What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2020-12-18 compared with 2019-12-11 · 280 added, 381 removed, 285 unchanged (70% of the section changed)

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Consolidated Balance Sheets as of September 30, 2020 and 2019

Consolidated Income Statements for the years ended September

30, 2019 and 2018

Consolidated Statements of Shareholders Equity for the years ended September 30,

2019 and 2018

Consolidated Statements of Cash Flows for the years ended September

30, 2019 and 2018

Consolidated Income Statements for the years ended September 30, 2020 and 2019

Consolidated Statements of Shareholders’ Equity for the years ended September 30, 2020 and 2019

Consolidated Statements of Cash Flows for the years ended September 30, 2020 and 2019

Notes to Consolidated Financial Statements

All other schedules are omitted because they are not applicable or the required information is shown in the consolidated

financial statements or notes thereto.

All other schedules are omitted because they are not applicable or the required information is shown in the consolidated financial statements or notes thereto.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of Gencor Industries, Inc.:

Opinions on the Financial Statements and Internal Control over Financial Reporting

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Gencor Industries, Inc.

(the Company) as of September 30, 2019 and 2018, and

the related consolidated statements of income, shareholders equity, and cash flows for each of the years in the two-year period ended September 30, 2019, and the related notes (collectively referred

to as the consolidated financial statements).

We also have audited the Companys internal control over financial reporting as of September 30, 2019, based on criteria established in Internal Control Integrated Framework

(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated

financial statements referred to in the first paragraph present fairly, in all material respects, the consolidated financial position of the Company as of September 30, 2019 and 2018, and the consolidated results of its operations and its cash

flows for each of the years in the two-year period ended September 30, 2019, in conformity with accounting principles generally accepted in the United States of America.

Also, in our opinion, the Company

maintained, in all material respects, effective internal control over financial reporting as of September 30, 2019, based on criteria established in Internal Control Integrated Framework (2013) issued by COSO.

Change in Accounting Principle

As disclosed in Notes 1

and 2 to the consolidated financial statements, during the year ended September 30, 2019 the Company elected to change its method of accounting for inventory to the first-in, first-out (FIFO) method from the last-in, last-out (LIFO) method used in prior years.

(the “Company”) as of September 30, 2020 and 2019, and the related consolidated statements of income, shareholders’ equity, and cash flows for each of the years in the two-year

period ended September 30, 2020, and the related notes (collectively referred to as the consolidated financial statements).

In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as of September 30, 2020 and 2019, and the consolidated results of its operations and its cash flows for each of the years in the two-year

period ended September 30, 2020, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

The Companys management is

responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying

Item 9A, Managements Annual Report on Internal Control over Financial Reporting.

Our responsibility is to express an opinion on the Companys consolidated financial statements and an opinion on the Companys internal

control over financial reporting based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in

accordance with the U.S.

These consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement,

whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the

consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management,

as well as evaluating the overall presentation of the consolidated financial statements.

Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that

a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.

Our audits also included performing such other procedures as we considered necessary in the circumstances.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control over Financial Reporting

A companys internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial

reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A companys internal control over financial reporting includes those policies and procedures that

(1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as

necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and the receipts and expenditures of the company are being made only in accordance with authorizations of management and directors

of the company;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the companys assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of

effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ MOORE STEPHENS LOVELACE, P.A.

S TEPHENS L OVELACE , P.A.

/s/ MSL, P.A.

Certified Public Accountants

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Cash and cash equivalents

Marketable securities at fair value (cost of $104,176,000 at September 30, 2019 and

$103,751,000 at September 30, 2018)

Accounts receivable, less allowance for doubtful accounts of $459,000 at September 30, 2019

and $313,000 at September 30, 2018

Marketable securities at fair value (cost of $ 89,514,000 at September 30, 2020 and $ 104,176,000 at September 30, 2019)

Accounts receivable, less allowance for doubtful accounts of $ 442,000 at September 30, 2020 and $ 459,000 at September 30, 2019

Costs and estimated earnings in excess of billings

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Property and equipment, net

Other long-term assets

LIABILITIES AND SHAREHOLDERS’ EQUITY

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Accrued expenses

Current operating lease liabilities

Total current liabilities

Deferred and other income taxes

Non-current operating lease liabilities

Total liabilities

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15,000,000 shares authorized;

12,277,337 shares and

12,252,337 shares issued and outstanding at September 30, 2019 and 2018, respectively

12,287,337 shares and 12,277,337 shares issued and outstanding at September 30, 2020 and 2019, respectively

Class B Stock, par value $ .10 per share;

6,000,000 shares authorized;

2,308,857 shares and

2,288,857 shares issued and outstanding at September 30, 2019 and 2018, respectively

2,318,857 shares and 2,308,857 shares issued and outstanding at September 30, 2020 and 2019, respectively

Capital in excess of par value

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See accompanying Notes to Consolidated Financial Statements

The amounts as of September 30, 2018 have been adjusted to reflect the change in inventory accounting

method, as described in Notes 1 and 2 to the Consolidated Financial Statements.

GENCOR INDUSTRIES, INC.

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See accompanying Notes to Consolidated Financial Statements

The amounts for the year ended September 30, 2018 have been adjusted to reflect the change in inventory

accounting method, as described in Notes 1 and 2 to the Consolidated Financial Statements.

GENCOR INDUSTRIES, INC.

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September 30, 2018 *

Inventory accounting method change *

September 30, 2017 *

Stock-based compensation

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See accompanying Notes to Consolidated Financial Statements

The balances as of September 30, 2017 and 2018, and the amounts for the year ended September 30,

2018, have been adjusted to reflect the change in inventory accounting method, as described in Notes 1 and 2 to the Consolidated Financial Statements.

The balances as of September 30, 2018, have been adjusted to reflect the change in inventory accounting method, as described in Notes 1 and 2 to the Consolidated Financial Statements.

GENCOR INDUSTRIES, INC.

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Cash flows from operating activities:

Adjustments to reconcile net income to cash provided by (used in) operating activities:

Adjustments to reconcile net income to cash provided by operating activities:

Purchase of marketable securities

( 131,635,000

( 188,066,000

Proceeds from sale and maturity of marketable securities

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Total adjustments

Cash flows provided by (used in) operating activities

Cash flows provided by operating activities

Cash flows from investing activities:

Capital expenditures

Proceeds from sale of property and equipment

Cash flows used in investing activities

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Cash flows provided by financing activities

Net increase (decrease) in cash and cash equivalents

Net increase in cash and cash equivalents

Cash and cash equivalents at:

Beginning of year

investing and financing activities:

Operating lease right-of-use

Operating lease liabilities

See accompanying Notes to Consolidated Financial Statements

* The amounts for the year ended September 30, 2018 have been adjusted to reflect the change in inventory accounting method, as described in Notes 1 and

2 to the Consolidated Financial Statements.

GENCOR INDUSTRIES, INC.

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Gencor Industries, Inc.

and its subsidiaries (collectively, the Company) is a diversified, heavy machinery manufacturer for the production of

highway construction materials and environmental control machinery and equipment.

These consolidated financial statements include the accounts of Gencor

Industries, Inc.

and its subsidiaries (collectively, the “Company”) is a diversified, heavy machinery manufacturer for the production of highway construction materials and environmental control machinery and equipment.

These consolidated financial statements include the accounts of Gencor Industries, Inc.

and its subsidiaries.

All significant intercompany accounts and transactions have been eliminated in consolidation.

Pronouncements and Policies

Accounting Pronouncements and Policies

In May 2014, the FASB issued ASU No.

2014-09, Revenue from Contracts with

Customers (Topic 606) (ASU 2014-09), amending its accounting guidance related to revenue recognition.

Under this ASU and subsequently issued amendments, revenue is recognized to depict the

transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

Additional disclosures are required to provide the nature, amount, timing and

uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract.

The standard is effective for annual periods,

and interim periods within those annual periods, beginning after December 15, 2017.

The Company adopted ASU 2014-09 in the first quarter of fiscal 2019.

The Company elected to adopt the standard using the

modified retrospective method.

The adoption of ASU 2014-09 did not have a significant impact on its consolidated financial statements.

Revenue from Contracts with Customers

(Topic 606) (“ASU 2014-09”),

amending its accounting guidance related to revenue recognition.

Under this ASU and subsequently issued amendments, revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

Additional disclosures are required to provide the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract.

The standard is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2017.

The Company adopted ASU 2014-09

in the first quarter of fiscal 2019.

The Company elected to adopt the standard using the modified retrospective method.

The adoption of ASU 2014-09

did not have a significant impact on its consolidated financial statements.

In February 2016, the FASB issued ASU No.

2016-02, Leases (Topic 842) (ASU 2016-02).

With adoption of this standard, lessees will have to recognize most leases as a right-of-use asset and a lease

liability on their balance sheet.

(Topic 842) (“ASU 2016-02”).

With adoption of this standard, lessees will have to recognize most leases as a right-of-use

asset and a lease liability on their balance sheet.

For income statement purposes, the FASB retained a dual model, requiring leases to be classified as either operating or finance.

Classification will be based on criteria that are similar to those applied in current

lease accounting.

ASU 2016-02 must be applied on a modified retrospective basis and is effective for fiscal years beginning after December 15, 2018, and interim periods within those years, with early

adoption permitted.

The Company does not expect the new accounting standard to have a significant impact on its financial results when adopted.

2017, the FASB issued ASU 2017-09, Compensation - Stock Compensation (Topic 718):

Scope of Modification Accounting (ASU 2017-09).

guidance clarifies when a change to the terms or conditions of a share-based payment award must be accounted for as a modification.

ASU 2017-09 is effective for annual periods, and interim periods within those

annual periods, beginning after December 15, 2017, with early adoption permitted.

Classification will be based on criteria that are similar to those applied in current lease accounting.

must be applied on a modified retrospective basis and is effective for fiscal years beginning after December 15, 2018, and interim periods within those years, with early adoption permitted.

The Company adopted ASU 2016-02 in the first quarter of fiscal 2020.

The initial adoption of ASU 2016-02 did not have a significant impact on its consolidated financial statements.

During the fourth quarter of fiscal 2020, the Company entered into a new operating lease which resulted in reporting a right-of-use (“ROU”) asset and related lease liabilities of approximately $ 970,000 (see Note 9 – Leases) .

In May 2017, the FASB issued ASU 2017-09,

Compensation - Stock Compensation

Scope of Modification Accounting

(“ASU 2017-09”).

The new guidance clarifies when a change to the terms or conditions of a share-based payment award must be accounted for as a modification.

is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2017, with early adoption permitted.

The Company adopted ASU 2017-09

in the first quarter of fiscal 2019.

The adoption of ASU 2017-09

did not have a significant impact on its consolidated financial statements.

No other accounting

pronouncements recently issued or newly effective have had, or are expected to have, a material impact on the Companys consolidated financial statements.

No other accounting pronouncements recently issued or newly effective have had, or are expected to have, a material impact on the Company’s consolidated financial statements.

Use of Estimates

The preparation of the consolidated

financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at

the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period.

The preparation of the consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period.

Actual results could differ from those estimates.

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The consolidated financial statements include basic and diluted earnings per share (“EPS”) information.

Basic EPS is based on the weighted-average

number of shares outstanding.

Basic EPS is based on the weighted-average number of shares outstanding.

Diluted EPS is based on the sum of the weighted-average number of shares outstanding plus common stock equivalents.

weighted-average shares issuable upon the exercise of stock options included in the diluted EPS calculation at September 30, 2019 were 307,000, which equates to 157,000 dilutive common stock equivalents.

For the year ended September 30,

2018, the weighted-average shares issuable upon the exercise of stock options included in the diluted EPS calculation were 367,000, which equates to 231,000 dilutive common stock equivalents.

Weighted-average shares issuable upon the exercise of

stock options, which were not included in the diluted EPS calculation because they were anti-dilutive, were zero in 2019 and 2018.

The following presents

the calculation of the basic and diluted EPS for the years ended September 30, 2019 and 2018:

2018 (as adjusted)

The weighted-average shares issuable upon the exercise of stock options included in the diluted EPS calculation at September 30, 2020 were 256,000 , which equates to 125,000 dilutive common stock equivalents.

For the year ended September 30, 2019, the weighted-average shares issuable upon the exercise of stock options included in the diluted EPS calculation were 307,000 , which equates to 157,000 dilutive common stock equivalents.

Weighted-average shares issuable upon the exercise of stock options, which were not included in the diluted EPS calculation because they were anti-dilutive, were 7,000 in 2020 and zero in 2019.

The following presents the calculation of the basic and diluted EPS for the years ended September 30, 2020 and 2019:

Common stock equivalents

Cash Equivalents

equivalents consist of short-term certificates of deposit and deposits in money market accounts with original maturities of three months or less.

Marketable Securities

Marketable debt and equity

securities are categorized as trading securities and are thus marked to market and stated at fair value.

Fair value is determined using the quoted closing or latest bid prices for Level 1 investments and market standard valuation methodologies

for Level 2 investments.

Cash equivalents consist of short-term certificates of deposit and deposits in money market accounts with original maturities of three months or less.

Marketable Securities and Fair Value Measurements

Marketable debt and equity securities are categorized as trading securities and are thus marked to market and stated at fair value.

Fair value is determined using the quoted closing or latest bid prices for Level 1 investments and market standard valuation methodologies for Level 2 investments.

Realized gains and losses on investment transactions are determined by specific identification and are recognized as incurred in the consolidated income statements.

Net changes in unrealized gains and losses are

reported in the consolidated income statements in the current period.

Net changes in unrealized gains and losses are reported in the consolidated income statements in the current period.

Fair Value Measurements

The fair value of financial instruments is presented based upon a hierarchy of levels that prioritizes the inputs of valuation techniques used to measure fair

The fair value of financial instruments is presented based upon a hierarchy of levels that prioritizes the inputs of valuation techniques used to measure fair value.

The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).

instruments level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

fair value of marketable equity securities (stocks), mutual funds, exchange-traded funds, government securities, and cash and money funds, are substantially based on quoted market prices (Level 1).

Corporate bonds are valued using market standard

valuation methodologies, including:

A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

The fair value of marketable equity securities (stocks), mutual funds, exchange-traded funds, government securities, and cash and money funds, are substantially based on quoted market prices (Level 1).

Corporate bonds are valued using market standard valuation methodologies, including:

discounted cash flow methodologies, and matrix pricing or other similar techniques.

The inputs to these market standard valuation methodologies include, but are not limited to:

interest rates, credit standing of

the issuer or counterparty, industry sector of the issuer, coupon rate, call provisions, maturity, estimated duration and assumptions regarding liquidity and estimated future cash flows.

In addition to bond characteristics, the valuation

methodologies incorporate market data, such as actual trades completed, bids and actual dealer quotes, where such information is available.

Accordingly, the estimated fair values are based on available market information and judgments about

financial instruments (Level 2).

interest rates, credit standing of the issuer or counterparty, industry sector of the issuer, coupon rate, call provisions, maturity, estimated duration and assumptions regarding liquidity and estimated future cash flows.

In addition to bond characteristics, the valuation methodologies incorporate market data, such as actual trades completed, bids and actual dealer quotes, where such information is available.

Accordingly, the estimated fair values are based on available market information and judgments about financial instruments (Level 2).

Fair values of the Level 2 investments are provided by the Company’s professional investment management firms.

The following table sets forth by level, within the fair value hierarchy, the Companys assets measured

at fair value as of September 30, 2019:

From time to time the Company may transfer cash between its marketable securities portfolio and operating cash and cash equivalents.

The following table sets forth by level, within the fair value hierarchy, the Company’s assets measured at fair value as of September 30, 2020:

Fair Value Measurements

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Cash and Money Funds

Net unrealized gains reported during fiscal 2019 on trading securities still held as of September 30, 2019, were

Net unrealized losses reported during fiscal 2020 on trading securities still held as of September 30, 2020, were $( 1,091,000 ).

There were no transfers of investments between Level 1 and Level 2 during the year ended September 30, 2020.

The following table

sets forth by level, within the fair value hierarchy, the Companys assets measured at fair value as of September 30, 2018:

In the fourth quarter of fiscal 2020, the Company liquidated approximately $ 17.0 million of its investments.

The cash was used to fund the acquisition of the Blaw-Knox paver business and associated assets, including inventory, fixed assets and related intellectual property, from Volvo CE (see Note 12 - Subsequent Events for additional information).

The following table sets forth by level, within the fair value hierarchy, the Company’s assets measured at fair value as of September 30, 2019:

Fair Value Measurements

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Cash and Money Funds

Net unrealized losses reported during fiscal 2018 on trading securities still held as of September 30, 2018, were

Net unrealized gains reported during fiscal 2019 on trading securities still held as of September 30, 2019, were $ 737,000 .

There were no transfers of investments between Level 1 and Level 2 during the year ended September 30, 2019.

In September 2018, the Company invested an additional $15.0 million of its operating cash in government

The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable, customer deposits and accrued expenses approximate

fair value because of the short-term nature of these items.

In fiscal 2019, the Company transferred a net $ 2.0 million from the marketable securities portfolio to operating cash and cash equivalents.

The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable, customer deposits and accrued expenses approximate fair value because of the short-term nature of these items.

Foreign Currency Transactions

Gains and losses resulting from foreign currency transactions are included in income and were not significant during the years ended September 30, 2019

Gains and losses resulting from foreign currency transactions are included in income and were not significant during the years ended September 30, 2020 and 2019.

Risk Management

Financial instruments

that potentially subject the Company to concentrations of credit risk primarily consist of cash and cash equivalents, marketable securities, and accounts receivable.

The Company maintains its cash accounts in various domestic financial institutions

which may from time to time exceed federally insured limits.

Financial instruments that potentially subject the Company to concentrations of credit risk primarily consist of cash and cash equivalents, marketable securities, and accounts receivable.

The Company maintains its cash accounts in various domestic financial institutions which may from time to time exceed federally insured limits.

Operating cash is retained overnight in non-interest-bearing accounts which allow for offsets to treasury service charges.

The marketable securities

include investments in cash and money funds, mutual funds, exchange-traded funds (ETFs), corporate bonds, government securities and stocks through two professional investment management firms.

Investment securities are exposed to

various risks, such as interest rate, market and credit risks.

The Companys customers are not concentrated in any specific geographic region, but are concentrated in

the road and highway construction industry.

The Company extends limited credit to its customers based upon their credit-worthiness and generally requires a significant up-front deposit before beginning

construction and full payment subject to hold-back provisions prior to shipment on complete asphalt plant and component orders.

The Company establishes an allowance for doubtful accounts based upon the credit risk of specific customers, historical

trends and other pertinent information.

The marketable securities include investments in cash and money funds, mutual funds, exchange traded funds (“ETF’s”), corporate bonds, government securities and stocks through professional investment management firms.

Investment securities are exposed to various risks, such as interest rate, market and credit risks.

The Company’s customers are not concentrated in any specific geographic region, but are concentrated in the road and highway construction industry.

The Company extends limited credit on parts sales to its customers based upon their credit-worthiness.

Generally, the Company requires a significant up-front deposit before beginning manufacturing on complete asphalt plant and component orders, and requires full payment subject to hold-back provisions prior to shipment.

The Company establishes an allowance for doubtful accounts based upon the credit risk of specific customers, historical trends and other pertinent information.

Inventories are valued at the lower of cost or net realizable value.

Net realizable value is defined as the estimated selling price of goods less reasonable

costs of completion and delivery.

Net realizable value is defined as the estimated selling price of goods less reasonable costs of completion and delivery.

During the fourth quarter of fiscal 2019, the Company changed its method for accounting for cost of inventories from the last-in,

first-out (LIFO) method to the first-in, first-out (FIFO) method.

As required by accounting principles

generally accepted in the United States of America (GAAP), the Company has reflected this change in accounting principle on a retrospective basis, resulting in changes to the historical periods presented.

Appropriate consideration is

given to obsolescence, excessive levels, deterioration, possible alternative uses and other factors in determining net realizable value.

(“LIFO”) method to the first-in,

(“FIFO”) method.

As required by accounting principles generally accepted in the United States of America (“GAAP”), the Company reflected this change in accounting principle on a retrospective basis, resulting in changes to the historical periods presented.

Appropriate consideration is given to obsolescence, excessive levels, deterioration, possible alternative uses and other factors in determining net realizable value.

The cost of work in process and finished goods includes materials, direct labor, variable costs and overhead.

The Company evaluates the need to record inventory adjustments on all inventories, including raw material, work in process, finished goods, spare parts and used equipment.

Used equipment acquired by the Company on

trade-in from customers is carried at estimated net realizable value.

Unless specific circumstances warrant different treatment regarding inventory obsolescence, the cost basis of inventories three to four

years old are reduced by 50%, while the cost basis of inventories four to five years old are reduced by 75%, and the cost basis of inventories greater than five years old are reduced to zero.

Inventory is typically reviewed for obsolescence on an

annual basis computed as of September 30, the Companys fiscal year end.

If significant known changes in trends, technology or other specific circumstances that warrant consideration occur during the year, then the impact on obsolescence

is considered at that time.

Used equipment acquired by the Company on trade-in

from customers is carried at estimated net realizable value.

Unless specific circumstances warrant different treatment regarding inventory obsolescence, an allowance is established to reduce

the cost basis of inventories three to four years old by 50 %,

the cost basis of inventories four to five years old by 75 %, and the cost basis of inventories greater than five years old to zero .

Inventory is typically reviewed for obsolescence on an annual basis computed as of September 30, the Company’s fiscal year end.

If significant known changes in trends, technology or other specific circumstances that warrant consideration occur during the year, then the impact on obsolescence is considered at that time.

Changes in the allowance for slow-moving and obsolete inventories are as follows:

(as adjusted)

Balance, beginning of year

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Property and equipment are stated at cost (see Note 4).

Depreciation of property and equipment is computed using the straight-line method over the estimated

useful lives of the related assets, as follows:

Depreciation of property and equipment is computed using the straight-line method over the estimated useful lives of the related assets, as follows:

Land improvements

Buildings & improvements

equipment, and intangible assets subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset (or asset group) may not be recoverable.

An impairment loss would be

recognized when the carrying amount of an asset exceeds the estimated undiscounted cash flows expected to result from the use of the asset and its eventual disposition.

The amount of the impairment loss to be recorded is calculated by the excess of

the assets carrying value over its fair value.

Property and equipment, and intangible assets subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset (or asset group) may not be recoverable.

An impairment loss would be recognized when the carrying amount of an asset exceeds the estimated undiscounted cash flows expected to result from the use of the asset and its eventual disposition.

The amount of the impairment loss to be recorded is calculated by the excess of the asset’s carrying value over its fair value.

Fair value is generally determined using a discounted cash flow analysis.

2 unchanged sentences

The Company adopted the provisions of ASU No.

2014-09 and related amendments effective for the quarter ended

December 31, 2018 using the modified retrospective method.

The adoption of this standard did not have a material impact on the timing or amounts of revenues recognized by the Company, and, as such, no cumulative effect adjustment was

recorded with the adoption of the standard.

The following table disaggregates the Companys net revenue by major source for the years ended

September 30, 2019 and 2018:

and related amendments effective for the quarter ended December 31, 2018 using the modified retrospective method.

The adoption of this standard did not have a material impact on the timing or amounts of revenues recognized by the Company, and, as such, no cumulative effect adjustment was recorded with the adoption of the standard.

The following table disaggregates the Company’s net revenue by major source for the years ended September 30, 2020 and 2019:

Equipment sales recognized over time

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Freight revenue

Revenues from contracts with customers for the design, manufacture and sale of custom equipment are recognized over time when

the performance obligation is satisfied by transferring control of the equipment.

Control of the equipment transfers over time, as the equipment is unique to the specific contract and thus does not create an asset with an alternative use to the

Revenues from contracts with customers for the design, manufacture and sale of custom equipment are recognized over time when the performance obligation is satisfied by transferring control of the equipment.

Control of the equipment transfers over time, as the equipment is unique to the specific contract and thus does not create an asset with an alternative use to the Company.

Revenues and costs are recognized in proportion to actual labor costs incurred, as compared with total estimated labor costs expected to be incurred, during the entire contract.

All incremental costs related to obtaining a contract are

expensed as incurred, as the amortization period is less than one year.

All incremental costs related to obtaining a contract are expensed as incurred, as the amortization period is less than one year.

Changes to total estimated contract costs or losses, if any, are recognized in the period in which they are determined.

Contract assets (excluding accounts receivable) under contracts with customers represent revenue recognized in excess of amounts billed on equipment sales

recognized over time.

These contract assets were $13,838,000 at September 30, 2019 and are included in current assets as costs and estimated earnings in excess of billings on the Companys consolidated balance sheet at September 30,

The Company anticipates that all of these contract assets at September 30, 2019, will be billed and collected within one year.

Revenues from

all other contracts for the design and manufacture of equipment, for service and for parts sales, net of any discounts and return allowances, are recorded at a point in time when control of the goods or services has been transferred.

Control of the

goods or service typically transfers at time of shipment or upon completion of the service.

Payment for equipment under contract with customers is

typically due prior to shipment.

Payment for services under contract with customers is due as certain milestones are completed.

Accounts receivable related to contracts with customers for equipment sales was $301,000 at September 30, 2019.

Contract assets (excluding accounts receivable) under contracts with customers represent revenue recognized in excess of amounts billed on equipment sales recognized over time.

These contract assets were $ 6,405,000 and $ 13,838,000 at September 30, 2020 and 2019, respectively, and are included in current assets as costs and estimated earnings in excess of billings on the Company’s consolidated balance sheets.

The Company anticipates that all of the contract assets at September 30, 2020, will be billed and collected within one year .

Revenues from all other contracts for the design and manufacture of equipment, for service and for parts sales, net of any discounts and return allowances, are recorded at a point in time when control of the goods or services has been transferred.

Control of the goods or service typically transfers at time of shipment or upon completion of the service.

Payment for equipment under contract with customers is typically due prior to shipment.

Payment for services under contract with customers is due as s

are completed.

Accounts receivable related to contracts with customers for equipment sales were $ 223,000 and $ 301,000 at September 30, 2020 and September 30, 2019, respectively.

Product warranty costs are estimated using historical experience and known issues and are charged to production costs as revenue is recognized.

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Balance, end of year

Provisions for estimated returns and allowances, and other adjustments are provided for in the same period the related sales

are recorded.

Provisions for estimated returns and allowances, and other adjustments are provided for in the same period the related sales are recorded.

Returns and allowances, which reduce product revenue, are estimated using historical experience.

Under certain contracts with customers, recognition of a portion of the consideration received may be

deferred and recorded as a contract liability if the Company has to satisfy a future obligation, such as to provide installation assistance.

There were no contract liabilities other than customer deposits at September 30, 2019.

deposits related to contracts with customers were $1,918,000 at September 30, 2019, and are included in current liabilities on the Companys consolidated balance sheet at September 30, 2019.

The Company records revenues earned for shipping and handling as freight revenue at the time of shipment, regardless of whether or not it is identified as a

separate performance obligation.

Under certain contracts with customers, recognition of a portion of the consideration received may be deferred and recorded as a contract liability if the Company has to satisfy a future obligation, such as to provide installation assistance.

There were no contract liabilities other than customer deposits at September 30, 2020 and September 30, 2019.

Customer deposits related to contracts with customers were $ 3,853,000 and $ 1,918,000 at September 30, 2020 and 2019, respectively, and are included in current liabilities on the Company’s consolidated balance sheets.

The Company records revenues earned for shipping and handling as freight revenue at the time of shipment, regardless of whether or not it is identified as a separate performance obligation.

The cost of shipping and handling is classified as production costs concurrently with the revenue recognition.

product engineering and development costs, and selling, general and administrative expenses are charged to operations as incurred.

All product engineering and development costs, and selling, general and administrative expenses are charged to operations as incurred.

Provision is made for any anticipated contract losses in the period that the loss becomes evident.

The allowance for doubtful accounts is determined by performing a specific review of all account balances greater than 90 days past due and other higher risk

amounts to determine collectibility, and also adjusting for any known customer payment issues with account balances in the less-than-90-day past due aging category.

The allowance for doubtful accounts is determined by performing a specific review of all account balances greater than 90 days past due and other higher risk amounts to determine collectability, and also adjusting for any known customer payment issues with account balances in the less-than-90-day

past due aging category.

Account balances are charged off against the allowance for doubtful accounts when they are determined to be uncollectible.

Any recoveries of account balances previously considered in the allowance for doubtful accounts reduce future additions to the

allowance for doubtful accounts.

Any recoveries of account balances previously considered in the allowance for doubtful accounts reduce future additions to the allowance for doubtful accounts.

The allowance for doubtful accounts also includes an estimate for returns and allowances.

Provisions for estimated returns and allowances and other adjustments, are provided for in the same period the related sales

are recorded.

Provisions for estimated returns and allowances and other adjustments, are provided for in the same period the related sales are recorded.

Returns and allowances, which reduce product revenue, are estimated using known issues and historical experience.

Changes in the allowance

for doubtful accounts are composed of the following:

Changes in the allowance for doubtful accounts are composed of the following:

Balance, beginning of year

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Provision for estimated returns and allowances

Uncollectible accounts writtenoff

Uncollectible accounts written off

Returns and allowances issued

2 unchanged sentences

Shipping and handling costs are included in production costs in the consolidated income statements.

Income taxes are provided for the tax

effects of transactions reported in the consolidated financial statements and primarily consist of taxes currently due, plus deferred taxes (see Note 6).

The Company recognizes deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the consolidated

financial statements or tax returns using current tax rates.

Income taxes are provided for the tax effects of transactions reported in the consolidated financial statements and primarily consist of taxes currently due, plus deferred taxes (see Note 6 – Income Taxes).

The Company recognizes deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the consolidated financial statements or tax returns using current tax rates.

The Company and its domestic subsidiaries file a consolidated federal income tax return.

Deferred tax assets and liabilities are measured using the rates expected to apply to taxable income in the years in which the temporary differences are

expected to reverse and the credits are expected to be used.

Deferred tax assets and liabilities are measured using the rates expected to apply to taxable income in the years in which the temporary differences are expected to reverse and the credits are expected to be used.

The effect on deferred tax assets and liabilities of the change in tax rates is recognized in income in the period that includes the enactment date.

All available evidence, both positive

and negative, is considered to determine whether, based on the weight of that evidence, the Company is more likely than not to realize the benefit of a deferred tax asset and whether a valuation allowance is needed for some portion or all of a

deferred tax asset.

All available evidence, both positive and negative, is considered to determine whether, based on the weight of that evidence, the Company is more likely than not to realize the benefit of a deferred tax asset and whether a valuation allowance is needed for some portion or all of a deferred tax asset.

No such valuation allowances were recorded as of September 30, 2020 and 2019.

On December 22, 2017, the U.S.

Tax Cuts and Jobs Act (the Tax Reform Act) was signed into

law by President Donald Trump.

The Tax Reform Act significantly lowered the U.S.

corporate income tax rate from 35% to 21% effective January 1, 2018, while also repealing the deduction for domestic production activities for tax years beginning

after December 31, 2017, implementing a territorial tax system and imposing repatriation tax on deemed repatriated earnings of foreign subsidiaries.

GAAP requires that the impact of tax legislation be recognized in the period in which the law

As a result of the Tax Reform Act, the Company recorded a tax benefit of $0.7 million due to re-measurement of its deferred tax liability, in the first quarter of fiscal 2018.

recorded an additional $0.1 million of tax benefits related to the Tax Reform Act in the fourth quarter of fiscal 2018.

The Companys income

tax provision is based on managements estimate of the effective tax rate for the full year.

The tax provision in any period will be affected by, among other things, permanent, as well as temporary differences in the deductibility of

certain items, in addition to changes in tax legislation.

As a result, the Company may experience significant fluctuations in the effective book tax rate (that is, its tax expense divided by pre-tax book

income) from period to period.

The Companys effective tax rates for fiscal 2019 and 2018 reflect the impact of the reduced rates under the Tax Reform Act.

The Company’s income tax provision is based on management’s estimate of the effective tax rate for the full year.

The tax provision in any period will be affected by, among other things, permanent, as well as temporary differences in the deductibility of certain items, in addition to changes in tax legislation.

As a result, the Company may experience significant fluctuations in the effective book tax rate (that is, its tax expense divided by pre-tax

book income) from period to period.

The Company’s effective tax rates for fiscal 2020 and 2019 reflect the impact of the reduced rates under the U.S.

Tax Cuts and Jobs Act (the “Tax Reform Act) which was signed into law on December 22, 2017.

Comprehensive Income

For the years ended

September 30, 2019 and 2018, other comprehensive income is equal to net income.

For the years ended September 30, 2020 and 2019, other comprehensive income is equal to net income.

Reporting Segments and Geographic Areas

The Company has one reportable segment.

For fiscal 2019 and 2018, total revenues of $81,329,000 and $98,614,000, and total long-term assets of $8,442,000 and

$7,942,000, respectively, were attributed to the United States.

For fiscal 2020 and 2019, total revenues of $ 77,420,000 and $ 81,329,000 , and total long-term assets of $ 9,336,000 and $ 8,442,000 , respectively, were attributed to the United States.

Revenues are attributed to geographic areas based on the location of the assets producing the revenues.

Customers with 10% (or greater) of Net Revenues

customer accounted for 10% or more of fiscal 2019 or 2018 net revenues.

No customer accounted for 10 % or more of fiscal 2020 or 2019 net revenues.

Subsequent Events

Management has evaluated events occurring from September 30, 2019 through the date these financial statements were filed with the Securities and Exchange

Commission for proper recording and disclosures herein.

Management has evaluated events occurring from September 30, 2020 through the date these consolidated financial statements were filed with the Securities and Exchange Commission for proper recording and disclosure herein.

On October 1, 2020, the Company acquired the Blaw-Knox paver business and associated assets, including inventory, fixed assets and related intellectual property,

from Volvo CE.

The acquisition was accounted for as a business combination under ASC 805, “Business Combinations.” The purchase price of approximately $ 14.4 million was funded by cash on hand (see Note 12 - Subsequent Events for additional information).

NOTE 2 - INVENTORIES

Inventories are valued at the lower of cost or net realizable value.

During the fourth quarter of fiscal 2019, the Company changed its method for accounting

for cost of inventories from the LIFO method to the FIFO method.

The Company believes the FIFO method will improve financial reporting by better reflecting the current value of inventory on the consolidated balance sheets, by more closely

aligning the flow of physical inventory with the accounting for the inventory, and by providing better matching of revenues and expenses.

During the fourth quarter of fiscal 2019, the Company changed its method for accounting for cost of inventories from the LIFO method to the FIFO method.

The Company believes the FIFO method improves financial reporting by better reflecting the current value of inventory on the consolidated balance sheets, by more closely aligning the flow of physical inventory with the accounting for the inventory, and by providing better matching of revenues and ex p

Net inventories consist of the following:

September 30,

(as adjusted)

Raw materials

3 unchanged sentences

Inventories, net

The fiscal 2018 consolidated financial statements have been retrospectively adjusted to apply the new method of FIFO cost

accounting for inventories.

The cumulative effect of this change on periods prior to those presented herein resulted in an increase in retained earnings of $2,708,000.

Slow-moving and obsolete inventory reserves were $4,700,000 and $4,543,000 (as adjusted) at

September 30, 2019 and 2018, respectively.

As a result of the retrospective application of this change in accounting method, the following financial

statement line items within the accompanying fiscal 2018 consolidated financial statements were adjusted, as follows:

As Originally

Reported under LIFO

Consolidated Balance Sheets

Inventories, net

Prepaid expenses

LIABILITIES & SHAREHOLDERS EQUITY

Deferred and other income taxes

Retained earnings

Consolidated Income Statements

Cost of goods sold

Income before income tax expense

Income tax expense

Basic earnings per common share

Diluted earnings per common share

Consolidated Statements of Cash Flows

Deferred and other income taxes

Prepaid expenses

Accrued expenses

There was no material impact to the previously reported unaudited interim fiscal 2018 quarterly condensed consolidated results

of operations or statements of income as a result of the retrospective application of the change in inventory accounting principle.

Slow-moving and obsolete inventory reserves were $ 4,617,000 and $ 4,700,000 at September 30, 2020 and 2019, respectively.

NOTE 3 - COSTS AND ESTIMATED EARNINGS IN EXCESS OF BILLINGS

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Property and equipment, net

Property and equipment includes approximately $12,866,000 and $11,996,000 of fully depreciated assets, which remained in

service during fiscal 2019 and 2018, respectively.

Property and equipment includes approximately $ 14,300,000 and $ 12,866,000 of fully depreciated assets, which remained in service during fiscal 2020 and 2019, respectively.

NOTE 5 - ACCRUED EXPENSES

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NOTE 6 - INCOME TAXES

The fiscal 2018 comparative amounts have been adjusted to reflect the change in inventory accounting method, as described in Notes 1 and 2 to the Consolidated

Financial Statements.

The provision for income tax expense consists of:

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State income taxes, net of federal benefit

Change in current tax rate

Change in deferred tax rate

Research & development tax refunds & credits

Dividend received deduction

Domestic production activities deduction

Incentive stock options

263A Section 481(a) adjustment

Effective income tax rate

4 unchanged sentences

Allowance for doubtful accounts

R&D tax credits carryforwards

Stock-based compensation

10 unchanged sentences

Total income taxes paid in fiscal 2020 and 2019 were $ 3,850,000 and $ 1,150,000 , respectively.

GAAP prescribes a comprehensive model for the financial recognition, measurement, classification, and disclosure of uncertain tax positions.

contains a two-step approach to recognizing and measuring uncertain tax positions.

The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates

that it is more likely than not that the position will be sustained on audit, based on the technical merits of the position.

The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon

Significant judgment is required in evaluating the Companys uncertain tax position and determining the Companys provision for

Although the Company believes the reserves of unrecognized tax benefits (UTBs) are reasonable, no assurance can be given that the final outcome of these matters will not be different from that which is reflected in the

Companys historical income tax provision and accruals.

The fiscal 2020 income taxes paid includes $ 2,050,000 of tax payments due on the filing of the Company’s Form 3115 with the Internal Revenue Service to reflect the revenue recognition method change to the percentage of completion method for tax purposes pursuant to Internal Revenue Code Sections 460 and 451(b).

GAAP prescribes a comprehensive model for the financial recognition, measurement, classification, and disclosure of

uncertain tax positions.

GAAP contains a two-step

approach to recognizing and measuring uncertain tax positions.

The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, based on the technical merits of the position.

The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon settlement.

Significant judgment is required in evaluating the Company’s uncertain tax position and determining the Company’s provision for taxes.

Although the Company believes the reserves of unrecognized tax benefits (“UTB’s”) are reasonable, no assurance can be given that the final outcome of these matters will not be different from that which is reflected in the Company’s historical income tax provision and accruals.

The Company adjusts these reserves in light of changing facts and circumstances.

As of September 30, 2020 and 2019, the Company had UTB’s of $ 150,000 .

There were no additional

accruals of UTBs during fiscal years ended September 30, 2019 and 2018.

The Company recognizes interest and penalties accrued related to

UTBs as a component of income tax expense.

There were no additional accruals of UTB’s during fiscal years ended September 30, 2020 and 2019.

The Company recognizes interest and penalties accrued related to UTB’s as a component of income tax expense.

There were no additional accruals of interest expense nor penalties during fiscal years ended September 30, 2020 and 2019.

It is reasonably possible that the amount of the UTBs with respect

to certain unrecognized tax positions will increase or decrease during the next 12 months.

It is reasonably possible that the amount of the UTB’s with respect to certain unrecognized tax positions will increase or decrease during the next 12 months.

The Company does not expect the change to have a material effect on its results of operations or its financial position.

The only expected potential reason

for change would be the normal expiration of the statute of limitations or the ultimate results stemming from any examinations by taxing authorities.

If recognized, the entire amount of UTBs would have an impact on the Companys effective

income tax rate.

The only expected potential reason for change would be the ultimate results stemming from any examinations by taxing authorities.

If recognized, the entire amount of UTB’s would have an impact on the Company’s effective income tax rate.

The effective income tax rate for fiscal 2020 was 17.2 % versus 20.5 % in fiscal 2019.

In fiscal 2019, the Company generated $ 241,000 of federal research and development credits (“R&D Credits”), all of which were used.

2019, the Company generated $241,000 of R&D Credits, all of which were used.

In fiscal 2020, the Company generated $ 421,000 of R&D Credits, all of which were used.

There were no R&D Credits carryforwards as of September 30, 2020.

As of September 30, 2017, the Company had $155,000 in Florida state research and development tax credits (Florida R&D Credits)

carryforwards.

The Company received additional Florida R&D Credits of $25,000 in fiscal 2018 and used $93,000, leaving $87,000 of Florida R&D Credits carryforwards as of September 30, 2018, which are included in net deferred and other

income tax liabilities of $(3,091,000) at September 30, 2018.

The Company did not receive any additional Florida R&D Credits in fiscal 2019.

As of September 30, 2018, the Company had $ 87,000 in Florida state research and development tax credits (“Florida R&D Credits”) carryforwards.

The Company did no t receive any additional Florida R&D Credits in fiscal 2020 or fiscal 2019.

The Company used the $ 87,000 of Florida R&D Credits carryforwards from fiscal 2018 in fiscal 2019.

1 unchanged sentence

The Company files U.S.

federal income tax returns, as well as

Florida and Iowa income tax returns.

federal income tax returns, as well as Florida and Iowa income tax returns.

The Company’s U.S.

federal income tax returns filed for tax years prior to fiscal year ended September 30, 2016 are generally no longer subject to examination by taxing authorities due to the expiration

of the statute of limitations.

federal income tax returns filed for tax years prior to fiscal year ended September 30, 2017 are generally no longer subject to examination by taxing authorities due to the expiration of the statute of limitations.

NOTE 7 - RETIREMENT BENEFITS

The Company has a voluntary 401(k) employee benefit plan, which covers all eligible, domestic employees.

The Company makes discretionary matching contributions

subject to a maximum level, in accordance with the terms of the plan.

The Company charged approximately $282,000 and $322,000 to expense under the provisions of the plan during the fiscal years 2019 and 2018, respectively.

NOTE 8 - LONG-TERM DEBT

The Company had no long-term

debt outstanding at September 30, 2019 or 2018.

The Company makes discretionary matching contributions subject to a maximum level, in accordance with the terms of the plan.

The Company charged approximately $ 290,000 and $ 282,000 to expense under the provisions of the plan during the years ended September 30, 2020 and 2019, respectively.

NOTE 8 - LONG-TERM DEBT AND ARRANGEMENTS WITH FINANCIAL INSTITUTIONS

The Company had no long-term debt outstanding at September 30, 2020 or 2019.

The Company does not currently require a credit facility.

As of September 30, 2019, total cash

deposits with insurance companies covering collateral needs were $135,000.

NOTE 9 - COMMITMENTS AND CONTINGENCIES

As of September 30, 2020, total cash deposits with insurance companies covering collateral needs were $ 85,000 .

In April 2020, a financial institution issued an irrevocable standby letter of credit (“letter of credit”) on behalf of the Company for the benefit of one of the Company’s insurance carriers.

The maximum amount that can be drawn by the beneficiary under the letter of credit is $ 150,000 .

The letter of credit expires in April 2021, unless terminated earlier, and can be extended, as provided by the agreement.

The Company intends to renew the letter of credit for as long as the Company does business with the beneficiary insurance carrier.

The letter is collateralized by restricted cash of the same amount on any outstanding drawings.

To date, no amounts have been drawn under the letter of credit.

NOTE 9 - LEASES

The Company leases certain equipment under non-cancelable operating leases.

Future minimum rental commitments under these leases at September 30, 2019 are immaterial.

Total rental expense for the fiscal years ended September 30, 2019 and 2018 was

$40,000 and $38,000, respectively.

Company is involved in legal proceedings arising out of the normal course of business, none of which we believe will have a material adverse effect on our business, financial condition or results of operations.

Claims made in the ordinary

course of business may be covered in whole or in part by insurance.

NOTE 10 - SHAREHOLDERS EQUITY

Under the Companys Certificate of Incorporation, as amended, certain rights of the holders of the Companys common stock are modified by shares of

Class B stock for as long as such shares shall remain outstanding.

During that period, holders of common stock will have the right to elect approximately 25% of the Companys Board of Directors, and conversely, holders of Class B

stock will be entitled to elect approximately 75% of the Companys Board of Directors.

During the period when shares of common stock and Class B stock are outstanding, certain matters submitted to a vote of shareholders will also require

approval of the holders of common stock and Class B stock, each voting separately as a class.

Future minimum rental payments under these leases at September 30, 2020 are immaterial.

Total rental expense for the fiscal years ended September

30, 2020 and 2019 was $ 37,000 and $ 40,000 , respectively.

On August 28, 2020, the Company entered into a three -year

operating lease for property related to the manufactur ing

and warehousing of the Blaw-Knox paver business

which was acquired after September 30, 2020 (refer to Note 12 – Subsequent Events for additional information

The lease term is for the period September 1, 2020 through August 31, 2023 .

In accordance with ASU 2016-02, the Company recorded a ROU asset totaling

$ 970,000 and

related lease liabilities at inception.

For the year ended September 30, 2020, operating lease cost was

$ 28,000 which was accrued at September 30, 2020 and paid in October 2020.

There were no cash payments related to this operating lease in fiscal 2020.

Other information concerning the Company’s operating lease accounted for under ASC 842 guidelines is as follows:

As of September 30, 2020

Operating lease ROU asset included in other long-term assets

Current operating lease liability

Non-current operating lease liability

Weighted average remaining lease term (in years)

Weighted average discount rate used in calculating ROU

Future annual minimum lease payments as of September 30, 2020 are as follows:

Annual Lease Payments

Less interest

Present value of lease liabilities

NOTE 10 - COMMITMENTS AND CONTINGENCIES

The Company is involved in legal proceedings arising out of the normal course of business, none of which we believe will have a material adverse effect on our business, financial condition or results of operations.

Claims made in the ordinary course of business may be covered in whole or in part by insurance.

The Company continues to monitor and evaluate the risks to public health and the slowdown in overall business activity related to the novel coronavirus (“COVID-19”)

pandemic, including impacts on its employees, customers, suppliers and financial results.

As of the date of issuance of these Consolidated Financial Statements, the Company’s operations have not been significantly impacted.

However, the full impact of the COVID-19

pandemic continues to evolve subsequent to the quarter and year ended September 30, 2020 and as of the date these Consolidated Financial Statements are issued.

As such, the full magnitude that the COVID-19

pandemic will have on

the Company’s financi a

l condition and future results of operations is uncertain.

Management is actively monitoring the situation on the Company’s financial condition, operations, suppliers, industry, customers, and workforce.

As the spread of COVID-19

continues, the Company’s ability to meet customer demands for products may be impacted or its customers may experience adverse business consequences due to COVID-19.

Reduced demand for products or ability to meet customer demand (including as a result of disruptions at the Company’s suppliers) could have a material adverse effect on its business operations and financial performance.

NOTE 11 - SHAREHOLDERS’ EQUITY AND STOCK-BASED COMPENSATION

Shareholders’ Equity

Under the Company’s Certificate of Incorporation, as amended, certain rights of the holders of the Company’s common stock are modified by shares of Class B stock for as long as such shares shall remain outstanding.

During that period, holders of common stock will have the right to elect approximately 25 % of the Company’s Board of Directors, and conversely, holders of Class B stock will be entitled to elect approximately 75 %

of the Company’s Board of Directors.

During the period when shares of common stock and Class B stock are outstanding, certain matters submitted to a vote of shareholders will also require approval of the holders of common stock and Class B stock, each voting separately as a class.

Common stock and Class B shareholders have equal rights with respect to dividends, preferences, and rights, including rights in liquidation.

NOTE 11 STOCK-BASED COMPENSATION

maintains a stock-based compensation plan, which provides for the issuance of Company stock to certain directors, officers, key employees and affiliates.

Stock-Based Compensation

On March 17, 2009, the shareholders of the Company approved the 2009 Incentive Compensation Plan (the “2009 Plan”).

The 2009 Plan provides that

the total number of shares of Company stock that may be subject to the granting of awards under the 2009 Plan (Awards) at any time during the term of the 2009 Plan shall be equal to 800,000 shares of common stock and 160,000 shares of

Class B stock.

The foregoing limit shall be increased, as provided for in the 2009 Plan.

The 2009 Plan provides that the total number of shares of Company stock that may be subject to the granting of awards under the 2009 Plan (“Awards”)

800,000 shares of common stock and 160,000 shares of Class B stock

, subject to adjustment pursuant to the terms of

the 2009 Plan.

Persons eligible to receive Awards under the 2009 Plan include employees, directors, consultants and other persons who provide services to the Company.

2009 Plan imposes individual limitations on the amount of certain Awards, in part, to comply with Internal Revenue Code, Section 162(m).

The Awards can be in the form of stock options, restricted and deferred stock, performance awards and other

stock-based awards, as provided for in the 2009 Plan.

As of September 30, 2019, all outstanding common stock options had been fully vested.

options amounted to 197,492 at September 30, 2019.

As long as the employee remains employed by the Company, these options are exercisable through October 1, 2021.

As of September 30, 2019, 45,000 outstanding Class B stock options were fully vested and are

exercisable through October 1, 2021 as long as the employee remains employed by the Company.

In addition, 30,000 outstanding Class B stock options were 75% vested and are exercisable through September 26, 2026 as long as the employee

remains employed by the Company.

As of September 30, 2019, 482,000 shares of Company common stock and 100,000 shares of Class B stock are

available for granting of Awards under the 2009 Plan.

The following table summarizes option activity under the 2009 Plan:

The 2009 Plan imposes individual limitations on the amount of certain Awards, in part, to comply with Internal Revenue Code, Section 162(m).

As of September 30, 2020 and 2019

, all outstanding common stock options

issued under the 2009 Plan

had been fully vested.

These options amounted to 177,492 at September 30, 2020.

As long as the employees remain

employed by the Company, these options are exercisable through October 1, 2021.

As of September 30, 2020 and 2019

, 45,000 outstanding Class B stock options

issued under the 2009 Plan

were fully vested and are exercisable through October 1, 2021 as long as the employee remains employed by the Company.

In addition, 30,000 outstanding Class B stock options

issued under the 2009 Plan

were fully vested at September 30, 2020, and were 75 % vested as of September 30, 2019,

and are exercisable through September 26, 2026 as long as the employee remains employed by the Company.

As of September 30, 2020,

are available for granting of Awards under the 2009 Plan.

following table summarizes option activity under the 2009

Exercise Price

4 unchanged sentences

Options outstanding at September 30, 2020

No options were granted, forfeited or cancelled during the year ended September 30, 2019.

The weighted average remaining

contractual life on the options outstanding as of September 30, 2019 is 2.5 years under the 2009 Plan.

NOTE 12 - RELATED-PARTY TRANSACTIONS

Marcar Leasing Corporation (Marcar) was engaged in leasing vehicles and forklifts to the Company.

Marcar is owned by a family member of

the Companys chairman.

New leases between the Company and Marcar provided for equal monthly payments.

On October 5, 2017, the Company agreed to purchase leased vehicles and forklifts under contract with Marcar for $320,000.

were no lease payments made to Marcar during fiscal 2018.

The Company has no further obligation to Marcar.

No options were granted, forfeited or cancelled during the years ended September 30, 2020 or September 30, 2019.

The weighted average remaining contractual life on the options outstanding as of September 30, 2020 is

1.6 years under the 2009 Plan.

NOTE 12 - SUBSEQUENT EVENTS

October 1, 2020, the Company acquired the Blaw-Knox paver business and associated assets, including inventory, fixed assets and related intellectual property, from Volvo CE .

The acquisition was accounted for as a business combination under ASC 805, “Business Combinations.” The purchase price of approximately $ 14.4 million, which is subject to post-closing adjustments, was funded by cash on hand.

Due to COVID-19 constraints, as well as limited time since the acquisition date, the Company is still in the process of completing the initial accounting for the business combination.

As a result, the specific amounts for the major classes of assets acquired are not provided.

There were no liabilities assumed.

This acquisition provides the Company entry into the hot mix paver segment of the asphalt industry.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data