Revenue

9 Months Ended

Mar. 31, 2020

Revenue from Contract with Customer [Abstract]

Revenue

Note 6. Revenue

Effective July 1, 2018, we adopted Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 606 “Revenue from Contracts with Customers”, which requires entities to assess the products or services promised in contracts with customers at contract inception to determine the appropriate unit at which to record revenues.  Revenue is recognized when control of the promised products or services is transferred to customers at an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those products or services. We adopted ASC 606 using the modified retrospective method, which means, using the allowed practical expedient, we applied the new standard to open contracts at June 30, 2018.  We reviewed remaining obligations as of the effective date and determined no adjustment was required to the opening balance of retained earnings.  Under the modified retrospective method, prior period revenue is not restated for comparative periods.  As a result of the adoption, we reclassified customer advance payments from inventory to contract liabilities.  Contract liabilities were $2,791,775 and $6,054 as of March 31, 2020 and June 30, 2019, respectively.  The increase in contract liabilities is primarily due to cash collected from progress payments related to specific contracts. The Company used the practical expedient to expense incremental costs incurred to obtain a contract when the contract term is less than one year.

Significant judgment is required in determining the satisfaction of performance obligations.  Revenues from our performance obligations are satisfied over time using the output method which considers the appraisal of results achieved and milestones reached or units delivered based on contractual shipment terms, typically shipping point.  Revenue is recognized when the customer takes control of the product or services.  The output method best depicts the transfer of control to the customer as the output method represents work completed. Control is typically transferred to the customer at shipping point as the company has a present right to payment, the customer has legal title to the asset, the customer has the significant risks and rewards of ownership of the asset, and in most instances the customer has accepted the asset.

Total revenue recognized for the three and nine months ended March 31, 2020 based on units delivered totaled $4,985,926 and $15,806,805, respectively, compared to $7,527,723 and $20,400,908 for the same periods in fiscal year 2019.  Total revenue recognized for the three and nine months ended March 31, 2020 based on milestones achieved totaled $1,205,374 and $3,594,988, respectively, compared to $1,690,418 and $4,457,741 for the same periods in fiscal year 2019.

The Company offers a standard one-year product warranty. Product warranties offered by the company are classified as assurance-type warranties, which means, the warranty only guarantees that the good or service functions as promised. Based on this, the provided warranty is not considered to be a distinct performance obligation.  The impact of variable consideration has been considered but none identified which would be required to be allocated to the transaction price as of March 31, 2020.  Our payment terms are generally 30-60 days. 

The Company’s backlog at March 31, 2020 totaling $59.8 million is expected, based on expected due dates, to be recognized in the following fiscal years: 24% in 2020; 46% in 2021; 21% in 2022, and 9% thereafter.