SIGNIFICANT ACCOUNTING POLICIES (Policies)

3 Months Ended

Feb. 26, 2022

Accounting Policies [Abstract]

Revenue Recognition

Revenue Recognition

The core principle of revenue recognition under accounting principles generally accepted in the Unites States of America (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 applies 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, medical and industrial systems, including aircraft instrumentation and navigation systems, satellite systems, power supplies, electronic controls, computers, medical devices, and high-temperature (200^o C) products.

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.

The Company’s transaction price is the fixed price per unit per each delivery upon shipment.

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 customers and the contracts 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

Disaggregation of Revenue

The following table summarizes the Company’s net sales by product line.

Net Sales by Product Line

(Dollars in thousands)

	Feb. 26, 2022	Feb. 27, 2021
Microelectronics	$1,541	$723
Optoelectronics	2,205	1,379
Sensors and Displays	2,320	1,948
	$6,066	$4,050
Timing of revenue recognition
Recognized at a point in time	$5,351	$3,327
Recognized over time	715	723
Total Revenue	$6,066	$4,050

The following table summarizes the Company’s Net Sales by Major Market.

2022 First Quarter Sales by Major Market (Dollars in thousands)
		Military		Space		Medical		Commercial		Total
Domestic Direct	$	2,505	$	603	$	555	$	189	$	3,852
Domestic Distribution		1,793		146		-		139		2,078
International		71		22		-		43		136
	$	4,369	$	771	$	555	$	371	$	6,066
2021 First Quarter Sales by Major Market (Dollars in thousands)
		Military		Space		Medical		Commercial		Total
Domestic Direct	$	1,423	$	219	$	550	$	148	$	2,340
Domestic Distribution		1,027		364		-		119		1,510
International		63		127		-		10		200
	$	2,513	$	710	$	550	$	277	$	4,050

Receivables, net, Contract Assets and Contract Liabilities

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 (deferred revenue) on the Condensed Balance Sheet. 

Receivables, net, contract assets and contract liabilities were as follows:

Receivables, net, Contract Assets and Contract Liabilities

(Dollars in thousands)

	February 26, 2022	November 30, 2021	December 1, 2020
Receivables, net	$3,484	$4,974	$2,639
Contract assets	$792	$603	$512
Deferred revenue	$1,439	$1,258	$111

There was $3,000 of revenue recognized in fiscal year 2022 that was included in the deferred revenue liability balance at the beginning of the fiscal year.

Contract costs

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.

Leases

Leases

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 in accordance with ASC 842. The Company had an operating lease expense of $13,000 for the first three months of 2022 and $12,000 for the first three months of 2021. 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:

	2/26/2022
2022	$	41,000
2023		14,000
Total lease payments		55,000
Interest		1,000
Present value of lease liabilities	$	54,000