| SIGNIFICANT ACCOUNTING POLICIES | Note 2 SIGNIFICANT ACCOUNTING POLICIES Revenue Recognition The core principle of revenue recognition under
GAAP is that the Company should 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. The Company’s revenue on the majority of
its customer contracts are recognized at a point in time, generally upon shipment of products. To achieve that core principle, the Company applied
the following steps: 1. Identify the contract(s) with a customer. The Company designs, manufactures and distributes
various types of microelectronic circuits, optoelectronics, and sensors and displays. The Company’s products are used as
components and assemblies in a broad range of military, space and industrial systems, including aircraft instrumentation and navigation
systems, satellite systems, power supplies, electronic controls, computers, medical devices, and high-temperature (200 o The Company’s revenues are from purchase
orders and/or contracts with customers associated with manufacture of products. We account for a contract when it has approval
and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial
substance and collectability of consideration is probable. 2. Identify the performance obligations in the
contract. The majority of the Company’s purchase
orders or contracts with customers contain a single performance obligation, the shipment of products. 3. Determine the transaction price. The transaction price reflects the Company’s
expectations about the consideration it will be entitled to receive from the customer at a fixed price per unit shipped based on
the terms of the contract or purchase order with the customer. To the extent our actual costs vary
from the fixed price that was negotiated, we will generate more or less profit or could incur a loss. 4. Allocate the transaction price to the performance
obligations in the contract. 5. Recognize revenue when (or as) the Company
satisfies a performance obligation. This performance obligation is satisfied when
control of the product is transferred to the customer, which occurs upon shipment or delivery. The Company receives purchase orders
for products to be delivered over multiple dates that may extend across reporting periods. The Company accounting policy treats
shipping and handling activities as a fulfillment cost. The Company invoices for each delivery upon shipment and recognizes revenues
at the fixed price for each distinct product delivered when transfer of control has occurred, which is generally upon shipment. For certain contracts under which the Company
produces products with no alternative use and for which the Company has an enforceable right to payment during the production cycle,
the Company recognizes revenue for the cost incurred of work in process plus a margin at the end of each period and records a contract
asset (unbilled receivable). The majority of these products are shipped weekly and monthly to the customer and the contract require
us to manage and limit the level of work in process to meet the scheduled delivery dates. In addition, the Company may have a contract
or purchase order to provide a non-recurring engineering service to a customer. These contracts are reviewed and performance obligations
are determined and we recognize revenue at the point in time in which each performance obligation
is fully satisfied Disaggregation of Revenue The following table summarizes the Company’s net
sales by product line.
2/29/2020 2/23/2019
Microcircuits $ 1,828 $ 882
Optoeletronics 1,574 1,249
Sensors and Displays 2,555 1,674
$ 5,957 $ 3,805
Timing of revenue recognition
Transferred at a point in time $ 5,093 $ 3,522
Transferred over time 864 283
Total Revenue $ 5,957 $ 3,805 The following table summarizes the Company’s net
sales by major market.
2020 First Quarter Sales by Major Market
Military Space Medical Commercial Total
Domestic Direct $ 1,142 $ 685 $ 757 $ 395 $ 2,979
Domestic Distribution 2,492 — 5 110 2,607
International 168 171 — 32 371
$ 3,802 $ 856 $ 762 $ 537 $ 5,957
2019 First Quarter Sales by Major Market
Military Space Medical Commercial Total
Domestic Direct $ 919 $ 276 $ 765 $ 309 $ 2,269
Domestic Distribution 1,175 — — 56 1,231
International 86 135 — 84 305
$ 2,180 $ 411 $ 765 $ 449 $ 3,805 Receivables, net, Contract
Assets and Contract Liabilities The timing of revenue recognition, billings and cash collections results
in billed accounts receivable, unbilled receivables (contract assets), and customer advances and deposits (contract liabilities)
on the Consolidated Balance Sheets. Receivables, net, contract assets
and contract liabilities were as follows:
February 29, 2020 November 30, 2019
Receivables, net $ 3,475 $ 3,382
Contract assets $ 864 $ 519
Deferred Revenue $ 242 $ 390 Revenue recognized in 2020 that was included in the deferred
revenue liability balance at the beginning of the year was $147,000. Contract costs The Company does not have material incremental costs to obtain a contract in
the form of sales commissions or bonuses. The Company incurs other immaterial costs to obtain and fulfill a contract; however,
the Company has elected the practical expedient under ASC 340-40-24-4 to recognize all incremental costs to obtain a contract as
an expense when incurred if the amortization period is one year or less. Short-Term Investments The Company has no short-term investments at
February 29, 2020. Short-term investments consist of certificates of deposits with maturities greater than 90 days. These investments
are reported at historical cost, which approximates fair value. All highly liquid investments with maturities of 90 days or less
are classified as cash equivalents. Inventories Inventories are stated at lower of cost or net
realizable value and include material, labor and manufacturing overhead. All inventories are valued using the FIFO (first-in, first-out)
method of inventory valuation. The Company determines the need to write inventory down to the lower of cost or net realizable value
via an analysis based on the usage of inventory over a three year period and projected usage based on current backlog. Income Taxes The Company accounts for income taxes using the
asset and liability method. Under this method the Company records deferred income taxes for the temporary differences between the
financial reporting basis and the tax basis of assets and liabilities at enacted tax rates expected to be in effect when such amounts
are realized or settled. The resulting deferred tax liabilities and assets are adjusted to reflect changes in tax law or rates
in the period that includes the enactment date. The Company records a liability for an unrecognized
tax benefit for a tax position that is not “more-likely-than-not” to be sustained. The Company did not record
any liability for uncertain tax positions as of November 30, 2019. Property, Plant, and Equipment Property, plant, and equipment are carried at
cost, and depreciation is provided using the straight-line method at rates based upon the following estimated useful lives (in
years) of the assets: Buildings....................................................................................................................................................15 Facility improvements......................................................................................................................... 8-15 Machinery and equipment................................................................................................................. 5-10 Furniture and fixtures ...........................................................................................................................5-8 The Company assesses long-lived assets for impairment
in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) ASC 360-10-35, Property,
Plant and Equipment – Subsequent Measurement Repairs and maintenance are expensed as incurred.
Improvements which extend the useful lives of property, plant, and equipment are capitalized. Research and Development Costs Costs for the design and development of new products
are expensed as incurred. Leases In February 2016, the FASB issued Accounting Standards Update (ASU)
2016-02, Leases (Topic 842) In the first quarter of 2020, the Company entered into a three (3)
year lease extension on the property that has been leased on a year to year basis. As a result, we recognized $ 165,000 for operating
lease liabilities and right-of-use assets upon adoption of ASC 842. The Company had an operating lease expense of $12,000 in the
first quarter of 2020. The Company used an estimated incremental borrowing rate of 3.25% representative of the rate of interest
that the company would have to pay to borrow on the Company’s line of credit. The remaining lease term is three years. The undiscounted future minimum lease payments consist
of the following at:
2/29/2020
2020 $ 39,000
2021 53,000
2022 55,000
2023 14,000
Total lease payments 161,000
Interest 8,000
Present value of lease liabilities $ 153,000 |
