NOTE

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles (

“U.S. GAAP”

Principles of Consolidation

The consolidated financial statements include the accounts of DPC and its wholly-owned subsidiary, DPL. All significant intercompany accounts and transactions have been eliminated in consolidation. In addition, DPC and DPL share certain employees and various costs. Such expenses are principally paid by DPC. Due to the nature of the parent and subsidiary relationship, the individual financial position and operating results of DPC and DPL

may

be different from those that would have been obtained had they been autonomous

Use of Estimates

The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions. The Company's management believes that the estimates, judgments and assumptions used are reasonable based upon information available at the time they are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements, and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates. Key estimates include fair value of certain financial instruments, reserve for trade receivables and inventories, carrying amounts of investments, accruals of certain liabilities, and deferred income taxes and related valuation allowance.

Foreign Currency Translation

A substantial portion of the Company’s revenues are generated in U.S. dollars (

U.S.

dollar"

). In addition, a substantial portion of the Company’s costs are incurred in U.S. dollars. Company management has determined that the U.S. dollar is the currency of the primary economic environment in which it operates.

Accordingly, monetary accounts maintained in currencies other than the U.S. dollar are re

-measured into U.S. dollars in accordance with Financial Accounting Standards Board (

“FASB”

) issued Accounting Standards Codification (

“ASC”

) No.

830,

Foreign Currency Matters

(

"ASC No.

830"

). All transaction gains and losses from the re

-measurement of monetary balance sheet items are reflected in the statements of operations as financial income or expenses as appropriate.

The financial statements of the DPL, whose functional currency has been determined to be its local currency, British Pound (

“GBP”

), have been translated into U.S. dollars in accordance with ASC No.

830.

All balance sheet accounts have been translated using the exchange rates in effect at the balance sheet date. Statement of operations amounts have been translated using the average exchange rate in effect for the reporting period. The resulting translation adjustments are reported as other comprehensive income (loss) in the consolidated statement of comprehensive income (loss) and accumulated comprehensive income (loss) in statement of changes in stockholders' equity.

Cash and Cash Equivalents

The Company considers all highly liquid investments with a maturity of

three

months or less at the time of purchase to be cash equivalents. Financial instruments that potentially subject the Company to a concentration of credit risk consist of cash and cash equivalents. The Company’s cash is maintained in checking accounts, money market funds and certificates of deposits with reputable financial institutions. These balances

may,

at times, exceed the U.S. Federal Deposit Insurance Corporation insurance limits. The Company has cash and cash equivalents of

$736

and

$868

December

31,

2016

and

2015,

respectively, in the United Kingdom (

“

U.K

”

). The Company has not experienced any losses on deposits of cash and cash equivalents.

Marketable Securities

The Company classifies its investments in shares of common stock of Telkoor and AVLP in accordance with ASC No.

320,

Investment in Debt and Equity Securities

(

“ASC No.

320

”

) and ASC No.

325,

Investment – Other

(

“ASC No.

325

”

). Marketable securities classified as “available-for-sale securities” and carried at fair value, based on quoted market prices. Unrealized gains and losses are reported in a separate component of stockholder’s equity in “accumulated other comprehensive loss” in equity. When evaluating the investment for other-than-temporary impairment, the Company reviews factors such as the length of time and extent to which fair value has been below cost basis, the financial condition of the issuer and any changes thereto, and the Company’s intent to sell, or whether it is more likely than not that it will be required to sell, the investment before recovery of the investment’s amortized cost basis.

Equity securities that do not have readily determinable fair values (i.e., non-marketable equity securities) and are not required to be accounted for under the equity method are typically carried at cost (i.e., cost method investments), as described in ASC No.

325

20.

The Company classifies its investment in debt securities of AVLP in accordance with ASC No.

320

and ASC No.

825.

Investment in convertible promissory notes in AVLP is classified as available-for-sale securities and is carried at fair value based on quoted market prices. Unrealized gains and losses are reported in a separate component of stockholder’s equity in “accumulated other comprehensive loss” in equity. When evaluating the investment for other-than-temporary impairment, the Company reviews factors such as the length of time and extent to which fair value has been below cost basis, the financial condition of the issuer and any changes thereto, and the Company’s intent to sell, or whether it is more likely than not that it will be required to sell, the investment before recovery of the investment’s amortized cost basis. Additionally, the investment in debt securities of AVLP qualifies for application of fair value option in accordance with ASC No.

825.

Accounts Receivable and Allowance for Doubtful Accounts

The Company’s receivables are recorded when billed and represent claims against

third

parties that will be settled in cash. The carrying amount of the Company’s receivables, net of the allowance for doubtful accounts, represents their estimated net realizable value. The Company individually reviews all accounts receivable balances and based upon an assessment of current creditworthiness, estimates the portion, if any, of the balance that will not be collected

. The Company estimates the allowance for doubtful accounts based on historical collection trends, age of outstanding receivables and existing economic conditions. If events or changes in circumstances indicate that a specific receivable balance

may

be impaired, further consideration is given to the collectability of those balances and the allowance is adjusted accordingly. A customer’s receivable balance is considered past-due based on its contractual terms. Past-due receivable balances are written-off when the Company’s internal collection efforts have been unsuccessful in collecting the amount due. Based on an assessment as of

December

31,

2016

and

2015,

of the collectability of invoices, accounts receivable are presented net of an allowance for doubtful accounts of

$32

and

nil

, respectively

Inventories

Inventories are stated at the lower of cost or market value. Inventory write-offs are provided to cover risks arising from slow-moving items or technological obsolescence.

Cost of inventories is determined as follows:

Raw materials, parts and supplies - using the

"first

-in,

first

-out" method.

Work-in-progress and finished products - on the basis of direct manufacturing costs with the addition of indirect manufacturing costs.

The Company periodically assesses its inventories valuation in respect of obsolete and slow moving items by reviewing revenue forecasts and technological obsolescence. When inventories on hand exceed the foreseeable demand or become obsolete, the value of excess inventory, which at the time of the review was not expected to be sold, is written off.

During the years ended

December

31,

2016

and

2015,

the Company recorded inventory write-offs of

$84

and

$9,

respectively, within the cost of revenue.

Property and Equipment, Net

Property and equipment as well as an intangible asset are stated at cost, net of accumulated depreciation and amortization. Repairs and maintenance costs are expensed as incurred. Depreciation and amortization are calculated using the straight-line method over the estimated useful lives of the assets, at the following annual rates:

Long-Lived Assets

The long-lived assets of the Company are reviewed for impairment in accordance with ASC No.

360,

Property, Plant, and Equipment

, whenever events or changes in circumstances indicate that the carrying amount of an asset

may

not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted cash flows expected to be generated by the assets. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. As of

December

31,

2016

and

2015,

impairment charges were necessary.

Revenue Recognition

The Company generates revenues from the sale of its products through a direct and indirect sales force.

Revenues from products are recognized in accordance with ASC No.

605,

Revenue Recognition

, when the following criteria are met: persuasive evidence of an arrangement exists, delivery has occurred, the seller's price to the buyer is fixed or determinable, no further obligation exists and collectability is reasonably assured.

Generally, the Company does not grant a right of return. However, certain distributors are allowed, in the

six

months after the initial stock purchase, to rotate stock that has not been sold for other products. Revenues subject to stock rotation rights are deferred until the products are sold to the end customer or until the rotation rights expire.

Service revenues are deferred and recognized on a straight-line basis over the term of the service agreement. Service revenues are immaterial in proportion to the Company's revenues.

Warranty

The Company offers a warranty period for all of its products. Warranty periods range from

one

two

years depending on the product. The Company estimates the costs that

may

be incurred under its warranty and records a liability in the amount of such costs at the time product revenue is recognized. Factors that affect the Company's warranty liability include the number of units sold, historical rates of warranty claims and cost per claim. The Company periodically assesses the adequacy of its recorded warranty liability and adjusts the amounts as necessary.

As of

December

31,

2016

and

2015,

the Company has accrued warranty liability of

$86

and

$94,

respectively.

Income

Taxes

The Company determines its income taxes under the asset and liability method in accordance with FASB ASC No.

740,

Income Taxes

, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are based on the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the fiscal year in which the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the fiscal years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the Statements of Income and Comprehensive Income in the period that includes the enactment date.

The Company accounts for uncertain tax positions in accordance with ASC No.

740

ASC No.

740

addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under ASC No.

740

25,

the Company

may

recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position.

The tax benefit to be recognized is measured as the largest amount of benefit that is greater than

fifty

percent likely of being realized upon ultimate settlement. To the extent that the final tax outcome of these matters is different than the amount recorded, such differences impact income tax expense in the period in which such determination is made. Interest and penalties, if any, related to accrued liabilities for potential tax assessments are included in income tax expense. ASC No.

740

also requires management to evaluate tax positions taken by the Company and recognize a liability if the Company has taken uncertain tax positions that more likely than not would not be sustained upon examination by applicable taxing authorities. Management of the Company has evaluated tax positions taken by the Company and has concluded that as of

December

31,

2016

and

2015,

there are no uncertain tax positions taken, or expected to be taken, that would require recognition of a liability that would require disclosure in the financial statements

Common Stock Purchase Warrants and Other Derivative Financial Instruments

The Company classifies Common Stock purchase warrants and other free standing derivative financial instruments as equity if the contracts (i) require physical settlement or net-share settlement or (ii) give the Company a choice of net-cash settlement or settlement in its own shares (physical settlement or net-share settlement). The Company classifies any contracts that (i) require net-cash settlement (including a requirement to net cash settle the contract if an event occurs and if that event is outside the control of the Company), (ii) give the counterparty a choice of net-cash settlement or settlement in shares (physical settlement or net-share settlement), or (iii) contain reset provisions as either an asset or a liability. The Company assesses classification of its freestanding derivatives at each reporting date to determine whether a change in classification between assets and liabilities is required. The Company determined that certain freestanding derivatives, which principally consist of issuance of warrants to purchase shares of common in connection with convertible notes, units and to employers of the Company, satisfy the criteria for classification as equity instruments as these warrants do not contain cash settlement features or variable settlement provision that cause them to not be indexed to the Company’s own stock.

Stock-Based Compensation

The Company accounts for stock-based compensation in accordance with ASC

718

"Compensation – Stock Compensation" ("ASC

718").

ASC

718

requires companies to estimate the fair value of equity-based payment awards on the date of grant using an option-pricing model. The value of the portion of the award that is ultimately expected to vest is recognized as an expense over the requisite service periods in the Company's consolidated statements of operations.

The Company estimates the fair value of stock options granted under ASC

718

using the Black-Scholes option-pricing model that uses the following assumptions.

Expected volatility is based on historical volatility that is representative of future volatility over the expected term of the options. The expected term of options granted was determined based on the simplified method, which is calculated as the midpoint between the vesting date and the end of the contractual term of the option. The Company uses the simplified method as it has determined that sufficient data is not available to develop an estimate of the expected option term based upon historical participant behavior. The risk free interest rate is based on the yield of U.S. Treasury bonds with equivalent terms. The dividend yield is based on the Company's historical and future expectation of dividends payouts. The Company has not paid cash dividends historically and has no plans to pay cash dividends in the foreseeable future.

The Company recognizes share-based compensation expenses for the value of its awards based on the straight line method over the requisite service period of each of the awards

During the years

2016

and

2015,

the Company estimated the fair value of stock options granted using the Black-Scholes option pricing model with the following weighted average assumptions

	2016				2015
Weighted average fair value			$0.46				$0.44
Dividend yield			0%				0%
Expected volatility		97.7%	-	98.2%		87.6%	-	88.3%
Risk-free interest rate		1.26%	-	1.77%		1.60%	-	1.91%
Expected life (years)			5			5.5	-	7

Convertible Instruments

The Company accounts for hybrid contracts that feature conversion options in accordance with applicable GAAP. ASC No.

815

Derivatives and Hedging Activities

, (“ASC

815”)

requires companies to bifurcate conversion options from their host instruments and account for them as freestanding derivative financial instruments according to certain criteria. The criteria includes circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under otherwise applicable GAAP with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument.

Conversion options that contain variable settlement features such as provisions to adjust the conversion price upon subsequent issuances of equity or equity linked securities at exercise prices more favorable than that featured in the hybrid contract generally result in their bifurcation from the host instrument.

The Company accounts for convertible instruments, when the Company has determined that the embedded conversion options should not be bifurcated from their host instruments, in accordance with ASC

470

“Debt with Conversion and Other Options” (“ASC

470

20”).

Under ASC

470

the Company records, when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. The Company accounts for convertible instruments (when the Company has determined that the embedded conversion options should be bifurcated from their host instruments) in accordance with ASC

815.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents, long term deposits and trade receivables.

Cash and cash equivalents are invested in banks in the U.S. and in the UK. Such deposits in the United States

may

be in excess of insured limits and are not insured in other jurisdictions.

Trade receivables of the Company and its subsidiary are mainly derived from sales to customers located primarily in the U.S. and in Europe. The Company performs ongoing credit evaluations of its customers and to date has not experienced any material losses. An allowance for doubtful accounts is determined with respect to those amounts that the Company and its subsidiary have determined to be doubtful of collection

Comprehensive Loss

The Company reports comprehensive loss in accordance with ASC

220,

"Comprehensive Income". This Statement establishes standards for the reporting and presentation of comprehensive loss and its components in a full set of general purpose financial statements. Comprehensive loss generally represents all changes in equity during the period except those resulting from investments by, or distributions to, stockholders. The Company determined that its items of other comprehensive loss relates to changes in foreign currency translation adjustments.

Fair value of Financial Instruments

In accordance with ASC

820,

“Fair Value Measurements and Disclosures”, fair value is defined as the exit price, or the amount that would be received for the sale of an as set or paid to transfer a liability in an orderly transaction between market participants as of the measurement date.

The guidance also establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in valuing the asset or liability and are developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the factors that market participants would use in valuing the asset or liability. The guidance establishes

three

levels of inputs that

may

be used to measure fair value:

Level

Quoted market prices in active markets for identical assets or liabilities.

Level

Other observable inputs other than Level

prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level

Unobservable inputs reflecting the reporting entity’s own assumptions.

The carrying amounts of financial instruments carried at cost, including cash and cash equivalents, trade receivables and trade receivable – related party, investments, notes receivable, trade payables and trade payables – related party approximate their fair value due to the short-term maturities of such instruments.

As of

December

31,

2016,

the fair value of the Company's investments was

$1,036

($90

as of

December

31,

2015).

nvestments as of

December

31,

2016

were concentrated in AVLP. The Company's investment in AVLP is comprised of convertible promissory notes of

$952,

net of unamortized discount and marketable equity securities of

$84

which are classified as available-for-sale investments. For investments in marketable equity securities, the Company took into consideration general market conditions, the duration and extent to which the fair value is below cost, and the Company’s ability and intent to hold the investment for a sufficient period of time to allow for recovery of value in the foreseeable future. As a result of this analysis, the Company has determined that its cost basis in Avalanche equitable securities approximates the current fair value

Consistent with the guidance at ASC

835,

the Company’s presumption is that the fair value of its convertible promissory notes in Avalanche have a present value equivalent to the cash proceeds exchanged. Further, the discount shall be reported in the balance sheet as a direct deduction from the face amount of the convertible promissory notes. Thus, the Company has determined that the amortized cost of its convertible promissory notes approximates fair value and are subject to a periodic impairment review. The interest income, including amortization of the discount arising at acquisition, for the convertible promissory notes are included in earnings. In the future, if the Company does not expect to recover the entire amortized cost basis, the Company shall recognize other-than-temporary impairments in other comprehensive income (loss).

The categorization of a financial instrument within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

The following table sets forth the Company’s financial instruments that were measured at fair value on a recurring basis by level within the fair value hierarchy:

	Fair V alue Measurement at December 31, 2016
	Total		Level 1		Level 2		Level 3
Investments – AVLP – a related party controlled by Philou, a majority shareholder of the Company	$	1,036	$	84	$	952	$	-

	Fair V alue Measurement at December 31, 201 5
	Total		Level 1		Level 2		Level 3
Investment – Telkoor – a related party, the Company's majority shareholder until September 22, 2016	$	90	$	-	$	-	$	90

As of

December

31,

2015,

the Company valued the investment in Telkoor for

$90.

The following table sets forth a summary of the changes in the fair value of the Company’s Level

financial instruments for the years ended

December

31,

2016

and

2015,

which are treated as investments, as follows:

	2016			2015
Balance at the beginning of year	$	90		$	207
Impairment		-			(110	)
Effect of exchange rate		-			(7	)
Disposition of investments		(90	)		-
Balance at the end of year	$	-		$	90

Debt Discounts

The Company accounts for debt discount according to ASC No.

470

20,

Debt with Conversion and Other Options

. Debt discounts are amortized through periodic charges to interest expense over the term of the related financial instrument using the effective interest method. During the years ended

December

31,

2016

and

2015,

the Company recorded amortization of debt discounts of

and nil, respectively

Net Loss per Share

Net loss per share is computed by dividing the net loss to common stockholders by the weighted average number of common shares outstanding. The calculation of the basic and diluted earnings per share is the same for all periods presented, as the effect of the potential common stock equivalents is anti-dilutive due to the Company’s net loss position for all periods presented. The Company has included

317,460

warrants, with an exercise price of

$.01,

in its earnings per share calculation for the year ended

December

31,

2016.

Anti-dilutive securities consisted of the following at

December

31:

	2016		2015
Stock options		2,256,000		1,146,000
Warrants		1,431,666		-
Convertible notes		963,636		-
Total		4,651,302		1,146,000

Recently Issued and Adopted Accounting Standards

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board, (FASB), or other standard setting bodies and adopted by the Company as of the specified effective date. Unless otherwise discussed, the impact of recently issued standards that are not yet effective will not have a material impact on the Company’s consolidated financial position or results of operations upon adoption.

October

2016,

the FASB issued updated guidance related to the recognition of income tax consequences of an intra-entity transfer of an asset other than inventory. This guidance will be effective for the

first

quarter of tax year

2018;

however, early adoption is permitted. The Company is evaluating the impact that this guidance will have its consolidated financial statements.

August

2016,

the FASB issued ASU

2016

15,

“Statement of Cash Flows (Topic

230)”

(“ASU

2016

15”),

which seeks to reduce the existing diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. For public entities, Update

2016

becomes effective for fiscal years beginning after

December

15,

2017,

including interim periods within those fiscal years, with early adoption permitted. The Company is currently evaluating the provisions of Update

2016

and assessing the impact, if any, it

may

have on its consolidated financial position, results of operations, cash flows or financial statement disclosures.

March

2016,

the FASB issued ASU

2016

09,

“Compensation - Stock Compensation (Topic

718)”

(“ASU

2016

09”),

which seeks to simplify accounting for share-based payment transactions including income tax consequences, classification of awards as either equity or liabilities, and the classification on the statement of cash flows. For public entities, Update

2016

becomes effective for fiscal years beginning after

December

15,

2016,

including interim periods within those fiscal years, with early adoption permitted. The Company has not yet determined the effect that ASU

2016

will have on its consolidated financial position, results of operations or financial statement disclosures.

March

2016,

the FASB issued guidance that involves several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. This guidance will be effective for the

first

quarter of tax year

2017;

however, early adoption is permitted. The Company is evaluating the impact that this guidance will have on its consolidated financial statements.

February

2016,

the FASB issued ASU No.

2016

02,

“

Leases

”

. The new standard provides guidance intended to improve financial reporting about leasing transaction. The ASU affects all companies that lease assets such as real estate, airplanes and manufacturing

equipment. The ASU will require companies that lease assets to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases. The new standard will take effect for fiscal years, and interim periods within those fiscal years, beginning after

December

15,

2018.

Early adoption is permitted. The Company has not determined the potential effects of this ASU on its consolidated financial statements.

January

2016,

the FASB issued ASU

2016

01,

"Recognition and Measurement of Financial Assets and Liabilities"

(“ASU

2016

01”).

ASU

2016

requires equity investments (excluding equity method investments and investments that are consolidated) to be measured at fair value with changes in fair value recognized in net income. Equity investments that do not have a readily determinable fair value

may

be measured at cost, adjusted for impairment and observable price changes. The ASU also simplifies the impairment assessment of equity investments, eliminates the disclosure of the assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at cost on the balance sheet and requires the exit price to be used when measuring fair value of financial instruments for disclosure purposes. Under ASU

2016

01,

changes in fair value (resulting from instrument-specific credit risk) will be presented separately in other comprehensive income for liabilities measured using the fair value option and financial assets and liabilities will be presented separately by measurement category and type either on the balance sheet or in the financial statement disclosures. ASU

2016

is effective for fiscal years beginning after

December

15,

2017,

and interim periods within those fiscal years. The Company has not yet determined the effect that ASU

2016

will have on its consolidated financial position, results of operations, or financial statement disclosures.

August

2014,

the FASB issued ASU

2014

15,

"Presentation of Financial Statements-Going Concern (Subtopic

205

40):

Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern."

The amendments is this ASU are intended to provide guidance on the responsibility of reporting entity management. Specifically, this ASU provides guidance to management related to evaluating whether there is substantial doubt about the reporting entity’s ability to continue as a going concern and about related financial statement note disclosures. Although the presumption that a reporting entity will continue to operate as a going concern is fundamental to the preparation of financial statements, prior to the issuance of this ASU, there was no guidance in U.S. generally accepted accounting principles (U.S. GAAP) related to the concept. Due to the lack of guidance in U.S. GAAP, practitioners and their clients often faced challenges in determining whether, when, and how a reporting entity should disclose the relevant information in its financial statements. As a result, the FASB issued this guidance to require management evaluation and potential financial statement disclosures. This ASU will be effective for financial statements with periods ending after

December

15,

2016.

The Company adopted the ASU during the fiscal year and corrected in this report.

May

2014,

the FASB issued ASU

2014

09,

“Revenue from Contracts with Customers (Topic

606)”

(“ASU

2014

09”).

ASU

2014

supersedes the revenue recognition requirements in ASC Topic

605,

“Revenue Recognition”

and some cost guidance included in ASC Subtopic

605

35,

"Revenue Recognition - Construction-Type and Production-Type Contracts.”

The core principle of ASU

2014

is that revenue is recognized when the transfer of goods or services to customers occurs in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services. ASU

2014

requires the disclosure of sufficient information to enable readers of the Company’s financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts. ASU

2014

also requires disclosure of information regarding significant judgments and changes in judgments, and assets recognized from costs incurred to obtain or fulfill a contract. ASU

2014

provides

two

methods of retrospective application. The

first

method would require the Company to apply ASU

2014

to each prior reporting period presented. The

second

method would require the Company to retrospectively apply ASU

2014

with the cumulative effect recognized at the date of initial application. ASU

2014

will be effective for the Company beginning in fiscal

2019

as a result of ASU

2015

14,

"Revenue from Contracts with Customers (Topic

606):

Deferral of the Effective Date,"

which was issued by the FASB in

August

2015

and extended the original effective date by

one

year. The Company is currently evaluating the impact of adopting the available methodologies of ASU

2014

and

2015

upon its financial statements in future reporting periods. The Company has not yet selected a transition method. The Company is in the process of evaluating the new standard against its existing accounting policies, including the timing of revenue recognition, and its contracts with customers to determine the effect the guidance will have on its financial statements and what changes to systems and controls

may

be warranted.

There have been

four

new ASUs issued amending certain aspects of ASU

2014

09,

ASU

2016

08,

"Principal versus Agent Considerations (Reporting Revenue Gross Versus Net),"

was issued in

March,

2016

to clarify certain aspects of the principal versus agent guidance in ASU

2014

09.

In addition, ASU

2016

10,

"Identifying Performance Obligations and Licensing,"

issued in

April

2016,

amends other sections of ASU

2014

including clarifying guidance related to identifying performance obligations and licensing implementation. ASU

2016

12,

"Revenue from Contracts with Customers - Narrow Scope Improvements and Practical Expedients"

provides amendments and practical expedients to the guidance in ASU

2014

in the areas of assessing collectability, presentation of sales taxes received from customers, noncash consideration, contract modification and clarification of using the full retrospective approach to adopt ASU

2014

09.

Finally, ASU

2016

20,

“Technical Corrections and Improvements to Topic

606,

Revenue from Contracts with Customers,”

was issued in

December

2016,

and provides elections regarding the disclosures required for remaining performance obligations in certain cases and also

makes other technical corrections and improvements to the standard. With its evaluation of the impact of ASU

2014

09,

the Company will also consider the impact on its financial statements related to the updated guidance provided by these

four

new ASUs.

The Company has considered all other recently issued accounting standards and does not believe the adoption of such standards will have a material impact on its consolidated financial statements.

Useful lives (in years)

Computer, software and related equipment

Office furniture and equipment

Leasehold improvements

Over the term of the lease of the life of the asset, whichever is shorter