Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Dec. 31, 2017 | Mar. 28, 2018 | Jun. 30, 2017 | |
Intangible assets, subject to amortization | |||
Entity Registrant Name | AIR INDUSTRIES GROUP | ||
Entity Central Index Key | 1,009,891 | ||
Document Type | 10-K/A | ||
Document Period End Date | Dec. 31, 2017 | ||
Amendment Flag | true | ||
Amendment Description | This amendment is being filed to include the XBRL presentation and to correct certain numbers in Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations and certain Notes to the Consolidated Financial Statements, specifically, Note 2. – Discontinued Operations, and Note 3. Summary of Significant Accounting Policies – Credit and Concentration Risks. Except for the corrections to the foregoing items, amendment speaks as of the original date of the original filing, does not reflect events that may have occurred subsequent to the date of the original filing and does not modify or update in any way any other disclosures made in the original filing. | ||
Current Fiscal Year End Date | --12-31 | ||
Is Entity a Well-known Seasoned Issuer? | No | ||
Is Entity a Voluntary Filer? | No | ||
Is Entity's Reporting Status Current? | Yes | ||
Entity Filer Category | Smaller Reporting Company | ||
Entity Common Stock, Shares Outstanding | 25,213,805 | ||
Entity Public Float | $ 11,879,537 | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2,017 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) | Dec. 31, 2017 | Dec. 31, 2016 |
Current Assets | ||
Cash and Cash Equivalents | $ 630,000 | $ 1,304,000 |
Accounts Receivable, Net of Allowance for Doubtful Accounts of $494,000 and $403,000, respectively | 5,464,000 | 6,073,000 |
Inventory | 31,141,000 | 32,568,000 |
Prepaid Expenses and Other Current Assets | 214,000 | 299,000 |
Prepaid Taxes | 49,000 | 409,000 |
Assets Held for Sale | 10,082,000 | 21,297,000 |
Total Current Assets | 47,580,000 | 61,950,000 |
Property and Equipment, net | 10,050,000 | 11,197,000 |
Capitalized Engineering Costs - Net of Accumulated Amortization of $5,380,000 and $4,957,000, respectively | 2,188,000 | 1,627,000 |
Deferred Financing Costs, Net, Deposits and Other Assets | 665,000 | 1,088,000 |
Intangible Assets, Net | 0 | 471,000 |
Goodwill | 272,000 | 6,467,000 |
TOTAL ASSETS | 60,755,000 | 82,800,000 |
Current Liabilities | ||
Notes Payable and Capitalized Lease Obligations - Current Portion | 23,131,000 | 32,913,000 |
Notes Payable – Related Party – Current Portion | 262,000 | 1,086,000 |
Accounts Payable and Accrued Expenses | 10,872,000 | 14,150,000 |
Deferred Gain on Sale - Current Portion | 38,000 | 38,000 |
Deferred Revenue | 931,000 | 946,000 |
Liabilities Directly Associated with Assets Held for Sale | 2,795,000 | 4,235,000 |
Income Taxes Payable | 20,000 | 20,000 |
Total Current Liabilities | 38,049,000 | 53,388,000 |
Long Term Liabilities | ||
Notes Payable and Capitalized Lease Obligations - Net of Current Portion | 1,798,000 | 2,971,000 |
Notes Payable – Related Party – Net of Current Portion | 1,650,000 | 0 |
Deferred Gain on Sale - Net of Current Portion | 295,000 | 333,000 |
Deferred Rent | 1,197,000 | 1,218,000 |
TOTAL LIABILITIES | 42,989,000 | 57,910,000 |
Commitments and Contingencies | ||
Stockholders' Equity | ||
Preferred Stock, par value $.001 - Authorized 3,000,000 shares, Designated as Series A Convertible Preferred Stock – par value $0.001, Authorized 0 at December 31, 2017 and 2,000,000 shares at December 31, 2016; 0 and 1,202,548 outstanding at December 31, 2017 and 2016 | 0 | 1,000 |
Common Stock - Par Value $.001 - Authorized 50,000,000 Shares, 25,213,805 and 7,626,945 Shares Issued and Outstanding as of December 31, 2017 and December 31, 2016, respectively | 25,000 | 7,000 |
Additional Paid-In Capital | 71,272,000 | 55,862,000 |
Accumulated Deficit | (53,531,000) | (30,980,000) |
TOTAL STOCKHOLDERS' EQUITY | 17,766,000 | 24,890,000 |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ 60,755,000 | $ 82,800,000 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - USD ($) | Dec. 31, 2017 | Dec. 31, 2016 |
ASSETS | ||
Allowance for Doubtful Accounts | $ 494,000 | $ 403,000 |
Accumulated Amortization | $ 5,380,000 | $ 4,957,000 |
Stockholders' Equity | ||
Preferred Stock par value | $ 0.001 | $ 0.001 |
Preferred Stock Authorized | 2,000,000 | 2,000,000 |
Common Stock par value | $ 0.001 | $ 0.001 |
Common Stock Authorized | 50,000,000 | 25,000,000 |
Common Stock Issued | 25,213,805 | 7,626,945 |
Common Stock Outstanding | 25,213,805 | 7,626,945 |
Series A Convertible Preferred Stock | ||
Stockholders' Equity | ||
Preferred Stock par value | $ .001 | $ 0.001 |
Preferred Stock Authorized | 1,000,000 | 1,000,000 |
Preferred Stock Issued | 0 | 1,202,548 |
Preferred Stock Outstanding | 0 | 1,202,548 |
Consolidated Statements of Oper
Consolidated Statements of Operations - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Consolidated Statements Of Operations | ||
Net Sales | $ 49,869,000 | $ 51,321,000 |
Cost of Sales | 45,002,000 | 47,052,000 |
Gross Profit | 4,867,000 | 4,269,000 |
Operating Expenses | (11,430,000) | (14,404,000) |
Impairment of goodwill | (6,195,000) | 0 |
Loss from Operations | (12,758,000) | (10,135,000) |
Interest and Financing costs | (3,378,000) | (2,500,000) |
Loss on Extinguishment of Debt | (112,000) | 0 |
Gain on Sale of Subsidiary | (200,000) | 0 |
Other (Expense) Income, Net | (22,000) | (131,000) |
Loss before Provision for Income Taxes | (16,070,000) | (12,766,000) |
(Benefit from) Provision for Income Taxes | (197,000) | 2,101,000 |
Loss from Continuing Operations | (15,873,000) | (14,867,000) |
Loss from Discontinued Operations, net of tax | (6,678,000) | (756,000) |
Net (Loss) | $ (22,551,000) | $ (15,623,000) |
Net Loss per share - basic | ||
Continuing operations | $ (1.20) | $ (1.96) |
Discontinued operations | (0.50) | (0.10) |
Net Loss per share – diluted | ||
Continuing operations | (1.20) | (1.96) |
Discontinued operations | $ (0.50) | $ (0.10) |
Weighted average shares outstanding - basic | 13,230,775 | 7,579,419 |
Weighted average shares outstanding - diluted | 13,230,775 | 7,579,419 |
Consolidated Statements of Stoc
Consolidated Statements of Stockholders' Equity - USD ($) | Preferred Stock | Common Stock | Additional Paid-In Capital | Accumulated Deficit | Total |
Begning balance, shares at Dec. 31, 2015 | 0 | 7,560,040 | |||
Ending balance, amount at Dec. 31, 2015 | $ 0 | $ 7,000 | $ 44,155,000 | $ (15,357,000) | $ 28,805,000 |
Issuance of Preferred Stock, shares | 1,202,548 | ||||
Issuance of Preferred Stock, amount | $ 1,000 | 10,304,000 | 10,305,000 | ||
Fair Value Allocation of Warrants | 1,236,000 | $ 1,236,000 | |||
Issuance of Restricted Stock, shares | 42,000 | ||||
Issuance of Restricted Stock, amount | 0 | 0 | |||
Exercise of Options/Warrants, shares | 24,905 | ||||
Exercise of Options/Warrants, amount | $ 0 | $ 0 | |||
Stock Compensation Expense | 167,000 | 167,000 | |||
Net Loss | (15,623,000) | (15,623,000) | |||
Ending balance, shares at Dec. 31, 2016 | 10,202,548 | 7,626,945 | |||
Ending balance, amount at Dec. 31, 2016 | $ 1,000 | $ 7,000 | 55,862,000 | (30,980,000) | 24,890,000 |
Issuance of Preferred Stock, shares | 91,893 | ||||
Issuance of Preferred Stock, amount | $ 0 | 0 | |||
Fair Value Allocation of Warrants | 2,500,000 | 2,500,000 | |||
Issuance of Common Stock, shares | 5,900,390 | ||||
Issuance of Common Stock, amount | $ 6,000 | 7,621,000 | 7,627,000 | ||
Common stock issued for directors fees, shares | 154,463 | ||||
Common stock issued for directors fees, amount | $ 0 | 232,000 | 232,000 | ||
Common stock issued for legal fees, shares | 92,000 | ||||
Common stock issued for legal fees, amount | $ 0 | 200,000 | 200,000 | ||
Conversion of preferred to common, shares | (1,294,441) | 8,629,606 | |||
Conversion of preferred to common, amount | $ (1,000) | $ 9,000 | 8,000 | ||
Common stock issued for convertible notes, shares | 2,810,401 | ||||
Common stock issued for convertible notes, amount | $ 3,000 | 4,525,000 | 4,528,000 | ||
Stock Compensation Expense | 332,000 | 332,000 | |||
Net Loss | (22,551,000) | (22,551,000) | |||
Ending balance, shares at Dec. 31, 2017 | 0 | 25,213,805 | |||
Ending balance, amount at Dec. 31, 2017 | $ 0 | $ 25,000 | $ 71,272,000 | $ (53,531,000) | $ 17,766,000 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
CASH FLOWS FROM OPERATING ACTIVITIES | ||
Net Loss | $ (22,551,000) | $ (15,623,000) |
Adjustments to reconcile net loss to net cash used in operating activities | ||
Depreciation of property and equipment | 2,723,000 | 3,347,000 |
Amortization of intangible assets | 673,000 | 1,279,000 |
Amortization of capitalized engineering costs | 423,000 | 362,000 |
Loss on Impairment of goodwill – continuing operations | 6,195,000 | 0 |
Loss on Impairment of goodwill – discontinued operations | 3,417,000 | 0 |
Bad debt expense (recovery) | 87,000 | 274,000 |
Non-cash employee compensation expense | 332,000 | 167,000 |
Non-cash directors compensation expense | 232,000 | 0 |
Amortization of deferred financing costs | 267,000 | 371,000 |
Deferred gain on sale of real estate | (38,000) | (38,000) |
Loss on sale of fixed assets held for sale | 0 | 5,000 |
(Gain) loss on sale of subsidiary | (200,000) | 0 |
Deferred Income Taxes | 0 | 2,063,000 |
Loss on impairment of intangible assets – discontinued operations | 1,085,000 | 0 |
Loss on Assets Held for Sale | 1,563,000 | 0 |
Loss on extinguishment of debt | 112,000 | 0 |
Amortization of convertible notes payable | 2,301,000 | 217,000 |
Changes in Assets and Liabilities (Increase) Decrease in Operating Assets: | ||
Assets Held for Sale - AMK Cash | 39,000 | (39,000) |
Accounts Receivable | 1,004,000 | 4,616,000 |
Inventory | 905,000 | (2,902,000) |
Prepaid Expenses and Other Current Assets | 281,000 | 394,000 |
Prepaid taxes | 360,000 | 126,000 |
Deposits and other assets | (113,000) | (150,000) |
Increase (Decrease) in Operating Liabilities: | ||
Accounts payable and accrued expenses | (3,527,000) | 4,495,000 |
Deferred Rent | 34,000 | 82,000 |
Deferred revenue | 410,000 | 84,000 |
Income Taxes payable | 0 | 6,000 |
NET CASH USED IN OPERATING ACTIVITIES | (3,986,000) | (692,000) |
CASH FLOWS FROM INVESTING ACTIVITIES | ||
Capitalized engineering costs | (985,000) | (963,000) |
Purchase of property and equipment | (1,514,000) | (1,632,000) |
Proceeds from the sale of fixed assets | 0 | 1,671,000 |
Proceeds from sale of subsidiary | 4,260,000 | 0 |
NET CASH USED IN INVESTING ACTIVITIES | 1,761,000 | (924,000) |
CASH FLOWS FROM FINANCING ACTIVITIES | ||
Note payable - revolver, net | (7,938,000) | (5,211,000) |
Payments of note payable - term loans | (3,178,000) | (3,184,000) |
Capital lease obligations | (1,397,000) | (1,226,000) |
Proceeds from capital lease refinance | 0 | |
Proceeds from notes payable - related party | 2,660,000 | 4,500,000 |
Proceeds from notes payable – third parties | 4,184,000 | 3,695,000 |
Payments of notes payable – third parties | (463,000) | 0 |
Deferred financing costs | (50,000) | (223,000) |
Expense for issuance of preferred stock | 0 | (663,000) |
Expenses for issuance of debt offering | 0 | (547,000) |
Proceeds from issuance of common stock | 7,733,000 | 0 |
Proceeds from the issuance of preferred stock | 0 | 5,250,000 |
NET CASH PROVIDED BY FINANCING ACTIVITIES | 1,551,000 | 2,391,000 |
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENT | (674,000) | 775,000 |
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR | 1,304,000 | 529,000 |
CASH AND CASH EQUIVALENTS AT END OF YEAR | 630,000 | 1,304,000 |
Supplemental cash flow information | ||
Cash paid during the period for interest | 2,035,000 | 1,494,000 |
Cash paid during the period for income taxes | 8,000 | 13,000 |
Supplemental schedule of non-cash investing and financing activities | ||
Common Stock issued for notes payable - related party | 2,254,000 | 0 |
Common Stock issued for notes payable - third parties | 1,941,000 | 0 |
Placement agent warrants issued | 85,000 | 0 |
Preferred stock issued for notes payable - related party | 0 | 3,250,000 |
Preferred shares issued for notes payable - other | 0 | 2,745,000 |
Preferred shares issued for PIK dividends | 913,000 | 502,000 |
Acquisition of property and equipment financed by capital lease | 225,000 | 2,096,000 |
Classification of Assets Held for Sale | 10,082,000 | 21,297,000 |
Liabilities directly associated with assets held for sale | $ (2,795,000) | $ (4,235,000) |
FORMATION AND BASIS OF PRESENTA
FORMATION AND BASIS OF PRESENTATION | 12 Months Ended |
Dec. 31, 2017 | |
Notes to Financial Statements | |
FORMATION AND BASIS OF PRESENTATION | Organization On August 30, 2013, Air Industries Group, Inc. (“Air Industries Delaware”) changed its state of incorporation from Delaware to Nevada as a result of a merger with and into its newly formed wholly-owned subsidiary, Air Industries Group, a Nevada corporation (“Air Industries Nevada” or “AIRI”) and the surviving entity, pursuant to an Agreement and Plan of Merger. The reincorporation was approved by the stockholders of Air Industries Delaware at its 2013 Annual Meeting of Stockholders. Air Industries Nevada is deemed to be the successor. The accompanying consolidated financial statements presented are those of AIRI, and its wholly-owned subsidiaries; Air Industries Machining Corp. (“AIM”), Welding Metallurgy, Inc. ("WMI" or “Welding”), Miller Stuart, Inc. (“Miller Stuart”), Nassau Tool Works, Inc. (“NTW”), Woodbine Products, Inc. (“Woodbine” or “WPI”), Decimal Industries, Inc. ("Decimal"), Eur-Pac Corporation (“Eur-Pac” or “EPC”), Electronic Connection Corporation (“ECC”), AMK Welding, Inc. (“AMK”), Air Realty Group, LLC ("Air Realty") The Sterling Engineering Corporation ("Sterling"), and Compac Development Corporation (“Compac”), (together, the “Company”). Going Concern The Company suffered a net loss from operations of $12,758,000 for the year ended December 31, 2017, and net losses of $22,551,000 and and $15,623,000 for the years ended December 31, 2017 and 2016, respectively. The Company also had negative cash flows from operations for the years ended December 31, 2017 and 2016. In 2015 the Company ceased paying dividends on its common stock and in 2016 disposed of the real estate on which an operating subsidiary was located through a sale leaseback transaction. In January 2017, the Company sold one of its operating subsidiaries. The Company has entered in a Stock Purchase Agreement to sell a majority of its Aerostructures & Electronics segment. During the year ended December 31, 2016 and subsequent thereto, the Company sold in excess of $29,856,000 in debt and equity securities to secure funds to operate its business. Furthermore, as of December 31, 2017, the Company was not in compliance with financial covenants under its Amended and Restated Revolving Credit, Term Loan and Security Agreement with PNC Bank (the “Loan Facility”). The continuation of the Company’s business is dependent upon its ability to achieve profitability and positive cash flow and, pending such achievement, future issuances of equity or other financing to fund ongoing operations. The consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. Sale of AMK On January 27, 2017, the Company sold all of the outstanding shares of AMK to Meyer Tool, Inc., pursuant to a Stock Purchase Agreement dated January 27, 2017 for a purchase price of $4,500,000, net of a working capital adjustment of ($163,000), plus additional quarterly payments, not to exceed $ 1,500,000, equal to five percent (5%) of Net Revenues of AMK commencing April 1, 2017. The Company recorded a $200,000 gain on the sale of AMK. The gain on sale was the difference between the non-contingent payments and the carrying value of the disposed business. The Company has made an accounting policy decision to record the contingent consideration as it is determined to be realizable. At December 31, 2016, AMK’s assets and liabilities have been reclassified as Assets Held for Sale and Liabilities Directly Associated with Assets Held for Sale, respectively. The carrying value of the assets, net of liabilities, held for sale was less than the contract sales price and accordingly no loss or impairment was recorded for the year ended December 31, 2016. In connection with the sale of AMK to Meyer Tool, Inc., on January 27, 2017, the Company, together with its wholly-owned subsidiaries, entered into the Fourteenth Amendment to the Amended and Restated Revolving Credit, Term Loan And Security Agreement with PNC Bank, N. A. (the “PNC Loan Agreement”) which amends certain terms and conditions of the PNC Loan Agreement and releases AMK from its obligations under the PNC Loan Agreement. The proceeds of the sale of AMK were applied as follows: $1,700,000 to the payment of the Term Loan (as defined in the PNC Loan Agreement), $1,800,000 to the payment of outstanding Revolving Advances (as defined in the PNC Loan Agreement), and $500,000 to the payment of existing accounts payable. The remaining $500,000 will be applied to outstanding accounts payable on a future date to be determined by PNC or used to reduce the amount of the Revolving Advance. The amendment also waives the noncompliance at September 30, 2016 with the Fixed Charge Coverage Ratio and the Minimum EBITDA covenants for the period then ended, and requires that the Company maintain a Fixed Charge Coverage Ratio of not less than 1.25 to 1.00, tested quarterly on a consolidated rolling twelve (12) month basis; however, for the quarter ending June 30, 2017, which shall be tested based upon the prior six (6) months, the Fixed Charge Coverage Ratio shall not be less than 1.00 to 1.00 and for the quarter ending September 30, 2017, which shall be tested based upon the prior nine (9) months, the Fixed Charge Coverage Ratio shall not be less than 1.10 to 1.00. The amendment also reduces the amount to be paid weekly in repayment of excess advances in the amount of $5,294,071 under the revolving credit facility from $100,000 to $50,000 for each Monday during the months of January, February and March of 2017. Thereafter, the weekly payments will return to $100,000 until such excess advances have been repaid in full. Subsequent Events Management has evaluated subsequent events through the date of this filing. Sale of Welding Metallurgy Inc. On March 21, 2018, the Company signed an agreement to sell all of the outstanding shares of WMI including its wholly owned subsidiaries Miller Stuart, Woodbine, Decimal and Compac Development Corp to CPI Aerostructures, Inc., pursuant to a Stock Purchase Agreement (SPA) for a purchase price of $9,000,000, subject to a customary working capital adjustment. The SPA also provides for contingent payments of up to an aggregate of $1,000,000 if WMI enters into specified agreements, long-term agreements with certain customers, by May 31, 2018 and July 31, 2018, respectively (the “Specified Dates”), which contingent payments are subject to reduction if subsequent to the Specified Dates WMI enters into those specified agreements by $100,000 for each calendar month after the Specified Date. The sale is subject to certain conditions, including CPI obtaining financing for the amount of the purchase price, and requires an escrow deposit of $2,000,000 to cover the working capital adjustment and our obligation to indemnify CPI against damages arising out of the breach of our representations and warranties and obligations under the SPA. It is anticipated that the sale will occur in May or June of 2018. Sale of Unregistered Equity Securities On January 9, 2018 the Company issued and sold to 35 accredited investors an aggregate of 852,000 shares of its common stock (the “Shares”) and warrants to purchase an additional 255,600 shares of common stock (the “Warrants”), for gross proceeds of $1,065,000 pursuant to a private placement (the “Offering”). The purchase price for the Shares and Warrants was $1.25 per Share. The Company had previously sold a total of 725,390 shares of common stock and warrants to purchase an additional 224,400 shares of common stock for gross proceeds of $935,000 on November 29, 2017, December 5, 2017 and December 29, 2017 pursuant to the Offering. The Warrants have an exercise price of $1.50 per share, subject to certain anti-dilution and other adjustments, including stock splits, and in the event of certain fundamental transactions such as mergers and other business combinations, and may be exercised on a cashless basis for a lesser number of shares depending upon prevailing market prices at the time of exercise. The Warrants may be exercised until November 30, 2022. If prior to July 1, 2018, the Company should complete a placement of shares of its common stock or securities convertible into or exercisable for shares of its common stock at an effective price or conversion rate (the “Subsequent Price”) less than $1.25 per share of common stock, there shall be issued to the purchasers in the Offering, such additional number of shares of common stock as would have been received had the Purchase Price thereunder been equal to the greater of the Subsequent Price and $1.00 per share, provided further that no adjustment shall be made for those subscribers who are officers, directors or otherwise deemed to be affiliates of the Company under the rules of the NYSE American. If the Company shall complete more than one placements of shares of its common stock or securities convertible into or exercisable for shares of its common stock prior to July 1, 2018, the Subsequent Price will be the lowest of the prices at which such offerings are completed. Taglich Brothers, Inc., a related party (see related party footnote for definition), which acted as placement agent for the sale of the Shares and Warrants, is entitled to a placement agent fee equal to $85,200 (8% of the amounts invested), payable at the Company’s option, in cash or additional shares of common stock and warrants having the same terms and conditions as the Shares and Warrants. Michael Taglich and Robert Taglich, directors of the Company, are principals of Taglich Brothers, Inc. Related Party Transactions In April 2018, Michael and Robert Taglich advanced an aggregate of $1,150,000 to be applied to a private placement on terms to be determined. |
DISCONTINUED OPERATIONS
DISCONTINUED OPERATIONS | 12 Months Ended |
Dec. 31, 2017 | |
Notes to Financial Statements | |
DISCONTINUED OPERATIONS | In March 2018, the Company entered into an agreement to sell WMI and related operations to CPI Aerostructures, Inc. pursuant to a Stock Purchase Agreement (SPA) for a purchase price of $9,000,000, subject to a working capital adjustment. The SPA also provides for contingent payments of up to an aggregate of $1,000,000 if WMI enters into specified agreements by May 31, 2018 and July 31, 2018, respectively (the “Specified Dates”), which contingent payments are subject to reduction by $100,000 for each calendar month which pause often after the Specified Date WMI enters into the specified agreements. The sale is subject to certain conditions, including CPI obtaining financing for the amount of the purchase price, and requires an escrow deposit of $2,000,000 to cover the working capital adjustment and our obligation to indemnify CPI against damages arising out of the breach of our representations and warranties and obligations under the SPA. It is anticipated that the sale will occur in May or June of 2018. At December 31, 2017, the Company has recorded a loss on impairment on intangible assets of $1,085,000 and a loss on assets held for sale of $1,563,000. The following table presents a reconciliation of the major financial lines constituting the results of operations for discontinued operations to the net income (loss) from discontinued operations presented separately in the consolidated statement of operations: December 31, 2017 2016 Net revenue $ 13,129,000 $ 15,954,000 Cost of goods sold 11,245,000 13,143,000 Gross profit 1,884,000 2,451,000 Operating expenses: Selling, general and administrative 2,488,000 3,105,000 Loss on impairment of assets 1,085,000 — Loss on assets held for sale 1,053,000 — Impairment of Goodwill 3,417,000 — Total operating expenses 8,553,000 3,105,000 Interest expense 12,000 96,000 Other income (expense) 3,000 5,000 Loss from discontinued operations before income taxes (6,678,000 ) (745,000 ) Provision for income taxes — 11,000 Net income (loss) from discontinued operations $ (6,678,000 ) $ (756,000 ) The following table presents a reconciliation of the WMI and subsidiaries net cash flow from operating, investing and financing activities for the periods indicated below: 2017 2016 Net cash used in operating activities - discontinued operation $ (2,765,055 ) $ (749,757 ) Net cash used in investing activities - discontinued operation $ (33,244 ) $ (172,906 ) Net cash provided by financing activities - discontinued operations $ 2,664,689 $ 859,856 Depreciation and amortization $ 374,871 $ 448,215 Capital expenditures $ (33,244 ) $ (172,906 ) See Note 8 for a reconciliation of the carrying amounts of major classes of assets and liabilities of the discontinued operations to the total assets and liabilities of the disposal group classified as held for sale that are presented separately in the consolidated balance sheets. |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended |
Dec. 31, 2017 | |
Notes to Financial Statements | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | Principal Business Activity The Company through its AIM subsidiary is primarily engaged in manufacturing aircraft structural parts, and assemblies for prime defense contractors in the aerospace industry in the United States. NTW is a manufacturer of aerospace components, principally landing gear for F-16 and F-18 fighter aircraft. Welding Metallurgy is a specialty welding and products provider whose significant customers include the world's largest aircraft manufacturers, subcontractors, and original equipment manufacturers. Miller Stuart is a manufacturer of aerospace components whose customers include major aircraft manufacturers and the US Military. Miller Stuart specializes in electromechanical systems, harness and cable assemblies, electronic equipment and printed circuit boards. Woodbine is a manufacturer of aerospace components whose customers include major aircraft component suppliers. Eur-Pac specializes in military packaging and supplies. Eur- Pac s primary business is “kitting” of supplies for all branches of the United States Defense Department including ordnance parts, hose assemblies, hydraulic, mechanical and electrical assemblies. Compac specializes in the manufacture of RFI/EMI (Radio Frequency Interference Electro-Magnetic Interference) shielded enclosures for electronic components. The Company’s customers consist mainly of publicly traded companies in the aerospace industry. If the sale of WMI closes, the Company will be more focused on complex machined products for aircraft landing gear and jet turbines. Principles of Consolidation The accompanying consolidated financial statements include accounts of the Company and its wholly-owned subsidiaries. Significant intercompany accounts and transactions have been eliminated in consolidation. Discontinued Operations In March 2018, the Company entered into an agreement to sell WMI. WMI is classified as a discontinued operation (see "Note 2 - Discontinued Operations"). As required, the Company has retrospectively recast its consolidated statements of operations and balance sheets for all periods presented to reflect these businesses as discontinued operations. The Company has not segregated the cash flows of these businesses in the consolidated statements of cash flows. Management was also required to make certain assumptions and apply judgment to determine historical expenses related to the discontinued operations presented in prior periods. Unless noted otherwise, discussion in the Notes to Consolidated Financial Statements refers to the Company’s continuing operations. Cash and Cash Equivalents Cash and cash equivalents include all highly liquid instruments with an original maturity of three months or less. Accounts Receivable Accounts receivable are reported at their outstanding unpaid principal balances net of allowances for uncollectible accounts. The Company provides for allowances for uncollectible receivables based on management's estimate of uncollectible amounts considering age, collection history, and any other factors considered appropriate. The Company writes off accounts receivable against the allowance for doubtful accounts when a balance is determined to be uncollectible. Inventory Valuation The Company values inventory at the lower of cost on a first - in -first-out basis or market. The Company generally purchases raw materials and supplies uniquely suited to the production of larger more complex parts, such as landing gear, only when non-cancellable contracts for orders have been received for finished goods. It occasionally produces larger more complex products, such as landing gear, in excess of purchase order quantities in anticipation of future purchase order demand. Historically this excess has been used in fulfilling future purchase orders. The Company purchases supplies and materials useful in a variety of products as deemed necessary even though orders have not been received. The Company periodically evaluates inventory items that are not secured by purchase orders and establishes reserves for obsolescence accordingly. The Company also reserves for excess quantities, slow-moving goods, and for other impairments of value. Assets Held for Sale and Liabilities Directly Associated Assets held for sale are reported at the lower of their carrying amount or fair value less cost to sell and included in current assets. Liabilities associated to business units held for sale are classified as a current liability. Capitalized Engineering Costs The Company has contractual agreements with customers to produce parts, which the customers design. Even though the Company has not designed and thus has no proprietary ownership of the parts, the manufacturing of these parts requires pre- production engineering and programming of the Company’s machines. The pre-production costs associated with a particular contract are capitalized and then amortized beginning with the first shipment of product pursuant to such contract. These costs are amortized on a straight-line basis over the estimated length of the contract, or if shorter, three years. If the Company is reimbursed for all or a portion of the pre-production expenses associated with a particular contract, only the unreimbursed portion would be capitalized. The Company may also progress bill customers for certain engineering costs being incurred. Such billings are recorded as deferred revenues until the appropriate revenue recognition criteria have been met. The Terms and Conditions contained in customer purchase orders may provide for liquidated damages in the event that a stop-work order is issued prior to the final delivery of the product. Property and Equipment Property and equipment are carried at cost net of accumulated depreciation and amortization. Repair and maintenance charges are expensed as incurred. Property, equipment, and improvements are depreciated using the straight-line method over the estimated useful lives of the assets or the particular improvements. Expenditures for repairs and improvements in excess of $1,000 that add to the productive capacity or extend the useful life of an asset are capitalized. Upon disposition, the cost and related accumulated depreciation are removed from the accounts and any related gain or loss is reflected in earnings. Long-Lived and Intangible Assets Identifiable intangible assets are amortized using the straight-line method over the period of expected benefit. Long-lived assets and intangible assets subject to amortization to be held and used are reviewed for impairment whenever events or changes in circumstances indicate that the related carrying amount may be impaired. The Company records an impairment loss if the undiscounted future cash flows are found to be less than the carrying amount of the asset. If an impairment loss has occurred, a charge is recorded to reduce the carrying amount of the asset to fair value. There has been no impairment as of December 31, 2017 and 2016. Deferred Financing Costs Costs incurred with obtaining and executing revolving debt arrangements are capitalized and amortized using the effective interest method over the term of the related debt. The amortization of such costs are included in interest and financing costs. Costs incurred with obtaining and executing other debt arrangements are presented as a direct deduction from the carrying value of the associated debt. Derivative Liabilities In connection with the issuances of equity instruments or debt, the Company may issue options or warrants to purchase common stock. In certain circumstances, these options or warrants may be classified as liabilities, rather than as equity. In addition, the equity instrument or debt may contain embedded derivative instruments, such as conversion options or listing requirements, which in certain circumstances may be required to be bifurcated from the associated host instrument and accounted for separately as a derivative liability instrument. The Company accounts for derivative liability instruments under the provisions of FASB ASC 815, Derivatives and Hedging. Revenue Recognition For 2017 and 2016 the Company recognized revenue in accordance with Staff Accounting Bulletin No. 104, "Revenue Recognition." The Company recognizes revenue when products are shipped and/or the customer takes ownership and assumes risk of loss, collection of the relevant receivable is probable, persuasive evidence of an arrangement exists, and the sales price is fixed or determinable. The Company recognizes certain revenues under a bill and hold arrangement with two of its large customers. For any requested bill and hold arrangement, the Company makes an evaluation as to whether the bill and hold arrangement qualifies for revenue recognition as follows: · The customer requests that the transaction be on a bill and hold basis. A customer must initiate the request for any bill and hold arrangement. Upon request for a bill and hold, the Company requires a signed letter from the customer upon which the customer specifically requests the bill and hold arrangement. Upon receipt of the letter, the Company begins its evaluation process to determine whether a bill and hold arrangement can be granted. · The customer has made fixed commitment to purchase in written documentation. All customers’ orders are through firm written purchase orders. · The goods are segregated from other inventory and are not available to fill any other customers’ orders. The Company’s goods are made to customers’ or their customer’s specifications and could not be sold to others. · The risk of ownership has passed to the customer. The product is complete and ready for shipment. The earnings process is complete. An internal evaluation is made as to whether the product is complete and ready for shipment. This involves a review of the purchase order and a completed inspection process by the Company’s quality control department. · The date is determined by which the Company expects payment and the Company has not modified its normal billing and credit terms for this buyer. Payment is expected as if the goods had been shipped. · The customer has the expected risk of loss in the event of a decline in the market value of goods. All goods are made to firm purchase orders with fixed prices. Any decline in value would not affect the pricing of the goods. The Company has not at any point, agreed to a price reduction on a bill and hold arrangement. The Company had approximately $619,000 and $2,914,000 of net sales that were billed but not shipped under such bill and hold arrangements as of December 31, 2017 and 2016, respectively. Payments received in advance from customers for products delivered are recorded as deferred revenue until earned, at which time revenue is recognized. The Terms and Conditions contained in our customer purchase orders often provide for liquidated damages in the event that a stop work order is issued prior to the final delivery. The Company utilizes a Returned Merchandise Authorization or RMA process for determining whether to accept returned products. Customer requests to return products are reviewed by the contracts department and if the request is approved, a credit is issued upon receipt of the product. Net sales represent gross sales less returns and allowances. Use of Estimates In preparing the financial statements, management is required to make estimates and assumptions that affect the reported amounts in the financial statements and accompanying notes. The more significant management estimates are the allowance for doubtful accounts, useful lives of property and equipment, provisions for inventory obsolescence, accrued expenses and whether to accrue for various contingencies. Actual results could differ from those estimates. Changes in facts and circumstances may result in revised estimates, which are recorded in the period in which they become known. Credit and Concentration Risks There were three customers that represented 62.0% of total sales, and three customers that represented 52.3% of total sales for the years ended December 31, 2017 and 2016, respectively. This is set forth in the table below. Customer Percentage of Sales 2017 2016 1 25.5 21.3 2 20.5 14.6 3 16.0 16.4 There were three customers that represented 68.7% of gross accounts receivable and two customers that represented 35.3% of gross accounts receivable at December 31, 2017 and 2016, respectively. This is set forth in the table below. Customer Percentage of Receivables December December 2017 2016 1 41.9 24.1 2 14.6 11.2 3 12.2 * *Customer was less than 10% of gross accounts receivable at December 31, 2016. During the year, the Company had occasionally maintained balances in its bank accounts that were in excess of the FDIC limit. The Company has not experienced any losses on these accounts. The Company has several key sole-source suppliers of various parts that are important for one or more of its products. These suppliers are its only source for such parts and, therefore, in the event any of them were to go out of business or be unable to provide parts for any reason, its business could be severely harmed. Income Taxes The Company accounts for income taxes in accordance with accounting guidance now codified as FASB ASC 740, "Income Taxes," which requires that the Company recognize deferred tax liabilities and assets based on the differences between the financial statement carrying amounts and the tax bases of assets and liabilities, using enacted tax rates in effect in the years the differences are expected to reverse. The provision for, or benefit from, income taxes includes deferred taxes resulting from the temporary differences in income for financial and tax purposes using the liability method. Such temporary differences result primarily from the differences in the carrying value of assets and liabilities. Future realization of deferred income tax assets requires sufficient taxable income within the carryback, carryforward period available under tax law. We evaluate, on a quarterly basis whether, based on all available evidence, it is probable that the deferred income tax assets are realizable. Valuation allowances are established when it is more likely than not that the tax benefit of the deferred tax asset will not be realized. The evaluation, as prescribed by ASC 740-10, “Income Taxes,” includes the consideration of all available evidence, both positive and negative, regarding historical operating results including recent years with reported losses, the estimated timing of future reversals of existing taxable temporary differences, estimated future taxable income exclusive of reversing temporary differences and carryforwards, and potential tax planning strategies which may be employed to prevent an operating loss or tax credit carryforward from expiring unused. The Company accounts for uncertainties in income taxes under the provisions of FASB ASC 740-10-05, "Accounting for Uncertainty in Income Taxes." The ASC clarifies the accounting for uncertainty in income taxes recognized in an enterprise's financial statements. The ASC prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The ASC provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. Effective July 1, 2016, the Company adopted FASB Accounting Standards Update 2015 - 17, Balance Sheet Classification of Deferred Taxes. The ASU is part of the Board's simplification initiative aimed at reducing complexity in accounting standards. To simplify presentation, the new guidance requires that all deferred tax assets and liabilities, along with any related valuation allowance, be classified as noncurrent on the balance sheet. As a result, each jurisdiction will now only have one net noncurrent deferred tax asset or liability. Importantly, the guidance does not change the existing requirement that only permits offsetting within a jurisdiction - that is, companies are still prohibited from offsetting deferred tax liabilities from one jurisdiction against deferred tax assets of another jurisdiction. The amendments in this Update may be applied either prospectively to all deferred tax liabilities and assets or retrospectively to all periods presented. If an entity applies the guidance prospectively, the entity should disclose in the first interim and first annual period of change, the nature of and reason for the change in accounting principle and a statement that prior periods were not retrospectively adjusted. If an entity applies the guidance retrospectively, the entity should disclose in the first interim and first annual period of change the nature of and reason for the change in accounting principle and quantitative information about the effects of the accounting change on prior periods. The Company has applied this guidance prospectively and has not restated prior period balances. Earnings per share Basic earnings per share is computed by dividing the net income applicable to common stockholders by the weighted-average number of shares of common stock outstanding for the period. Potentially dilutive shares, using the treasury stock method, are included in the diluted per-share calculations for all periods when the effect of their inclusion is dilutive. The following is a reconciliation of the denominators of basic and diluted earnings per share computations: 2017 2016 Weighted average shares outstanding used to compute basic earnings per share 13,230,775 7,579,419 Effect of dilutive stock options and warrants — — Weighted average shares outstanding and dilutive securities used to compute dilutive earnings per share 13,230,775 7,579,419 The following securities have been excluded from the calculation as the exercise price was greater than the average market price of the common shares: December 31, December 31, 2017 2016 Stock Options 354,000 633,000 Warrants 1,480,000 520,000 1,834,000 1,153,000 The following securities have been excluded from the calculation even though the exercise price was less than the average market price of the common shares because the effect of including these potential shares was anti-dilutive due to the net loss incurred during the years: December 31, December 31, 2017 2016 Stock Options 146,000 3,000 Warrants 41,000 321,000 187,000 324,000 Stock-Based Compensation The Company accounts for stock-based compensation in accordance with FASB ASC 718, "Compensation – Stock Compensation." Under the fair value recognition provision of the ASC, stock-based compensation cost is estimated at the grant date based on the fair value of the award. The Company estimates the fair value of stock options and warrants granted using the Black-Scholes-Merton option pricing model. Goodwill Goodwill represents the excess of the acquisition cost of businesses over the fair value of the identifiable net assets acquired. The goodwill amount of $272,000 at December 31, 2017 relates to the acquisitions of NTW $163,000 and ECC $109,000. The goodwill amount of $9,884,000 at December 31, 2016 relates to the acquisitions of Welding $292,000, NTW $163,000, Woodbine $2,565,000, Eur-Pac $1,655,000, ECC $109,000, Sterling $4,540,000 and Compac $560,000. The Company accounts for the impairment of goodwill under the provisions of ASU 2011-08 (“ASU 2011-08”), “Intangibles Goodwill and Other (Topic 350): Testing Goodwill for Impairment.” ASU 2011-08 updated the guidance on the periodic testing of goodwill for impairment. The updated guidance gives companies the option to perform a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. The Company performs impairment testing for goodwill annually, or more frequently when indicators of impairment exist. As discussed above, the Company adopted ASU 2011-08 and performs a qualitative assessment in the fourth quarter of each year to determine whether it was more likely than not that the fair value of each of Welding, including Woodbine, NTW, Eur-Pac, ECC, AMK, Sterling, Eur-Pac and Compac was less than its carrying amount. During 2017 the Company determined that goodwill for Welding, Woodbine, Compac, Eur-Pac and Sterling in the amounts of $291,000, $2,565,000, $560,000, $1,656,000 and $4,540,000, respectively, had been impaired. Goodwill is not amortized, but is tested at least annually for impairment, or if circumstances occur that more likely than not reduce the fair value of the reporting unit below its carrying amount. Goodwill is not amortized, but is tested at least annually for impairment, or if circumstances occur that more likely than not reduce the fair value of the reporting unit below its carrying amount. During 2017, the Company determined that goodwill for Eur-Pac and Sterling in the amounts of $1,655,000 and $4,540,000, respectively, had been impaired. The total of $6,195,000 is included loss from continuing operations. During 2017, the Company determined that goodwill for Welding, Woodbine and Compac in the amounts of $292,000, $2,565,000, $560,000, respectively, had been impaired. The total of $3,417,000 is included in loss from discontinued operations. Freight Out Freight out is included in operating expenses and amounted to $196,000 and $180,000 for the years ended December 31, 2017 and 2016, respectively. JOBS Act On April 5, 2012, the JOBS Act was signed into law. The JOBS Act contains provisions that, among other things, reduce certain reporting requirements for qualifying public companies. As an “emerging growth company,” the Company may, under Section 7(a)(2)(B) of the Securities Act, delay adoption of new or revised accounting standards applicable to public companies until such standards would otherwise apply to private companies. An “emerging growth company” is one with less than $1.0 billion in annual sales, has less than $700 million in market value of its shares of common stock held by non-affiliates and issues less than $1.0 billion of non-convertible debt over a three year period. The Company may take advantage of this extended transition period until the first to occur of the date that it (i) is no longer an "emerging growth company" or (ii) affirmatively and irrevocably opts out of this extended transition period. The Company has elected to take advantage of the benefits of this extended transition period. Until the date that it is no longer an "emerging growth company" or affirmatively and irrevocably opts out of the exemption provided by Securities Act Section 7(a)(2)(B), upon issuance of a new or revised accounting standard that applies to its consolidated financial statements and that has a different effective date for public and private companies, the Company will disclose the date on which adoption is required for non-emerging growth companies and the date on which the Company will adopt the recently issued accounting standard. Recently Issued Accounting Pronouncements In January 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities (Subtopic 825-10) (“ASU 2016-01”). The main objective of ASU 2016-01 is enhancing the reporting model for financial instruments to provide users of financial statements with more decision-useful information. The amendments address certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. ASU 2016-01 is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company does not expect the adoption of this amendment to have a significant impact on its consolidated financial statements. In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842)” (“ASU 2016-02”). The main objective of ASU 2016-02 is to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. To meet that objective, the FASB is amending the FASB Accounting Standards Codification and creating Topic 842, Leases. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company does not expect the adoption of this amendment to have a significant impact on its consolidated financial statements. In April 2016, the FASB issued ASU 2016-10 Revenue from Contracts with Customers (Topic 606) (“ASU 2016-10”). The core principle of the guidance in Topic 606 is that an entity should recognize revenue to depict the transfer of promised 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. The amendments in ASU 2016-10 affect the guidance in ASU 2014-09, Revenue from Contracts with Customers, which is not yet effective. The effective date and transition requirements of ASU 2016-10 are the same as the effective date and transition requirements of ASU 2014-09. They are effective prospectively for reporting periods beginning after December 15, 2017 and early adoption is not permitted. The Company is currently assessing the impact of the adoption of these amendments on its consolidated financial statements. In May 2016, the FASB issued Accounting Standards Update No. 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow -Scope Improvements and Practical Expedients. The amendments do not change the core revenue recognition principle in Topic 606. The amendments provide clarifying guidance in certain narrow areas and add some practical expedients. These amendments are effective at the same date that Topic 606 is effective. Topic 606 is effective for public entities for annual reporting periods beginning after December 15, 2017, including interim reporting periods therein (i.e., January 1, 2018, for a calendar year entity). Topic 606 is effective for nonpublic entities one year later. The Company is currently assessing the impact of the adoption of the amendments to Topic 606 and these amendments on its consolidated financial statements. In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. The standard provides guidance on how certain cash receipts and payments are presented and classified in the statement of cash flows, including beneficial interests in securitization, which would impact the presentation of the deferred purchase price from sales of receivables. The standard is intended to reduce current diversity in practice. Early adoption is permitted, including adoption in an interim period. The Company does not expect the adoption of these amendments to have a significant impact on its consolidated financial statements. In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows: Restricted Cash, which clarifies the presentation requirements of restricted cash within the statement of cash flows. The changes in restricted cash and restricted cash equivalents during the period should be included in the beginning and ending cash and cash equivalents balance reconciliation on the statement of cash flows. When cash, cash equivalents, restricted cash or restricted cash equivalents are presented in more than one-line item within the statement of financial position, an entity shall calculate a total cash amount in a narrative or tabular format that agrees to the amount shown on the statement of cash flows. Details on the nature and amounts of restricted cash should also be disclosed. This standard is effective for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019. The Company is currently in the process of evaluating the impact of the adoption of this standard on our financial statements. In January 2017, the FASB issued ASU 2017-01 (“ASU 2017-01”), Business Combinations, which clarifies the definition of a business, particularly when evaluating whether transactions should be accounted for as acquisitions or dispositions of assets or businesses. The first part of the guidance provides a screen to determine when a set is not a business; the second part of the guidance provides a framework to evaluate whether both an input and a substantive process are present. The guidance will be effective after December 15, 2018, and interim periods within annual periods beginning after December 15, 2019. Early adoption is permitted for transactions that have not been reported in issued financial statements. The Company is currently assessing the impact of this update on the presentation of these financial statements. In January 2017, FASB issued ASU No. 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Accounting for Goodwill Impairment, Step 2 of the goodwill impairment test, which requires determining the implied fair value of goodwill and comparing it with its carrying amount has been eliminated. Thus, the goodwill impairment test is performed by comparing the fair value of a reporting unit with its carrying amount (i.e., what was previously referred to as Step 1). In addition, ASU No. 2017-04 requires entities having one or more reporting units with zero or negative carrying amounts to disclose (1) the identity of such reporting units, (2) the amount of goodwill allocated to each, and (3) in which reportable segment the reporting unit is included. ASU No. 2017-04 is effective as follows: (1) for a public business entity that is an SEC filer for annual or interim goodwill impairment tests in fiscal years beginning after December 15, 2019. The Company is currently in the process of evaluating the impact of the adoption of this standard on our financial statements. In July 2017, the FASB issued ASU 2017-11, Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815): (Part I) Accounting for Certain Financial Instruments with Down Round Features, (Part II) Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception. The ASU allows companies to exclude a down round feature when determining whether a financial instrument (or embedded conversion feature) is considered indexed to the entity’s own stock. As a result, financial instruments (or embedded conversion features) with down round features may no longer be required to be accounted classified as liabilities. A company will recognize the value of a down round feature only when it is triggered and the strike price has been adjusted downward. For equity-classified freestanding financial instruments, such as warrants, an entity will treat the value of the effect of the down round, when triggered, as a dividend and a reduction of income available to common shareholders in computing basic earnings per share. For convertible instruments with embedded conversion features containing down round provisions, entities will recognize the value of the down round as a beneficial conversion discount to be amortized to earnings. The guidance in ASU 2017-11is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted, and the guidance is to be applied using a full or modified retrospective approach. The Company adopted this guidance in the current quarter, effective April 1, 2017. As a result, the warrants issued on May 12, 2017, in connection with the bridge financing, were equity-classified. The Company does not believe that any other recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying consolidated financial statements. Reclassifications Reclassifications occurred to certain 2016 amounts to conform to the 2017 classification. |
ACCOUNTS RECEIVABLE
ACCOUNTS RECEIVABLE | 12 Months Ended |
Dec. 31, 2017 | |
Notes to Financial Statements | |
ACCOUNTS RECEIVABLE | The components of accounts receivable at December 31, are detailed as follows: December 31, December 31, 2017 2016 Accounts Receivable Gross $ 5,958,000 $ 6,476,000 Allowance for Doubtful Accounts (494,000 ) (403,000 ) Accounts Receivable Net $ 5,464,000 $ 6,073,000 The allowance for doubtful accounts for the years ended December 31, 2017 and 2016 is as follows: Balance at Beginning of Year Charged to Costs and Expenses Deductions from Reserves Balance at End of Year Year ended December 31, 2017 Allowance for Doubtful Accounts $ 403,000 $ 91,000 $ — $ 494,000 Year ended December 31, 2016 Allowance for Doubtful Accounts $ 196,000 $ 274,000 $ 67,000 $ 403,000 |
INVENTORY
INVENTORY | 12 Months Ended |
Dec. 31, 2017 | |
Notes to Financial Statements | |
INVENTORY | The components of inventory at December 31, consisted of the following: December 31, December 31, 2017 2016 Raw Materials $ 5,346,000 $ 5,513,000 Work In Progress 19,947,000 21,903,000 Finished Goods 10,122,000 8,928,000 Inventory Reserve (4,274,000 ) (3,776,000 ) Total Inventory $ 31,141,000 $ 32,568,000 The Company periodically evaluates inventory and establishes reserves for obsolescence, excess quantities, slow-moving goods, and for other impairment of value. Balance at Beginning of Year Additions to Reserve Deductions from Reserves Balance at End of Year Year ended December 31, 2017 Reserve for Inventory $ (3,776,000 ) $ (503,000 ) $ 5,000 $ (4,274,000 ) Year ended December 31, 2016 Reserve for Inventory $ (3,181,000 ) $ (681,000 ) $ 86,000 $ (3,776,000 ) |
PROPERTY AND EQUIPMENT
PROPERTY AND EQUIPMENT | 12 Months Ended |
Dec. 31, 2017 | |
Notes to Financial Statements | |
PROPERTY AND EQUIPMENT | The components of property and equipment at December 31, consisted of the following: December 31, December 31, 2017 2016 Land $ 300,000 $ 300,000 Buildings and Improvements 1,650,000 1,650,000 31.5 years Machinery and Equipment 11,554,000 12,172,000 5 - 8 years Capital Lease Machinery and Equipment 6,534,000 5,573,000 5 - 8 years Tools and Instruments 8,538,000 7,520,000 1.5 - 7 years Automotive Equipment 172,000 195,000 5 years Furniture and Fixtures 311,000 312,000 5 - 8 years Leasehold Improvements 528,000 525,000 Term of Lease Computers and Software 406,000 406,000 4 - 6 years Total Property and Equipment 29,993,000 28,653,000 Less: Accumulated Depreciation (19,943,000 ) (17,456,000 ) Property and Equipment, net $ 10,050,000 $ 11,197,000 Depreciation expense for the years ended December 31, 2017 and 2016 was approximately $1,868,000 and $3,175,000, respectively. Assets held under capitalized lease obligations are depreciated over the shorter of their related lease terms or their estimated productive lives. Depreciation of assets under capital leases is included in depreciation expense for 2017 and 2016. Accumulated depreciation on these assets was approximately $3,595,000 and $2,320,000 as of December 31, 2017 and 2016, respectively. |
INTANGIBLE ASSETS
INTANGIBLE ASSETS | 12 Months Ended |
Dec. 31, 2017 | |
Notes to Financial Statements | |
INTANGIBLE ASSETS | The components of the intangibles assets at December 31, consisted of the following: December 31, December 31, 2017 2016 Customer Relationships $ 4,925,000 $ 4,925,000 5 to 14 years Trade Names — — 15-20 years Technical Know-how — — 10 years Non-Compete 50,000 50,000 5 years Professional Certifications — — .25 to 2 years Total Intangible Assets 4,975,000 4,975,000 Less: Accumulated Amortization (4,975,000 ) (4,504,000 ) Intangible Assets, net $ — $ 471,000 The expense for amortization of the intangibles for the years ended December 31, 2017 and 2016 was approximately $471,000 and $995,000, respectively. As of December 31, 2017 Intangible Assets have been fully amortized. |
ASSETS HELD FOR SALE AND LIABIL
ASSETS HELD FOR SALE AND LIABILITES DIRECLTY ASSOCIATED | 12 Months Ended |
Dec. 31, 2017 | |
Assets Held For Sale And Liabilites Direclty Associated | |
ASSETS HELD FOR SALE AND LIABILITES DIRECLTY ASSOCIATED | AMK As discussed in Note 1, on January 27, 2017, the Company sold all of the outstanding shares of AMK Welding, Inc. (“AMK”) to Meyer Tool, Inc., pursuant to a Stock Purchase Agreement dated January 27, 2017 (“the Stock Purchase Agreement”) for a purchase price of $4,500,000, subject to a working capital adjustment, plus additional quarterly payments, not to exceed $1,500,000, equal to five percent (5%) of Net Revenues of AMK commencing April 1, 2017. At December 31, 2016, the Company had reclassified its assets held for sale and the liabilities directly associated to these assets. The components of these assets and liabilities are as follows: Components of Assets Held for Sale and Liabilities Directly Associated Assets Held for Sale December 31, 2016 Cash $ 40,000 Accounts Receivable, net of allowance for doubtful accounts 722,000 Inventory, net of reserves 260,000 Prepaid and other assets 96,000 Property and equipment, net of accumulated depreciation 3,478,000 Intangible Assets, net of accumulated amortization 819,000 Goodwill 635,000 Assets Held for Sale $ 6,050,000 Accounts payable and accrued expenses 379,000 Capital lease obligations 1,680,000 Deferred revenues 96,000 Liabilities directly associated to Assets Held for Sale $ 2,155,000 Additionally, AMK's operations were previously reported in the Company's Turbine Engine Components segment. The amounts below represent AMK's operations that have been excluded from this segment for the year ended December 31, 2016: Segment Data Turbine Engine Components 2016 Net Sales $ 4,511,000 Gross Profit 169,000 Pre Tax (Loss) Income (1,595,000 ) Assets 6,050,000 WMI As discussed in Note 1, on March 21, 2018, the Company signed a Stock Purchase Agreement to sell all of the outstanding shares of WMI to CPI for a purchase price of $9,000,000, subject to a working capital adjustment, and a contingent payment of $1,000,000. At December 31, 2017 and 2016, the Company reclassified its assets held for sale and the liabilities directly associated to these assets. The components of these assets and liabilities are as follows: Components of Assets Held for Sale and Liabilities Directly Associated Assets Held for Sale December 31, 2017 December 31, 2016 Accounts Receivable, net of allowance for doubtful accounts $ 2,217,000 $ 1,976,000 Inventory, net of reserves 8,065,000 7,283,000 Prepaid and other assets 485,000 266,000 Property and equipment, net of accumulated depreciation 878,000 1,022,000 Intangible Assets, net of accumulated amortization — 1,283,000 Impairment of Assets Held for Sale (1,563,000 ) — Goodwill — 3,417,000 Assets Held for Sale $ 10,082,000 $ 15,247,000 Accounts payable and accrued expenses 2,138,000 2,010,000 Deferred Revenue 521,000 — Notes Payable & Capital lease obligations 11,000 — Deferred rent 125,000 70,000 Liabilities directly associated to Assets Held for Sale $ 2,795,000 $ 2,080,000 Additionally, WMI's operations were previously reported in the Company's Aerostructures & Electronics segment. The amounts below represent WMI's operations that have been excluded from this segment for the years ended December 31, 2017 and 2016, respectively: Segment Data Aerostructures & Electronics 2017 2016 Net Sales $ 13,129,000 $ 15,594,000 Gross Profit 1,884,000 2,451,000 Pre Tax (Loss) Income (6,678,000 ) (756,000 ) Assets 10,082,000 15,247,000 |
ACCOUNTS PAYABLE AND ACCRUED EX
ACCOUNTS PAYABLE AND ACCRUED EXPENSES | 12 Months Ended |
Dec. 31, 2017 | |
Notes to Financial Statements | |
ACCOUNTS PAYABLE AND ACCRUED EXPENSES | The components of accounts payable at December 31, are detailed as follows: December 31, December 31, 2017 2016 Accounts Payable $ 8,634,000 $ 11,994,000 Accrued Expenses 2,238,000 2,156,000 $ 10,872,000 $ 14,150,000 |
SALE AND LEASEBACK TRANSACTION
SALE AND LEASEBACK TRANSACTION | 12 Months Ended |
Dec. 31, 2017 | |
Notes to Financial Statements | |
SALE AND LEASEBACK TRANSACTION | On April 11, 2016, the Company executed a Sale - Leaseback Arrangement, whereby the Company sold the building and real property located in South Windsor, Connecticut (the “South Windsor Property”) for a purchase price of $1,700,000. The net proceeds from the sale of the property were applied to the amounts owed to PNC Bank. Simultaneous with the closing of the sale of the South Windsor Property, the Company entered into a 15-year lease (the “Lease”) with the purchaser for the property. Base annual rent is approximately $155,000 for the first year and increases approximately 3% per year, each year thereafter. The Lease grants the Company an option to renew the Lease for an additional period of five years. Pursuant to the terms of the Lease, the Company is required to pay all of the costs associated with the operation of the facilities, including, without limitation, insurance, taxes and maintenance. The Lease also contains representations, warranties, obligations, conditions and indemnification provisions in favor of the purchaser and grants the purchaser remedies upon a breach of the Lease by the Company, including the right to terminate the Lease and hold the Company liable for any deficiency in future rent. On October 24, 2006, the Company consummated a Sale - Leaseback Arrangement, whereby the Company sold the buildings and real property located in Bay Shore, New York (the “Bay Shore Property”) for a purchase price of $6,200,000. The Company realized a gain on the sale of $1,051,000 of which $300,000 was recognized during the year ended December 31, 2006. The remaining $751,000 is being recognized ratably over the remaining term of the twenty - year lease at approximately $38,000 per year. The gain is included in Other Income in the accompanying Consolidated Statements of Operations. The unrecognized portion of the gain in the amount of $333,000 and $371,000 as of December 31, 2017 and 2016, respectively, is classified as Deferred Gain on Sale in the accompanying Consolidated Balance Sheets. Simultaneous with the closing of the sale of the Bay Shore Property, the Company entered into a 20-year triple- net lease (the “Lease”) with the purchaser for the property. Base annual rent is approximately $540,000 for the first five years, $560,000 for the sixth year, and thereafter increases 3% per year. The Lease grants the Company an option to renew the Lease for an additional period of five years. The Company has on deposit with the purchaser $89,000 as security for the performance of its obligations under the Lease. In addition, the Company has on deposit $150,000 with the landlord as security for the completion of certain repairs and upgrades to the Bay Shore Property. This amount is included in the caption Deferred Finance costs, Net, Deposit and Other Assets in the accompanying Consolidated Balance Sheets. Pursuant to the terms of the Lease, the Company is required to pay all of the costs associated with the operation of the facilities, including, without limitation, insurance, taxes and maintenance. The lease also contains customary representations, warranties, obligations, conditions and indemnification provisions and grants the purchaser customary remedies upon a breach of the lease by the Company, including the right to terminate the Lease and hold the Company liable for any deficiency in future rent. See Note 14 Commitments and Contingencies. The Company accounted for these transactions under the provisions of FASB ASC 840-40, “Leases-Sale-Leaseback Transactions”. On January 27, 2017, the Company entered into an agreement to sell the stock of AMK. Included in this agreement was the transfer of the capital lease obligation on the South Windsor Property transferred to the purchaser of AMK. At December 31, 2016, the Company reclassified the capital asset of $1,700,000 and lease obligation of $1,680,000 to Assets Held for Sale and Liabilities Held for Sale, respectively. See Note 1 for additional discussion regarding the sale of AMK. |
NOTES PAYABLE AND CAPITAL LEASE
NOTES PAYABLE AND CAPITAL LEASE OBLIGATIONS | 12 Months Ended |
Dec. 31, 2017 | |
Notes to Financial Statements | |
NOTES PAYABLE AND CAPITAL LEASE OBLIGATIONS | Notes payable and capital lease obligations consist of the following: December 31, December 31, 2017 2016 Revolving credit note payable to PNC Bank N.A. ("PNC") $ 16,455,000 $ 24,393,000 Term loans, PNC 3,471,000 6,649,000 Capital lease obligations 3,073,000 4,215,000 Related party notes payable, net of debt discount 1,912,000 1,086,000 Other note payable 1,930,000 627,000 Subtotal 26,841,000 36,970,000 Less: Current portion of notes and capital obligations (23,393,000 ) (33,999,000 ) Notes payable and capital lease obligations, net of current portion $ 3,448,000 $ 2,971,000 PNC Bank N.A. ("PNC") The Company has a Loan Facility with PNC secured by substantially all of its assets. The Loan Facility has been amended many times during its term. The Loan Facility was amended in June 2016 (the “Twelfth Amendment”) and September 2016 (the “Thirteenth Amendment”). In connection with the Twelfth Amendment, the Company paid PNC a fee of $100,000 and reimbursed it for the fees and expenses of its counsel. The Twelfth Amendment provides for a $33,000,000 revolving loan. In addition, in the Twelfth Amendment the four term loans (Term Loan A, Term Loan B, Term Loan C and Term Loan D) then outstanding were consolidated into a single term loan with the initial principal amount of $7,387,854. Further, in the Twelfth Amendment the Company acknowledged that there were then outstanding excess advances under the revolving loan in the amount of $12,500,000. Under the terms of the Loan Facility, as amended, the revolving loan now bears interest at (a) the sum of the Alternate Base Rate plus one and three- quarters of one percent (1.75%) with respect to Domestic Rate Loans; and (b) the sum of the LIBOR Rate plus four and one-half of one percent (4.50%) with respect to LIBOR Rate Loans. The amount outstanding under the revolving loan, inclusive of the excess advance, was $16,455,000 and $24,393,000, as of December 31, 2017 and December 31, 2016, respectively. Because the revolving loans contain a subjective acceleration clause which could permit PNC to require repayment prior to maturity, all of the loans outstanding with PNC are classified with the current portion of notes and capital lease obligations. The Loan Facility was further amended pursuant to the Thirteenth Amendment, to modify the advance rate with respect to our inventory to be the lesser of (i) 75% of the eligible inventory, an increase from 50%, and (ii) 90% of the liquidation value of the eligible inventory, an increase from 85%, subject to the inventory sublimit of $12,500,000 and such reserves as PNC may deem proper. In addition, in the Thirteenth Amendment the lender waived any default resulting from the Company’s obligation to comply with the minimum EBITDA (as defined in the Loan Facility) covenant for the period ended June 30, 2016, consented to the issuance of the Company’s 12% Subordinated Convertible Notes and the amendment to the Company’s Articles of Incorporation to increase the authorized number of shares of Preferred Stock and Series A Preferred Stock. The repayment terms of the Term Loan provided for in the Twelfth Amendment consist of sixty (60) consecutive monthly principal installments, the first fifty-nine (59) of which shall be in the amount of $123,133 commencing on the first business day of July, 2016, and continuing on the first business day of each month thereafter, with a sixtieth (60th) and final payment of any unpaid balance of principal and interest payable on the last business day of June, 2021. At the closing of the Twelfth Amendment, the Company paid $1,500,000 to reduce the outstanding excess under the revolving loan from $12,500,000 to $11,000,000. It also agreed that the excess advances will be paid down by $100,000 each week commencing the second week after the closing of the Twelfth Amendment. To the extent that the Company disposes of collateral used to secure the Loan Facility, other than inventory, the Company must promptly repay the draws on the credit facility in the amount equal to the net proceeds of such sale. The terms of the Loan Facility require that among other things, the Company maintain a specified Fixed Charge Coverage Ratio and maintain a minimum EBITDA. In addition, the Company is limited in the amount of capital expenditures it can make. The Company also is limited as to the amount of dividends it can pay its shareholders, as defined in the Loan Facility. On June 19, 2017, we entered into the Fifteenth Amendment to the Loan Facility, which waived the failure to comply with the minimum EBITDA covenant for the periods ended December 31, 2016 and March 31, 2017 and the Capital Expenditures covenant for the period ended December 31, 2016. The amendment also requires that we maintain at all times a Fixed Charge Coverage Ratio, tested quarterly on a consolidated basis beginning September 30, 2017, as follows: (i) 1.00 to 1.00 for the quarter ending September 30, 2017, tested based upon the prior three (3) months, (ii) 1.05 to 1.00 for the quarter ending December 31, 2017, tested based upon the prior six (6) months and (iii) 1.05 to 1.00 for the quarter ending March 31, 2018, tested based upon the prior nine months and that we maintain EBITDA of not less than $345,000 for the period ending September 30, 2017. The amendment also provided that we were not required to maintain a Fixed Charge Coverage Ratio and that no testing was required to the Fixed Charge Coverage Ratio for the periods ending December 31, 2016 and June 30, 2017 and that we are not required to maintain a Fixed Charge Coverage Ratio and that no testing will be required of the Fixed Charge Coverage Ratio for the period ending June 30, 2017. As of December 31, 2017, the Company was not in compliance with our Fixed Charge Coverage Ratio covenant. The failure to satisfy the foregoing covenants would constitute a default under the Loan Facility and PNC at its option could give notice to the Company that all amounts under the Loan Facility are immediately due and payable, and accordingly all amounts due under the loan facility have been classified as current, as of December 31, 2017. In addition, the amendment reduced the weekly payments we are required to make to reduce our $2,244,071 over-advance under the revolving credit facility as of June 19, 2017 from $100,000 to $25,000 per week during the period commencing May 22, 2017 through and including July 10, 2017. At December 31, 2017, the over-advance had been paid in full. We paid $50,000 to PNC in connection with the amendment and reimbursed PNC’s counsel fees. As of December 31, 2017, our debt to PNC in the amount of $19,926,000 consisted of the revolving credit loan in the amount of $16,455,000 and the term loan in the amount of $3,471,000. As of December 31, 2016, our debt to PNC in the amount of $31,042,000 consisted of the revolving credit note due to PNC in the amount of $24,393,000 and the term loan due to PNC in the amount of $6,649,000. Each day, the Company’s cash collections are swept directly by the bank to reduce the revolving loans and the Company then borrows according to a borrowing base formula. The Company's receivables are payable directly into a lockbox controlled by PNC (subject to the terms of the Loan Facility). PNC may use some elements of subjective business judgment in determining whether a material adverse change has occurred in the Company's condition, results of operations, assets, business, properties or prospects allowing it to demand repayment of the Loan Facility. As of December 31, 2017 the future minimum principal payments for the term loans are as follows: For the year ending Amount December 31, 2018 $ 1,478,000 December 31, 2019 1,478,000 December 31, 2020 515,000 December 31, 2021 — December 31, 2022 — Thereafter — PNC Term Loans payable 3,471,000 Less: Current portion 3,471,000 Long-term portion $ — Interest expense related to these credit facilities amounted to approximately $2,122,000 and $1,908,000 for the years ended December 31, 2017 and 2016, respectively. During the year ended December 31, 2017, the Company discovered that PNC Bank had been improperly calculating interest expense on a monthly basis since 2007. The result was a net overcharge of approximately $1,500,000 through December 31, 2017. On a monthly basis, PNC Bank had allocated the Company’s line of credit balances between each of the Company’s subsidiaries, based on their individual entity balance. Some of these accounts held debit balances, while others carried credit balances. PNC charged interest to the Company for its entities with debit balances without offsetting credit balances. This method of segregating the Company’s debt balances by entity by PNC Bank has ceased. As of the date of this filing, the Company has recovered all of its identified overcharged interest and has not noted any further discrepancies. Capital Leases Payable – Equipment The Company is committed under several capital leases for manufacturing and computer equipment. All leases have bargain purchase options exercisable at the termination of each lease. Capital lease obligations totaled $3,073,000 and $4,215,000 as of December 31, 2017 and 2016, respectively, with various interest rates ranging from approximately 4% to 14%. As of December 31, 2017, the aggregate future minimum lease payments, including imputed interest, with remaining terms of greater than one year are as follows: For the year ending Amount December 31, 2018 $ 1,428,000 December 31, 2019 1,264,000 December 31, 2020 542,000 December 31, 2021 52,000 December 31, 2022 15,000 Thereafter — Total future minimum lease payments 3,301,000 Less: imputed interest (228,000 ) Less: current portion (1,293,000 ) Total Long Term Portion $ 1,780,000 Related Party Notes Payable Taglich Brothers, Inc. is a corporation co-founded by two directors of the Company, Michael and Robert Taglich. In addition, a third director of the Company is a vice president of Taglich Brothers, Inc. Taglich Brothers, Inc. has acted as placement agent for various debt and equity financing transactions and has received cash and equity compensation for their services. In addition, Michael and Robert Taglich have also invested in the Company through various debt and equity financings. Related party notes payable to Michael and Robert Taglich, and their affiliated entities, totaled $2,126,000 and $1,086,000, as of December 31, 2017 and December 31, 2016, respectively. On April 8, 2016, the Company issued a promissory note (“the Taglich Note B”) to Michael Taglich in the principal amount of $350,000. The Taglich Note B bore interest at the rate of 7% per annum. The Company’s obligation under the Taglich Note B was subordinated to its indebtedness to PNC. This note has been repaid in full. On April 8, 2016, the Company issued a promissory note (“the Taglich Note C”) to Robert Taglich in the principal amount of $350,000. The Taglich Note C bore interest at the rate of 7% per annum. The Company’s obligation under the Taglich Note C was subordinated to its indebtedness to PNC. This note has been repaid in full. On May 6, 2016, the Company issued a promissory note (“the Taglich Note D”) to Michael Taglich in the principal amount of $400,000. The Taglich Note D bore interest at the rate of 7% per annum. The Company’s obligation under the Taglich Note D was subordinated to its indebtedness to PNC. This note has been repaid in full. On May 6, 2016, the Company issued a promissory note (“the Taglich Note E”) to Robert Taglich in the principal amount of $300,000. The Taglich Note E bore interest at the rate of 7% per annum. The Company’s obligation under the Taglich Note E was subordinated to its indebtedness to PNC. This note has been repaid in full. On May 25, 2016, the Company issued 110,000 and 65,000 shares of Series A Preferred Stock to Michael Taglich and Robert Taglich, respectively upon surrender of Taglich Notes D and E, in the aggregate principal of $1,100,000 and $650,000, respectively. On August 1, 2016, the Company issued a promissory note (the “Taglich Note F”) to Michael Taglich, in the principal amount of $1,000,000. The Taglich Note F bore interest at the rate of 7% per annum. The Company's obligation under the Taglich Note F was subordinated to its indebtedness to PNC. On August 4, 2016, the Company issued a promissory note (the “Taglich Note G”) to Michael Taglich, in the principal amount of $500,000. The Taglich Note G bore interest at the rate of 7% per annum. The Company’s obligation under the Taglich Note G was subordinated to its indebtedness to PNC. On August 19, 2016, the Company issued to Michael Taglich its 12% Subordinated Convertible Notes due December 31, 2017 (the “12% Notes”) in the principal amount of $1,520,703, together with warrants to purchase 61,817 shares of common stock, upon surrender for cancellation of Taglich Notes F & G in the aggregate principal amount of $1,500,000, together with accrued interest thereon and on notes previously exchanged for Series A Preferred Stock of $20,703. In addition, the Company issued to Robert Taglich a 12% Note in the principal amount of $4,373, together with warrants to purchase 177 shares of common stock, in consideration of the forgiveness of interest of $4,373 accrued on notes previously exchanged for Series A Preferred Stock. On March 17, 2017, the Company borrowed $200,000 and $300,000 from each of Michael Taglich and Robert Taglich, respectively, directors and principal stockholders of our company, and issued promissory notes in the principal amounts of $200,000 and $300,000 to Michael Taglich and Robert Taglich, respectively, to evidence our obligation to repay that indebtedness. The notes bore interest at the rate of 7% per annum. The notes have been converted into 346,992 shares of common stock as of December 31, 2017. On May 2, and May 10, 2017, the Company borrowed an aggregate of $750,000 from each of Michael Taglich and Robert Taglich. This indebtedness, together with accrued interest, were converted into May 2018 Notes on May 12, 2017. In April 2018, Michael and Robert Taglich advanced an aggregate of $1,150,000 to be applied to a private placement on terms yet to be determined. Taglich Brothers acted as a placement agent in connection with the sale of the May 2018 Notes and warrants discussed below for which they are to be paid commissions in the aggregate amount of $176,000. As compensation for its services as placement agent for the offering of the 12% Notes discussed below, the Company paid Taglich Brothers a fee of $295,400 and issued to Taglich Brothers five-year warrants to purchase 68,617 shares of common stock at an initial exercise price of $6.15, subject to certain anti-dilution and other adjustments. 12% Subordinated Convertible Notes On August 19, 2016, the Company entered into a Placement Agency Agreement with Taglich Brothers, Inc., as placement agent (the “Placement Agent”), pursuant to which the Placement Agent agreed to offer on behalf of the Company, on a best efforts basis, up to $4,250,000 of the Company’s 12% Subordinated Convertible Notes due December 31, 2017 (the “12% Notes”) to accredited investors (“the Offering”), together with five-year warrants to purchase 4,065 shares of common stock (the “Warrants”) for each $100,000 principal amount of 12% Notes purchased, in a private placement exempt from the registration requirements of the Securities Act of 1933, as amended (the Securities Act ) . The 12% Notes were convertible, at the option of the holders, into shares of the Company’s common stock at an initial conversion price of $4.92 per share, subject to adjustment for certain events. The 12% Notes were automatically convertible into shares of the Company’s Series A Convertible Preferred Stock (“Series A Preferred Stock”) at a price of $10.00 per share, the stated value of the Series A Preferred Stock, upon the filing of a certificate of amendment to the Company’s Articles of Incorporation increasing the number of shares of Series A Preferred Stock so that a sufficient number of shares are available for issuance upon conversion of the 12% Notes and for issuance in lieu of payment of cash dividends (the “Certificate of Amendment”) in accordance with the provisions of the certificate of designation authorizing the issuance of the Series A Preferred Stock. The amendment was subject to the approval of the Company’s stockholders. Under the terms of the Placement Agency Agreement, the Placement Agent is entitled to a placement agent fee equal to 7% of the gross proceeds of the offering, five year warrants to purchase 8% of the number of shares of the Company’s common stock issuable upon conversion of the 12% Notes at an exercise price of $6.15 per share, equal to 125% of the initial conversion price per share of the 12% Notes, and reimbursement for its actual out-of-pocket expenses not to exceed in the aggregate $25,000. In August 2016, the Company issued and sold a total of $2,720,000 principal amount of the 12% Notes, together with Warrants to purchase an aggregate of 110,556 shares of common stock, yielding net proceeds to the Company of approximately $2,320,000, pursuant to a Securities Purchase Agreements with accredited investors. The Company also issued to Michael Taglich a 12% Note in the principal amount of $1,520,703, together with Warrants to purchase 61,817 shares of common stock at an initial exercise price of $6.15, subject to anti-dilution and other adjustments, including stock splits, and in the event of certain fundamental transactions such as mergers and other business combinations, upon surrender for cancellation of Taglich Notes F and G in the aggregate principal amount of $1,500,000, together with accrued interest thereon and on notes previously exchanged for Series A Preferred Stock of $20,703. In addition, the Company issued to Robert Taglich a 12% Note in the principal amount of $4,373, together with Warrants to purchase 177 shares of common stock, in consideration of the forgiveness of interest of $4,373 accrued on notes previously exchanged for Series A Preferred Stock. The Warrants including those issued to the placement agent are classified within stockholders equity, pursuant to ASC 480, Distinguishing Liabilities from Equity and ASC 815-40, Derivatives and Hedging: Contracts in Own Equity. The 12% Notes contained a contingent put that results in early settlement of the 12% Notes upon the filing of a certificate of amendment to the Company’s Articles of Incorporation, increasing the number of shares of Series A Preferred Stock so that a sufficient number of shares are available for issuance upon conversion of the 12% Notes. The embedded put feature is required to be separately measured at fair value with changes in value recognized in the statement of operations, pursuant to ASC 815-15, Derivatives and Hedging: Embedded Derivatives, as the put feature is not clearly and closely related to the convertible promissory note. The proceeds received upon issuing the 12% Notes and Warrants was allocated to each instrument on a relative fair value basis. The initial fair value of the Warrants was determined using the Black Scholes Merton valuation model with the following assumptions: expected term of 5 years; risk free interest rate of 1.2%; and volatility of 90%. The allocated value of the 12% Notes was further reduced for the initial fair value of the embedded put of approximately $755,000. The resulting discount to the 12% Notes, including the allocated transactions costs, is amortized to interest expense using the effective interest method over the term of the Notes. As compensation for its services as placement agent for the offering of the 12% Notes, the Company paid Taglich Brothers, Inc. a fee of $295,400. On November 30, 2016, the Company’s stockholders approved the amendment to the Company’s Articles of Incorporation, and consequently the Company issued a total of 438,770 shares of its Series A Preferred Stock to holders of its 12% Notes upon the automatic conversion of the principal amount of, and accrued interest on, the 12% Notes at the rate of $10.00 per share. Private Placements of 8% Subordinated Convertible Notes From November 23, 2016 through March 21, 2017, the Company received gross proceeds of $4,775,000, of which $1,950,000 were received from Robert and Michael Taglich, from the sale of an equal principal amount of our 8% Subordinated Convertible Notes (the “8% Notes”), together with warrants to purchase a total of 383,080 shares of our common stock, in private placement transactions with accredited investors (the “8% Note Offerings”). In connection with the offering of the 8% Notes, the Company issued 8% Notes in the aggregate principal amount of $382,000 to Taglich Brothers, Inc., placement agent for the 8% Note Offerings, in lieu of payment of cash compensation for sales commissions, together with warrants to purchase a total of 180,977 shares of our common stock. Payment of the principal and accrued interest on the 8% Notes are junior and subordinate in right of payment to our indebtedness under the Loan Facility. Interest on the 2018 Notes is payable on the outstanding principal amount thereof at the annual rate of 8%, payable quarterly commencing February 28, 2017, in cash, or at our option, in additional 2018 Notes, provided that if accrued interest payable on $1,269,000 principal amount of the 2018 Notes issued in December 2016 is paid in additional 2018 Notes, interest for that quarterly interest payment shall be calculated at the rate of 12% per annum. Upon the occurrence and continuation of an event of default, interest shall accrue at the rate of 12% per annum. During the year ended December 31, 2017, we issued $354,238 principal amount of 8% Notes in lieu of cash payment of accrued interest. As of December 31, 2017, we had outstanding $5,525,000 principal amount of 8% Notes, of which $3,003,000 principal amount is due on November 30, 2018 and $2,522,000 principal amount is due on February 28, 2019. The outstanding principal amount plus accrued interest on the 8% Notes is convertible at the option of the holder into shares of common stock conversion prices ranging from $2.25 to $4.45 per share, subject to certain anti-dilution and other adjustments, including stock splits, and in the event of certain fundamental transactions such as mergers and other business combinations. An event of default under the 8% Notes will occur (i) if the Company fails to make any payment under the 8% Notes within ten days after the date first due, or (ii) if the Company files a petition in bankruptcy or under any similar insolvency law, makes an assignment for the benefit of its creditors, or if any voluntary petition in bankruptcy or under any similar insolvency law is filed against the Company and such petition is not dismissed within sixty (60) days after the filing thereof. Upon the occurrence and continuation of an event of default, holders of a majority of the outstanding principal amount of the 8% Notes then outstanding, upon notice to the Company and the holders of the Senior Indebtedness (as defined in the 8% Notes), may demand immediate payment of the unpaid principal amount of the 8% Notes, together with accrued interest thereon and all other amounts payable under the 8% Notes, subject to the subordination provisions of the 8% Notes. The exercise price of the warrants issued in connection with the 8% Note Offerings ranges from $3.00 to $4.53 per share, subject to certain anti-dilution and other adjustments, including stock splits, distributions in respect of the common stock and in the event of certain fundamental transactions such as mergers and other business combinations, and may be exercised on a cashless basis for a lesser number of shares depending upon prevailing market prices at the time of exercise. Of these warrants, 320,702 warrants may be exercised until November 30, 2021 and 243,307 warrants may be exercised until January 31, 2022. May Note Financing On May 12 and May 19, 2017, the Company issued and sold to 17 accredited investors (including Michael N. Taglich and Robert F. Taglich individually and a partnership of which they are partners), its “May 2018 Notes” in the aggregate principal amount of $4,158,624, together with warrants to purchase an aggregate of 501,039 shares of common stock, for gross proceeds (net of the exchange of indebtedness totaling $1,503,288 due to Michael N. Taglich and Robert F. Taglich for working capital advances made on May 2 and 10, 2017) of $2,534,196. Roth Capital LLC and Taglich Brothers acted as placement agents in connection with the sale of the May 2018 Notes and warrants for which they are to be paid commissions in the aggregate amount of $191,155. The May 2018 Notes and warrants were issued for a purchase price equal to 97% of the principal amount of the May 2018 Notes purchased. The principal amount of each May 2018 Note will be increased by 2% for each 30 days it remains outstanding commencing August 1, 2017. Upon the occurrence of, and during the continuance of an Event of Default (as defined in the May 2018 Notes), the May 2018 Notes will accrue late interest at the rate of 10% per annum. Payment of the principal and accrued interest, if any, on the May 2018 Notes is junior and subordinate in right of payment to the Company’s indebtedness under the Loan Facility. The principal amount, together with accrued interest, if any, of the May 2018 Notes, when issued, were convertible into shares of common stock at a conversion price of $2.49 per share, subject to anti-dilution and other adjustments for stock splits and certain fundamental transactions, including recapitalizations, mergers and other business combination transactions (the “Fixed Conversion Price”), and thereafter at the lower of the Fixed Conversion Price and 75% of the five (5) Weighted Average Prices (as defined in the May 2018 Notes) of the common stock during the five consecutive trading day period ending on the trading day immediately preceding the day of a request by the holder for conversion of the May 2018 Note. The Company has the right to redeem all, or a portion of (on a pro rata basis), of the May 2018 Notes upon written notice to the holders not less than three trading days prior to the applicable redemption date. In connection with the Company’s July 2017 public offering of its common stock, approximately $1,754,215 principal amount of the May 2018 Notes were converted into 1,240,605 shares of common stock at $1.50 per share, the public offering price of the shares sold in the Public Offering, and $463,501 principal amount of May 2018 Notes were redeemed. The balance of the May 2018 Notes were converted into 1,222,809 shares of common stock at $1.50 per share, the public offering price of the shares sold in the Public Offering, pursuant to the restructuring approved by the Company’s stockholders at the Company’s Annual Meeting on October 3, 2017. Consequently, no May 2018 Notes remain outstanding. The Company issued warrants to purchase 501,039 shares of common stock as part of the private placement of the May 2018 Notes. The warrants, when issued, were exercisable at an initial exercise price of $2.49 per share until May 12, 2022, and may be exercised on a cashless basis for a lesser number of shares based upon prevailing market prices when exercised. The exercise price of the warrants is subject to anti-dilution and other adjustments, including stock splits, and in the event of certain fundamental transactions such as recapitalizations, mergers and other business combination transactions. In accordance with the terms of the warrants, the exercise price was reduced to $1.50 per share, the public offering price of the shares of common stock sold in the Public Offering. The Company early adopted the provisions of ASU 2017-11 in recognizing the warrants. As a result, the exercise price reset provisions were excluded from the assessment of whether the warrants are considered indexed to the Company’s own stock. The warrants otherwise meet the requirements for equity classification, as such were initially classified in Stockholders’ Equity. The Company will recognize the value of the exercise price reset provision if and when it becomes triggered, by recognizing the value of the effect of the exercise price reset as a deemed dividend and a reduction of income available to common shareholders in computing basic earnings per share. The proceeds received upon issuing the May 2018 Notes and warrants was allocated to each instrument on a relative fair value basis. The allocation resulted in an effective conversion price for the May 2018 Notes that was below the quoted market price of the Company’s common stock. As such, the Company recognized a beneficial conversion feature equal to the intrinsic value of the conversion feature on each issuance date, resulting in an additional discount to the initial carrying value of the May 2018 Notes with a corresponding credit to additional paid-in capital. On October 3, 2017, holders of $1,834,214 aggregate principal amount of the Company’s May 2018 Notes agreed to convert their 2018 Notes into 1,222,809 shares of common stock. The May 2018 Notes, when issued, were convertible at a conversion price per share of $2.49. The conversion that occurred on October 3, 2017 was at a lower conversion price of $1.50 per share (the offering price of the shares of common stock in the Public Offering). |
STOCKHOLDERS' EQUITY
STOCKHOLDERS' EQUITY | 12 Months Ended |
Dec. 31, 2017 | |
Notes to Financial Statements | |
STOCKHOLDERS' EQUITY | Issuance of Series A Preferred Stock and Related Financings On May 25, 2016, and June 1, 2016, the Company completed a private placement of 700,000 shares of our Series A Preferred Stock for $10.00 per share and received gross cash proceeds of $5,250,000, net of $1,750,000 principal amount of our promissory notes exchanged by Michael Taglich and Robert Taglich, two of our principal stockholders, for shares of Series A Preferred Stock. The Company had issued the promissory notes to Michael Taglich and Robert Taglich for amounts borrowed from September 2015 through May 2016. The September 2015 loan bore interest at the rate of 4% per annum and was to be paid on September 7, 2016. The other loans bore interest at the rate of 7% per annum and were to be repaid on June 30, 2016, or, if earlier, upon the sale of the Company’s equity from which it derived proceeds of $1,800,000 or $2,000,000 depending upon the promissory notes issued. Preferred Stock The shares of Series A Preferred Stock have a stated value of $10.00 per share and are initially convertible into shares of common stock at a price of $4.92 per share (subject to adjustment upon the occurrence of certain events). When issued, the dividend rate on the Series A Preferred Stock was 12% per annum, payable quarterly and was to increase to 15% per annum if we were to issue PIK Shares in lieu of payment of cash dividends payable until June 15, 2018. The dividend rate on the Series A Preferred Stock was originally to increase to 16% per annum after June 2018, 19% per annum to the extent dividends were paid in PIK Shares. In July 2017, the Company amended the Certificate of Designation authorizing the issuance of the Series A Preferred Stock to provide for the automatic conversion of the outstanding shares of Series A Preferred Stock into common stock at a conversion price of $1.50 per share, the offering price of the shares of common stock in the Public Offering, subject to stockholder approval in accordance with the applicable rules of the NYSE MKT. In addition, the amendment to the Certificate of Designation eliminated the liquidation preference and quarterly dividend payable to holders of the Series A Preferred Stock. Under the terms of the amendment, holders of the Series A Preferred Stock were to share ratably with the holders of the common stock on an as-converted basis (2.0325 shares of common stock for each share of Series A Preferred Stock held of record) with respect to dividends declared, paid or set aside for payment, assets available for distribution to stockholders upon the liquidation, dissolution or winding up of the Company’s affairs, in addition to voting upon the election of directors and other matters submitted to stockholders for approval, except for matters requiring a class vote of the holders of the Series A Preferred Stock specified in the Certificate of Designation or under applicable law. The Company has the right to redeem the Series A Preferred Stock after May 26, 2018 for a redemption price of $10.00, plus accrued and unpaid dividends; however, the Company may not have sufficient cash available to effect such redemption. In connection with the placement we incurred approximately $606,000 of direct offering costs and $57,000 in legal expenses and granted to the placement agents warrants to purchase 8% of the number of shares of our common stock (113,820 shares) issuable upon conversion of the Series A Preferred Stock sold in the offering. The warrants are exercisable in whole or in part, at an initial exercise price per share of $6.15, and are exercisable for cash or on a cashless basis commencing on November 26, 2016 and expiring on May 26, 2021. The exercise price and number of shares of common stock issuable under the warrants are subject to adjustments for stock dividends, splits, combinations and similar events. Of the proceeds generated by the sale of our shares of Series A Preferred Stock, $1,500,000 was paid to PNC to reduce the amount outstanding under our Loan Facility. In August 2016, the Company completed the private placement of $2,720,000 principal amount of our 12% Subordinated Convertible Notes due December 31, 2017 (the “12% Notes”), together with warrants to purchase an aggregate of 110,658 shares of common stock, for a total purchase price of $2,720,000, from which we derived net proceeds of approximately $2,319,800, which was used to pay down the Company’s indebtedness under the Loan Facility and for working capital. The Company also issued to Michael Taglich a 12% Note in the principal amount of $1,520,713, together with warrants to purchase 61,817 shares of common stock, upon surrender for cancellation of promissory notes in the aggregate principal amount of $1,500,000, together with accrued interest thereon and on notes previously exchanged for Series A Preferred Stock of $20,713. The Company had issued the promissory notes to Michael Taglich for amounts borrowed in August 2016. The promissory notes bore interest at the rate of 7% per annum and were to be repaid on December 31, 2016, or, if earlier, upon the sale of our equity securities from which we derived proceeds of $2,000,000. In addition, the Company issued to Robert Taglich a 12% Note in the principal amount of $4,373, together with warrants to purchase 177 shares of common stock, in consideration of the forgiveness of interest of $4,373 accrued on notes previously exchanged for Series A Preferred Stock. The 12% Notes provided for the automatic conversion of the principal and accrued interest of the 12% Notes into shares of Series A Preferred Stock at a price of $10.00 per share, the stated value of the Series A Preferred Stock, upon the filing of an amendment to the Company’s Articles of Incorporation increasing the number of shares of preferred stock we are authorized to issue from 1,000,000 shares to 3,000,000 shares, including 2,000,000 shares of Series A Preferred Stock (the “Charter Amendment”). The Company issued 438,770 shares of Series A Preferred Stock to the holders of the 12% Notes on November 30, 2016, the date the Company’s stockholders approved the Charter Amendment and the Company filed the certificate of amendment effecting the Charter Amendment with the Office of the Secretary of State of Nevada. As a result of the automatic conversion of the 12% Notes into shares of Series A Preferred Stock, no 12% Notes are outstanding. As compensation for its services as placement agent for the offering of the 12% Notes, the Company paid Taglich Brothers, Inc. a fee of $295,400 and issued to Taglich Brothers, Inc. five-year warrants to purchase 68,617 shares of common stock at an initial exercise price of $6.15, subject to certain anti-dilution and other adjustments, including stock splits, and in the event of certain fundamental transactions such as mergers and other business combinations. On July 12, 2017, the Company filed an amendment to the certificate of designation authorizing the issuance of its Series A Convertible Preferred Stock (“Series A Preferred Stock”). The Amendment provides for the automatic conversion of shares of Series A Preferred Stock into shares of common stock upon the consummation of the Offering at a conversion price of $1.50 per share, subject to receiving stockholder approval of such conversion in accordance with the applicable rules of the NYSE MKT. In addition, the amendment changes the liquidation preference and dividend rights of the holders of Series A Preferred Stock to be on a pari passu basis with the Company’s common stock on an as converted basis based upon a conversion price of $4.92 per share. As a result of the consummation of the Offering, once stockholder approval has been obtained, the conversion price of the Series A Preferred Stock will automatically be reduced from $4.92 per share to $1.50 per share, which was the offering price of the shares of common stock in the Offering, and the conversion rate for each share of Series A Preferred Stock converted will be increased from 2.0325 shares of common stock to 6.6667 share of common stock. On October 3, 2017, holders of 1,294,441 outstanding shares of the Company’s Series A Preferred Stock automatically converted into 8,629,606 shares of common stock. As of December 31, 2017 and 2016, the Company had outstanding 0 and 1,202,548 shares of Series A Preferred Stock outstanding. Common Stock On July 12, 2017, the Company sold 5,175,000 shares of common stock at a price of $1.50 per for gross proceeds of $7,762,500 in an underwritten public offering (“Public Offering”) from which it derived net proceeds of $6,819,125, of which approximately $4,000,000 was used to pay outstanding trade payables, $463,501 was used to redeem an equal principal amount of the $4,158,624 principal amount of the May 2018 Notes and $2,355,624 was added to the Company’s working capital. On November 29, 2017, Air Industries Group (the “Company”) entered into a Placement Agency Agreement with Taglich Brothers, Inc. as placement agent (the “Placement Agent”), pursuant to which the Placement Agent agreed to offer on behalf of the Company, on a best efforts basis, up to 1,600,000 shares of the Company’s common stock (the “Shares”) to accredited investors (the “Offering”), together with five-year warrants to purchase 24,000 shares of common stock for each $100,000 of shares purchased (the Warrants”), in a private placement exempt from the registration requirements of the Securities Act. The Offering commenced November 29, 2017 and was completed in four closings for gross proceeds of $2,000,000 as follows: Shares Warrants Date Total Investment # of shares Price # of warrants Ex Price 11/29/2017 $300,000 217,390 $1.38 72,000 $1.50 12/5/2017 400,000 320,000 $1.25 96,000 $1.50 12/29/2017 235,000 188,000 $1.25 56,400 $1.50 Subtotal- 2017 935,000 725,390 224,400 1/9/2018 1,065,000 852,000 $1.25 255,600 $1.50 Total Offering $2,000,000 1,577,390 480,000 During the year ended December 31, 2017, the Company issued 246,463 shares of common stock in lieu of cash payment for various services provided to the Company. |
EMPLOYEE BENEFITS PLANS
EMPLOYEE BENEFITS PLANS | 12 Months Ended |
Dec. 31, 2017 | |
Notes to Financial Statements | |
EMPLOYEE BENEFITS PLANS | The Company employs both union and non-union employees and maintains several benefit plans. Union Substantially the entire workforce at AIM is subject to a union contract with the United Service Workers Union TUJAT Local 355, EIN 11-1772919 (the "Union"). The contract expires on December 31, 2018. Medical benefits for union employees are provided through a policy with Extensis, the costs of which are substantially borne by the Company. In addition, the Company is obligated to make contributions for union dues and a security fund (defined contribution plan) for the benefit of each union employee. Contributions to the security fund amounted to $136,000 and $263,000 for the years ended December 31, 2017 and 2016, respectively. The Company adopted ASU No. 2011-09, "Compensation - Retirement Benefits-Multiemployer Plans (Subtopic 715-80): Disclosures about an Employer's Participation in a Multiemployer Plan" ("ASU 2011-09"). ASU 2011-09 requires additional disclosures about an employer's participation in a multiemployer pension plan. Previously, disclosures were limited primarily to the historical contributions made to the plans. ASU 2011-09 applies to nongovernmental entities that participate in multiemployer plans. The Union’s retirement plan is a defined contribution plan. As such, the Company is not responsible for the obligations of other companies in the Union’s retirement plan and no further disclosures are required. Others All other Company employees, are covered under a co-employment agreement with Extensis. The Company has two defined contribution plans under Section 401(k) of the Internal Revenue Code (the "Plans"). Pursuant to the Plans, qualified employees may contribute a percentage of their pre-tax eligible compensation to the Plan. The Company does not match any contributions that employees may make to the Plans. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 12 Months Ended |
Dec. 31, 2017 | |
Notes to Financial Statements | |
COMMITMENTS AND CONTINGENCIES | Real Estate Leases The Company leases its facilities under various operating lease agreements, which contain renewal options and escalation provisions. Rent expense was $1,305,000 and $2,429,000 for the years ended December 31, 2017 and 2016, respectively. The Company is responsible for paying all operating costs under the terms of the leases. As of December 31, 2017, the aggregate future minimum lease payments are as follows: Fifth Avenue Lamar Street Motor Parkway Porter Street For the year ending Annual Rent Annual Rent Annual Rent Annual Rent Total Rents December 31, 2018 $ 769,000 $ 300,000 $ 110,000 $ 115,000 $ 1,294,000 December 31, 2019 792,000 — 113,000 48,000 953,000 December 31, 2020 817,000 — 116,000 — 933,000 December 31, 2021 842,000 — 103,000 — 945,000 December 31, 2022 866,000 — — — 866,000 Thereafter 3,501,000 — — — 3,501,000 Total Rents $ 7,587,000 $ 300,000 $ 442,000 $ 163,000 $ 8,492,000 The leases provide for scheduled increases in base rent. Rent expense is charged to operations using the straight-line method over the term of the lease which results in rent expense being charged to operations at inception of the lease in excess of required lease payments. This excess is shown as deferred rent in the accompanying consolidated balance sheets. On April 11, 2016, the Company executed a Sale-Leaseback Arrangement, whereby the Company sold the building and real property located in South Windsor, Connecticut (the “Property”) for a purchase price of $1,700,000. The net proceeds from the sale of the property were applied to the amounts owed to PNC Bank. Simultaneous with the closing of the sale of the Property, the Company entered into a 15- year lease (the “Lease”) with the purchaser for the property. Base annual rent was approximately $155,000 for the first year and increases approximately 3% per year each year thereafter. The Lease granted the Company an option to renew the Lease for an additional period of five years. Pursuant to the terms of the Lease, the Company was required to pay all of the costs associated with the operation of the facilities, including, without limitation, insurance, taxes and maintenance. The Lease also contained representations, warranties, obligations, conditions and indemnification provisions in favor of the purchaser and grants the purchaser remedied upon a breach of the Lease by the Company, including the right to terminate the Lease and hold the Company liable for any deficiency in future rent. On March 21, 2018, the Company entered into an agreement to sell the stock of WMI. Included in this agreement, the operating lease obligation for the Plant Ave. facility would transfer to the purchaser of WMI upon the sale of WMI. See Note 1 Subsequent Events for additional discussion regarding the sale of WMI. At December 31, 2017, the Company has excluded this lease commitment from the table above. Loss Contingencies During 2016, a number of actions were commenced against the Company by vendors, landlords and former landlords, including a third party claim as a result of an injury suffered on a portion of a leased property not occupied by the Company. As certain of these claims represent amounts included in accounts payable they are not specifically discussed herein. Westbury Park Associates, LLC commenced an action on or about January 11, 2017 against Air Industries Group in the NYS Supreme Court, County of Suffolk, seeking the recovery of approximately $31,000 for past rent arrears, and for an unidentified sum representing all additional rent due under an alleged commercial lease through the end of its term, plus attorney’s fees. The Company believes that it has a meritorious defense, and there was no lease on the property and that its subsidiary Compac Development Corp was a hold-over tenant occupying the space on month-to-month tenancy. On January 18, 2018, REP B-2, LLC filed a petition for a warrant of eviction and a money judgement of approximately $56,000 against Air Industries Group arising from rent arrears on commercial space. On January 18, 2018, 360 Motor Parkway, LLC filed a petition for a warrant of eviction and a money judgement of approximately $12,000 against Air Industries Group arising from rent arrears on commercial space. Each proceeding has resulted in a stipulation of settlement providing monthly repayment schedules to bring those rent arrears current, the last of which are due on May 1, 2018, at which time the proceedings may be dismissed. An employee of the Company commenced an action against, among others, Rechler Equity B-2, LLC and Air Industries Group, in the Supreme Court State of New York, Suffolk County, seeking compensation in an undetermined amount for injuries suffered while leaving the premises occupied by Welding Metallurgy, Inc. Rechler Equity B-2, LLC, has served a Third Party Complaint in this action against Air Industries Group, Inc. and Welding Metallurgy, Inc. The action remains in the early pleading stage. The Company believes it is not liable to the employee and any amount it might have to pay would be covered by insurance. An employee of the Company commenced an action against, among others, Sterling Engineering and Air Industries Group, in Connecticut Commission on Human Rights and Opportunities, seeking lost wages in an undetermined amount for the employee’s termination. The action remains in the early pleading stage. The Company believes it is not liable to the employee and any amount it might have to pay would be covered by insurance. |
INCOME TAXES
INCOME TAXES | 12 Months Ended |
Dec. 31, 2017 | |
Notes to Financial Statements | |
INCOME TAXES | The provision for (benefit from) income taxes as of December 31, is set forth below: 2017 2016 Current Federal tax refund $ (178,000 ) $ — State 8,000 38,000 Prior Year overaccruals Federal — — State (27,000 ) — Total (Benefit) Expense (197,000 ) 38,000 Deferred Tax Benefit — (4,962,000 ) Valuation Allowance — 7,025,000 Net Provision for (Benefit from) Income Taxes $ (197,000 ) $ 2,101,000 The following is a reconciliation of our income tax rate computed using the federal statutory rate to our actual income tax rate as of December 31, 2017 2016 U.S. statutory income tax rate 34.00 % 34.00 % State taxes 0.09 % 1.50 % Permanent differences, overaccruals and non-deductible items -0.22 % 0.08 % Rate change and provision to return true-up -22.60 % 0.85 % Expired stock options -0.19 % -0.15 % Deferred tax valuation allowance -10.09 % -51.64 % Total 0.99 % -15.36 % The components of net deferred tax assets at December 31, 2017 and December 31, 2016 are set forth below: December 31, December 31, 2017 2016 Deferred tax assets Current: Net operating losses $ 7,730,000 $ 4,754,000 Bad debts 135,000 413,000 Inventory - 263A adjustment 591,000 — Accounts payable, accrued expenses and reserves — 930,000 Total current deferred tax assets before valuation allowance 8,456,000 6,097,000 Valuation allowance (8,456,000 ) (6,097,000 ) Total current deferred tax assets after valuation allowance — — Non-current: Section 1231 loss carry forward — 4,000 Stock based compensation - options and restricted stock 124,000 164,000 Capitalized engineering costs 281,000 431,000 Deferred rent 299,000 468,000 Amortization - NTW Transaction 519,000 1,324,000 Inventory reserves 960,000 1,157,000 Deferred gain on sale of real estate 80,000 121,000 Other 114,000 160,000 Total non-current deferred tax assets before valuation allowance 2,377,000 3,829,000 Valuation allowance (758,000 ) (928,000 ) Total non-current deferred tax assets after valuation allowance 1,619,000 2,901,000 Deferred tax liabilities: Property and equipment (1,619,000 ) (2,595,000 ) Amortization – NTW Goodwill — (33,000 ) Amortization – Welding Transaction — (273,000 ) Total non-current deferred tax liabilities (1,619,000 ) (2,901,000 ) Net non-current deferred tax asset $ — $ — During the years ended December 31, 2017 and December 31, 2016, the Company recorded a valuation allowance equal to its net deferred tax assets. The Company determined that due to a recent history of net losses, that at this time, sufficient uncertainty exists regarding the future realization of these deferred tax assets through future taxable income. If, in the future, the Company believes that it is more likely than not that these deferred tax benefits will be realized, the valuation allowances will be reduced or eliminated. With a full valuation allowance, any change in the deferred tax asset or liability is fully offset by a corresponding change in the valuation allowance. At December 31, 2017 and 2016, the Company provided a valuation allowance on its deferred tax assets of $9,214,000 and $7,025,000, respectively. At December 31, 2017 and 2016, the Company had no material unrecognized tax benefits and no adjustments to liabilities or operations were required. The Company does not expect that its unrecognized tax benefits will materially increase within the next twelve months. The Company recognizes interest and penalties related to uncertain tax positions in interest expense. As of December 31, 2017 and 2016, the Company has not recorded any provisions for accrued interest and penalties related to uncertain tax positions. In certain cases, the Company's uncertain tax positions are related to tax years that remain subject to examination by the relevant tax authorities. The Company files federal and state income tax returns in jurisdictions with varying statutes of limitations. The 2014 through 2017 tax years generally remain subject to examination by federal and state tax authorities. |
STOCK OPTIONS AND WARRANTS
STOCK OPTIONS AND WARRANTS | 12 Months Ended |
Dec. 31, 2017 | |
Notes to Financial Statements | |
STOCK OPTIONS AND WARRANTS | Stock-Based Compensation Stock Options On March 30, 2015, the Board of Directors adopted the Company’s 2015 Equity Incentive Plan (“2015 Plan”) which was approved by affirmative vote of the Company’s stockholders on June 25, 2015. The Plan authorized the grant of rights with respect to up to 350,000 shares. In June 2016, the Board of Directors adopted the Company’s 2016 Equity Incentive Plan (“2016 Plan”) which authorized the grant of rights with respect to up to 350,000 shares. The 2016 Plan was approved by affirmative vote of the Company’s stockholders on November 30, 2016. In July 2017, the Board of Directors adopted the Company’s 2017 Equity Incentive Plan (“2017 Plan”) which authorized the grant of rights with respect to up to 1,200,000 shares. The 2017 Plan was approved by affirmative vote of the Company’s stockholders on October 3, 2017. During the year ended December 31, 2017, the Company granted options to purchase 695,000 shares of common stock to certain of its employees and directors. The weighted average fair value of the granted options was estimated using the Black-Scholes option pricing model with the following assumptions: risk free interest rate of 1.72% to 1.81%; expected volatility factors of 82% to 85%; expected dividend yield of 0%; and estimated option term of 5 years. During the year ended December 31, 2016, the Company granted options to purchase 100,000 shares of common stock to certain of its employees. The weighted average fair value of the granted options was estimated using the Black-Scholes option pricing model with the following assumptions: risk free interest rate of 0.73% to 2.04%; expected volatility factors of 31% to 59%; expected dividend yield of 0%; and estimated option term of 5 years. During the year ended December 31, 2016, the Board of Directors approved the issuance of 18,000 options, to non-employee members of the Company’s Board of Directors. These options vested quarterly as to 25% of the shares subject to the options, commencing June 2, 2016. The Company recorded stock based compensation expense of $323,000 and $167,000 in its consolidated statement of operations for the years ended December 31, 2017 and 2016, respectively, and such amounts were included as a component of general and administrative expense. The fair values of stock options granted were estimated using the Black-Sholes option-pricing model with the following assumptions for the years ended December 31: 2017 2016 Risk-free interest rates 1.72 – 1.81 % 0.73% - 2.04 % Expected life (in years) 4.9 5 .0 Expected volatility 82%-85 % 31%-59 % Dividend yield 0.0 % 0.0 % Weighted-average grant date fair value per share $0.90 $1.88 The expected life is the number of years that the Company estimates, based upon history, that the options will be outstanding prior to exercise or forfeiture. Expected life is determined using the “simplified method” permitted by Staff Accounting Bulletin No. 107. In addition to the inputs referenced above regarding the option pricing model, the Company adjusts the stock-based compensation expense for estimated forfeiture rates that are revised prospectively according to forfeiture experience. The stock volatility factor is based on the Company’s experience. A summary of the status of the Company's stock options as of December 31, 2017 and 2016, and changes during the two years then ended are presented below. Options Wtd. Avg. Exercise Price Balance, December 31, 2015 564,342 $ 7.35 Granted during the period 128,000 5.28 Exercised during the period (24,905 ) 2.95 Terminated/Expired during the period (31,095 ) 8.47 Balance, December 31, 2016 636,342 7.01 Granted during the period 695,000 1.45 Exercised during the period (0 ) — Terminated/Expired during the period (282,715 ) 7.66 Balance, December 31, 2017 1,048,627 $ 3.20 Exercisable at December 31, 2017 416,125 $ 5.43 The following table summarizes information about stock options at December 31, 2017: Range of Exercise Prices Number Outstanding Wtd. Avg. Life Wtd. Avg. Exercise Price $0.00 - $5.00 842,978 5.6 years $1.99 $5.01 - $20.00 205,655 2.7 years 8.14 $0.00 - $20.00 1,048,633 5.1 years $3.20 As of December 31, 2017, there was $470,233 of unrecognized compensation cost related to non-vested stock option awards, which is to be recognized over the remaining weighted average vesting period of three years. The aggregate intrinsic value at December 31, 2017 was based on the Company's closing stock price of $1.69 was $166,050. The aggregate intrinsic value was calculated based on the positive difference between the closing market price of the Company’s Common Stock and the exercise price of the underlying options. The total number of in-the-money options exercisable as of December 31, 2017 was 695,000. The weighted average fair value of options granted during the years ended December 31, 2017 and 2016 was $0.90 and $1.88 per share, respectively. The total intrinsic value of options exercised during the years ended December 31, 2017 and 2016 was $0 and $34,050, respectively. The total fair value of shares vested during the years ended December 31, 2017 and 2016 was $235,550 and $63,830, respectively. Warrants During the year ended December 31, 2017 and 2016, the Company issued 971,611 and 571,871 warrants, respectively, in connection with convertible notes payable and common stock issuances. The following tables summarize the Company's outstanding warrants as of December 31, 2017 and changes during the two years then ended: Warrants Wtd. Avg. Exercise Price Wtd. Ave. Remaining Contractual Life (years) Balance, December 31, 2015 164,585 $ 7.85 1.15 Issued 675,691 1.07 2.36 Exercised during the period — — — Terminated/Expired during the period — — — Balance, December 31, 2016 840,276 5.13 4.01 Granted during the period 971,611 2.61 4.42 Terminated/Expired during the period (107,785 ) 6.30 — Balance, December 31, 2017 1,704,102 $ 3.62 4.04 Exercisable at December 31, 2017 1,704,102 $ 3.62 4.04 The fair values of warrants granted were estimated using the Black-Sholes option-pricing model with the following assumption for the years ended December 31: 2017 2016 Risk-free interest rates 1.85%-2.20% 1.40% - 2.04% Expected life (in years) 5 5 Expected volatility 63%-115% 33%-59% Dividend yield 0 0 Weighted-average grant date fair value per share $1.10-$2.89 $0.81-$1.40 |
SEGMENT REPORTING
SEGMENT REPORTING | 12 Months Ended |
Dec. 31, 2017 | |
Notes to Financial Statements | |
SEGMENT REPORTING | In accordance with FASB ASC 280, “Segment Reporting” ("ASC 280"), the Company discloses financial and descriptive information about its reportable operating segments. Operating segments are components of an enterprise about which separate financial information is available and regularly evaluated by the chief operating decision maker in deciding how to allocate resources and in assessing performance. The Company follows ASC 280, which establishes standards for reporting information about operating segments in annual and interim financial statements, and requires that companies report financial and descriptive information about their reportable segments based on a management approach. ASC 280 also establishes standards for related disclosures about products and services, geographic areas and major customers. The Company currently divides its operations into three operating segments: Complex Machining which consists of AIM and NTW; Aerostructures and Electronics which consists of WMI, WPI, MSI, Eur-Pac, ECC, and Compac; and Turbine Engine Components which consists of AMK and Sterling. Along with our operating subsidiaries, we report the results of our corporate division as an independent segment. The accounting policies of each of the segments are the same as those described in the Summary of Significant Accounting Policies. The Company evaluates performance based on revenue, gross profit contribution and assets employed. Corporate level operating costs are allocated to segments. These costs include corporate costs such as legal, audit, tax and other professional fees including those related to being a public company. Given the pending sale of WMI, in the future, the Company may change its reportable operating segments. Financial information about the Company’s reporting segments for the years ended December 30, 2017 and December 31, 2016 are as follows: Year Ended December 31, 2017 2016 COMPLEX MACHINING Net Sales $ 38,489,000 $ 37,124,000 Gross Profit 4,906,000 4,382,000 Pre Tax Loss (2,839,000 ) (5,432,000 ) Assets 43,207,000 45,073,000 AEROSTRUCTURES & ELECTRONICS Net Sales 4,574,000 3,224,000 Gross Profit 507,000 38,000 Pre Tax Loss (4,233,000 ) (3,240,000 ) Assets 1,021,000 4,596,000 TURBINE ENGINE COMPONENTS Net Sales 6,806,000 10,973,000 Gross Loss (546,000 ) (151,000 ) Pre Tax Loss (7,599,000 ) (4,084,000 ) Assets 6,157,000 17,235,000 CORPORATE Net Sales — — Gross Profit — — Pre Tax Loss (1,399,000 ) (10,000 ) Assets 288,000 649,000 CONSOLIDATED Net Sales 49,869,000 51,321,000 Gross Profit 4,867,000 4,269,000 Pre Tax Loss (16,070,000 ) (12,766,000 ) (Benefit from) provision for Income Taxes (197,000 ) 2,101,000 Loss from Discontinued Operations (6,678,000 ) (756,000 ) Assets Held for Sale 10,082,000 15,247,000 Net (Loss) Income (22,551,000 ) (15,623,000 ) Assets $ 60,755,000 $ 82,800,000 |
SUMMARY OF SIGNIFICANT ACCOUN24
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended |
Dec. 31, 2017 | |
Employee Benefits Plans Contributions to security fund | |
Principal Business Activity | The Company through its AIM subsidiary is primarily engaged in manufacturing aircraft structural parts, and assemblies for prime defense contractors in the aerospace industry in the United States. NTW is a manufacturer of aerospace components, principally landing gear for F-16 and F-18 fighter aircraft. Welding Metallurgy is a specialty welding and products provider whose significant customers include the world's largest aircraft manufacturers, subcontractors, and original equipment manufacturers. Miller Stuart is a manufacturer of aerospace components whose customers include major aircraft manufacturers and the US Military. Miller Stuart specializes in electromechanical systems, harness and cable assemblies, electronic equipment and printed circuit boards. Woodbine is a manufacturer of aerospace components whose customers include major aircraft component suppliers. Eur-Pac specializes in military packaging and supplies. Eur- Pac s primary business is “kitting” of supplies for all branches of the United States Defense Department including ordnance parts, hose assemblies, hydraulic, mechanical and electrical assemblies. Compac specializes in the manufacture of RFI/EMI (Radio Frequency Interference Electro-Magnetic Interference) shielded enclosures for electronic components. The Company’s customers consist mainly of publicly traded companies in the aerospace industry. If the sale of WMI closes, the Company will be more focused on complex machined products for aircraft landing gear and jet turbines. |
Principles of Consolidation | The accompanying consolidated financial statements include accounts of the Company and its wholly-owned subsidiaries. Significant intercompany accounts and transactions have been eliminated in consolidation. |
Discontinued Operations | In March 2018, the Company entered into an agreement to sell WMI. WMI is classified as a discontinued operation (see "Note 2 - Discontinued Operations"). As required, the Company has retrospectively recast its consolidated statements of operations and balance sheets for all periods presented to reflect these businesses as discontinued operations. The Company has not segregated the cash flows of these businesses in the consolidated statements of cash flows. Management was also required to make certain assumptions and apply judgment to determine historical expenses related to the discontinued operations presented in prior periods. Unless noted otherwise, discussion in the Notes to Consolidated Financial Statements refers to the Company’s continuing operations. |
Cash and Cash Equivalents | In March 2018, the Company entered into an agreement to sell WMI. WMI is classified as a discontinued operation (see "Note 2 - Discontinued Operations"). As required, the Company has retrospectively recast its consolidated statements of operations and balance sheets for all periods presented to reflect these businesses as discontinued operations. The Company has not segregated the cash flows of these businesses in the consolidated statements of cash flows. Management was also required to make certain assumptions and apply judgment to determine historical expenses related to the discontinued operations presented in prior periods. Unless noted otherwise, discussion in the Notes to Consolidated Financial Statements refers to the Company’s continuing operations. |
Accounts Receivable | Accounts receivable are reported at their outstanding unpaid principal balances net of allowances for uncollectible accounts. The Company provides for allowances for uncollectible receivables based on management's estimate of uncollectible amounts considering age, collection history, and any other factors considered appropriate. The Company writes off accounts receivable against the allowance for doubtful accounts when a balance is determined to be uncollectible. |
Inventory Valuation | The Company values inventory at the lower of cost on a first - in -first-out basis or market. The Company generally purchases raw materials and supplies uniquely suited to the production of larger more complex parts, such as landing gear, only when non-cancellable contracts for orders have been received for finished goods. It occasionally produces larger more complex products, such as landing gear, in excess of purchase order quantities in anticipation of future purchase order demand. Historically this excess has been used in fulfilling future purchase orders. The Company purchases supplies and materials useful in a variety of products as deemed necessary even though orders have not been received. The Company periodically evaluates inventory items that are not secured by purchase orders and establishes reserves for obsolescence accordingly. The Company also reserves for excess quantities, slow-moving goods, and for other impairments of value. |
Assets Held for Sale and Liabilities Directly Associated | Assets held for sale are reported at the lower of their carrying amount or fair value less cost to sell and included in current assets. Liabilities associated to business units held for sale are classified as a current liability. |
Capitalized Engineering Costs | The Company has contractual agreements with customers to produce parts, which the customers design. Even though the Company has not designed and thus has no proprietary ownership of the parts, the manufacturing of these parts requires pre- production engineering and programming of the Company’s machines. The pre-production costs associated with a particular contract are capitalized and then amortized beginning with the first shipment of product pursuant to such contract. These costs are amortized on a straight-line basis over the estimated length of the contract, or if shorter, three years. If the Company is reimbursed for all or a portion of the pre-production expenses associated with a particular contract, only the unreimbursed portion would be capitalized. The Company may also progress bill customers for certain engineering costs being incurred. Such billings are recorded as deferred revenues until the appropriate revenue recognition criteria have been met. The Terms and Conditions contained in customer purchase orders may provide for liquidated damages in the event that a stop-work order is issued prior to the final delivery of the product. |
Property and Equipment | Property and equipment are carried at cost net of accumulated depreciation and amortization. Repair and maintenance charges are expensed as incurred. Property, equipment, and improvements are depreciated using the straight-line method over the estimated useful lives of the assets or the particular improvements. Expenditures for repairs and improvements in excess of $1,000 that add to the productive capacity or extend the useful life of an asset are capitalized. Upon disposition, the cost and related accumulated depreciation are removed from the accounts and any related gain or loss is reflected in earnings. |
Long-Lived and Intangible Assets | Identifiable intangible assets are amortized using the straight-line method over the period of expected benefit. Long-lived assets and intangible assets subject to amortization to be held and used are reviewed for impairment whenever events or changes in circumstances indicate that the related carrying amount may be impaired. The Company records an impairment loss if the undiscounted future cash flows are found to be less than the carrying amount of the asset. If an impairment loss has occurred, a charge is recorded to reduce the carrying amount of the asset to fair value. There has been no impairment as of December 31, 2017 and 2016. |
Deferred Financing Costs | Costs incurred with obtaining and executing revolving debt arrangements are capitalized and amortized using the effective interest method over the term of the related debt. The amortization of such costs are included in interest and financing costs. Costs incurred with obtaining and executing other debt arrangements are presented as a direct deduction from the carrying value of the associated debt. |
Derivative Liabilities | In connection with the issuances of equity instruments or debt, the Company may issue options or warrants to purchase common stock. In certain circumstances, these options or warrants may be classified as liabilities, rather than as equity. In addition, the equity instrument or debt may contain embedded derivative instruments, such as conversion options or listing requirements, which in certain circumstances may be required to be bifurcated from the associated host instrument and accounted for separately as a derivative liability instrument. The Company accounts for derivative liability instruments under the provisions of FASB ASC 815, Derivatives and Hedging. |
Revenue Recognition | For 2017 and 2016 the Company recognized revenue in accordance with Staff Accounting Bulletin No. 104, "Revenue Recognition." The Company recognizes revenue when products are shipped and/or the customer takes ownership and assumes risk of loss, collection of the relevant receivable is probable, persuasive evidence of an arrangement exists, and the sales price is fixed or determinable. The Company recognizes certain revenues under a bill and hold arrangement with two of its large customers. For any requested bill and hold arrangement, the Company makes an evaluation as to whether the bill and hold arrangement qualifies for revenue recognition as follows: · The customer requests that the transaction be on a bill and hold basis. A customer must initiate the request for any bill and hold arrangement. Upon request for a bill and hold, the Company requires a signed letter from the customer upon which the customer specifically requests the bill and hold arrangement. Upon receipt of the letter, the Company begins its evaluation process to determine whether a bill and hold arrangement can be granted. · The customer has made fixed commitment to purchase in written documentation. All customers’ orders are through firm written purchase orders. · The goods are segregated from other inventory and are not available to fill any other customers’ orders. The Company’s goods are made to customers’ or their customer’s specifications and could not be sold to others. · The risk of ownership has passed to the customer. The product is complete and ready for shipment. The earnings process is complete. An internal evaluation is made as to whether the product is complete and ready for shipment. This involves a review of the purchase order and a completed inspection process by the Company’s quality control department. · The date is determined by which the Company expects payment and the Company has not modified its normal billing and credit terms for this buyer. Payment is expected as if the goods had been shipped. · The customer has the expected risk of loss in the event of a decline in the market value of goods. All goods are made to firm purchase orders with fixed prices. Any decline in value would not affect the pricing of the goods. The Company has not at any point, agreed to a price reduction on a bill and hold arrangement. The Company had approximately $619,000 and $2,914,000 of net sales that were billed but not shipped under such bill and hold arrangements as of December 31, 2017 and 2016, respectively. Payments received in advance from customers for products delivered are recorded as deferred revenue until earned, at which time revenue is recognized. The Terms and Conditions contained in our customer purchase orders often provide for liquidated damages in the event that a stop work order is issued prior to the final delivery. The Company utilizes a Returned Merchandise Authorization or RMA process for determining whether to accept returned products. Customer requests to return products are reviewed by the contracts department and if the request is approved, a credit is issued upon receipt of the product. Net sales represent gross sales less returns and allowances. |
Use of Estimates | In preparing the financial statements, management is required to make estimates and assumptions that affect the reported amounts in the financial statements and accompanying notes. The more significant management estimates are the allowance for doubtful accounts, useful lives of property and equipment, provisions for inventory obsolescence, accrued expenses and whether to accrue for various contingencies. Actual results could differ from those estimates. Changes in facts and circumstances may result in revised estimates, which are recorded in the period in which they become known. |
Credit and Concentration Risks | There were three customers that represented 62.0% of total sales, and three customers that represented 52.3% of total sales for the years ended December 31, 2017 and 2016, respectively. This is set forth in the table below. Customer Percentage of Sales 2017 2016 1 25.5 21.3 2 20.5 14.6 3 16.0 16.4 There were three customers that represented 68.7% of gross accounts receivable and two customers that represented 35.3% of gross accounts receivable at December 31, 2017 and 2016, respectively. This is set forth in the table below. Customer Percentage of Receivables December December 2017 2016 1 41.9 24.1 2 14.6 11.2 3 12.2 * *Customer was less than 10% of gross accounts receivable at December 31, 2016. During the year, the Company had occasionally maintained balances in its bank accounts that were in excess of the FDIC limit. The Company has not experienced any losses on these accounts. The Company has several key sole-source suppliers of various parts that are important for one or more of its products. These suppliers are its only source for such parts and, therefore, in the event any of them were to go out of business or be unable to provide parts for any reason, its business could be severely harmed. |
Income Taxes | The Company accounts for income taxes in accordance with accounting guidance now codified as FASB ASC 740, "Income Taxes," which requires that the Company recognize deferred tax liabilities and assets based on the differences between the financial statement carrying amounts and the tax bases of assets and liabilities, using enacted tax rates in effect in the years the differences are expected to reverse. The provision for, or benefit from, income taxes includes deferred taxes resulting from the temporary differences in income for financial and tax purposes using the liability method. Such temporary differences result primarily from the differences in the carrying value of assets and liabilities. Future realization of deferred income tax assets requires sufficient taxable income within the carryback, carryforward period available under tax law. We evaluate, on a quarterly basis whether, based on all available evidence, it is probable that the deferred income tax assets are realizable. Valuation allowances are established when it is more likely than not that the tax benefit of the deferred tax asset will not be realized. The evaluation, as prescribed by ASC 740-10, “Income Taxes,” includes the consideration of all available evidence, both positive and negative, regarding historical operating results including recent years with reported losses, the estimated timing of future reversals of existing taxable temporary differences, estimated future taxable income exclusive of reversing temporary differences and carryforwards, and potential tax planning strategies which may be employed to prevent an operating loss or tax credit carryforward from expiring unused. The Company accounts for uncertainties in income taxes under the provisions of FASB ASC 740-10-05, "Accounting for Uncertainty in Income Taxes." The ASC clarifies the accounting for uncertainty in income taxes recognized in an enterprise's financial statements. The ASC prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The ASC provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. Effective July 1, 2016, the Company adopted FASB Accounting Standards Update 2015 - 17, Balance Sheet Classification of Deferred Taxes. The ASU is part of the Board's simplification initiative aimed at reducing complexity in accounting standards. To simplify presentation, the new guidance requires that all deferred tax assets and liabilities, along with any related valuation allowance, be classified as noncurrent on the balance sheet. As a result, each jurisdiction will now only have one net noncurrent deferred tax asset or liability. Importantly, the guidance does not change the existing requirement that only permits offsetting within a jurisdiction - that is, companies are still prohibited from offsetting deferred tax liabilities from one jurisdiction against deferred tax assets of another jurisdiction. The amendments in this Update may be applied either prospectively to all deferred tax liabilities and assets or retrospectively to all periods presented. If an entity applies the guidance prospectively, the entity should disclose in the first interim and first annual period of change, the nature of and reason for the change in accounting principle and a statement that prior periods were not retrospectively adjusted. If an entity applies the guidance retrospectively, the entity should disclose in the first interim and first annual period of change the nature of and reason for the change in accounting principle and quantitative information about the effects of the accounting change on prior periods. The Company has applied this guidance prospectively and has not restated prior period balances. |
Earnings per share | Basic earnings per share is computed by dividing the net income applicable to common stockholders by the weighted-average number of shares of common stock outstanding for the period. Potentially dilutive shares, using the treasury stock method, are included in the diluted per-share calculations for all periods when the effect of their inclusion is dilutive. The following is a reconciliation of the denominators of basic and diluted earnings per share computations: 2017 2016 Weighted average shares outstanding used to compute basic earnings per share 13,230,775 7,579,419 Effect of dilutive stock options and warrants — — Weighted average shares outstanding and dilutive securities used to compute dilutive earnings per share 13,230,775 7,579,419 The following securities have been excluded from the calculation as the exercise price was greater than the average market price of the common shares: December 31, December 31, 2017 2016 Stock Options 354,000 633,000 Warrants 1,480,000 520,000 1,834,000 1,153,000 The following securities have been excluded from the calculation even though the exercise price was less than the average market price of the common shares because the effect of including these potential shares was anti-dilutive due to the net loss incurred during the years: December 31, December 31, 2017 2016 Stock Options 146,000 3,000 Warrants 41,000 321,000 187,000 324,000 |
Stock-Based Compensation | The Company accounts for stock-based compensation in accordance with FASB ASC 718, "Compensation – Stock Compensation." Under the fair value recognition provision of the ASC, stock-based compensation cost is estimated at the grant date based on the fair value of the award. The Company estimates the fair value of stock options and warrants granted using the Black-Scholes-Merton option pricing model. |
Goodwill | Goodwill represents the excess of the acquisition cost of businesses over the fair value of the identifiable net assets acquired. The goodwill amount of $272,000 at December 31, 2017 relates to the acquisitions of NTW $163,000 and ECC $109,000. The goodwill amount of $9,884,000 at December 31, 2016 relates to the acquisitions of Welding $292,000, NTW $163,000, Woodbine $2,565,000, Eur-Pac $1,655,000, ECC $109,000, Sterling $4,540,000 and Compac $560,000. The Company accounts for the impairment of goodwill under the provisions of ASU 2011-08 (“ASU 2011-08”), “Intangibles Goodwill and Other (Topic 350): Testing Goodwill for Impairment.” ASU 2011-08 updated the guidance on the periodic testing of goodwill for impairment. The updated guidance gives companies the option to perform a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. The Company performs impairment testing for goodwill annually, or more frequently when indicators of impairment exist. As discussed above, the Company adopted ASU 2011-08 and performs a qualitative assessment in the fourth quarter of each year to determine whether it was more likely than not that the fair value of each of Welding, including Woodbine, NTW, Eur-Pac, ECC, AMK, Sterling, Eur-Pac and Compac was less than its carrying amount. During 2017 the Company determined that goodwill for Welding, Woodbine, Compac, Eur-Pac and Sterling in the amounts of $291,000, $2,565,000, $560,000, $1,656,000 and $4,540,000, respectively, had been impaired. Goodwill is not amortized, but is tested at least annually for impairment, or if circumstances occur that more likely than not reduce the fair value of the reporting unit below its carrying amount. Goodwill is not amortized, but is tested at least annually for impairment, or if circumstances occur that more likely than not reduce the fair value of the reporting unit below its carrying amount. During 2017, the Company determined that goodwill for Eur-Pac and Sterling in the amounts of $1,655,000 and $4,540,000, respectively, had been impaired. The total of $6,195,000 is included loss from continuing operations. During 2017, the Company determined that goodwill for Welding, Woodbine and Compac in the amounts of $292,000, $2,565,000, $560,000, respectively, had been impaired. The total of $3,417,000 is included in loss from discontinued operations. |
Freight Out | Freight out is included in operating expenses and amounted to $196,000 and $180,000 for the years ended December 31, 2017 and 2016, respectively. |
JOBS Act | On April 5, 2012, the JOBS Act was signed into law. The JOBS Act contains provisions that, among other things, reduce certain reporting requirements for qualifying public companies. As an “emerging growth company,” the Company may, under Section 7(a)(2)(B) of the Securities Act, delay adoption of new or revised accounting standards applicable to public companies until such standards would otherwise apply to private companies. An “emerging growth company” is one with less than $1.0 billion in annual sales, has less than $700 million in market value of its shares of common stock held by non-affiliates and issues less than $1.0 billion of non-convertible debt over a three year period. The Company may take advantage of this extended transition period until the first to occur of the date that it (i) is no longer an "emerging growth company" or (ii) affirmatively and irrevocably opts out of this extended transition period. The Company has elected to take advantage of the benefits of this extended transition period. Until the date that it is no longer an "emerging growth company" or affirmatively and irrevocably opts out of the exemption provided by Securities Act Section 7(a)(2)(B), upon issuance of a new or revised accounting standard that applies to its consolidated financial statements and that has a different effective date for public and private companies, the Company will disclose the date on which adoption is required for non-emerging growth companies and the date on which the Company will adopt the recently issued accounting standard. |
Recently Issued Accounting Pronouncements | In January 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities (Subtopic 825-10) (“ASU 2016-01”). The main objective of ASU 2016-01 is enhancing the reporting model for financial instruments to provide users of financial statements with more decision-useful information. The amendments address certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. ASU 2016-01 is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company does not expect the adoption of this amendment to have a significant impact on its consolidated financial statements. In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842)” (“ASU 2016-02”). The main objective of ASU 2016-02 is to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. To meet that objective, the FASB is amending the FASB Accounting Standards Codification and creating Topic 842, Leases. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company does not expect the adoption of this amendment to have a significant impact on its consolidated financial statements. In April 2016, the FASB issued ASU 2016-10 Revenue from Contracts with Customers (Topic 606) (“ASU 2016-10”). The core principle of the guidance in Topic 606 is that an entity should recognize revenue to depict the transfer of promised 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. The amendments in ASU 2016-10 affect the guidance in ASU 2014-09, Revenue from Contracts with Customers, which is not yet effective. The effective date and transition requirements of ASU 2016-10 are the same as the effective date and transition requirements of ASU 2014-09. They are effective prospectively for reporting periods beginning after December 15, 2017 and early adoption is not permitted. The Company is currently assessing the impact of the adoption of these amendments on its consolidated financial statements. In May 2016, the FASB issued Accounting Standards Update No. 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow -Scope Improvements and Practical Expedients. The amendments do not change the core revenue recognition principle in Topic 606. The amendments provide clarifying guidance in certain narrow areas and add some practical expedients. These amendments are effective at the same date that Topic 606 is effective. Topic 606 is effective for public entities for annual reporting periods beginning after December 15, 2017, including interim reporting periods therein (i.e., January 1, 2018, for a calendar year entity). Topic 606 is effective for nonpublic entities one year later. The Company is currently assessing the impact of the adoption of the amendments to Topic 606 and these amendments on its consolidated financial statements. In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. The standard provides guidance on how certain cash receipts and payments are presented and classified in the statement of cash flows, including beneficial interests in securitization, which would impact the presentation of the deferred purchase price from sales of receivables. The standard is intended to reduce current diversity in practice. Early adoption is permitted, including adoption in an interim period. The Company does not expect the adoption of these amendments to have a significant impact on its consolidated financial statements. In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows: Restricted Cash, which clarifies the presentation requirements of restricted cash within the statement of cash flows. The changes in restricted cash and restricted cash equivalents during the period should be included in the beginning and ending cash and cash equivalents balance reconciliation on the statement of cash flows. When cash, cash equivalents, restricted cash or restricted cash equivalents are presented in more than one-line item within the statement of financial position, an entity shall calculate a total cash amount in a narrative or tabular format that agrees to the amount shown on the statement of cash flows. Details on the nature and amounts of restricted cash should also be disclosed. This standard is effective for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019. The Company is currently in the process of evaluating the impact of the adoption of this standard on our financial statements. In January 2017, the FASB issued ASU 2017-01 (“ASU 2017-01”), Business Combinations, which clarifies the definition of a business, particularly when evaluating whether transactions should be accounted for as acquisitions or dispositions of assets or businesses. The first part of the guidance provides a screen to determine when a set is not a business; the second part of the guidance provides a framework to evaluate whether both an input and a substantive process are present. The guidance will be effective after December 15, 2018, and interim periods within annual periods beginning after December 15, 2019. Early adoption is permitted for transactions that have not been reported in issued financial statements. The Company is currently assessing the impact of this update on the presentation of these financial statements. In January 2017, FASB issued ASU No. 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Accounting for Goodwill Impairment, Step 2 of the goodwill impairment test, which requires determining the implied fair value of goodwill and comparing it with its carrying amount has been eliminated. Thus, the goodwill impairment test is performed by comparing the fair value of a reporting unit with its carrying amount (i.e., what was previously referred to as Step 1). In addition, ASU No. 2017-04 requires entities having one or more reporting units with zero or negative carrying amounts to disclose (1) the identity of such reporting units, (2) the amount of goodwill allocated to each, and (3) in which reportable segment the reporting unit is included. ASU No. 2017-04 is effective as follows: (1) for a public business entity that is an SEC filer for annual or interim goodwill impairment tests in fiscal years beginning after December 15, 2019. The Company is currently in the process of evaluating the impact of the adoption of this standard on our financial statements. In July 2017, the FASB issued ASU 2017-11, Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815): (Part I) Accounting for Certain Financial Instruments with Down Round Features, (Part II) Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception. The ASU allows companies to exclude a down round feature when determining whether a financial instrument (or embedded conversion feature) is considered indexed to the entity’s own stock. As a result, financial instruments (or embedded conversion features) with down round features may no longer be required to be accounted classified as liabilities. A company will recognize the value of a down round feature only when it is triggered and the strike price has been adjusted downward. For equity-classified freestanding financial instruments, such as warrants, an entity will treat the value of the effect of the down round, when triggered, as a dividend and a reduction of income available to common shareholders in computing basic earnings per share. For convertible instruments with embedded conversion features containing down round provisions, entities will recognize the value of the down round as a beneficial conversion discount to be amortized to earnings. The guidance in ASU 2017-11is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted, and the guidance is to be applied using a full or modified retrospective approach. The Company adopted this guidance in the current quarter, effective April 1, 2017. As a result, the warrants issued on May 12, 2017, in connection with the bridge financing, were equity-classified. The Company does not believe that any other recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying consolidated financial statements. |
Reclassifications | Reclassifications occurred to certain 2016 amounts to conform to the 2017 classification. |
DISCONTINUED OPERATIONS (Tables
DISCONTINUED OPERATIONS (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Acquisition Tables | |
Reconciliation of the major financial lines constituting the results of operations for discontinued operations | December 31, 2017 2016 Net revenue $ 13,129,000 $ 15,954,000 Cost of goods sold 11,245,000 13,143,000 Gross profit 1,884,000 2,451,000 Operating expenses: Selling, general and administrative 2,488,000 3,105,000 Loss on impairment of assets 1,085,000 — Loss on assets held for sale 1,053,000 — Impairment of Goodwill 3,417,000 — Total operating expenses 8,553,000 3,105,000 Interest expense 12,000 96,000 Other income (expense) 3,000 5,000 Loss from discontinued operations before income taxes (6,678,000 ) (745,000 ) Provision for income taxes — 11,000 Net income (loss) from discontinued operations $ (6,678,000 ) $ (756,000 ) |
Reconciliation of the WMI and subsidiaries net cash flow from operating, investing and financing activities | 2017 2016 Net cash used in operating activities - discontinued operation $ (2,765,055 ) $ (749,757 ) Net cash used in investing activities - discontinued operation $ (33,244 ) $ (172,906 ) Net cash provided by financing activities - discontinued operations $ 2,664,689 $ 859,856 Depreciation and amortization $ 374,871 $ 448,215 Capital expenditures $ (33,244 ) $ (172,906 ) |
SUMMARY OF SIGNIFICANT ACCOUN26
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Commitments And Contingencies Details Narrative | |
Credit and Concentration Risks | Customer Percentage of Sales 2017 2016 1 25.5 21.3 2 20.5 14.6 3 16.0 16.4 Customer Percentage of Receivables December December 2017 2016 1 41.9 24.1 2 14.6 11.2 3 12.2 * |
Earnings per share | 2017 2016 Weighted average shares outstanding used to compute basic earnings per share 13,230,775 7,579,419 Effect of dilutive stock options and warrants — — Weighted average shares outstanding and dilutive securities used to compute dilutive earnings per share 13,230,775 7,579,419 |
Anti-dilutive Securities | December 31, December 31, 2017 2016 Stock Options 354,000 633,000 Warrants 1,480,000 520,000 1,834,000 1,153,000 December 31, December 31, 2017 2016 Stock Options 146,000 3,000 Warrants 41,000 321,000 187,000 324,000 |
ACCOUNTS RECEIVABLE (Tables)
ACCOUNTS RECEIVABLE (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Notes to Financial Statements | |
Components of accounts receivable | December 31, December 31, 2017 2016 Accounts Receivable Gross $ 5,958,000 $ 6,476,000 Allowance for Doubtful Accounts (494,000 ) (403,000 ) Accounts Receivable Net $ 5,464,000 $ 6,073,000 |
Allowance for doubtful accounts | Balance at Beginning of Year Charged to Costs and Expenses Deductions from Reserves Balance at End of Year Year ended December 31, 2017 Allowance for Doubtful Accounts $ 403,000 $ 91,000 $ — $ 494,000 Year ended December 31, 2016 Allowance for Doubtful Accounts $ 196,000 $ 274,000 $ 67,000 $ 403,000 |
INVENTORY (Tables)
INVENTORY (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Inventory Tables | |
Components of inventory | December 31, December 31, 2017 2016 Raw Materials $ 5,346,000 $ 5,513,000 Work In Progress 19,947,000 21,903,000 Finished Goods 10,122,000 8,928,000 Inventory Reserve (4,274,000 ) (3,776,000 ) Total Inventory $ 31,141,000 $ 32,568,000 |
Reserve for inventory | Balance at Beginning of Year Additions to Reserve Deductions from Reserves Balance at End of Year Year ended December 31, 2017 Reserve for Inventory $ (3,776,000 ) $ (503,000 ) $ 5,000 $ (4,274,000 ) Year ended December 31, 2016 Reserve for Inventory $ (3,181,000 ) $ (681,000 ) $ 86,000 $ (3,776,000 ) |
PROPERTY AND EQUIPMENT (Tables)
PROPERTY AND EQUIPMENT (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Disclosure 6.Property And Equipment Tables Abstract | |
Property and equipment | December 31, December 31, 2017 2016 Land $ 300,000 $ 300,000 Buildings and Improvements 1,650,000 1,650,000 31.5 years Machinery and Equipment 11,554,000 12,172,000 5 - 8 years Capital Lease Machinery and Equipment 6,534,000 5,573,000 5 - 8 years Tools and Instruments 8,538,000 7,520,000 1.5 - 7 years Automotive Equipment 172,000 195,000 5 years Furniture and Fixtures 311,000 312,000 5 - 8 years Leasehold Improvements 528,000 525,000 Term of Lease Computers and Software 406,000 406,000 4 - 6 years Total Property and Equipment 29,993,000 28,653,000 Less: Accumulated Depreciation (19,943,000 ) (17,456,000 ) Property and Equipment, net $ 10,050,000 $ 11,197,000 |
INTANGIBLE ASSETS (Tables)
INTANGIBLE ASSETS (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Components of accounts payable | |
Intangible assets | December 31, December 31, 2017 2016 Customer Relationships $ 4,925,000 $ 4,925,000 5 to 14 years Trade Names — — 15-20 years Technical Know-how — — 10 years Non-Compete 50,000 50,000 5 years Professional Certifications — — .25 to 2 years Total Intangible Assets 4,975,000 4,975,000 Less: Accumulated Amortization (4,975,000 ) (4,504,000 ) Intangible Assets, net $ — $ 471,000 |
ASSETS HELD FOR SALE AND LIAB31
ASSETS HELD FOR SALE AND LIABILITES DIRECLTY ASSOCIATED (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Assets Held For Sale And Liabilites Direclty Associated Tables | |
Components of Assets Held for Sale and Liabilities Directly Associated | Components of Assets Held for Sale and Liabilities Directly Associated Assets Held for Sale December 31, 2016 Cash $ 40,000 Accounts Receivable, net of allowance for doubtful accounts 722,000 Inventory, net of reserves 260,000 Prepaid and other assets 96,000 Property and equipment, net of accumulated depreciation 3,478,000 Intangible Assets, net of accumulated amortization 819,000 Goodwill 635,000 Assets Held for Sale $ 6,050,000 Accounts payable and accrued expenses 379,000 Capital lease obligations 1,680,000 Deferred revenues 96,000 Liabilities directly associated to Assets Held for Sale $ 2,155,000 Assets Held for Sale December 31, 2017 December 31, 2016 Accounts Receivable, net of allowance for doubtful accounts $ 2,217,000 $ 1,976,000 Inventory, net of reserves 8,065,000 7,283,000 Prepaid and other assets 485,000 266,000 Property and equipment, net of accumulated depreciation 878,000 1,022,000 Intangible Assets, net of accumulated amortization — 1,283,000 Impairment of Assets Held for Sale (1,563,000 ) — Goodwill — 3,417,000 Assets Held for Sale $ 10,082,000 $ 15,247,000 Accounts payable and accrued expenses 2,138,000 2,010,000 Deferred Revenue 521,000 — Notes Payable & Capital lease obligations 11,000 — Deferred rent 125,000 70,000 Liabilities directly associated to Assets Held for Sale $ 2,795,000 $ 2,080,000 |
Company's Turbine Engine Components segment data | Segment Data Turbine Engine Components 2016 Net Sales $ 4,511,000 Gross Profit 169,000 Pre Tax (Loss) Income (1,595,000 ) Assets 6,050,000 Segment Data Aerostructures & Electronics 2017 2016 Net Sales $ 13,129,000 $ 15,594,000 Gross Profit 1,884,000 2,451,000 Pre Tax (Loss) Income (6,678,000 ) (756,000 ) Assets 10,082,000 15,247,000 |
ACCOUNTS PAYABLE AND ACCRUED 32
ACCOUNTS PAYABLE AND ACCRUED EXPENSES (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Payables and Accruals [Abstract] | |
Components of accounts payable | December 31, December 31, 2017 2016 Accounts Payable $ 8,634,000 $ 11,994,000 Accrued Expenses 2,238,000 2,156,000 $ 10,872,000 $ 14,150,000 |
NOTES PAYABLE AND CAPITAL LEA33
NOTES PAYABLE AND CAPITAL LEASE OBLIGATIONS (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Federal Tax Rate | |
Notes payable and capital lease obligations | December 31, December 31, 2017 2016 Revolving credit note payable to PNC Bank N.A. ("PNC") $ 16,455,000 $ 24,393,000 Term loans, PNC 3,471,000 6,649,000 Capital lease obligations 3,073,000 4,215,000 Related party notes payable, net of debt discount 1,912,000 1,086,000 Other note payable 1,930,000 627,000 Subtotal 26,841,000 36,970,000 Less: Current portion of notes and capital obligations (23,393,000 ) (33,999,000 ) Notes payable and capital lease obligations, net of current portion $ 3,448,000 $ 2,971,000 |
Future minimum principal payments for term loan | For the year ending Amount December 31, 2018 $ 1,478,000 December 31, 2019 1,478,000 December 31, 2020 515,000 December 31, 2021 — December 31, 2022 — Thereafter — PNC Term Loans payable 3,471,000 Less: Current portion 3,471,000 Long-term portion $ — |
Future minimum lease payments, including imputed interest | For the year ending Amount December 31, 2018 $ 1,428,000 December 31, 2019 1,264,000 December 31, 2020 542,000 December 31, 2021 52,000 December 31, 2022 15,000 Thereafter — Total future minimum lease payments 3,301,000 Less: imputed interest (228,000 ) Less: current portion (1,293,000 ) Total Long Term Portion $ 1,780,000 |
STOCKHOLDERS' EQUITY (Tables)
STOCKHOLDERS' EQUITY (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Stockholders Equity Tables | |
Equity | Shares Warrants Date Total Investment # of shares Price # of warrants Ex Price 11/29/2017 $300,000 217,390 $1.38 72,000 $1.50 12/5/2017 400,000 320,000 $1.25 96,000 $1.50 12/29/2017 235,000 188,000 $1.25 56,400 $1.50 Subtotal- 2017 935,000 725,390 224,400 1/9/2018 1,065,000 852,000 $1.25 255,600 $1.50 Total Offering $2,000,000 1,577,390 480,000 |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Commitments And Contingencies Tables | |
Future minimum lease payments | Fifth Avenue Lamar Street Motor Parkway Porter Street For the year ending Annual Rent Annual Rent Annual Rent Annual Rent Total Rents December 31, 2018 $ 769,000 $ 300,000 $ 110,000 $ 115,000 $ 1,294,000 December 31, 2019 792,000 — 113,000 48,000 953,000 December 31, 2020 817,000 — 116,000 — 933,000 December 31, 2021 842,000 — 103,000 — 945,000 December 31, 2022 866,000 — — — 866,000 Thereafter 3,501,000 — — — 3,501,000 Total Rents $ 7,587,000 $ 300,000 $ 442,000 $ 163,000 $ 8,492,000 |
INCOME TAXES (Tables)
INCOME TAXES (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Disclosure 14.Income Taxes Tables Abstract | |
Provision for (benefit from) income taxes | 2017 2016 Current Federal tax refund $ (178,000 ) $ — State 8,000 38,000 Prior Year overaccruals Federal — — State (27,000 ) — Total (Benefit) Expense (197,000 ) 38,000 Deferred Tax Benefit — (4,962,000 ) Valuation Allowance — 7,025,000 Net Provision for (Benefit from) Income Taxes $ (197,000 ) $ 2,101,000 |
Reconciliation of our income tax rate | 2017 2016 U.S. statutory income tax rate 34.00 % 34.00 % State taxes 0.09 % 1.50 % Permanent differences, overaccruals and non-deductible items -0.22 % 0.08 % Rate change and provision to return true-up -22.60 % 0.85 % Expired stock options -0.19 % -0.15 % Deferred tax valuation allowance -10.09 % -51.64 % Total 0.99 % -15.36 % |
Deferred tax assets | December 31, December 31, 2017 2016 Deferred tax assets Current: Net operating losses $ 7,730,000 $ 4,754,000 Bad debts 135,000 413,000 Inventory - 263A adjustment 591,000 — Accounts payable, accrued expenses and reserves — 930,000 Total current deferred tax assets before valuation allowance 8,456,000 6,097,000 Valuation allowance (8,456,000 ) (6,097,000 ) Total current deferred tax assets after valuation allowance — — Non-current: Section 1231 loss carry forward — 4,000 Stock based compensation - options and restricted stock 124,000 164,000 Capitalized engineering costs 281,000 431,000 Deferred rent 299,000 468,000 Amortization - NTW Transaction 519,000 1,324,000 Inventory reserves 960,000 1,157,000 Deferred gain on sale of real estate 80,000 121,000 Other 114,000 160,000 Total non-current deferred tax assets before valuation allowance 2,377,000 3,829,000 Valuation allowance (758,000 ) (928,000 ) Total non-current deferred tax assets after valuation allowance 1,619,000 2,901,000 Deferred tax liabilities: Property and equipment (1,619,000 ) (2,595,000 ) Amortization – NTW Goodwill — (33,000 ) Amortization – Welding Transaction — (273,000 ) Total non-current deferred tax liabilities (1,619,000 ) (2,901,000 ) Net non-current deferred tax asset $ — $ — |
STOCK OPTIONS AND WARRANTS (Tab
STOCK OPTIONS AND WARRANTS (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Fair values of stock options granted | 2017 2016 Risk-free interest rates 1.72 – 1.81 % 0.73% - 2.04 % Expected life (in years) 4.9 5 .0 Expected volatility 82%-85 % 31%-59 % Dividend yield 0.0 % 0.0 % Weighted-average grant date fair value per share $0.90 $1.88 |
Company's stock options | Options Wtd. Avg. Exercise Price Balance, December 31, 2015 564,342 $ 7.35 Granted during the period 128,000 5.28 Exercised during the period (24,905 ) 2.95 Terminated/Expired during the period (31,095 ) 8.47 Balance, December 31, 2016 636,342 7.01 Granted during the period 695,000 1.45 Exercised during the period (0 ) — Terminated/Expired during the period (282,715 ) 7.66 Balance, December 31, 2017 1,048,627 $ 3.20 Exercisable at December 31, 2017 416,125 $ 5.43 |
Summary information about stock options | Range of Exercise Prices Number Outstanding Wtd. Avg. Life Wtd. Avg. Exercise Price $0.00 - $5.00 842,978 5.6 years $1.99 $5.01 - $20.00 205,655 2.7 years 8.14 $0.00 - $20.00 1,048,633 5.1 years $3.20 |
Company's outstanding warrants | Warrants Wtd. Avg. Exercise Price Wtd. Ave. Remaining Contractual Life (years) Balance, December 31, 2015 164,585 $ 7.85 1.15 Issued 675,691 1.07 2.36 Exercised during the period — — — Terminated/Expired during the period — — — Balance, December 31, 2016 840,276 5.13 4.01 Granted during the period 971,611 2.61 4.42 Terminated/Expired during the period (107,785 ) 6.30 — Balance, December 31, 2017 1,704,102 $ 3.62 4.04 Exercisable at December 31, 2017 1,704,102 $ 3.62 4.04 |
Fair values of warrants granted | 2017 2016 Risk-free interest rates 1.85%-2.20% 1.40% - 2.04% Expected life (in years) 5 5 Expected volatility 63%-115% 33%-59% Dividend yield 0 0 Weighted-average grant date fair value per share $1.10-$2.89 $0.81-$1.40 |
SEGMENT REPORTING (Tables)
SEGMENT REPORTING (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
IncomeTaxRateReconciliation | |
Operating segments | Year Ended December 31, 2017 2016 COMPLEX MACHINING Net Sales $ 38,489,000 $ 37,124,000 Gross Profit 4,906,000 4,382,000 Pre Tax Loss (2,839,000 ) (5,432,000 ) Assets 43,207,000 45,073,000 AEROSTRUCTURES & ELECTRONICS Net Sales 4,574,000 3,224,000 Gross Profit 507,000 38,000 Pre Tax Loss (4,233,000 ) (3,240,000 ) Assets 1,021,000 4,596,000 TURBINE ENGINE COMPONENTS Net Sales 6,806,000 10,973,000 Gross Loss (546,000 ) (151,000 ) Pre Tax Loss (7,599,000 ) (4,084,000 ) Assets 6,157,000 17,235,000 CORPORATE Net Sales — — Gross Profit — — Pre Tax Loss (1,399,000 ) (10,000 ) Assets 288,000 649,000 CONSOLIDATED Net Sales 49,869,000 51,321,000 Gross Profit 4,867,000 4,269,000 Pre Tax Loss (16,070,000 ) (12,766,000 ) (Benefit from) provision for Income Taxes (197,000 ) 2,101,000 Loss from Discontinued Operations (6,678,000 ) (756,000 ) Assets Held for Sale 10,082,000 15,247,000 Net (Loss) Income (22,551,000 ) (15,623,000 ) Assets $ 60,755,000 $ 82,800,000 |
DISCONTINUED OPERATIONS (Detail
DISCONTINUED OPERATIONS (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Acquisition Details | ||
Net revenue | $ 13,129,000 | $ 15,954,000 |
Cost of goods sold | 11,245,000 | 13,143,000 |
Gross profit | 1,884,000 | 2,451,000 |
Operating expenses: | ||
Selling, general and administrative | 2,488,000 | 3,105,000 |
Loss on impairment of assets | 1,085,000 | 0 |
Loss on assets held for sale | 1,053,000 | 0 |
Impairment of Goodwill | 3,417,000 | 0 |
Total operating expenses | 8,553,000 | 3,105,000 |
Interest expense | 12,000 | 96,000 |
Other income (expense) | 3,000 | 5,000 |
Loss from discontinued operations before income taxes | (6,678,000) | (745,000) |
Provision for income taxes | 0 | 11,000 |
Net income (loss) from discontinued operations | (6,678,000) | (756,000) |
Net cash used in operating activities - discontinued operation | (2,765,055) | (749,757) |
Net cash used in investing activities - discontinued operation | (33,244) | (172,906) |
Net cash provided by financing activities - discontinued operations | 2,664,689 | 859,856 |
Depreciation and amortization | 374,871 | 448,215 |
Capital expenditures | $ (33,244) | $ (172,906) |
SUMMARY OF SIGNIFICANT ACCOUN40
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Disclosure 3.Summary Of Significant Accounting Policies Details Abstract | ||
Customer 1 percentage of sales | 25.50% | 21.30% |
Customer 2 percentage of sales | 20.50% | 14.60% |
Customer 3 percentage of sales | 16.00% | 16.40% |
SUMMARY OF SIGNIFICANT ACCOUN41
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 1) | Dec. 31, 2017 | Dec. 31, 2016 | |
Disclosure 3.Summary Of Significant Accounting Policies Details 1Abstract | |||
Customer 1 percentage of receivables | 41.90% | 24.10% | |
Customer 2 percentage of receivables | 14.60% | 11.20% | |
Customer 3 percentage of receivables | 12.20% | [1] | |
[1] | Customer was less than 10% of gross accounts receivable at December 31, 2016. |
SUMMARY OF SIGNIFICANT ACCOUN42
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 2) - shares | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Impairment of goodwill | ||
Weighted average shares outstanding used to compute basic earnings per share | 13,230,775 | 7,579,419 |
Effect of dilutive stock options and warrants | 0 | 0 |
Weighted average shares outstanding and dilutive securities used to compute dilutive earnings per share | 13,230,775 | 7,579,419 |
SUMMARY OF SIGNIFICANT ACCOUN43
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 3) - shares | Dec. 31, 2017 | Dec. 31, 2016 |
Stock Options | 354,000 | 633,000 |
Warrants | 1,480,000 | 520,000 |
Anti dilutive Securities | 1,834,000 | 1,153,000 |
Anti Dilutive | ||
Stock Options | 146,000 | 3,000 |
Warrants | 41,000 | 321,000 |
Anti dilutive Securities | 187,000 | 324,000 |
SUMMARY OF SIGNIFICANT ACCOUN44
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) | 12 Months Ended | |
Dec. 31, 2017USD ($)Customer | Dec. 31, 2016USD ($)Customer | |
Summary Of Significant Accounting Policies Details Narrative | ||
Customers represented percentage of total sales | 62.00% | 52.30% |
Number of Customers represented percentage of total sales | 3 | 3 |
Customers represented percentage of gross accounts receivable | 68.70% | 35.30% |
Number of Customers represented percentage of gross accounts receivable | 3 | 2 |
Freight out | $ | $ 196,000 | $ 180,000 |
ACCOUNTS RECEIVABLE (Details)
ACCOUNTS RECEIVABLE (Details) - USD ($) | Dec. 31, 2017 | Dec. 31, 2016 |
Receivables [Abstract] | ||
Accounts Receivable Gross | $ 5,958,000 | $ 8,806,000 |
Allowance for Doubtful Accounts | (494,000) | (403,000) |
Accounts Receivable Net | $ 5,464,000 | $ 6,073,000 |
ACCOUNTS RECEIVABLE (Details 1)
ACCOUNTS RECEIVABLE (Details 1) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Receivables [Abstract] | ||
Allowance for Doubtful Accounts Beginning Balance | $ 403,000 | $ 196,000 |
Allowance for Doubtful Accounts Charged to Costs and Expenses | 91,000 | 274,000 |
Allowance for Doubtful Accounts Deductions From Reserves | 0 | 67,000 |
Allowance for Doubtful Accounts Ending Balance | $ 494,000 | $ 403,000 |
INVENTORY (Details)
INVENTORY (Details) - USD ($) | Dec. 31, 2017 | Dec. 31, 2016 |
Inventory Details | ||
Raw Materials | $ 5,346,000 | $ 5,513,000 |
Work In Progress | 19,947,000 | 21,903,000 |
Finished Goods | 10,122,000 | 8,928,000 |
Inventory Reserve | (4,274,000) | (3,776,000) |
Total Inventory | $ 31,141,000 | $ 32,568,000 |
INVENTORY (Details 1)
INVENTORY (Details 1) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Inventory Details 1 | ||
Reserve for Inventory, Beginning | $ (3,776,000) | $ (3,181,000) |
Additions to Reserve | (503,000) | (681,000) |
Deductions from Reserves | 5,000 | 86,000 |
Reserve for Inventory, Ending | $ (4,274,000) | $ (3,776,000) |
PROPERTY AND EQUIPMENT (Details
PROPERTY AND EQUIPMENT (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Total Property and Equipment | $ 29,993,000 | $ 28,653,000 |
Less: Accumulated Depreciation | (19,943,000) | (17,456,000) |
Property and Equipment, net | 10,050,000 | 11,197,000 |
Land [Member] | ||
Total Property and Equipment | 300,000 | 300,000 |
Buildings and Improvements [Member] | ||
Total Property and Equipment | $ 1,650,000 | 1,650,000 |
Property Plant And Equipment Useful Life | 31 years 6 months | |
Machinery and Equipment | ||
Total Property and Equipment | $ 11,554,000 | 12,172,000 |
Machinery and Equipment | Minimum | ||
Property Plant And Equipment Useful Life | 5 years | |
Machinery and Equipment | Maximum | ||
Property Plant And Equipment Useful Life | 8 years | |
Capital Lease Machinery and Equipment | ||
Total Property and Equipment | $ 6,534,000 | 5,573,000 |
Capital Lease Machinery and Equipment | Minimum | ||
Property Plant And Equipment Useful Life | 5 years | |
Capital Lease Machinery and Equipment | Maximum | ||
Property Plant And Equipment Useful Life | 8 years | |
Tools and Instruments | ||
Total Property and Equipment | $ 8,538,000 | 7,520,000 |
Tools and Instruments | Minimum | ||
Property Plant And Equipment Useful Life | 1 year 6 months | |
Tools and Instruments | Maximum | ||
Property Plant And Equipment Useful Life | 7 years | |
Automotive Equipment | ||
Total Property and Equipment | $ 172,000 | 195,000 |
Property Plant And Equipment Useful Life | 5 years | |
Furniture and Fixtures | ||
Total Property and Equipment | $ 311,000 | 312,000 |
Furniture and Fixtures | Minimum | ||
Property Plant And Equipment Useful Life | 5 years | |
Furniture and Fixtures | Maximum | ||
Property Plant And Equipment Useful Life | 8 years | |
Leasehold Improvements | ||
Total Property and Equipment | $ 528,000 | 525,000 |
Computers and Software | ||
Total Property and Equipment | $ 406,000 | $ 406,000 |
Computers and Software | Minimum | ||
Property Plant And Equipment Useful Life | 4 years | |
Computers and Software | Maximum | ||
Property Plant And Equipment Useful Life | 6 years |
PROPERTY AND EQUIPMENT (Detai50
PROPERTY AND EQUIPMENT (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Property, Plant and Equipment [Abstract] | ||
Depreciation expense | $ 2,723,000 | $ 3,347,000 |
INTANGIBLE ASSETS (Details)
INTANGIBLE ASSETS (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Customer Relationships | $ 4,925,000 | $ 4,925,000 |
Trade Names | 0 | 0 |
Technical Know-how | 0 | 0 |
Non-Compete | 50,000 | 50,000 |
Professional Certifications | 0 | 0 |
Total Intangible Assets | 4,975,000 | 4,975,000 |
Less: Accumulated Amortization | (4,975,000) | (4,504,000) |
Intangible Assets, net | $ 0 | $ 471,000 |
Customer Relationships [Member] | Minimum | ||
Intangible Assets Useful Life | 5 years | |
Customer Relationships [Member] | Maximum | ||
Intangible Assets Useful Life | 14 years | |
Trade Names [Member] | Minimum | ||
Intangible Assets Useful Life | 15 years | |
Trade Names [Member] | Maximum | ||
Intangible Assets Useful Life | 20 years | |
Technical Know How [Member] | ||
Intangible Assets Useful Life | 10 years | |
Non Compete [Member] | ||
Intangible Assets Useful Life | 5 years | |
Professional Certifications [Member] | Minimum | ||
Intangible Assets Useful Life | 3 months | |
Professional Certifications [Member] | Maximum | ||
Intangible Assets Useful Life | 2 years |
INTANGIBLE ASSETS (Details Narr
INTANGIBLE ASSETS (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Notes to Financial Statements | ||
Amortization of the intangibles | $ 673,000 | $ 1,279,000 |
ASSETS HELD FOR SALE AND LIAB53
ASSETS HELD FOR SALE AND LIABILITES DIRECLTY ASSOCIATED (Details) - USD ($) | Dec. 31, 2017 | Dec. 31, 2016 |
Assets Held for Sale | ||
Assets Held for Sale | $ 10,082,000 | $ 21,297,000 |
Deferred rent | 1,197,000 | 1,218,000 |
Liabilities directly associated to Assets Held for Sale | 2,795,000 | 4,235,000 |
AMK | ||
Assets Held for Sale | ||
Cash | 40,000 | |
Accounts Receivable, net of allowance for doubtful accounts | 722,000 | |
Inventory, net of reserves | 260,000 | |
Prepaid and other assets | 96,000 | |
Property and equipment, net of accumulated depreciation | 3,478,000 | |
Intangible Assets, net of accumulated amortization | 819,000 | |
Goodwill | 635,000 | |
Assets Held for Sale | 6,050,000 | |
Accounts payable and accrued expenses | 379,000 | |
Capital lease obligations | 1,680,000 | |
Deferred revenues | 96,000 | |
Liabilities directly associated to Assets Held for Sale | 2,155,000 | |
WMI | ||
Assets Held for Sale | ||
Accounts Receivable, net of allowance for doubtful accounts | 2,217,000 | 1,976,000 |
Inventory, net of reserves | 8,065,000 | 7,283,000 |
Prepaid and other assets | 485,000 | 266,000 |
Property and equipment, net of accumulated depreciation | 878,000 | 1,022,000 |
Intangible Assets, net of accumulated amortization | 0 | 1,283,000 |
Impairment of Assets Held for Sale | (1,563,000) | 0 |
Goodwill | 0 | 3,417,000 |
Assets Held for Sale | 10,082,000 | 15,247,000 |
Accounts payable and accrued expenses | 2,138,000 | 2,010,000 |
Capital lease obligations | 11,000 | 0 |
Deferred revenues | 521,000 | 0 |
Deferred rent | 125,000 | 70,000 |
Liabilities directly associated to Assets Held for Sale | $ 2,795,000 | $ 2,080,000 |
ASSETS HELD FOR SALE AND LIAB54
ASSETS HELD FOR SALE AND LIABILITES DIRECLTY ASSOCIATED (Details 1) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Gross Profit | $ 4,867,000 | $ 4,269,000 |
WMI | ||
Assets | 10,082,000 | 15,247,000 |
AMK | ||
Net Sales | 4,511,000 | |
Gross Profit | 169,000 | |
Pre Tax (Loss) Income | (1,595,000) | |
Assets | 6,050,000 | |
WMI | ||
Net Sales | 13,129,000 | 15,594,000 |
Gross Profit | 1,884,000 | 2,451,000 |
Pre Tax (Loss) Income | $ (6,678,000) | $ (756,000) |
ACCOUNTS PAYABLE AND ACCRUED 55
ACCOUNTS PAYABLE AND ACCRUED EXPENSES (Details) - USD ($) | Dec. 31, 2017 | Dec. 31, 2016 |
Payables and Accruals [Abstract] | ||
Accounts Payable | $ 8,634,000 | $ 11,994,000 |
Accrued Expenses | 2,238,000 | 2,156,000 |
Accounts Payable and Accrued Expenses | $ 10,872,000 | $ 14,150,000 |
SALE AND LEASEBACK TRANSACTION
SALE AND LEASEBACK TRANSACTION (Details Narrative) - USD ($) | Dec. 31, 2017 | Dec. 31, 2016 |
Sale And Leaseback Transaction Details Narrative | ||
Unrecognized portion of the Sale and Leaseback gain | $ 333,000 | $ 371,000 |
NOTES PAYABLE AND CAPITAL LEA57
NOTES PAYABLE AND CAPITAL LEASE OBLIGATIONS (Details) - USD ($) | Dec. 31, 2017 | Dec. 31, 2016 |
Disclosure 9.Notes Payable And Capital Lease Obligations Details Abstract | ||
Revolving credit note payable to PNC Bank N.A. ("PNC") | $ 16,455,000 | $ 24,393,000 |
Term loan, PNC | 3,471,000 | 6,649,000 |
Capital lease obligations | 3,073,000 | 4,215,000 |
Related party notes payable, net of debt discount | 1,912,000 | 1,086,000 |
Other note payable | 1,930,000 | 627,000 |
Subtotal | 26,841,000 | 36,970,000 |
Less: Current portion of notes and capital obligations | (23,393,000) | (33,999,000) |
Notes payable and capital lease obligations, net of current portion | $ 3,448,000 | $ 2,971,000 |
NOTES PAYABLE AND CAPITAL LEA58
NOTES PAYABLE AND CAPITAL LEASE OBLIGATIONS (Details 1) | Dec. 31, 2017USD ($) |
Disclosure 9.Notes Payable And Capital Lease Obligations Details 1Abstract | |
December 31, 2018 | $ 1,478,000 |
December 31, 2019 | 1,478,000 |
December 31, 2020 | 515,000 |
December 31, 2021 | 0 |
December 31, 2022 | 0 |
Thereafter | 0 |
PNC Term Loan payable | 3,471,000 |
Less: current portion | 3,471,000 |
Long-term portion | $ 0 |
NOTES PAYABLE AND CAPITAL LEA59
NOTES PAYABLE AND CAPITAL LEASE OBLIGATIONS (Details 2) | Dec. 31, 2017USD ($) |
December 31, 2018 | $ 1,478,000 |
December 31, 2019 | 1,478,000 |
December 31, 2020 | 515,000 |
December 31, 2021 | 0 |
December 31, 2022 | 0 |
Thereafter | 0 |
Total future minimum lease payments | 3,471,000 |
Capital Leases Payable - Equipment | |
December 31, 2018 | 1,428,000 |
December 31, 2019 | 1,264,000 |
December 31, 2020 | 542,000 |
December 31, 2021 | 52,000 |
December 31, 2022 | 15,000 |
Thereafter | 0 |
Total future minimum lease payments | 3,301,000 |
Less: imputed interest | (228,000) |
Less: current portion | (1,293,000) |
Total Long Term Portion | $ 1,780,000 |
NOTES PAYABLE AND CAPITAL LEA60
NOTES PAYABLE AND CAPITAL LEASE OBLIGATIONS (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Disclosure 9.Notes Payable And Capital Lease Obligations Details 3Abstract | ||
Balance due under revolving loan | $ 16,455,000 | $ 24,393,000 |
Revolving loan interest rate | 4.50% | 4.50% |
Interest expense related to credit facilities | $ 2,122,000 | $ 1,908,000 |
Capital lease obligations | $ 3,073,000 | $ 4,215,000 |
Interest rate minimum | 4.00% | 4.00% |
Interest rate maximum | 14.00% | 14.00% |
STOCKHOLDERS' EQUITY (Details)
STOCKHOLDERS' EQUITY (Details) | 12 Months Ended |
Dec. 31, 2017USD ($)$ / sharesshares | |
Total Investment | $ | $ 2,000,000 |
Number of shares | 1,577,390 |
Number of warrants | 480,000 |
Date One | |
Total Investment | $ | $ 300,000 |
Number of shares | 217,390 |
Price | $ / shares | $ 1.38 |
Number of warrants | 72,000 |
Ex Price | $ / shares | $ 1.50 |
Date Two | |
Total Investment | $ | $ 400,000 |
Number of shares | 320,000 |
Price | $ / shares | $ 1.25 |
Number of warrants | 96,000 |
Ex Price | $ / shares | $ 1.50 |
Date Three | |
Total Investment | $ | $ 235,000 |
Number of shares | 188,000 |
Price | $ / shares | $ 1.25 |
Number of warrants | 56,400 |
Ex Price | $ / shares | $ 1.50 |
2,017 | |
Total Investment | $ | $ 935,000 |
Number of shares | 725,390 |
Number of warrants | 224,400 |
Date Four | |
Total Investment | $ | $ 1,065,000 |
Number of shares | 852,000 |
Price | $ / shares | $ 1.25 |
Number of warrants | 255,600 |
Ex Price | $ / shares | $ 1.50 |
EMPLOYEE BENEFITS PLANS (Detail
EMPLOYEE BENEFITS PLANS (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Retirement Benefits [Abstract] | ||
Employee Benefits Plans Contributions to security fund | $ 136,000 | $ 263,000 |
COMMITMENTS AND CONTINGENCIES63
COMMITMENTS AND CONTINGENCIES (Details) | Dec. 31, 2017USD ($) |
December 31, 2018 | $ 1,294,000 |
December 31, 2019 | 953,000 |
December 31, 2020 | 933,000 |
December 31, 2021 | 945,000 |
December 31, 2022 | 866,000 |
Thereafter | 3,501,000 |
Total Rents | 8,492,000 |
Fifth Avenue Annual Rent [Member] | |
December 31, 2018 | 769,000 |
December 31, 2019 | 792,000 |
December 31, 2020 | 817,000 |
December 31, 2021 | 842,000 |
December 31, 2022 | 866,000 |
Thereafter | 3,501,000 |
Total Rents | 7,587,000 |
Lamar Street Annual Rent [Member] | |
December 31, 2018 | 300,000 |
December 31, 2019 | 0 |
December 31, 2020 | 0 |
December 31, 2021 | 0 |
December 31, 2022 | 0 |
Thereafter | 0 |
Total Rents | 300,000 |
Motor Parkway Annual Rent [Member] | |
December 31, 2018 | 110,000 |
December 31, 2019 | 113,000 |
December 31, 2020 | 116,000 |
December 31, 2021 | 103,000 |
December 31, 2022 | 0 |
Thereafter | 0 |
Total Rents | 442,000 |
Porter Street Annual Rent [Member] | |
December 31, 2018 | 115,000 |
December 31, 2019 | 48,000 |
December 31, 2020 | 0 |
December 31, 2021 | 0 |
December 31, 2022 | 0 |
Thereafter | 0 |
Total Rents | $ 163,000 |
COMMITMENTS AND CONTINGENCIES64
COMMITMENTS AND CONTINGENCIES (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Commitments And Contingencies Details Narrative Abstract | ||
Rent expense | $ 1,305,000 | $ 2,429,000 |
INCOME TAXES (Details)
INCOME TAXES (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Current | ||
Federal tax refund | $ (178,000) | $ 0 |
State | 8,000 | 38,000 |
Prior year overaccruals | ||
Federal | 0 | 0 |
State | (27,000) | 0 |
Total Expense | (197,000) | 38,000 |
Deferred Tax Benefit | 0 | (4,962,000) |
Valuation Allowance | 0 | 7,025,000 |
Net Benefit from Income Taxes | $ (197,000) | $ 2,101,000 |
INCOME TAXES (Details 1)
INCOME TAXES (Details 1) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Income Taxes Details 1 | ||
U. S. statutory income tax rate | 34.00% | 34.00% |
State taxes | 0.09% | 1.50% |
Permanent differences, overaccruals and non-deductible items | (0.22%) | 0.08% |
Rate change and provision to return true-up | (22.60%) | 0.85% |
Expired stock options | (0.19%) | (0.15%) |
Deferred tax valuation allowance | (10.09%) | (51.64%) |
Total | 0.99% | (15.36%) |
INCOME TAXES (Details 2)
INCOME TAXES (Details 2) - USD ($) | Dec. 31, 2017 | Dec. 31, 2016 |
Current: | ||
Net operating losses | $ 7,730,000 | $ 4,754,000 |
Bad debts | 135,000 | 413,000 |
Inventory - 263A adjustment | 591,000 | 0 |
Account payable, accrued expenses and reserves | 0 | 930,000 |
Total current deferred tax asset before valuation allowance | 8,456,000 | 6,097,000 |
Valuation Allowance | (8,456,000) | (6,097,000) |
Total current deferred tax asset after valuation allowance | 0 | 0 |
Non- Current: | ||
Section 1231 loss carry forward | 0 | 4,000 |
Stock based compensation - options and restricted stock | 124,000 | 164,000 |
Capitalized engineering costs | 281,000 | 431,000 |
Deferred rent | 299,000 | 468,000 |
Amortization - NTW Transaction | 519,000 | 1,324,000 |
Inventory reserves | 960,000 | 1,157,000 |
Deferred gain on sale of real estate | 80,000 | 121,000 |
Other | 114,000 | 160,000 |
Total non-current deferred tax asset before valuation allowance | 2,377,000 | 3,829,000 |
Valuation allowance | (758,000) | (928,000) |
Total non-current deferred tax asset after valuation allowance | 1,619,000 | 2,901,000 |
Deferred tax liabilities: | ||
Property and equipment | (1,619,000) | (2,595,000) |
Amortization - NTW Goodwill | 0 | (33,000) |
Amortization - Welding Transaction | 0 | (273,000) |
Total non-current deferred tax liability | (1,619,000) | (2,901,000) |
Net non-current deferred tax asset | $ 0 | $ 0 |
INCOME TAXES (Details Narrative
INCOME TAXES (Details Narrative) - USD ($) | Dec. 31, 2017 | Dec. 31, 2016 |
Income Taxes Details Narrative | ||
Valuation allowance | $ 9,214,000 | $ 7,025,000 |
STOCK OPTIONS AND WARRANTS (Det
STOCK OPTIONS AND WARRANTS (Details) - $ / shares | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Expected life (in years) | 4 years 10 months 24 days | 5 years |
Dividend yield | 0.00% | 0.00% |
Weighted-average grant date fair value per share | $ 0.90 | $ 1.88 |
Minimum | ||
Risk-free interest rates | 1.72% | 0.73% |
Expected volatility | 82.00% | 31.00% |
Maximum | ||
Risk-free interest rates | 1.81% | 2.04% |
Expected volatility | 85.00% | 59.00% |
STOCK OPTIONS AND WARRANTS (D70
STOCK OPTIONS AND WARRANTS (Details 1) - Stock option - $ / shares | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Options | ||
Begining Balance | 636,342 | 564,342 |
Granted | 695,000 | 128,000 |
Exercised | 0 | (24,905) |
Terminated/Expired | (282,715) | (31,095) |
Ending Balance | 1,048,633 | 636,342 |
Exercisable at December 31, 2017 | 416,125 | |
Wtd. Avg. Exercise Price | ||
Begining Balance | $ 7.01 | $ 7.35 |
Granted | 1.45 | 5.28 |
Exercised | 0 | 2.95 |
Terminated/Expired | 7.66 | 8.47 |
Ending Balance | 3.20 | $ 7.01 |
Exercisable at December 31, 2017 | $ 5.43 |
STOCK OPTIONS AND WARRANTS (D71
STOCK OPTIONS AND WARRANTS (Details 2) - Stock option - $ / shares | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Range of Exercise Prices, lower limit | $ 0 | ||
Range of Exercise Prices, upper limit | $ 20 | ||
Remaining Number Outstanding | 1,048,633 | 636,342 | 564,342 |
Wtd. Avg. Life | 5 years 1 month 6 days | ||
Wtd. Avg. Exercise Price | $ 3.20 | $ 7.01 | $ 7.35 |
Range One | |||
Range of Exercise Prices, lower limit | 0 | ||
Range of Exercise Prices, upper limit | $ 5 | ||
Remaining Number Outstanding | 842,978 | ||
Wtd. Avg. Life | 5 years 7 months 6 days | ||
Wtd. Avg. Exercise Price | $ 1.99 | ||
Range Two | |||
Range of Exercise Prices, lower limit | 5.01 | ||
Range of Exercise Prices, upper limit | $ 20 | ||
Remaining Number Outstanding | 205,655 | ||
Wtd. Avg. Life | 2 years 8 months 12 days | ||
Wtd. Avg. Exercise Price | $ 8.14 |
STOCK OPTIONS AND WARRANTS (D72
STOCK OPTIONS AND WARRANTS (Details 3) - Warrant - $ / shares | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Warrants | ||
Begining Balance | 840,276 | 164,585 |
Granted | 971,611 | 675,691 |
Exercised | 0 | |
Terminated/Expired | (107,785) | 0 |
Ending Balance | 1,704,102 | 840,276 |
Exercisable at December 31, 2017 | 1,704,102 | |
Wtd. Avg. Exercise Price | ||
Begining Balance | $ 5.13 | $ 7.85 |
Granted | 2.61 | 1.07 |
Exercised | 0 | |
Terminated/Expired | 6.30 | 0 |
Ending Balance | 3.62 | $ 5.13 |
Exercisable at December 31, 2017 | $ 3.62 | |
Wtd. Ave. Remaining Contractual Life (years) | ||
Begining Balance | 4 years 5 months 1 day | 1 year 1 month 24 days |
Granted | 4 years 5 months 1 day | 2 years 4 months 10 days |
Ending Balance | 4 years 14 days | 4 years 4 days |
Exercisable at December 31, 2017 | 4 years 14 days |
STOCK OPTIONS AND WARRANTS (D73
STOCK OPTIONS AND WARRANTS (Details 4) - $ / shares | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Expected life (in years) | 4 years 10 months 24 days | 5 years |
Dividend yield | 0.00% | 0.00% |
Weighted-average grant date fair value per share | $ 0.90 | $ 1.88 |
Minimum | ||
Risk-free interest rates | 1.72% | 0.73% |
Expected volatility | 82.00% | 31.00% |
Maximum | ||
Risk-free interest rates | 1.81% | 2.04% |
Expected volatility | 85.00% | 59.00% |
Warrant | ||
Expected life (in years) | 5 years | 5 years |
Dividend yield | 0.00% | 0.00% |
Warrant | Minimum | ||
Risk-free interest rates | 1.85% | 1.40% |
Expected volatility | 63.00% | 33.00% |
Weighted-average grant date fair value per share | $ 1.10 | $ 0.81 |
Warrant | Maximum | ||
Risk-free interest rates | 2.20% | 2.04% |
Expected volatility | 115.00% | 59.00% |
Weighted-average grant date fair value per share | $ 2.89 | $ 1.40 |
STOCK OPTIONS AND WARRANTS (D74
STOCK OPTIONS AND WARRANTS (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Stock compensation expense | $ 332,000 | $ 167,000 |
Unrecognized compensation cost related to non-vested stock option awards | $ 470,233 | |
Unrecognized compensation cost related to non-vested stock option awards, period | 3 years | |
Weighted-average grant date fair value per share | $ 0.90 | $ 1.88 |
Fair value of shares vested | $ 235,550 | $ 63,830 |
Stock option | ||
Granted during the period, Options | 695,000 | 128,000 |
Options exercisable | 416,125 |
SEGMENT REPORTING (Details)
SEGMENT REPORTING (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Gross Profit | $ 4,867,000 | $ 4,269,000 |
Loss from Discontinued Operations | (6,678,000) | (756,000) |
COMPLEX MACHINING | ||
Net Sales | 38,489,000 | 37,124,000 |
Gross Profit | 4,906,000 | 4,382,000 |
Pre Tax Loss | (2,839,000) | (5,432,000) |
Assets | 43,207,000 | 45,073,000 |
AEROSTRUCTURES & ELECTRONICS | ||
Net Sales | 4,574,000 | 3,224,000 |
Gross Profit | 507,000 | 38,000 |
Pre Tax Loss | (4,233,000) | (3,240,000) |
Assets | 1,021,000 | 4,596,000 |
TURBINE ENGINE COMPONENTS | ||
Net Sales | 6,806,000 | 10,973,000 |
Gross Profit | (546,000) | (151,000) |
Pre Tax Loss | (7,599,000) | (4,084,000) |
Assets | 6,157,000 | 17,235,000 |
CORPORATE | ||
Net Sales | 0 | 0 |
Gross Profit | 0 | 0 |
Pre Tax Loss | (1,399,000) | (10,000) |
Assets | 288,000 | 649,000 |
CONSOLIDATED | ||
Net Sales | 49,869,000 | 51,321,000 |
Gross Profit | 4,867,000 | 4,269,000 |
Pre Tax Loss | (16,070,000) | (12,766,000) |
Benefit from Income Taxes | (197,000) | 2,101,000 |
Loss from Discontinued Operations | (6,678,000) | (756,000) |
Assets Held for Sale | 10,082,000 | 15,247,000 |
Net (Loss) Income | (22,551,000) | (15,623,000) |
Assets | $ 60,755,000 | $ 82,800,000 |