Policies

Revenue Recognition

Sales include revenues from system hardware and the related integrated software, database products and service contracts. The following methods are used to determine revenue recognition:

Percentage of Completion. In arrangements that are longer in term and require significant production, modification or customization, revenue is recognized using the percentage-of-completion method. In applying this method, the Company utilizes cost-to-cost methodology whereby it estimates the percent complete by calculating the ratio of costs incurred (consisting of material, labor and subcontracting costs, as well as an allocation of indirect costs) for each contract to its total anticipated costs for that contract. This ratio is then utilized to determine the amount of gross profit earned based on the Company’s estimate of total gross profit at completion for each contract. The Company routinely reviews estimates related to percentage-of-completion contracts and adjusts for changes in the period the revisions are made. Billings on uncompleted percentage-of-completion contracts may be greater than or less than incurred costs and estimated earnings and are recorded as an asset or liability in the accompanying condensed consolidated balance sheets.

In those arrangements where software is a significant component of the contract, the Company uses the percentage-of-completion method as described above.

Completed Contract. Contract arrangements which typically require a relatively short period of time to complete the production, modification, and customization of products are accounted for using the completed contract method. Accordingly, revenue is recognized upon delivery of the completed product, provided persuasive evidence of an arrangement exists, title and risk of loss have transferred to the customer, the fee is fixed or determinable, and collection is reasonably assured.

Multiple Element Arrangements. Some contracts include multiple elements. Significant deliverables in such arrangements commonly include various hardware components of the Company’s visual display systems, domes, show content and various service and maintenance elements. Revenue earned on elements such as products, services and maintenance contracts are allocated to each element based on the relative fair values of the elements. Relative fair values of elements are generally determined based on actual and estimated selling price. Delivery times of such contracts typically occur within a three to six-month time period.

Other. Other revenue consists primarily of amounts earned under maintenance contracts that are generally sold as a single element. Revenue from product maintenance contracts, including separately priced extended warranty contracts, is deferred and recognized over the period of performance under the contract.

Anticipated Losses. For contracts with anticipated losses at completion, a provision is recorded when the loss is probable. After an anticipated loss is recorded, subsequent revenues and cost of sales are recognized in equal and offsetting amounts as contract costs are incurred.

Net Income Per Common Share

Net Income Per Common Share

Basic net income per common share is computed based on the weighted-average number of common shares outstanding during the period. Diluted net income per common share is computed based on the weighted-average number of common shares and dilutive common stock equivalents outstanding during the period. Stock options are considered to be common stock equivalents. When the Company incurs a loss, potentially dilutive common stock equivalents are excluded as their effect would be anti-dilutive, thereby decreasing the net loss per common share. Stock options produced common stock equivalents 723,283 used to compute diluted net income per share for the six months ended June 30, 2017.

Recent Accounting Pronouncements

The new revenue recognition standard prescribes a five-step model that focuses on transfer of control and entitlement to payment when determining the amount of revenue to recognize. The new model requires companies to identify contractual performance obligations and determine whether revenue should be recognized at a point in time or over time for each of these obligations. The Company expects the revenue currently generated on contracts using the percent-complete method will continue to be recognized over time utilizing the cost-to-cost measure of progress consistent with its current practice. Therefore, the Company does not expect a material impact to the consolidated financial statements related to percent-complete contracts. The Company is in the process of evaluating the impact of the new standard on its contracts that are accounted for on the completed-contract method and anticipates that the revenue recognition for these contracts will change to an over-time method using the percent-complete method with cost-to-cost measurement of progress consistent with the Company’s current percent-complete contracts. The Company expects that after accounting for the transition, this change will reduce period to period fluctuations in reported sales. The Company also expects its revenue recognition disclosure to significantly

expand due to the new qualitative and quantitative requirements under the standard. The Company plans to adopt the new standard effective January 1, 2018 using the modified retrospective approach with the cumulative effect of initially applying the new standard recognized in retained earnings at the date of adoption. The Company has begun to analyze its existing revenue agreements to evaluate the impact of adoption.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) ("ASU 2016-02"). ASU 2016-02 changes the accounting for leases. In particular, lessees will recognize lease assets and lease liabilities for operating leases. This update will have a minimal effect on lessor accounting. ASU 2016-02 is not effective until 2019. The Company is currently assessing the impact on its financial reporting of implementing this guidance.