ACCOUNTING STANDARDS UPDATES

3 Months Ended

Jun. 30, 2018

New Accounting Pronouncements and Changes in Accounting Principles [Abstract]

ACCOUNTING STANDARDS UPDATES

NOTE 3 - ACCOUNTING STANDARDS UPDATES

New Accounting Standards Recently Adopted

Effective April 1, 2018, the Company adopted the requirements of ASU 2014-09, which provides a single revenue recognition model for the transfer of promised goods or services in a manner reflective of the consideration we are entitled to in exchange for those goods or services. The Company applied the new revenue guidance retrospectively with a cumulative effect adjustment to retained earnings at April 1, 2018 for initial application of the guidance (modified retrospective method). Results for reporting periods beginning after April 1, 2018, are presented under ASC 606, while prior period amounts are not adjusted and are reported in accordance with the Company's historic accounting practices under ASC 605.

With the adoption of ASC 606 the Company changed its revenue recognition model to reflect recognition of revenue at a point in time, or over time using an inputs based methodology that recognizes revenue on cost incurred and labor hours expended, which is different than the units of delivery methodology previously utilized under ASC 605. The Company also modified and expanded its disclosures as they relate to revenues and contract balances under ASC 606.

In conformity with the new revenue guidelines, unbilled accounts receivable are classified as contract assets and advance payments and billings in excess of revenue are classified as contract liabilities as of June 30, 2018 and March 31, 2018.

The adoption of ASC 606 resulted in a cumulative increase to retained earnings of $19,647, net of $7,385 of tax expense, as of April 1, 2018, driven by changes in contract assets and liabilities. For the three months ended June 30, 2018, product sales increased by approximately $2.5 million due to the change in revenue recognition when compared to ASC 605. Under ASC 605 the Company did not recognize revenue prior to delivery if payment, title, risk of loss was tied to delivery. The new guidance has been applied to all incomplete contracts at the date of initial application. The following table compares the opening and closing balances for inventories, contract assets and contract liabilities:

	June 30, 2018		April 1, 2018
			As adjusted
Inventories	$	1,025,211	$	976,693
Contract assets	$	4,175,499	$	2,056,414
Contract liabilities	$	1,458,319	$	890,802

The following tables summarize the impact of the adoption of ASC 606 on the condensed consolidated financial statements. The adjustments are the result of timing differences between the recognition of revenue under ASC 606 and ASC 605. Under ASC 605 the Company did not recognize revenue prior to delivery if payment, title, or risk of loss was tied to delivery. Under ASC 606, the Company generally recognizes revenue over time prior to delivery, as control over the promised goods and services transfers to the customer.

Condensed Consolidated Balance Sheet:	June 30, 2018
	As reported		Adjustments			ASC 605
ASSETS
Contract assets	$	4,175,499	$	(4,175,499	)	$	—
Inventories	$	1,025,211	$	2,105,312		$	3,130,523
Deferred tax assets	$	2,423,515	$	251,635		$	2,675,150
LIABILITIES
Contract liabilities	$	1,458,319	$	(1,165,622	)	$	292,697
Accrued expenses	$	752,717	$	37,313		$	790,030
SHAREHOLDERS’ EQUITY
Retained earnings	$	57,048	$	(690,244	)	$	(633,196	)

Condensed Consolidated Statement of Operations:	Three months ended June 30, 2018
	As reported		Adjustments			ASC 605
Net sales	$	4,098,823	$	(2,466,981	)	$	1,631,842
Cost of sales	$	3,046,299	$	(1,551,220	)	$	1,495,079
Selling, general and administrative	$	730,465	$	(914	)	$	729,551
Income (loss) before income taxes	$	229,414	$	(914,848	)	$	(685,434	)
Income tax provision (benefit)	$	65,029	$	(244,250	)	$	(179,221	)
Net income (loss)	$	164,385	$	(670,598	)	$	(506,213	)
Net income (loss) per share – basic	$	0.01	$	(0.02	)	$	(0.01	)
Net income (loss) per share – diluted	$	0.01	$	(0.02	)	$	(0.01	)

Condensed Consolidated Statement of Cash Flows:	Three months ended June 30, 2018
	As reported			Adjustments			ASC 605
Net income	$	164,385		$	(670,598	)	$	(506,213	)
Adjustments to reconcile net income to net cash used in operating activities:
Change in contract loss provision	$	(15,875	)	$	85,694		$	69,819
Deferred income taxes	$	65,029		$	(251,635	)	$	(186,606	)
Changes in operating assets and liabilities:
Inventories	$	(48,518	)	$	(2,105,312	)	$	(2,153,830	)
Contract assets	$	(2,119,085	)	$	4,175,499		$	2,056,414
Accrued expenses	$	118,339		$	(68,207	)	$	50,132
Contract liabilities	$	567,517		$	(1,165,622	)	$	(598,105	)

Effective April 1, 2018, the Company adopted ASU 2016-16, Income Taxes (Topic 740): Intra Entity Transfers of Assets Other Than Inventory. The guidance in ASU 2016-16 requires companies to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. As such, the Company was required to remeasure an unrecognized deferred tax asset created from the repurchase of land and building from a certain variable interest entity in 2010. The modified retrospective approach was used to transition to the new guidance, with a cumulative-effect adjustment recorded in retained earnings as of the beginning of the period of adoption. The adoption of ASU 2016-16 resulted in a cumulative increase to retained earnings of $0.4 million as of April 1, 2018.

Issued Standards Not Yet Adopted

In February 2016, the FASB issued ASU 2016-02, Leases. Under this amendment, lessees will be required to recognize the following for all leases (with the exception of short-term leases) at the commencement date: 1) a lease liability which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis, and 2) a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, with early application permitted. Lessees must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. We are currently evaluating the impact ASU 2016-02 will have on our financial statements and disclosures.