Note

Revenue from Contract

with Customers

July 1, 2018,

the Company adopted ASC Topic

606,

Revenue from Contracts with Customers, and all the related amendments (“ASC Topic

606”

), using the modified retrospective method. In addition, the Company elected to apply certain of the permitted practical expedients within the revenue recognition guidance and make certain accounting policy elections, including those related to significant financing components, sales taxes and shipping and handling activities. Most of the changes resulting from the adoption of ASC Topic

606

July 1, 2018

were changes in presentation within the Unaudited Consolidated Balance Sheet. Therefore, while the Company made adjustments to certain opening balances on its

July 1, 2018

Unaudited Consolidated Balance Sheet, the Company made

adjustment to opening Retained Earnings.

The core principle of ASC Topic

606

is that an entity recognizes revenue to depict the transfer of promised goods and services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. The application of the FASB’s guidance on revenue recognition requires the Company to recognize the amount of revenue and consideration that the Company expects to receive in exchange for goods and services transferred to our customers. To do this, the Company applies the

five

-step model prescribed by the FASB, which requires us to: (

) identify the contract with the customer; (

) identify the performance obligations in the contract; (

) determine the transaction price; (

) allocate the transaction price to the performance obligations in the contract; and (

) recognize revenue when, or as, the Company satisfies a performance obligation.

The Company accounts for a contract or purchase order when it has approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability of consideration is probable. Revenue is recognized when control of the product passes to the customer, which is upon shipment, unless otherwise specified within the customer contract or on the purchase order as delivery, and is recognized at the amount that reflects the consideration the Company expects to receive for the products sold, including various forms of discounts. When revenue is recorded, estimates of returns are made and recorded as a reduction of revenue. Contracts with customers are evaluated to determine if there are separate performance obligations related to timing of product shipment that will be satisfied in different accounting periods. When that is the case, revenue is deferred until each performance obligation is met.

revenue was deferred as of

December 31, 2019.

Purchase orders are of durations less than

one

year. As such, the Company applies the practical expedient in ASC paragraph

606

and does

not

disclose information about remaining performance obligations that have original expected durations of

one

year or less, for which work has

not

yet been performed.

Certain taxes assessed by governmental authorities on revenue producing transactions, such as value added taxes, are excluded from revenue and recorded on a net basis.

Performance Obligations

The Company’s primary source of revenue is derived from the manufacture and distribution of metrology tools and equipment, saw blades and related products sold to distributors. The Company recognizes revenue for sales to our customers when transfer of control of the related good or service has occurred. All of the Company’s revenue was recognized under the point in time approach for the

three

and

six

months ended

December 31, 2019

and

2018.

Contract terms with certain metrology equipment customers could result in products and services being transferred over time as a result of the customized nature of some of the Company’s products, together with contractual provisions in the customer contracts that provide the Company with an enforceable right to payment for performance completed to date; however, under typical terms, the Company does

not

have the right to consideration until the time of shipment from its manufacturing facilities or distribution centers, or until the time of delivery to its customers. If certain contracts in the future provide the Company with this enforceable right of payment, the timing of revenue recognition from products transferred to customers over time

may

be slightly accelerated compared to the Company’s right to consideration at the time of shipment or delivery.

The Company’s typical payment terms vary based on the customer, geographic region, and the type of goods and services in the contract or purchase order. The period of time between invoicing and when payment is due is typically

not

significant. Amounts billed and due from the Company’s customers are classified as accounts receivables on the Consolidated Balance Sheets. As the Company’s standard payment terms are usually less than

one

year, the Company has elected the practical expedient under ASC paragraph

606

not

assess whether a contract has a significant financing component.

The Company’s customers take delivery of goods, and they are recognized as revenue at the time of transfer of control to the customer, which is usually at the time of shipment, unless otherwise specified in the customer contract or purchase order. This determination is based on applicable shipping terms, as well as the consideration of other indicators, including timing of when the Company has a present right to payment, when physical possession of products is transferred to customers, when the customer has the asset, and provisions in contracts regarding customer acceptance.

While unit prices are generally fixed, the Company provides variable consideration for certain customers, typically in the form of promotional incentives at the time of sale. The Company utilizes the most likely amount to estimate the effect of uncertainty on the amount of variable consideration to which the Company would be entitled. The most likely amount method considers the single most likely amount from a range of possible consideration amounts. The most likely amounts are based upon the contractual terms of the incentives and historical experience with each customer. The Company records estimates for cash discounts, promotional rebates, and other promotional allowances in the period the related revenue is recognized (“Customer Credits”). The provision for Customer Credits is recorded as a reduction from gross sales and reserves for Customer Credits are presented within accrued expenses on the Unaudited Consolidated Balance Sheets. Actual Customer Credits have

not

differed materially from estimated amounts for each period presented. Amounts billed to customers for shipping and handling are included in net sales and costs associated with shipping and handling are included in cost of sales. The Company has concluded that its estimates of variable consideration are

not

constrained according to the definition within the new standard. Additionally, the Company applies the practical expedient in ASC paragraph

606

18B

and accounts for shipping and handling activities that occur after the customer has obtained control of a good as a fulfillment activity, rather than a separate performance obligation.

With the adoption of ASC Topic

606,

the Company reclassified certain amounts related to variable consideration. Under ASC Topic

606,

the Company is required to present a refund liability and a return asset within the Unaudited Consolidated Balance Sheet, whereas in periods prior to adoption, the Company presented the estimated margin impact of expected returns as a contra-asset within accounts receivable. The changes in the refund liability are reported in net sales, and the changes in the return asset are reported in cost of sales in the Unaudited Consolidated Statements of Operations. As a result, the balance sheet presentation was adjusted beginning in Fiscal

2019.

As of

December 31, 2019,

the balance of the return asset is

$0.1

million and the balance of the refund liability is

$0.2

million, and they are presented within prepaid expenses and other current assets and accrued expenses, respectively, on the Unaudited Consolidated Balance Sheet. The Company, in general, warrants its products against certain defects in material and workmanship when used as designed, for a period of up to

year. The Company does

not

sell extended warranties.

Contract Balances

Contract assets primarily relate to the Company’s rights to consideration for work completed but

not

billed at the reporting date on contracts with customers. Contract assets are transferred to receivables when the rights become unconditional. Contract liabilities primarily relate to contracts where advance payments or deposits have been received, but performance obligations have

not

yet been met, and therefore, revenue has

not

been recognized. The Company had

contract asset balances, but had contract liability balances of

$0.6

million at

December 31, 2019

located in Accounts Payable in the Consolidated Balance Sheets.

Disaggregation of Revenue

The Company operates in

two

reportable segments: North America and International. ASC Topic

606

requires further disaggregation of an entity’s revenue. In the following table, the Company's net sales by shipping origin are disaggregated accordingly for the

three

and

six

months ended

December 31, 2019

and

2018

(in thousands):

	Three Months Ended				Six Months Ended
	12/31/19		12/31/18		12/31/19		12/31/18
North America
United States	$	31,085	$	32,413	$	59,708	$	60,360
Canada & Mexico		2,013		2,215		4,398		4,468
		33,098		34,628		64,106		64,828
International
Brazil		15,000		12,519		27,822		24,886
United Kingdom		5,372		5,657		10,603		11,673
China		1,653		2,052		3,167		3,761
Australia & New Zealand		1,741		1,676		3,280		3,285
		23,766		21,904		44,872		43,605

Total Sales	$	56,864	$	56,532	$	108,978	$	108,433