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KAST CONSTRUCTION COMPANY LLC AND SUBSIDIARY <br />NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS <br />As of and for the years ended December 31, 2013 and 2012 <br />NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — CONTINUED <br />Depreciation <br />Depreciation is provided for on the straight -line -method over the estimated useful lives of <br />the assets. <br />Income Taxes <br />The company is treated as a partnership under the provisions of the Internal Revenue <br />Code and state laws. Under these provisions, the company does not pay federal or state <br />corporate income taxes on its taxable income. Instead the members are liable for <br />individual income taxes on the company's income. <br />Uncertain Tax Positions <br />The company accounts for uncertain tax positions in accordance with FASB ASC 740 <br />Income Taxes. This pronouncement prescribes a recognition threshold and measurement <br />process for financial statement recognition of uncertain tax positions taken or expected to <br />be taken in a tax return. The interpretation also provides guidance on recognition, <br />derecognition, classification, interest and penalties, accounting in interim periods, <br />disclosure and transition. <br />Reclassifications <br />Certain reclassifications have been made to prior year amounts to conform with the current <br />year presentation. <br />NOTE 3 — MAJOR CUSTOMERS <br />During the years ended December 31., 2013 and 2012, four customers accounted for <br />revenues comprising 60% and 82%, respectively, of the company's total revenues. Total <br />revenues derived from these customers amounted to approximately $52,578,000 and <br />$52,459,000, respectively. <br />NOTE 4 — UNCERTAIN TAX POSITIONS <br />The company has reviewed potential tax uncertainties in accordance with FASB ASC 740 <br />and determined that there are no uncertainties that would have a material impact on the <br />company's results of operations or financial condition as of December 31, 2013. <br />As of December 31, 2013, the statute of limitations remains open for federal tax returns for <br />2010 and following years; therefore, they are subject to potential examinations by the <br />Internal Revenue Service. <br />9 <br />