Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2020 | May 11, 2020 | |
Document and Entity Information [Abstract] | ||
Entity Registrant Name | AIR INDUSTRIES GROUP | |
Entity Central Index Key | 0001009891 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2020 | |
Document Fiscal Period Focus | Q1 | |
Document Fiscal Year Focus | 2020 | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business | true | |
Entity Emerging Growth Company | false | |
Entity Current Reporting Status | Yes | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 30,579,075 | |
Entity File Number | 001-35927 | |
Entity Interactive Data Current | Yes | |
Entity Incorporation State Country Code | NV |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) | Mar. 31, 2020 | Dec. 31, 2019 |
Current Assets | ||
Cash and Cash Equivalents | $ 1,494,000 | $ 1,294,000 |
Accounts Receivable, Net of Allowance for Doubtful Accounts of $1,128,000 and $859,000 | 8,623,000 | 7,858,000 |
Inventory | 29,808,000 | 28,646,000 |
Prepaid Expenses and Other Current Assets | 453,000 | 447,000 |
Income Tax Receivable | 1,416,000 | |
Total Current Assets | 41,794,000 | 38,245,000 |
Property and Equipment, Net | 7,130,000 | 7,578,000 |
Operating Lease Right-Of-Use-Asset | 3,501,000 | 3,623,000 |
Deferred Financing Costs, Net, Deposits and Other Assets | 1,463,000 | 1,481,000 |
Goodwill | 163,000 | 163,000 |
TOTAL ASSETS | 54,051,000 | 51,090,000 |
Current Liabilities | ||
Notes Payable and Finance Lease Obligations - Current Portion | 2,255,000 | 3,139,000 |
Notes Payable - Related Party - Current Portion | 5,923,000 | 6,862,000 |
Accounts Payable and Accrued Expenses | 9,389,000 | 8,105,000 |
Operating Lease Liabilities - Current Portion | 722,000 | 697,000 |
Deferred Gain on Sale - Current Portion | 38,000 | 38,000 |
Deferred Revenue | 1,004,000 | 1,011,000 |
Liability Related to the Sale of Future Proceeds from Disposition of Subsidiary - Current Portion | 200,000 | 200,000 |
Income Taxes Payable | 15,000 | 27,000 |
Total Current Liabilities | 19,546,000 | 20,079,000 |
Long Term Liabilities | ||
Notes Payable and Finance Lease Obligations - Net of Current Portion | 16,732,000 | 15,949,000 |
Operating Lease Liabilities - Net of Current Portion | 4,043,000 | 4,235,000 |
Deferred Gain on Sale - Net of Current Portion | 209,000 | 219,000 |
Liability Related to the Sale of Future Proceeds from Disposition of Subsidiary - Net of Current Portion | 338,000 | 402,000 |
TOTAL LIABILITIES | 40,868,000 | 40,884,000 |
Commitments and Contingencies | ||
Stockholders' Equity | ||
Preferred Stock, par value $.001 - Authorized 3,000,000 shares, 0 shares outstanding, at both March 31, 2020 and December 31, 2019. | ||
Common Stock - Par Value $.001 - Authorized 60,000,000 Shares, 30,531,949 and 29,478,338 Shares Issued and Outstanding as of March 31, 2020 and December 31, 2019, respectively | 30,000 | 29,000 |
Additional Paid-In Capital | 79,352,000 | 77,434,000 |
Accumulated Deficit | (66,199,000) | (67,257,000) |
TOTAL STOCKHOLDERS' EQUITY | 13,183,000 | 10,206,000 |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ 54,051,000 | $ 51,090,000 |
Condensed Consolidated Balanc_2
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) | Mar. 31, 2020 | Dec. 31, 2019 |
Statement of Financial Position [Abstract] | ||
Allowance for doubtful accounts | $ 1,128,000 | $ 859,000 |
Preferred stock, par value | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized | 3,000,000 | 3,000,000 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, par value | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 60,000,000 | 60,000,000 |
Common stock, shares issued | 30,531,949 | 29,478,338 |
Common stock, shares outstanding | 30,531,949 | 29,478,338 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations (Unaudited) - USD ($) | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Income Statement [Abstract] | ||
Net Sales | $ 13,447,000 | $ 13,878,000 |
Cost of Sales | 11,266,000 | 11,604,000 |
Gross Profit | 2,181,000 | 2,274,000 |
Operating Expenses | 2,262,000 | 2,062,000 |
Loss on abandonment of Leases | (275,000) | |
Loss from Operations | (81,000) | (63,000) |
Interest and Financing Costs | (252,000) | (833,000) |
Interest Expense - Related Parties | (128,000) | (130,000) |
Other Income, Net | 105,000 | 31,000 |
Loss before Benefit from Income Taxes | (356,000) | (995,000) |
Benefit from Income Taxes | (1,414,000) | |
Income (Loss) from Continuing Operations | 1,058,000 | (995,000) |
Income from Discontinued Operations, net of tax | 72,000 | |
Net Income (Loss) | $ 1,058,000 | $ (923,000) |
Net Income (Loss) per share - Basic | ||
Continuing operations | $ 0.04 | $ (0.03) |
Discontinued operations | 0 | |
Net Income (Loss) per share - Diluted | ||
Continuing operations | 0.03 | (0.03) |
Discontinued operations | $ 0 | |
Weighted average shares outstanding - basic | 30,380,234 | 28,601,390 |
Weighted average shares outstanding - diluted | 36,521,454 | 28,601,390 |
Condensed Consolidated Statem_2
Condensed Consolidated Statements of Stockholders' Equity (Unaudited) - USD ($) | Common Stock | Additional Paid-in Capital | Accumulated Deficit | Total |
Balance at Dec. 31, 2018 | $ 28,000 | $ 76,101,000 | $ (64,523,000) | $ 11,606,000 |
Balance, shares at Dec. 31, 2018 | 28,392,853 | |||
Common stock issued for directors fees | 131,000 | 131,000 | ||
Common stock issued for directors fees, shares | 147,830 | |||
Costs related to issuance of stock | (58,000) | (58,000) | ||
Stock Compensation Expense | 233,000 | 233,000 | ||
Other Adjustments - Shares Issued, shares | 144,899 | |||
Other Adjustments - Fair Value allocation | (185,000) | (185,000) | ||
Net Income (Loss) | (923,000) | (923,000) | ||
Balance at Mar. 31, 2019 | $ 28,000 | 76,222,000 | (65,446,000) | 10,804,000 |
Balance, shares at Mar. 31, 2019 | 28,685,582 | |||
Balance at Dec. 31, 2019 | $ 29,000 | 77,434,000 | (67,257,000) | 10,206,000 |
Balance, shares at Dec. 31, 2019 | 29,478,338 | |||
Common stock issued for directors fees | 55,000 | 55,000 | ||
Common stock issued for directors fees, shares | 43,771 | |||
Costs related to issuance of stock | (145,000) | (145,000) | ||
Issuance of Common Stock | $ 1,000 | 983,000 | 984,000 | |
Issuance of Common Stock, shares | 419,597 | |||
Common Stock Issued for Convertible Notes | 885,000 | 885,000 | ||
Common Stock Issued for Convertible Notes, shares | 590,243 | |||
Stock Compensation Expense | 140,000 | 140,000 | ||
Net Income (Loss) | 1,058,000 | 1,058,000 | ||
Balance at Mar. 31, 2020 | $ 30,000 | $ 79,352,000 | $ (66,199,000) | $ 13,183,000 |
Balance, shares at Mar. 31, 2020 | 30,531,949 |
Condensed Consolidated Statem_3
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
CASH FLOWS FROM OPERATING ACTIVITIES | ||
Net Income (Loss) | $ 1,058,000 | $ (923,000) |
Adjustments to reconcile net income (loss) to net cash used in in operating activities | ||
Depreciation of property and equipment | 656,000 | 666,000 |
Non-cash employee compensation expense | 140,000 | 233,000 |
Non-cash directors compensation | 55,000 | 131,000 |
Non-cash other income recognized | (92,000) | (109,000) |
Non-cash interest expense | 28,000 | 33,000 |
Abandonment of lease | 275,000 | |
Amortization of Right-of-Use Asset | 122,000 | 124,000 |
Deferred gain on sale of real estate | (10,000) | (10,000) |
(Gain) loss on sale of equipment | 16,000 | (42,000) |
Amortization of debt discount on convertible notes payable | 78,000 | 194,000 |
Bad debt expense | 268,000 | |
Amortization of deferred financing costs | 30,000 | |
(Increase) Decrease in Operating Assets: | ||
Accounts receivable | (1,033,000) | (1,669,000) |
Inventory | (1,162,000) | 364,000 |
Prepaid expenses and other current assets | (6,000) | (115,000) |
Prepaid taxes | 41,000 | |
Income tax receivable | (1,416,000) | |
Deposits and other assets | (76,000) | (263,000) |
Increase (Decrease) in Operating Liabilities: | ||
Accounts payable and accrued expenses | 1,216,000 | (517,000) |
Operating Lease Liabilities | (167,000) | (136,000) |
Income Taxes Payable | (12,000) | (20,000) |
Deferred revenue | (7,000) | 15,000 |
NET CASH USED IN OPERATING ACTIVITIES | (314,000) | (1,728,000) |
CASH FLOWS FROM INVESTING ACTIVITIES | ||
Purchase of property and equipment | (78,000) | (30,000) |
Proceeds from sale of equipment | 84,000 | |
NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES | (78,000) | 54,000 |
CASH FLOWS FROM FINANCING ACTIVITIES | ||
Note payable - revolver - net - Sterling National Bank | 1,033,000 | |
Note payable - revolver - net - PNC | 19,000 | |
Payments of note payable - term notes - Sterling National Bank | (90,000) | |
Payments of note payable - term notes - PNC | (370,000) | |
Proceeds from sale of future proceeds from disposition of subsidiary | 800,000 | |
Transaction costs from sale of future proceeds from disposition of subsidiary | (3,000) | |
Payments of finance lease obligations | (7,000) | (284,000) |
Proceeds from issuance of common stock | 984,000 | |
Costs related to issuance of stock | (145,000) | (58,000) |
Payments of notes payable issuances- related party | (1,012,000) | |
Payments of notes payable - third party | (100,000) | |
Payments of loan payable - financed asset | (71,000) | |
NET CASH PROVIDED BY FINANCING ACTIVITIES | 592,000 | 104,000 |
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | 200,000 | (1,570,000) |
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD | 1,294,000 | 2,012,000 |
CASH AND CASH EQUIVALENTS AT END OF PERIOD | 1,494,000 | 442,000 |
Supplemental cash flow information | ||
Cash paid during the period for interest | 205,000 | 285,000 |
Cash paid during the period for income taxes | ||
Supplemental disclosure of non-cash transactions | ||
Right of Use Asset additions under ASC 842 | 4,368,000 | |
Operating Lease Liabilities under ASC 842 | 5,397,000 | |
Write-off deferred rent under ASC 842 | 1,165,000 | |
Common Stock issued for conversion of notes payable and accrued interest | $ 885,000 |
Formation and Basis of Presenta
Formation and Basis of Presentation | 3 Months Ended |
Mar. 31, 2020 | |
Formation and Basis of Presentation [Abstract] | |
FORMATION AND BASIS OF PRESENTATION | Note 1. FORMATION AND BASIS OF PRESENTATION Organization Air Industries Group is a Nevada corporation (“AIRI”). As of and for the three months ending March 31, 2020, the accompanying condensed consolidated financial statements presented are those of AIRI, and its wholly-owned subsidiaries; Air Industries Machining Corp. (“AIM”), Nassau Tool Works, Inc. (“NTW”), and the Sterling Engineering Corporation (“Sterling”), (together, the “Company”). The results of Eur-Pac Corporation (“EPC”) and Electronic Connection Corporation (“ECC”) are included in loss from discontinued operations, since operations ceased on March 31, 2019. See Note 2 for details of discontinued operations. Principal Business Activities 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. Sterling manufactures components and provides services for jet engines and ground-power turbines. The Company’s customers consist mainly of publicly traded companies in the aerospace industry. Basis of Presentation The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and with Rule 8-03 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, as filed with the Securities and Exchange Commission, from which the accompanying condensed consolidated balance sheet dated December 31, 2019 was derived. Reclassifications Certain account balances in 2019 have been reclassified to conform to the current period presentation. Closing of EPC and ECC Management completed its shut-down plan of EPC and ECC and has closed related operations during the quarter ending March 31, 2019. Impact of Covid-19 On March 11, 2020, the World Health Organization announced that infections caused by the coronavirus disease of 2019 (“COVID-19”) had become pandemic, and on March 13, 2020, the U.S. President announced a national emergency relating to the disease. National, state and local authorities have adopted various regulations and orders, including mandates on the number of people that may gather in one location and closing non-essential businesses. To date, the Company has been deemed an essential business and has not curtailed its operations. The measures adopted by various governments and agencies, as well as the likelihood that many individuals and businesses will voluntarily shut down or self-quarantine, are expected to have serious adverse impacts on domestic and foreign economies of uncertain severity and duration. The effectiveness of economic stabilization efforts which may be adopted by governments is uncertain. The likely overall economic impact of the COVID-19 pandemic will be highly negative to the general economy. In accordance with the Department of Defense guidance issued in March 2020 designating the Defense Industrial Base as a critical infrastructure workforce, the Company’s facilities have continued to operate in support of essential products and services required to meet national security commitments to the U.S. government and the U.S. military, however, facility closures or work slowdowns or temporary stoppages could occur. Although the Company’s facilities are open, we have been unable to operate at full capacity or achieve high levels of productivity due to the implementation of enhanced safety procedures and increased employee absenteeism. Financial impacts related to COVID-19, including actions and costs in response to the pandemic, were not material to the Company’s first quarter 2020 financial position, results of operations or cash flows. Going forward, the Company currently expects the COVID–19 crisis to result in a reduction to 2020 revenue and operating margins in portions of its business driven primarily by supplier disruption, changes in employee productivity, and related program delays or challenges. The Company and its employees, suppliers, customers and its global community are facing tremendous challenges and the Company cannot predict how this dynamic situation will evolve or the impact it will have. The Company has implemented procedures to promote employee safety including more frequent and enhanced cleaning and adjusted schedules and work flows to support physical distancing. These actions will result in increased operating costs. In addition, a number of the Company’s suppliers and customers have suspended or otherwise reduced their operations, and the Company is experiencing some supply chain shortages. Suppliers are also experiencing liquidity pressures and disruptions to their operations as a result of COVID-19. The Company also has large numbers of employees working from home. On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) was signed into law. The CARES Act provides aid to small businesses through programs administered by the Small Business Administration (“SBA”). The CARES Act includes, among other things, includes provisions relating to payroll tax credits and deferrals, net operating loss carryback periods, alternative minimum tax credits and technical corrections to tax depreciation methods for qualified improvement property. The CARES Act also established a Paycheck Protection Program (“PPP”), whereby certain small businesses are eligible for a loan to fund payroll expenses, rent, and related costs. In May 2020, AIM, NTW and Sterling (each a “Borrower”) entered into government subsidized loans with Sterling National Bank (“SNB”) as the lender in an aggregate principal amount of $2.4 million (“SBA Loans”). Each SBA Loan is evidenced by a promissory note (“Note”). Subject to the terms of the Note, the SBA Loan bears interest at a fixed rate of one percent (1%) per annum, with the first six months of interest deferred, has an initial term of two years, and is unsecured and guaranteed by the SBA. At least 75% of the proceeds of each Loan must be used for payroll and payroll-related costs, in accordance with the applicable provisions of the federal statute authorizing the loan program administered by the SBA and the rules promulgated thereunder (the “Loan Program”). The Borrower may apply to SNB for forgiveness of a portion of the SBA Loan in accordance the applicable provisions of the federal statute authorizing the Loan Program. Each Note provides for customary events of default including, among other things, cross-defaults on any other loan with SNB. Each SBA Loan may be accelerated upon the occurrence of an event of default. In addition, as a result of the passage of the CARES Act, the Company filed a net operating loss carryback claim in the amount of $1,416,000. See Note 10. We believe the Company will have enough cash on hand to support the Company’s activities at least through June 1, 2021. Subsequent Events Management has evaluated subsequent events through the date of this filing. |
Discontinued Operations
Discontinued Operations | 3 Months Ended |
Mar. 31, 2020 | |
Discontinued Operations and Disposal Groups [Abstract] | |
DISCONTINUED OPERATIONS | Note 2. DISCONTINUED OPERATIONS As discussed in Note 1, the Company disposed of its EPC and ECC subsidiaries in March 2019. As required, the Company has retrospectively recast its condensed consolidated statements of operations for the 2019 period presented. As such, these businesses are reported as discontinued operations for the three months ended March 31, 2019. The Company has not segregated the cash flows of these businesses in the condensed 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 Condensed Consolidated Financial Statements refers to the Company's continuing operations. The following table presents the results of discontinued operations presented separately in the condensed consolidated statement of operations for the three months ended March 31, 2019: Three Months Ended March 31, 2019 (unaudited) Net revenue $ 132,000 Cost of goods sold 105,000 Gross profit 27,000 Operating expenses: Selling, general and administrative 96,000 Gain on impairment of assets 41,000 Total operating loss (28,000 ) Interest expense (1,000 ) Other income 101,000 Income from discontinued operations before income taxes 72,000 Provision for income taxes - Income from discontinued operations, net of income tax $ 72,000 Non-cash operating amounts for discontinued operations for the three months ended March 31, 2019 include depreciation and amortization of $6,000. The Company did not incur any capital expenditures for discontinued operations for the three months ended March 31, 2019. There were no other significant non-cash operating amounts or investing items of the discontinued operations for the period. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 3 Months Ended |
Mar. 31, 2020 | |
Accounting Policies [Abstract] | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | Note 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Inventory Valuation For annual periods, the Company values inventory at the lower of cost on a first-in-first-out basis or estimated net realizable value. The Company does not take physical inventories at interim quarterly reporting periods. As such, substantially all of the inventory value at March 31, 2020 and 2019 has been estimated using a gross profit percentage based on historical gross profit percentages of previous periods as applied to the net sales of the current period, as management believes that the gross profit percentage on these items are materially consistent from period to period. The remainder of the inventory value at March 31, 2020 and 2019 is estimated based on the Company's standard cost perpetual inventory system, as management believes the perpetual system computed value for these items provides a better estimate of value for that inventory. Adjustments to reconcile the annual physical inventory to the Company's books are treated as changes in accounting estimates and are recorded in the fourth quarter. Credit and Concentration Risks Net Sales and Accounts Receivable There were three customers that represented 79.9% and 73.8% of total net sales for the three months ended March 31, 2020 and 2019, respectively. This is set forth in the table below. Customer Percentage of Sales March 31, 2020 March 31, 2019 (Unaudited) (Unaudited) 1 36.20 28.80 2 31.50 31.40 3 12.20 * 4 * 13.60 * Customer was less than 10% of total net sales for the three months ended March 31, 2020 and 2019, respectively. There were two customers that represented 60.0% of gross accounts receivable at March 31, 2020 and three customers that represented 67.8% of gross accounts receivable at December 31, 2019, respectively. This is set forth in the table below. Customer Percentage of Receivables March 31, 2020 December 31, 2019 (Unaudited) 1 43.60 32.70 2 16.40 25.10 3 * 10.00 * Customer was less than 10% of Gross Accounts Receivable at March 31, 2020. Cash and Cash Equivalents 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. Major Suppliers 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. Leases The Company accounts for leases under ASC 842, "Leases". All leases are required to be recorded on the balance sheet and are classified as either operating leases or finance leases. The lease classification affects the expense recognition in the income statement. Operating lease charges are recorded entirely in operating expenses. Finance lease charges are split, where amortization of the right-of- use asset is recorded in operating expenses and an implied interest component is recorded in interest expense. Earnings (Loss) per share Basic earnings (loss) per share ("EPS") is computed by dividing the net income (loss) applicable to common stockholders by the weighted-average number of shares of common stock outstanding for the period. For purposes of calculating diluted earnings per common share, the numerator includes net income plus interest on convertible notes payable assumed converted as of the first day of the period. The denominator includes both the weighted-average number of shares of common stock outstanding during the period and the number of common stock equivalents if the inclusion of such common stock equivalents is dilutive. Dilutive common stock equivalents potentially include stock options and warrants using the treasury stock method and convertible notes payable using the if-converted method. The following is the calculation of net income (loss) applicable to common stockholders utilized to calculate EPS: Three Months Ended March 31, March 31, (Unaudited) (Unaudited) Net Income (loss) per statement of operations $ 1,058,000 $ (923,000 ) Add: Convertible Note Interest for Potential Note Conversion 170,000 - Net income (loss) used to calculate earnings per share $ 1,228,000 $ (923,000 ) The following is a reconciliation of the denominators of basic and diluted earnings per share computations: Three Months Ended March 31, March 31, (Unaudited) (Unaudited) Weighted average shares outstanding used to compute basic earnings per share 30,380,234 28,601,390 Effect of dilutive stock options and warrants 1,137,769 - Effect of dilutive convertible notes payable 5,003,451 - Weighted average shares outstanding and dilutive securities used to compute dilutive earnings per share 36,521,454 28,601,390 The following securities have been excluded from the calculation as the exercise price was greater than the average market price of the common shares: Three Months Ended March 31, March 31, (Unaudited) (Unaudited) Stock Options 234,000 861,000 Warrants 1,423,000 2,240,000 1,657,000 3,101,000 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 that period: Three Months Ended March 31, March 31, (Unaudited) (Unaudited) Stock Options - 500,000 Warrants - - - 500,000 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. Stock based compensation expense for employees amounted to $140,000 and $233,000 for the three months ended March 31, 2020 and 2019, respectively. Stock compensation expense for directors amounted to $55,000 and $131,000 for the three months ended March 31, 2020 and 2019, respectively. Stock compensation expenses for employees and directors were included in operating expenses on the accompanying Condensed Consolidated Statements of Income. 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 $163,000 at both March 31, 2020 and December 31, 2019 relates to the acquisition of NTW. 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. The COVID-19 pandemic was a triggering event for testing whether goodwill has been impaired. The goodwill amounted to $163,000 at March 31, 2020. The Company performed a qualitative assessment and determined it is not more likely than not that the fair value was less than their carrying values as of March 31, 2020. We will continue to monitor the impacts of the COVID-19 pandemic in future quarters. Changes in our forecasts or further decreases in the value of our common stock could cause book values to exceed fair values which may result in goodwill impairment charges in future periods. The Company has determined that there has been no impairment of goodwill at March 31, 2020 and 2019. Recently Issued Accounting Pronouncements In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes ("ASU 2019-12"), which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted. The Company is currently evaluating the impact of this standard on its consolidated financial statements and related disclosures. 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. |
Property and Equipment
Property and Equipment | 3 Months Ended |
Mar. 31, 2020 | |
Property, Plant and Equipment [Abstract] | |
PROPERTY AND EQUIPMENT | Note 4. PROPERTY AND EQUIPMENT The components of property and equipment at March 31, 2020 and December 31, 2019 consisted of the following: March 31, December 31, 2020 2019 (unaudited) Land $ 300,000 $ 300,000 Buildings and Improvements 1,659,000 1,650,000 31.50 years Machinery and Equipment 12,264,000 12,251,000 5 - 8 years Finance Lease Machinery and Equipment 6,495,000 6,495,000 5 - 8 years Tools and Instruments 11,219,000 11,021,000 1.50 - 7 years Automotive Equipment 148,000 177,000 5 years Furniture and Fixtures 290,000 290,000 5 - 8 years Leasehold Improvements 530,000 530,000 Term of Lease Computers and Software 428,000 425,000 4 - 6 years Total Property and Equipment 33,333,000 33,139,000 Less: Accumulated Depreciation (26,203,000 ) (25,561,000 ) Property and Equipment, net $ 7,130,000 $ 7,578,000 Depreciation expense for the three months ended March 31, 2020 and 2019 was approximately $656,000 and $660,000, respectively. Assets held under finance lease obligations are depreciated over the shorter of their related lease terms or their estimated productive lives. Depreciation of assets under finance leases is included in depreciation expense for 2020 and 2019. Accumulated depreciation on these assets was approximately $6,156,000 and $5,936,000 as of March 31, 2020 and December 31, 2019, respectively. |
Leases
Leases | 3 Months Ended |
Mar. 31, 2020 | |
Leases [Abstract] | |
LEASES | Note 5. LEASES The Company has operating and finance leases for leased office and manufacturing facilities and equipment leases. The Company leases certain machinery and equipment under finance leases and leases its offices and manufacturing facilities under operating leases. The leases have remaining lease terms of one to six years, some of which include options to extend or terminate the leases. March 31, 2020 Weighted Average Remaining Lease Term - in years 6.11 Weighted Average discount rate - % 9.50 % The aggregate undiscounted cash flows of operating lease payments, with remaining terms greater than one year are as follows: Amount For the twelve months ended (unaudited) December 31, 2020 (remaining nine months) $ 854,000 December 31, 2021 1,118,000 December 31, 2022 868,000 December 31, 2023 895,000 December 31, 2024 923,000 Thereafter 1,681,000 Total future minimum lease payments 6,339,000 Less: discount (1,574,000 ) Total operating lease maturities 4,765,000 Less: current portion of operating lease liabilities (722,000 ) Total long term portion of operating lease maturities $ 4,043,000 |
Notes Payable, Related Party No
Notes Payable, Related Party Notes Payable and Finance Lease Obligations | 3 Months Ended |
Mar. 31, 2020 | |
Notes and Loans Payable [Abstract] | |
NOTES PAYABLE, RELATED PARTY NOTES PAYABLE AND FINANCE LEASE OBLIGATIONS | Note 6. NOTES PAYABLE, RELATED PARTY NOTES PAYABLE AND FINANCE LEASE OBLIGATIONS Notes payable, related party notes payable and finance lease obligations consist of the following: March 31, December 31, 2020 2019 (unaudited) Revolving credit note payable to Sterling National Bank (“SNB”) $ 13,577,000 $ 12,543,000 Term loan, SNB 3,645,000 3,800,000 Finance lease obligations 15,000 22,000 Loan Payable - financed asset 313,000 385,000 Related party notes payable, net of debt discount 5,923,000 6,862,000 Convertible notes payable-third parties, net of debt discount 1,437,000 2,338,000 Subtotal 24,910,000 25,950,000 Less: Current portion of notes payable and finance lease obligations (8,178,000 ) (10,001,000 ) Notes payable, related party notes payable and finance lease obligations, net of current portion $ 16,732,000 $ 15,949,000 Sterling National Bank (“SNB”) On December 31, 2019, the Company entered into a new loan facility (“SNB Facility”) with Sterling National Bank, (“SNB”) expiring on December 30, 2022. The new Loan Facility provides for a $16,000,000 revolving loan (“SNB revolving line of credit”) and a term loan (“SNB term loan”) with a balance of $3,800,000 at December 31, 2019. Proceeds from the SNB Facility repaid our outstanding loan facility (“PNC Facility”) with PNC Bank N.A. (“PNC”). The formula to determine the amounts of revolving advances permitted to be borrowed under the SNB revolving line of credit is based on a percentage of the Company’s eligible receivables and eligible inventory (as defined in the SNB Facility). Each day, the Company’s cash collections are swept directly by SNB to reduce the SNB revolving loan balance and the Company then borrows according to a borrowing base formula. The Company’s receivables are payable directly into a lockbox controlled by SNB (subject to the terms of the SNB Facility). The repayment terms of the SNB term loan provide for monthly principal installments in the amount of $45,238, payable on the first business day of each month, beginning on February 1, 2020, with a final payment of any unpaid balance of principal and interest payable on December 30, 2022. In addition, for so long as the SNB term loan remains outstanding, if Excess Cash Flow (as defined) is a positive number for any fiscal year, beginning with the year ending December 31, 2020, the Company shall pay to SNB an amount equal to the lesser of (i) twenty-five percent (25%) of the Excess Cash Flow for such Fiscal Year and (ii) the outstanding principal balance of the term loan. Such payment shall be made to SNB and applied to the outstanding principal balance of the term loan, on or prior to April 15 of the Fiscal Year immediately following such Fiscal Year. The Company may voluntarily prepay balances under the SNB Facility. Any prepayment of less than all of the outstanding principal of the SNB term loan is applied to the principal of the SNB term loan. The terms of the SNB Facility require that, among other things, the Company maintain a specified Fixed Charge Coverage Ratio of 1.25 to 1.00 at the end of each Fiscal Quarter beginning with the Fiscal Quarter ending March 31, 2020. In addition, the Company is limited in the amount of Capital Expenditures it can make. As of March 31, 2020 the Company was in compliance with all loan covenants. The SNB Facility also restricts the amount of dividends the Company may pay to its stockholders. Substantially all of the Company’s assets are pledged as collateral under the SNB Facility. As of March 31, 2020 the future minimum principal payments for the SNB term loan are as follows: For the twelve months ending Amount December 31, 2020 (remainder of the year) $ 406,000 December 31, 2021 543,000 December 31, 2022 2,760,000 SNB Term Loan payable 3,709,000 Less: debt issuance costs (64,000 ) Total SNB Term Loan payable, net of debt issuance costs 3,645,000 Less: Current portion 543,000 Long-term portion $ 3,102,000 Under the terms of the SNB Facility, both the SNB revolving line of credit and the SNB term loan will bear an interest rate equal to 30-day LIBOR, (with a 1% floor), plus 2.5%. The average interest rate charged during the period ended March 31, 2020 was 4.0%. As of March 31, 2020, our debt to SNB in the amount of $17,222,000 consisted of the SNB revolving line of credit note in the amount of $13,577,000 and the SNB term loan in the amount of $3,645,000. As of December 31, 2019, our debt to SNB in the amount of $16,343,000 consisted of the SNB revolving line of credit note in the amount of $12,543,000 and the SNB term loan in the amount of $3,800,000. Interest expense related to the SNB Facility amounted to approximately $120,000 for the three months ended March 31, 2020. PNC Bank N.A. (“PNC”) The Company previously maintained the PNC Facility. Under the PNC Facility, substantially all of the Company’s assets were pledged as collateral. The PNC Facility provided for a $15,000,000 revolving line of credit (“PNC revolving line of credit”) and a term loan (“PNC term loan”). Interest expense related to the PNC Facility amounted to approximately $512,000 for the three months ended March 31, 2019. On December 31, 2019, both the PNC revolving line of credit and PNC term loan were paid in full and all assets that were previously pledged as collateral were released. Loan Payable – Financed Asset The Company is committed to a loan for manufacturing equipment purchased during 2019. The loan payable obligation totaled $313,000 and $385,000 as of March 31, 2020 and December 31, 2019, respectively. The loan bears interest at 3% per annum. The future minimum loan payments, are as follows: For the twelve months ending Amount December 31, 2020 (remainder of the year) $ 216,000 December 31, 2021 97,000 Loan Payable - Financed Asset 313,000 Less: Current portion (289,000 ) Long-term portion $ 24,000 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 its services. On January 15, 2019, the Company issued its 7% senior subordinated convertible promissory notes due December 31, 2020, each in the principal amount of $1,000,000 (together, the “7% Notes”), to Michael Taglich and Robert Taglich, each for a purchase price of $1,000,000. The 7% Notes bear interest at the rate of 7% per annum, are convertible into shares of the Company’s common stock at a conversion price of $0.93 per share, subject to the anti-dilution adjustments set forth in the 7% Notes and are subordinate to the Company’s indebtedness under the SNB Facility. In connection with the 7% Notes, the Company paid Taglich Brothers, Inc. a fee of $80,000 (4% of the purchase price of the 7% Notes), paid in the form of a promissory note having terms substantially identical to the 7% Notes. On June 26, 2019, the Company was advanced $250,000 from each of Michael and Robert Taglich. These notes bear interest at a rate of 12% per annum. In connection with these notes, the Company issued 37,500 shares of stock to each of Michael and Robert Taglich. The maturity date of these notes was June 30, 2020 but have been extended to December 31, 2020. On October 21, 2019, the Company was advanced $1,000,000 from Michael Taglich. This advance was repaid on January 2, 2020. The interest rate on this advance was 12% per annum. Private Placement of Subordinated Notes due May 31, 2019, together with Shares of Common Stock On March 29, 2018 and April 4, 2018, Michael Taglich and Robert Taglich advanced $1,000,000 and $100,000, respectively, to the Company for use as working capital. The Company subsequently issued its Subordinated Notes originally due May 31, 2019 to Michael Taglich and Robert Taglich, together with shares of common stock, in the financing described below, to evidence its obligation to repay the foregoing advances. In May 2018, the Company issued $1,200,000 of Subordinated Notes due May 31, 2019 (the “2019 Notes”), together with a total of 214,762 shares of common stock to Michael Taglich, Robert Taglich and another accredited investor. As part of the financing, the Company issued to Michael Taglich $1,000,000 principal amount of 2019 Notes and 178,571 shares of common stock for a purchase price of $1,000,000 and to Robert Taglich $100,000 principal amount of 2019 Notes and 17,857 shares of common stock. The Company issued and sold a 2019 Note in the principal amount of $100,000, plus 18,334 shares of common stock to the other accredited investor for a purchase price of $100,000. This additional note was paid in full on January 2, 2020. Interest on the 2019 Notes is payable on the outstanding principal amount thereof at the rate of one percent (1%) per month, payable monthly commencing June 30, 2018. Upon the occurrence and continuation of a failure to pay accrued interest, interest shall accrue and be payable on such amount at the rate of 1.25% per month; provided that upon the occurrence and continuation of a failure to timely pay the principal amount of the 2019 Note, interest shall accrue and be payable on such principal amount at the rate of 1.25% per month and shall no longer be payable on interest accrued but unpaid. The 2019 Notes are subordinate to the Company’s obligations to SNB. Taglich Brothers acted as placement agent for the offering and received a commission in the aggregate amount of 4% of the amount invested which was paid in kind. During the second quarter of 2019, the maturity date of the 2019 Notes was extended to June 30, 2020. The interest rate of the notes remains at 12% per annum. In connection with the extension, 180,000 shares of common stock were issued on a pro-rata basis to each of the note holders, including 150,000 shares to Michael Taglich and 15,000 shares to Robert Taglich at $1.01 per share or $182,000. The costs have been recorded as a debt discount, and are being accreted over the revised term. In connection with the SNB Loan facility, Michael and Robert Taglich agreed to extend the maturity date of the 2019 Notes to December 31, 2020. 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 SNB Facility. Interest on the 8% 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 8% Notes, provided that if accrued interest payable on $1,269,000 principal amount of the 8% Notes issued in December 2016 is paid in additional 8% 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. Related party advances and notes payable, net of debt discounts to Michael and Robert Taglich, and their affiliated entities, totaled $5,923,000 and $6,862,000, as of March 31, 2020 and December 31, 2019, respectively. Unamortized debt discounts related to these notes amounted to $153,000 and $226,000 as of March 31, 2020 and December 31, 2019, respectively. Interest incurred on these related party notes amounted to approximately $128,000 and $130,000 for the three months ended March 31, 2020 and 2019, respectively. Amortization of debt discount incurred on these related party notes amounted to approximately $73,000 and $130,000 for the three months ended March 31, 2020 and 2019. The amortization of the debt discount is included in interest and financing costs in the Condensed Consolidated Statement of Operations. All related party notes are due on December 31, 2020. There are no principal payments due on these notes until such time. Convertible Notes Payable – Third Parties In January 2020, the third party holders of $805,000 principal of the 8% Notes with accrued interest thereon of $80,000 converted their notes into approximately 590,243 shares of common stock at a per share price of $1.50. 8% Notes payable to third parties totaled $1,437,000 and $2,338,000, as of March 31, 2020 and December 31, 2019, respectively. Interest incurred on the 8% Notes amounted to approximately $42,000 and $40,000 for the three months ended March 31, 2020 and 2019, respectively. Unamortized debt discounts related to these notes amounted to $3,000 and $7,000 as of March 31, 2020 and December 31, 2019, respectively. Amortization of debt discount on the 8% Notes amounted to approximately $4,000 and $120,000 for the three months ended March 31, 2020 and 2019, respectively. These costs are included in interest and financing costs in the Condensed Consolidated Statement of Operations. All convertible notes with third parties are due on December 31, 2020. There are no principal payments due on these notes until such time. |
Liability Related to the Sale o
Liability Related to the Sale of Future Proceeds from Disposition of Subsidiary | 3 Months Ended |
Mar. 31, 2020 | |
Placement invested percentage [Abstract] | |
LIABILITY RELATED TO THE SALE OF FUTURE PROCEEDS FROM DISPOSITION OF SUBSIDIARY | NOTE 7. LIABILITY RELATED TO THE SALE OF FUTURE PROCEEDS FROM DISPOSITION OF SUBSIDIARY In connection with the sale of the Company's wholly-owned subsidiary, AMK Welding, Inc. ("AMK") to Meyer Tool, Inc., ("Meyer") in 2017, Meyer was obligated to pay the Company within 30 days after the end of each calendar quarter, commencing April 1, 2017, an amount equal to five (5%) percent of the net sales of AMK for that quarter until the aggregate payments made to the Company (the "Meyer Agreement") equals $1,500,000 (the "Maximum Amount"). As of December 31, 2018, the Company received an aggregate of $363,000 under the Meyer Agreement. In order to increase liquidity, on January 15, 2019, the Company entered into a "Purchase Agreement" with 15 accredited investors (the "Purchasers"), including Michael and Robert Taglich, pursuant to which the Company assigned to the Purchasers all of their rights, title and interest to the remaining $1,137,000 of the $1,500,000 in payments due from Meyer for the sale of AMK (the "Remaining Amount") for an immediate payment of $800,000, including $100,000 from each of Michael and Robert Taglich, and $75,000 for the benefit of the children of Michael Taglich. The timing of the payments is based upon the net sales of AMK. If the Purchasers have not received the entire Remaining Amount by March 31, 2023, they have the right to demand payment of their pro rata portion of the unpaid Remaining Amount from the Company ("Put Right"). To the extent the Purchasers exercise their Put Right, the remaining payments from Meyer will be retained by the Company. The Purchasers have agreed to pay Taglich Brothers, Inc. a fee equal to 2% per annum of the purchase price paid by such Purchasers, payable quarterly, to be deducted from the payments of the Remaining Amount, for acting as paying agent in connection with the payments from Meyer. Although the Company sold all of its rights to retain the Remaining Amount, as a result of its obligation to the Purchasers, the Company is required to account for the Remaining Amount or portion thereof as income when earned. The Company recorded the $800,000 in proceeds as a liability on its condensed consolidated balance sheet, net of transaction costs of $3,000. Transaction costs will be amortized to interest expense over the estimated life of the Purchase Agreement. As payments are remitted to the Purchasers, the balance of the recorded liability will be effectively repaid over the life of the Purchase Agreement. To determine the amortization of the recorded liability, the Company is required to estimate the total amount of future payment to be received by the Purchasers. The Company estimates that the entire Remaining Amount will be received, and accordingly, the Remaining Amount less the $800,000 purchase price received (the "Discount") will be amortized into the liability balance and recorded as interest expense. The Discount will be amortized through the earliest date that the purchasers can exercise their Put Right, using the straight line method (which is not materially different than the effective interest method) over the estimated life of the Purchase Agreement with the Purchasers. Periodically the Company will assess the estimated payments to be made to the Purchasers related to the Meyer Agreement, and to the extent the amount or timing of the payments is materially different from their original estimates, the Company will prospectively adjust the amortization of the liability. The amount or timing of the payments from Meyer are not within the Company's control. Since the inception of the Purchase Agreement, the Company estimates the effective annual interest rate over the life of the agreement to be approximately 18%. The liability is classified between the current and non-current portion of liability related to sale of future proceeds from disposition of subsidiary based on the estimated recognition of the payments to be received by the purchasers in the next 12 months from the financial statements reporting date. The Company recognized $92,000 and $109,000 of non-cash income reflected in "other income, net" on the condensed consolidated statement of operations and recorded $28,000 and $33,000 of related non-cash interest expense related to the Purchase Agreement, for the three months ended March 31, 2020 and 2019, respectively. The table below shows the activity within the liability account for the three months ended March 31, 2020: Liabilities related to sale of future proceeds from disposition of subsidiaries - as of December 31, 2019 $ 602,000 Non-Cash other income recognized (92,000 ) Non-Cash interest expense recognized 28,000 Liabilities related to sale of future proceeds from disposition of subsidiary - as of March 31, 2020 538,000 Less: unamortized transaction costs (3,000 ) Liability related to sale of future proceeds from disposition of subsidiary, net $ 535,000 |
Stockholders' Equity
Stockholders' Equity | 3 Months Ended |
Mar. 31, 2020 | |
Equity [Abstract] | |
STOCKHOLDERS' EQUITY | Note 8. STOCKHOLDERS' EQUITY Common Stock – Sale of Securities In January 2020, we issued and sold 419,597 shares of our common stock for gross proceeds of $984,000 pursuant to our Form S-3 filed on October 10, 2019 as updated on January 15, 2020. Costs of the sale amounted to $145,000. The Company issued 43,771 and 147,830 shares of common stock in lieu of cash payments for director fees for the three months ended March 31, 2020 and 2019, respectively. |
Contingencies
Contingencies | 3 Months Ended |
Mar. 31, 2020 | |
Contingencies [Abstract] | |
CONTINGENCIES | Note 9. CONTINGENCIES A number of actions have been 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. On December 20, 2018, pursuant to a Stock Purchase Agreement dated as of March 21, 2018 ("SPA"), the Company completed the sale of all of the outstanding shares of its subsidiary, Welding Metallurgy, Inc. to CPI Aerostructures. On March 19, 2019, in accordance with the procedures set forth in the SPA with CPI Aerostructures, the Company received a notice from CPI claiming that the working capital deficit used to compute the purchase price was understated. The issue of the amount of the working capital deficit was submitted to BDO USA, LLP ("BDO"), acting as an expert, and it issued a report dated September 3, 2019, where it determined that the amount of the working capital deficit was approximately $4,145,870. On September 9, 2019 the Company received a demand from CPI for payment of such amount. The Company advised CPI that the determination of BDO is void because, among other things, it believes BDO exceeded the scope of its authority as set forth in the SPA. On September 27, 2019, CPI filed a notice of motion in the Supreme Court of the State of New York, County of New York, against the Company seeking, among other things, an order of specific performance requiring delivery of the funds deposited in escrow, together with the balance of the working capital deficit which it claimed, and a judgment against the Company in the amount of approximately $4,200,000 of which $2,000,000 would be satisfied by delivery of the funds in escrow. On October 7, 2019, the Company agreed to the release of $619,316 of the funds held in escrow in respect of claims related to the working capital deficit not related to the value of WMI's inventory. As of December 31, 2018, the Company has placed a reserve against substantially all of the escrowed amount and cannot estimate the amount of loss. For, among others, the reasons stated above the Company intends to contest vigorously any claim CPI may make for payment based on the BDO Report. Outside counsel for the company has advised that at this stage in the proceedings, it cannot offer an opinion as to the probable outcome. As of March 31, 2020, there has been no new developments. Contract Pharmacal Corp. commenced an action on October 2, 2018, relating to a Sublease entered into between the Company and Contract Pharmacal in May 2018 with respect to the property at 110 Plant Avenue, Hauppauge, New York. In the action Contract Pharmacal seeks damages for an amount in excess of $1,000,000 for our failure to make the entire premises available by the Sublease commencement date. The Company disputes the validity of the claims asserted by Contract Pharmacal and believes it has meritorious defenses to those claims and have recently submitted a motion in opposition to its motion for summary judgement. As of March 31, 2020, it is not possible to estimate if a loss will be incurred, as such there has been no accrual. From time to time we also may be engaged in various lawsuits and legal proceedings in the ordinary course of our business. We are currently not aware of any legal proceedings the ultimate outcome of which, in our judgment based on information currently available, would have a material adverse effect on our business, financial condition or operating results. There are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial stockholder of our common stock, is an adverse party or has a material interest averse to our interest. |
Income Taxes
Income Taxes | 3 Months Ended |
Mar. 31, 2020 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | Note 10. INCOME TAXES The Company recorded no income tax expense for the three months ended March 31, 2020 and 2019 because the estimated annual effective tax rate was zero. In determining the estimated annual effective income tax rate, the Company analyzes various factors, including projections of the Company's annual earnings and taxing jurisdictions in which the earnings will be generated, the impact of state and local income taxes, the ability to use tax credits and net operating loss carry forwards, and available tax planning alternatives. As a result of the passage of the CARES Act, the Company filed a net operating loss carryback claim in the amount of $1,416,000. The Company is currently evaluating the impact of other provisions of the CARES Act on its accounting for income taxes and does not believe it has a material impact at this time. The Company recorded no other federal income tax benefit for both of the three months ended March 31, 2020 and 2019. As of March 31, 2020 and December 31, 2019, the Company provided a full valuation allowance against its net deferred tax assets since the Company believes it is more likely than not that its deferred tax assets will not be realized. |
Segment Reporting
Segment Reporting | 3 Months Ended |
Mar. 31, 2020 | |
Segment Reporting [Abstract] | |
SEGMENT REPORTING | Note 11. 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 two operating segments: Complex Machining, which consists of AIM and NTW; and Turbine Engine Components, which consists of Sterling. Along with its operating subsidiaries, the Company reports the results of our corporate division as an independent segment. For reporting purposes, EPC and ECC have been classified as discontinued operations for the three months ending March 31, 2019. The accounting policies of each of the segments are the same as those described in the Summary of Significant Accounting Policies. Intersegment transfers are recorded at the transferors cost, and there is no intercompany profit or loss on intersegment transfers. We evaluate performance based on revenue, gross profit contribution and assets employed. Financial information about the Company's reporting segments for the three months ended March 31, 2020 and 2019 are as follows: For the Three Months Ended March 31, 2020 2019 (unaudited) (unaudited) COMPLEX MACHINING Net Sales $ 12,064,000 $ 12,418,000 Gross Profit 2,168,000 2,213,000 Pre Tax Income from continuing operations 1,170,000 1,443,000 Assets 48,732,000 45,554,000 TURBINE ENGINE COMPONENTS Net Sales 1,383,000 1,460,000 Gross Profit 13,000 61,000 Pre Tax Loss from continuing operations (126,000 ) (170,000 ) Assets 4,569,000 5,235,000 CORPORATE Net Sales - - Gross Profit - - Pre Tax Loss from continuing operations (1,400,000 ) (2,268,000 ) Assets 750,000 507,000 CONSOLIDATED Net Sales 13,447,000 13,878,000 Gross Profit 2,181,000 2,274,000 Pre Tax Loss from continuing operations (356,000 ) (995,000 ) Benefit from Income Taxes (1,414,000 ) - Income from Discontinued Operations, net of taxes - 72,000 Net Income (Loss) 1,058,000 (923,000 ) Assets $ 54,051,000 $ 51,296,000 |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 3 Months Ended |
Mar. 31, 2020 | |
Accounting Policies [Abstract] | |
Inventory Valuation | Inventory Valuation For annual periods, the Company values inventory at the lower of cost on a first-in-first-out basis or estimated net realizable value. The Company does not take physical inventories at interim quarterly reporting periods. As such, substantially all of the inventory value at March 31, 2020 and 2019 has been estimated using a gross profit percentage based on historical gross profit percentages of previous periods as applied to the net sales of the current period, as management believes that the gross profit percentage on these items are materially consistent from period to period. The remainder of the inventory value at March 31, 2020 and 2019 is estimated based on the Company's standard cost perpetual inventory system, as management believes the perpetual system computed value for these items provides a better estimate of value for that inventory. Adjustments to reconcile the annual physical inventory to the Company's books are treated as changes in accounting estimates and are recorded in the fourth quarter. |
Credit and Concentration Risks | Credit and Concentration Risks Net Sales and Accounts Receivable There were three customers that represented 79.9% and 73.8% of total net sales for the three months ended March 31, 2020 and 2019, respectively. This is set forth in the table below. Customer Percentage of Sales March 31, 2020 March 31, 2019 (Unaudited) (Unaudited) 1 36.20 28.80 2 31.50 31.40 3 12.20 * 4 * 13.60 * Customer was less than 10% of total net sales for the three months ended March 31, 2020 and 2019, respectively. There were two customers that represented 60.0% of gross accounts receivable at March 31, 2020 and three customers that represented 67.8% of gross accounts receivable at December 31, 2019, respectively. This is set forth in the table below. Customer Percentage of Receivables March 31, 2020 December 31, 2019 (Unaudited) 1 43.60 32.70 2 16.40 25.10 3 * 10.00 * Customer was less than 10% of Gross Accounts Receivable at March 31, 2020. Cash and Cash Equivalents 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. Major Suppliers 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. |
Leases | Leases The Company accounts for leases under ASC 842, "Leases". All leases are required to be recorded on the balance sheet and are classified as either operating leases or finance leases. The lease classification affects the expense recognition in the income statement. Operating lease charges are recorded entirely in operating expenses. Finance lease charges are split, where amortization of the right-of- use asset is recorded in operating expenses and an implied interest component is recorded in interest expense. |
Earnings per share | Earnings (Loss) per share Basic earnings (loss) per share ("EPS") is computed by dividing the net income (loss) applicable to common stockholders by the weighted-average number of shares of common stock outstanding for the period. For purposes of calculating diluted earnings per common share, the numerator includes net income plus interest on convertible notes payable assumed converted as of the first day of the period. The denominator includes both the weighted-average number of shares of common stock outstanding during the period and the number of common stock equivalents if the inclusion of such common stock equivalents is dilutive. Dilutive common stock equivalents potentially include stock options and warrants using the treasury stock method and convertible notes payable using the if-converted method. The following is the calculation of net income (loss) applicable to common stockholders utilized to calculate EPS: Three Months Ended March 31, March 31, (Unaudited) (Unaudited) Net Income (loss) per statement of operations $ 1,058,000 $ (923,000 ) Add: Convertible Note Interest for Potential Note Conversion 170,000 - Net income (loss) used to calculate earnings per share $ 1,228,000 $ (923,000 ) The following is a reconciliation of the denominators of basic and diluted earnings per share computations: Three Months Ended March 31, March 31, (Unaudited) (Unaudited) Weighted average shares outstanding used to compute basic earnings per share 30,380,234 28,601,390 Effect of dilutive stock options and warrants 1,137,769 - Effect of dilutive convertible notes payable 5,003,451 - Weighted average shares outstanding and dilutive securities used to compute dilutive earnings per share 36,521,454 28,601,390 The following securities have been excluded from the calculation as the exercise price was greater than the average market price of the common shares: Three Months Ended March 31, March 31, (Unaudited) (Unaudited) Stock Options 234,000 861,000 Warrants 1,423,000 2,240,000 1,657,000 3,101,000 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 that period: Three Months Ended March 31, March 31, (Unaudited) (Unaudited) Stock Options - 500,000 Warrants - - - 500,000 |
Stock-Based Compensation | 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. Stock based compensation expense for employees amounted to $140,000 and $233,000 for the three months ended March 31, 2020 and 2019, respectively. Stock compensation expense for directors amounted to $55,000 and $131,000 for the three months ended March 31, 2020 and 2019, respectively. Stock compensation expenses for employees and directors were included in operating expenses on the accompanying Condensed Consolidated Statements of Income. |
Goodwill | 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 $163,000 at both March 31, 2020 and December 31, 2019 relates to the acquisition of NTW. 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. The COVID-19 pandemic was a triggering event for testing whether goodwill has been impaired. The goodwill amounted to $163,000 at March 31, 2020. The Company performed a qualitative assessment and determined it is not more likely than not that the fair value was less than their carrying values as of March 31, 2020. We will continue to monitor the impacts of the COVID-19 pandemic in future quarters. Changes in our forecasts or further decreases in the value of our common stock could cause book values to exceed fair values which may result in goodwill impairment charges in future periods. The Company has determined that there has been no impairment of goodwill at March 31, 2020 and 2019. |
Recently Issued Accounting Pronouncements | Recently Issued Accounting Pronouncements In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes ("ASU 2019-12"), which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted. The Company is currently evaluating the impact of this standard on its consolidated financial statements and related disclosures. 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. |
Discontinued Operations (Tables
Discontinued Operations (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Discontinued Operations and Disposal Groups [Abstract] | |
Schedule of reconciliation of the major financial lines constituting the results of operations for discontinued operations | Three Months Ended March 31, 2019 (unaudited) Net revenue $ 132,000 Cost of goods sold 105,000 Gross profit 27,000 Operating expenses: Selling, general and administrative 96,000 Gain on impairment of assets 41,000 Total operating loss (28,000 ) Interest expense (1,000 ) Other income 101,000 Income from discontinued operations before income taxes 72,000 Provision for income taxes - Income from discontinued operations, net of income tax $ 72,000 |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Accounting Policies [Abstract] | |
Schedule of credit and concentration risks | Customer Percentage of Sales March 31, 2020 March 31, 2019 (Unaudited) (Unaudited) 1 36.20 28.80 2 31.50 31.40 3 12.20 * 4 * 13.60 * Customer was less than 10% of total net sales for the three months ended March 31, 2020 and 2019, respectively. Customer Percentage of Receivables March 31, 2020 December 31, 2019 (Unaudited) 1 43.60 32.70 2 16.40 25.10 3 * 10.00 * Customer was less than 10% of Gross Accounts Receivable at March 31, 2020. |
Schedule of calculation of net income (loss) applicable to common stockholders utilized to calculate EPS | Three Months Ended March 31, March 31, (Unaudited) (Unaudited) Net Income (loss) per statement of operations $ 1,058,000 $ (923,000 ) Add: Convertible Note Interest for Potential Note Conversion 170,000 - Net income (loss) used to calculate earnings per share $ 1,228,000 $ (923,000 ) |
Schedule of earnings per share | Three Months Ended March 31, March 31, (Unaudited) (Unaudited) Weighted average shares outstanding used to compute basic earnings per share 30,380,234 28,601,390 Effect of dilutive stock options and warrants 1,137,769 - Effect of dilutive convertible notes payable 5,003,451 - Weighted average shares outstanding and dilutive securities used to compute dilutive earnings per share 36,521,454 28,601,390 |
Schedule of anti-dilutive securities | Three Months Ended March 31, March 31, (Unaudited) (Unaudited) Stock Options 234,000 861,000 Warrants 1,423,000 2,240,000 1,657,000 3,101,000 Three Months Ended March 31, March 31, (Unaudited) (Unaudited) Stock Options - 500,000 Warrants - - - 500,000 |
Property and Equipment (Tables)
Property and Equipment (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Property, Plant and Equipment [Abstract] | |
Schedule of property and equipment | March 31, December 31, 2020 2019 (unaudited) Land $ 300,000 $ 300,000 Buildings and Improvements 1,659,000 1,650,000 31.50 years Machinery and Equipment 12,264,000 12,251,000 5 - 8 years Finance Lease Machinery and Equipment 6,495,000 6,495,000 5 - 8 years Tools and Instruments 11,219,000 11,021,000 1.50 - 7 years Automotive Equipment 148,000 177,000 5 years Furniture and Fixtures 290,000 290,000 5 - 8 years Leasehold Improvements 530,000 530,000 Term of Lease Computers and Software 428,000 425,000 4 - 6 years Total Property and Equipment 33,333,000 33,139,000 Less: Accumulated Depreciation (26,203,000 ) (25,561,000 ) Property and Equipment, net $ 7,130,000 $ 7,578,000 |
Leases (Tables)
Leases (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Operating Lease Liabilities Tables Abstract | |
Schedule of components of lease costs, lease term and discount rate | March 31, 2020 Weighted Average Remaining Lease Term - in years 6.11 Weighted Average discount rate - % 9.50 % |
Schedule of aggregate undiscounted cash flows of operating lease payments | Amount For the twelve months ended (unaudited) December 31, 2020 (remaining nine months) $ 854,000 December 31, 2021 1,118,000 December 31, 2022 868,000 December 31, 2023 895,000 December 31, 2024 923,000 Thereafter 1,681,000 Total future minimum lease payments 6,339,000 Less: discount (1,574,000 ) Total operating lease maturities 4,765,000 Less: current portion of operating lease liabilities (722,000 ) Total long term portion of operating lease maturities $ 4,043,000 |
Notes Payable, Related Party _2
Notes Payable, Related Party Notes Payable and Finance Lease Obligations (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Notes and Loans Payable [Abstract] | |
Schedule of notes payable, related party notes payable and finance lease obligations | March 31, December 31, 2020 2019 (unaudited) Revolving credit note payable to Sterling National Bank (“SNB”) $ 13,577,000 $ 12,543,000 Term loan, SNB 3,645,000 3,800,000 Finance lease obligations 15,000 22,000 Loan Payable - financed asset 313,000 385,000 Related party notes payable, net of debt discount 5,923,000 6,862,000 Convertible notes payable-third parties, net of debt discount 1,437,000 2,338,000 Subtotal 24,910,000 25,950,000 Less: Current portion of notes payable and finance lease obligations (8,178,000 ) (10,001,000 ) Notes payable, related party notes payable and finance lease obligations, net of current portion $ 16,732,000 $ 15,949,000 |
Schedule of future minimum principal payments for the SNB term loan | For the twelve months ending Amount December 31, 2020 (remainder of the year) $ 406,000 December 31, 2021 543,000 December 31, 2022 2,760,000 SNB Term Loan payable 3,709,000 Less: debt issuance costs (64,000 ) Total SNB Term Loan payable, net of debt issuance costs 3,645,000 Less: Current portion 543,000 Long-term portion $ 3,102,000 |
Schedule of future minimum loans payments | For the twelve months ending Amount December 31, 2020 (remainder of the year) $ 216,000 December 31, 2021 97,000 Loan Payable - Financed Asset 313,000 Less: Current portion (289,000 ) Long-term portion $ 24,000 |
Liability Related to the Sale_2
Liability Related to the Sale of Future Proceeds from Disposition of Subsidiary (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Liability Related To Sale Of Future Proceeds From Disposition Of Subsidiary | |
Schedule of activity within the liability account | Liabilities related to sale of future proceeds from disposition of subsidiaries - as of December 31, 2019 $ 602,000 Non-Cash other income recognized (92,000 ) Non-Cash interest expense recognized 28,000 Liabilities related to sale of future proceeds from disposition of subsidiary - as of March 31, 2020 538,000 Less: unamortized transaction costs (3,000 ) Liability related to sale of future proceeds from disposition of subsidiary, net $ 535,000 |
Segment Reporting (Tables)
Segment Reporting (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Segment Reporting [Abstract] | |
Schedule of operating segments | For the Three Months Ended March 31, 2020 2019 (unaudited) (unaudited) COMPLEX MACHINING Net Sales $ 12,064,000 $ 12,418,000 Gross Profit 2,168,000 2,213,000 Pre Tax Income from continuing operations 1,170,000 1,443,000 Assets 48,732,000 45,554,000 TURBINE ENGINE COMPONENTS Net Sales 1,383,000 1,460,000 Gross Profit 13,000 61,000 Pre Tax Loss from continuing operations (126,000 ) (170,000 ) Assets 4,569,000 5,235,000 CORPORATE Net Sales - - Gross Profit - - Pre Tax Loss from continuing operations (1,400,000 ) (2,268,000 ) Assets 750,000 507,000 CONSOLIDATED Net Sales 13,447,000 13,878,000 Gross Profit 2,181,000 2,274,000 Pre Tax Loss from continuing operations (356,000 ) (995,000 ) Benefit from Income Taxes (1,414,000 ) - Income from Discontinued Operations, net of taxes - 72,000 Net Income (Loss) 1,058,000 (923,000 ) Assets $ 54,051,000 $ 51,296,000 |
Formation and Basis of Presen_2
Formation and Basis of Presentation (Details) - USD ($) | 1 Months Ended | |
May 31, 2020 | Mar. 31, 2020 | |
Formation and Basis of Presentation (Textual) | ||
Net operating loss carryback | $ 1,416,000 | |
Subsequent Event [Member] | ||
Formation and Basis of Presentation (Textual) | ||
Government subsidized loans description | AIM, NTW and Sterling (each a “Borrower”) entered into government subsidized loans with Sterling National Bank ("SNB") as the lender in an aggregate principal amount of $2.4 million (“SBA Loans”). Each SBA Loan is evidenced by a promissory note (“Note”). Subject to the terms of the Note, the SBA Loan bears interest at a fixed rate of one percent (1%) per annum, with the first six months of interest deferred, has an initial term of two years, and is unsecured and guaranteed by the SBA. At least 75% of the proceeds of each Loan must be used for payroll and payroll-related costs, in accordance with the applicable provisions of the federal statute authorizing the loan program administered by the SBA and the rules promulgated thereunder (the “Loan Program”). |
Discontinued Operations (Detail
Discontinued Operations (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Discontinued Operations and Disposal Groups [Abstract] | ||
Net revenue | $ 132,000 | |
Cost of goods sold | 105,000 | |
Gross profit | 27,000 | |
Operating expenses: | ||
Selling, general and administrative | 96,000 | |
Gain on impairment of assets | 41,000 | |
Total operating loss | (28,000) | |
Interest expense | (1,000) | |
Other income | 101,000 | |
Income from discontinued operations before income taxes | 72,000 | |
Provision for income taxes | ||
Income from discontinued operations, net of income tax | $ 72,000 |
Discontinued Operations (Deta_2
Discontinued Operations (Details Textual) | 3 Months Ended |
Mar. 31, 2019USD ($) | |
Discontinued Operations (Textual) | |
Depreciation and amortization | $ 6,000 |
Summary of Significant Accoun_4
Summary of Significant Accounting Policies (Details) | 3 Months Ended | 12 Months Ended | |||
Mar. 31, 2020 | Mar. 31, 2019 | Dec. 31, 2019 | |||
Total Sales [Member] | Customer one [Member] | |||||
Percentage of Sales | 36.20% | 28.80% | |||
Total Sales [Member] | Customer two [Member] | |||||
Percentage of Sales | 31.50% | 31.40% | |||
Total Sales [Member] | Customer three [Member] | |||||
Percentage of Sales | 12.20% | [1] | |||
Total Sales [Member] | Customer four [Member] | |||||
Percentage of Sales | [1] | 13.60% | |||
Accounts receivable [Member] | Customer one [Member] | |||||
Percentage of Sales | 43.60% | 32.70% | |||
Accounts receivable [Member] | Customer two [Member] | |||||
Percentage of Sales | 16.40% | 25.10% | |||
Accounts receivable [Member] | Customer three [Member] | |||||
Percentage of Sales | [2] | 10.00% | |||
[1] | Customer was less than 10% of total net sales for the three months ended March 31, 2020 and 2019, respectively. | ||||
[2] | Customer was less than 10% of Gross Accounts Receivable at March 31, 2020. |
Summary of Significant Accoun_5
Summary of Significant Accounting Policies (Details 1) - USD ($) | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Summary Of Significant Accounting Policies | ||
Net Income (loss) per statement of operations | $ 1,058,000 | $ (923,000) |
Add: Convertible Note Interest for Potential Note Conversion | 170,000 | |
Net income (loss) to calculate earnings per share | $ 1,228,000 | $ (923,000) |
Summary of Significant Accoun_6
Summary of Significant Accounting Policies (Details 2) - shares | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Accounting Policies [Abstract] | ||
Weighted average shares outstanding used to compute basic earnings per share | 30,380,234 | 28,601,390 |
Effect of dilutive stock options and warrants | 1,137,769 | |
Effect of dilutive convertible notes payable | 5,003,451 | |
Weighted average shares outstanding and dilutive securities used to compute dilutive earnings per share | 36,521,454 | 28,601,390 |
Summary of Significant Accoun_7
Summary of Significant Accounting Policies (Details 3) - shares | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Securitied exculded from calculation due to exercise price in excess of average market share | 1,657,000 | 3,101,000 |
Antidilutive securities excluded from computation of earnings per share, amount | 500,000 | |
Warrant [Member] | ||
Securitied exculded from calculation due to exercise price in excess of average market share | 1,423,000 | 2,240,000 |
Antidilutive securities excluded from computation of earnings per share, amount | ||
Employee Stock Option [Member] | ||
Securitied exculded from calculation due to exercise price in excess of average market share | 234,000 | 861,000 |
Antidilutive securities excluded from computation of earnings per share, amount | 500,000 |
Summary of Significant Accoun_8
Summary of Significant Accounting Policies (Details Textual) | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2020USD ($)Customer / Customers | Mar. 31, 2019USD ($)Customer / Customers | Dec. 31, 2019USD ($)Customer / Customers | |
Summary of Significant Accounting Policies (Textual) | |||
Stock-based compensation | $ 140,000 | $ 233,000 | |
Goodwill | 163,000 | $ 163,000 | |
Director [Member] | |||
Summary of Significant Accounting Policies (Textual) | |||
Stock-based compensation | $ 55,000 | $ 131,000 | |
Accounts receivable [Member] | |||
Summary of Significant Accounting Policies (Textual) | |||
Number of customers | Customer / Customers | 2 | 3 | |
Concentration risks | 60.00% | 67.80% | |
Credit and concentration risks, description | Customer was less than 10% of Gross Accounts Receivable at March 31, 2020. | ||
Total Sales [Member] | |||
Summary of Significant Accounting Policies (Textual) | |||
Number of customers | Customer / Customers | 3 | 3 | |
Concentration risks | 79.90% | 73.80% | |
Credit and concentration risks, description | Customer was less than 10% of total net sales for the three months ended March 31, 2020 and 2019, respectively. | ||
NTW | |||
Summary of Significant Accounting Policies (Textual) | |||
Goodwill | $ 163,000 | $ 163,000 |
Property and Equipment (Details
Property and Equipment (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2020 | Dec. 31, 2019 | |
Total Property and Equipment | $ 33,333,000 | $ 33,139,000 |
Less: Accumulated Depreciation | (26,203,000) | (25,561,000) |
Property and Equipment, net | 7,130,000 | 7,578,000 |
Land [Member] | ||
Total Property and Equipment | 300,000 | 300,000 |
Buildings and Improvements [Member] | ||
Total Property and Equipment | $ 1,659,000 | 1,650,000 |
Property and Equipment, Useful Life | 31 years 6 months | |
Machinery and Equipment [Member] | ||
Total Property and Equipment | $ 12,264,000 | 12,251,000 |
Machinery and Equipment [Member] | Minimum [Member] | ||
Property and Equipment, Useful Life | 5 years | |
Machinery and Equipment [Member] | Maximum [Member] | ||
Property and Equipment, Useful Life | 8 years | |
Finance Lease Machinery and Equipment [Member] | ||
Total Property and Equipment | $ 6,495,000 | 6,495,000 |
Tools and Instruments [Member] | ||
Total Property and Equipment | $ 11,219,000 | 11,021,000 |
Tools and Instruments [Member] | Minimum [Member] | ||
Property and Equipment, Useful Life | 1 year 6 months | |
Tools and Instruments [Member] | Maximum [Member] | ||
Property and Equipment, Useful Life | 7 years | |
Automotive Equipment [Member] | ||
Total Property and Equipment | $ 148,000 | 177,000 |
Property and Equipment, Useful Life | 5 years | |
Furniture and Fixtures [Member] | ||
Total Property and Equipment | $ 290,000 | 290,000 |
Furniture and Fixtures [Member] | Minimum [Member] | ||
Property and Equipment, Useful Life | 5 years | |
Furniture and Fixtures [Member] | Maximum [Member] | ||
Property and Equipment, Useful Life | 8 years | |
Leasehold Improvements [Member] | ||
Total Property and Equipment | $ 530,000 | 530,000 |
Property and Equipment, Useful Life, description | Term of Lease | |
Computers and Software [Member] | ||
Total Property and Equipment | $ 428,000 | $ 425,000 |
Computers and Software [Member] | Minimum [Member] | ||
Property and Equipment, Useful Life | 4 years | |
Computers and Software [Member] | Maximum [Member] | ||
Property and Equipment, Useful Life | 6 years | |
Finance Lease Machinery and Equipment [Member] | Minimum [Member] | ||
Property and Equipment, Useful Life | 5 years | |
Finance Lease Machinery and Equipment [Member] | Maximum [Member] | ||
Property and Equipment, Useful Life | 8 years |
Property and Equipment (Detai_2
Property and Equipment (Details Textual) - USD ($) | 3 Months Ended | ||
Mar. 31, 2020 | Mar. 31, 2019 | Dec. 31, 2019 | |
Property and Equipment (Textual) | |||
Depreciation expense | $ 656,000 | $ 666,000 | |
Accumulated depreciation | $ 6,156,000 | $ 5,936,000 |
Leases (Details)
Leases (Details) | Mar. 31, 2020 |
Leases [Abstract] | |
Weighted Average Remaining Lease Term - in years | 6 years 1 month 9 days |
Weighted Average discount rate - % | 9.50% |
Leases (Details 1)
Leases (Details 1) - USD ($) | Mar. 31, 2020 | Dec. 31, 2019 |
For the twelve months ended December 31, | ||
Total long term portion of operating lease maturities | $ 4,043,000 | $ 4,235,000 |
Operating lease payments [Member] | ||
For the twelve months ended December 31, | ||
December 31, 2020 (remaining nine months) | 854,000 | |
December 31, 2021 | 1,118,000 | |
December 31, 2022 | 868,000 | |
December 31, 2023 | 895,000 | |
December 31, 2024 | 923,000 | |
Thereafter | 1,681,000 | |
Total future minimum lease payments | 6,339,000 | |
Less: discount | (1,574,000) | |
Total operating lease maturities | 4,765,000 | |
Less: current portion of operating lease liabilities | (722,000) | |
Total long term portion of operating lease maturities | $ 4,043,000 |
Notes Payable, Related Party _3
Notes Payable, Related Party Notes Payable and Finance Lease Obligations (Details) - Notes payable and finance lease obligations [Member] - USD ($) | Mar. 31, 2020 | Dec. 31, 2019 |
Revolving credit note payable to Sterling National Bank ("SNB") | $ 13,577,000 | $ 12,543,000 |
Term loans, SNB | 3,645,000 | 3,800,000 |
Finance lease obligations | 15,000 | 22,000 |
Loan Payable - financed asset | 313,000 | 385,000 |
Related party notes payable, net of debt discount | 5,923,000 | 6,862,000 |
Convertible notes payable - third parties, net of debt discount | 1,437,000 | 2,338,000 |
Subtotal | 24,910,000 | 25,950,000 |
Less: Current portion of notes payable and finance lease obligations | (8,178,000) | (10,001,000) |
Notes payable, related party notes payable and finance lease obligations, net of current portion | $ 16,732,000 | $ 15,949,000 |
Notes Payable, Related Party _4
Notes Payable, Related Party Notes Payable and Finance Lease Obligations (Details 1) - Term loans [Member] | Mar. 31, 2020USD ($) |
For the twelve months ending | |
December 31, 2020 (remainder of the year) | $ 406,000 |
December 31, 2021 | 543,000 |
December 31, 2022 | 2,760,000 |
SNB Term Loan payable | 3,709,000 |
Less: debt issuance costs | (64,000) |
Total SNB Term Loan payable, net of debt issuance costs | 3,645,000 |
Less: current portion | 543,000 |
Long-term portion | $ 3,102,000 |
Notes Payable, Related Party _5
Notes Payable, Related Party Notes Payable and Finance Lease Obligations (Details 2) - Term loans [Member] | Mar. 31, 2020USD ($) |
For the twelve months ending | |
December 31, 2020 (remainder of the year) | $ 216,000 |
December 31, 2021 | 97,000 |
Loan payable - Financied Asset | 313,000 |
Less: Current portion | (289,000) |
Long-term portion | $ 24,000 |
Notes Payable, Related Party _6
Notes Payable, Related Party Notes Payable and Finance Lease Obligations (Details Textual) - USD ($) | Jun. 26, 2019 | Jan. 15, 2019 | Jan. 31, 2020 | Oct. 21, 2019 | May 31, 2019 | May 31, 2018 | Mar. 31, 2020 | Mar. 31, 2019 | Jun. 30, 2019 | Dec. 31, 2019 | Apr. 04, 2018 | Mar. 29, 2018 |
Notes Payable and Capital Lease Obligations (Textual) | ||||||||||||
Issuance of common stock, shares | 419,597 | |||||||||||
Issuance of common stock | $ 984,000 | $ 984,000 | ||||||||||
Notes payable percentage | 18.00% | |||||||||||
Interest rate | 3.00% | 12.00% | ||||||||||
Michael Taglich [Member] | ||||||||||||
Notes Payable and Capital Lease Obligations (Textual) | ||||||||||||
Common stock purchased, shares | 15,000 | |||||||||||
Common stock purchase price, per share | $ 1.01 | |||||||||||
Advanced from related parties | $ 250,000 | |||||||||||
Issuance of common stock, shares | 37,500 | |||||||||||
Proceeds from related party debt | $ 1,000,000 | |||||||||||
Michael Taglich [Member] | Robert [Member] | ||||||||||||
Notes Payable and Capital Lease Obligations (Textual) | ||||||||||||
Advanced from related parties | $ 100,000 | $ 1,000,000 | ||||||||||
Robert [Member] | ||||||||||||
Notes Payable and Capital Lease Obligations (Textual) | ||||||||||||
Common stock purchased, shares | 150,000 | |||||||||||
Common stock purchase price, per share | $ 1.01 | |||||||||||
Issuance of common stock, shares | 37,500 | |||||||||||
Taglich Brothers, Inc., [Member] | ||||||||||||
Notes Payable and Capital Lease Obligations (Textual) | ||||||||||||
Related party notes payable allocated percentage, description | 4% of the purchase price of the 7% Notes | |||||||||||
Robert and Michael Taglich [Member] | ||||||||||||
Notes Payable and Capital Lease Obligations (Textual) | ||||||||||||
Loan facility, description | 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 SNB Facility. | |||||||||||
Interest-bearing, description | Interest on the 8% 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 8% Notes, provided that if accrued interest payable on $1,269,000 principal amount of the 8% Notes issued in December 2016 is paid in additional 8% 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. | |||||||||||
Interest expense | $ 128,000 | $ 130,000 | ||||||||||
Convertible notes payable | 5,923,000 | $ 6,862,000 | ||||||||||
Amortization of debt discount | 73,000 | 130,000 | ||||||||||
Unamortized debt discounts | $ 153,000 | 226,000 | ||||||||||
Two Thousand Nineteen [Member] | ||||||||||||
Notes Payable and Capital Lease Obligations (Textual) | ||||||||||||
Interest-bearing, description | Interest on the 2019 Notes is payable on the outstanding principal amount thereof at the rate of one percent (1%) per month, payable monthly commencing June 30, 2018. Upon the occurrence and continuation of a failure to pay accrued interest, interest shall accrue and be payable on such amount at the rate of 1.25% per month; provided that upon the occurrence and continuation of a failure to timely pay the principal amount of the 2019 Note, interest shall accrue and be payable on such principal amount at the rate of 1.25% per month and shall no longer be payable on interest accrued but unpaid. The 2019 Notes are subordinate to the Company’s obligations to SNB. | |||||||||||
Principal amount | $ 100,000 | |||||||||||
Common stock purchased, shares | 18,334 | 180,000 | ||||||||||
Common stock purchase price | $ 100,000 | $ 182,000 | ||||||||||
Aggregate principal amount | $ 1,200,000 | |||||||||||
Subordinated Notes Maturity Date | May 31, 2019 | Jun. 30, 2020 | ||||||||||
Issuance of common stock, shares | 214,762 | |||||||||||
Accrued interest on notes payable | 1.25% | |||||||||||
Placement agent fee | 4.00% | |||||||||||
Two Thousand Nineteen [Member] | Michael Taglich [Member] | ||||||||||||
Notes Payable and Capital Lease Obligations (Textual) | ||||||||||||
Aggregate principal amount | $ 100,000 | |||||||||||
Issuance of common stock, shares | 17,857 | |||||||||||
Two Thousand Nineteen [Member] | Robert [Member] | ||||||||||||
Notes Payable and Capital Lease Obligations (Textual) | ||||||||||||
Placement invested percentage | 4.00% | |||||||||||
Aggregate principal amount | $ 1,000,000 | |||||||||||
Issuance of common stock | 178,571 | |||||||||||
Total purchase price | $ 1,000,000 | |||||||||||
SNB Bank [Member] | ||||||||||||
Notes Payable and Capital Lease Obligations (Textual) | ||||||||||||
Loan facility, description | The terms of the SNB Facility require that, among other things, the Company maintain a specified Fixed Charge Coverage Ratio of 1.25 to 1.00 at the end of each Fiscal Quarter beginning with the Fiscal Quarter ending March 31, 2020. | |||||||||||
Interest-bearing, description | Under the terms of the SNB Facility, both the SNB revolving line of credit and the SNB term loan will bear an interest rate equal to 30-day LIBOR, (with a 1% floor), plus 2.5%. The average interest rate charged during the period ended March 31, 2020 was 4.0%. | |||||||||||
Principal amount | $ 17,222,000 | 16,343,000 | ||||||||||
Coverage ratio, description | The Company maintain a specified Fixed Charge Coverage Ratio of 1.25 to 1.00 at the end of each Fiscal Quarter beginning with the Fiscal Quarter ending March 31, 2020. | |||||||||||
Revolving credit loan debt to SNB | $ 13,577,000 | 12,543,000 | ||||||||||
Term loan amount | 3,645,000 | $ 3,800,000 | ||||||||||
Interest expense | 120,000 | |||||||||||
PNC Bank [Member] | ||||||||||||
Notes Payable and Capital Lease Obligations (Textual) | ||||||||||||
Principal amount | 15,000,000 | |||||||||||
Interest expense | 512,000 | |||||||||||
2019 Notes [Member] | ||||||||||||
Notes Payable and Capital Lease Obligations (Textual) | ||||||||||||
Notes payable percentage | 12.00% | |||||||||||
Senior Subordinated Convertible Promissory Notes [Member] | ||||||||||||
Notes Payable and Capital Lease Obligations (Textual) | ||||||||||||
Loan facility, description | The Company issued its 7% senior subordinated convertible promissory notes due December 31, 2020, each in the principal amount of $1,000,000 (together, the “7% Notes”), to Michael Taglich and Robert Taglich, each for a purchase price of $1,000,000. The 7% Notes bear interest at the rate of 7% per annum, are convertible into shares of the Company’s common stock at a conversion price of $0.93 per share, subject to the anti-dilution adjustments set forth in the 7% Notes and are subordinate to the Company’s indebtedness under the SNB Facility. | |||||||||||
Related party notes payable allocated percentage, description | In connection with the 7% Notes, the Company paid Taglich Brothers, Inc. a fee of $80,000 (4% of the purchase price of the 7% Notes), paid in the form of a promissory note having terms substantially identical to the 7% Notes. | |||||||||||
Convertible Notes Payable, Third Parties [Member] | ||||||||||||
Notes Payable and Capital Lease Obligations (Textual) | ||||||||||||
Principal amount | $ 805,000 | |||||||||||
Sale of principle convertible note interest rate | 8.00% | |||||||||||
Interest expense | $ 42,000 | 40,000 | ||||||||||
Interest rate | 8.00% | |||||||||||
Debt converted | $ 80,000 | |||||||||||
Convertible debt, shares issued | 590,243 | |||||||||||
Share price | $ 1.50 | |||||||||||
Convertible notes payable | $ 1,437,000 | $ 2,338,000 | ||||||||||
Amortization of debt discount | 4,000 | $ 120,000 | ||||||||||
Notes payable and finance lease obligations [Member] | ||||||||||||
Notes Payable and Capital Lease Obligations (Textual) | ||||||||||||
Related party advances and notes payable, net of debt discounts | 5,923,000 | 6,862,000 | ||||||||||
Unamortized debt discounts | 3,000 | 7,000 | ||||||||||
Loan payable obligation | $ 313,000 | $ 385,000 |
Liability Related to the Sale_3
Liability Related to the Sale of Future Proceeds from Disposition of Subsidiary (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Liability Related To Sale Of Future Proceeds From Disposition Of Subsidiary Details Abstract | ||
Liabilities related to sale of future proceeds from disposition of subsidiaries - beginning balance | $ 602,000 | |
Non-Cash other income recognized | (92,000) | $ (109,000) |
Non-Cash interest expense recognized | 28,000 | $ 33,000 |
Liabilities related to sale of future proceeds from disposition of subsidiary - ending balance | 538,000 | |
Less: unamortized transaction costs | (3,000) | |
Liability related to sale of future proceeds from disposition of subsidiary, net | $ 535,000 |
Liability Related to the Sale_4
Liability Related to the Sale of Future Proceeds from Disposition of Subsidiary (Details Textual) - USD ($) | Jan. 15, 2019 | Apr. 01, 2017 | Mar. 31, 2020 | Mar. 31, 2019 | Dec. 31, 2018 |
Liability Related to the Sale of Future Proceeds from Disposition of Subsidiary (Textual) | |||||
Sale of subsidiary, description | Amount equal to five (5%) percent of the net sales of AMK for that quarter until the aggregate payments made to the Company (the "Meyer Agreement") equals $1,500,000 (the "Maximum Amount"). | ||||
Aggregate of amount received | $ 363,000 | ||||
Purchase agreement, description | The Company entered into a "Purchase Agreement" with 15 accredited investors (the "Purchasers"), including Michael and Robert Taglich, pursuant to which the Company assigned to the Purchasers all of their rights, title and interest to the remaining $1,137,000 of the $1,500,000 in payments due from Meyer for the sale of AMK (the "Remaining Amount") for an immediate payment of $800,000, including $100,000 from each of Michael and Robert Taglich, and $75,000 for the benefit of the children of Michael Taglich. The timing of the payments is based upon the net sales of AMK. If the Purchasers have not received the entire Remaining Amount by March 31, 2023, they have the right to demand payment of their pro rata portion of the unpaid Remaining Amount from the Company ("Put Right"). To the extent the Purchasers exercise their Put Right, the remaining payments from Meyer will be retained by the Company. | ||||
Purchase price per annum | 2.00% | ||||
Proceeds as liability amount | $ 800,000 | ||||
Net of transaction costs | 3,000 | ||||
Annual interest rate percentage | 18.00% | ||||
Non-cash other income recognized | $ 92,000 | 109,000 | |||
Non-cash interest expense recognized | $ 28,000 | 33,000 | |||
Purchase price received | $ 800,000 |
Stockholders' Equity (Details)
Stockholders' Equity (Details) - USD ($) | 1 Months Ended | 3 Months Ended | |
Jan. 31, 2020 | Mar. 31, 2020 | Mar. 31, 2019 | |
Stockholders' Equity (Textual) | |||
Issuance of common stock, shares | 419,597 | ||
Issuance of common stock | $ 984,000 | $ 984,000 | |
Share issuance costs | $ (145,000) | $ (58,000) | |
Director [Member] | |||
Stockholders' Equity (Textual) | |||
Common stock issued for directors fees, shares | 43,771 | 147,830 |
Contingencies (Details)
Contingencies (Details) - USD ($) | 1 Months Ended | |||
May 31, 2018 | Oct. 07, 2019 | Sep. 27, 2019 | Sep. 03, 2019 | |
Contingencies (Textual) | ||||
Damages value | $ 1,000,000 | |||
Working capital deficit | $ 4,200,000 | $ 4,145,870 | ||
Satisfied to delivered escrow fund | $ 619,316 | $ 2,000,000 |
Income Taxes (Details Textual)
Income Taxes (Details Textual) - USD ($) | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Income Taxes (Textual) | ||
Annual effective tax rate | 0.00% | |
Income tax expense | $ (1,414,000) | |
Federal income tax benefit | ||
Net operating loss carryback claim | $ 1,416,000 |
Segment Reporting (Details)
Segment Reporting (Details) - USD ($) | 3 Months Ended | ||
Mar. 31, 2020 | Mar. 31, 2019 | Dec. 31, 2019 | |
Net Sales | $ 13,447,000 | $ 13,878,000 | |
Gross Profit | 2,181,000 | 2,274,000 | |
Pre Tax Income from continuing operations | (356,000) | (995,000) | |
Benefit from Income Taxes | (1,414,000) | ||
Income from Discontinued Operations, net of taxes | 72,000 | ||
Net Income (Loss) | 1,058,000 | (923,000) | |
Assets | 54,051,000 | $ 51,090,000 | |
COMPLEX MACHINING | |||
Net Sales | 12,064,000 | 12,418,000 | |
Gross Profit | 2,168,000 | 2,213,000 | |
Pre Tax Income from continuing operations | 1,170,000 | 1,443,000 | |
Assets | 48,732,000 | 45,554,000 | |
TURBINE ENGINE COMPONENTS | |||
Net Sales | 1,383,000 | 1,460,000 | |
Gross Profit | 13,000 | 61,000 | |
Pre Tax Income from continuing operations | (126,000) | (170,000) | |
Assets | 4,569,000 | 5,235,000 | |
CORPORATE | |||
Net Sales | |||
Gross Profit | |||
Pre Tax Income from continuing operations | (1,400,000) | (2,268,000) | |
Assets | 750,000 | 507,000 | |
CONSOLIDATED | |||
Net Sales | 13,447,000 | 13,878,000 | |
Gross Profit | 2,181,000 | 2,274,000 | |
Pre Tax Income from continuing operations | (356,000) | (995,000) | |
Benefit from Income Taxes | (1,414,000) | ||
Income from Discontinued Operations, net of taxes | 72,000 | ||
Net Income (Loss) | 1,058,000 | (923,000) | |
Assets | $ 54,051,000 | $ 51,296,000 |
Segment Reporting (Details Text
Segment Reporting (Details Textual) | 3 Months Ended |
Mar. 31, 2020Segments | |
Segment Reporting (Textual) | |
Number of reportable segments | 2 |