NOTE

- SUMMARY

OF SIGNIFICANT ACCOUNTING POLICIES

Consolidation:

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

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

2019

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

) in the

first

quarter of fiscal

2019

and adopting ASU

2016

02,

“Leases” in the

first

quarter of fiscal

2020

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 the terms with the customer. The Company offers standard warranties that do

not

represent separate performance obligations.

Installation is a separate performance obligation, except for the Company’s 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 Graphics and select lighting products are highly customized for specific customers. 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 print graphics branding

●

Electrical components based on customer specifications

●

Digital signage and related media content

The Company also offers installation services for its Graphics and select lighting products. 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 the Company believes it best depicts the nature, amount, and timing of its revenue and cash flows. The table presents a reconciliation of the disaggregation by reportable segments.

	Three Months Ended				Nine Months Ended
(In thousands)	March 31, 2020				March 31, 2020
	Lighting Segment		Graphics Segment		Lighting Segment		Graphics Segment
Timing of revenue recognition
Products and services transferred at a point in time	$	43,222	$	15,093	$	147,260	$	50,339
Products and services transferred over time		5,791		6,904		18,380		26,109
	$	49,013	$	21,997	$	165,640	$	76,448

	Three Months Ended				Nine Months Ended
	March 31, 2020				March 31, 2020
	Lighting Segment		Graphics Segment		Lighting Segment		Graphics Segment
Type of Product and Services
LED lighting, digital signage solutions, electronic circuit boards	$	42,536	$	2,234	$	143,615	$	13,515
Legacy products		5,949		14,444		20,252		47,155
Turnkey services and other		528		5,319		1,773		15,778
	$	49,013	$	21,997	$	165,640	$	76,448

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 project management and 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 the Company applies 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 payment from its customers with contracts. Payments are generally due within

days of completion of the performance obligation and invoicing, therefore, payments do

not

contain significant financing components.

●

The Company collects sales tax and other taxes concurrent with revenue-producing activities which 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.

ASC 606 Cumulative Impact

(in thousands)	Balance as of					Balance as of
	June 30, 2018		Adjustments			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
Shareholder's 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 and interim periods within those years, beginning after

December 15, 2018,

or the Company’s fiscal

2020,

with early adoption permitted. The Company adopted this guidance effective

July 1, 2019

using a modified-retrospective transition method, under which it elected

not

to adjust comparative periods. The Company elected the package of practical expedients permitted under the new guidance to

not

reassess prior conclusions related to contracts containing leases, lease classification, and initial direct costs. In addition, the Company elected the practical expedient to

not

separate lease and non-lease component and the accounting policy election to

not

present leases with an initial term of

twelve

months or less on the balance sheet.

The Company’s most significant leases are those relating to certain manufacturing facilities along with a small office space. Besides these real estate leases, most other leases are insignificant and consist of leases related to a vehicle, forklifts, small tooling, and various office equipment. All of the Company’s leases are operating leases and are included in other long-term assets with the corresponding liability in other long-term liabilities. Lease expense is recognized on a straight-line basis over the lease term. The Company used its incremental borrowing rate when determining the present value of lease payments. The adoption of the new lease standard resulted in the recognition of right-of-use assets (ROU assets) of

$10.4

million and lease liabilities of

$10.8

million which includes the impact of existing deferred rents and tenant improvement allowances on the consolidated balance sheets as of

July 1, 2019

for the Company’s real estate leases. The adoption of the standard resulted in

material impact to consolidated statements of operations or consolidated statements of cash flow. (Refer to Note

)

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 consolidated financial statements other than noted below.

December 2019,

a novel coronavirus disease (“COVID-

19”

) was reported and in

January 2020,

the World Health Organization (“WHO”) declared it a Public Health Emergency of International Concern. On

February 28, 2020,

the WHO raised its assessment of the COVID-

threat from high to very high at a global level due to the continued increase in the number of cases and affected countries, and on

March 11, 2020,

the WHO characterized COVID-

as a pandemic.

As of the date of this filing, the Company’s locations and primary suppliers continue to be operating. However, the broader implications of COVID-

on the Company’s results of operations and overall financial performance remain uncertain. The Company

may

experience constrained supply or slowed customer demand that could materially impact its business, results of operations and overall financial performance in future periods. See

Risk Factors

in Part II, Item

of this Form

-Q

for further discussion of the possible impact of the COVID-

pandemic on the Company’s business