Note 2 - Significant Accounting Policies

6 Months Ended

Jun. 30, 2019

Notes to Financial Statements

New Accounting Pronouncements and Changes in Accounting Principles [Text Block]

NOTE

2—SIGNIFICANT

ACCOUNTING POLICIES

Revenue Recognition

Revenue is principally derived from the sale and licensing of highly engineered plastic sheet and film products. The Company receives specific purchase orders for the manufacture, sale and delivery of these products that identify the goods and/or services to be transferred, the price for those goods and other commercial terms of the order. The goods are generally purchased under EXW (or EX-Works) terms, meaning that the customer is responsible for arranging the shipping of the goods and title passes when the goods are picked up from the Company’s dock. Revenue is recognized upon the transfer of title, and there are

no

price concessions, volume discounts, rebates, refunds, credits, incentives, performance bonuses, royalties or other types of variable consideration.

In the specific case of the Equipment Purchase Agreement and a Technology License Agreement (collectively, the “Original Agreements”) signed on

January 16, 2018

for an aggregate transaction price of

$6,000,

the Company will purchase from a

third

party specialized equipment (the “Equipment”) for the production of

one

of the Company’s proprietary encapsulants (the “Encapsulant”), resell the Equipment to the customer, install the Equipment at a facility of the customer and train the customer’s personnel in the Equipment’s use. Under the Technology and License Agreement, the Company has granted the customer the right to use the formula for the Encapsulant and certain of the Company’s production techniques to make or have made the Encapsulant for use in photovoltaic (PV) modules manufactured by the customer. For revenue recognition purposes, the Company defines the following

three

distinct major performance obligations of the Agreements and the corresponding transaction price allocated to those performance obligations:

• Obligation 1 - $1,750 - Price Report, Formula and Sample

• Obligation 2 - $2,000 - Equipment, including delivery & installation (incl. training)

• Obligation 3 - $2,250 - License (perpetual)

Obligation

1

is considered to be separate and distinct from the other

two

obligations, in that the information provided under this obligation represents significant standalone value to the customer and the Company’s obligation to provide this information is separately identifiable from the other obligations in the agreements. Obligation

2

and Obligation

3

were also clearly identifiable, as defined by the Equipment Purchase Agreement (including delivery and installation by an agreed-upon date) and the license (“License”) granted pursuant to the Technology License Agreement (with an effective start date upon the receipt of an acceptance test payment).

The Company is applying a “cost-plus” approach to Obligation

1

and Obligation

2.

As the Company had never before sold any type of license, had

no

established specific license pricing and had

no

knowledge of pricing for similar licenses, the Company is using the residual approach for Obligation

3.

The License is perpetual, distinct and

not

combined with other goods and services, and is a right to use, rather than to access, functional intellectual property.

The Company also assessed whether it was acting in a principal or agent role in each performance obligation of the Original Agreements. In all obligations, the Company determined it was acting in the role of principal and therefore revenue is recognized on a gross basis.

On

July 29, 2019

the Company entered into certain new agreements with respect to the Original Agreements. See Note

18.

Recent Accounting Pronouncements

In

February 2016,

the FASB issued ASU

2016

-

02,

“Leases (Topic

842

).” This ASU requires a lessee to recognize in the statement of financial position a liability to make lease payments and a right-of-use asset representing its right to use the underlying asset for the lease term and also requires additional qualitative and quantitative disclosures. ASU

2016

-

02

is effective for reporting periods beginning after

December 15, 2018,

with early adoption permitted. After a thorough assessment, the Company determined that this pronouncement had

no

impact on its Condensed Consolidated Financial Statements.

There are

no

other new accounting pronouncements that the Company believes

may

have a material impact on its Condensed Consolidated Financial Statements.