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2 WNDPB September 2011

WND Impact

Flooding impactedlocal businesses

2 FloodingimpactedlocalbusinessesKevin Nelson

made it a

personal point to

help those during

flooding in the

state’s capital city

4 The floodsimpact onincome taxesIt may seem

premature to

start thinking

about this year’s

taxes

6 Developingangel andcapitalinvestors inwesternNorth DakotaIt has been tough

to get venture

capital groups

into North

Dakota.

6 WND News

Front Cover:Evan Anderson is

helping transform

ideas into reality.

See page 8

Kevin Nelson, Associate Vice President, Civil Services/Aviation for Ulteig inBismarck, ND, made it a personal point to help those during flooding in thestate’s capital city during the week following Memorial Day.

After helping his sister and a friend, he starteddriving around the community helpingthose needing sandbagging help. “They had

the look of desperation,” he says. “In addition, somepeople weren’t building the dikes the right way andweren’t too happy to see me when I told them theyhad to redo the dike. At first it was overwhelming,but then they were relieved when they found outthat the changes would make the dikes sturdier.”

Ulteig was just one of the many companiesalong the Missouri River and Souris River thateither helped or was impacted by the flooddevastation. Along with Nelson’s individualcommitment, Ulteig also worked with the Corps ofEngineers, contractors, and the city of Bismarck toestimate and check the water elevation.

Business-wise, Nelson states that the floodingtook Ulteig away from productive work. “We knewwe could get caught up if we put in more hours,” heexplains. “Helping this community is important tous, because without the community, business wouldbe nothing. We’ve realized what the long-term effectwill be.”

For example, Ulteig had jobs scheduled to start

in June that haven’t started because construction isbehind schedule as a result of the flood fightingeffort around the region.

MASSIVE EFFORT BY ENERGYCOMPANIES TO MAINTAIN POWER

In Minot, ND, Xcel Energy put forth a massiveeffort during the flood to maintain power so thatcritical city facilities and homes unaffected by floodwaters would still have electrical service, statesKathy Aas, Community Relations Manager for XcelEnergy.

“Most of Xcel Energy’s electricity systemremained energized and dangerous throughout theflooding event,” she says. “Due to the rapid influx ofwater during this flood event, it was difficult tosafely disconnect service even within the mandatoryevacuation areas. As the water receded, Xcel Energyworked to de-energize the electrical system inflooded areas by removing meters one at a time.”

Xcel Energy, who serves 17,000 customers inMinot and nearby communities, de-energizedalmost 3,400 electric meters. As of the middle ofJuly, the energy company has only been able to

Table of Contents

U.S. Highway 52 was closed near Minot because of flooding in June. The flood caused several majorhighways and roads to be closed, which caused problems for Verendrye and other businesses.

WNDPB 3

reconnect more than 700 meters, most of which are only temporaryservices.

Verendrye Electric Cooperative, a non-profit electric distributioncooperative that provides electricity to more than 9,000 customers andaround 12,500 electric meters in seven counties, estimates that almost1,000 members were impacted in some way by the flood.

“A good example of how some of the city members were affectedwould be the Holiday Village mobile home park, located in southeastMinot,” says Tom Rafferty, Verendrye Electric CooperativeCommunications Manager. “When the river crested, those mobilehomes were inundated nearly up to the rooftops. The park has about260 members and we had to disconnect the entire park because ofsafety reasons and because the entire park was evacuated.”

Rafferty adds that the goal was to leave the power on as long aspossible so that people running sump pumps could continue to do so.“But when water is several feet high in areas, power had to bedisconnected for safety reasons,” he explains.

FIGHTING FLOOD WATERS ON SEVERAL FRONTSI Keating Inc. Furniture World had to battle the flooding in both

Bismarck and Minot.In Bismarck, the company was concerned about flood waters

potentially reaching the Kirkwood Mall. Arrangements were made tolease the former Home Depot building. “Once we had that buildingleased, we knew we could minimize the threat of losing substantialinvestment in inventory and the building also could provide us with theopportunity to continue our operations,” says Matt Kramer, Owner ofI. Keating Inc. Furniture World. “It was critical for us to maintainoperation for two reasons. First, we wanted to ensure that employeescould continue to have jobs and income, and second we wanted tocontinue to provide service to our customers.”

Kramer was also concerned about the homes and belongings of theemployees and residents of Bismarck allowing use of company trucksand employees to safely move people and their belongings. “We allowedour staff to leave work in order to help with the flood fight in a varietyof ways – from moving homes to sandbagging,” Kramer says.

Kramer adds that Minot had many of the same concerns asBismarck. The main store is right on the edge of the flooding and therewas a warehouse that was impacted by flood waters. “Fortunately, wehad time to move any inventory that would have been affected,”Kramer states. “The flood in Minot directly impacted more homes,

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4 WNDPB September 2011

WND Impact

Special rules for income tax deductions resulting from thedisaster may allow some individuals to claim refundsfrom previous years’ taxes paid, and provide cash for

cleanup. Many of the receipts needed to prove the loss areeasily accessible now (they are still in the jockey box of thepickup), and those that are not available will take some timeto assemble before the filing deadline for 2011 income taxreturns. Tax professionals are aware of the special rulesgoverning casualty loss reporting, and have time now to assistwith these issues. And the records necessary to file aninsurance claim are the same as those needed for claiming taxdeductions, saving valuable time in the long run.

Individuals with damages to property need records to

The flood’s impactIt may seem premature to start thinkingabout this year’s income taxes whenthere is still water surrounding ourhomes and businesses and on thecalendar says it’s summer. But there isgood reason to do just that.

including 15 of our employees.”

BUSINESS IMPACT FROM THE FLOODKramer says that he knows that many other businesses were impacted on a

far greater level than his company was. “We are still in the process ofmeasuring the business impact,” he states. “Door traffic at our two largeststores was significantly impacted for the months of June and July. OurBismarck store experienced a short term decline in business, but recoveredquickly and was back to normal numbers by the end of June.”

As for Minot, Kramer states that door traffic was significantly impacted forthree weeks due to Broadway being closed. The Minot store is stillexperiencing the flood effects (as of the end of July.)

“With the amount of homes affected in the Minot area at more than 4,000,it could be some time before our business recovers to the pre-flood numbers.”

The flood also resulted in additional business expenses for I. Keating Inc.Furniture World. The company leased the Home Depot Building in Bismarckfor three months and some additional warehouse space in Minot for threemonths.

Along with working longer hours to catch up on work, Ulteig has seen animpact on its bottom line, Nelson says. “The flooding delays revenue we havebeen expecting for the year,” he states. “We are staying plenty busy with otherprojects.”

Nelson adds that the business side is coming back, however, some ofUlteig’s clients are still impacted. “Projects are impacted because water is stillso high,” he states. “Businesses are slowly getting back to normal.”

For the electrical companies, the flood did damage equipment and washedout poles and undergrounds lines, as well as damaged switchgears andtransformers.

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“Hundreds of meters are damaged and will have to be replaced,”Rafferty states. “It is too early to put a total dollar value on thedamage.”

Along with flood work, Verendrye continues to do the normal,non-flood restoration work. “Minot is growing and we have manynew homes and businesses that we will be hooking up this summerand fall,” Rafferty says.

For Xcel Energy, in addition to system damages, the ServiceCenter was completely flooded with water reaching about 6 ½ feetinside the building.

Aas says the company is grateful to Montana Dakota Utilities forsharing office and warehouse space. Additionally, Minot StateUniversity assisted Xcel Energy with housing needs for additionalworkers.

“With motels filled to capacity or flooded, Xcel Energy leased RVsfor some employee housing,” she says. “We are also grateful to theMinot Public Schools for allowing us to locate them on theirproperty.”

Aas adds that as homeowners rebuild, they are encouraged tocheck out efficiency rebates for central air conditioning and otherequipment. “The utilities in the state worked to increase the amountsof rebates available to FEMA-registered homeowners throughDecember 31 as part of a package of offerings through the AmericanRecovery and Reinvestment Act (ARRA) in partnership with theNorth Dakota Department of Commerce. These rebates help makehighly efficient units more affordable and customers can see thebenefits for years to come in reduced energy costs.” WNDPB

Alan Van Ormer - avanormer@prairiebizmag.com

establish the original cost of the property. Taxpayers mustestablish the market value of the property both before and afterthe flood damage, as well as amounts spent to restore or replacethe property. If documents were damaged or lost, there areoptions to reconstruct the records needed for tax reporting.

Businesses also require records to support the cost ofproperty lost, amounts spent to repair or replace property, and toaccount for the expenses of protecting property from damage.Most businesses have insurance to assist in these circumstances,so good recordkeeping will minimize the tax cost of receivinginsurance proceeds. Employers must also comply withadditional reporting if the business provided any form ofassistance to its employees.

No need to be intimidated by all of the rules. There areseveral reliable resources available: IRS and the state of ND bothpublish information on their websites that is very readable (www.irs.gov and www.nd.gov/tax); and tax professionals canguide in planning for the best outcome in each unique situation.

Casualty losses from the flood do affect income taxes, so actnow to improve the financial impact of the floods on you.WNDPB

Carleen Shilling is a CPA and a partner with Eide Bailly LLP.She can be reached at cshilling@eidebailly.com.

WND Finance

We’re a gap-financing type fund,” states Dean Reese, CEO of the NorthDakota Development Fund. “We deal with financial institutionsthroughout the state, as well as finding ways to fit the needs of the

company.”Niles Hushka has been an angel and venture investor for at least 10 years. He is

also a mentor at the Idea Center in Bismarck, ND.“Angel investors must be risk takers with compassion,” he states. “They are

people who have attempted and been successful but also have failed.”The group that Hushka participates in focuses on successful businesses that

need cash to make major leaps forward. “You get involved only when you areasked,” he states. “You watch and read everything that involves your companies andthen step in only when your help is requested.”

Hushka adds that the biggest challenge is keeping a positive attitude. “Seven outof 10 of your investments fail!” he exclaims.

Reese adds that the biggest issue the fund deals with is risk. “We can do loansand equity investments in the companies,” he states. “The main thing is workingwith companies who are coming to the state, current companies who areexpanding, along with start-ups, and finding more and better paying jobs.”

“

WND News

Developing angel and capital investors inIt has been tough to get venture capital groupsinto North Dakota. However, the North DakotaDevelopment Fund is playing the role of asmaller-investor type to help businesses getstarted and create jobs.

LAND BOARD APPROVES $53 MILLION TOHELP COMMUNITIES IMPACTED BY OIL ANDGAS DEVELOPMENT

The Board of University and School Lands (LandBoard) has approved $53.5 million in grants to helpcommunities impacted by oil and gas development payfor needed infrastructure projects.

Dickinson, Williston, and Minot were granted $21million to fund infrastructure projects that supportgrowing populations. Williston will receive $12 million,Dickinson, $5 million, and Minot, $4 million. Inaddition, smaller cities in the region will also share theremaining $32.5 million.

The grant funds are expected to help address housinginfrastructure needs including street construction andimprovement projects, municipal water lines andsewer lines.

State taxes paid on oil and gas production will befunding the grants.

DICKINSON DEALING WITHINFRASTRUCTURE WORK

North Dakota state officials have authorizednearly $54 million in grants to help oil-impacted cities withinfrastructure needs. Dickinson,ND will receive the $5 million itrequested to help pay for a wastewater treatment facility.

Construction of 40 lots hasalso started in the DiamondAcres Subdivision innortheast Dickinson.The plan is to developalmost 190 lots forsingle and multi-familyhomes, as well as 10commercial lots.

6 WNDPB September 2011

WNDPB 7

The North Dakota Development Fund is like an angel investor orventure capitalist in that they have an exit strategy and provide equityfor projects. One difference is that an angel investor or venturecapitalist is looking at a return on investment.

“Our strategy for a return on investment isn’t in the same realm,”Reese states.

The North Dakota Development Fund plays a role of a smallerinvestment type, usually around $300,000, but Reese says the fund haswent higher. “We negotiate our own exit strategy and like to be outwithin five years,” he adds. “We generally like to see companies havetheir ‘prototype developed and tested before requesting funding’.”

The North Dakota Development Fund was created in 1991 under‘Growing North Dakota Legislation,’ an initiative that was looking atways to help fund companies. Since 1991, an estimated $27 millionhas been placed in the fund and more than $85 million has beeninvested in ‘Primary Sector’ North Dakota companies. Primary Sectoris defined as an individual, corporation, limited liability company,partnership or association, which through the employment ofknowledge or labor adds value to a product, process, or service thatresults in the creation of new wealth. Primary Sector includestourism, but not production agriculture and is typicallybusinesses such as manufacturing, food processing, or exportedservice companies.

Reese says the Fund has been self-sustaining since 2003 and the Fund hasworked with at least 480 companies.WNDPB

Alan Van Ormer -avanormer@prairiebizmag.com

western North Dakota1

STPH

ASE

GRANITE PEAK BREAKSGROUND ONWILLISTON INDUSTRIALPARK

Work on the BakkenIndustrial Park Subdivision, a770 real estate project, hasstarted along U.S. Highway 2and 85 north of Williston. Theindustrial park is expected tohelp Williston with a plannedand orderly development ofWilliston’s commercial andindustrial land.

Site construction on 447acres in the first phase of theproject started on Aug. 1. Itincludes earthwork, roads,infrastructure, andsewer lines.

8 WNDPB September 2011

From napkin scribbles to products:Innovative Solutions helps transformideas into reality

In the back of the shop, wheel chairs sit up against the wall and apolice car prototype is parked in the parking lot. Welcome toInnovative Solutions…the place where ideas become reality.“Our core strength is helping people solve problems,” explains Evan

Anderson, CEO of Innovative Solutions, LLC. “This company startedwith an initial focus of helping inventors. After a while we found thatthose same skills were needed in other industries to help them withproduct development.”

With its beginnings dating back to 2001, Innovative Solutions offersservices such as Design, Prototyping, Manufacturing, Photorendering,Animation and Inventor Services to a very diverse client base thatstretches across several industries. Anderson’s passion for the inventionand problem solving process is evident in each project that he and histeam of six employees take on. His extensive background inmanufacturing management and product development helps round outhis team that includes a strong engineering and fabrication staff with theability to create in-house prototypes – the first edition of a productwhere you try it out and make it better before manufacturing it for sale –ensuring flexibility and speed for their clients.

“We’ve learned what it takes to go from a scribble on a napkin to aproduct to sell!” exclaims Anderson. Some of those ideas that started outas scribbles include components for medevac helicopters, an electricalharness test system for a manufacturing environment, Talon – a policepursuit ending device, an automated test stand for a truck lid, an agecalculator for bar and restaurant use, a lancet for drawing blood samples,and even a gadget called The Pumpkin Gutter – a device invented by

Anderson that provides a quick and easy way to remove pumpkin stringsand seeds while carving. The Pumpkin Gutter has gained nationalattention by being featured on Martha Stewart and The Today Show. Theproduct is currently available on Amazon.com and will be available atlarge retail outlets this fall.

“Innovative Solutions is an invaluable asset for someone in mysituation,” says Randy Lang, a client that has been working withInnovative Solutions for over a year on two projects. Lang is currentlytesting prototype products that the IS team designed and created.Modifications that need to be made are handled skillfully, and Andersonhas also facilitated a patent search through an attorney forLang’s products.

“With my employment and family obligations, there would be nopossible way for me to accomplish this task,” explains Lang. “I am verythankful for Evan’s business. Innovative Solutions is a conduit forbringing ideas to fruition. I believe this service to be invaluable.”

The IS client base also includes larger corporations such as Bobcat,Phoenix International and Sanford Health as well as companies andindividuals located in California, Texas, and Illinois. “We have experiencein so many different industries,” says Anderson, “and we always bringlots of differing viewpoints to the table to make sure we leave no stoneunturned no matter what the project!”

Innovative Solutions is located in Bismarck, ND. You can visit theirwebsite at www.innovativesolutions-llc.com. WNDPB

Mandy Anderson is a Bismarck, ND-based freelance writer. She can bereached at mandy@mandybanderson.com.

WND Innovation

Tubular Transport & Logistics (“TTL”), a rail transloading anddistribution company based in Rifle, CO, has been named as the newoperator and lease holder for the Northern Plains Commerce Centre(“NPCC”).

Under the new lease agreement, TTL will continue to service theexisting local rebar, wire, and lumber accounts while seeking additionalopportunities for transloading locally delivered products. In addition,TTL will add new business, including oil country tubular goods (OCTG)for distribution into the Bakken.

“We are enthusiastic about this opportunity to bring additional jobs toBismarck,” commented Vince McLeod III, president of TTL. “In additionto continuing current operations, we expect to generate $100 million intaxable sales for North Dakota in the first year of operation through ourpartnership with Energy Tubulars.” Energy Tubulars, Inc. (“ETI”) brokersOCTG for use at oil drilling sites throughout the United States.

In addition to maintaining existing operations at the NPCC, TTLintends to retain the existing staff as well as hire additional employees.“We have been very impressed top to bottom with the staff at NPCC,from the skills of existing management to the quality of care that forklift

operators have given the products at the site,” said Dan Heykoop,executive vice president. “This opportunity for TTL is especially excitingfor the possibility of adding quality people to our team.”

Current projections are that TTL operations will add 25 new full-time jobs for the City of Bismarck. “Our growth projections suggest thatwe will need 7 to 10 truck drivers and 6 handlers by year’s end and willemploy 30 by the end of year three,” Heykoop added.

Tubular Transport and Logistics is a joint venture between twoCalifornia-based companies, Budway Enterprises, Inc. (“Budway”) andEnergy Tubulars, Inc. (“ETI”).

As a joint venture between these two companies, Tubular Transportand Logistics allows ETI to better control its supply chain by leveragingBudway’s transloading and trucking experience. TTL’s inventory controlsystems provide real-time visibility to customer inventories and GPStracking of shipments. The foundation of ETI’s OCTG business provideseconomic support for Budway to expand transload operations into newlocations. TTL also provides trucking services for all the productsit transloads.

TUBULAR TRANSPORT & LOGISTICS TO MANAGE NORTHERN PLAINS COMMERCE CENTRE

On a shelf in the corner of the boardroom sits a pile of red and black calculators with buttonsworn out from thousands of tests. A black shoe with a rubber tip insert covering the fragilestiletto heal stands nearby and packages of strange pumpkin carving gadgets hang on a hook.