Condensed Financial Statements

9 Months Ended

Feb. 29, 2024

Notes

Condensed Financial Statements

Notes to Condensed Consolidated Financial Statements

1.The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q. Accordingly, they do not include all the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of the Company, the accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting of only normal recurring accruals) necessary to present fairly the financial position as of February 29, 2024 and May 31, 2023, the results of operations for the three and nine months ended February 29, 2024 and February 28, 2023, and cash flows for the nine months ended February 29, 2024 and February 28, 2023. These financial statements should be read in conjunction with the audited financial statements and notes thereto contained in the Company's Annual Report to Shareholders for the year ended May 31, 2023.  

2.The Company has evaluated events and transactions for potential recognition or disclosure in the financial statements through the date the financial statements were issued. 

3.There is no provision nor shall there be any provisions for profit sharing, dividends, or any other benefits of any nature at any time for this fiscal year. 

4.For the nine-month periods ended February 29, 2024 and February 28, 2023, the net income was divided by 3,411,703 and 3,502,982 respectively, which is net of the Treasury shares, to calculate the net income per share.  For the three-month periods ended February 29, 2024 and February 28, 2023, net income was divided by 3,302,497 and 3,505,849 respectively, which is net of the Treasury shares, to calculate the net income per share. 

5.The results of operations for the three and nine-month periods ended February 29, 2024 are not necessarily indicative of the results to be expected for the full year. 

6.Recently issued Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) guidance has either been implemented or is not significant to the Company. 

7.Short-term Investments: 

At times, the Company invests excess funds in liquid interest earning instruments. Short-term investments at February 29, 2024 and May 31, 2023 include “available for sale” money market funds, US treasury securities and corporate bonds stated at fair value, which approximates cost. The short-term investments (24) mature on various dates during the period March 2024 to December 2026. Unrealized holding gains and losses would be presented as a separate component of accumulated other comprehensive income, net of deferred income taxes. Realized gains and losses on the sale of investments are determined using the specific identification method.

The short-term investments are valued using pricing models maximizing the use of observable inputs for similar securities. This includes basing value on yields currently available on comparable securities of issuers with similar credit ratings.

8.Inventory: 

	February 29, 2024	May 31, 2023
Raw materials	$795,623	$673,453
Work-in-process	5,658,693	5,005,416
Finished goods	274,456	330,435
	6,728,772	6,009,304
Less allowance for obsolescence	51,000	68,000
	$6,677,772	$5,941,304

9.Revenue Recognition: 

Revenue is recognized (generally at fixed prices) when, or as, the Company transfers control of promised products or services to a customer in an amount that reflects the consideration to which the Company expects to be entitled in exchange for transferring those products or services.

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. The majority of our contracts have a single performance obligation as the promise to transfer the individual goods or services is not separately identifiable from other promises in the contracts which are, therefore, not distinct. Promised goods or services that are immaterial in the context of the contract are not separately assessed as performance obligations.

For contracts with customers in which the Company satisfies a promise to the customer to provide a product that has no alternative use to the Company and the Company has enforceable rights to payment for progress completed to date inclusive of profit, the Company satisfies the performance obligation and recognizes revenue over time (generally less than one year) using costs incurred to date relative to total estimated costs at completion to measure progress toward satisfying our performance obligations. Incurred costs represent work performed, which corresponds with, and thereby best depicts, the transfer of control to the customer. Contract costs include labor, material and overhead. Adjustments to cost estimates are made periodically, and losses expected to be incurred on contracts in progress are charged to operations in the period such losses are determined. Other sales to customers are recognized upon shipment to the customer based on contract prices and terms. In the nine months ended February 29, 2024, 58% of revenue was recorded for contracts in which revenue was recognized over time while 42% was recognized at a point in time. In the nine months ended February 28, 2023, 62% of revenue was recorded for contracts in which revenue was recognized over time while 38% was recognized at a point in time.

Progress payments are typically negotiated for longer term projects. Payments are otherwise due once performance obligations are complete (generally at shipment and transfer of title). For financial statement presentation purposes, the Company nets progress billings against the total costs incurred and estimated earnings recognized on uncompleted contracts. The asset, “costs and estimated earnings in excess of billings,” represents revenues recognized in excess of amounts billed. The liability, “billings in excess of costs and estimated earnings,” represents billings in excess of revenues recognized.

If applicable, the Company recognizes an asset for the incremental, material costs of obtaining a contract with a customer if the Company expects the benefit of those costs to be longer than one year and the costs are expected to be recovered. As of February 29, 2024 and May 31, 2023, the Company does not have material incremental costs on any open contracts with an original expected duration of greater than one year, and therefore such costs are expensed as incurred. These incremental costs include, but are not limited to, sales commissions incurred to obtain a contract with a customer.

10.The February 28, 2023 statements of income have been reclassified to conform with the presentation adopted for February 29, 2024. 

11.Accrued Expenses:  

	February 29, 2024	May 31, 2023
Customer deposits	$363,641	$367,902
Personnel costs	2,919,543	3,023,501
Other	756,807	686,919
	$4,039,991	$4,078,322