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Pacie S <br /> QUALITY COM:MUNIC.-\TIONS FIRL SECURITY. INC.. <br /> QUALITY COMMUNICATIONS OF FLORIDA. INC. <br /> AND QUALITY HOLDING GROUP. L.L.C. <br /> 411 NOTES TO THE COMBINED FINANCIAL STATEMENTS <br /> DECEMBER 31. 2003 <br /> NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) <br /> E. Income Taxes <br /> Quality Communications Fire & Security, Inc. and Quality Communications of Florida, Inc., with <br /> the consent of their stockholder, have elected, under the Internal Revenue Code, to be an "S" <br /> corporation. In lieu of corporation income taxes, the stockholders of an "S" corporation are taxed <br /> on their proportionate share of the Company's taxable income. <br /> Quality Holding. Group, L.L.C. is a limited liability company. In lieu of corporation income <br /> taxes, the members of the "LLC are taxed on their proportionate share of the "LLC As a result, <br /> no provision or liability for federal income taxes has been included in these combined financial <br /> statements. <br /> F. Use of Estimates <br /> The preparation of the combined financial statements, in conformity with United States generally <br /> accepted accounting principles, requires management to make estimates and assumptions that <br /> affect certain reported amounts and disclosures. .Accordingly, actual results could differ from <br /> those estimates. <br /> ® <br /> G. Inventories <br /> Quality Communications Fire & Security. Inc.'s inventory is stated at the estimated lower of cost <br /> or market value on the first in first out (FIFO) basis. <br /> H. Concentration of Credit Risk <br /> Quality Communications Fire & Security, Inc. maintains cash in demand deposit accounts with <br /> federally insured banks. At times, the balances in the accounts may be in excess of federally <br /> insured limits. <br /> 1. Eliminations <br /> All material inter-company activities have been eliminated for the combined financial statements. <br /> See accountant's review report. <br />