Note 2 - Revenue Recognition - Percentage-of-Completion - ITATS ("Intermediate Level TACAN Test Set") (AN/ARM-206)

9 Months Ended

Dec. 31, 2012

Revenue Recognition, Percentage-of-Completion Method [Policy Text Block]

Note 2 – Revenue Recognition – Percentage-of-Completion – ITATS (“Intermediate Level TACAN Test Set”) (AN/ARM-206)

Due to the unique nature of the ITATS program, wherein a significant portion of this contract will not be delivered for over a year, revenues under this contract are recognized on a percentage-of-completion basis, which recognizes sales and profit as they are earned, rather than at the time of shipment.  Revenues and profits are estimated using the cost-to-cost method of accounting where revenues are recognized and profits recorded based upon the ratio of costs incurred to estimate of total costs at completion.  The ratio of costs incurred to date to the estimate of total costs at completion is applied to the contract value to determine the revenues and profits.  When adjustments in estimated contract revenues or estimated costs at completion are required, any changes from prior estimates are recognized by recording adjustments in the current period for the inception-to-date effect of the changes on current and prior periods.  The Company also receives progress billings on this program, which is a funding mechanism by the government to assist contractors on long-term contracts prior to delivery.  These progress payments are applied to Unbilled Government Receivables resulting from revenues recognized under percentage-of-completion accounting.  There have been no progress billings or revenues recognized during the nine months ended December 31, 2012 in connection with the ITATS program.

The AN/ARM-206 ITATS program is proceeding well with the enhancements funded by the U.S. Navy last year now finished. The Company has completed final acceptance testing on the initial prototype units and has secured approval on these units in February 2012. The Company is currently undergoing its Production Readiness Review with the U.S. Navy.  The Company currently has orders for 102 units for approximately $5.3 million. It is expected that shipments will commence in the first half of calendar year 2013.