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TIMOTHY ROSE CONTRACTING, INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2007 NOTE 1: SUMMARY OF SIGINFICANT ACCOUNTING POLICIES - CONTINUED Cash Equivalents The Company considers securities with maturities of three months or less to be cash equivalents. Marketable Equity Securities The Company has elected to classify its investments in equity securities as available for -sale securities and report them at fair value, with unrealized gain or loss excluded from earnings and reported as a separate component of equity. Under this method, the cost of marketable securities sold is determined on the average cost, method. Depreciation Property and equipment are recorded at cost. Depreciation is provided using accelerated and straight-line methods over the estimated useful lives (5 to 7 years) of the assets. Expenditures for major renewals and betterments that extend the useful lives of property and equipment are capitalized. Expenditures for maintenance and repairs are charged to expense as incurred. Depreciation expense for the current year totaled $307,048. Income Taxes The Company, with the consent of its shareholder, has elected under the Internal Revenue Code to be taxed as an S Corporation. In lieu of corporation income taxes, the shareholder of an S corporation is taxed on the Company's taxable income. Therefore, no provision or liability for federal income taxes has been included in these financial statements. NOTE 2: MARKETABLE SECURITIES Marketable securities consist of available for sale common stock securities with an unrealized holding loss of $4,594 from its cost to fair value. NOTE 3: CONTRACT RECEIVABLES Contract receivables at December 31, 2007, consists of the following: Contracts in progress $1,035,807 Retention 110167563 $2052 370 No allowance for uncollectible accounts has been provided since in management's opinion all accounts receivables are fully collectible. As of May 15, 2008, substantially all of the receivables were collected. He