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Note 14 - Business Segments
 3 Months Ended
Sep. 30, 2021
Notes to Financial Statements  
Segment Reporting Disclosure [Text Block]

14.

BUSINESS SEGMENTS

 

The Company generates revenue primarily from 3 different segments: Manufacturing, Testing and Distribution. The Company accounts for a contract with a customer when there is 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. The Company’s revenues are measured based on consideration stipulated in the arrangement with each customer, net of any sales incentives and amounts collected on behalf of third parties, such as sales taxes. The revenues are recognized as separate performance obligations that are satisfied by transferring control of the product or service to the customer.

 

The revenue allocated to individual countries was based on where the customers were located. The allocation of the cost of equipment, the current year investment in new equipment and depreciation expense have been made based on the primary purpose for which the equipment was acquired.

 

Significant Judgments

 

The Company’s arrangements with its customers include various combinations of products and services, which are generally capable of being distinct and accounted for as separate performance obligations. A product or service is considered distinct if it is separately identifiable from other deliverables in the arrangement and if a customer can benefit from it on its own or with other resources that are readily available to the customer.

 

The Company allocates the transaction price to each performance obligation on a relative stand-alone selling price basis (“SSP”). Determining the SSP for each distinct performance obligation and allocation of consideration from an arrangement to the individual performance obligations and the appropriate timing of revenue recognition are significant judgments with respect to these arrangements. The Company typically establishes the SSP based on observable prices of products or services sold separately in comparable circumstances to similar clients. The Company may estimate SSP by considering internal costs, profit objectives and pricing practices in certain circumstances.

 

Warranties, discounts and allowances are estimated using historical and recent data trends. The Company includes estimates in the transaction price only to the extent that a significant reversal of revenue is not probable in subsequent periods. The Company’s products and services are generally not sold with a right of return, nor has the Company experienced significant returns from or refunds to its customers.

 

Manufacturing

 

The Company primarily derives revenue from the sale of both front-end and back-end semiconductor test equipment and related peripherals, maintenance and support of all these products, installation and training services and the sale of spare parts. The Company’s revenues are measured based on consideration stipulated in the arrangement with each customer, net of any sales incentives and amounts collected on behalf of third parties, such as sales taxes.

 

The Company recognizes revenue at a point in time when the Company has satisfied its performance obligation by transferring control of the product to the customer. The Company uses judgment to evaluate whether the control has transferred by considering several indicators, including:

 

• whether the Company has a present right to payment;

 

• the customer has legal title;

 

• the customer has physical possession;

 

• the customer has significant risk and rewards of ownership; and

 

• the customer has accepted the product, or whether customer acceptance is considered a formality based on history of acceptance of similar products (for example, when the customer has previously accepted the same equipment, with the same specifications, and when we can objectively demonstrate that the tool meets all the required acceptance criteria, and when the installation of the system is deemed perfunctory).

 

Not all indicators need to be met for the Company to conclude that control has transferred to the customer. In circumstances in which revenue is recognized prior to the product acceptance, the portion of revenue associated with its performance obligations of product installation and training services are deferred and recognized upon acceptance.

 

The majority of sales under the Manufacturing segment include a standard 12-month warranty. The Company has concluded that the warranty provided for standard products are assurance type warranties and are not separate performance obligations. Warranty provided for customized products are service warranties and are separate performance obligations. Transaction prices are allocated to this performance obligation using cost plus method. The portion of revenue associated with warranty service is deferred and recognized as revenue over the warranty period, as the customer simultaneously receives and consumes the benefits of warranty services provided by the Company.

 

Testing

 

The Company renders testing services to manufacturers and purchasers of semiconductors and other entities who either lack testing capabilities or whose in-house screening facilities are insufficient. The Company primarily derives testing revenue from burn-in services, manpower supply and other associated services. SSP is directly observable from the sales orders. Revenue is allocated to performance obligations satisfied at a point in time depending upon terms of the sales order. Generally, there is no other performance obligation other than what has been stated inside the sales order for each of these sales.

 

Terms of contract that may indicate potential variable consideration include warranty, late delivery penalty and reimbursement to solve nonconformance issues for rejected products. Based on historical and recent data trends, it is concluded that these terms of the contract do not represent potential variable consideration. The transaction price is not contingent on the occurrence of any future event.

 

Distribution

 

The Company distributes complementary products, particularly equipment, industrial products and components by manufacturers mainly from the U.S., Europe, Taiwan and Japan. The Company recognizes revenue from product sales at a point in time when the Company has satisfied its performance obligation by transferring control of the product to the customer. The Company uses judgment to evaluate whether control has transferred by considering several indicators discussed above. The Company recognizes the revenue at a point in time, generally upon shipment or delivery of the products to the customer or distributors, depending upon terms of the sales order. 

 

All intersegment revenue was from the manufacturing segment to the testing and distribution segments. Total intersegment revenue was $92 for the three months ended September 30, 2021, as compared to $381 for the same period in the last fiscal year.  Corporate assets mainly consisted of cash and prepaid expenses. Corporate expenses mainly consisted of stock option expenses, salaries, insurance, professional expenses and directors' fees. Corporate expenses are allocated to the four segments. The following segment information table includes segment operating income or loss after including the corporate expenses allocated to the segments, which gets eliminated in the consolidation.

 

The following segment information is unaudited for the three months ended September 30, 2021, and September 30, 2020:

 

Business Segment Information:

 

  

Three Months

Ended

Sept. 30,

 

Net

Revenue

  

Operating

Income / (Loss)

  

Total

Assets

  

Depr.

And

Amort.

  

Capital

Expenditures

 

Manufacturing

 

2021

 $3,562   300   18,558   103   60 
  

2020

 $2,625   (18)  10,383   106   67 
                       

Testing Services

 

2021

  4,600   536   18,363   585   377 
  

2020

  2,954   (337

)

  20,848   579   20 
                       

Distribution

 

2021

  1,998   254   1,288   2   - 
  

2020

  1,258   124   758   -   - 
                       

Real Estate

 

2021

  11   (23

)

  1,588   19   1 
  

2020

  4   (27

)

  3,722   17   - 
                       

Fabrication

 

2021

  -   -   -   -   - 

Services *

 

2020

  -   -   25   -   - 
                       

Corporate &

 

2021

  -   (97

)

  314   -   - 

Unallocated

 

2020

  -   (69

)

  92   -   - 
                       

Total Company

 

2021

 $10,171   970   40,111   709   438 
  

2020

 $6,841   (327

)

  35,828   702   87 

 

* Fabrication services is a discontinued operation.