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SBLM ARCHITECTS, P.C. (AN S CORPORATION) NOTES TO FINANCIAL STATEMENT DECEMBER 31, 2008 NOTE 2 - FIXED ASSETS (Continued) The Company's property under capital leases which is included in fixed assets at December 31,2008 consists of office equipment at a cost of $244,514 less accumulated depreciation of $143,335. Depreciation expense for the year ended December 31, 2008 totaled $236,786. NOTE 3 - NOTE PAYABLE TO BANK In June 2005, the Company entered into a $500,000 promissory note agreement with a bank. Among other provisions, the note, as amended, is due in June 2009 and borrowings under the term loan incur interest at the rate of 5.6% per annum. The note is secured by substantially all assets of the Company. Certain officers of the Company have personally guaranteed the loan. At December 31, 2008, borrowings under the note totaled zero. In June 2005, the Company also entered into a line of credit for $250,000, which in July 2007 was expanded to $1,250,000. The line of credit was expanded again in June 2008 to $3,000,000, which has been utilized in 2008. At December 31, 2008, borrowings under the line totaled $299,983. Borrowings under the line of credit bear interest at the bank's prime rate. NOTE 4 - RELATED PARTY TRANSACTIONS Note Receivable In 2006, the Company entered into a promissory note agreement whereby the Company would lend up to $150,000 to Acertus Consulting Group, LLC ("Acertus"). The promissory note is due upon demand and incurs interest at 8.25% per annum. The 2006 agreement was superseded by the March 2007 amendment, which expanded the promissory note agreement to lend up to $400,000 to Acertus. TAo CompanY-OWrTs-jO% trt'~. At December 31,2008, the Company was repaid in full pursuant to this agreement. In 2008, the Company entered into a promissory note agreement whereby the Company lent $205,000 to DB Right, LLC ("DB Right"). The promissory note is due July 15, 2009 and incurs interest at 5% per annum. The Company shareholders own DB Right, with the same ownership as they have for the Company.