Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2017 | May 10, 2017 | |
Document And Entity Information | ||
Entity Registrant Name | Polar Power, Inc. | |
Entity Central Index Key | 1,622,345 | |
Document Type | 10-Q | |
Trading Symbol | POLA | |
Document Period End Date | Mar. 31, 2017 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity a Well-known Seasoned Issuer | No | |
Entity a Voluntary Filer | No | |
Entity's Reporting Status Current | Yes | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 10,143,158 | |
Document Fiscal Period Focus | Q1 | |
Document Fiscal Year Focus | 2,017 |
CONDENSED BALANCE SHEETS (Unaud
CONDENSED BALANCE SHEETS (Unaudited) - USD ($) | Mar. 31, 2017 | Dec. 31, 2016 |
Current assets | ||
Cash and cash equivalents (including restricted cash of $1,000,049 at March 31, 2017) | $ 17,750,733 | $ 16,242,158 |
Accounts receivable | 3,347,992 | 4,403,946 |
Inventories, net | 5,558,695 | 4,839,591 |
Prepaid expenses | 277,481 | 178,569 |
Total current assets | 26,934,901 | 25,664,264 |
Other assets: | ||
Property and equipment, net | 734,370 | 737,586 |
Deposits | 66,796 | 66,796 |
Deferred tax assets | 223,293 | 160,637 |
Total assets | 27,959,360 | 26,629,283 |
Current liabilities | ||
Accounts payable | 966,304 | 659,355 |
Customer deposits | 168,204 | 71,954 |
Income taxes payable | 1,661,244 | 1,227,308 |
Accrued liabilities and other current liabilities | 601,929 | 669,889 |
Current portion of notes payable | 107,568 | 111,368 |
Total current liabilities | 3,505,249 | 2,739,874 |
Notes payable, net of current portion | 209,253 | 237,431 |
Total liabilities | 3,714,502 | 2,977,305 |
Commitments and Contingencies | ||
Shareholders' Equity | ||
Preferred stock, $0.0001 par value, 5,000,000 shares authorized, no shares issued and outstanding | ||
Common stock, $0.0001 par value, 50,000,000 shares authorized, 10,143,158 shares issued and outstanding | 1,014 | 1,014 |
Additional paid-in capital | 19,242,715 | 19,242,715 |
Retained earnings | 5,001,129 | 4,408,249 |
Total shareholders' equity | 24,244,858 | 23,651,978 |
Total liabilities and shareholders' equity | $ 27,959,360 | $ 26,629,283 |
CONDENSED BALANCE SHEETS (Unau3
CONDENSED BALANCE SHEETS (Unaudited) (Parenthetical) - USD ($) | Mar. 31, 2017 | Dec. 31, 2016 |
Statement of Financial Position [Abstract] | ||
Restricted cash | $ 1,000,049 | |
Preferred stock, par value (in dollars per share) | $ 0.0001 | $ 0.0001 |
Preferred stock, authorized | 5,000,000 | 5,000,000 |
Preferred stock, issued | ||
Preferred stock, outstanding | ||
Common stock, par value (in dollars per share) | $ 0.0001 | $ 0.0001 |
Common stock, authorized | 50,000,000 | 50,000,000 |
Common stock, issued | 10,143,158 | 10,143,158 |
Common stock, outstanding | 10,143,158 | 10,143,158 |
CONDENSED STATEMENTS OF OPERATI
CONDENSED STATEMENTS OF OPERATIONS (Unaudited) - USD ($) | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Income Statement [Abstract] | ||
Net sales | $ 4,966,981 | $ 3,387,743 |
Cost of sales | 3,050,251 | 1,949,639 |
Gross profit | 1,916,730 | 1,438,104 |
Operating Expenses | ||
General and administrative | 671,425 | 363,798 |
Research and development | 76,003 | 74,583 |
Sales and Marketing | 195,094 | 41,931 |
Depreciation and amortization | 7,734 | 5,646 |
Total operating expenses | 950,256 | 485,958 |
Income from operations | 966,474 | 952,146 |
Other (expenses) income | ||
Interest expenses | (4,776) | (24,004) |
Other income | 2,462 | 1,229 |
Total other (expenses) income, net | (2,314) | (22,775) |
Income before income taxes | 964,160 | 929,371 |
Income tax provision | 371,280 | 353,161 |
Net Income | $ 592,880 | $ 576,210 |
Net Income per share - basic and diluted (in dollars per share) | $ 0.06 | $ 0.08 |
Weighted average shares outstanding, basic and diluted (in shares) | 10,143,158 | 7,383,150 |
CONDENSED STATEMENT OF SHAREHOL
CONDENSED STATEMENT OF SHAREHOLDERS' EQUITY (Unaudited) - 3 months ended Mar. 31, 2017 - USD ($) | Common Stock [Member] | Additional Paid-In Capital [Member] | Retained Earnings [Member] | Total |
Balance at beginning at Dec. 31, 2016 | $ 1,014 | $ 19,242,715 | $ 4,408,249 | $ 23,651,978 |
Balance at beginning (in shares) at Dec. 31, 2016 | 10,143,158 | |||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||
Net income | 592,880 | 592,880 | ||
Balance at end at Mar. 31, 2017 | $ 1,014 | $ 19,242,715 | $ 5,001,129 | $ 24,244,858 |
Balance at end (in shares) at Mar. 31, 2017 | 10,143,158 |
CONDENSED STATEMENTS OF CASH FL
CONDENSED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Cash flows from operating activities: | ||
Net Income | $ 592,880 | $ 576,210 |
Adjustments to reconcile net income to net cash used in operating activities: | ||
Common shares issued for services | 37,500 | |
Depreciation and amortization | 59,174 | 40,914 |
Changes in operating assets and liabilities | ||
Accounts receivable | 1,055,954 | (839,445) |
Inventories | (719,104) | (295,250) |
Prepaid expenses | (98,912) | (27,037) |
Deposits | (7,500) | |
Deferred tax assets | (62,656) | |
Accounts payable | 306,949 | 477,127 |
Income taxes payable | 433,936 | 353,161 |
Customer deposits | 96,250 | (108,535) |
Accrued expenses and other current liabilities | (67,960) | (55,880) |
Net cash provided by operating activities | 1,596,511 | 151,265 |
Cash flows from investing activities: | ||
Acquisition of property and equipment | (55,957) | (93,805) |
Payable for acquired technology | (45,000) | |
Net cash used in investing activities | (55,957) | (138,805) |
Cash flows from financing activities: | ||
Advances (repayment) of credit line net | 39,711 | |
Repayment of notes | (31,979) | (82,719) |
Net cash used in financing activities | (31,979) | (43,008) |
Increase (decrease) in cash and cash equivalents | 1,508,575 | (30,548) |
Cash and cash equivalents, beginning of period | 16,242,158 | 263,418 |
Cash and cash equivalents, end of period | 17,750,733 | 232,870 |
Supplemental Cash Flow Information: | ||
Taxes Paid | 4,776 | 24,004 |
Supplemental non-cash investing and financing activities: | ||
Assets acquired under notes payable | $ 223,186 |
ORGANIZATION AND SUMMARY OF SIG
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 3 Months Ended |
Mar. 31, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The Company Polar Power, Inc. was incorporated in the State of Washington as Polar Products, Inc. and in 1991 reincorporated in the State of California under the name Polar Power, Inc. In December 2016, Polar Power, Inc. reincorporated in the State of Delaware (the “Company”). The Company designs, manufactures and sells direct current, or DC, power systems to supply reliable and low-cost energy to off-grid, bad-grid and backup power applications. The Company’s products integrate DC generator and proprietary automated controls, lithium batteries and solar systems to provide low operating cost and lower emissions alternative power needs in telecommunications, defense, automotive and industrial markets. On November 14, 2016, the Company effected a 1-for-2.85 reverse split of its common shares. All share and per share amounts have been retroactively restated to reflect the split as if it had occurred as of the earliest period presented. Basis of Presentation of Unaudited Financial Information The unaudited condensed financial statements of the Company for the three months ended March 31, 2017 and 2016 have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and pursuant to the requirements for reporting on Form 10-Q and Regulation S-K for scaled disclosures for smaller reporting companies. Accordingly, they do not include all the information and footnotes required by GAAP for complete financial statements. However, such information reflects all adjustments (consisting solely of normal recurring adjustments), which are, in the opinion of management, necessary for the fair presentation of the Company’s financial position and results of operations. Results shown for interim periods are not necessarily indicative of the results to be obtained for a full fiscal year. The balance sheet information as of December 31, 2016 was derived from the audited financial statements included in the Company’s financial statements as of and for the years ended December 31, 2016 and 2015 contained in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March 10, 2017. These financial statements should be read in conjunction with that report. Estimates The preparation of financial statements in conformity with GAAP 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 revenue and expenses during the reporting period. Material estimates relate to the assumptions made in determining reserves for uncollectible receivables, inventory reserves and returns, impairment analysis of long term assets and deferred tax assets, income tax accruals, accruals for potential liabilities and assumptions made in valuing the fair market value of equity transactions. Actual results may differ from those estimates. Inventories Inventories consist of raw materials and finished goods and are stated at the lower of cost or market. Cost is determined principally on a first-in-first-out average cost basis. Inventory quantities on hand are reviewed regularly and write-downs for obsolete inventory is recorded based on an estimated forecast of the inventory item demand in the near future. As of March 31, 2017 and December 31, 2016, the Company has established inventory reserves of $250,000 for obsolete and slow-moving inventory. As of March 31, 2017 and December 31, 2016, the components of inventories were as follows: March 31, December 31, (unaudited) Raw materials $ 3,570,387 $ 3,302,818 Finished goods 2,238,308 1,786,773 5,808,695 5,089,591 Less: Inventory reserve (250,000 ) (250,000 ) Total Inventories, net $ 5,558,695 $ 4,839,591 Product Warranties The Company provides limited warranties for parts and labor at no cost to its customers within a specified time period after the sale. The warranty terms are typically from one to five years. Provisions for estimated expenses related to product warranties are made at the time products are sold. These estimates are established using historical information about the nature, frequency and average cost of warranty claim settlements as well as product manufacturing and recovery from suppliers. Management actively studies trends of warranty claims and takes action to improve product quality and minimize warranty costs. The Company estimates the actual historical warranty claims coupled with an analysis of unfulfilled claims to record a liability for specific warranty purposes. The Company’s product warranty obligations are included in other accrued liabilities in the balance sheets. As of March 31, 2017 and December 31, 2016, the Company had accrued a liability for warranty reserve of $175,000. Management believes that the warranty accrual is appropriate; however actual claims incurred could differ from original estimates, requiring adjustments to the accrual. The product warranty accrual is included in current liabilities in the accompanying balance sheets. The following is a tabular reconciliation of the product warranty liability, excluding the deferred revenue related to the Company’s warranty coverage: March 31, December 31, Changes in estimates for warranties (unaudited) Balance at beginning of the period $ 175,000 $ 25,000 Payments (32,180 ) (135,457 ) Provision for warranties 32,180 285,457 Balance at end of the period $ 175,000 $ 175,000 Income Taxes The Company accounts for income taxes using the asset and liability method whereby deferred tax assets are recognized for deductible temporary differences, 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 bases. 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 before the Company is able to realize their benefits, or that future deductibility is uncertain. Tax benefits from an uncertain tax position are recognized only if it more likely than not that the tax position will be sustained on examination by the taxing authorities based on 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 greater than 50 percent likelihood of being realized upon ultimate resolution. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. Concentrations Cash. Revenues Accounts receivable Accounts payable Purchases Recent Accounting Pronouncements In May 2014, the FASB issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers In February 2016, the FASB issued Accounting Standards Update (ASU) No. 2016-02, Leases Other recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the SEC did not or are not believed by management to have a material impact on the Company’s present or future consolidated financial statements. |
RESTRICTED CASH
RESTRICTED CASH | 3 Months Ended |
Mar. 31, 2017 | |
Receivables [Abstract] | |
RESTRICTED CASH | NOTE 2 – RESTRICTED CASH As of March 31, 2017, the Company’s cash balance of $17,750,733 included restricted cash of $1,000,049. The restricted cash serves as a collateral to the line of credit (see Note 5) opened with a bank in March 2017. |
PROPERTY AND EQUIPMENT
PROPERTY AND EQUIPMENT | 3 Months Ended |
Mar. 31, 2017 | |
Property, Plant and Equipment [Abstract] | |
PROPERTY AND EQUIPMENT | NOTE 3 – PROPERTY AND EQUIPMENT Property and equipment consist of the following: March 31, December 31, (Unaudited) Production tooling, jigs, fixtures $ 70,749 $ 70,749 Shop equipment and machinery 1,217,953 1,193,892 Vehicles 83,780 51,883 Leasehold improvements 42,173 42,173 Office equipment 100,245 100,245 Software 97,533 97,533 Total property and equipment, cost 1,612,433 1,556,475 Less: accumulated depreciation and amortization (878,063 ) (818,889 ) Property and equipment, net $ 734,370 $ 737,586 Depreciation and amortization expense on property and equipment for the three months ended March 31, 2017 and March 31, 2016 was $59,174 and $40,914, respectively. During the three months ended March 31, 2017 and March 31, 2016, $51,440 and $35,269, respectively, of the depreciation expense were included in the balance of cost and sales. |
NOTES PAYABLE
NOTES PAYABLE | 3 Months Ended |
Mar. 31, 2017 | |
Payables and Accruals [Abstract] | |
NOTES PAYABLE | NOTE 4 – NOTES PAYABLE Notes payable consist of the following: March 31, December 31, (Unaudited) Total Equipment Notes Payable 316,821 348,799 Current Portion 107,568 111,368 Notes Payable, Long term $ 209,253 $ 237,431 The Company has entered into several financing agreements for the purchase of equipment. The terms of these financing arrangements are for a term of 2 years to 5 years, with interest rates ranging from 1.9% to 6.9% per annum, secured by the purchased equipment. Aggregate monthly payments of principal and interest of approximately $10,000 are due through 2019. |
LINE OF CREDIT
LINE OF CREDIT | 3 Months Ended |
Mar. 31, 2017 | |
Debt Disclosure [Abstract] | |
LINE OF CREDIT | NOTE 5 – LINE OF CREDIT On March 21, 2017, the Company entered into a Credit Agreement and related documents with Citibank, N.A. for a revolving credit facility for an aggregate amount of up to $1,000,000. The credit facility will expire at such time the parties mutually agree to terminate the credit facility or at the election of the lender. Interest accrues on the principal amount of revolving loans outstanding under the credit facility at a rate equal to the greater of (i) the prime rate of interest as published by Citibank, or (ii) the one-month London Interbank Offered Rate plus 2.0%. Amounts outstanding from time to time under the credit facility are due and payable monthly in an amount equal to the greater of 2.0% of the outstanding principal balance or $100, plus accrued interest. Upon the termination of the credit facility, any amounts owed under the credit facility will be payable by the Company in 48 equal consecutive monthly installments of principal, together with accrued monthly interest and any other charges beginning the first calendar month after the date of cancellation. The credit facility is also subject to an annual finance charge of $2,500, which amount has been waived for the first year. The credit facility is secured by a Certificate of Deposit (restricted cash) account opened by the Company with Citibank in the amount of $1,000,000. The Company’s credit facility contains negative covenants prohibiting it from (i) creating or permitting to exist any liens, security interests or other encumbrances on the Company’s assets, (ii) engaging in any business activities substantially different than those in which the Company is presently engaged, (iii) ceasing operations, liquidating, merging, transferring, acquiring or consolidating with any other entity, changing its name, dissolving or transferring or selling collateral out of the ordinary course of business, or (iv) paying dividends on the Company’s capital stock (other than dividends payable in stock). As of March 31, 2017, the Company had not borrowed any funds under the credit facility and thus had availability of $1,000,000. |
SHAREHOLDERS' EQUITY
SHAREHOLDERS' EQUITY | 3 Months Ended |
Mar. 31, 2017 | |
Stockholders' Equity Note [Abstract] | |
SHAREHOLDERS' EQUITY | NOTE 6 – SHAREHOLDERS’ EQUITY Warrants At March 31, 2017, warrant shares outstanding were as follows: Shares Weighted Average Exercise Price Outstanding December 31, 2016 115,000 $ 8.75 Issued $ — $ — Exercised — — Outstanding, March 31, 2017 $ 115,000 $ 8.75 All warrants outstanding are exercisable and have a remaining contractual life of 4.7 years. There was no intrinsic value of the outstanding and exercisable warrants at March 31, 2017. |
DISTRIBUTION AGREEMENT WITH A R
DISTRIBUTION AGREEMENT WITH A RELATED ENTITY | 3 Months Ended |
Mar. 31, 2017 | |
Distribution Agreement With Related Entity | |
DISTRIBUTION AGREEMENT WITH A RELATED ENTITY | NOTE 7– DISTRIBUTION AGREEMENT WITH A RELATED ENTITY On March 1, 2014, the Company entered into a subcontractor installer agreement with Smartgen Solutions, Inc. (“Smartgen”), a related entity that is engaged in business of equipment rental and provider of maintenance, repair and installation services to mobile telecommunications towers in California. Under the terms of the agreement, Smartgen has been appointed as a non-exclusive, authorized service provider for the installation, repair and service of the Company’s products in Southern California. The agreement has a term of three years from the date of execution and automatically renews for additional one year periods if not terminated. During the three months ended March 31, 2017 and 2016, Smartgen performed $70,647 and $11,933 in field services, respectively. During the three months ended March 31, 2017, Smartgen purchased $960 in goods, parts and services from the Company. Smartgen made no purchases from the Company in the three months ended March 31, 2016. |
INCOME TAXES
INCOME TAXES | 3 Months Ended |
Mar. 31, 2017 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | NOTE 8 – INCOME TAXES The provision for income taxes consists of the following for the three months ended March 31, 2017 and March 31, 2016: Periods Ended March 31, 2017 2016 Current Federal $ 345,558 $ 285,892 State 88,378 67,269 Deferred Federal (50,721 ) — State (11,935 ) — Provision for income tax expense $ 371,280 $ 353,161 Periods Ended March 31, 2017 2016 Federal income tax rate 34 % 34 % State tax, net of federal benefit 8 % 8 % Permanent differences — % — % Change in accrued liabilities (6.6 )% — % Change in valuation allowances — % — % Other 3.6 % (3.0 )% Effective income tax rate 39 % 39 % Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial statement purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets and liabilities at March 31, 2017 and at December 31, 2016 are as follows: March 31, December 31, Deferred tax assets: Inventory reserves $ 225,622 105,000 Accrued liabilities 149,767 209,084 Other — — Total deferred tax assets 375,389 314,084 Deferred tax liability Accumulated depreciation (152,096 ) (153,447 ) Net deferred tax assets $ 223,293 $ 160,637 Effective January 1, 2007, the Company adopted FASB guidelines that address 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 the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement. This guidance also provides guidance on derecognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. At the date of adoption, and as of March 31, 2017 and December 31, 2016, the Company did not have a liability for unrecognized tax benefits, and no adjustment was required at adoption. The Company files income tax returns in the U.S. federal jurisdiction and various states. The Company is subject to U.S. federal or state income tax examinations by tax authorities for tax years after 2010. The Company’s policy is to record interest and penalties on uncertain tax provisions as income tax expense. As of March 31, 2017 and December 31, 2016, the Company has no accrued interest or penalties related to uncertain tax positions. Additionally, tax years 2010 through 2016 remain open to examination by the major taxing jurisdictions to which the Company is subject. |
COMMITMENT AND CONTINGENCIES
COMMITMENT AND CONTINGENCIES | 3 Months Ended |
Mar. 31, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENT AND CONTINGENCIES | NOTE 9 – COMMITMENT AND CONTINGENCIES Legal Proceedings From time to time, the Company may be involved in general commercial disputes arising in the ordinary course of our business. The Company is not currently involved in legal proceedings that could reasonably be expected to have material adverse effect on its business, prospects, financial condition or results of operations. Sales Backlog As of March 31, 2017, the Company had a backlog of $1,026,579. The amount of backlog represents revenue that the Company anticipates recognizing in the future, as evidenced by purchase orders and other purchase commitments received from customers, but on which work has not yet been initiated or with respect to which work is currently in progress. The Company’s backlog consists of 46.2% in purchases of its DC power systems by telecommunications customers, of which 32.5% is from the Company’s single largest telecommunications customer. In addition, the Company’s backlog includes 29.0% in purchases from military contractors, 38.5% from miscellaneous customers. The Company believes that the majority of its backlog will be shipped within the next six months. However, there can be no assurance that the Company will be successful in fulfilling such orders and commitments in a timely manner or that the Company will ultimately recognize as revenue the amounts reflected in its backlog. |
ORGANIZATION AND SUMMARY OF S16
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 3 Months Ended |
Mar. 31, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation of Unaudited Financial Information | Basis of Presentation of Unaudited Financial Information The unaudited condensed financial statements of the Company for the three months ended March 31, 2017 and 2016 have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and pursuant to the requirements for reporting on Form 10-Q and Regulation S-K for scaled disclosures for smaller reporting companies. Accordingly, they do not include all the information and footnotes required by GAAP for complete financial statements. However, such information reflects all adjustments (consisting solely of normal recurring adjustments), which are, in the opinion of management, necessary for the fair presentation of the Company’s financial position and results of operations. Results shown for interim periods are not necessarily indicative of the results to be obtained for a full fiscal year. The balance sheet information as of December 31, 2016 was derived from the audited financial statements included in the Company’s financial statements as of and for the years ended December 31, 2016 and 2015 contained in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March 10, 2017. These financial statements should be read in conjunction with that report. |
Estimates | Estimates The preparation of financial statements in conformity with GAAP 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 revenue and expenses during the reporting period. Material estimates relate to the assumptions made in determining reserves for uncollectible receivables, inventory reserves and returns, impairment analysis of long term assets and deferred tax assets, income tax accruals, accruals for potential liabilities and assumptions made in valuing the fair market value of equity transactions. Actual results may differ from those estimates. |
Inventories | Inventories Inventories consist of raw materials and finished goods and are stated at the lower of cost or market. Cost is determined principally on a first-in-first-out average cost basis. Inventory quantities on hand are reviewed regularly and write-downs for obsolete inventory is recorded based on an estimated forecast of the inventory item demand in the near future. As of March 31, 2017 and December 31, 2016, the Company has established inventory reserves of $250,000 for obsolete and slow-moving inventory. As of March 31, 2017 and December 31, 2016, the components of inventories were as follows: March 31, December 31, (unaudited) Raw materials $ 3,570,387 $ 3,302,818 Finished goods 2,238,308 1,786,773 5,808,695 5,089,591 Less: Inventory reserve (250,000 ) (250,000 ) Total Inventories, net $ 5,558,695 $ 4,839,591 |
Product Warranties | Product Warranties The Company provides limited warranties for parts and labor at no cost to its customers within a specified time period after the sale. The warranty terms are typically from one to five years. Provisions for estimated expenses related to product warranties are made at the time products are sold. These estimates are established using historical information about the nature, frequency and average cost of warranty claim settlements as well as product manufacturing and recovery from suppliers. Management actively studies trends of warranty claims and takes action to improve product quality and minimize warranty costs. The Company estimates the actual historical warranty claims coupled with an analysis of unfulfilled claims to record a liability for specific warranty purposes. The Company’s product warranty obligations are included in other accrued liabilities in the balance sheets. As of March 31, 2017 and December 31, 2016, the Company had accrued a liability for warranty reserve of $175,000. Management believes that the warranty accrual is appropriate; however actual claims incurred could differ from original estimates, requiring adjustments to the accrual. The product warranty accrual is included in current liabilities in the accompanying balance sheets. The following is a tabular reconciliation of the product warranty liability, excluding the deferred revenue related to the Company’s warranty coverage: March 31, December 31, Changes in estimates for warranties (unaudited) Balance at beginning of the period $ 175,000 $ 25,000 Payments (32,180 ) (135,457 ) Provision for warranties 32,180 285,457 Balance at end of the period $ 175,000 $ 175,000 |
Income Taxes | Income Taxes The Company accounts for income taxes using the asset and liability method whereby deferred tax assets are recognized for deductible temporary differences, 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 bases. 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 before the Company is able to realize their benefits, or that future deductibility is uncertain. Tax benefits from an uncertain tax position are recognized only if it more likely than not that the tax position will be sustained on examination by the taxing authorities based on 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 greater than 50 percent likelihood of being realized upon ultimate resolution. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. |
Concentrations | Concentrations Cash. Revenues Accounts receivable Accounts payable Purchases |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In May 2014, the FASB issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers In February 2016, the FASB issued Accounting Standards Update (ASU) No. 2016-02, Leases Other recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the SEC did not or are not believed by management to have a material impact on the Company’s present or future consolidated financial statements. |
ORGANIZATION AND SUMMARY OF S17
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Schedule of components of inventory | As of March 31, 2017 and December 31, 2016, the components of inventories were as follows: March 31, December 31, (unaudited) Raw materials $ 3,570,387 $ 3,302,818 Finished goods 2,238,308 1,786,773 5,808,695 5,089,591 Less: Inventory reserve (250,000 ) (250,000 ) Total Inventories, net $ 5,558,695 $ 4,839,591 |
Schedule of reconciliation of the product warranty liability | The following is a tabular reconciliation of the product warranty liability, excluding the deferred revenue related to the Company’s warranty coverage: March 31, December 31, Changes in estimates for warranties (unaudited) Balance at beginning of the period $ 175,000 $ 25,000 Payments (32,180 ) (135,457 ) Provision for warranties 32,180 285,457 Balance at end of the period $ 175,000 $ 175,000 |
PROPERTY AND EQUIPMENT (Tables)
PROPERTY AND EQUIPMENT (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Property, Plant and Equipment [Abstract] | |
Schedule of property and equipment | Property and equipment consist of the following: March 31, December 31, (Unaudited) Production tooling, jigs, fixtures $ 70,749 $ 70,749 Shop equipment and machinery 1,217,953 1,193,892 Vehicles 83,780 51,883 Leasehold improvements 42,173 42,173 Office equipment 100,245 100,245 Software 97,533 97,533 Total property and equipment, cost 1,612,433 1,556,475 Less: accumulated depreciation and amortization (878,063 ) (818,889 ) Property and equipment, net $ 734,370 $ 737,586 |
NOTES PAYABLE (Tables)
NOTES PAYABLE (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Payables and Accruals [Abstract] | |
Schedule of notes payable | Notes payable consist of the following: March 31, December 31, (Unaudited) Total Equipment Notes Payable 316,821 348,799 Current Portion 107,568 111,368 Notes Payable, Long term $ 209,253 $ 237,431 |
SHAREHOLDERS' EQUITY (Tables)
SHAREHOLDERS' EQUITY (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Stockholders' Equity Note [Abstract] | |
Schedule of warrants shares outstanding | At March 31, 2017, warrant shares outstanding were as follows: Shares Weighted Average Exercise Price Outstanding December 31, 2016 115,000 $ 8.75 Issued $ — $ — Exercised — — Outstanding, March 31, 2017 $ 115,000 $ 8.75 |
INCOME TAXES (Tables)
INCOME TAXES (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Income Tax Disclosure [Abstract] | |
Schedule of provision for income taxes | The provision for income taxes consists of the following for the three months ended March 31, 2017 and March 31, 2016: Periods Ended March 31, 2017 2016 Current Federal $ 345,558 $ 285,892 State 88,378 67,269 Deferred Federal (50,721 ) — State (11,935 ) — Provision for income tax expense $ 371,280 $ 353,161 Periods Ended March 31, 2017 2016 Federal income tax rate 34 % 34 % State tax, net of federal benefit 8 % 8 % Permanent differences — % — % Change in accrued liabilities (6.6 )% — % Change in valuation allowances — % — % Other 3.6 % (3.0 )% Effective income tax rate 39 % 39 % |
Schedule of deferred tax assets and liabilities | Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial statement purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets and liabilities at March 31, 2017 and at December 31, 2016 are as follows: March 31, December 31, Deferred tax assets: Inventory reserves $ 225,622 105,000 Accrued liabilities 149,767 209,084 Other — — Total deferred tax assets 375,389 314,084 Deferred tax liability Accumulated depreciation (152,096 ) (153,447 ) Net deferred tax assets $ 223,293 $ 160,637 |
ORGANIZATION AND SUMMARY OF S22
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - USD ($) | Mar. 31, 2017 | Dec. 31, 2016 |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Raw materials | $ 3,570,387 | $ 3,302,818 |
Finished goods | 2,238,308 | 1,786,773 |
Total Inventories, gross | 5,808,695 | 5,089,591 |
Less: Inventory reserve | (250,000) | (250,000) |
Total Inventories, net | $ 5,558,695 | $ 4,839,591 |
ORGANIZATION AND SUMMARY OF S23
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 1) - USD ($) | 3 Months Ended | 12 Months Ended |
Mar. 31, 2017 | Dec. 31, 2016 | |
Changes in estimates for warranties | ||
Balance at beginning of the period | $ 175,000 | $ 25,000 |
Payments | (32,180) | (135,457) |
Provision for warranties | 32,180 | 285,457 |
Balance at end of the period | $ 175,000 | $ 175,000 |
ORGANIZATION AND SUMMARY OF S24
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) | Nov. 14, 2016 | Mar. 31, 2017 | Mar. 31, 2016 | Dec. 31, 2016 |
Reverse split | 1-for-2.85 | |||
Largest Vendors One [Member] | Accounts Payable [Member] | ||||
Concentration risk | 22.90% | 29.00% | ||
Largest Vendors Two [Member] | Accounts Payable [Member] | ||||
Concentration risk | 19.60% | 9.00% | ||
Largest Vendors Three [Member] | Accounts Payable [Member] | ||||
Concentration risk | 8.20% | 9.00% | ||
Yanmar Engines Company [Member] | Cost of Sales [Member] | ||||
Concentration risk | 13.00% | 13.00% | ||
Kubota Corporation [Member] | Cost of Sales [Member] | ||||
Concentration risk | 8.00% | 9.00% | ||
Sales Backlog [Member] | Verizon Wireless [Member] | ||||
Concentration risk | 91.60% | 80.10% | ||
Sales Backlog [Member] | International Customers [Member] | ||||
Concentration risk | 1.00% | 4.40% | ||
Accounts Receivable [Member] | Verizon Wireless [Member] | ||||
Concentration risk | 94.40% | 94.00% | ||
Minimum [Member] | ||||
Warrant term | 1 year | |||
Maximum [Member] | ||||
Warrant term | 5 years |
RESTRICTED CASH (Details Narrat
RESTRICTED CASH (Details Narrative) - USD ($) | Mar. 31, 2017 | Dec. 31, 2016 | Mar. 31, 2016 | Dec. 31, 2015 |
Receivables [Abstract] | ||||
Cash and cash equivalents | $ 17,750,733 | $ 16,242,158 | $ 232,870 | $ 263,418 |
Restricted cash | $ 1,000,049 |
PROPERTY AND EQUIPMENT (Details
PROPERTY AND EQUIPMENT (Details) - USD ($) | Mar. 31, 2017 | Dec. 31, 2016 |
Total property and equipment, cost | $ 1,612,433 | $ 1,556,475 |
Less: accumulated depreciation and amortization | (878,063) | (818,889) |
Property and equipment, net | 734,370 | 737,586 |
Production Tooling, Jigs, Fixtures [Member] | ||
Total property and equipment, cost | 70,749 | 70,749 |
Shop Equipment And Machinery [Member] | ||
Total property and equipment, cost | 1,217,953 | 1,193,892 |
Vehicles [Member] | ||
Total property and equipment, cost | 83,780 | 51,883 |
Leasehold Improvements [Member] | ||
Total property and equipment, cost | 42,173 | 42,173 |
Office Equipment [Member] | ||
Total property and equipment, cost | 100,245 | 100,245 |
Software [Member] | ||
Total property and equipment, cost | $ 97,533 | $ 97,533 |
PROPERTY AND EQUIPMENT (Detai27
PROPERTY AND EQUIPMENT (Details Narrative) - USD ($) | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Depreciation and amortization expense | $ 59,174 | $ 40,914 |
Cost of Sales [Member] | ||
Depreciation expense | $ 51,440 | $ 35,269 |
NOTES PAYABLE (Details)
NOTES PAYABLE (Details) - USD ($) | Mar. 31, 2017 | Dec. 31, 2016 |
Payables and Accruals [Abstract] | ||
Total Equipment Notes Payable | $ 316,821 | $ 348,799 |
Current Portion | 107,568 | 111,368 |
Notes Payable, Long term | $ 209,253 | $ 237,431 |
NOTES PAYABLE (Details Narrativ
NOTES PAYABLE (Details Narrative) - Several Financing Agreements [Member] - Equipment [Member] | 3 Months Ended |
Mar. 31, 2017USD ($) | |
Description of collateral | Secured by the purchased equipment. |
Monthly payments of principal and interest | $ 10,000 |
Frequency of payment | Monthly |
Minimum [Member] | |
Debt term | 2 years |
Interest rate | 1.90% |
Maximum [Member] | |
Debt term | 5 years |
Interest rate | 6.90% |
LINE OF CREDIT (Details Narrati
LINE OF CREDIT (Details Narrative) - Credit Agreement [Member] - Citibank, N.A. [Member] - Revolving Credit Facility [Member] | Mar. 21, 2017USD ($) |
Maximum borrowing capacity | $ 1,000,000 |
Description of expiration | Expire at such time the parties mutually agree to terminate the credit facility or at the election of the lender. |
Description of interest rate | Interest accrues on the principal amount of revolving loans outstanding under the credit facility at a rate equal to the greater of (i) the prime rate of interest as published by Citibank, or (ii) the one-month London Interbank Offered Rate plus 2.0%. |
Description of payments | Amounts outstanding from time to time under the credit facility are due and payable monthly in an amount equal to the greater of 2.0% of the outstanding principal balance or $100, plus accrued interest. |
Annual finance charge | $ 2,500 |
Description of collateral | Certificate of Deposit (restricted cash) account opened by the Company with Citibank in the amount of $1,000,000. |
Description covenant terms | (i) creating or permitting to exist any liens, security interests or other encumbrances on the Companys assets, (ii) engaging in any business activities substantially different than those in which the Company is presently engaged, (iii) ceasing operations, liquidating, merging, transferring, acquiring or consolidating with any other entity, changing its name, dissolving or transferring or selling collateral out of the ordinary course of business, or (iv) paying dividends on the Companys capital stock (other than dividends payable in stock). |
Remaining borrowing capacity | $ 1,000,000 |
SHAREHOLDERS' EQUITY (Details)
SHAREHOLDERS' EQUITY (Details) - Warrant [Member] | 3 Months Ended |
Mar. 31, 2017$ / sharesshares | |
Shares [Roll Forward] | |
Outstanding at beginning | shares | 115,000 |
Issued | shares | |
Exercised | shares | |
Outstanding at end | shares | 115,000 |
Weighted Average Exercise Price [Roll Forward] | |
Outstanding at beginning | $ / shares | $ 8.75 |
Issued | $ / shares | |
Exercised | $ / shares | |
Outstanding at end | $ / shares | $ 8.75 |
SHAREHOLDERS' EQUITY (Details N
SHAREHOLDERS' EQUITY (Details Narrative) | 3 Months Ended |
Mar. 31, 2017 | |
Warrant [Member] | |
Remaining contractual life | 4 years 8 months 12 days |
DISTRIBUTION AGREEMENT WITH A33
DISTRIBUTION AGREEMENT WITH A RELATED ENTITY (Details Narrative) - Subcontractor Installer Agreement [Member] - Smartgen Solutions, Inc. ("Smartgen") [Member] - USD ($) | Mar. 31, 2017 | Mar. 31, 2016 |
Due to related party | $ 70,647 | $ 11,933 |
Due from related party | $ 960 | $ 0 |
INCOME TAXES (Details)
INCOME TAXES (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Current | ||
Federal | $ 345,558 | $ 285,892 |
State | 88,378 | 67,269 |
Deferred | ||
Federal | (50,721) | |
State | (11,935) | |
Provision for income tax expense | $ 371,280 | $ 353,161 |
INCOME TAXES (Details 1)
INCOME TAXES (Details 1) | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Income Tax Disclosure [Abstract] | ||
Federal income tax rate | 34.00% | 34.00% |
State tax, net of federal benefit | 8.00% | 8.00% |
Change in accrued liabilities | (6.60%) | |
Other | 3.60% | (3.00%) |
Effective income tax rate | 39.00% | 39.00% |
INCOME TAXES (Details 2)
INCOME TAXES (Details 2) - USD ($) | Mar. 31, 2017 | Dec. 31, 2016 |
Deferred tax assets: | ||
Inventory reserves | $ 225,622 | $ 105,000 |
Accrued liabilities | 149,767 | 209,084 |
Other | ||
Total deferred tax assets | 375,389 | 314,084 |
Deferred tax liability | ||
Accumulated depreciation | (152,096) | (153,447) |
Net deferred tax assets | $ 223,293 | $ 160,637 |
COMMITMENT AND CONTINGENCIES (D
COMMITMENT AND CONTINGENCIES (Details Narrative) | 3 Months Ended |
Mar. 31, 2017USD ($) | |
Amount of sales backlog | $ 1,026,579 |
Sales Backlog [Member] | Customer Concentration Risk [Member] | Military Contractors [Member] | |
Concentration of risk | 29.00% |
Sales Backlog [Member] | Customer Concentration Risk [Member] | Miscellaneous Customers [Member] | |
Concentration of risk | 38.50% |
Sales Backlog [Member] | DC Power Systems [Member] | Customer Concentration Risk [Member] | |
Concentration of risk | 46.20% |
Sales Backlog [Member] | DC Power Systems [Member] | Customer Concentration Risk [Member] | Customer One [Member] | |
Concentration of risk | 32.50% |