Financial Statement CPA Certified EXEMPT

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Hycon Investments, LLC Notes to Financial Statements June 30, 2024 9 Note 2 Summary of Significant Accounting Policies (Continued) Variable Consideration Contracts commonly contain variable considerations in the form of incentive fees, performance bonuses, award fees, liquidated damages or penalties. Other contract provisions also give rise to variable consideration such as claims and unpriced change orders that may either increase or decrease the transaction price. The Company estimates the amount of variable consideration at the most likely amount to which the Company expects to be entitled. Variable consideration associated with claims and unapproved change orders is included in the transaction price when the Company believes it has an enforceable right to the modification or claim, the amount can be estimated reliably, and its realization is probable. The Company recognizes claims against vendors, subcontractors, and others as a reduction in recognized costs when enforceability is established by the contract and the amounts are reasonably estimable and probable of recovery. Reductions in costs are recognized to the extent of the lesser of the amount management expects to recover or actual costs incurred. Cost and Expense Recognition Contract costs include all direct labor, materials, subcontractor, and equipment costs, and those indirect costs related to contract performance, such as indirect labor, tools and supplies, repairs, interest, and depreciation costs. Indirect costs are allocated to contracts based on direct labor and subcontractor costs. Costs incurred that do not contribute to satisfying performance obligations are excluded from the cost input calculation for revenue recognition. These costs comprise wasted materials, wasted or rework labor and other resources to fulfill a contract that were not reflected in the price of the contract. A limited allowance for material overages and labor inefficiencies is typically included in the Company’s contract costs estimates (and by extension in the contract price). When it is probable that the total contract costs will exceed total contract revenues, a provision for the estimated expected loss is recorded in the period it is identified. Contract Estimates Due to the nature of the Company’s performance obligations, the estimation of total revenue and cost at completion is subject to many variables and requires significant judgment. Management must make assumptions and estimates regarding labor productivity and availability, the complexity of the work to be performed, the cost and availability of materials, the performance of subcontractors, and the availability and timing of funding from the customer, among other variables. As a significant change in one or more of these estimates could affect the profitability of contracts, the Company reviews and update contract-related estimates regularly through a review process in which management reviews the progress and execution of performance obligations and the estimated cost at completion. As part of this process, management reviews information including, but not limited to, any outstanding key contract matters, progress toward completion and the related program schedule and the related changes in estimates of revenues and costs. The Company recognizes adjustments in estimated revenue recognized on contracts under the cumulative catch-up method. Under this method, the impact of the adjustment on revenue recorded to date is recognized in the period the adjustment is identified. Revenue and profit in future periods of contract performance is recognized using the adjusted estimate. If at any time the estimate of contract profitability indicates an anticipated loss on the contract, a provision for the entire loss is recognized in the period it is identified.