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CONTRACT ASSETS AND CONTRACT LIABILITIES

9 Months Ended

Sep. 30, 2019

Revenue from Contract with Customer [Abstract]

CONTRACT ASSETS AND CONTRACT LIABILITIES

9. Contract assets and contract liabilities

Net contract assets consist of the following:

	September 30, 2019
	U.S.
	Government			Commercial			Total
Contract assets	$	49,657,016		$	71,801,068		$	121,458,084
Contract liabilities		(1,819,792	)		(3,463	)		(1,823,255	)
Net contract assets	$	47,837,224		$	71,797,605		$	119,634,829

	December 31, 2018
	U.S.
	Government			Commercial			Total
Contract assets	$	48,358,481		$	64,975,010		$	113,333,491
Contract liabilities		(3,780,866	)		(24,240	)		(3,805,106	)
Net contract assets	$	44,577,615		$	64,950,770		$	109,528,385

The increase in the Company’s net contract assets from January 1, 2019 to September 30, 2019 was primarily due to costs incurred on the G-650 program ($2.2 million increase), the new design of the HondaJet engine inlet ($1.8 million increase), for which the Company has not begun billing on a steady rate and the Raytheon Next Generation Jammer pod 2.0 ($3.3 million increase). Additionally, contract assets on the Company’s F-35 Lock Assembly program increased $0.6 million.

U.S. government contracts includes contracts directly with the U.S. government and government subcontractors.

Revisions in the estimated gross profits on contracts and contract amounts are made in the period in which the circumstances requiring the revisions occur. During the nine months ended September 30, 2019, the effect of such revisions in total estimated contract profits resulted in a decrease to the total gross profit to be earned on the contracts of approximately $327,000 from that which would have been reported had the revised estimates been used as the basis of recognition of contract profits in prior years. During the nine months ended September 30, 2018, the effect of such revisions was a decrease to total gross profit of approximately $683,000.

Although management believes it has established adequate procedures for estimating costs to uncompleted open contracts, it is possible that additional significant costs could occur on contracts prior to completion.