Certain reclassifications have been made to prior periods to conform to current period presentation.
2. Significant Accounting Policies
Use of Estimates
The preparation of consolidated financial statements in
accordance with U.S. GAAP requires management to exercise its judgment in the process of applying the Companys accounting policies. It also requires that management make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingencies at the date of the financial statements and the reported amounts of revenue and expense during the reporting periods.
Estimates are used when accounting for certain items such as allowances for doubtful accounts and sales
returns, depreciation and amortization, inventory obsolescence, asset impairments (including goodwill and other intangible assets), contingencies, the value of share-based compensation, the determination of accrued expenses, certain asset valuations
including deferred tax asset valuations, the useful lives of property and equipment, post-retirement obligations and the accounting for business combinations. The accounting estimates used in the preparation of the consolidated financial statements
will change as new events occur, as more experience is acquired, as additional information is obtained and as the operating environment changes. Actual results could differ from those estimates.
Cash and Cash Equivalents
Cash comprises cash on hand. Cash equivalents are short-term,
highly liquid investments that are readily convertible to known amounts of cash and that are subject to an insignificant risk of change in value, and have original maturities of three months or less.
The Company recognizes revenue in accordance with Staff
Accounting Bulletin (SAB) No. 101, Revenue Recognition in Financial Statements, as amended by SAB No. 104, Revenue Recognition. Revenue and related cost of sales from product sales is recognized when the
significant risks and rewards of ownership have been transferred, title to the product and risk of loss transfers to the Companys customers and collection of sales proceeds is reasonably assured. Based on the above criteria, revenue is
generally recognized when the product is shipped from the Companys warehouse or, in limited instances, when it is received by the customer depending on the specific terms of the arrangement. Product sales are recorded net of trade discounts
(including volume and early payment incentives), sales returns, value-added tax and similar taxes. Shipping and handling costs are included in cost of revenue. Sales to customers generally include a right of return. Sales returns have not
historically been significant to the Companys revenue and have been within estimates made by management.
Many of the Companys products are designed and engineered to meet customer specifications. These activities and the testing of the
Companys products to determine compliance with those specifications occur prior to any revenue being recognized. Products are then manufactured and sold to customers. Customer arrangements do not involve post-installation or post-sale testing
Accounting Standards Codification
(ASC) Topic 718, CompensationStock Compensation (ASC 718), requires that a company measure at fair value any new or modified share-based compensation arrangements with employees and recognize as compensation
expense that fair value over the requisite service period.