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UNDERWATER ENGINEERING SERVICES, INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2017 AND 2016 Note 6 - Property and Equipment Property and equipment, net is stated at cost. A summary of property and equipment at December 31, 2017 and 2016 is as follows: Barges Furniture, fixtures and equipment Less: Accumulated depreciation 2017 2016 616,192 $ 616,192 1,154,124 1,128,016 1,770,316 1,744,208 1,519,615 1,409,907 $ 250,701 $ 334,301 Depreciation expense relating to property and equipment amounted to approximately $81,000 and $97,000 for the years ended December 31, 2017 and 2016, respectively. Note 7 - Retirement Plans During the years ended December 31, 2017 and 2016, the Company participated in three retirement plans, as noted below, with its related parties in a multiple employer agreement. Through an amendment, the Company maintains a 401(k) profit sharing plan ("401(k) Plan") for all eligible employees who are at least 21 years of age. The 401(k) Plan allows for employees to defer up to 25% of annual compensation up to the Internal Revenue Service ("IRS") dollar limit that is adjusted annually for inflation. The 401(k) Plan provides for the Company to make a safe - harbor matching contribution. Effective January 1, 2016, the Company amended the Plan to modify the safe -harbor match to be 100% of the first 6% of qualified deferrals, which was in place as of December 31, 2016. The 401(k) Plan does not provide for the Company to make profit sharing contributions. An independent party has been selected to administer the 401(k) Plan. The Company has provided for a contribution to the 401(k) Plan for the years ended December 31, 2017 and 2016 of approximately $124,000 and $106,000, respectively. These amounts are also included in accrued expenses and other current liabilities in the accompanying balance sheets at year-end. The Company also sponsors a Non -Qualified Deferred Compensation Plan ("Rabbi Plan") for certain key executives providing for distributions upon retirement, death, disability, termination, or within one (1) year after a change in control of the Company. Participants in the Rabbi Plan are entitled to enter into a Salary Reduction Agreement providing for a reduction in the participants' compensation inclusive of bonuses. This reduction is contributed to the Rabbi Plan. Employer contributions to the Rabbi Pian are discretionary. These contributions may be allocated as specified by the employer and become fully vested after ten (10) years of service. Under the provisions of the Rabbi Plan, distributions of employee deferrals or employer contributions are to be in accordance with the annual election made in connection with the plan year's contribution. 12