| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | Note 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Description of Business: The Company designs, develops and manufactures printed circuit
connectors for high performance applications. We have also developed a high performance plastic circular connector line. All of
our connectors utilize the HYPERBOLOID contact design, a rugged, high-reliability contact system ideally suited for high-stress
environments. We believe we are the only independent producer of HYPERBOLOID printed circuit board connectors in the United States. The Company’s customers consist of OEM’s (Original
Equipment Manufacturers), companies manufacturing medical equipment, and distributors who resell the Company’s products to
OEMs. The Company sells its products directly and through regional representatives located in all regions of the United States,
Canada, Israel, India, various Pacific Rim countries, South Korea and the European Union (EU). The customers the Company services are in the Government,
Military, Aerospace, Medical, Automotive, Industrial, Test Equipment and Commercial Electronics markets. The Company appears on
the Military Qualified Product Listing “QPL” to MIL-DTL-55302 and supply customer requested modifications to this specification.
Sales to the commercial electronic (inclusive of aerospace, space, oil & gas, medical & miscellaneous) and military markets
were 49.9% and 50.1%, respectively, of the Company’s net sales for the year ended March 29, 2019 as compared to the comparable
sales of 35% and 45%, respectively, for the year ended March 30, 2018. The Company’s offering of “QPL” items
has recently been expanded to include additional products. In order to remain competitive, the Company has an internal
program to upgrade, add and maintain machinery, review material costs and increase labor force productively. During the fiscal
year ended March 29, 2019, we purchased several machines to increase the productivity of certain processes. This should help us
meet this goal. New Product Development: The Company is sought after by many of its customers to
design and manufacture custom connectors. This has created many new products that are innovative designs and employ new technologies.
The Company continues to be successful because of its ability to assist its customers and create a new design, including engineering
drawing packages, in a relatively short period of time. We will continue to support our customers to the best of our ability. A new product line featuring high density connectors has
been added to the Company’s product offering. The Company is beginning to recognize meaningful revenue from this product
line and we expect it to grow in the coming years. The standard printed circuit board connectors we produce
are continually being expanded and utilized in many of the military programs being built today. We have recently received approval
for additional products that we can offer under the Military Qualified Product Listing “QPL.” Accounting Period: The Company maintains an accounting period based upon a
52-53 week year, which ends on the nearest Friday in business days to March 31 st Revenue Recognition: In May 2014, the Financial Accounting Standards Board issued
ASC 606 “Revenue from Contracts with Customers” that, as amended on August 12, 2015, became effective for annual report
periods beginning after December 15, 2017. The core principle underlying ASC 606, is to recognize revenue
to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity
expects to be entitled in exchange for those goods or services.” ASC 606-10-05-4 sets out the following steps for an entity
to follow when applying the core principle to its revenue -generating transactions:
· Identify the contract with a customer
· Identify the performance obligations in the contract
· Determine the transaction price
· Allocate the transaction price to the performance obligations
· Recognize revenue when (or as) each performance obligation is satisfied The Company has adopted the provisions of ASC 606 for the
quarter ended June 29, 2018. However, such adoption did not have any material effect on the way in which the Company recognizes,
records and reports revenues. The Company does not offer any discounts, credits or other
sales incentives. Historically, the Company believes that it has no collection issues with its customer base. The Company’s
policy with respect to customer returns and allowances as well as product warranty is as follows: The Company will accept a return of defective products within
one year from shipment for repair or replacement at the Company’s option. If the product is repairable, the Company at its
own cost, will repair and return it to the customer. If unrepairable, the Company will either offer an allowance against payment
or will reimburse the customer for the total cost of product. The cost of this warranty with respect to defective products is immaterial
at this time. The Company provides engineering services as part of the
relationship with its customers in developing custom products. The Company is not obligated to provide such engineering service
to its customers. The Company does not invoice its customers separately for these services. Inventories: Inventories are stated at cost, on an average basis, which
does not exceed net realizable value. The Company manufactures products pursuant to specific technical
and contractual requirements. The Company historically purchases material in excess of
its requirements to avail itself of favorable pricing as well as the possibility of receiving additional orders from customers.
This excess may result in material not being used in subsequent periods, which may result in this material being deemed obsolete. The Company annually reviews its purchase and usage activity
of its inventory of parts as well as work in process and finished goods to determine which items of inventory have become obsolete
within the framework of current and anticipated orders. The Company, based upon historical experience, has determined that if a
part has not been used and purchased or an item of finished goods has not been sold in three years, it is deemed to be obsolete.
The Company estimates which materials may be obsolete and which products in work in process or finished goods may be sold at less
than cost. A periodic adjustment, based upon historical experience is made to inventory in recognition of this impairment. The
Company recognized $399,979 and $208,257 for the years ended March 29, 2019 and March 30, 2018, respectively, as a reduction of
inventory due to obsolescence. Concentration of Credit Risk: Financial instruments which potentially subject the Company
to concentrations of credit risk consist primarily of cash and cash equivalents and accounts receivable. Under the provisions of the Dodd-Frank Wall Street Reform
and Consumer Protection Act, the Federal Deposit Insurance Corporation (FDIC) will permanently insure all accounts maintained in
each financial institution up to $250,000 in the aggregate. As of March 29, 2019, the Company had funds on deposit in
the amount of $7,263,839 in one financial institution of which $7,013,839 exceeds FDIC coverage. The Company has not experienced
any losses in such accounts and believes its cash balances are not exposed to any significant risk. Property, Plant and Equipment: Property, plant and equipment are stated at cost less accumulated
depreciation and amortization. The Company provides for depreciation and amortization using the Double Declining Balance method
over the estimated useful lives (5-7 years) of the related assets. Maintenance and repair expenditures are charged to operations,
and renewals and betterments are capitalized. Items of property, plant and equipment, which are sold, retired or otherwise disposed
of, are removed from the asset and accumulated depreciation or amortization account. Any gain or loss thereon is either credited
or charged to operations. Income Taxes: Deferred income taxes arise from temporary differences resulting
from different depreciation methods used for financial and income tax purposes. The Company has adopted the Financial Accounting
Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 740. Earnings Per Share: The Company accounts for earnings per share pursuant
to ASC Topic 260, “Earnings per Share”, which requires disclosure on the Financial Statements of
“basic” and “diluted” earnings per share. Basic earnings per share are computed by dividing net
income by the weighted average number of common shares outstanding for the year. Diluted earnings per share is computed by
dividing net income by the weighted average number of common shares outstanding plus common stock equivalents (if dilutive)
related to stock options for each year. As the Company reported net income for both the years ended March 29, 2019 and March
30, 2018, respectively, basic and diluted income per share are calculated separately as follows:
3/29/2019 3/30/2018
NET INCOME $ 5,160,776 $ 2,565,559
BASIC EARNINGS PER COMMON SHARE $ 2.23 $ 1.11
FULLY DILUTED EARNINGS PER SHARE $ 2.15 $ 1.10
WEIGHTED AVERAGE NUMBER OF 2,321,331 $ 2,303,468
DILUTIVE EFFECT OF OPTIONS GRANTED 92,399 30,238
WEIGHTED AVERAGE NUMBER OF 2,413,730 2,333,706 Fair Value of Financial Instruments: The carrying value of the Company’s financial instruments,
consisting of accounts receivable, accounts payable, and borrowings, approximate their fair value due to the relatively short maturity
of these instruments. Use of Estimates: The preparation of Financial Statements in conformity with
generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts
of assets and liabilities, revenues and expenses, and disclosure of contingent assets and liabilities at the date of the Financial
Statements. Actual amounts could differ from those estimates. Impairment of Long-Lived Assets: The Company has adopted the provisions of ASC Topic 360,
“Property, Plant and Equipment-Impairment or Disposal of Long Lived Assets,” and requires that long-lived assets and certain identifiable
intangibles to be held and used by an entity be reviewed for impairment whenever events or changes in circumstances indicate that
the carrying amount of an asset may not be recoverable. There were no long-lived asset impairments recognized by the Company for
the years ended March 29, 2019 and March 30, 2018,
respectively. Stock-Based Compensation Plan: Compensation expense for stock options granted to directors,
officers and key employees is based on the fair value of the award on the measurement date, which is the date of the grant. The
expense is recognized ratably over the service period of the award. The fair value of stock options is estimated using a Black-Scholes
valuation model. The fair value of any other non-vested stock awards is generally the market price of the Company’s common
stock on the date of the grant. Recent Accounting Pronouncements In December 2016, the FASB issued ASU 2016-20, Technical
Corrections and Improvements to Topic 606, Revenue from Contracts with Customers. The amendments in this update are of a similar
nature to the items typically addressed in the ASU 2016-19, Technical Corrections and Improvements. The FASB elected to issue a
separate update for technical corrections and improvements to Topic 606 as well as other Topics amended by ASU 2014-09 to increase
public awareness of the proposals and to expedite improvements to ASU-2014-9. The adoption of ASU 2016-20 is effective from the
periods beginning after December 31, 2017, including interim reporting periods within that reporting period. Early adoption is
permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that
reporting period. Leases FASB ASC 2016-02 Leases (Topic 842) – In
February 2016, the FASB issued ASC 2016-02, which requires lessees to recognize almost all leases on their balance sheet as a
right-of-use asset and a lease liability. For income statement purposes, the FASB retained a dual model, requiring leases to
be classified as either operating or finance. Classification will be based on criteria that are largely similar to those
applied in current lease accounting, but without explicit bright lines. Lessor accounting is similar to the current model,
but has been updated to align with certain changes to the lessee model and the new revenue recognition standard. ASC 2016-02
is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. We have
adopted ASC 2016-02 as of April 1, 2019, and do expect guidance to have an impact on the financial statements for the
forthcoming fiscal year. |
