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I I .. I I I I I I Ie I I I I I I I ,e I ClJBELLlS HlJSI:\'ESS TRUST NOTES TO CONSOLIDATED FI:\':\~CL\L STATE:\I E:\'TS Note I - Organization Cubcllis Associates, fnc. (the Company) is an architectural, interior design, engineering and survey fiml with offices located in Boston and Weymouth. Massachusetts: Ponland. ylaine; Philadelphia, Pennsylvania: Englewood and Freehold, Nev.- Jersey: and Chicago. Illinois. The Company's principall1larkets arc retail. corporate office buildings and interiors consisting of both nc\v and renovation work. On ;\iovember 5.2001. Cubellis Business Trust. a Massachusetts Business Trust (the Trust) was fOllned and the stockholders of the Company exchanged their shares for bendicial interests of the Trust. As a result. the Company is now a wholly oWlled SUbSldiJry of the rrust. On February I. 2004. the Company fomled a ncw wholly o\vned SubSIdIary, Cubcllis \tlarco .\ssociates, Inc. On that date, Marco Design Group, a Michigan corporation. merged into Cubellis \tlarco Associates, Inc., the surviving wholly owned subsidiary. ill cxchange for shares of beneficia! interest of Cubcllis Business Trust in the amount of S I 93.928 isstled to the former ~vlarco Design Group shareholder. Terms of the merger included an employment contract for an executive stlbjt:ct to provisions orthe agreement. Oll July I, 2005, the Company completed an asset purchase transaction with Ecoplan. P.A. (Ecoplan), a Ne\v Jcrst:y corporation under which the Company acquired substantially all the assets and assumed substantially all the liabilities of Ecoplan. Total consideration paid by the Company to acquire Ecoplan was 5702,722, of which 5552,722 was paid in 2005 with the remainder dut: in annual installments through 200t) (see Note 7). The Company also incurred transaction costs in the amount of 534.751. Terms of the asset purchase agreement included an employment contract for the o\vncr and certain employees of Ecoplan subject to provisions of the agreement. On September I, 2005. the Company fomled a new wholly owned subsidiary. Cubdlis/MGDf Associates. fnc. On that date. Mann. Gin, Dubin & Frazier. Ltd.. an Illinois corporation. was acquired by Cubcllis/MGDF Associates. Inc. in exchange for cash in the amount of 5300.000. a note payable in the amount of 5300.000 (see Note 7) and shares of beneficial interest of Cubcllis Business Trust in the amount of S600.000 issued to one of the former Mann. Gin, Dubin & Fra/.ier. Ltd. shareholders. The Company also incurred transaction costs in the amount of 551.139. Temls of the merger included an employment contract for the fanner shareholders of \lann. Gin. Dubin 8: Fra/.ier, Ltd. subject to provisions of the :.lgreement. These consolidalL'd financial statements include only the accounts and transactions of the Trust and the Company and its wholly owned subsidiaries. Note 2 ~ Summary of Signiticant Accoullting Policies Accoullting ~Iethod The accrual method of accollnting is used in the pn:p:.lration of the financial statements. The cOlvorate income tax returns are prt:pared on the cash basis. All intercomp:.lny transactions and halances have been eliminated. 6