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Note 3 - Revenue
12 Months Ended
Dec. 31, 2022
Notes to Financial Statements  
Revenue from Contract with Customer [Text Block]

NOTE 3. REVENUE

 

Revenue recognition

Our revenue is comprised of product, engineering services and repair services. All revenue is recognized when the Company satisfies its performance obligation(s) under the contract by transferring the promised product or service to our customer either when (or as) our customer obtains control of the product or service, with the majority of our revenue being recognized over time including goods produced under contract manufacturing agreements and services revenue. A performance obligation is a promise in a contract to transfer a distinct product or service to a customer. A contract’s transaction price is allocated to each distinct performance obligation. The majority of our contracts have a single performance obligation, as the promise to transfer products or services is not separately identifiable from other promises in the contract and, therefore, not distinct.

 

Revenue is measured as the amount of consideration we expect to receive in exchange for transferring products or providing services. As such, revenue is recorded net of returns, allowances and customer discounts. Sales, value add, and other taxes collected from customers and remitted to governmental authorities are accounted for on a net (excluded from revenues) basis. Shipping and handling costs are included in cost of goods sold.

 

The majority of our revenue is derived from the transfer of goods produced under contract manufacturing agreements which have no alternative use and we have an enforceable right to payment for our performance completed to date. Our performance obligations within our contract manufacturing agreements are generally satisfied over time as the goods are produced based on customer specifications and we have an enforceable right to payment for the goods produced. If these requirements are not met, the revenue is recognized at a point in time, generally upon shipment. Revenue under contract manufacturing agreements that was recognized over time accounted for approximately 72% and 78% of our revenue for the years ended December 31, 2022 and 2021, respectively. Revenues under these agreements are generally recognized over time using an input measure based upon the proportion of actual costs incurred.

 

Accounting for contract manufacturing agreements involves the use of various techniques to estimate total revenue and costs. We estimate profit on these agreements as the difference between total estimated revenue and expected costs to complete the performance obligation within the terms of the agreement and recognize the respective profit as the goods are produced. The estimates to determine the profit earned on the performance obligation are based on anticipated selling prices and historical cost of goods sold and represent our best judgement at the time. Changes in judgements on these above estimates could impact the timing and amount of revenue recognized with a resulting impact on the timing and amount of associated profit.

 

On occasion our customers provide materials to be used in the manufacturing process and the fair value of the materials is included in revenue as noncash consideration at the point in time when the manufacturing process commences along with the same corresponding amount recorded as cost of goods sold. The inclusion of noncash consideration has no impact on overall profitability.

 

Contract Assets

Contract assets, recorded as such in the Consolidated Balance Sheet, consist of unbilled amounts related to revenue recognized over time. Significant changes in the contract assets balance during the years ended December 31, 2022 and 2021 was as follows:

 

Balance outstanding at December 31, 2021

  $ 8,698  

Increase (decrease) attributed to:

       

Amounts transferred over time to contract assets

    96,924  

Amounts invoiced during the period

    (95,640 )

Balance outstanding at December 31, 2022

  $ 9,982  

 

We expect substantially all of the remaining performance obligations for the contract assets recorded as of December 31, 2022, to be transferred to receivables within 90 days, with any remaining amounts to be transferred within 180 days. We bill our customers upon shipment with payment terms of up to 120 days.

 

The following tables summarize our net sales by market for the years ended December 31, 2022 and 2021:

 

   

Year Ending December 31, 2022

 
   

Product/ Service

Transferred

Over Time

   

Product

Transferred at

Point in Time

   

Noncash

Consideration

   

Total Net Sales

by Market

 

Medical

  $ 51,473     $ 22,288     $ 2,146     $ 75,907  

Aerospace and Defense

    16,745       1,859       875       19,479  

Industrial

    28,706       8,541       1,490       38,737  

Total net sales

  $ 96,924     $ 32,688     $ 4,511     $ 134,123  

 

   

Year Ending December 31, 2021

 
   

Product/ Service

Transferred

Over Time

   

Product

Transferred at

Point in Time

   

Noncash

Consideration

   

Total Net Sales

by Market

 

Medical

  $ 47,285     $ 13,250     $ 2,512     $ 63,047  

Aerospace and Defense

    14,879       861       899       16,639  

Industrial

    27,213       6,851       1,418       35,482  

Total net sales

  $ 89,377     $ 20,962     $ 4,829     $ 115,168