Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Dec. 31, 2017 | Feb. 23, 2018 | Jun. 30, 2017 | |
Document and Entity Information | |||
Entity Registrant Name | IKONICS CORP | ||
Entity Central Index Key | 1,083,301 | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 2017 | ||
Amendment Flag | false | ||
Current Fiscal Year End Date | --12-31 | ||
Entity Well-known Seasoned Issuer | No | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes | ||
Entity Filer Category | Smaller Reporting Company | ||
Entity Public Float | $ 12,454,213 | ||
Entity Common Stock, Shares Outstanding | 1,983,553 | ||
Document Fiscal Year Focus | 2,017 | ||
Document Fiscal Period Focus | FY |
BALANCE SHEETS
BALANCE SHEETS - USD ($) | Dec. 31, 2017 | Dec. 31, 2016 |
CURRENT ASSETS: | ||
Cash and cash equivalents | $ 929,700 | $ 1,048,713 |
Short-term investments | 2,895,000 | 3,246,000 |
Trade receivables, less allowances of $53,000 in 2017 and $54,000 in 2016 | 2,190,260 | 2,336,501 |
Inventories | 2,086,065 | 1,986,172 |
Prepaid expenses and other assets | 168,242 | 361,905 |
Income taxes receivable | 2,116 | 66,181 |
Total current assets | 8,271,383 | 9,045,472 |
PROPERTY, PLANT, AND EQUIPMENT, at cost: | ||
Land and building | 9,207,790 | 9,189,743 |
Machinery and equipment | 4,968,595 | 4,884,814 |
Office equipment | 1,573,191 | 1,566,856 |
Vehicles | 245,679 | 272,144 |
Gross property, plant, and equipment, at cost | 15,995,255 | 15,913,557 |
Less accumulated depreciation | (7,693,594) | (7,001,162) |
Total property, plant, and equipment, at cost | 8,301,661 | 8,912,395 |
INTANGIBLE ASSETS, less accumulated amortization of $174,991 in 2017 and $149,072 in 2016 | 351,186 | 338,127 |
Total assets | 16,924,230 | 18,295,994 |
CURRENT LIABILITIES: | ||
Current portion of long-term debt, net | 130,899 | 127,303 |
Accounts payable | 321,860 | 730,386 |
Accrued compensation | 360,554 | 388,600 |
Other accrued liabilities | 62,468 | 67,088 |
Total current liabilities | 875,781 | 1,313,377 |
LONG-TERM LIABILITIES | ||
Long-term debt, less current portion, net | 2,946,518 | 3,077,457 |
Deferred income taxes | 144,000 | 446,000 |
Total long-term liabilities | 3,090,518 | 3,523,457 |
Total liabilities | 3,966,299 | 4,836,834 |
COMMITMENTS AND CONTINGENCIES | ||
STOCKHOLDERS' EQUITY: | ||
Preferred stock, par value $.10 per share; authorized 250,000 shares: none issued | ||
Common stock, par value $.10 per share; authorized 4,750,000 shares; issued and outstanding 1,983,553 shares in 2017 and 2,018,753 shares in 2016 | 198,355 | 201,875 |
Additional paid-in capital | 2,709,390 | 2,732,006 |
Retained earnings | 10,050,186 | 10,525,279 |
Total stockholders' equity | 12,957,931 | 13,459,160 |
Total liabilities and stockholders' equity | $ 16,924,230 | $ 18,295,994 |
BALANCE SHEETS (Parenthetical)
BALANCE SHEETS (Parenthetical) - USD ($) | Dec. 31, 2017 | Dec. 31, 2016 |
BALANCE SHEETS | ||
Trade receivables, allowance | $ 53,000 | $ 54,000 |
INTANGIBLE ASSETS, accumulated amortization | $ 174,991 | $ 149,072 |
Preferred stock, par value (in dollars per share) | $ 0.10 | $ 0.10 |
Preferred stock, shares authorized | 250,000 | 250,000 |
Preferred stock, shares issued | 0 | 0 |
Common stock, par value (in dollars per share) | $ 0.10 | $ 0.10 |
Common stock, shares authorized | 4,750,000 | 4,750,000 |
Common stock, shares issued | 1,983,553 | 2,018,753 |
Common stock, shares outstanding | 1,983,553 | 2,018,753 |
STATEMENTS OF OPERATIONS
STATEMENTS OF OPERATIONS - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
STATEMENTS OF OPERATIONS | ||
NET SALES | $ 17,243,244 | $ 17,569,901 |
COST OF GOODS SOLD | 11,512,699 | 11,332,991 |
GROSS PROFIT | 5,730,545 | 6,236,910 |
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES | 5,506,466 | 5,611,849 |
RESEARCH AND DEVELOPMENT EXPENSES | 688,688 | 647,065 |
LOSS FROM OPERATIONS | (464,609) | (22,004) |
INTEREST EXPENSE | (83,080) | (58,222) |
OTHER | 23,542 | 11,165 |
LOSS BEFORE INCOME TAXES | (524,147) | (69,061) |
INCOME TAX BENEFIT | (298,000) | (4,000) |
NET LOSS | $ (226,147) | $ (65,061) |
LOSS PER COMMON SHARE: | ||
Basic (in dollars per share) | $ (0.11) | $ (0.03) |
Diluted (in dollars per share) | $ (0.11) | $ (0.03) |
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING: | ||
Basic (in shares) | 2,007,613 | 2,018,649 |
Diluted (in shares) | 2,007,613 | 2,018,649 |
STATEMENTS OF STOCKHOLDERS' EQU
STATEMENTS OF STOCKHOLDERS' EQUITY - USD ($) | Common Stock | Additional Paid-in Capital | Retained Earnings | Total |
BALANCE at Dec. 31, 2015 | $ 201,825 | $ 2,703,050 | $ 10,590,340 | $ 13,495,215 |
BALANCE (in shares) at Dec. 31, 2015 | 2,018,253 | |||
Increase (Decrease) in Stockholders' Equity | ||||
Net loss | (65,061) | (65,061) | ||
Exercise of stock options and related tax benefit | $ 50 | 3,949 | 3,999 | |
Exercise of stock options and related tax benefit (in shares) | 500 | |||
Stock based compensation and related tax benefit | 25,007 | 25,007 | ||
BALANCE at Dec. 31, 2016 | $ 201,875 | 2,732,006 | 10,525,279 | $ 13,459,160 |
BALANCE (in shares) at Dec. 31, 2016 | 2,018,753 | 2,018,753 | ||
Increase (Decrease) in Stockholders' Equity | ||||
Net loss | (226,147) | $ (226,147) | ||
Exercise of stock options and related tax benefit | $ 25 | 1,798 | 1,823 | |
Exercise of stock options and related tax benefit (in shares) | 250 | |||
Common stock repurchased | $ (3,545) | (47,975) | (248,946) | (300,466) |
Common stock repurchased (in shares) | (35,450) | |||
Stock based compensation and related tax benefit | 23,561 | 23,561 | ||
BALANCE at Dec. 31, 2017 | $ 198,355 | $ 2,709,390 | $ 10,050,186 | $ 12,957,931 |
BALANCE (in shares) at Dec. 31, 2017 | 1,983,553 | 1,983,553 |
STATEMENTS OF CASH FLOWS
STATEMENTS OF CASH FLOWS - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ||
Net loss | $ (226,147) | $ (65,061) |
Adjustments to reconcile net loss to net cash provided by operating activities: | ||
Depreciation | 836,877 | 760,772 |
Amortization | 38,265 | 33,768 |
Stock based compensation | 23,561 | 25,007 |
Net gain on sale and disposal of property, plant and equipment | (28,689) | (5,750) |
Deferred income taxes | (302,000) | 61,000 |
Changes in working capital components: | ||
Trade receivables | 146,241 | (171,307) |
Inventories | (99,893) | 133,633 |
Prepaid expenses and other assets | 193,663 | (276,257) |
Income tax receivable | 64,003 | 36,831 |
Accounts payable | (408,526) | 310,141 |
Accrued expenses | (32,666) | 74,170 |
Net cash provided by operating activities | 204,689 | 916,947 |
CASH FLOWS FROM INVESTING ACTIVITIES: | ||
Purchases of property, plant, equipment and construction in progress | (230,089) | (2,064,426) |
Proceeds from sale of property and equipment | 32,635 | 21,000 |
Purchases of intangibles | (38,977) | (27,146) |
Purchases of short-term investments | (3,875,000) | (4,379,000) |
Proceeds on sale of short-term investments | 4,226,000 | 1,133,000 |
Net cash provided by (used in) investing activities | 114,569 | (5,316,572) |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||
Proceeds from long-term debt | 3,415,000 | |
Payment of debt issuance costs | (139,418) | |
Payments on long-term debt | (139,690) | (79,475) |
Repurchase of common stock | (300,466) | |
Proceeds from exercise of stock options | 1,885 | 3,765 |
Net cash (used in) provided by financing activities | (438,271) | 3,199,872 |
NET DECREASE IN CASH AND CASH EQUIVALENTS | (119,013) | (1,199,753) |
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD | 1,048,713 | 2,248,466 |
CASH AND CASH EQUIVALENTS AT END OF PERIOD | 929,700 | 1,048,713 |
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION | ||
Cash paid for interest | 70,990 | 43,421 |
Cash received for income taxes, net | $ 60,003 | $ 102,234 |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended |
Dec. 31, 2017 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Description of Business and Foreign Export Sales - IKONICS Corporation’s (the Company or IKONICS) traditional business has been the development and manufacturing of high-quality photochemical imaging systems for sale primarily to a wide range of printers and decorators of surfaces. Customers’ applications are primarily screen printing and abrasive etching. These sales have been augmented with inkjet receptive films, ancillary chemicals and related equipment to provide a full line of products and services to its customers. Leveraging these technologies the Company is also diversifying and expanding its business to industrial markets. These efforts also include the Company’s Advanced Material Solutions (AMS) business unit which uses the Company’s proprietary process and photoresist film for the abrasive etching of composite materials, industrial ceramics, silicon wafers, and glass wafers. The customer base for AMS is primarily the aerospace and electronics industries. Based on its expertise in ultraviolet curable fluids and inkjet receptive substrates, the Company has also developed a patented digital texturing technology (DTX) for putting patterns and textures into steel molds for the plastic injection molding industry. The original equipment manufacturer (“OEM”) for the Company’s DTX technology is primarily the automotive industry. Industrial inkjet printers, which are integral to the DTX system, are manufactured and sold by a strategic partner. The Company’s business plan is to sell a suite of products including consumable fluids and transfer films. For most markets these sales are direct to the mold maker. The DTX technology is being expanded to prototyping where the Company’s technology offers a unique combination of high definition and large format prints. The Company’s principal markets are throughout the United States. In addition, the Company sells to Europe, Latin America, Asia, and other parts of the world. The Company extends credit to its customers, all on an unsecured basis, on terms that it establishes for individual customers. Foreign sales approximated 31.0% and 28.0% of net sales in 2017 and 2016, respectively. The Company’s trade receivables at December 31, 2017 and 2016 due from foreign customers were 25.5% and 23.6% of total trade receivables, respectively. The foreign export receivables are comprised primarily of open credit arrangements with terms ranging from 30 to 90 days. No single customer or foreign country represented greater than 10% of net sales in 2017 or in 2016. The Company considers events or transactions that occur after the balance sheet date but before the financial statements are issued to provide additional evidence relative to certain estimates or to identify matters that require additional disclosure. A summary of the Company’s significant accounting policies follows: Cash Equivalents — The Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents. Cash equivalents consist of money market funds in which the carrying value approximates fair value because of the short maturity of these instruments. The money market fund invests in United States dollar denominated securities that present minimal credit risk and consist of investments in debt securities issued or guaranteed by the United States government or by United States government agencies or instrumentalities, repurchase agreements fully collateralized by the United States Treasury, and United States government securities. Short-Term Investments — Short-term investments consist of fully insured certificates of deposit with original maturities ranging from one to twelve months as of both December 31, 2017 and 2016. Trade Receivables — Trade receivables are carried at original invoice amount less an estimate made for doubtful receivables based on a review of all outstanding amounts on an on-going basis. Management determines the allowance for doubtful accounts by regularly evaluating individual customer receivables and considering a customer’s financial condition, credit history, and current economic conditions. Trade receivables are written off when deemed uncollectible. Recoveries of trade receivables previously written off are recorded when received. Accounts are considered past due if payment is not received according to agreed-upon terms. A small percentage of the trade receivables balance is denominated in a foreign currency with no concentration in any given country. At the end of each reporting period, the Company analyzes the receivable balance for customers paying in a foreign currency. These balances are adjusted to each quarter or year-end spot rate in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) No. 830, Foreign Currency Matters. Foreign currency transactions and translation adjustments did not have a significant effect on the Balance Sheets or the Statements of Operations, Stockholders’ Equity and Cash Flows for 2017 and 2016. Inventories — Inventories are stated at the lower of cost or market using the last-in, first-out (LIFO) method. If the first-in, first-out (FIFO) cost method had been used, inventories would have been approximately $1,183,000 and $1,127,000 higher than reported at December 31, 2017 and 2016, respectively. The inventory reserve for obsolescence was $7,000 and $5,000 at December 31, 2017 and 2016, respectively. The major components of inventories are as follows: Dec 31, 2017 Dec 31, 2016 Raw materials $ 1,428,924 $ 1,438,471 Work-in-progress 423,186 355,208 Finished goods 1,416,547 1,319,856 Reduction to LIFO cost (1,182,592) (1,127,363) Total Inventories $ 2,086,065 $ 1,986,172 Property, Plant and Equipment — Major expenditures extending the life of the property, plant and equipment are capitalized. Repair and maintenance costs are expensed in the period in which they are incurred. Depreciation of property, plant and equipment is computed using the straight-line method over the following estimated useful lives: Years Buildings 15-40 Machinery and equipment 5-10 Office equipment 3-10 Vehicles 3 Intangible Assets — Intangible assets consist of patents and licenses. Intangible assets are amortized on a straight-line basis over their estimated useful lives or agreement terms. As of December 31, 2017, the remaining estimated weighted average useful lives of intangible assets are as follows: Years Patents 10.6 Licenses 0.3 Impairment of Long-lived Assets — The Company reviews its long-lived assets, including property, plant and equipment and intangible assets, for impairment when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying amount. Any impairment loss recorded is measured as the amount by which the carrying value of the assets exceeds the fair value of the assets. To date, the Company has determined that no loss on impairment of long-lived assets exists. Fair Value of Financial Instruments — The carrying amounts of financial instruments, including cash and cash equivalents, short-term investments, trade receivables, accounts payable, and accrued liabilities approximate fair value due to the short maturities of these instruments. T he fair value of long-term debt approximates its carrying value and has been estimated based on interest rates being offered for similar debt having the same or similar remaining maturities and collateral requirements . Revenue Recognition — The Company recognizes revenue on sales of products when title passes which can occur at the time of shipment or when the goods arrive at the customer location depending on the agreement with the customer. The Company sells its products to both distributors and end-users. Sales to distributors and end-users are recorded based upon the criteria governed by the sales, delivery, and payment terms stated on the invoices from the Company to the purchaser. In addition to transfer of title / risk of loss, all revenue is recorded in accordance with the criteria outlined: (a) persuasive evidence of an arrangement (principally in the form of customer sales orders and the Company’s sales invoices, as generally there is no other formal agreement underlying the sale transactions); (b) delivery and performance (evidenced by proof of delivery, e.g. the shipment of film and substrates with bill of lading used for proof of delivery for FOB shipping point terms, and the carrier booking confirmation report used for FOB destination terms. Once the finished product is shipped and physically delivered under the terms of the invoice and sales order, the Company has no additional performance or service obligations to complete); (c) a fixed and determinable sales price (the Company’s pricing is established and is not based on variable terms, as evidenced in either the Company’s invoices or the limited number of distribution agreements; the Company rarely grants extended payment terms and has no history of concessions); and (d) a reasonable likelihood of payment (the Company’s terms are standard, and the Company does not have a history of significant customer defaults or non-payment). Sales are reported on a net basis by deducting credits, estimated normal returns and discounts. The Company’s return policy does not vary by geography. The customer has no rotation or price protection rights and the Company is not under a warranty obligation. Freight billed to customers is included in sales. Shipping costs are included in cost of goods sold. Deferred Taxes — Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carryforwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax basis. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. The Company classifies deferred tax assets and liabilities as noncurrent. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. The Tax Cut and Jobs Act of 2017 (the “Tax Reform Act”) was enacted December 22, 2017. This legislation makes significant changes in U.S. tax law including a reduction in the corporate tax rates, changes to net operating loss carryforwards and carrybacks and a repeal of the corporate alternative minimum tax. The legislation reduced the U.S. corporate tax rate from the current rate of 34% and 35% to 21%. As a result of the enacted law, the Company was required to revalue deferred tax assets and liabilities at the newly enacted rate. This revaluation resulted in a benefit of $115,000 to income tax expense in continuing operations and a corresponding reduction in the deferred tax liability. The other provisions of the Tax Reform Act did not have a material impact on the 2017 consolidated financial statements. The Company follows the accounting standard on accounting for uncertainty in income taxes, which addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under this guidance, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement. The guidance on accounting for uncertainty in income taxes also addresses derecognition, classification, interest and penalties on income taxes, and accounting in interim periods. Earnings Per Common Share (EPS) — Basic EPS is calculated using net income (loss) divided by the weighted average of common shares outstanding. Diluted EPS is similar to Basic EPS except that the weighted average number of common shares outstanding is increased to include the number of additional common shares, when dilutive, that would have been outstanding if the potential dilutive common shares, such as those shares subject to options, had been issued. Shares used in the calculation of diluted EPS are summarized below: 2017 2016 Weighted average common shares outstanding 2,018,649 Dilutive effect of stock options — — Weighted average common and common equivalent shares outstanding 2,018,649 If the Company was in a net income position at December 31, 2017, 2,250 options with a weighted average exercise price of $8.91 would have been included as part of the weighted average common and common equivalent shares outstanding as the options would have been dilutive, while 15,918 options with a weighted average exercise price of $14.51 would have remained excluded as the options were anti-dilutive. If the Company was in a net income position at December 31, 2016, 4,750 options with a weighted average exercise price of $10.58 would have been included as part of the weighted average common and common equivalent shares outstanding as the options would have been dilutive, while 11,418 options with a weighted average exercise price of $15.99 would have remained excluded as the options were anti-dilutive. Employee Stock Plan - The Company accounts for employee stock options under the provision of ASC 718, Compensation — Stock Compensation. Recent Accounting Pronouncements: In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers. ASU 2014‑09 supersedes the revenue recognition requirements in Revenue Recognition (Topic 605 ), and requires entities to recognize revenue in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers: Deferral of the Effective Date, which defers the adoption of ASU 2014-09 to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. The standard permits two methods of adoption: retrospectively to each prior reporting period presented (full retrospective method), or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application ( the modified retrospective method). The standard also requires expanded disclosures relating to the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. Additionally, qualitative and quantitative disclosures are required about customer contracts, significant judgments and changes in judgments, and assets recognized from the costs to obtain or fulfill a contract. The Company will adopt the provisions of ASU 2014-09 on January 1, 2018 using the modified retrospective method. While most of the Company’s revenue is contracted with customers through one-time purchase orders and short-term contracts, the Company does have long-term contracts with certain customers. The Company is nearly complete with its evaluation of the effect of adoption on its financial statements, and will expand its financial statement disclosures in future periods in order to comply with the new standard. For the revenue streams assessed, the Company does not anticipate any adjustments regarding the timing of recognizing revenue as a result of the adoption. The Company does not incur upfront costs to obtain a contract and, upon adoption, the Company will elect to treat delivery costs as a fulfillment activity that are expensed as incurred. During February 2016, the FASB issued ASU No. 2016-02, Leases . ASU No. 2016-02 was issued to increase transparency and comparability among organizations by recognizing all lease transactions (with terms in excess of 12 months) on the balance sheet as a lease liability and a right-of-use asset (as defined). ASU No. 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, with earlier application permitted. Upon adoption, the lessee will apply the new standard retrospectively to all periods presented or retrospectively using a cumulative effect adjustment in the year of adoption. The Company is currently assessing the effect that ASU No. 2016-02 will have on its financial statements. In March 2016, the FASB issued ASU No. 2016-09, Compensation—Stock Compensation (Topic 718). This standard makes several modifications to Topic 718 related to the accounting for forfeitures, employer tax withholding on share-based compensation and the financial statement presentation of excess tax benefits or deficiencies. ASU 2016-09 also clarifies the statement of cash flows presentation for certain components of share-based awards. The standard is effective for interim and annual reporting periods beginning after December 15, 2016, although early adoption is permitted. The Company adopted ASU No. 2016-09 in 2017 with minimal impact on the financial statements. Use of Estimates — The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include the allowance for doubtful trade receivables, the reserve for inventory obsolescence, and the valuation allowance for deferred tax assets. |
INCOME TAXES
INCOME TAXES | 12 Months Ended |
Dec. 31, 2017 | |
INCOME TAXES | |
INCOME TAXES | 2. INCOME TAXES Income tax expense (benefit) for the years ended December 31, 2017 and 2016 consists of the following: The Tax Cut and Jobs Act of 2017 (the “Tax Reform Act”) was enacted December 22, 2017. This legislation makes significant changes in U.S. tax law including a reduction in the corporate tax rates, changes to net operating loss carryforwards and carrybacks and a repeal of the corporate alternative minimum tax. The legislation reduced the U.S. corporate tax rate from the current rate of 34% and 35% to 21%. As a result of the enacted law, the Company was required to revalue deferred tax assets and liabilities at the newly enacted rate. This revaluation resulted in a benefit of $115,000 to income tax expense in continuing operations and a corresponding reduction in the deferred tax liability. The other provisions of the Tax Reform Act did not have a material impact on the 2017 consolidated financial statements. 2017 2016 Current: Federal $ $ State Deferred - Federal $ $ The expected provision benefit for income taxes, computed by applying the U.S. federal income tax rate of 34% in 2017 and 2016 to income (loss) before taxes, is reconciled to income benefit as follows: 2017 2016 Expected provision for federal income taxes $ $ State income taxes, net of federal benefit Non-deductible meals, entertainment, and life insurance Research and development credit Change in valuation allowance 16,000 Tax rate change adjustment related to Tax Reform Act - Prior year true-ups and other $ $ Net deferred tax liabilities consist of the following as of December 31, 2017 and 2016: 2017 2016 Deferred tax liabilities: Accrued vacation $ $ Inventories reserve Allowance for doubtful accounts Allowance for sales returns Research and development credit carryforward Accrued self-insured medical Property and equipment Intangible assets Net operating loss - Other Valuation allowance Net deferred tax liabilities $ $ The Company’s federal net operating loss carryforward and research and development credit carryover as of December 31, 2017 was $167,000 and $40,000, respectively, and will begin to expire in 2036. The Company’s state net operating loss carryforwards at December 31, 2017 total $834,000 and begin expiring in 2026. The Company has state research and development credit carryforwards as of December 31, 2017 of $115,000. The valuation allowance balance of $91,000 and $60,000 at December 31, 2017 and 2016, relates entirely to Minnesota research and development credit carryforwards that the Company does not expect to utilize and begin to expire in 2028. The change in the valuation allowance was $31,000 in 2017 and $15,000 in 2016. Approximately $15,000 of the $31,000 change in 2017 is a result of recording the impact of the revaluation on these credits and corresponding increase in valuation allowance related to the Tax Reform Act discussed above. It has been the Company’s policy to recognize interest and penalties related to uncertain tax positions in income tax expense. As of December 31, 2017 and 2016, there was no liability for unrecognized tax benefits. The Company is subject to federal and state taxation. As of December 31, 2017, with few exceptions, the Company is no longer subject to examination prior to tax year 2014. |
INTANGIBLE ASSETS
INTANGIBLE ASSETS | 12 Months Ended |
Dec. 31, 2017 | |
INTANGIBLE ASSETS | |
INTANGIBLE ASSETS | 3. INTANGIBLE ASSETS Intangible assets consist of patents, patent applications, and licenses. Capitalized patent application costs are included with patents. Intangible assets are amortized on a straight-line basis over their estimated useful lives or terms of their agreement, whichever is shorter. There were no abandonments or impairment adjustments to intangible assets during the years ended December 31, 2017 and 2016. Intangible assets at December 31, 2017 and 2016 consist of the following: December 31, 2017 December 31, 2016 Gross Carrying Accumulated Gross Carrying Accumulated Amount Amortization Amount Amortization Amortized intangible assets: Patents $ 476,177 $ $ 437,199 $ License $ 526,177 $ $ 487,199 $ 2017 2016 Aggregate amortization expense: For the years ended December 31 $ 25,919 $ 25,115 Estimated amortization expense for the years ending December 31: 2018 $ 24,000 2019 23,000 2020 22,000 2021 22,000 2022 22,000 In connection with the license agreement, the Company has agreed to pay royalties ranging from 3% to 5% on the sales of products subject to the agreements. The Company incurred $11,000 and $12,000 of expense under these agreements during 2017 and 2016, respectively, which are included in selling, general and administrative expenses in the Statements of Operations. |
RETIREMENT PLAN
RETIREMENT PLAN | 12 Months Ended |
Dec. 31, 2017 | |
RETIREMENT PLAN | |
RETIREMENT PLAN | 4. RETIREMENT PLAN The Company has established a salary deferral plan under Section 401(k) of the Internal Revenue Code. Such deferrals accumulate on a tax-deferred basis until the employee withdraws the funds. The Company contributes up to 5% of each eligible employee’s compensation. Total retirement expense for the years ended December 31, 2017 and 2016 was approximately $235,000 and $236,000, respectively. |
SEGMENT INFORMATION
SEGMENT INFORMATION | 12 Months Ended |
Dec. 31, 2017 | |
SEGMENT INFORMATION | |
SEGMENT INFORMATION | 5. SEGMENT INFORMATION The Company’s reportable segments are strategic business units that offer different products and have varied customer bases. There are five reportable segments: Domestic, Export, IKONICS Imaging, DTX and AMS. Domestic sells screen printing film, emulsions, and inkjet receptive film to distributors located in the United States and Canada. IKONICS Imaging sells photo resistant film, art supplies, glass, metal medium and related abrasive etching equipment to end user customers located in the United States and Canada. AMS provides sound deadening technology to the aerospace industry along with products and services for etched composites, ceramics, glass and silicon wafers. DTX includes products and customers related to patented and proprietary inkjet technology used for mold texturing and prototyping. Export sells primarily the same products as Domestic and the IKONICS Imaging products not related to AMS or DTX. The accounting policies of the segments are the same as those described in the summary of significant accounting policies included in Note 1. Management evaluates the performance of each segment based on the components of divisional income, and does not allocate assets and liabilities to segments except for trade receivables. Financial information with respect to the reportable segments follows: For the year ended December 31, 2017: IKONICS Domestic Export Imaging DTX AMS Unalloc. Total Net sales $ $ $ $ $ $ — $ Cost of goods sold — Gross profit (loss) — Selling, general, and administrative* Research and development* — — — — — Income (loss) from operations $ $ $ $ $ $ $ For the year ended December 31, 2016: IKONICS Domestic Export Imaging DTX AMS Unalloc. Total Net sales $ 7,361,222 $ 4,508,577 $ 4,253,249 $ 404,898 $ 1,041,955 $ — $ Cost of goods sold 4,203,125 3,501,769 1,906,664 162,376 1,559,057 — Gross profit (loss) 3,158,097 1,006,808 2,346,585 242,522 (517,102) — Selling, general, and administrative* 1,396,266 650,513 1,052,823 144,970 419,469 1,947,808 Research and development* — — — — — 647,065 Income (loss) from operations $ 1,761,831 $ 356,295 $ 1,293,762 $ 97,552 $ (936,571) $ (2,594,873) $ * The Company does not allocate all general and administrative expenses or any research and development expenses to its operating segments for internal reporting. Trade receivables by segment as of December 31, 2017 and December 31, 2016 were as follows: Dec 31, 2017 Dec 31, 2016 Domestic $ 1,119,228 $ 1,206,866 Export 558,872 551,803 IKONICS Imaging 238,813 363,602 DTX 64,278 52,935 AMS 238,848 177,374 Unallocated (16,079) Total $ 2,190,260 $ 2,336,501 |
STOCKHOLDERS' EQUITY
STOCKHOLDERS' EQUITY | 12 Months Ended |
Dec. 31, 2017 | |
STOCKHOLDERS' EQUITY | |
STOCKHOLDERS' EQUITY | 6. STOCKHOLDERS’ EQUITY The Company has a stock incentive plan for the issuance of up to 442,750 shares of common stock. The plan provides for granting eligible participants stock options or other stock awards, as described by the plan, at prices ranging from 85% to 110% of fair market value at date of grant. Options granted expire up to seven years after the date of grant. Such options generally become exercisable over a three year period. A total of 101,989 shares of common stock are reserved for additional grants of options under the plan as of December 31, 2017. Under the plan, the Company charged compensation expense of $23,561 and $25,007 against income in 2017 and 2016, respectively. As of December 31, 2017, there was approximately $17,000 of unrecognized compensation expense related to unvested share-based compensation awards granted which is expected to be recognized over the next three years. Proceeds from the exercise of stock options were approximately $2,000 and $4,000 for 2017 and 2016, respectively. The fair value of options granted during 2017 and 2016 was estimated using the Black-Scholes option pricing model with the following assumptions: 2017 2016 Dividend yield 0% 0% Expected volatility 41.3% 42.4% Expected life of option Five Years Five Years Risk-free interest rate 1.8% 1.3% Fair value of each option on grant date $ 3.43 $ 4.02 There were 2,250 and 4,500 options granted during 2017 and 2016, respectively. A summary of the status of the Company’s stock option plan as of December 31, 2017 and changes during the year then ended is presented below: Weighted Average Exercise Shares Price Outstanding at January 1, 2017 16,168 $ 14.40 Granted 2,250 8.91 Exercised (250) 7.54 Outstanding at December 31, 2017 18,168 $ 13.81 Exercisable at December 31, 2017 10,499 $ 15.41 The weighted-average grant date fair value of options granted was $3.43 and $4.02 for the years ended December 31, 2017 and 2016, respectively. The total intrinsic value of stock options exercised was $490 and $2,160 for the years ended December 31, 2017 and 2016, respectively. In prior years, the Company’s board of directors had authorized the repurchase of up to 250,000 shares of common stock. A total of 219,589 shares were repurchased under this program including 1,950 shares repurchased during the second quarter of 2017. As of August 2, 2017, the plan allowed for an additional 30,411 shares to be repurchased. On August 3, 2017, the Company’s board of directors approved a new repurchase authorization for up to 100,000 shares of the Company’s common stock, which replaces all prior authorizations. Shares repurchased under this new authorization may be made through open market and privately negotiated transactions from time to time. The new share repurchase authorization does not have an expiration date. Subsequent to August 2, 2017 the Company repurchased 33,500 shares for $278,620. During 2017, the Company repurchased 25,000 shares for $218,750 from a beneficial shareholder holding more than 5% of outstanding common stock. |
CONCENTRATION OF CREDIT RISK
CONCENTRATION OF CREDIT RISK | 12 Months Ended |
Dec. 31, 2017 | |
CONCENTRATION OF CREDIT RISK | |
CONCENTRATION OF CREDIT RISK | 7. CONCENTRATION OF CREDIT RISK The Company maintains its cash balances primarily in two financial institutions. As of December 31, 2017, the balance at one of the institutions exceeded the Federal Deposit Insurance Corporation coverage. Trade receivables are financial instruments that also expose the Company to concentration of credit risk. The large number of customers comprising the Company’s customer base and their dispersion across different geographic areas limits such exposure. In addition, the Company routinely assesses the financial strength of its customers and maintains an allowance for doubtful accounts that management believes will adequately provide for credit losses. |
LONG-TERM DEBT
LONG-TERM DEBT | 12 Months Ended |
Dec. 31, 2017 | |
LONG-TERM DEBT | |
LONG-TERM DEBT | 8. LONG-TERM DEBT On April 1, 2016, the Company entered into a financing agreement (the “Financing Agreement”) under which the Duluth Economic Development Authority (the “Issuer”) agreed to sell $3,415,000 of its Tax Exempt Industrial Revenue Bonds, Series 2016 (IKONICS Project) (the “Bonds”) to Wells Fargo Bank, National Association (the “Bank”), and the Bank agreed to lend to the Company the proceeds received from the sale of the Bonds (the “Loan”). The closing of the sale of the Bonds occurred on April 29, 2016. The proceeds from the Loan were used to finance the construction of a 27,300-square foot building as well as related equipment for use in the Company’s manufacture of sound deadening technology used in the aerospace industry and products consisting of etched composites, ceramics, glass and silicon wafers, to be located in Duluth, Minnesota (the “Project”). The Loan requires monthly payments of approximately $18,000, including interest. The Loan bears interest at a rate of 2.14% per year, subject to change based upon changes to the maximum federal corporate tax rate, payable monthly, and matures on April 1, 2041. Including debt costs of approximately $139,000, the Loan’s effective interest rate was 2.77% at December 31, 2017. As a result of the Tax Reform Act described in Note 2, the Company estimates the future effective interest rate will be approximately 3.23% beginning in March 2018, resulting in an approximate $15,000 increase in interest payments annually. The Loan is subject to mandatory purchase provisions, under which any owners of the Bonds (the “Owners”) may tender the Bonds to the Issuer on April 1, 2021, which would result in the Company repaying the outstanding loan principal and any outstanding accrued and unpaid interest to the Issuer at that time. If in the event the Bonds are not repurchased on April 1, 2021, the Bonds shall be subject to the interest rate and redemption provisions set forth in the associated covenant agreement. Subject to limitations in the associated covenant agreement, the Company may cause a redemption of the Bonds, in whole or in part, in authorized denominations at the redemption prices set forth in the Financing Agreement, together with any accrued or unpaid interest to the date of redemption. The Bonds are also subject to redemption in whole in the event of certain extraordinary events related to the Project. The Company is subject to certain customary covenants set forth in the associated covenant agreement, including a requirement that the Company maintain a debt service coverage ratio as of the end of each calendar quarter of not less than 1.25 to 1.00 on a rolling four-quarter basis. The remaining principal payments required under the agreement for years ended December 31, and the current and long‑term portion of the principal, are as follows: 2018 2019 2020 2021 2022 Thereafter Total Principal Less: Unamortized debt issuance costs Less: Current portion Long-term portion $ In connection with the agreement, the Company incurred debt issuance costs of approximately $139,000 during 2016, which were deferred and are being amortized over the term of the Financing Agreement. Amortization of debt issuance costs was approximately $12,000 for 2017 and $9,000 for 2016 and is included in interest expense. Debt issuance costs of $106,000 and $12,000 are netted against long-term debt and current portion of long‑term debt, respectively as of December 31, 2017. Amortization of debt costs is expected to be approximately $10,000 annually for each of the next five years. In addition to the $3,415,000 in indebtedness pursuant to the Loan, the Company has a bank line of credit providing for borrowings of up to $2,050,000, expiring on June 30, 2019 that bears interest at 1.8 percentage points over the 30‑day LIBOR rate. The Company did not utilize this line of credit during 2017 or 2016 and there were no borrowings outstanding as of December 31, 2017 and 2016. There are no financial covenants related to the line of credit and the Company expects to obtain a similar line of credit when the current line of credit expires. Both the $3,415,000 financing pursuant to the Loan and the line of credit are collateralized by substantially all assets of the Company. |
SUMMARY OF SIGNIFICANT ACCOUN15
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended |
Dec. 31, 2017 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Cash Equivalents | Cash Equivalents — The Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents. Cash equivalents consist of money market funds in which the carrying value approximates fair value because of the short maturity of these instruments. The money market fund invests in United States dollar denominated securities that present minimal credit risk and consist of investments in debt securities issued or guaranteed by the United States government or by United States government agencies or instrumentalities, repurchase agreements fully collateralized by the United States Treasury, and United States government securities. |
Short-Term Investments | Short-Term Investments — Short-term investments consist of fully insured certificates of deposit with original maturities ranging from one to twelve months as of both December 31, 2017 and 2016. |
Trade Receivables | Trade Receivables — Trade receivables are carried at original invoice amount less an estimate made for doubtful receivables based on a review of all outstanding amounts on an on-going basis. Management determines the allowance for doubtful accounts by regularly evaluating individual customer receivables and considering a customer’s financial condition, credit history, and current economic conditions. Trade receivables are written off when deemed uncollectible. Recoveries of trade receivables previously written off are recorded when received. Accounts are considered past due if payment is not received according to agreed-upon terms. A small percentage of the trade receivables balance is denominated in a foreign currency with no concentration in any given country. At the end of each reporting period, the Company analyzes the receivable balance for customers paying in a foreign currency. These balances are adjusted to each quarter or year-end spot rate in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) No. 830, Foreign Currency Matters. Foreign currency transactions and translation adjustments did not have a significant effect on the Balance Sheets or the Statements of Operations, Stockholders’ Equity and Cash Flows for 2017 and 2016. |
Inventories | Inventories — Inventories are stated at the lower of cost or market using the last-in, first-out (LIFO) method. If the first-in, first-out (FIFO) cost method had been used, inventories would have been approximately $1,183,000 and $1,127,000 higher than reported at December 31, 2017 and 2016, respectively. The inventory reserve for obsolescence was $7,000 and $5,000 at December 31, 2017 and 2016, respectively. The major components of inventories are as follows: Dec 31, 2017 Dec 31, 2016 Raw materials $ 1,428,924 $ 1,438,471 Work-in-progress 423,186 355,208 Finished goods 1,416,547 1,319,856 Reduction to LIFO cost (1,182,592) (1,127,363) Total Inventories $ 2,086,065 $ 1,986,172 |
Property, Plant and Equipment | Property, Plant and Equipment — Major expenditures extending the life of the property, plant and equipment are capitalized. Repair and maintenance costs are expensed in the period in which they are incurred. Depreciation of property, plant and equipment is computed using the straight-line method over the following estimated useful lives: Years Buildings 15-40 Machinery and equipment 5-10 Office equipment 3-10 Vehicles 3 |
Intangible Assets | Intangible Assets — Intangible assets consist of patents and licenses. Intangible assets are amortized on a straight-line basis over their estimated useful lives or agreement terms. As of December 31, 2017, the remaining estimated weighted average useful lives of intangible assets are as follows: Years Patents 10.6 Licenses 0.3 |
Impairment of Long-lived Assets | Impairment of Long-lived Assets — The Company reviews its long-lived assets, including property, plant and equipment and intangible assets, for impairment when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying amount. Any impairment loss recorded is measured as the amount by which the carrying value of the assets exceeds the fair value of the assets. To date, the Company has determined that no loss on impairment of long-lived assets exists. |
Fair Value of Financial Instruments | Fair Value of Financial Instruments — The carrying amounts of financial instruments, including cash and cash equivalents, short-term investments, trade receivables, accounts payable, and accrued liabilities approximate fair value due to the short maturities of these instruments. T he fair value of long-term debt approximates its carrying value and has been estimated based on interest rates being offered for similar debt having the same or similar remaining maturities and collateral requirements . |
Revenue Recognition | Revenue Recognition — The Company recognizes revenue on sales of products when title passes which can occur at the time of shipment or when the goods arrive at the customer location depending on the agreement with the customer. The Company sells its products to both distributors and end-users. Sales to distributors and end-users are recorded based upon the criteria governed by the sales, delivery, and payment terms stated on the invoices from the Company to the purchaser. In addition to transfer of title / risk of loss, all revenue is recorded in accordance with the criteria outlined: (a) persuasive evidence of an arrangement (principally in the form of customer sales orders and the Company’s sales invoices, as generally there is no other formal agreement underlying the sale transactions); (b) delivery and performance (evidenced by proof of delivery, e.g. the shipment of film and substrates with bill of lading used for proof of delivery for FOB shipping point terms, and the carrier booking confirmation report used for FOB destination terms. Once the finished product is shipped and physically delivered under the terms of the invoice and sales order, the Company has no additional performance or service obligations to complete); (c) a fixed and determinable sales price (the Company’s pricing is established and is not based on variable terms, as evidenced in either the Company’s invoices or the limited number of distribution agreements; the Company rarely grants extended payment terms and has no history of concessions); and (d) a reasonable likelihood of payment (the Company’s terms are standard, and the Company does not have a history of significant customer defaults or non-payment). Sales are reported on a net basis by deducting credits, estimated normal returns and discounts. The Company’s return policy does not vary by geography. The customer has no rotation or price protection rights and the Company is not under a warranty obligation. Freight billed to customers is included in sales. Shipping costs are included in cost of goods sold. |
Deferred Taxes | Deferred Taxes — Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carryforwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax basis. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. The Company classifies deferred tax assets and liabilities as noncurrent. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. The Tax Cut and Jobs Act of 2017 (the “Tax Reform Act”) was enacted December 22, 2017. This legislation makes significant changes in U.S. tax law including a reduction in the corporate tax rates, changes to net operating loss carryforwards and carrybacks and a repeal of the corporate alternative minimum tax. The legislation reduced the U.S. corporate tax rate from the current rate of 34% and 35% to 21%. As a result of the enacted law, the Company was required to revalue deferred tax assets and liabilities at the newly enacted rate. This revaluation resulted in a benefit of $115,000 to income tax expense in continuing operations and a corresponding reduction in the deferred tax liability. The other provisions of the Tax Reform Act did not have a material impact on the 2017 consolidated financial statements. The Company follows the accounting standard on accounting for uncertainty in income taxes, which addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under this guidance, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement. The guidance on accounting for uncertainty in income taxes also addresses derecognition, classification, interest and penalties on income taxes, and accounting in interim periods. |
Earnings Per Common Share (EPS) | Earnings Per Common Share (EPS) — Basic EPS is calculated using net income (loss) divided by the weighted average of common shares outstanding. Diluted EPS is similar to Basic EPS except that the weighted average number of common shares outstanding is increased to include the number of additional common shares, when dilutive, that would have been outstanding if the potential dilutive common shares, such as those shares subject to options, had been issued. Shares used in the calculation of diluted EPS are summarized below: 2017 2016 Weighted average common shares outstanding 2,018,649 Dilutive effect of stock options — — Weighted average common and common equivalent shares outstanding 2,018,649 If the Company was in a net income position at December 31, 2017, 2,250 options with a weighted average exercise price of $8.91 would have been included as part of the weighted average common and common equivalent shares outstanding as the options would have been dilutive, while 15,918 options with a weighted average exercise price of $14.51 would have remained excluded as the options were anti-dilutive. If the Company was in a net income position at December 31, 2016, 4,750 options with a weighted average exercise price of $10.58 would have been included as part of the weighted average common and common equivalent shares outstanding as the options would have been dilutive, while 11,418 options with a weighted average exercise price of $15.99 would have remained excluded as the options were anti-dilutive. |
Employee Stock Plan | Employee Stock Plan - The Company accounts for employee stock options under the provision of ASC 718, Compensation — Stock Compensation. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements: In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers. ASU 2014‑09 supersedes the revenue recognition requirements in Revenue Recognition (Topic 605 ), and requires entities to recognize revenue in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers: Deferral of the Effective Date, which defers the adoption of ASU 2014-09 to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. The standard permits two methods of adoption: retrospectively to each prior reporting period presented (full retrospective method), or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application ( the modified retrospective method). The standard also requires expanded disclosures relating to the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. Additionally, qualitative and quantitative disclosures are required about customer contracts, significant judgments and changes in judgments, and assets recognized from the costs to obtain or fulfill a contract. The Company will adopt the provisions of ASU 2014-09 on January 1, 2018 using the modified retrospective method. While most of the Company’s revenue is contracted with customers through one-time purchase orders and short-term contracts, the Company does have long-term contracts with certain customers. The Company is nearly complete with its evaluation of the effect of adoption on its financial statements, and will expand its financial statement disclosures in future periods in order to comply with the new standard. For the revenue streams assessed, the Company does not anticipate any adjustments regarding the timing of recognizing revenue as a result of the adoption. The Company does not incur upfront costs to obtain a contract and, upon adoption, the Company will elect to treat delivery costs as a fulfillment activity that are expensed as incurred. During February 2016, the FASB issued ASU No. 2016-02, Leases . ASU No. 2016-02 was issued to increase transparency and comparability among organizations by recognizing all lease transactions (with terms in excess of 12 months) on the balance sheet as a lease liability and a right-of-use asset (as defined). ASU No. 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, with earlier application permitted. Upon adoption, the lessee will apply the new standard retrospectively to all periods presented or retrospectively using a cumulative effect adjustment in the year of adoption. The Company is currently assessing the effect that ASU No. 2016-02 will have on its financial statements. In March 2016, the FASB issued ASU No. 2016-09, Compensation—Stock Compensation (Topic 718). This standard makes several modifications to Topic 718 related to the accounting for forfeitures, employer tax withholding on share-based compensation and the financial statement presentation of excess tax benefits or deficiencies. ASU 2016-09 also clarifies the statement of cash flows presentation for certain components of share-based awards. The standard is effective for interim and annual reporting periods beginning after December 15, 2016, although early adoption is permitted. The Company adopted ASU No. 2016-09 in 2017 with minimal impact on the financial statements. |
Use of Estimates | Use of Estimates — The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include the allowance for doubtful trade receivables, the reserve for inventory obsolescence, and the valuation allowance for deferred tax assets. |
SUMMARY OF SIGNIFICANT ACCOUN16
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Schedule of major components of inventories | Dec 31, 2017 Dec 31, 2016 Raw materials $ 1,428,924 $ 1,438,471 Work-in-progress 423,186 355,208 Finished goods 1,416,547 1,319,856 Reduction to LIFO cost (1,182,592) (1,127,363) Total Inventories $ 2,086,065 $ 1,986,172 |
Schedule of estimated useful lives of property, plant and equipment | Years Buildings 15-40 Machinery and equipment 5-10 Office equipment 3-10 Vehicles 3 |
Schedule of remaining estimated weighted average useful lives of intangible assets | As of December 31, 2017, the remaining estimated weighted average useful lives of intangible assets are as follows: Years Patents 10.6 Licenses 0.3 |
Summary of shares used in the calculation of diluted EPS | 2017 2016 Weighted average common shares outstanding 2,018,649 Dilutive effect of stock options — — Weighted average common and common equivalent shares outstanding 2,018,649 |
INCOME TAXES (Tables)
INCOME TAXES (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
INCOME TAXES | |
Schedule of components of income tax expense | 2017 2016 Current: Federal $ $ State Deferred - Federal $ $ |
Schedule of expected provision for income taxes, computed by applying the U.S. federal income tax rate to income before taxes, reconciled to income tax expense | 2017 2016 Expected provision for federal income taxes $ $ State income taxes, net of federal benefit Non-deductible meals, entertainment, and life insurance Research and development credit Change in valuation allowance 16,000 Tax rate change adjustment related to Tax Reform Act - Prior year true-ups and other $ $ |
Schedule of components of net deferred tax liabilities | 2017 2016 Deferred tax liabilities: Accrued vacation $ $ Inventories reserve Allowance for doubtful accounts Allowance for sales returns Research and development credit carryforward Accrued self-insured medical Property and equipment Intangible assets Net operating loss - Other Valuation allowance Net deferred tax liabilities $ $ |
INTANGIBLE ASSETS (Tables)
INTANGIBLE ASSETS (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
INTANGIBLE ASSETS | |
Schedule of components of intangible assets | December 31, 2017 December 31, 2016 Gross Carrying Accumulated Gross Carrying Accumulated Amount Amortization Amount Amortization Amortized intangible assets: Patents $ 476,177 $ $ 437,199 $ License $ 526,177 $ $ 487,199 $ 2017 2016 Aggregate amortization expense: For the years ended December 31 $ 25,919 $ 25,115 |
Schedule of estimated amortization expense | Estimated amortization expense for the years ending December 31: 2018 $ 24,000 2019 23,000 2020 22,000 2021 22,000 2022 22,000 |
SEGMENT INFORMATION (Tables)
SEGMENT INFORMATION (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
SEGMENT INFORMATION | |
Schedule of financial information with respect to the reportable segments | For the year ended December 31, 2017: IKONICS Domestic Export Imaging DTX AMS Unalloc. Total Net sales $ $ $ $ $ $ — $ Cost of goods sold — Gross profit (loss) — Selling, general, and administrative* Research and development* — — — — — Income (loss) from operations $ $ $ $ $ $ $ For the year ended December 31, 2016: IKONICS Domestic Export Imaging DTX AMS Unalloc. Total Net sales $ 7,361,222 $ 4,508,577 $ 4,253,249 $ 404,898 $ 1,041,955 $ — $ Cost of goods sold 4,203,125 3,501,769 1,906,664 162,376 1,559,057 — Gross profit (loss) 3,158,097 1,006,808 2,346,585 242,522 (517,102) — Selling, general, and administrative* 1,396,266 650,513 1,052,823 144,970 419,469 1,947,808 Research and development* — — — — — 647,065 Income (loss) from operations $ 1,761,831 $ 356,295 $ 1,293,762 $ 97,552 $ (936,571) $ (2,594,873) $ * |
Schedule of trade receivables by segment | Dec 31, 2017 Dec 31, 2016 Domestic $ 1,119,228 $ 1,206,866 Export 558,872 551,803 IKONICS Imaging 238,813 363,602 DTX 64,278 52,935 AMS 238,848 177,374 Unallocated (16,079) Total $ 2,190,260 $ 2,336,501 |
STOCKHOLDERS' EQUITY (Tables)
STOCKHOLDERS' EQUITY (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
STOCKHOLDERS' EQUITY | |
Assumptions used in estimating fair value of stock options | 2017 2016 Dividend yield 0% 0% Expected volatility 41.3% 42.4% Expected life of option Five Years Five Years Risk-free interest rate 1.8% 1.3% Fair value of each option on grant date $ 3.43 $ 4.02 |
Stock option activity | Weighted Average Exercise Shares Price Outstanding at January 1, 2017 16,168 $ 14.40 Granted 2,250 8.91 Exercised (250) 7.54 Outstanding at December 31, 2017 18,168 $ 13.81 Exercisable at December 31, 2017 10,499 $ 15.41 |
LONG-TERM DEBT (Tables)
LONG-TERM DEBT (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
LONG-TERM DEBT | |
Schedule of remaining principal payments and current and long-term portion of the principal | The remaining principal payments required under the agreement for years ended December 31, and the current and long‑term portion of the principal, are as follows: 2018 2019 2020 2021 2022 Thereafter Total Principal Less: Unamortized debt issuance costs Less: Current portion Long-term portion $ |
SUMMARY OF SIGNIFICANT ACCOUN22
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Foreign Export Sales (Details) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Export | Minimum | ||
Description of Business and Foreign Export Sales | ||
Term under credit arrangement | 30 days | |
Export | Maximum | ||
Description of Business and Foreign Export Sales | ||
Term under credit arrangement | 90 days | |
Sales Revenue, Segment | Customer Concentration Risk | Export | ||
Description of Business and Foreign Export Sales | ||
Percentage of net sales and trade receivable | 31.00% | 28.00% |
Trade Accounts Receivable | Credit Concentration Risk | ||
Description of Business and Foreign Export Sales | ||
Percentage of net sales and trade receivable | 25.50% | 23.60% |
SUMMARY OF SIGNIFICANT ACCOUN23
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Short-Term Investments (Details) - Certificates of Deposit | 12 Months Ended |
Dec. 31, 2017 | |
Minimum | |
Short-term investments | |
Maturity period | 1 month |
Maximum | |
Short-term investments | |
Maturity period | 12 months |
SUMMARY OF SIGNIFICANT ACCOUN24
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Inventories (Details) - USD ($) | Dec. 31, 2017 | Dec. 31, 2016 |
Inventories | ||
FIFO inventory amount | $ 1,183,000 | $ 1,127,000 |
Reserve for inventory obsolescence | 7,000 | 5,000 |
Major components of inventories | ||
Raw materials | 1,428,924 | 1,438,471 |
Work-in-progress | 423,186 | 355,208 |
Finished goods | 1,416,547 | 1,319,856 |
Reduction to LIFO cost | (1,182,592) | (1,127,363) |
Total inventories | $ 2,086,065 | $ 1,986,172 |
SUMMARY OF SIGNIFICANT ACCOUN25
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Property, Plant and Equipment (Details) | 12 Months Ended |
Dec. 31, 2017 | |
Building | Minimum | |
Depreciation | |
Estimated useful lives | 15 years |
Building | Maximum | |
Depreciation | |
Estimated useful lives | 40 years |
Machinery and Equipment | Minimum | |
Depreciation | |
Estimated useful lives | 5 years |
Machinery and Equipment | Maximum | |
Depreciation | |
Estimated useful lives | 10 years |
Office Equipment | Minimum | |
Depreciation | |
Estimated useful lives | 3 years |
Office Equipment | Maximum | |
Depreciation | |
Estimated useful lives | 10 years |
Vehicles | |
Depreciation | |
Estimated useful lives | 3 years |
SUMMARY OF SIGNIFICANT ACCOUN26
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Intangible Assets (Details) | 12 Months Ended |
Dec. 31, 2017 | |
Patents | |
INTANGIBLE ASSETS | |
Remaining estimated weighted average useful lives | 10 years 7 months 6 days |
Licensing Agreements | |
INTANGIBLE ASSETS | |
Remaining estimated weighted average useful lives | 3 months 18 days |
SUMMARY OF SIGNIFICANT ACCOUN27
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Income Taxes (Details) - USD ($) | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |||
U.S. federal income tax rate (as a percent) | 21.00% | 34.00% | 34.00% |
U.S. federal income tax rate #2 (as a percent) | 35.00% | ||
Tax rate change adjustment related to Tax Reform Act | $ 115,000 |
SUMMARY OF SIGNIFICANT ACCOUN28
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Earnings Per Common Shares (Details) - $ / shares | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Earnings Per Common Share (EPS) | ||
Weighted average common shares outstanding | 2,007,613 | 2,018,649 |
Weighted average common and common equivalent shares outstanding | 2,007,613 | 2,018,649 |
Stock Options. | ||
Anti-dilutive securities | ||
Options not included in weighted average common shares outstanding | 2,250 | 4,750 |
Weighted average exercise price of options not included in weighted average common shares outstanding (in dollars per share) | $ 8.91 | $ 10.58 |
Outstanding options to purchase shares of common stock not included, anti-dilutive | 15,918 | 11,418 |
Weighted average exercise price of options, anti-dilutive (in dollars per share) | $ 14.51 | $ 15.99 |
INCOME TAXES - Income Tax Expen
INCOME TAXES - Income Tax Expense (Details) - USD ($) | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
INCOME TAXES | |||
U.S. federal income tax rate (as a percent) | 21.00% | 34.00% | 34.00% |
U.S. federal income tax rate #2 (as a percent) | 35.00% | ||
Tax rate change adjustment related to Tax Reform Act | $ 115,000 | ||
Current: | |||
Federal | (5,000) | $ (72,000) | |
State | 9,000 | 7,000 | |
Total current | 4,000 | (65,000) | |
Deferred - Federal | (302,000) | 61,000 | |
Income tax expense | $ (298,000) | $ (4,000) |
INCOME TAXES - Reconciliation o
INCOME TAXES - Reconciliation of Expected Provision for Income Taxes (Details) - USD ($) | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Reconciliation of expected provision for income taxes, computed by applying the U.S. federal income tax rate to income before taxes, to income tax expense | |||
U.S. federal income tax rate (as a percent) | 21.00% | 34.00% | 34.00% |
Expected provision for federal income taxes | $ (178,000) | $ (23,000) | |
State income taxes, net of federal benefit | 2,000 | 7,000 | |
Non-deductible meals, entertainment, and life insurance | 29,000 | 27,000 | |
Research and development credit | (38,000) | (32,000) | |
Change in valuation allowance | 16,000 | 15,000 | |
Tax rate change adjustment related to Tax Reform Act | (115,000) | ||
Prior year true-ups and other | (14,000) | 2,000 | |
Income tax expense | (298,000) | (4,000) | |
Deferred tax liabilities: | |||
Accrued vacation | 19,000 | 32,000 | |
Inventories reserve | 46,000 | 66,000 | |
Allowance for doubtful accounts | 2,000 | 4,000 | |
Allowance for sales returns | 9,000 | 15,000 | |
Research and development credit carryforward | 131,000 | 77,000 | |
Accrued self-insured medical | 1,000 | 3,000 | |
Property and equipment | (242,000) | (499,000) | |
Intangible assets | (65,000) | (92,000) | |
Net operating loss | 40,000 | ||
Other | 6,000 | 8,000 | |
Valuation allowance | (91,000) | (60,000) | |
Net deferred tax liabilities | $ (144,000) | $ (446,000) |
INCOME TAXES - Net Deferred Tax
INCOME TAXES - Net Deferred Tax Liabilities (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Deferred Income Tax Expense | ||
Federal net operating loss carryforwards | $ 167,000 | |
Research and development credit carryforward | 131,000 | $ 77,000 |
State net operating loss carryforwards | 834,000 | |
Valuation allowance | 91,000 | 60,000 |
Change in valuation allowance | 31,000 | 15,000 |
Change in valuation allowance related to Tax Cuts and Jobs Act of 2017 | 15,000 | |
Unrecognized tax benefits | 0 | $ 0 |
Federal | ||
Deferred Income Tax Expense | ||
Research and development credit carryforward | 40,000 | |
State | ||
Deferred Income Tax Expense | ||
State net operating loss carryforwards | $ 115,000 |
INTANGIBLE ASSETS (Details)
INTANGIBLE ASSETS (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
INTANGIBLE ASSETS | ||
Abandonment or impairment adjustments | $ 0 | $ 0 |
Amortized intangible assets: | ||
Gross Carrying Amount | 526,177 | 487,199 |
Accumulated Amortization | (174,991) | (149,072) |
Aggregate amortization expense: | 25,919 | 25,115 |
Estimated amortization expense | ||
2,018 | 24,000 | |
2,019 | 23,000 | |
2,020 | 22,000 | |
2,021 | 22,000 | |
2,022 | 22,000 | |
Patents | ||
Amortized intangible assets: | ||
Gross Carrying Amount | 476,177 | 437,199 |
Accumulated Amortization | (126,032) | (103,238) |
Licensing Agreements | ||
Amortized intangible assets: | ||
Gross Carrying Amount | 50,000 | 50,000 |
Accumulated Amortization | (48,959) | (45,834) |
Other disclosures | ||
Expense under license agreement | $ 11,000 | $ 12,000 |
Licensing Agreements | Minimum | ||
Other disclosures | ||
Payment of royalties (as a percent) | 3.00% | |
Licensing Agreements | Maximum | ||
Other disclosures | ||
Payment of royalties (as a percent) | 5.00% |
RETIREMENT PLAN (Details)
RETIREMENT PLAN (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
RETIREMENT PLAN | ||
Maximum contribution of the entity as a percentage of eligible employee's compensation | 5.00% | |
Retirement expense | $ 235,000 | $ 236,000 |
SEGMENT INFORMATION (Details)
SEGMENT INFORMATION (Details) | 12 Months Ended | |
Dec. 31, 2017USD ($)segment | Dec. 31, 2016USD ($) | |
Segment Reporting Information | ||
Number of reportable segments | segment | 5 | |
Financial information with respect to the reportable segments | ||
Net sales | $ 17,243,244 | $ 17,569,901 |
Cost of goods sold | 11,512,699 | 11,332,991 |
GROSS PROFIT | 5,730,545 | 6,236,910 |
Selling general and administrative | 5,506,466 | 5,611,849 |
Research and development | 688,688 | 647,065 |
LOSS FROM OPERATIONS | (464,609) | (22,004) |
Trade receivables by segment | ||
Trade receivables | 2,190,260 | 2,336,501 |
Unalloc. | ||
Financial information with respect to the reportable segments | ||
Selling general and administrative | 1,904,058 | 1,947,808 |
Research and development | 688,688 | 647,065 |
LOSS FROM OPERATIONS | (2,592,746) | (2,594,873) |
Trade receivables by segment | ||
Trade receivables | (29,779) | (16,079) |
Domestic | ||
Financial information with respect to the reportable segments | ||
Net sales | 6,934,433 | 7,361,222 |
Cost of goods sold | 4,100,497 | 4,203,125 |
GROSS PROFIT | 2,833,936 | 3,158,097 |
Selling general and administrative | 1,345,427 | 1,396,266 |
LOSS FROM OPERATIONS | 1,488,509 | 1,761,831 |
Trade receivables by segment | ||
Trade receivables | 1,119,228 | 1,206,866 |
Export | ||
Financial information with respect to the reportable segments | ||
Net sales | 4,722,950 | 4,508,577 |
Cost of goods sold | 3,721,800 | 3,501,769 |
GROSS PROFIT | 1,001,150 | 1,006,808 |
Selling general and administrative | 645,973 | 650,513 |
LOSS FROM OPERATIONS | 355,177 | 356,295 |
Trade receivables by segment | ||
Trade receivables | 558,872 | 551,803 |
IKONICS Imaging | ||
Financial information with respect to the reportable segments | ||
Net sales | 4,021,970 | 4,253,249 |
Cost of goods sold | 1,915,390 | 1,906,664 |
GROSS PROFIT | 2,106,580 | 2,346,585 |
Selling general and administrative | 1,065,957 | 1,052,823 |
LOSS FROM OPERATIONS | 1,040,623 | 1,293,762 |
Trade receivables by segment | ||
Trade receivables | 238,813 | 363,602 |
DTX | ||
Financial information with respect to the reportable segments | ||
Net sales | 817,640 | 404,898 |
Cost of goods sold | 487,509 | 162,376 |
GROSS PROFIT | 330,131 | 242,522 |
Selling general and administrative | 168,553 | 144,970 |
LOSS FROM OPERATIONS | 161,578 | 97,552 |
Trade receivables by segment | ||
Trade receivables | 64,278 | 52,935 |
Micro-Machining | ||
Financial information with respect to the reportable segments | ||
Net sales | 746,251 | 1,041,955 |
Cost of goods sold | 1,287,503 | 1,559,057 |
GROSS PROFIT | (541,252) | (517,102) |
Selling general and administrative | 376,498 | 419,469 |
LOSS FROM OPERATIONS | (917,750) | (936,571) |
Trade receivables by segment | ||
Trade receivables | $ 238,848 | $ 177,374 |
STOCKHOLDERS EQUITY - Plan Info
STOCKHOLDERS EQUITY - Plan Information and FV Assumptions (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Stock options | ||
Number of shares of common stock authorized for issuance | 442,750 | |
Compensation cost recognized | $ 23,561 | $ 25,007 |
Unrecognized compensation cost | $ 17,000 | |
Period during which compensation cost is expected to be recognized | 3 years | |
Proceeds from the exercise of stock | $ 1,885 | 3,765 |
Minimum | ||
Stock options | ||
Price range of stock award (as a percent) | 85.00% | |
Maximum | ||
Stock options | ||
Price range of stock award (as a percent) | 110.00% | |
Stock Options. | ||
Stock options | ||
Period over which options become exercisable | 3 years | |
Common stock reserved for future grants (in shares) | 101,989 | |
Proceeds from the exercise of stock | $ 2,000 | $ 4,000 |
Assumptions used to determine fair value of stock options granted | ||
Dividend yield (as a percent) | 0.00% | 0.00% |
Expected volatility (as a percent) | 41.30% | 42.40% |
Expected life of option | 5 years | 5 years |
Risk-free interest rate (as a percent) | 1.80% | 1.30% |
Fair value of each option on grant date (in dollars per share) | $ 3.43 | $ 4.02 |
Stock Options. | Maximum | ||
Stock options | ||
Expiration period of options granted | 7 years |
STOCKHOLDERS' EQUITY - Stock Op
STOCKHOLDERS' EQUITY - Stock Option Activity (Details) - Stock Options. - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Shares | ||
Outstanding at beginning of period (in shares) | 16,168 | |
Granted (in shares) | 2,250 | 4,500 |
Exercised (in shares) | (250) | |
Outstanding at end of period (in shares) | 18,168 | 16,168 |
Exercisable at end of period (in shares) | 10,499 | |
Weighted Average Exercise Price | ||
Outstanding at beginning of period (in dollars per shares) | $ 14.40 | |
Granted (in dollars per share) | 8.91 | |
Exercised (in dollars per share) | 7.54 | |
Outstanding at end of period (in dollars per share) | 13.81 | $ 14.40 |
Exercisable at end of period (in dollars per share) | 15.41 | |
Other disclosures | ||
Weighted-average grant date fair value of options granted (in dollars per share) | $ 3.43 | $ 4.02 |
Total intrinsic value of options exercised (in dollars) | $ 490 | $ 2,160 |
STOCKHOLDERS EQUITY - Stock Rep
STOCKHOLDERS EQUITY - Stock Repurchase (Details) - USD ($) | 3 Months Ended | 5 Months Ended | 12 Months Ended | |||
Jun. 30, 2017 | Dec. 31, 2017 | Dec. 31, 2017 | Aug. 03, 2017 | Aug. 02, 2017 | Dec. 31, 2016 | |
STOCKHOLDERS' EQUITY | ||||||
Share authorized for repurchase (in shares) | 100,000 | 250,000 | ||||
Treasury stock shares acquired to date (in shares) | 219,589 | 219,589 | ||||
Share repurchased under share repurchase program (in shares) | 1,950 | 33,500 | ||||
Remaining share authorized for repurchase (in shares) | $ 30,411 | |||||
Value of share repurchased (in dollars) | $ 278,620 | |||||
Shares repurchased under share repurchase program from significant shareholder (in shares) | 25,000 | |||||
Value of shares repurchase from significant shareholder (in dollars) | $ 218,750 | |||||
Minimum ownership percent of shareholder in share repurchase program (as a percent) | 5.00% |
CONCENTRATION OF CREDIT RISK (D
CONCENTRATION OF CREDIT RISK (Details) | 12 Months Ended |
Dec. 31, 2017item | |
CONCENTRATION OF CREDIT RISK | |
Number of financial institutions in which cash balance maintained by entity in partially insured checking account | 2 |
Number of financial institutions in which cash balance exceeded the federal deposit insurance corporation coverage | 1 |
LONG-TERM DEBT (Details)
LONG-TERM DEBT (Details) | Apr. 29, 2016USD ($)ft² | Mar. 31, 2018USD ($) | Dec. 31, 2017USD ($) | Dec. 31, 2016USD ($) | Apr. 01, 2016USD ($) |
Remaining principal payments | |||||
Less: Current portion | $ 130,899 | $ 127,303 | |||
Long-term portion | 2,946,518 | 3,077,457 | |||
Loan | |||||
Financing agreement | |||||
Monthly payments including interest | $ 18,000 | ||||
Interest rate | 2.14% | ||||
Deferred debt issuance costs, gross | $ 139,000 | ||||
Loan’s effective interest rate | 2.77% | ||||
Debt service coverage ratio | 1.25 | ||||
Remaining principal payments | |||||
2,018 | 143,000 | ||||
2,019 | 146,000 | ||||
2,020 | 149,000 | ||||
2,021 | 152,000 | ||||
2,022 | 156,000 | ||||
Thereafter | 2,450,000 | ||||
Total Principal | 3,196,000 | ||||
Less: Unamortized debt issuance costs | 118,000 | ||||
Less: Current portion | 131,000 | ||||
Long-term portion | 2,947,000 | ||||
Debt Issuance Costs | |||||
Amortization of debt costs | 12,000 | 9,000 | |||
Deferred debt issuance costs, noncurrent, net | 106,000 | ||||
Deferred debt issuance costs, current, net | 12,000 | ||||
Annual expected amortization expense over the next five years | $ 10,000 | ||||
Remaining amortization period | 5 years | ||||
Loan | Building | |||||
Financing agreement | |||||
Area of building | ft² | 27,300 | ||||
Line Of Credit. | |||||
Debt Issuance Costs | |||||
Maximum borrowings | $ 2,050,000 | ||||
Outstanding borrowings | $ 0 | $ 0 | |||
Line Of Credit. | 30-day LIBOR | |||||
Debt Issuance Costs | |||||
Line of credit basis spread (as a percent) | 1.80% | ||||
Forecast | Loan | |||||
Financing agreement | |||||
Loan’s effective interest rate | 3.23% | ||||
Expected increase in annual interest payments | $ 15,000 | ||||
Duluth Economic Development Authority | |||||
Financing agreement | |||||
Bonds issued to the Bank | $ 3,415,000 |