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Supplemental Balance Sheet Disclosures | 9 Months Ended
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Jun. 30, 2014
Supplemental Balance Sheet Disclosures |
Supplemental Balance Sheet Disclosures | 2. Supplemental Balance Sheet Disclosures Unbilled Receivables Unbilled receivables represent primarily sales recorded under the percentage-of-completion method of accounting that, in accordance with applicable contract terms, have not been billed to customers. Unbilled receivables, net of customer payments, were $11.3 million and $6.5 million at June 30, 2014 and September 30, 2013, respectively. The percentage-of-completion method of accounting for EDC sales requires estimates of profit margins for contracts be reviewed by the Company on a quarterly basis. If the initial estimates of sales and costs under a contract are accurate, the percentage-of-completion method results in the profit margin being recorded evenly as revenue is recognized under the contract. Changes in these underlying estimates because of revisions in sales and cost estimates or the exercise of contract options may result in profit margins being recognized unevenly over the life of a contract because such changes are accounted for on a cumulative basis in the period in which the estimates are revised. Significant changes in estimates related to accounting for long-term contracts may have a material effect on the Company’s results of operations in the period in which the revised estimates are made. Cumulative catch-up adjustments resulting from changes in estimates reduced operating income by $559,000 and $1,172,000, respectively, for the three and nine months ended June 30, 2014. Cumulative catch-up adjustments resulting from changes in estimates reduced operating income by $161,000 and $364,000, respectively, for the three and nine months ended June 30, 2013. Inventories Inventories are stated at the lower of cost (first-in, first-out) or market, net of reserve for excess and obsolete inventory, and consist of the following:
|  | June 30, |  | September 30, |
|  | 2014 |  | 2013 |
Raw materials |  | $ | 4,609,075 |  | $ | 3,126,592 |
Work-in-process |  | 1,111,548 |  | 857,602 |
Finished goods |  | 152,264 |  | 393,319 |
|  | $ | 5,872,887 |  | $ | 4,377,513 |
Prepaid expenses and other current assets Prepaid expenses and other current assets consist of the following:
|  | June 30, |  | September 30, |
|  | 2014 |  | 2013 |
Prepaid insurance |  | $ | 394,398 |  | $ | 350,913 |
Other |  | 324,632 |  | 291,297 |
|  | $ | 719,030 |  | $ | 642,210 |
Property and equipment Property and equipment, net consists of the following:
|  | June 30, |  | September 30, |
|  | 2014 |  | 2013 |
Land |  | $ | 1,021,245 |  | $ | 1,021,245 |
Computer equipment |  | 2,254,829 |  | 2,173,266 |
Corporate airplane |  | 3,128,504 |  | 3,128,504 |
Furniture and office equipment |  | 1,063,254 |  | 1,062,296 |
Manufacturing facility |  | 5,719,805 |  | 5,631,001 |
Equipment |  | 5,024,272 |  | 4,678,678 |
|  | 18,211,909 |  | 17,694,990 |
Less: Accumulated depreciation and amortization |  | (10,681,419 | ) | (10,374,495 | )
|  | $ | 7,530,490 |  | $ | 7,320,495 |
Depreciation and amortization related to property and equipment was approximately $140,000 and $113,000 for the three months ended June 30, 2014 and 2013, respectively. The corporate airplane is utilized primarily in support of product development and has been depreciated to its estimated salvage value. Depreciation and amortization related to property and equipment was approximately $414,000 and $330,000 for the nine months ended June 30, 2014 and 2013, respectively. Other assets Other assets consist of the following:
|  | June 30, |  | September 30, |
|  | 2014 |  | 2013 |
Intangible assets, net of accumulated amortization of $495,037 at June 30, 2014 and September 30, 2013 |  | $ | 105,200 |  | $ | 105,200 |
Other non-current assets |  | $ | 10,447 |  | 116,333 |
|  | $ | 115,647 |  | $ | 221,533 |
Intangible assets consist of licensing and certification rights which are amortized over a defined number of units. No impairment charges were recorded in the nine months ended June 30, 2014 and 2013. Total amortization expense was approximately $0 and $7,000 for the three months ended June 30, 2014 and 2013, respectively. Total amortization expense for the nine months ended June 30, 2014 and 2013 was $0 and $36,000, respectively. The timing of future amortization expense is not determinable because the intangible assets are being amortized over a defined number of units. Accrued expenses Accrued expenses consist of the following:
|  | June 30, |  | September 30, |
|  | 2014 |  | 2013 |
Warranty |  | $ | 846,060 |  | $ | 701,456 |
Salary, benefits and payroll taxes |  | 517,381 |  | 679,325 |
Professional fees |  | 339,592 |  | 393,570 |
Income taxes payable |  | 146,760 |  | 337,993 |
EDC program costs |  | 1,295,155 |  | 560,428 |
Litigation claims |  | — |  | 656,865 |
Other |  | 274,198 |  | 343,272 |
|  | $ | 3,419,146 |  | $ | 3,672,909 |
Other accrued expenses consist primarily of accruals for inventory-in-transit, royalties and operating expenses as of June 30, 2014 and for payments to sub-contractors and consultants for services completed as of September 30, 2013. Warranty cost and accrual information for the three and nine months ended June 30, 2014 is highlighted below:
|  | Three Months Ending |  | Nine Months Ending |
|  | June 30, 2014 |  | June 30, 2014 |
Warranty accrual, beginning of period |  | $ | 743,482 |  | $ | 701,456 |
Accrued expense for the three and nine months ended June 30, 2014 |  | 150,915 |  | 307,908 |
Warranty cost for the three and nine months ended June 30, 2014 |  | (48,337 | ) | (163,304 | )
Warranty accrual, end of period |  | $ | 846,060 |  | $ | 846,060 |

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