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Barth Construction, Inc . NOTES TO FINANCIAL STATEMENTS (See Accountants ' Review Report) September 30, 2002 1 NOTE A - SUMMARY OF ACCOUNTING POLICIES (continued) Revenue from construction contracts is recognized using the completed contract method for income tax purposes and using the percentage-of-completion method for financial statement purposes. Certain overhead expenses indirectly related to contracts are deferred for income tax purposes, but are expensed for financial statement presentation. Depreciation expense for tax purposes is computed using shorter lives and accelerated methods as provided by the Internal Revenue Code. Depreciation expense for financial statement purposes is computed using estimated economic lives and the straight-line method. ' 7. Use of Accounting Estimates ' The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. NOTE B - ORGANIZATION The business was incorporated and began conducting business in September, 1979, under the laws of the State - of Florida. The Company is engaged principally in construction of commercial buildings and residential housing. NOTE C - CONCENTRATIONS OF CREDIT RISK ' The Company provides general contracting services for residential and commercial projects, primarily in Indian River County, Florida. The Company's receivables are collectible under contractual draw schedule arrangements, with retained receivables (usually ten percent of billings to date) due at the completion of the contract. The Company maintains cash balances at several financial institutions in Vero Beach, Florida. Accounts at 1 banks and savings and loan institutions are insured by the Federal Deposit Insurance Corporation up to $ 100,000. Cash accounts at security brokerage institutions are not insured. At September 30, 2002, the Company had uninsured cash balances totaling $387,664. NOTE D — FAIR VALUE OF MARKETABLE SECURITIES - ' The Company has a number of marketable securities, none of which are held for trading purposes. The Company estimated the fair value of all securities to be $331 , 848, which is approximately $ 199,962 less than the cumulative cost basis of $531 , 810. This difference is carried as an unrealized holding loss as it is not considered permanent. During the year ended September 30, 2002, one security holding was sold for $25 ,000, ' at no gain. As of December 31 , 2002, cost and fair value of equity securities are as follows : Available for sale, at cost $ 531 ,810 Gross unrealized gains 21158 Gross unrealized losses 202 120 ' Fair value 1 848