| SIGNIFICANT ACCOUNTING POLICIES | 2.
SIGNIFICANT ACCOUNTING POLICIES Use
of Estimates The
preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the dates of the financial statements
and the reported amounts of revenues and expenses during the reporting periods. Management develops, and changes periodically, these
estimates and assumptions based on historical experience and on various other factors that are believed to be reasonable under the circumstances.
Actual amounts could differ significantly from these estimates. Revenue
Recognition The
Company applies the requirements of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”)
Topic 606, Revenue from Contracts with Customers The
principle of Topic 606 was achieved through applying the following five-step approach:
● Identification
of the contract, or contracts, with a customer —
● Identification
of the performance obligations in the contract —
● Determination
of the transaction price
● Allocation
of the transaction price to the performance obligations in the contract
● Recognition
of revenue when, or as, the Company satisfies a performance obligation
■ The
Company has a present right to payment
■ The
customer has legal title to the goods
■ The
Company has transferred physical possession of the goods
■ The
customer has the significant risks and rewards of ownership of the goods
■ The
customer has accepted the goods It
is important to note that the indicators are not a set of conditions that must be met before the Company can conclude that control of
the goods has transferred to the customer. The indicators are a list of factors that are often present if a customer has control of the
goods. The
Company has typical, unmodified FOB shipping point terms. As the seller, the Company can determine that the shipped goods meet the agreed-upon
specifications in the contract or customer purchase order (e.g., items, quantities, and prices) with the buyer, so customer acceptance
would be deemed a formality, as noted in ASC 606-10-55-86. As a result, the Company has a legal right to payment upon shipment of the
goods. Based
upon the above, the Company has concluded that control substantively transfers to the customer upon shipment. Other
considerations of Topic 606 include the following:
● Contract
Costs -
● Warranties
● Returned
Goods
● Volume
Rebates (Promotional Incentives)
■ The
amount of consideration is highly susceptible to factors outside the Company’s influence.
■ The
uncertainty about the amount of consideration is not expected to be resolved for a long period
of time.
■ The
Company’s experience with similar types of contracts is limited.
■ The
contract has a large number and broad range of possible consideration amounts. If
it was concluded that the above factors were in place for the Company, it would support the probability of a significant reversal of
revenue. However, as none of the four factors apply to the Company, promotional incentives are recorded as a reduction of revenue based
upon estimates of the eligible products expected to be sold. Regarding
disaggregated revenue disclosures, as previously noted, the Company’s business is controlled as a single operating segment that
consists of the manufacture and sale of flexible metal hose. Most of the Company’s transactions are very similar in nature, contract,
terms, timing, and transfer of control of goods. As indicated in this Note 2, Significant Accounting Policies, under the caption “Significant
Concentrations”, the majority of the Company’s sales were geographically contained within North America, with the remainder
scattered internationally. All performance assessments and resource allocations are generally based upon the review of the results of
the Company as a whole. Cash
Equivalents The
Company considers all highly liquid investments with an original maturity of 90 days or less at the time of purchase to be cash equivalents.
Cash equivalents include investments in an institutional money market fund, which invests in U.S. Treasury bills, notes, and bonds, and/or
repurchase agreements, backed by such obligations, and in U.S. Treasury bills and certificates of deposit. Carrying value approximates
fair value except for U.S. Treasury bills and certificates of deposit where amortized cost approximates fair value. Cash and cash equivalents
are deposited at various area banks, which at times may exceed federally insured limits. The Company monitors the viability of the banking
institutions carrying their assets on a regular basis and has the ability to transfer cash to various institutions during times of risk.
The Company has not experienced any losses related to these cash balances and believes its credit risk to be minimal. Accounts
Receivable and Provision for Credit Losses All
accounts receivable is stated at amortized cost, net of allowances for credit losses, and adjusted for any write-offs. The Company maintains
allowances for credit losses, which represent an estimate of expected losses over the remaining contractual life of its receivables considering
current market conditions and estimates for supportable forecasts when appropriate. The estimate is a result of the Company’s ongoing
assessments and evaluations of collectability, historical loss experience, and future expectations in estimating credit losses in its
receivable portfolio. For accounts receivable, the Company uses historical loss experience rates and applies them to a related aging
analysis while also considering customer and/or economic risk where appropriate. Determination of the proper amount of allowances requires
management to exercise judgment about the timing, frequency and severity of credit losses that could materially affect the provision
for credit losses and, as a result, operating profit. The allowances consider numerous quantitative and qualitative factors that include
receivable type, historical loss experience, delinquency trends, collection experience, current economic conditions, estimates for supportable
forecasts, when appropriate, and credit risk characteristics. The
reserve for credit losses, which include future credits, discounts, and doubtful accounts, was $ 774,000 1,126,000 Inventories Inventories
are valued at the lower of cost or net realizable value. The cost of inventories is determined by the first-in, first-out (FIFO) method.
The Company generally considers inventory quantities beyond two years of usage, measured on a historical usage basis, to be excess inventory
and reduces the carrying value of inventory accordingly. Property
and Equipment Property
and equipment are initially recorded at cost. Depreciation and amortization are computed using the straight-line method over the estimated
useful lives of the assets or, for leasehold improvements, the life of the lease, if shorter. When assets are retired or otherwise disposed
of, the cost and related accumulated depreciation are removed from the accounts and any resulting gain or loss is reflected in other
income or expense for the period. The cost of maintenance and repairs is expensed as incurred; significant improvements are capitalized. Goodwill
In
accordance with FASB ASC Topic 350, Intangibles – Goodwill and Other Stock
Based Compensation Plans In
2006, the Company adopted a Phantom Stock Plan (the “Plan”), which allows the Company to grant phantom stock units (“Units”)
to certain key employees, officers, or directors. The Units each represent a contractual right to payment of compensation in the future
based upon the market value of the Company’s common stock and are accordingly recorded as liabilities. The Units follow a vesting
schedule over three years from the grant date and are then paid upon maturity. In accordance with FASB ASC Topic 718, Compensation
- Stock Compensation The
Plan has been amended and restated, for all grants made starting January 1, 2023, to set the vesting method to three-year cliff vesting
following the grant date, with payment upon maturity. Additionally, for grants made starting January 1, 2023, upon retirement at age
67 or greater, and with one year of continuous service prior to retirement, vesting of the issued grant(s) would accelerate on a pro-rata
basis, 1/3 per year from the grant date. Further
details of the Plan are provided in Note 7, Stock Based Compensation Plans, to the Condensed Consolidated Financial Statements included
in this report. Product
Liability Reserves Product
liability reserves represent the estimated unpaid amounts under the Company’s insurance policy deductibles or self-insured retention
limits, with respect to existing claims. The Company uses the most current available data to estimate claims. As explained more fully
under Note 6, Commitments and Contingencies, to the Condensed Consolidated Financial Statements included in this report, for various
product liability claims covered under the Company’s general liability insurance policies, the Company must pay certain defense
and settlement costs within its deductible or self-insured retention limits, ranging primarily from $ 250,000 3,000,000 Leases The
Company applies the requirements of FASB ASC Topic 842, Leases
1. The
lease transfers ownership of the underlying asset to the lessee by the end of the lease term.
2. The
lease grants the lessee an option to purchase the underlying asset that the lessee is reasonably
certain to exercise.
3. The
lease term is for the major part of the remaining economic life of the underlying asset.
4. The
present value of the sum of lease payments and any residual value guaranteed by the lessee
equals or exceeds substantially all of the fair value of the underlying asset.
5. The
underlying asset is of such a specialized nature that it is expected to have no alternative
use to the lessor at the end of the lease term. For
any leases that do not meet the criteria identified above for finance leases, the Company treats such leases as operating leases. As
of June 30, 2024 and December 31, 2023, each of the Company’s leases is classified as an operating lease. Both
finance and operating leases are reflected on the balance sheet as lease or “right-of-use” assets and lease liabilities. There
are some exceptions which the Company has elected in its accounting policies. For leases with terms of twelve months or less, or below
the Company’s general capitalization policy threshold, the Company has elected an accounting policy to not recognize lease assets
and lease liabilities for all asset classes. The Company recognizes lease expense for such leases generally on a straight-line basis
over the lease term. The
Company determines if a contract is a lease at the inception of the arrangement. The Company reviews all options to extend, terminate,
or purchase its right-of-use assets at the inception of the lease and accounts for these options when they are reasonably certain to
be exercised. Certain leases contain non-lease components, such as common area maintenance, which are generally accounted for separately.
In general, the Company will assess if non-lease components are fixed and determinable, or variable, when determining if the component
should be included in the lease liability. For purposes of calculating the present value of the lease obligations, the Company utilizes
the implicit interest rate within the lease agreement when known and/or determinable, and otherwise utilizes its incremental borrowing
rate at the time of the lease agreement. Fair
Value of Financial and Nonfinancial Instruments The
Company measures financial instruments in accordance with FASB ASC Topic 820, Fair Value Measurements and Disclosures Intangibles - Goodwill and Other Earnings
per Common Share Basic
earnings per share have been computed using the weighted-average number of common shares outstanding. For the periods presented, there
are no dilutive securities. Consequently, basic and dilutive earnings per share are the same. Currency
Translation Assets
and liabilities denominated in foreign currencies are translated into U.S. dollars at exchange rates prevailing on the balance sheet
dates. The assets and liabilities denominated in foreign currencies relate to the Company’s U.K. subsidiary whose functional currency
is the British Pound and the U.K. subsidiary’s France subsidiary whose functional currency is the Euro. The Condensed Consolidated
Statements of Income are translated into U.S. dollars at average exchange rates for the period. Adjustments resulting from the translation
of financial statements are excluded from the determination of income and are accumulated in a separate component of shareholders’
equity. Exchange gains and losses resulting from foreign currency transactions are included in the Condensed Consolidated Statements
of Income in the period in which they occur. Income
Taxes The
Company accounts for tax liabilities in accordance with the FASB ASC Topic 740, Income Taxes Deferred
tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered
or settled. The effect on deferred tax assets and liabilities from a change in tax rates is recognized in income in the period that includes
the enactment date. A valuation allowance is provided for deferred tax assets if it is more likely than not that these items will either
expire before the Company is able to realize the benefit, or that future deductibility is uncertain. The
FASB ASC Topic 740, Income Taxes The
Company follows the provisions of FASB ASC Subtopic 740-10 relative to accounting for uncertainties in tax positions. These provisions
provide guidance on the recognition, de-recognition and measurement of potential tax benefits associated with tax positions. Other
Comprehensive Income For
the three and six months ended June 30, 2024 and 2023, respectively, the components of other comprehensive income consisted solely of
foreign currency translation adjustments. Significant
Concentrations The
Company has one significant customer which represented more than 10% of the Company’s Accounts Receivable as of June 30, 2024 and
as of December 31, 2023. That same customer represented more than 10% of the Company’s total Net Sales for the three and six months
ended June 30, 2024 and 2023. Geographically, the Company has a significant amount of sales in the United States versus internationally Subsequent
Events The
Company evaluates all events or transactions through the date of the related filing that may have a material impact on its Condensed
Consolidated Financial Statements. Refer to Note 11 of the Condensed Consolidated Financial Statements. Recent
Accounting Pronouncements In
March 2020, the FASB issued Accounting Standards Update (“ASU”) No. 2020-04, Reference Rate Reform (Topic 848): Facilitation
of the Effects of Reference Rate Reform on Financial Reporting, Deferral of Sunset
Date of Topic 848 In
December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures |
