NOTE

SUMMARY

OF SIGNIFICANT ACCOUNTING POLICIES

A summary of the Company’s significant accounting policies is included in Note

to the audited consolidated financial statements of the Company’s fiscal

2018

Annual Report on Form

-K. Significant changes to our accounting policies as a result of adopting ASU-

2014

“Revenue from Contracts with Customers” (Topic

606

) are discussed below.

Revenue Recognition:

The Company recognizes revenue when it satisfies the performance obligation in its customer contracts or purchase orders. Most of the Company’s products have a single performance obligation which is satisfied at a point in time when control is transferred to the customer. Control is generally transferred at time of shipment when title and risk of ownership passes to the customer. For customer contracts with multiple performance obligations, the Company allocates the transaction price and any discounts to each performance obligation based on relative standalone selling prices. Payment terms are typically within

days from the shipping date, depending on our terms with the customer. The Company offers standard warranties that do

not

represent separate performance obligations.

Installation is a separate performance obligation, except for our digital signage products. For digital signage products, installation is

not

a separate performance obligation as the product and installation is the combined item promised in digital signage contracts. The Company is

not

always responsible for installation of products it sells and has

post-installation responsibilities other than standard warranties.

A number of the Company's products are highly customized. As a result, these customized products do

not

have an alternative use. For these products, the Company has a legal right to payment for performance to date and generally does

not

accept returns on these items. The measurement of performance is based upon cost plus a reasonable profit margin for work completed. Because there is

alternative use and there is a legal right to payment, the Company transfers control of the item as the item is being produced and therefore, recognizes revenue over time. The customized product types are as follows:

●

Customer specific printed graphic branding

●

Electrical components based on customer specifications

●

Digital signage and related media content

The Company also offers installation services. Installation revenue is recognized over time as our customer simultaneously receives and consumes the benefits provided through the installation process.

For these customized products and installation services, revenue is recognized using a cost-based input method: recognizing revenue and gross profit as work is performed based on the relationship between the actual cost incurred and the total estimated cost for the contract.

Disaggregation of Revenue

The Company disaggregates the revenue from contracts with customers by the timing of revenue recognition because we believe it best depicts the nature, amount, and timing of our revenue and cash flows. The table presents a reconciliation of the disaggregation by reportable segments.

	Three Months Ended September 30
	Lighting Segment		Graphics Segment
Timing of revenue recognition
Products and services transferred at a point in time	$	54,249	$	17,694
Products and services transferred over time		7,183		5,831
	$	61,432	$	23,525

	Three Months Ended September 30
	Lighting Segment		Graphics Segment
Type of Product and Services
New Technology Products	$	51,305	$	2,402
Legacy Products		9,076		15,964
Turnkey Services and Other		1,051		5,159
	$	61,432	$	23,525

New technology products include LED lighting and controls, electronic circuit boards, and digital signage solutions. Legacy products include lighting fixtures utilizing light sources other than LED technology and printed

two

and

three

dimensional graphic products. Turnkey services and other includes installation services along with shipping and handling charges.

Practical Expedients and Exemptions

●

The Company’s contracts with customers have an expected duration of

one

year or less, as such we apply the practical expedient to expense sales commissions as incurred, and have omitted disclosures on the amount of remaining performance obligations.

●

Shipping costs that are

not

material in context of the delivery of products are expensed as incurred.

●

The Company’s accounts receivable balance represents the Company’s unconditional right to receive consideration from its customers with contracts. Payments are due within

days of completion of the performance obligation and invoicing, therefore, does

not

contain significant financing components.

●

The Company collects sales tax and other taxes concurrent with revenue-producing activities and are excluded from revenue. Shipping and handling costs are treated as fulfillment activities and included in cost of products and services sold on the Consolidated Statements of Operations.

New Accounting Pronouncements:

July 1, 2018,

the Company adopted ASU

2014

09.

“Revenue from Contracts with Customers,” (Topic

606

) using the modified retrospective adoption method which requires a cumulative effect adjustment to the opening balance of retained earnings. This approach was applied to contracts that were

not

completed as of

June 30, 2018.

Results for reporting periods beginning

July 1, 2018

are presented under Topic

606,

while prior period amounts are

not

adjusted and continue to be reported under the accounting standards in effect for the prior period. The Company recorded a net increase to beginning retained earnings of

$591,000

July 1, 2018

due to the cumulative impact of adopting Topic

606,

as described below.

	Balance as of June 30, 2018		Adjustments			Opening Balance as of July 1, 2018
Assets:
Accounts receivable, net		50,609		4,935			55,544
Inventories, net		50,994		(4,167	)		46,827
Other long-term assets, net		9,786		(177	)		9,609
S tockholders' Equity:
Retained earnings		15,124		591			15,715

February 2016,

the Financial Accounting Standards Board issued ASU

2016

02,

“Leases.” The amended guidance requires an entity to recognize assets and liabilities that arise from leases. The amended guidance is effective for financial statements issued for fiscal years and interim periods within those years, beginning after

December 15, 2018,

or the Company’s fiscal year

2020,

with early adoption permitted. The Company is currently evaluating the impact the amended guidance will have on its financial statements.

Subsequent Events:

The Company has evaluated subsequent events for potential recognition and disclosure through the date the consolidated financial statements were filed.

items were identified during this evaluation that required adjustment to or disclosure in the accompanying financial statements other than noted below.

October 29, 2018,

The Company announced that it will permanently close its New Windsor, New York manufacturing facility. The facility manufactures indoor lighting products and is included in the results of the Lighting Segment. Production will be transferred to the Company’s Erlanger, Kentucky and Blue Ash, Ohio facilities, also included in the Lighting Segment. The New Windsor facility has a workforce of

140

employees.

October 15, 2018,

the Board of Directors of the Company appointed James A. Clark as the Company’s Chief Executive Officer and President. Mr. Clark entered into an Employment Agreement as of

October 16, 2018

which provides that his employment with the Company shall begin on

November 1, 2018.

The Employment Agreement also defines his compensation and benefit package.

Reclassifications:

Certain prior year amounts have been reclassified to conform to the current year presentation within the cash flows from operating activities section and cash flows from financing activities section of the statement of cash flows. These reclassifications have

impact on net income or earnings per share.