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CROWDERGULF, LLC NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2017 AND 2016 1 1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — CONTINUED Trade Receivables — Continued Due to the significance of the contract amounts, the governmental entities generally\\do noj4ay what they owe the Company for services performed prior to receiving the FEIVG4�-eimbOrsernents. Consequently, payments may be delayed and amounts ultimately received by the Co trnay be less than the amounts agreed-upon under the contracts. In the even\FEMA j eimburses the governmental entities for less than the contractually agreed-upo ^amob ts,\the governmental entities can appeal for a full reimbursement. Management anticipates that it will support the governmental�ntities .n\their efforts to fully collect the contract amounts from FEMA, including any appeals process\\w�ith FEMA, in order to satisfy their contractual obligations with the Company. In the even \uItimate amount received by the Company is less than the full contract amount, the Company>either attempt to collect the difference from the municipality or accept a lower amount. Trade receivables are carried at original invoic��un and management determines an allowance at year-end based on their estimate of future co i ctabilit and historywith these types of contracts Y� Yp and specific governmental entities. Trade receivablessarewritten off when deemed uncollectible. Recoveries of trade receivables previously written off\are recorded when received. The Company does not charge interest on trade receivables. As;of December 31, 2017 and 2016, the Company considers all receivables to be collectiblAcingly, no allowance for doubtful accounts has been recorded in the financial statements. \/-/ Property and Equipment\ Property and equipmetS�\areveo rded at their original costs. Depreciation is computed using the straight-line method overthe estima ed useful life of the related assets. The Company estimates the useful life of hea`y-eq.ui ment\machinery and vehicles to be 5 years, office equipment to be 7-10 years, and buildingsand-improvements to be 15 — 40 years. When assets are retired or otherwise disposed of-theot'\n.d he related accumulated depreciation are removed from the accounts, and any resulting gaimor loss is reflected in income for the period. The cost of routine maintenance and repairs is:charged to exp nse as incurred. Depreciation expense for the years ended December 31, 20177 and 2016was�approximately $340,000 and, $180,000, respectively. qui men \Renta//"I and Leases Th p The Compa�y rents or leases a significant amount of the equipment required to fulfill its contracts. Generally)this equipment is rented on a job-by-job basis for short periods of time and is expensed asoperating leases. As of December 31, 2017 and 2016, none of the Company's equipment rental arrangements were capital leases. Advertising Costs The Company conducts non-direct advertising. Advertising costs are expensed as incurred. Advertising costs totaled approximately $59,000 and $38,000 for the years ended December 31, 2017 and 2016, respectively. • 8