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BUDGET CONSTRUCTION CO., INC. AND BUDGET HOLDINGS, LLC NOTES TO THE COMBINED FINANCIAL STATEMENTS Years Ended December 31, 2008 and 2007 NOTE 1 - Summary of operations and significant accounting policies: Description of Business: The combined financial statements include the operations of Budget Construction Co., Inc. (liThe Company"), incorporated on April 17, 1991, and its affiliate, Budget Holdings, LLC (liThe 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 liThe Companies. II 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 Financial Accounting Standards Board 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. The Company records the certificates of deposit at fair value at the balance sheet date. Any interest earned on these investments is recognized upon maturity on the statement of income. The certificates of deposit mature on March 2, 2009, with annual percentage yield of2.85%, securing a stand-by letter of credit of $136, 109 as described on Note - 15 of these combined financial statements. 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 31,2008, the stockholders of The Company had not entered into a business continuity plan. Long-lived Assets: Long-lived assets to be held and used are reviewed for impairment whenever events or changes in circumstances indicate that the related carrying amount may not be recoverable. When required, impairment losses on assets to be held and used are recognized based on the excess of the asset's carrying amount; and, fair value of the asset and long-lived assets to be disposed of are reported at the lower of carrying amount or fair value less cost to sell. 6 Benitez & Company, CPA's