7. Accrued Future Loss Contracts

In accordance with the Company’s revenue recognition policy, certain contracts are accounted for using the percentage of completion accounting method. Revenue is recognized based on a measurement of completion comparing the ratio of costs incurred to date with total estimated costs multiplied by the contract value. Inherent in these estimates are uncertainties about the total cost to complete the project. If the estimate to complete results in a loss on the contract, the Company will record the amount of the estimated loss in the period the determination is made. Changes to the estimate may result in a charge or benefit to operations. As of December 31, 2011, the Company estimated and recorded a future loss of $1,253,147.