| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | Note
2 SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES: Basis
of Presentation The
accompanying condensed financial statements and the related disclosures as of June 30, 2022 and for the three months ended June 30, 2022
and 2021 are unaudited and have been prepared in accordance with accounting principles generally accepted in the United States, or U.S.
GAAP, and the rules and regulations of the SEC for interim financial statements. Accordingly, they do not include all of the information
and footnotes required by U.S. GAAP for complete financial statements. These interim condensed financial statements should be read in
conjunction with the March 31, 2022 audited financial statements and notes included in the Annual Report on Form 10-K filed on June 22,
2023. The March 31, 2022 balance sheet included herein was derived from the audited financial statements as of that date but does not
include all disclosures including notes required by U.S. GAAP for complete financial statements. In the opinion of management, the condensed
financial statements reflect all adjustments, consisting of normal and recurring adjustments, necessary for the fair presentation of
the Company’s financial position and results of operations for the three months ended June 30, 2022 and 2021. The results of operations
for the interim periods are not necessarily indicative of the results to be expected for the fiscal year ended March 31, 2023 or any
other interim period or future period. Revenue
Recognition The
core principle underlying Accounting Standards Codification ASC 606 “Revenue from Contracts with Customers” (“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 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 recognizes revenue and the related cost of products sold when the performance obligations are satisfied. The performance obligations
are typically satisfied upon shipment of physical goods. In addition to the satisfaction of the performance obligations, the following
conditions are required for revenue recognition: an arrangement exists, there is a fixed price, and collectability is reasonably assured. The
Company does not offer any discounts, credits or other sales incentives. Historically, the Company has not had an issue with uncollectible
accounts receivable. 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
provide a replacement at its own cost. The
Company’s disaggregated revenue by geographical location is as follows:
For the Three Months
2022 2021
Domestic $ 3,012,794 $ 4,571,993
International 1,065,790 1,938,584
Total $ 4,078,584 $ 6,510,577 Approximately
54.7% and 79.4% of the international net sales for the three months ended June 30, 2022 and 2021, respectively represent sales to customers
located in China. The
Company’s aggregated revenue by industry as a percentage of total revenue is provided below:
For the Three Months
2022 2021
Industry % %
Defense 55.9 56.0
Commercial Aerospace 20.4 14.7
Space 17.0 21.5
Other 6.7 7.8 Inventories Inventories
are comprised of raw materials, work-in-process and finished goods, and 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 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 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’s allowance for obsolete inventory was
$271,000 and $211,000 as of June 30, 2022 and March 31, 2022, respectively, and was reflected as a reduction of inventory. 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. At
times, the Company’s cash in banks was in excess of the Federal Deposit Insurance Corporation insurance limits. The Company has
not experienced any loss as a result of these deposits. (Net
Loss) 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 (net loss) earnings per common share
are computed by dividing net (loss) income by the weighted average number of common shares outstanding for the reporting period. Diluted
(net loss) earnings per share is computed by dividing net (loss) income by the weighted average number of common shares outstanding plus
common stock equivalents (if dilutive) for the reporting period. Basic
and diluted (net loss) earnings per share is calculated as follows:
For the Three Months
2022 2021
Net (loss) income $ (2,903,776 ) $ 2,343,588
(Net loss) earnings per common share:
Basic $ (1.23 ) $ 0.99
Diluted $ (1.23 ) $ 0.95
Weighted average number of common shares outstanding-basic (in thousands) 2,370 2,370
Dilutive effect of options to the extent that such options are determined to be in the money for the period (in thousands) - 101
Weighted average number of common shares outstanding-fully diluted (in thousands) 2,370 2,472 Potentially
dilutive securities outlined in the table below have been excluded from the computation of diluted (net loss) earnings per share because
the effect of their inclusion would have been anti-dilutive.
For the Three Months
2022 2021
Potentially dilutive options to purchase common shares 472,217 225,000 Fair
Value of Financial Instruments The
carrying value of the Company’s financial instruments, consisting of accounts receivable and accounts payable, approximate their
fair value due to the relatively short maturity of these instruments. The Company is exposed to credit risk through its cash but mitigates
this risk by keeping these deposits at major financial institutions. ASC
820, “Fair Value Measurements and Disclosures”, provides the framework for measuring fair value. That framework provides
a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest
priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority
to unobservable inputs (level 3 measurements). Fair
value is defined as an exit price, representing the amount that would be received upon the sale of an asset or payment to transfer a
liability in an orderly transaction between market participants. Fair
value is a market-based measurement that is determined based on assumptions that market participants would use in pricing an asset or
liability. A three-tier fair value hierarchy is used to prioritize the inputs in measuring fair value as follows: Level
1 - Quoted prices in active markets for identical assets or liabilities. Level
2 - Quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in
markets that are not active, or other inputs that are observable, either directly or indirectly. Level
3- Significant unobservable inputs that cannot be corroborated by market data and inputs that are derived principally from or corroborated
by observable market data or correlation by other means. Use
of Estimates The
preparation of financial statements in conformity with generally accepted accounting principles (“GAAP”) 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. The Company utilizes estimates with respect to determining
the useful lives of fixed assets, the fair value of stock based instruments, an incremental borrowing rate for determining for its leases
the present value of lease payments, the calculation of inventory obsolescence, as well as determining the amount of the valuation allowance
for deferred income tax assets, net. Actual amounts could differ from those estimates. Segment
Information The
Company identifies its operating segments in accordance with ASC 280, Segment Reporting (“ASC 280”). Operating segments are
defined as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating
decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance. The Company’s chief
operating decision maker, its Chief Executive Officer, manages the Company’s operations on a combined basis for the purposes of
allocating resources. Accordingly, the Company has determined it operates and manages its business in a single reportable operating segment. Depreciation The
Company provides for depreciation and amortization on a straight-line basis over the estimated useful lives (5-7 years) of the related
assets. Depreciation expense for the three months ended June 30, 2022 and 2021 was $248,483 and $175,916 respectively. Stock-Based
Compensation 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 the 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
June 2016, the FASB issued ASU 2016-13 – Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses
on Financial Instruments (“ASU 2016-13”), which was subsequently revised by ASU 2018-19 and ASU 2020-02. The ASU introduces
a new model for assessing impairment on most financial assets. Entities will be required to use a forward-looking expected loss model,
which will replace the current incurred loss model, which will result in earlier recognition of allowance for losses. The ASU will be
effective for the Company’s first interim period of the fiscal year ended March 31, 2024. The Company has evaluated the impact
of the adoption of ASU 2016-13, and related updates, and has determined that the impact would not be material to its financial statements
and disclosures. The
Company has evaluated other recently issued accounting pronouncements and has concluded that the impact of recently issued standards
that are not yet effective will not have a material impact on the Company’s financial position or results of operations upon adoption. Subsequent
Events The
Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the financial statements
were available to be issued. The Company did not identify any subsequent events that would have required adjustment or disclosure in
the financial statements. |
