Financial Statement CPA Certified EXEMPT

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Hycon Investments, LLC Notes to Financial Statements June 30, 2024 8 Note 2 Summary of Significant Accounting Policies (Continued) Contract Assets and Liabilities (Continued) Retainage is not considered to be a significant financing component because the intent is to protect the customer. Retainage amounts are generally classified as current assets within the Company’s balance sheet. Retainage that has been billed, but is not due until completion of performance and acceptance by customers, is generally expected to be collected within the Company’s operating cycle. The balance of contracts retainage as of June 30, 2024, pertains to contracts in progress. These contract-related assets are carried at the outstanding amount due less an estimate for credit losses, if deemed necessary. Contract liabilities consist of advance payments and billings in excess of revenue recognized as well as deferred revenue. Credit Losses The Company maintains an allowance for credit losses for its financial instruments, which are primarily composed of contracts receivable and contract assets. The measurement and recognition of credit losses involve the use of judgment and represents management’s estimate of expected lifetime credit losses based on historical experience, trends, and current conditions. The credit loss assessment can be made individually or as a collective of the financial instruments. The Company’s assessment of expected credit losses includes consideration of current and expected economic, market and industry factors affecting the Company’s customers, including their financial condition, the aging of account balances, historical credit loss experience, customer concentrations, and customer credit-worthiness. Amounts are written off against the allowance when they are considered to be uncollectible, and reversals of previously reserved amounts are recognized if a specifically reserved item is settled for an amount exceeding the previous estimate. Construction Contracts The Company recognizes revenue on construction contracts over time as performance obligations are satisfied due to the continuous transfer of control to the customer. The Company recognizes revenue using a cost-based input method, by which actual costs incurred relative to total estimated contract costs are used to determine a percentage of progress toward contract completion. This percentage is applied to the transaction price to determine the cumulative revenue recognized. Costs incurred that do not contribute to satisfying performance obligations are excluded from the cost input calculation as these amounts are not reflective of transferring control to the customer. The Company believes the cost-based input method is the most faithful depiction of performance because it directly measures the value of the services transferred to the customer. Performance Obligation A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account in ASC Topic 606. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. For most of the contracts, the customer contracts with the Company to provide a significant service of integrating a complex set of tasks and components into a single project or capability (even if that single project results in the delivery of multiple units). Hence, the entire contract is accounted for as one performance obligation. A series of goods or services are a single performance obligation if the goods or services are substantially the same and each distinct good or service in the series will be satisfied over time and the same method would be used to measure progress towards satisfaction.