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I I DRC EMERGENCY SERVICES,LLC INOTES TO FINANCIAL STATEMENTS DECEMBER 31,2016 I 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: 1 General: DRC Emergency Services,LLC(the Company)is an Alabama limited liability company whose principal activities consist of disaster management and civil construction,specializing in providing emergency preparation,disaster response and recovery from major catastrophes.The Company operates primarily in the southeastern United States. Accounting method: I The company uses the accrual method of accounting for financial statement purposes.Revenues are recognized when earned,and expenses are recorded when incurred. Cash and cash equivalents: For purposes of reporting cash flows,cash and cash equivalents include all cash on hand and held at financial institutions. Use of estimates: The preparation of financial statements in conformity with generally accepted accounting principles requires management I to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly,actual results could differ from those estimates. I Depreciation: All fixed assets are stated at cost. For financial statement purposes, depreciation is calculated using the straight line method of depreciation.Estimated useful lives range from three to thirty nine years.Depreciation expense for the period January 19,2016 through December 31,2016 was$763,556. I Trade accounts receivable and other receivables: Accounts receivables are charged to bad debt expense when they are determined to be uncollectible based upon a periodic I review of the accounts by management.Accounting principles generally accepted in the United States of America require that the allowance method be used to recognize bad debts;however,the effect of using the direct write-off method is not materially different from the results that would have been obtained under the allowance method. I Advertising Costs: Costs of advertising are expensed as incurred.Advertising expense was$1,197 for the period January 19,2016 through December 31,2016. IRevenue Recognition: Revenue is recognized when earned.Cost of services and all other expenses are charged to expense when the cost of the service has been incurred. IIncome taxes: All tax effects of the Company's income or loss are passed through to the members individually and,therefore,income taxes are not provided for the tax effect of transactions reported in the financial statements. 2. NOTES RECEIVABLE: IIn May of 2016,the Company issued a note in the amount of$210,000.The note bears interest at 10%and is due in eight quarterly installments,with the final payment due July 1,2018. 1 8 IDRC Emergency Services,LLC 105 RFP No.18-04-02