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CERES ENVIRONMENTAL SERVICES, INC. NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2016 NOTE 8 -Concentrations Financial instruments consist principally of cash and cash equivalents, short-term investments, and accounts receivable. Cash and cash equivalents are mainly placed with large banks in bank deposit and money market accounts; however, balances typically exceed federally insured limits. The Company has not experienced any losses in such accounts.Accounts receivable represent amounts primarily due directly from contracts with public entities and governmental agencies that are located throughout the United States. As of December 31, 2016, two customers represented approximately 58% of outstanding accounts receivable. As of December 31, 2016, two customers represented approximately 81% of costs and estimated earnings in excess of billings on uncompleted contracts. For the year ended December 31, 2016,four customers represented approximately 69%of contract revenues. NOTE 9-Contingencies The Company has litigation arising from the normal course of business. Due to uncertainties present in any settlement negotiations, management's view of possible outcomes could change. In management's opinion, the outcome of any such litigation will not materially affect the Company's financial condition. The Company, as a condition for entering into some of its construction contracts, had outstanding surety bonds as of December 31, 2016. If the Company fails to perform under the terms of a contract or to pay subcontractors and vendors who provided goods or services under a contract, the customer may demand that the surety make payments or provide services under the bond. The Company must reimburse the surety for any expenses or outlays it incurs. To date,the Company is not aware of any material losses to its sureties in connection with bonds the sureties have posted on its behalf. NOTE 10-Government Grants Received During 2009, the Company received$306,674 from the Texas Commission on Environmental Quality for the purchase of certain emission reducing equipment. The grant agreements stipulate that the equipment must be used for a minimum number of hours over a minimum number of years, as defined in the agreements, or the funds are subject to repayment.The grant monies have been recorded as a reduction of the equipment cost and are being amortized against depreciation expense over the estimated useful lives of the related assets. Amortization for the year ended December 31, 2016 totaled $10,546. NOTE 11 -Subsequent Events The Company has evaluated subsequent events through April 28, 2017, the date on which the financial statements were available to be issued. Page 14 CONFIDENTIAL& PROPRIETARY