In July 2009, the FASB Accounting Standards
Codification (the "Codification") officially became the single source of authoritative nongovernmental U.S. GAAP, superseding
existing FASB, American Institute of Certified Public Accountants, Emerging Issues Task Force, and related accounting literature.
Going forward, only one level of authoritative GAAP will exist. All other accounting literature will be considered non-authoritative.
Use of Estimates
The preparation of financial
statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that
affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial
statement and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from the estimates.
Cash and Cash Equivalents
For financial statement presentation purposes,
those short-term, highly liquid investments with original maturities of three months or less are considered to be cash or cash
The Company extends credit to its customers
in the normal course of business and performs ongoing credit evaluations of its customers, maintaining allowances for potential
credit losses which, when realized, have been within management's expectations. The allowance method is used to account for uncollectible
amounts. The evaluation is inherently subjective, as it requires estimates that are susceptible to significant revision as more
information becomes available. Allowance for doubtful accounts was $116,033 at December 31, 2011 and $49,800 at December 31, 2010,
For financial reporting, profits on construction
contracts are recognized by the Company on the percentage-of-completion method, measured by the percentage of costs incurred to
date to estimate total construction costs for each contract. This method is used because contracts in process include all materials,
direct labor and subcontractor costs and those indirect costs related to contract performance, such as depreciation, motor vehicles,
payroll taxes, employee benefits, small tools, insurance, etc. Selling and administrative costs are charged to expense as incurred.
Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined. Changes in
job performance, job conditions and estimated profitability, including those arising from contract penalty provisions and final
contract settlements may result in revisions to costs and income and are recognized in the period in which the revisions are determined.
An amount equal to contract costs attributable to claims is included in revenues when realization is probable and the amount can
be reasonably estimated. Because of the inherent uncertainties in estimating costs, it is at least reasonably possible that the
Companys estimates of costs and revenues will change.
Property, Plant and Equipment
Property and equipment are reported at cost
less accumulated depreciation. Equipment under capital leases is stated at the present value of minimum lease payments. Depreciation
is computed using the straight-line method over the estimated useful lives of the assets. Lives for property, plant and equipment
are as follows: leasehold improvementsLesser of term or useful life; machinery and equipment5 to 15 years; furniture
and fixtures3 to 10 years; computer hardware and software 3 to 7 years. Routine maintenance costs are expensed as incurred.
Expenditures for renewals and betterments are capitalized. The cost and related accumulated depreciation of assets retired or sold
are removed from the accounts and gains or losses are recognized in operations. For the years ending December 31, 2011 and 2010,
the Company recorded $98,278 and $87,580 in depreciation expense, respectively.
Valuation of Intangibles and Other Long Lived Assets
The recoverability of
long-lived assets, including equipment and intangible assets, is reviewed when events or changes in circumstances occur that indicate
that the carrying value of the asset may not be recoverable. The assessment of possible impairment is based on the ability to recover
the carrying value of the asset from the expected future pre-tax cash flows (undiscounted and without interest charges) of the
related operations. If these cash flows are less than the carrying value of such asset, an impairment loss is recognized for the
difference between estimated fair value and carrying value. The primary measure of fair value is based on discounted cash flows.
The measurement of impairment requires management to make estimates of these cash flows related to long-lived assets, as well as
other fair value determinations.
Fair Value of Financial Instruments
Fair value estimates discussed
herein are based upon certain market assumptions and pertinent information available to management as of December 31, 2011. The
respective carrying value of certain on-balance sheet financial instruments approximated their fair values. These financial instruments
include cash and cash equivalents, accounts receivable, accounts payable, line of credit, and accrued expenses. Fair values were
assumed to approximate carrying values for these financial instruments since they are short-term in nature and their carrying amounts
approximate fair values or they are receivable or payable on demand.
Stock Based Compensation
Stock based awards are
accounted for according to the provisions of FASB ASC 718. Our primary type of share-based compensation consists of stock options.
We use the Black-Scholes option pricing model in valuing options. The inputs for the valuation analysis of the options include
the market value of the Company's common stock, the estimated volatility of the Company's common stock, the exercise price of the
warrants and the risk free interest rate.
Fair Value Measurements
FASB ASC 820 defines fair
value and establishes a framework for measuring fair value and establishes a fair value hierarchy which prioritizes the inputs
to the inputs to the valuation techniques. Fair value is the price that would be received to sell an asset or amount paid to transfer
a liability in an orderly transaction between market participants at the measurement date. A fair value measurement assumes that
the transaction to sell the asset or transfer the liability occurs in the principal market for the asset or liability or, in the
absence of a principal market, the most advantageous market. Valuation techniques that are consistent with the market, income or
cost approach, as specified by FASB ASC 820, are used to measure fair value.
Fair Value Hierarchy
FASB ASC 820 specifies
a hierarchy of valuation techniques based upon whether the inputs to those valuation techniques reflect assumptions other market
participants would use based upon market data obtained from independent sources (observable inputs), or reflect the Company's own
assumptions of market participant valuation (unobservable inputs). In accordance with FASB ASC 820, these two types of inputs have
created the following fair value hierarchy:
Level 1 - Quoted prices in active markets
that are unadjusted and accessible at the measurement date for identical, unrestricted assets or liabilities.
Level 2 - Quoted prices for identical assets
and liabilities in markets that are not active, quoted prices for similar assets and liabilities in active markets or financial
instruments for which significant inputs are observable, either directly or indirectly.
Level 3 - Prices or valuations that require
inputs that are both significant to the fair value measurement and unobservable.
FASB ASC 820 requires
the use of observable market data if such data is available without undue cost and effort.
The Company measures fair
value as an exit price using the procedures described for all assets and liabilities measured at fair value. When available, the
Company uses unadjusted quoted market prices to measure fair value and classifies such items within Level 1. If quoted market prices
are not available, fair value is based upon internally developed models that use, where possible, current market-based or independently-sourced
market parameters such as interest rates and currency rates. Items valued using internally generated models are classified according
to the lowest level input or value driver that is significant to the valuation. Thus, an item may be classified in Level 3 even
though there may be inputs that are readily observable. If quoted market prices are not available, the valuation model used generally
depends on the specific asset or liability being valued. The determination of fair value considers various factors including interest
rate yield curves and time value underlying the financial instruments.
Deferred tax assets and liabilities are recognized
for temporary differences between the financial reporting basis and the tax basis of our assets and liabilities. Deferred taxes
are recognized for the estimated taxes ultimately payable or recoverable based on enacted tax laws. Allowances are recorded if
recovery is uncertain.
Earnings per Common Share
Basic net loss per share
is computed using the weighted average number of common shares outstanding during the period. Basic and diluted earnings per share
are the same as outstanding options are antidilutive. Dilutive common equivalent shares consist of options to purchase common stock
(only if those options are exercisable and at prices below the average share price for the period) and shares issuable upon the
conversion of the Company's securities.
Intangible assets with estimable lives and other
long-lived assets are reviewed for impairment annually or whenever events or changes in circumstances indicate that the carrying
amount of an asset or asset group may not be recoverable. Recoverability of intangible assets with estimable lives and other long-lived
assets is measured by a comparison of the carrying amount of an asset or asset group to future net undiscounted pretax cash flows
expected to be generated by the asset or asset group. If these comparisons indicate that an asset is not recoverable, the impairment
loss recognized is the amount by which the carrying amount of the asset or asset group exceeds the related estimated fair value.
Estimated fair value is based on either discounted future pretax operating cash flows or appraised values, depending on the nature
of the asset. Judgment is required to estimate future operating cash flows.
Recent Accounting Pronouncements
ASU 2010-29. In December 2010,
the FASB issued clarification of the accounting guidance related to disclosure of pro forma information for business combinations
that occur in the current reporting period. The guidance requires companies to present pro forma information in their comparative
financial statements as if the acquisition date for any business combination that occurred in the current reporting period had
occurred at the beginning of the prior year reporting period. The Company adopted this guidance effective January 1, 2011.
ASU 2010-29 is a disclosure only clarification and its adoption had no impact on the Companys financial condition or results
of operation. The Company has included the disclosures required pursuant to this guidance in this Report.
ASU 2011-04. In May 2011, the
FASB issued ASU 2011-04, which amends ASC Topic 820, Fair Value Measurements and Disclosures, to achieve common fair value
measurement and disclosure requirements under GAAP and International Financial Reporting Standards (IFRS). This standard
gives clarification for the highest and best use valuation concepts. The ASU also provides guidance on fair value measurements
relating to instruments classified in stockholders equity and instruments managed within a portfolio. Further, ASU 2011-04
clarifies disclosures for financial instruments categorized within level 3 of the fair value hierarchy that require companies to
provide quantitative information about unobservable inputs used, the sensitivity of the measurement to changes in those inputs,
and the valuation processes used by the reporting entity. The Company is currently evaluating the newly prescribed disclosures
but does not expect they will have a material impact on the consolidated financial statements.
ASU 2011-05. In June 2011, the FASB
issued ASU 2011-05, which amends the guidance in Topic 220, Comprehensive Income, by eliminating the option to present
components of other comprehensive income (OCI) in the statement of stockholders equity. Instead, the guidance
now requires entities to present all non-owner changes in stockholders equity either as a single continuous statement of
comprehensive income or as two separate but consecutive statements of income and comprehensive income. The components of OCI have
not changed nor has the guidance on when OCI items are reclassified to net income. Similarly, ASU 2011-05 does not change the guidance
to disclose OCI components gross or net of the effect of income taxes, provided that the tax effects are presented on the face
of the statement in which OCI is presented, or disclosed in the notes to the financial statements. The Company adopted this guidance
effective January 1, 2012. The adoption of this guidance is not expected to have an impact on the Companys consolidated
ASU 2011-8. In September 2011,
the FASB issued ASU 2011-8, which amends ASC 350, Intangibles-Goodwill and Other. The amendments in this ASU give companies
the option to first perform a qualitative assessment to determine whether it is more likely than not (a likelihood of more than
50.0%) that the fair value of a reporting unit is less than its carrying amount. If a company concludes that this is the case,
it must perform the two-step goodwill impairment test. Otherwise, a company is not required to perform this two-step test. Under
the amendments in this ASU, an entity has the option to bypass the qualitative assessment for any reporting unit in any period
and proceed directly to performing the first step of the two-step goodwill impairment test. The Company adopted this guidance effective
January 1, 2012. The adoption of this guidance is not expected to have an impact on the Companys consolidated financial
ASU 2011-11. In December 2011, the
FASB issued ASU 2011-11. The amendments in this ASU require companies to disclose information about offsetting and related arrangements
to enable users of its financial statements to understand the effect of those arrangements on its financial position. The ASU is
required to be applied retrospectively for all prior periods presented and is effective for annual periods for fiscal years beginning
on or after January 1, 2013, and interim periods within those annual fiscal years. The adoption of this guidance is not expected
to have an impact on the Companys consolidated financial statements.