,2012 Current: Federal $1,369 $1,812 State 71 337 Total current income tax expense 1,440 2,149 Deferred: Federal (409) (1,294)State (157) (180)Total deferred income tax (benefit) (566) (1,474) Total income tax expense $874 $675 64 NV5 Holdings, Inc. and SubsidiariesNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousdands, except share data) Temporary differences comprising the net deferred income tax asset (liability) shown in the Company’s consolidated balance sheets were as follows: December 31,2013 December 31,2012 Deferred tax asset: Allowance for doubtful accounts $408 $467 Accrued compensation 888 245 Deferred rent 202 255 Acquired intangibles 222 Depreciation and amortization 113 State income taxes 16 Other 192 208 Total deferred tax asset 1,912 1,304 Deferred tax liability: State income taxes (40) Acquired intangibles (9)Depreciation and amortization (108) Other (36) (133)Total deferred tax liability (184) (142)Net deferred tax asset $1,728 $1,162 Total income tax expense (benefit) was different than the amount computed by applying the Federal statutory rate as follows: Year endedDecember 31, 2013 Year endedDecember 31, 2012 Tax at federal statutory rate $1,235 $669 State taxes, net of Federal benefit 227 104 Federal and state tax credits (367) Discrete federal tax benefit (168) Domestic production activities deduction (107) (139)Other permanent differences, net 54 41 Total income tax expense $874 $675 As of December 31, 2013, the Company had net current and net noncurrent deferred income tax assets of $1,004 and $724, respectively. As of December 31, 2012,the Company had current and net noncurrent deferred income tax assets of $543 and $619, respectively. No valuation allowance against the Company's net deferredincome tax assets is needed as of December 31, 2013 and 2012. Deferred income tax liabilities primarily relate to intangible assets and accounting basis adjustmentswhere the Company has a future obligation for tax purposes. Our consolidated effective income tax rate was 24.1% for the year ended December 31, 2013. The difference between the effective tax rate and the combinedstatutory federal and state tax rate of 39.0% is principally due to the domestic production activities deduction and research and development credits as well as highertax deductions realized on our 2012 federal and state tax returns filed during the third quarter of 2013. The effective tax rate for the year ended December 31, 2013 alsoincludes the discrete federal tax benefit of $168 (4.6%) related to the retroactive legislative reinstatement on January 2, 2013 of the research and development tax creditfor the year ended December 31, 2012, which is required to be included in the period the reinstatement was enacted into law. Our consolidated effective income tax ratewas 34.3% for the year ended December 31, 2012. The reduction in the effective tax rate compared to the combined statutory federal and state tax rate of 39.0% isprincipally due to the domestic production activities deduction. In January 2013, the federal government extended research and development tax credits for years 2012and 2013. Accordingly, we recognized the benefits for 2012 research and development credits in 2013. 65 NV5 Holdings, Inc. and SubsidiariesNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except share data) The California Franchise Tax Board (“CFTB”) initiated an examination of Nolte’s state of California tax filings and raised various questions about approximately$700 of research and development tax credits generated and included in Nolte’s tax returns for the years 20052010. We responded to these inquiries, but in the fourthquarter of 2012, the California Franchise Tax Board denied these credits in full. In early 2013, the CFTB assigned a new examiner. The CFTB examiner conducted a fieldvisit in order to understand our design activities associated with these qualified research activities as the CFTB is reconsidering and reevaluating its position. Noltebelieves it has appropriate qualified research activities, qualified research expenses and documentation to support the credits and believes this position meets therecognition criteria under Accounting Standards Codification (“ASC”) 74010. Accordingly, we have not recorded a liability for uncertain tax benefits related to thesestate or federal research and development credits. An adverse outcome could have an adverse impact on our financial position, results of operations and cash flows. Note 17 – Subsequent Events On January 31, 2014, we acquired certain assets and assumed certain liabilities of Air Quality Consulting, Inc. (“AQC”) located in Tampa, Florida, whichspecializes in occupational health, safety and environmental consulting for a purchase price of up to $1,000 consisting of cash, notes and common stock. On March 21, 2014, we acquired AK Environmental, LLC (“AK”), a natural gas pipeline inspection, construction management and environmental consulting firm,primarily servicing the Northeast, MidAtlantic and Southeast United States. The purchase price was $7,000 and was made with a combination of cash, note payableand stock. Under the acquisition method of accounting, the Company will recognize the assets acquired and the liabilities assumed at their fair values and will record anallocation of the purchase price to the tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values as of theacquisition dates. We expect goodwill will be recorded based on the amount by which the purchase price exceeds the fair value of the net assets acquired and theamount attributable to the reputation of the businesses acquired, the workforce in place and the synergies to be achieved from these acquisitions. In order todetermine the fair values of tangible and intangible assets acquired and liabilities assumed, we will likely engage a third party independent valuation specialist. TheCompany expects to establish a preliminary purchase price allocation with respect to these transactions by the end of the second quarter of 2014. 66 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not applicable. ITEM 9A. CONTROLS AND PROCEDURES Controls and Procedures As of the end of the period covered by this Annual Report on Form 10K, we carried out an evaluation, under the supervision and with the participation of ourmanagement, including our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls andprocedures (as such term is defined in Rules 13a15(e) and 15d15(e) under the Exchange Act. Based on that evaluation, our Chief Executive Officer and our ChiefFinancial Officer concluded that, as of the end of the period covered by this Annual Report on Form 10K, the Company’s disclosure controls and procedures, wereeffective such that the information relating to the Company required to be disclosed in our SEC reports (i) is recorded, processed, summarized and reported within thetime periods specified in the SEC’s rules and forms and (ii) is accumulated and communicated to the Company’s management, including our Chief Executive Officer andour Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Management's Report on Internal Control Over Financial Reporting Our management is responsible for establishing and maintaining adequate control over financial reporting (as defined in Rule 13a15(f) under the SecuritiesExchange Act of 1934, as amended). Internal control over financial reporting is a process to provide reasonable assurance regarding the reliability of our financialreporting for external purposes in accordance with accounting principles generally accepted in the United States. Because of its inherent limitations, internal controlover financial reporting is not intended to provide absolute assurance that a misstatement of our financial statements would be prevented or detected. Ourmanagement, with the participation of our Chief Executive Officer and Chief Financial Officer, assessed the effectiveness of our internal control over financial reportingas of December 31, 2013. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the TreadwayCommission (COSO) in 1992 Internal Control—Integrated Framework. Our management has concluded that, as of December 31, 2013, our internal control over financialreporting was effective based on these criteria. Report of Independent Registered Public Accounting Firm This Annual Report on Form 10K does not include an attestation report of the Company's independent registered public accounting firm regarding internalcontrol over financial reporting. Management's report was not subject to attestation by the Company's independent registered public accounting firm pursuant to therules of the SEC that permit the Company to provide only management's report in this Annual Report on Form 10K. Changes in Internal Control Over Financial Reporting Under the supervision and with the participation of our management, including our Principal Executive Officer and Principal Financial Officer, we conducted anevaluation of any changes in our internal control over financial reporting (as such term is defined in Rules 13a15(f) and 15d15(f) under the Exchange Act) thatoccurred during our most recently completed fiscal quarter. Based on that evaluation, our Principal Executive Officer and Principal Financial Officer concluded thatthere have not been any changes in our internal control over financial reporting during our most recently completed fiscal quarter that has materially affected, or isreasonably likely to materially affect, our internal control over financial reporting. ITEM 9B. OTHER INFORMATION. None. 67 PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE. Incorporated by reference from our definitive proxy statement for the 2014 Annual Meeting of Stockholders, to be filed within 120 days of our fiscal 2013 yearend. ITEM 11. EXECUTIVE COMPENSATION. Incorporated by reference from our definitive proxy statement for the 2014 Annual Meeting of Stockholders, to be filed within 120 days of our fiscal 2013 yearend. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS. Incorporated by reference from our definitive proxy statement for the 2014 Annual Meeting of Stockholders, to be filed within 120 days of our fiscal 2013 yearend. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE Incorporated by reference from our definitive proxy statement for the 2014 Annual Meeting of Stockholders, to be filed within 120 days of our fiscal 2013 yearend. ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES. Incorporated by reference from our definitive proxy statement for the 2014 Annual Meeting of Stockholders, to be filed within 120 days of our fiscal 2013 yearend. 68 PART IV ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (a) Financial Statements: (1) The financial statements required to be included in this Annual Report on Form 10K are included in Item 8 therein. (2) All supplemental schedules have been omitted since the information is either included in the financial statements or the notes thereto or they are notrequired or are not applicable. (3) See attached Exhibit Index of this Annual Report on Form 10K. (b) Exhibits: Number Description 3.1 Amended and Restated Certificate of Incorporation (Incorporated by reference to Exhibit 3.1 to the Company’sRegistration Statement on Form S1 filed with the SEC on January 28, 2013) 3.2 Bylaws (Incorporated by reference to Exhibit 3.2 to the Company’s Registration Statement on Form S1 filed with theSEC on January 28, 2013) 4.1 Specimen Unit Certificate (Incorporated by reference to Exhibit 4.1 to Amendment No. 1 to the Company’s RegistrationStatement on Form S1 filed with the SEC March 11, 2013) 4.2 Specimen Stock Certificate (Incorporated by reference to Exhibit 4.2 to Amendment No. 1 to the Company’s RegistrationStatement on Form S1 filed with the SEC March 11, 2013) 4.3 Specimen Warrant Certificate (included in Exhibit 4.5) (Incorporated by reference to Exhibit 4.5 to Amendment No. 1 tothe Company’s Registration Statement on Form S1 filed with the SEC March 11, 2013) 4.4 Underwriting Agreement, dated March 26, 2013, between the Registrant and Roth Capital Partners, LLC (Incorporatedby reference to Exhibit 1.1 of the Current Report on Form 8K filed with the SEC on April 1, 2013) 4.5 Underwriter’s Warrant dated April 2, 2013 (Incorporated by reference to Exhibit 4.1 of the Current Report on Form 8Kfiled with the SEC on April 5, 2013) 4.6 Warrant Agreement, dated April 2, 2013, between Registrar and Transfer Company and the Registrant (Incorporated byreference to Exhibit 4.2 of the Current Report on Form 8K filed with the SEC on April 5, 2013) 4.7 Amended and Restated Warrant Agreement, dated September 24, 2013, between Registrar and Transfer Company andthe Registrant (Incorporated by reference to Exhibit 4.1 of the Current Report on Form 8K filed with the SEC onSeptember 27, 2013) 10.1 2011 Equity Incentive Plan, as amended through March 8, 2013† (Incorporated by reference to Exhibit 10.1 toAmendment No. 1 to the Company’s Registration Statement on Form S1 filed with the SEC March 11, 2013) 10.2 Form of Restricted Stock Agreement† (Incorporated by reference to Exhibit 10.2 to Amendment No. 1 to the Company’sRegistration Statement on Form S1 filed with the SEC March 11, 2013) 10.3 Form of Restricted Stock Unit Agreement† (Incorporated by reference to Exhibit 10.3 to Amendment No. 1 to theCompany’s Registration Statement on Form S1 filed with the SEC March 11, 2013) 69 Number Description 10.4 Form of Indemnity Agreement (Incorporated by reference to Exhibit 10.5 to the Company’s Registration Statement onForm S1 filed with the SEC on January 28, 2013) 10.6 Employment Agreement, dated April 11, 2011, between NV5, Inc. and Dickerson Wright† (Incorporated by reference toExhibit 10.7 to the Company’s Registration Statement on Form S1 filed with the SEC on January 28, 2013) 10.7 Employment Agreement, dated October 1, 2010, between NV5, Inc. (formerly Vertical V, Inc.) and Richard Tong, asamended by that certain First Amendment to Employment Agreement, dated as of March 18, 2011, between NV5, Inc.and Richard Tong† (Incorporated by reference to Exhibit 10.8 to the Company’s Registration Statement on Form S1filed with the SEC on January 28, 2013) 10.8 Employment Agreement, dated October 1, 2010, between NV5, Inc. (formerly Vertical V, Inc.) and Alexander Hockman, asamended by that certain First Amendment to Employment Agreement, dated as of March 18, 2011, between NV5, Inc.and Alexander Hockman† (Incorporated by reference to Exhibit 10.9 to the Company’s Registration Statement on FormS1 filed with the SEC on January 28, 2013) 10.9 Employment Agreement, dated January 25, 2012, between NV5, Inc. and Michael Rama† (Incorporated by reference toExhibit 10.10 to the Company’s Registration Statement on Form S1 filed with the SEC on January 28, 2013) 10.10 Employment Agreement, dated October 1, 2010, between NV5, Inc. (formerly Vertical V, Inc.) and MaryJo O’Brien, asamended by that certain First Amendment to Employment Agreement, dated as of March 18, 2011, between NV5, Inc.and MaryJo O’Brien† (Incorporated by reference to Exhibit 10.11 to the Company’s Registration Statement on Form S1filed with the SEC on January 28, 2013) 10.11 Business Loan Agreement, dated March 16, 2012, between NV5, Inc., as borrower, and Torrey Pines Bank, as lender,regarding Loan Number 0901122297 (Incorporated by reference to Exhibit 10.12 to the Company’s RegistrationStatement on Form S1 filed with the SEC on January 28, 2013) 10.12 Business Loan Agreement, dated September 19, 2012, between NV5, Inc., as borrower, and Torrey Pines Bank, as lender,regarding Loan Number 0909121377 (Incorporated by reference to Exhibit 10.13 to the Company’s RegistrationStatement on Form S1 filed with the SEC on January 28, 2013) 10.13 Business Loan Agreement, dated September 19, 2012, between Nolte Associates, Inc., as borrower, and Torrey PinesBank, as lender, regarding Loan Number 0909122289 (Incorporated by reference to Exhibit 10.14 to the Company’sRegistration Statement on Form S1 filed with the SEC on January 28, 2013) 10.14 Stock Purchase Agreement, dated as of August 3, 2010, between George S. Nolte Jr., George S. Nolte Jr. and JacquelineA. Nolte, as trustee of the Nolte Family Trust u/t/a/ dated March 28, 1989, as amended and restated August 20, 2011,and NV5, Inc. (formerly Vertical V, Inc.) (Incorporated by reference to Exhibit 10.15 to the Company’s RegistrationStatement on Form S1 filed with the SEC on January 28, 2013) 10.15 Letter Agreement, dated March 12, 2013, between NV5 Holdings, Inc. and the Nolte Family Trust u/t/a dated March 23,1989, as amended and restated August 20, 2011 (Incorporated by reference to Exhibit 10.15 to Amendment No. 2 to theCompany’s Registration Statement on Form S1 filed with the SEC March 20, 2013) 70 Number Description 10.16 Business Loan Agreement (Loan Number 0309136049), dated January 31, 2014, between NV5 Holdings, Inc., asborrower, and Western Alliance Bank, as lender (Incorporated by reference to Exhibit 10.1 to the Company’s CurrentReport on Form 8K filed with the SEC on February 5, 2014). 21.1* Subsidiaries of the Registrant 23.1* Consent of Independent Registered Public Accounting Firm 24.1* Power of Attorney (included in signature page) 31.1* Certification of Chief Executive Officer pursuant to Rule 13a14(a) and 15d14(a) under the Securities Exchange Act of1934, as adopted pursuant to § 302 of the SarbanesOxley Act of 2002 31.2* Certification of Chief Financial Officer pursuant to Rule 13a14(a) or 15d14(a) under the Securities Exchange Act of1934, as adopted pursuant to § 302 of the SarbanesOxley Act of 2002 32.1* Certifications of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to§ 906 of the SarbanesOxley Act of 2002** 101.INS*** XBRL Instance Document 101.SCH*** XBRL Taxonomy Extension Schema Document 101.CAL*** XBRL Taxonomy Extension Calculation Linkbase Document 101.LAB*** XBRL Taxonomy Extension Label Linkbase Document 101.PRE*** XBRL Taxonomy Extension Presentation Linkbase Document 101.DEF*** XBRL Taxonomy Extension Definition Linkbase Document †Indicates a management contract or compensatory plan, contract or arrangement. *Filed herewith. **Furnished herewith. This certification is being furnished solely to accompany this report pursuant to 18 U.S.C. Section 1350, and is not being filed for purposesof Section 18 of the Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filings of the Company, whether made before or afterthe date hereof, regardless of any general incorporation language in such filing. ***Furnished herewith. In accordance with Rule 406T of Regulation ST, the information in these exhibits shall not be deemed to be “filed” for purposes ofSection 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability under that section, and shall not be incorporated by referenceinto any registration statement or other document filed under the Securities Act of 1933, as amended, except as expressly set forth by specific reference in suchfiling. 71 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalfby the undersigned, thereunto duly authorized. NV5 HOLDINGS, INC. By:/s/ Dickerson Wright Dickerson Wright Chairman, Chief Executive Officer and President KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Dickerson Wright and Richard Tong, andeach of them, the individual’s true and lawful attorneysinfact and agent, with full power of substitution and resubstitution, for the person and in his or her name,place and stead, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10K, and to file the same, with all exhibits thereto, and otherdocuments in connection therewith with the Securities and Exchange Commission, granting unto said attorneysinfact and agents, and each of them, full power andauthority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, and fully and to all intents and purposes as hemight or could do in person hereby ratifying and confirming all that said attorneyinfact and agents, or his substitute or substitutes, may lawfully do or cause to bedone by virtue hereof. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant and in thecapacities and on the dates indicated. Signature Title Date /s/ Dickerson Wright Chairman, Chief Executive Officer, and President March 28, 2014Dickerson Wright (Principal Executive Officer) /s/ Michael P. Rama Vice President and Chief Financial Officer March 28, 2014Michael P. Rama (Principal Financial and Accounting Officer) /s/ Donald C. Alford Executive Vice President and Director March 28, 2014Donald C. Alford /s/ Gerald J. Salontai Director March 28, 2014Gerald J Salontai /s/ Jeffrey A. Liss Director March 28, 2014Jeffrey A. Liss /s/ William D. Pruitt Director March 28, 2014William D. Pruitt 72 Exhibit 21.1 LIST OF SUBSIDIARIESOFNV5 HOLDINGS, INC. Name of Subsidiary State or other Jurisdiction ofIncorporation or Organization Parent Names under which such Subsidiaries Do BusinessNV5 Global, Inc.(f/n/a NV5, Inc.) Delaware NV5 Holdings, Inc. N/A Nolte Associates, Inc. California NV5 Holdings, Inc. NV5Nolte Vertical FiveConsilium PartnersDunn Environmental, Inc. NV5 West, Inc.(f/n/a Testing Engineers Southwest,Inc.) Delaware NV5 Global, Inc. Vertical V Testing Engineers, Inc.BTC Vertical VBTC Labs Vertical VTesting Engineers Vertical VNV5 NV5, Inc.(f/n/a Vertical V – Southeast, Inc.) Delaware NV5 Global, Inc. NV5 StructuresNV5 KACOKACOKaderabek Company Inc.PHA NV5 Northeast, Inc.(f/n/a Vertical V – Northeast, Inc.) Delaware NV5 Global, Inc. N/AExhibit 23.1 CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM We have issued our report dated March 28, 2014, with respect to the consolidated financial statements included in the Annual Report of NV5 Holdings, Inc. on Form10K for the year ended December 31, 2013. We hereby consent to the incorporation by reference of said report in the Registration Statement of NV5 Holdings, Inc. onForm S8 (File No. 333187963). /s/ GRANT THORNTON LLP Fort Lauderdale, FloridaMarch 28, 2014 /s/ Dickerson WrightDickerson WrightChairman, Chief Executive Officer, and President(Principal Executive Officer)Exhibit 31.1 CERTIFICATION I, Dickerson Wright, certify that: 1. I have reviewed this Annual Report on Form 10K of NV5 Holdings, Inc.; 2. Based on my knowledge, this Annual Report does not contain any untrue statement of material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Annual Report; 3. Based on my knowledge, the financial statements, and other financial information included in this Annual Report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this Annual Report; 4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in ExchangeAct Rules 13a15(e) and 15d15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a15(f) and 15d15(f)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensurethat material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly duringthe period in which this Annual Report is being prepared; b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, toprovide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance withgenerally accepted accounting principles; c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this Annual Report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this Annual Report based on such evaluation; and d) Disclosed in this Annual Report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recentfiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, theregistrant’s internal control over financial reporting; and 5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the registrant’s ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control overfinancial reporting. Date: March 28, 2014/s/ Michael P. RamaMichael P. RamaVice President & Chief Financial Officer(Principal Financial Officer)Exhibit 31.2 CERTIFICATION I, Michael P. Rama, certify that: 1. I have reviewed this Annual Report on Form 10K of NV5 Holdings, Inc.; 2. Based on my knowledge, this Annual Report does not contain any untrue statement of material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Annual Report; 3. Based on my knowledge, the financial statements, and other financial information included in this Annual Report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this Annual Report; 4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in ExchangeAct Rules 13a15(e) and 15d15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a15(f) and 15d15(f)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensurethat material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly duringthe period in which this Annual Report is being prepared; b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, toprovide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance withgenerally accepted accounting principles; c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this Annual Report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this Annual Report based on such evaluation; and d) Disclosed in this Annual Report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recentfiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, theregistrant’s internal control over financial reporting; and 5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the registrant’s ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control overfinancial reporting. Date: March 28, 2014 /s/ Dickerson WrightDickerson WrightChairman, Chief Executive Officer, and President /s/ Michael P. RamaMichael P. RamaVice President & Chief Financial OfficerExhibit 32.1 CERTIFICATION PURSUANT TO18 U.S.C. SECTION 1350,AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANESOXLEY ACT OF 2002 In connection with the Annual Report of NV5 Holdings, Inc. (the “Company”) on Form 10K for the year ended December 31, 2013, as filed with the Securitiesand Exchange Commission on the date hereof (the “Report”), Dickerson Wright, Chief Executive Officer of the Company, and Michael P. Rama, Chief Financial Officerof the Company, each certify, to the best of his knowledge, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the SarbanesOxley Act of 2002,that: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Date: March 28, 2014 Date: March 28, 2014 This certification accompanies this Annual Report on Form 10K pursuant to Section 906 of the SarbanesOxley Act of 2002 and shall not, except to the extentrequired by such Act, be deemed filed by NV5 Holdings, Inc. for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to theextent that NV5 Holdings, Inc. specifically incorporates it by reference. A signed original of this written statement required by Section 906 has been provided to NV5 Holdings, Inc. and will be retained by NV5 Holdings, Inc. andfurnished to the Securities and Exchange Commission or its staff upon request.

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