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KAST CONSTRUCTION COMPANY LLC AND SUBSIDIARY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of and for the years ended December 31, 2013 and 2012 NOTE 7 — PROPERTY AND EQUIPMENT Depreciation for the years ended December 31, 2013 and 2012, was $18,232 and $9,273, respectively. Cost, accumulated depreciation and estimated useful lives at December 31, 2013 and 2012, are as follows: Category Estimated Useful Lives 2013 2012 Furniture and fixtures Machinery and equipment Computer equipment Leasehold improvements Less: accumulated depreciation 7 Years $ 175,987 $ 38,445 5 Years 105,277 105,277 5 Years 60,989 13,387 39 Years 109,720 10,839 451,973 167,948 117,435 132,272 $ 334,538 $ 35,676 NOTE 8 — CONCENTRATION OF CREDIT RISK The company maintains its cash balances in one financial institution. The balances are insured by the Federal Deposit Insurance Corporation up to $250,000 per institution. These balances at times may exceed the insured limits. At December31, 2013, the total unsecured balances of the company at this financial institution amounted to $9,019,792. At December 31, 2013 and 2012, four and three customers accounted for contracts receivable comprising 68% and 83%, respectively, of the company's total receivables. Total contracts receivable due from these customers amounted to approximately $14,086,000 and $6,392,000, respectively. At December 31, 2013, one vendor accounted for accounts payable comprising 11% of the company's total payables. Total accounts payable due to this vendor amounted to approximately $2,273,000. NOTE 9 — CONTINGENCIES The company is contingently liable to a surety company under a general indemnity agreement. The company agrees to indemnify the surety for any payments made on contracts of suretyship, guaranty, or indemnity. The company believes that all contingent liabilities will be satisfied by their performance on the specific bonded contracts. 11