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i Barth Construction, Inc. NOTES TO FINANCIAL STATEMENTS (See Independent Accountants ' Review Report) September 30, 2011 NOTE F - COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS Costs incurred on uncompleted contracts $ 194559839 Estimated earnings 1444703 1 , 600,542 Less : billings to date 1 , 594,760 $ 5 .782 Included in the accompanying balance sheet under the following captions . Costs and estimated earnings in excess of billings on uncompleted contracts $ 22,852 Billings in excess of costs and estimated earnings on uncompleted contracts 174070 5 .782 NOTE G - RELATED PARTY TRANSACTIONS The Company entered into a lease agreement with an entity controlled by the Company' s sole shareholder on May 23 , 1990, to lease its office facilities at a monthly base rate of $2,846 through February 28, 2009 . The Company paid $ -0- rent (including sales tax) to the related party during the year ended September 30, 2011 . No rent has been charged since February 2009. The Company shares certain administrative and overhead costs with a corporation (the related corporation) solely owned by the Company ' s sole shareholder. The Company annually reviews such shared costs and bills of the related corporation for its share of those costs . The Company was paid $339,325 from the related corporation during year ended September 30, 2011 for billings of cost reimbursements for the calendar year 2010 . The Company also receives management and supervision services from the related corporation.. During the year ended September 30, 2011 , the Company paid the related corporation $200,000 for such services, and that amount was payable to the related corporation at September 30, 2011 . NOTE H - INCOME TAXES Deferred income taxes arise from timing differences resulting from income and expense items reported for financial accounting and tax purposes in different periods. Deferred taxes are classified as current or noncurrent, depending on the classification of the assets and liabilities to which they relate. Deferred taxes arising from timing differences that are not related to an asset or liability are classified as current or noncurrent depending on the periods in which the timing differences are expected to reverse. The components of income tax expense (benefit) are: Currently payable $ 18,688 Deferred tax benefit (59.300) Total income tax expense (benefit) (40. 6121 The principal sources of timing differences are different depreciation methods and different long term contract revenue recognition methods used for financial accounting and income tax reporting purposes. - 9 -