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BUDGET CONSTRUCTION CO., INe. AND BUDGET HOLDINGS, LLC NOTES TO THE COMBINED FINANCIAL STATEMENTS Years Ended December 31, 2007 and 2006 NOTE 1 - Summary of operations and significant accounting policies: Description of Business: The combined financial statements include the operations of Budget Construction Co., Inc. ("The Company"), incorporated on April 17, 1991, and its affiliate, Budget Holdings, LLC ("The Affiliate"), formed on March 18, 2002, both formed under the laws of the State of Florida. Unless otherwise specified, all entities are hereby referred to as "The Companies." The Company operates as a specialty contractor specializing on the installation of water and sewer utility lines, storm drainage, underground systems as well as site clearing, paving, curbing and development. The Company also operates as a specialty contractor doing commercial interior build-outs. The Company's revenues consist of contracts with local and state-wide general contractors, developers, and government awarded jobs. The Affiliate operates as a real estate holding company. Principle of Combination: The combined financial statements include the accounts of The Company and The Affiliate, a variable interest entity, under FASB Interpretation No. 46 (R)," Consolidation of Variable Interest Entities". The Company is the primary beneficiary of The Affiliate. Therefore, all significant inter-company transactions and balances have been eliminated. Cash and Cash Equivalents: The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Cash and cash equivalents includes $1,000,000 of cash take-out from loan proceeds required to be maintained by The Affiliate on deposit with the bank. Concentration of Credit Risk: Financial instruments that potentially subject The Company to concentration of credit risk consist primarily of cash, cash equivalent and contracts receivable. The Company maintains its cash balances in two financial institutions, insured by the Federal Deposit Insurance Corporation. From time to time, cash balances exceed the insured limits. Concentration of credit risk with respect to contracts receivable is significant due to the various provisions on the construction contracts, the final payment, release of retainage balances, and acceptance of the job by the owners. As of December 31, 2007, the stockholders of The Company had not entered into a business continuity plan. Financial Instruments: The Companies' balance sheets include the following financial instruments: cash and equivalents, and contracts receivable. The Companies consider the carrying amounts in the combined financial statements to approximate fair value for these financial instruments because of the relatively short period of time between origination of the instruments and their expected realization. Warranty: Warranty costs are normally incurred prior to project completion and are charged to project costs as they are incurred.. Warranty costs incurred subsequent to project completion were not material for the years presented. As of December 31, 2007 and 2006, no accrued liability was considered necessary by management of The Company for warranties on completed jobs. 6 Benitez & Company. CPA',