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. I I I I I I I I I I I I I I I I I I I MAY-31-2006 01:15P FROM: 3056692165 P.5 PISTORINO & ALAi\1 CONSULTING ENGINEERS, INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2005 NOTE1-COMPANY Pistorino & Alam Consulting Engineers, Inc. (the "Company") is a professional consulting fIrm of engineers, planners, and surveyors with in-house capacity for the total project development, from planning and alternatives' evaluation through design, construction and start-up services .The Company provides civil/construction engineering services to municipal and private clients. Established in Florida in 1986, the Company currently employs about 30 engineers, planners, designers, surveyors and support staff. The Company's projects are diverse, including industrial and public facilities, transportation and infrastructure. Its clients include private sector businesses and all level of governments. Revenues are derived from billings for services and reimbursable expenses. NOTE 2 - BASIS OF ACCOUNTING The Company's policy is to prepare its overhead schedules, which support the statement of direct labor, fringe benefits and general overhead, on the basis of accounting practices prescribed by Subpart 9900 and Part 31 of the Federal Acquisition Regulations (FAR), Section 112.061 of the Florida Statues, and Florida Department of Management Services Rule 60L-9. Accordingly, the above mentioned statement is not intended to present the results of operation of the Company in confonnity with generally accepted accounting principles. NOTE 3 - DESCRIPTION OF ACCOUNTING SYSTEM The Company maintains ajob cost accounting system for the recording and accumulation of costs incurred under its contracts. Each project is assigned ajob number so that costs may be segregated and accumulated in the Company's job cost accounting system. The company's method of estimating costs for pricing purpose during the proposal process is consistent with the accumulation and reporting of costs under its job-order cost accounting system. NOTE 4 - FIELD OFFICE In calculating the fIeld office pool, the allocation to indirect labor and fringe benefits is based upon the ratio of field office direct labor to total direct labor. The remaining field office pool allocation will be based upon the ration offield indirect labor allocation to total home office labor. The direct labor dollars for the field office represent the 2005 wages of the individuals specifically identified by the Company as physical working allhefield office site. 3