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I Metric Engineering, Inc. and Subsidiary Notes to Consolidated Financial Statements June 30, 2008 NOT FOR PUBLIC INSPECTION / DO NOT COPY This financial statement is private and exempt from public inspection, or copying of public records pursuant to Florida Statutes 119.071 (I)(c). 8. Income Taxes The company adopted FASB Statement No. 109 Accounting for Income Taxes. The principal book/tax differences are the use of the percentage of completion method for revenue recognition, the methods of depreciation and the use of the accrual basis discussed in Note I, reflected in the preparation of the accrual basis financial statements compared to the completed contract method to recognize revenues, the accelerated methods of depreciation allowed by the IRS and the cash basis of accounting used to calculate taxable income. The IRS also requires amortization of goodwill over 15 years, however goodwill was accounted for as investments in the tax retum and, consequently, not amortized. 9. Contract BackIol! and Contracts in Prol!ress The following schedule summarizes changes in backlog on contracts during the year ended June 30, 2008. Backlog represents the amount of revenue the Company expects to realize from work to be performed on uncompleted contracts in progress at the end of the period and from contractual agreements on which work has not yet begun. The Company had the following approximate backlog of contracts as of June 30, 2008: Total contract fee Less contract revenues earned to date Backlog as of June 30, 2007 $ 98,593,762 45,829,717 $ 52,764,045 Estimated eamings in excess of billings on uncompleted contracts, representing services provided and unbilled, total $1,230,489 for the year ended June 30, 2008. 10. Related Party Transactions The Company has several office leases with related parties, (Metricor, Panametric and Tamiami Group). Metricor sold the building in July 2007. The rent expense paid during the year and expirations of the leases as of the year ended June 30, 2008 are as follows: Description Tamiami Group Panametric Metricor June 30, 2008 $ 201,694 $ 52,002 $ 11,786 $ 265,482 Expiration 03/31/09 04/30/09 07/31/07 Additionally, the Company currently has over 230 leases with related parties (Better Leasing, Inc.) for equipment and vehicles whose expiration range through 2009. The Company spent the following amount on vehicles and equipment leasing during the year ended June 30, 2007: Description Vehicles Equipment June 30, 2008 $ 806,687 294,483 $ 1,101,170 10