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I. . . . . . . . I. I. .. I: I. . I. . . I. . . . . I. I. I. . I. I. . . I: '. . . . . ,. . . I. .. . . . . . . . . . . . ,. NOTE J. BERMELLO, AJAMIL & PARTNERS, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FlNANCIAL STATEMENTS DECEMBER 31, 2006 AND 2005 COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS (CONTINUED) NOTE 4. RELATED PARTY TRANSACTIONS These amounts are included in the accompanying balance sheets under the following captions: 2006 2005 Costs and estimated earnings in excess of billings on uncompleted contracts Billings in excess of costs and estimated earnings on uncompleted contracts $ 1,072,436 $ 429,755 0.443.000) (2.997.433) $ (370.564) $ (2.567.678) Estimated losses on uncompleted contracts have been accrued in the amount of $220,000 at December 31, 2006 and 2005. In July 1999, the Company entered into a loan agreement with its two principal stockholders to include all balances previously owed by these stockholders. The loan agreement bears interest at 7% and is payable by the stockholders through monthly payroll deductions of $5,000. The balance owed to the Company at December 31, 2006 and 2005 was $338,873 and $366,489, respectively. The current portion of this loan at December 31, 2006 and 2005 was $60,000 and has been reflected as due from stockholders in current assets in the accompanying consolidated balance sheets. During 2005, certain contract receivables from entities controlled by these stockholders were included in a promissory note receivable. The outstanding balance on these contracts amounted to $257,634 and $1,294,647 as of December 31, 2006 and 2005, respectively, and has been included in the caption due from related parties in the accompanying consolidated balance sheets. Unpaid principal balance does not have a specific maturity date, but is expected to be collected in subsequent years. Due from related parties also includes salary advances which are deducted from the corresponding profit distributions received by the stockholders. Such advances do not bear interest and have no specific maturity dates. Salary advances amounted to $291,282 and $244,307 at December 31, 2006 and 2005, respectively. -13-