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07 annual report


CONTENTS Our Mission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Our Accomplishments. . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Our Report to the Community. . . . . . . . . . . . . . . . . . . . . 3

Financial Report Independent Auditor’s Report. . . . . . . . . . . . . . . . . . . . 4 Statements of Position . . . . . . . . . . . . . . . . . . . . . . . . . 5 Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Liabilities and Net Assets. . . . . . . . . . . . . . . . . . . . . 5 Statements of Activities and Changes in Net Assets. . . . 6 Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . 7 Statements of Functional Expenses 2007 . . . . . . . . . . . 8 Statements of Functional Expenses 2006 . . . . . . . . . . . 9 Notes to Financial Statements. . . . . . . . . . . . . . . . . . . 10 Management and Board of Directors. . . . . . . . . . . . . . . 12 Our Awards. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Our Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13


O

ur Mission We believe that meaningful employment provides the best mechanism for integrating people with disabilities into productive society. Work enhances self-worth, teaches marketable skills and provides a sense of accomplishment and belonging. It reinforces that the individual with a disability is a valuable member of society and that he or she has a productive place in it. Employment also reduces the dependence on public assistance programs and enables the employed individual to gain more economic security and choices than they would otherwise have.

Job Options, Inc. focuses exclusively on providing meaningful employment opportunities for people with disabilities in environments where they work JOI has helped and interact with nondisabled people. This can help reinforce the fact that they are not so different after all, over 4,000 disabled and that we all have diverse talents and skills as well as individuals take their place challenges. JOI coordinates with other social agencies in our community where they programs to people with that provide assistance can contribute and gain a real disabilities. These programs include vocational training, counseling and assisted living housing. Once the sense of self-worth from the individual is ready, JOI provides skill assessment, work they perform. job placement assistance, on-the-job training, ongoing job support programs, and finally, job search assistance into competitive employment. Our employees include individuals with diverse disabilities, ranging from physical disabilities to psychological, emotional and developmental disabilities, as well as individuals who are disabled because of substance-abuse histories. Over the course of its history, JOI has helped over 4,000 disabled individuals take their place in our community where they can contribute and gain a real sense of self-worth from the work they perform.

Page 1 | Job Options 2007 Annual Report


O

ur Accomplishments

Job Options Revenue over the past six years has more than doubled, growing from $13.6 million in fiscal 2001/2002 to more than $31 million in fiscal 2006/2007. We are on track to generate approximately $36 million in revenue in fiscal 2007/2008. During this period of rapid expansion, the number of disabled employees has grown from less than 200 seven years ago to over 460 today.

We believe JOI is poised to continue substantial growth in the near term...

Achieved Profitability in Laundry Operations

Over the past four years we have doubled the size of our laundry business by opening up a new automated facility in San Bernardino. Job Options’ (JOI) laundry business now accounts for nearly 20% of our total revenue. Productivity at San Bernardino has also doubled, with the entire Laundry Division operating profitably. Due to our automated processes, JOI has built a significant commercial laundry business. We’ve secured contracts with high-end resorts such as La Costa Resort and Spa, Fantasy Springs and WorldMark Resorts. In recognition of these accomplishments, in 2006 we were awarded the NISH Business Innovation Award. To win this prestigious award, JOI competed against more than 500 other not-for-profit organizations in the AbilityOne Program (formerly JWOD).

Expansion of Business at CAMP Pendleton

In 2007 we were selected to manage shelf-stocking and inventory-preparation services at the Camp Pendleton Commissary, and began a base-wide custodial contract. These projects provided an additional 57 jobs for individuals with disabilities. In total, the work we perform at Camp Pendleton amounts to over $9 million in revenue and provides employment for over 250 JOI employees.

Food Service Dispute Settled

We settled a two-year dispute over our contractual pricing with Sodexo with minimal impact on our operations. In addition, we are poised to begin cooking and baking operations as well as continued mess attendant work at five locations.

NAVFAC Implementation

We were selected by NISH and the Navy to be the prime contractor for 16 different custodial contracts that fall under the AbilityOne umbrella. These were consolidated into a single contract, with locations in California, Arizona and Nevada. Currently nine of 16 contracts have been incorporated into the prime contract, with all others under this single contract by year-end. By acting as the prime contractor, we enhance our management capabilities and are positioned for additional work with the federal government.

Job Options 2007 Annual Report | Page 2

Ongoing ISO Certification

JOI has been ISO 9001:2000 registered in our Custodial, Food Service, Laundry and Commissary Divisions for over three years. Certification under this quality-management program signifies that we comply with principles of world-class providers. The quality standards and procedures we adhere to are an important part of the rehabilitative services we provide to our disabled employees. These procedures clearly define the work and expected output while contributing to the pride our employees develop as they meet the demanding requirements of our customers.

Business Development

JOI is pursuing new lines of business in secure electronic mail services, call-center operations and in our traditional businesses through partnerships such as businesses owned by disabled veterans.

Debt Reduction

Improved cash flow from decreasing outstanding receivables enabled us to repay over $1 million of debt in fiscal 2006/2007, thereby improving our balance sheet.

We believe JOI is poised to continue

substantial growth in the near term

as we pursue selected commercial

opportunities and expansion in the AbilityOne Program. In addition, we should continue to benefit from the ongoing military and federal government outsource-support functions that can be more cost-effectively supplied by the private sector.


Hospital (20%)

5723

2919

7033

1146 Admin (3%)

9673

7255

O

Custodial (5%)

NAVFAC (8%)

(16%)

Commissary (27%)

Laundry (20%)

ur Report to the Community JOI works in partnership with

Job Options is a San Diego-based not-for-profit organization whose primary mission is to provide meaningful employment for people with disabilities. We meet this goal by employing individuals in basic services such as janitorial, food service, laundry, administrative/clerical, commissary-inventory management and shelf-stocking services to government and commercial customers. Most of our employment opportunities are with various agencies within the federal government and are offered under the provisions of AbilityOne, formerly known as the Javits-Wagner-O’Day Job Options Divisional Revenuefederal government program, which enables certain contracts to be set aside for firms that primarily employ 1741 people Food Under Service individuals with disabilities. this legislation, Custodial NAVFAC (16%) with disabilities must work a minimum (5%) of the (8%) of 75% Hospital 5723 2919 direct labor hours expended under these contracts. (20%) 1146 the We currently have7033long-term contracts with Admin U.S. Department of Defense, General Services(3%) Admin9673 7255 istration, Veterans Administration, Homeland Security (U.S. Customs Border Protection) and the U.S. Postal Service. Our largest customer is the Commissary Department of Laundry (27%) Defense, with a (20%) substantial presence at many of the Navy and Marine Corps bases throughout Southern California. Approximately 87% of our current employees work in federal government facilities, with the remaining 13% in the commercial sector.

government and commercial customers Job Options to provide quality, reliable and costRevenue

effective support services.

35

Millions Millions

Millions

Employees

800 600

28.9

30.1

31.1

26

400 20.6

20

0

97 98 99 00 01 02 03 04 05 06 07 13.6 12.7

15

7

6

/0

06

5

/0

05

4

/0

04

3

/0

03

2

/0

02

1

/0

01

0

/0

00

9

/0

99

8

/9

/9

98

97

Employees

7

6

/0

06

5

/0

05

4

/0

04

3

/0

03

2

/0

02

1

/0

01

0

/0

00

9

/0

8

/9

/9

99

Job Options is entirely self-funded through the contract revenue we receive from various governmental and commercial entities. We do not depend on any gifts or grants to fund our operations, and therefore have an ongoing responsibility to operate within budget. 98

0

9.3

8.5 6.8

97

5

Employees

7

6

/0

/0

06

5

4

/0

05

04

3

/0

/0

03

2

25

0

JOI is now in its 20th year of operation. Over the past six years, our annual rate of growth has been more than 20%. This growth resulted in JOI generating revenue of of Job Options over $31 million Number in fiscal 2006/2007. To meet the Employees requirements of our contracts, JOI currently employs over 800 1000 people, the majority of whom have a disability: physical, psychological, developmental or emotional. 800

/0

6.8

02

1

Job Options Revenue

1000

5

9.3

Commissary (27%)

Number of Job Options

10

13.6

01

0

/0

9

/0

00

99

8

/9

10

98

/9

97

20

1146 Admin (3%)

9673

7255

200

20.6

2919

7033

Number of Job Options Employees Employees

31.1

25

12.7

5723

1741 Custodial (5%)

NAVFAC (8%)

Laundry (20%)

30

26

8.5

9.3

8.5

0

35

15

Food Service 13.6 (16%) 12.7

15

5

Job Options Revenue

28.9

Job Options Divisional Revenue

20

Hospital 10 (20%)6.8

35

30

31.1

26

Job Options Divisional Revenue 20.6

25

Job Options Revenue

30.1

30.1

28.9

30

In 2006/2007, we reorganized our Custodial Division into three separate groups: Hospital Number of Job Options Environmental Employees Services, NAVFAC and Base Custodial to more effectively service our 1000 customers. This resulted in JOI having seven major 800 Divisions – Food Service, Laundry, Commissary and Professional/Administrative Services in 600 addition to the three mentioned above. 400

600 200 400 0 200 0

97 98 99 00 01 02 03 04 05 06 07

97 98 99 00 01 02 03 04 05 06 07

Page 3 | Job Options 2007 Annual Report


Independent Auditor’s Report To the Board of Directors Job Options, Inc. We have audited the accompanying statements of financial position of Job Options, Inc., a California Not-for-Profit Corporation (the “Organization”) as of September 30, 2007 and 2006, and the related statements of activities, changes in net assets, functional expenses and cash flows for the years then ended. These financial statements are the responsibility of the Organization’s management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Job Options, Inc., a California Not-for-Profit Corporation as of September 30, 2007 and 2006, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.


 Donald McLean and Company San Diego, California February 12, 2008

Job Options 2007 Annual Report | Page 4

financial repor t

Statements of Position . . . . . . . . . . . . . . . . . . . . . . . . . 5 Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Liabilities and Net Assets. . . . . . . . . . . . . . . . . . . . . 5 Statements of Activities and Changes in Net Assets. . . . 6 Statements of Cash Flows. . . . . . . . . . . . . . . . . . . . . . . 7 Statements of Functional Expenses 2007. . . . . . . . . . . . 8 Statements of Functional Expenses 2006. . . . . . . . . . . . 9 Notes to Financial Statements . . . . . . . . . . . . . . . . . . . 10


Job Options, Inc.

A CALIFORNIA NOT-FOR-PROFIT CORPORATION

STATEMENTS OF Position SEPTEMBER 30, 2007 AND 2006

ASSETS

2007

2006

CURRENT ASSETS Cash and cash equivalents $ 888,042 $ 692,456 Inventory 250,947 253,025 Contracts receivable 5,301,716 5,058,190 Accounts receivable 113,304 311,830 Prepaid expense 177,799 190,239 Total Current Assets 6,731,808 6,505,740 PROPERTY AND EQUIPMENT Equipment 3,253,268 3,028,678 Furniture and fixtures 6,321 6,321 Leasehold improvements 296,455 292,955 Building 1,322,048 1,322,048 Land 100,539 100,539 Automobiles 261,995 182,076 Less: Accumulated depreciation (1,886,855) (1,598,409) Net Property and Equipment 3,353,771 3,334,208 Non-current Assets Deposits Total Assets

43,290

$ 10,128,869

28,856

$ 9,868,804

Liabilities and Net Assets Current Liabilities Accounts payable and other liabilities $ 1,719,674 $ 1,105,462 Accrued payroll and payroll related expenses 1,472,099 1,345,385 Notes payable, current 416,193 1,005,841 Total Current Liabilities 3,607,966 3,456,688 Notes Payable, net of current portion 2,095,534 2,319,343 Total Liabilities 5,703,500 5,776,031 Net Assets – unrestricted 4,425,369 4,092,773 Total Liabilities and Net Assets

$ 10,128, 869

$ 9,868,804

The accompanying notes are an integral part of these financial statements

Page 5 | Job Options 2007 Annual Report


Job Options, Inc.

A CALIFORNIA NOT-FOR-PROFIT CORPORATION

STATEMENTS OF Activities and changes in net assets

For the Years ended SEPTEMBER 30, 2007 AND 2006

2007

2006

REVEnue Contract revenue $ 30,753,594 $ 29,441,623 Claims and other revenue 297,132 597,465 Interest and investment income 56,233 44,014

Total Revenue 31,106,959 30,083,102

DIRECT EXpense Employee salaries $ 13,343,162 $ 12,660,255 Employee benefits 5,880,188 5,555,780 Subcontractor services 3,230,461 2,940,718 General supplies 1,207,483 1,378,984 NISH commission 934,280 874,265 Utilities 703,013 879,766 Depreciation 358,800 349,344 Equipment leases and rents 292,575 315,879 Other business services 275,849 299,993 Travel 242,393 255,347 Equipment repair and maintenance 198,214 177,965 Bank services and interest 130,262 98,233 Insurance 147,825 132,005 Facility rents 128,666 130,160 Bad Debt expense 110,166 109,506 Professional fees 86,230 200 Food and paper goods 63,374 82,503 Telephone 61,492 69,378 Printing and postage 36,379 19,600 Office supplies 28,049 32,867 Building maintenance 24,832 9,563 Licenses and tax 7,956 13,309 Minor equipment 6,631 10,218 Staff development 4,924 3,131 Marketing 4,855 50 Dues and subscriptions 586 2,074 Total Direct Expense 27,508,645 26,401,093 Administrative Expense 3,265,718 3,431,526 Total Expense 30,774,363 29,832,619 Change in Unrestricted Net Assets

332,596

250,483

Net Assets at Beginning of Year 4,092,773 3,842,290 Net Assets at End of Year

$ 4,425,369

The accompanying notes are an integral part of these financial statements

Job Options 2007 Annual Report | Page 6

$ 4,092,773


Job Options, Inc.

A CALIFORNIA NOT-FOR-PROFIT CORPORATION

STATEMENTS OF Cash Flows

For the Years ended SEPTEMBER 30, 2007 AND 2006

2007

2006

CASh flow from operating activities: Excess of revenues over expenses

$

332,596

$

250,483

358,800

349,344

Add charges to revenue not requiring use of cash: Depreciation Adjustments to reconcile excess of revenue over expenses to net cash flow from operating activities

(Increase)/decrease in contracts and accounts receivable (Increase)/decrease in inventory (Increase)/decrease in prepaid expense (Increase)/decrease in deposits Increase/(decrease) in accounts payable and other liabilities

(45,000) (475,077) 2,078 135,529 12,440 64,624 (14,434) 459 740,926 (440,933)

Net cash (used) by investing activities 1,387,406 (115,571)

Cash flow from investing activities Acquisition of property and equipment (528,365) (335,001) Disposal of equipment 150,003 5,453

Net cash (used) by investing activities (378,362) (329,548)

Cash FlOw from financing activities Proceeds from additional notes payable 190,835 1,630,626 Principal payments on notes payable (1,004,293) (1,345,169)

Net cash provided by financing activities (813,458)

x

285,457

Net increase/(decrease) in cash and cash equivalents

195,586 (159,662)

Cash and cash equivalents beginning of year

692,456

852,118

Cash and cash equivalents at end of year

$

888,042

$

692,456

Supplemental information Interest paid

$

179,119

$

162,218

The accompanying notes are an integral part of these financial statements

Page 7 | Job Options 2007 Annual Report


Job Options, Inc.

A CALIFORNIA NOT-FOR-PROFIT CORPORATION

STATEMENTS OF FUNCTIONAL Expenses For the Year ended SEPTEMBER 30, 2007

2007 TOTAL

PROGRAM SERVICE

MANAGEMENT AND GENERAL

Payroll $ 13,343,162 $ 13,343,162 $ – Payroll benefits 5,914,039 5,880,188 33,851 Management fee 3,048,810 – 3,048,810 Sub-contractor services 3,230,461 3,230,461 – General supplies 1,208,751 1,207,483 1,268 NISH and other commissions 934,280 934,280 – Utilities 703,013 703,013 – Depreciation 358,800 358,800 – Equipment leases and rents 298,261 292,575 5,686 Other business services 281,297 272,722 8,575 Travel 252,523 242,394 10,129 Insurance 208,650 147,825 60,825 Equipment repair and maintenance 198,321 198,214 107 Bank services and interest 179,119 130,262 48,857 Facility rents 128,666 128,666 – Professional fees 125,651 86,230 39,421 Bad debt expense 110,166 110,166 – Telephone 63,948 61,492 2,456 Food and paper goods 63,374 63,374 – Printing and postage 36,379 27,691 8,688 Office supplies 29,015 28,224 791 Building maintenance 24,872 24,832 40 License and taxes 9,173 7,956 1,217 Staff development 7,211 4,924 2,287 Minor equipment 6,631 6,631 – Marketing 6,050 4,855 1,195 Dues and subscriptions 2,740 586 2,154 Donations 1,000 – 1,000

Totals

$ 30,774,363

$ 27,497,006

The accompanying notes are an integral part of these financial statements

Job Options 2007 Annual Report | Page 8

$ 3,277,357


Job Options, Inc.

A CALIFORNIA NOT-FOR-PROFIT CORPORATION

STATEMENTS OF functional expenses For the Year ended SEPTEMBER 30, 2006

2006 TOTAL

PROGRAM SERVICE

MANAGEMENT AND GENERAL

Payroll $ 12,847,304 $ 12,660,255 $ 187,049 Payroll benefits 5,619,331 5,555,780 63,551 Management fee 2,974,507 – 2,974,507 Sub-contractor services 2,940,718 2,940,718 – General supplies 1,379,211 1,378,984 227 Utilities 881,765 879,766 1,999 NISH and other commissions 874,265 874,265 – Depreciation 349,344 349,344 – Other business services 317,895 299,993 17,902 Equipment leases and rents 315,879 315,879 – Travel 255,347 255,347 – Insurance 203,986 132,005 71,981 Equipment repair and maintenance 183,550 177,965 5,585 Bank services and interest 162,218 98,233 63,985 Facility rents 130,160 130,160 – Bad debt expense 109,506 109,506 – Food and paper goods 82,503 82,503 – Telephone 71,560 69,378 2,182 Office supplies 33,092 32,867 225 Printing and postage 21,403 19,600 1,803 Staff development 20,066 3,131 16,935 License and taxes 17,162 13,309 3,853 Professional fees 12,610 200 12,410 Minor equipment 10,218 10,218 – Building maintenance 9,563 9,563 – Dues and subscriptions 8,956 2,074 6,882 Marketing 500 50 450

Totals

$ 29,832,619

$ 26,401,093

$ 3,431,526

The accompanying notes are an integral part of these financial statements

Page 9 | Job Options 2007 Annual Report


NOTE 1 – NATURE OF BUSINESS

Job Options, Inc. (the “Organization”) contracts with federal agencies and private companies to provide a variety of services, including janitorial, grounds maintenance, shelf stocking and laundry throughout Southern California. Work is performed primarily under time and material and negotiated price contracts. The workforce consists principally of capable individuals with severe mental, physical or psychological disabilities. Onthe-job training and continued support is provided to assist employees in reaching their fullest potential. The Organization works closely with the Department of Rehabilitation and other non-profit agencies that assist individuals with disabilities and currently employs over 700 individuals.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Accounting The Organization utilizes the accrual method of accounting for financial statement reporting. Under this method, revenue is recognized when earned and expenses are recognized when incurred.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents Cash equivalents consist of short-term highly liquid investments that are readily converted to cash with an original maturity of three months or less.

Fair Value The carrying amounts reported in the statements of financial position for cash and cash equivalents, accounts receivable, and accounts payable approximate fair value due to their immediate short-term maturity.

Depreciation and Fixed Assets The Organization capitalizes all fixed asset acquisitions and major improvements with a cost basis of $1000 or more with a determinable life greater than one year at the acquisition cost. Replacement, maintenance and repairs, which do not improve or extend the life of the respective asset, are expensed as incurred. Depreciation is computed using the straight-line method over the estimated useful life of the asset. Amortization expense and accumulated amortization have been included in depreciation expense and accumulated depreciation, respectively.

Functional Expenses The costs of providing the Organization’s programs have been summarized on a functional basis in these financial statements. Based on management’s estimates, costs have been allocated between programs and supporting services as they relate to those functions.

Contracts Receivable and Accounts Receivable Contracts receivable consists of balances due for services provided pursuant to written and verbal contracts with various public and private agencies. Generally accepted accounting principles in the United States of America require that an allowance for doubtful accounts be established for accounts receivable. It is the Organization’s policy to evaluate the collectability of receivables on a regular and ongoing basis, if deemed necessary, an adjustment to the allowance for bad debt account is recorded. Accordingly, contracts and accounts receivable are shown net of an allowance for doubtful accounts.

Basis of Presentation Accounting principles generally accepted in the United States of America require that the Organization present information about its financial position and activities in three classes of net assets: unrestricted, temporarily restricted and permanently restricted. In these reporting periods, the Organization had only unrestricted net assets. The Organization reports contributions as restricted if they are received with donor stipulations that limit the use of the donated asset. When a donorimposed restriction expires, that is, when the time restriction expires, or the purpose restriction is accomplished, temporarily restricted net assets are reclassified to unrestricted net assets. When restrictions on contributions are satisfied in the same period as the receipt of the contribution, the Organization reports both the revenue and the related expense in the unrestricted net assets.

Administrative Expense Administrative expense shown on the statement of activities reflects all costs associated with administration/management and general. Based on management’s estimates, administrative costs have been allocated between programs and supporting services as they relate to those functions as reflected in the statements of functional expense.

NOTE 3 – SHORT-TERM INVESTMENTS Short-term investment income comprised of interest and dividends in the amount of $56,233 and $44,014 for the years ended September 30, 2007 and 2006, respectively.

Short-Term Investments

NOTE 4 – CONCENTRATION OF CREDIT RISK

In accordance with accounting principles generally accepted in the United States of America, the Organization accounts for its short-term investments with a readily determinable market value by recording and reporting those investments at fair value. Information about the income earned from short-term investments is discussed in Note 3.

The Organization maintains cash/cash equivalent balances in excess of the $100,000 FDIC limit in one high-quality financial institution. As of September 30, 2007, $879,483 classified as cash was in excess of the FDIC limit.

Retirement Plans The Organization offers a non-contributory 403-B savings plan. The plan allows eligible employees to defer up to the maximum allowed under appropriate laws governing the plan selected. The Organization has two departments, NMC and Food Service, which are covered under union contracts for health and welfare and pension benefits. Contributions for these benefits are carried in employee benefits. Employees in other divisions are paid $.90 per hour as part of the mandated health and welfare benefit. Additional contributions of varying amounts for health and welfare are paid to outside administrators. These contributions are also carried in employee benefits.

Income Taxes

The Organization is a non-profit Corporation exempt from income taxes, except for unrelated business income, under Internal Revenue Code Section 501 (C)(3). Unrelated business activities do not result in significant taxable income.

Job Options 2007 Annual Report | Page 10

NOTE 5 – RELATED PARTIES – MENTAL HEALTH SYSTEMS, INC. Beginning in the year ended September 30, 1994, Mental Health Systems, Inc. (MHS) assisted in establishing Job Options, Inc. (JOI), as a non-profit entity administering vocational rehabilitation programs for MHS. Although JOI is no longer administering vocational rehabilitation programs for MHS, they have entered into other business transactions since that time. As of September 30, 2007 and 2006, the Organization had the following outstanding liabilities and lease commitments with MHS: The Organization has entered into an operating lease agreement with MHS for laundry equipment. The lease commenced December 15, 1997 and matures December 15, 2012. Monthly lease payments decrease annually in years one through eight and become fixed in years nine through fifteen. Monthly lease payments during the year ended September 30, 2007 and September 30, 2006 were $1,800. Total lease payments during the years ended September 30, 2007 and 2006, were $21,600 and $22,422,


respectively. Aggregate future lease payment liabilities are $16,197 for the year ending September 30, 2008. The Organization has the ability to cancel lease with thirty days notice. The Organization would then incur a penalty of three months’ rent. The Organization has entered into a second operating lease agreement with MHS for laundry equipment. The lease commenced February 1, 1998, and matures February 1, 2013 and requires monthly lease payments of $885. Total lease payments during each of the years ended September 30, 2007 and 2006 were $10,620. Aggregate future lease payment liabilities are $7,968 for the year ending September 30, 2008. The Organization has the ability to cancel lease with thirty days’ notice. The Organization would then incur a penalty of three months’ rent.

NOTE 6 – RELATED PARTY – BEHAVIORAL MANAGEMENT SYSTEMS, INC.

The Organization entered into a promissory note agreement with Mental Health Systems, Inc. (a related party) in the amount of $1,000,000, accruing interest at 8.50%. The loan is payable in full with accrued interest on the maturity date of June 30, 2007. The balance as of September 30, 2006 was $700,000. The balance as of September 30, 2007 was $0. In 2004 the Organization entered into a construction loan agreement with NCB Development Corporation in the amount of $181,571 for the construction of a facility. During the year ended September 30, 2005, additional proceeds of $503,429 were added to the loan. During the year ended September 30, 2006 additional proceeds of $433,906 were added to the loan. The balance as of September 30, 2007 and 2006 was $1,065,968 and $1,087,536, respectively. Effective interest rate is 8.375 % through 4/7/11 at which point the rate will fluctuate at 3.5% over the weekly average yield of US Treasury Securities. The loan will mature March 27, 2016.

The Organization has entered into an agreement with Behavioral Management Systems, Inc. (BMS) as of April 1, 2004. BMS is a for-profit entity which has been organized to provide administrative services to the Organization. Officers of Job Options, Inc. are also officers of BMS. Management fees not allocated to programs was $3,048,810 for the year ended September 30, 2007.

During the year ended September 30, 2005, the Organization entered into an equipment loan agreement with NCB in the amount of $500,000. Additional proceeds of $196,720 were added to the loan. The interest rate is the NCB Commercial Loan Base Rate which is currently 6.22%.This loan will mature October 1, 2010. The balance as of September 30, 2007 and 2006 was $520,629 and $687,898, respectively.

NOTE 7 – OPERATING LEASE COMMITMENTS

The Organization has various car loans outstanding with maturities through 2009. The balance in these loans was $14,440 and $31,746 as of September 30, 2007 and 2006, respectively.

The Organization has entered into various operating lease agreements for equipment, vehicles and office space. The leases expire at various dates throughout the years ending September 30, 2012. Future minimum payments, by year and in the aggregate, under noncancelable operating leases with initial or remaining terms of one year or more, consisted of the following as of September 30: Years ending September 30;

2008

2009

2010

93,884

2011

131,684

2012 and thereafter

8,326

$

$

467,401 283,277

984,572

Aggregate future maturities of long-term debt are as follows: Years ending September 30;

2008

$

416,193

2009

344,066

2010

206,776

2011

78,752

2012

50,034

Thereafter

1,415,906

Total

Less current portion

Long-term debt

$

2,511,727 416,193 2,095,534

NOTE 8 – NOTES PAYABLE

NOTE 9 – ASSETS ACQUIRED VIA CAPITAL LEASE

Notes payable consist of the following:

Included in fixed assets are $771,687 of assets that have been acquired via a capital lease agreement on September 30, 2005. There are four separate lease agreements; each requires a $1 buyout at the completion of the lease term. As of September 30, 2007 and 2006, amortization expense, which has been included in depreciation expense, was $54,624 and $57,482, respectively.

Capital lease payable to Tenant Financial Services in the amount of $31,956 for the purchase of a street sweeper, effective interest at 11.5%, 60 monthly payments of $533, with a $1 buy-out at lease maturity date of March 1, 2007. The balance as of September 30, 2007 and 2006 was $0 and $2,592, respectively. The Organization has entered in a non-cancelable lease with Associated Bank in the amount of $500,000 for the purchase of laundry equipment, effective interest at 7.85%, 60 monthly payments of $10,102, with a $1 buy-out at lease maturity date of January 23, 2009. The balance as of September 30, 2007 and 2006 was $152,991 and $257,704, respectively. The Organization had available a revolving line of credit from NCB Development Corporation that was reduced from $1,000,000 to $582,500. The interest rate started at 8.25% and will fluctuate at 3.5% over the weekly average yield of US Treasury Securities. Principal and interest in the amount of $4,867 will be paid monthly with any accrued interest and principal balance due in full on the maturity date of April 1, 2016. The balance as of September 30, 2007 and September 30, 2006 was $567,223 and $577,707, respectively. The Organization entered into a capital lease with Celtic Leasing during this fiscal year. The agreement allows for the purchase of equipment up to $367,822. As of September 30, 2007, the principal balance was $190,835. The effective interest rate as of September 30, 2007 was 6.94%

NOTE 10 – HEALTH AND WELFARE MONEY PURCHASE PENSION PLAN Included in accounts payable and other liabilities as of September 30, 2007 and 2006 were $215,352 and $234,206, respectively, due to various trusts for health and welfare pensions. Included in employee benefits expense were $2,907,805 and $2,639,298, of health and welfare benefits for the years ended September 30, 2007 and 2006, respectively.

NOTE 11 – CONTRACTS AND ACCOUNTS RECEIVABLE – ALLOWANCE FOR DOUBTFUL ACCOUNTS Consistent with generally accepted accounting principles in the United States of America, contracts receivable as of September 30, 2007 and 2006, are shown net of an allowance for doubtful accounts in the amount of $156,942 and $110,000, respectively. The Organization recorded bad debt of $110,166 and $109,506 for the years ended September 30, 2007 and 2006, respectively.

Page 11 | Job Options 2007 Annual Report


Management and Board of Directors MANAGEMENT William R. Mead, Ph.D. Chief Executive Officer

Bill Eastwood, MA Chief Administrative Officer

Jeffrey Johnson Chief Operating Officer

Joe Ryan Laundry Division Manager

Doug Baker Food Service Division Manager

Jeffrey Abate Hospital Environmental Services Division Manager

Margaret Ann Pena NAVFAC Division Manager Gladis Jarquin Administrative Services Division Manager/Safety Officer

Carol Whiteley Commissary Division Manager Valorie Seidl Human Resources Director

Char Healy Controller

Juan Agundis Information Technology Director

Joe Marino Director of Quality Assurance

Steve Credle PTS Administrator and Purchasing

Darren Taplin Navfac Contract Manager

Richard Carillo Director of Contacts Governmental Relations

BOARD OF DIRECTORS Celia Ballesteros Patrick O’Sullivan Bruce Whitcomb, Chairman Richard Woodaman

O

ur Awards

JOB OPTIONS: Recognized for excellence The quality of service we deliver to our customers is a result of our employees’ ability to get the job done efficiently, professionally and with pride. Job Options and its employees have been the recipients of many awards and accolades through the years, including: 2007 NISH Award for Outstanding Performance 2006 NAVFAC SW FEAD San Diego Safety Award – Facilities Maintenance Category–for Janitorial Services for Naval Medical Center 2006 NISH National Business Innovation Award 2006 Grassroots Excellence Award for Governmental Relations 2002 Jim Smith–NISH National Evilyne Villines Award 2005 James Bandy–NISH National William Usdane Award

Job Options 2007 Annual Report | Page 12


O

ur Services

Administrative Services

Grounds/Landscape Maintenance

Customer service • Data entry • Office support • Word processing • Bilingual services • Project Management

Linen and Laundry Services Uniforms • Table linens and napkins • Bed linens and terry • Pick-up and delivery • Flat work, finishing, dry cleaning • Folding • Item rental and COG • Amenities • Dust control (mats, wet mops, dust mops)

Building and custodial Services Floor maintenance • Floor auto scrubbing • Floor power polishing • Carpet cleaning • Vacuuming • Window cleaning • Furniture and office cleaning • Food preparation area cleaning • Hospital aseptic cleaning • Biological agent decontamination and prevention • Restroom cleaning and sanitizing • Common area cleaning • Low dusting and cleaning – walls, doors, furniture, etc. • High dust and cleaning – blinds, ceiling fans and drapes • Waste containers – empty, wash and sanitize • Strip and make beds • Change towels • Restock supplies

Lawn care • Planting • Trimming • Weeding • Watering • Beds maintenance • Street sweeping • Irrigations system construction and maintenance

COMMISSARY AND WAREHOUSING Inventory tracking, management and order writing • Material management and logistics-truck loading/unloading, forklift handling • Shelf-stocking

food and Hospitality services Cashiers • Salad/Pastry/Deli/Other – Selfserve bar replenishment • Table busing and cleaning • Silverware and table setting replenishment • Scullery • Pot washing • Kitchen cleaning • Plate silverware bar/ replenishment • Restaurant area cleaning • Cooking and baking • Menu planning • Food service budget development • Food ordering • Procurement inventory in storage

As a valued partner, Job Options plays a key role in providing

solutions in a wide range of areas to business and government.

our Employees featured in this report The employees photographed in this annual report were taken on location at their respective places of employment. On the cover clockwise: James Bandy: Machine Finisher, Chula Vista Laundry Adolfo Vizcarra: Custodian, San Ysidro Port of Entry Mayra Vella: Restaurant Cleaning, Camp Pendleton Steve Credle: PTS Administrator Inside front cover: Patricia Cruz: Machine Finisher, Chula Vista Laundry Page 12: Hugo Martinez: Production Supervisor, Chula Vista Laundry Back cover: Micah Niel: Scullery Worker, Camp Pendleton Photography by Richard Dowdy: Studio 2055 Concept and Design by Studio 2055, studio2055.com


Laundry Plant

Laundry plant

Food ServiceS

3465 Camino Del Rio South Suite 300 San Diego, CA 92108 Phone: 619-688-1784 Fax: 619-688-9884

Chula Vista Plant 2248 Main Street, Suite 10 Chula Vista, CA 91911 Phone: 619-575-7627 Fax: 619-424-8768

San Bernardino Plant 1110 S. Washington Avenue San Bernardino, CA 92408 Phone: 909-386-0342 Fax: 909-890-4673

560 Greenbrier Drive Suite 103 Oceanside, CA 92054 Phone: 760-547-2480 Fax: 760-547-2485

Š2008 Job Options, Inc. 04/08; 50

Corporate Office


Job Options Inc. Annual Report 2007