2. Supplemental Balance Sheet Disclosures

Unbilled Receivables

Unbilled receivables principally represent sales recorded under the percentage-of-completion method of accounting that have not been billed to customers in accordance with applicable contract terms. Unbilled receivables, net of progress payments were $1.1 million at December 31, 2017 and $1.5 million at September 30, 2017.

Significant changes in estimates related to accounting for long-term contracts under the percentage-of-completion method may have a material effect on the Company’s results of operations in the period in which the revised estimates are made. Cumulative catch-up adjustments resulting from changes in estimates were $0 for the three months ended December 31, 2017. Cumulative catch-up adjustments resulting from changes in estimates increased operating income by $154,000 for the three months ended December 31, 2016.

Inventories

Inventories are stated at the lower of cost (first-in, first-out) or net realizable value, net of write-downs for excess and obsolete inventory, and consist of the following:

	December 31,		September 30,
	2017		2017

Raw materials	$	3,296,968	$	2,920,209
Work-in-process	795,633		794,756
Finished goods	402,450		464,689

	$	4,495,051	$	4,179,654

Prepaid expenses and other current assets

Prepaid expenses and other current assets consist of the following:

	December 31,		September 30,
	2017		2017

Prepaid insurance	$	414,660	$	402,300
Income tax refund receivable	461,664		260,509
Other	225,723		429,255

	$	1,102,047	$	1,092,064

Property and equipment

Property and equipment, net consists of the following:

	December 31,			September 30,
	2017			2017

Land	$	1,021,245		$	1,021,245
Computer equipment	2,311,068			2,247,866
Corporate airplane	3,194,571			3,194,571
Furniture and office equipment	1,051,637			1,051,637
Manufacturing facility	5,733,313			5,733,313
Equipment	5,527,849			5,507,774

	18,839,683			18,756,406
Less: accumulated depreciation and amortization	(12,190,463		)	(12,087,395		)

	$	6,649,220		$	6,669,011

Depreciation and amortization related to property and equipment was approximately $103,000 and $108,000 for the three months ended December 31, 2017 and 2016, respectively. The corporate airplane is utilized primarily in support of product development and has been depreciated to its estimated salvage value.

Other assets

Other assets consist of the following:

	December 31,		September 30,
	2017		2017
Intangible assets, net of accumulated amortization of $531,637 and $531,637 at December 31, 2017 and September 30, 2017	$	68,600	$	68,600
Other non-current assets	118,416		118,715

	$	187,016	$	187,315

Intangible assets consist of licensing and certification rights which are amortized over a defined number of units. No impairment charges were recorded in the three months ended December 31, 2017 and 2016.

There was no amortization expense for the three months ended December 31, 2017 and 2016. The timing of future amortization expense is not determinable because the intangible assets are being amortized over a defined number of units.

Accrued expenses

Accrued expenses consist of the following:

	December 31,		September 30,
	2017		2017

Warranty	$	926,965	$	1,013,461
Salary, benefits and payroll taxes	374,109		258,688
Professional fees	299,493		219,331
Other	138,461		268,557

	$	1,739,028	$	1,760,037

Warranty cost and accrual information for the three months ended December 31, 2017 is highlighted below:

	Three Months Ending
	December 31, 2017

Warranty accrual, beginning of period	$	1,013,461
Accrued expense	(26,259		)
Warranty cost	(60,237		)

Warranty accrual, end of period	$	926,965