Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Dec. 31, 2017 | Feb. 24, 2018 | Jun. 30, 2017 | |
Document And Entity Information | |||
Entity Registrant Name | RELM WIRELESS CORP | ||
Entity Central Index Key | 2,186 | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 2017 | ||
Amendment Flag | false | ||
Current Fiscal Year End Date | --12-31 | ||
Is Entity a Well-known Seasoned Issuer? | No | ||
Is Entity a Voluntary Filer? | No | ||
Is Entity's Reporting Status Current? | Yes | ||
Entity Filer Category | Smaller Reporting Company | ||
Entity Public Float | $ 28,567,823 | ||
Entity Common Stock, Shares Outstanding | 13,844,584 | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2,017 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) $ in Thousands | Dec. 31, 2017 | Dec. 31, 2016 |
Current assets: | ||
Cash and cash equivalents | $ 7,147 | $ 10,910 |
Available-for-sale securities | 9,184 | 0 |
Trade accounts receivable (net of allowance for doubtful accounts of $50 in 2017 and 2016) | 5,524 | 3,448 |
Inventories, net | 14,358 | 13,999 |
Prepaid expenses and other current assets | 772 | 1,410 |
Total current assets | 36,985 | 29,767 |
Property, plant and equipment, net | 2,201 | 2,486 |
Available-for-sale securities | 0 | 6,472 |
Deferred tax assets, net | 3,317 | 3,418 |
Other assets | 298 | 401 |
Total assets | 42,801 | 42,544 |
Current liabilities: | ||
Accounts payable | 5,971 | 1,973 |
Accrued compensation and related taxes | 1,364 | 2,193 |
Accrued warranty expense | 1,389 | 650 |
Accrued other expenses and other current liabilities | 1,159 | 169 |
Dividends payable | 273 | 1,235 |
Deferred revenue | 157 | 142 |
Total current liabilities | 10,313 | 6,362 |
Deferred revenue | 481 | 408 |
Total liabilities | 10,794 | 6,770 |
Commitments and contingencies | ||
Stockholders' equity: | ||
Preferred stock; $1.00 par value; 1,000,000 authorized shares: none issued or outstanding | 0 | 0 |
Common stock; $.60 par value; 20,000,000 authorized shares: 13,844,584 and 13,754,749 issued and outstanding shares at December 31, 2017 and 2016, respectively | 8,307 | 8,253 |
Additional paid-in capital | 25,642 | 25,382 |
Retained earnings | (5,450) | 240 |
Accumulated other comprehensive income | 4,318 | 2,061 |
Treasury stock, at cost, 192,094 and 30,422 shares at December 31, 2017 and 2016, respectively | (810) | (162) |
Total stockholders' equity | 32,007 | 35,774 |
Total liabilities and stockholders' equity | $ 42,801 | $ 42,544 |
Condensed Consolidated Balance3
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands | Dec. 31, 2017 | Dec. 31, 2016 |
ASSETS | ||
Allowance for doubtful accounts, net | $ 50 | $ 50 |
Stockholders equity: | ||
Preferred stock, par value | $ 1 | $ 1 |
Preferred stock, authorized shares | 1,000,000 | 1,000,000 |
Preferred stock, issued shares | 0 | 0 |
Preferred stock, outstanding shares | 0 | 0 |
Common stock, par value | $ 0.60 | $ 0.60 |
Common stock, authorized shares | 20,000,000 | 20,000,000 |
Common stock, issued shares | 13,844,584 | 13,754,749 |
Common stock, outstanding shares | 13,844,584 | 13,754,749 |
Treasury stock, shares | 192,094 | 30,422 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Income Statement [Abstract] | ||
Sales, net | $ 39,395 | $ 50,689 |
Expenses | ||
Cost of products | 29,845 | 33,612 |
Selling, general and administrative | 14,577 | 12,792 |
Total expenses | 44,422 | 46,404 |
Operating income (loss) | (5,027) | 4,285 |
Other income (expense): | ||
Interest income | 46 | 9 |
Gain on sale of available-for-sale securities | 1,833 | 0 |
Legal settlement | (1,436) | 0 |
Loss on disposal of property, plant and equipment | (95) | 0 |
Other expense | (106) | (22) |
Total other income (expense) | 242 | (13) |
Income (loss) before income taxes | (4,785) | 4,272 |
Discrete tax item-impact of tax reform | (665) | 0 |
Income tax expense | 1,824 | (1,583) |
Net income (loss) | $ (3,626) | $ 2,689 |
Net income (loss) per share-basic | $ (0.27) | $ .20 |
Net income (loss) per share-diluted | $ (0.27) | $ 0.19 |
Weighted average shares outstanding-basic | 13,625 | 13,735 |
Weighted average shares outstanding-diluted | 13,625 | 13,823 |
Condensed Consolidated Stateme5
Condensed Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Condensed Consolidated Statements Of Comprehensive Income | ||
Net income (loss) | $ (3,626) | $ 2,689 |
Unrealized gain on available-for-sale securities, net of tax | 2,257 | 1,664 |
Total comprehensive (loss) income | $ (1,369) | $ 4,353 |
Condensed Consolidated Stateme6
Condensed Consolidated Statements of Stockholders Equity - USD ($) $ in Thousands | Common Stock | Additional Paid-In Capital | Retained Earnings | Accumulated Other Comprehensive Income | Treasury Stock (Deficit) | Total |
Beginning Balance, shares at Dec. 31, 2015 | 13,730,562 | |||||
Beginning Balance, amount at Dec. 31, 2015 | $ 8,238 | $ 24,926 | $ 1,259 | $ 397 | $ 0 | $ 34,820 |
Common stock options exercised and issued, shares | 24,187 | |||||
Common stock options exercised and issued, amount | $ 15 | 15 | 30 | |||
Share-based compensation expense | 49 | 49 | ||||
Restricted stock unit compensation expense | 0 | |||||
Realized tax benefit from stock option exercise | 392 | 392 | ||||
Dividends declared | (3,708) | (3,708) | ||||
Net income (loss) | 2,689 | 2,689 | ||||
Unrealized gain on available-for-sale securities | 1,664 | 1,664 | ||||
Repurchase of common stock | (162) | (162) | ||||
Ending Balance, shares at Dec. 31, 2016 | 13,754,749 | |||||
Ending Balance, amount at Dec. 31, 2016 | $ 8,253 | 25,382 | 240 | 2,061 | (162) | 35,774 |
Common stock options exercised and issued, shares | 89,835 | |||||
Common stock options exercised and issued, amount | $ 54 | 129 | 183 | |||
Share-based compensation expense | 55 | 55 | ||||
Restricted stock unit compensation expense | 76 | 76 | ||||
Realized tax benefit from stock option exercise | 0 | |||||
Dividends declared | (2,064) | (2,064) | ||||
Net income (loss) | (3,626) | (3,626) | ||||
Unrealized gain on available-for-sale securities | 2,257 | 2,257 | ||||
Repurchase of common stock | (648) | (648) | ||||
Ending Balance, shares at Dec. 31, 2017 | 13,844,584 | |||||
Ending Balance, amount at Dec. 31, 2017 | $ 8,307 | $ 25,642 | $ (5,450) | $ 4,318 | $ (810) | $ 32,007 |
Condensed Consolidated Stateme7
Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Operating activities | ||
Net income (loss) | $ (3,626) | $ 2,689 |
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities: | ||
Allowance for doubtful accounts | 0 | 17 |
Inventory allowance | 149 | 180 |
Deferred tax expense | (1,163) | 1,118 |
Depreciation and amortization | 942 | 942 |
Share-based compensation expense | 55 | 49 |
Restricted stock unit compensation expense | 76 | 0 |
Realized tax benefit from stock option exercise | 0 | 392 |
Gain on sale of available-for-sale securities | (1,833) | 0 |
Loss on disposal of property, plant and equipment | 95 | 0 |
Changes in operating assets and liabilities: | ||
Trade accounts receivable | (2,076) | 657 |
Inventories | (508) | 2,103 |
Prepaid expenses and other current assets | 637 | 1,671 |
Other assets | (20) | (3) |
Accounts payable | 3,998 | (312) |
Accrued compensation and related taxes | (829) | 1,057 |
Accrued warranty expense | 739 | 112 |
Deferred revenue | 88 | 48 |
Accrued other expenses and other current liabilities | 990 | 1 |
Net cash (used in) provided by operating activities | (2,286) | 10,721 |
Investing activities | ||
Purchases of property, plant and equipment | (628) | (1,394) |
Purchase of available-for-sale securities | 0 | (481) |
Proceeds from sale of available-for-sale securities | 2,642 | 0 |
Net cash used in investing activities | 2,014 | (1,875) |
Financing activities | ||
Dividends paid | (3,026) | (2,473) |
Repurchase of common stock | (648) | (162) |
Proceeds from issuance of common stock | 183 | 30 |
Net cash used in financing activities | (3,491) | (2,605) |
(Decrease) increase in cash | (3,763) | 6,241 |
Cash and cash equivalents, beginning of year | 10,910 | 4,669 |
Cash and cash equivalents, end of year | 7,147 | 10,910 |
Supplemental disclosure | ||
Cash paid for income taxes | 0 | 50 |
Non-cash financing activity | ||
Cashless exercise of stock options and related conversion of net shares to stockholders’ equity | $ 27 | $ 4 |
1. Summary of Significant Accou
1. Summary of Significant Accounting Policies | 12 Months Ended |
Dec. 31, 2017 | |
Accounting Policies [Abstract] | |
1. Summary of Significant Accounting Policies | Description of Business The primary business of RELM Wireless Corporation and its subsidiaries (collectively, the “Company”) is the designing, manufacturing and marketing of wireless communications equipment consisting primarily of two-way land mobile radios and related products, which are sold in two primary markets: (1) the government and public safety market and (2) the business and industrial market. The Company has only one reportable business segment. Principles of Consolidation The accounts of the Company have been included in the accompanying consolidated financial statements. All significant intercompany balances and transactions have been eliminated in consolidation. Inventories Inventories are stated at the lower of cost (determined by the average cost method) or net realizable value. Freight costs are classified as a component of cost of products in the accompanying consolidated statements of operations. The allowance for slow-moving, excess, or obsolete inventory is used to state the Company’s inventories at the lower of cost or market. Because the amount of inventory that will actually be recouped through sales cannot be known with certainty at any particular time, the Company relies on past sales experience, future sales forecasts, and its strategic business plans. Generally, in analyzing inventory levels, inventory is classified as having been used or unused during the past year. The Company then establishes a reserve based upon several factors, including, but not limited to, business forecasts, inventory quantities and historic usage profile. Supplemental to the aforementioned analysis, specific inventory items are reviewed individually by management. Based on the review, considering business levels, future prospects, new products and technology changes, management, using its business judgment, may adjust the valuation of specific inventory items to reflect an accurate valuation. Management also performs a determination of net realizable value for all finished goods with a selling price below cost. For all such items, the inventory is valued at not more than the selling price less cost, if any, to sell. Property, Plant and Equipment Property, plant and equipment is carried at cost. Expenditures for maintenance, repairs and minor renewals are expensed as incurred. When properties are retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the respective accounts and the resulting gain or loss is reflected in operations for the period. Depreciation and amortization are generally computed on the straight-line method using lives of 3 to 10 years for machinery and equipment and 5 to 6 years for leasehold improvements. Impairment of Long-Lived Assets Management regularly reviews long-lived assets and intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets which considers the discounted future net cash flows. No long-lived assets were considered impaired at December 31, 2017 and 2016. Cash Equivalents The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. Allowance for Doubtful Accounts The Company records an allowance for doubtful accounts based on specifically identified amounts that the Company believes to be uncollectible. The Company also records an additional allowance based on certain percentages of the Company’s aged receivables, which are determined based on historical experience and the Company’s assessment of the general financial conditions affecting the Company’s customer base. If the Company’s actual collections experience changes, revisions to the Company’s allowance may be required. After all attempts to collect a receivable have failed, the receivable is written off against the allowance. Based on the information available, management believes the allowance for doubtful accounts as of December 31, 2017 and 2016 is adequate. Revenue Recognition Sales revenue is recognized when the earnings process is complete and collection is reasonably assured. The earnings process is generally complete when the product is shipped or received by the customer, depending upon whether the title to the goods, as well as the risks and benefits of ownership, are transferred to the customer at point of shipment or point of delivery. However, sales to the federal government are recognized when the products are delivered. For extended warranties, sales revenue associated with the warranty is deferred at the time of sale and later recognized on a straight-line basis over the extended warranty period. The Company periodically reviews its revenue recognition procedures to assure that such procedures are in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Surcharges collected on certain sales to government customers and remitted to governmental agencies are not included in revenues or in costs and expenses. Income Taxes The Company accounts for income taxes using the asset and liability method specified by GAAP. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using the enacted tax rates expected to apply in the period in which the deferred tax asset or liability is expected to be realized. The effect of changes in net deferred tax assets and liabilities is recognized on the Company’s consolidated balance sheets and consolidated statements of operations in the period in which the change is recognized. Valuation allowances are provided to the extent that impairment of tax assets are more likely than not. In determining whether a tax asset is realizable, the Company considers, among other things, estimates of future earnings based on information currently available, current and anticipated customers, contracts and new product introductions, as well as recent operating results during 2017 and 2016 and certain tax planning strategies. If the Company fails to achieve the future results anticipated in the calculation and valuation of net deferred tax assets, the Company may be required to adjust the valuation allowance related to its deferred tax assets in the future. On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “2017 Tax Act”). The 2017 Tax Act makes broad and complex changes to the U.S. tax code, including, but not limited to, (1) reducing the U.S. federal corporate tax rate from 35% to 21%; (2) eliminating the corporate alternative minimum tax (“AMT”) and changing how existing AMT credits can be realized; and (3) changing rules related to uses and limitations of net operating loss carryforwards created in tax years beginning after December 31, 2017. In connection with the Company’s initial analysis of the impact of the 2017 Tax Act, the Company has recorded a discrete net tax expense of $665 in the year ended December 31, 2017 for the effect of the corporate rate reduction. The net tax expense primarily relates to a reduction in the deferred tax assets of $1,524 and a reduction in the deferred tax liability related to unrealized gain on available-for-sale securities of $(859). Concentration of Credit Risk The Company performs periodic credit evaluations of its customers’ financial condition and generally does not require collateral. At December 31, 2017 and 2016, accounts receivable from governmental customers were approximately $2,663 and $1,090, respectively. Generally, receivables are due within 30 days. Credit losses relating to customers have been consistently within management’s expectations. The Company primarily maintains cash balances at one financial institution. Accounts are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250. From time to time, the Company has had cash in financial institutions in excess of federally insured limits. As of December 31, 2017, the Company had cash and cash equivalents in excess of FDIC limits of $7,053. Manufacturing and Raw Materials The Company relies upon a limited number of manufacturers to produce its products and on a limited number of component suppliers. Some of these manufacturers and suppliers are in other countries. Approximately 65.7% of the Company’s material, subassembly and product procurements in 2017 were sourced internationally, of which approximately 61.6% were sourced from three suppliers. For 2016, approximately 76.3% of the Company’s material, subassembly and product procurements were sourced internationally, of which approximately 70% were sourced from three suppliers. Purchase orders denominated in U.S. dollars are placed with these suppliers from time to time and there are no guaranteed supply arrangements or commitments. Use of 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 at the date of the consolidated financial statements and the reported amounts of sales and expenses during the reporting period. Significant estimates include accounts receivable allowances, inventory obsolescence allowance, warranty allowance, capitalized software costs and income tax accruals. Actual results could differ from those estimates. Fair Value of Financial Instruments The Company’s financial instruments consist of cash and cash equivalents, trade accounts receivable, available-for-sale securities, accounts payable, accrued expenses and other liabilities. As of December 31, 2017 and 2016, the carrying amount of cash and cash equivalents, trade accounts receivable, accounts payable, accrued expenses and other liabilities approximated their respective fair value due to the short-term nature and maturity of these instruments. The Company uses observable market data or assumptions (Level 1 inputs, as defined in accounting guidance) that it believes market participants would use in pricing the available-for-sale securities. There were no sales of available-for-sale securities, nor gains or losses reclassified out of accumulated other comprehensive income as a result of an other-than-temporary impairment of the available-for-sale securities. There were no transfers of available-for-sale securities between Level 1 and Level 2 during the year ended December 31, 2017. Available-For-Sale Securities Investments reported on the December 31, 2017 and 2016 consolidated balance sheets consist of marketable equity securities of a publicly held company. As of December 31, 2017 and 2016, the investment cost was $2,402 and $3,242, respectively. Management intends to hold such securities for a sufficient period in which to realize a reasonable return, which periods may range between one to several years, although there is no assurance that positive returns will be realized or that such securities will not be liquidated in a shorter-than-expected time frame to accommodate future liquidity requirements. For year ended December 31, 2017, investments were classified as current and available-for-sale. Investments are marked to market at each measurement date, with unrealized gains or losses presented as adjustments to accumulated other comprehensive income or loss. Shipping and Handling Costs Shipping and handling costs are classified as a part of cost of products in the accompanying consolidated statements of operations for the years ended December 31, 2017 and 2016. Amounts billed to a customer, if any, for shipping and handling are reported as a revenue. Advertising and Promotion Costs The cost for advertising and promotion is expensed as incurred. Advertising and promotion expenses are classified as part of selling, general and administrative (“SG&A”) expenses in the accompanying consolidated statements of operations. For the years ended December 31, 2017 and 2016, such expenses totaled $424 and $334, respectively. Engineering, Research and Development Costs Included in SG&A expenses for the years ended December 31, 2017 and 2016 are engineering, research and development costs of $5,000 and $4,123, respectively. Share-Based Compensation The Company accounts for share-based arrangements in accordance with GAAP, which requires a public entity to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award (with limited exceptions). That cost will be recognized over the period during which the employee is required to provide service in exchange for the award requisite service period (usually the vesting period). No compensation cost is recognized for equity instruments for which employees do not render the requisite service. Employee share purchase plans will not result in recognition of compensation cost if certain conditions are met. Restricted Stock Units On June 15, 2017, the Company granted to each non-employee director restricted stock units (“RSUs”) with a grant fair value of $20 per award, which will vest in full on June 15, 2018, subject to continued service through such vesting date. Earnings Per Share Earnings per share amounts are computed and presented for all periods in accordance with GAAP. Other Comprehensive Income (Loss) Other comprehensive income (loss) consists of net income (loss) and unrealized gain on available-for-sale securities, net of taxes. Product Warranty The Company offers two-year warranties to its customers, depending on the specific product and terms of the customer purchase agreement. The Company’s typical warranties require it to repair and replace defective products during the warranty period at no cost to the customer. At the time the product revenue is recognized, the Company records a liability for estimated costs under its warranties. The costs are estimated based on historical experience. The Company periodically assesses the adequacy of its recorded liability for product warranties and adjusts the amount as necessary. Reclassifications Certain prior year amounts have been reclassified to conform to the current year presentation. These reclassifications had no impact on previously reported net income for the year ended December 31, 2016. Recent Accounting Pronouncements In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09 on “Revenue from Contracts with Customers,” which provides for a single, principles-based model for revenue recognition and replaces the existing revenue recognition guidance. In August 2015, the FASB issued ASU 2015-14, which delays the effective date of ASU 2014-09 by one year. The guidance is effective for annual and interim periods beginning on or after December 15, 2017, and will replace most existing revenue recognition guidance under U.S. GAAP when it becomes effective. This ASU requires additional disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and estimates and changes in those estimates. It permits the use of either a retrospective or cumulative effect transition method. The Company will adopt ASU 2014-09 in the first quarter of 2018 and apply the modified retrospective approach. Because the Company’s primary source of revenues is from shipments of products, the Company does not expect the impact on its consolidated financial statements to be material. In July 2015, the FASB issued ASU 2015-11, “ ,” In January 2016, the FASB issued ASU 2016-01 “Financial Instruments,” which amends the guidance in U.S. GAAP on the classification and measurement of financial instruments. Changes to the current guidance primarily affect the accounting for equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. In addition, the ASU clarifies guidance related to the valuation allowance assessment when recognizing deferred tax assets resulting from unrealized losses on available-for-sale debt securities. The new standard is effective for fiscal years and interim periods beginning after December 15, 2017, and upon adoption, an entity should apply the amendments by means of a cumulative-effect adjustment to the balance sheet at the beginning of the first reporting period in which the guidance is effective. Early adoption is not permitted except for the provision to record fair value changes for financial liabilities under the fair value option resulting from instrument-specific credit risk in other comprehensive income. On January 1, 2018, the Company adopted the new guidance and, consequently, the Company has recognized approximately $4,300 of net unrealized gain in its retained earnings balance. In February 2016, the FASB issued ASU 2016-02, “Leases,” which amends leasing guidance by requiring companies to recognize a right-of-use asset and a lease liability for all operating and capital (finance) leases with lease terms greater than twelve months. The lease liability will be equal to the present value of lease payments. The lease asset will be based on the lease liability, subject to adjustment, such as for initial direct costs. For income statement purposes, leases will continue to be classified as operating or capital (finance), with lease expense in both cases calculated substantially the same as under the prior leasing guidance. The updated guidance is effective for interim and annual periods beginning after December 15, 2018, with early adoption permitted. The Company expects this will result in the recognition of right-of-use assets and lease liabilities not currently recorded on the consolidated financial statements under existing accounting guidance, but the Company is still evaluating all the Company’s contractual arrangements and the impact that adoption of ASU 2016-02 will have on the Company’s consolidated financial statements. In March 2016, the FASB issued ASU 2016-09, “Improvements to Employee Share-Based Payment Accounting.” The guidance is effective for annual reporting periods beginning after December 15, 2016 and interim periods within those fiscal years with early adoption permitted. The Company has adopted the new guidance with no material impact on its consolidated financial statements. The Company does not discuss recent pronouncements that are not anticipated to have an impact on or are unrelated to its financial condition, results of operations, cash flows or disclosures. |
2. Inventories, net
2. Inventories, net | 12 Months Ended |
Dec. 31, 2017 | |
Notes to Financial Statements | |
2. Inventories, net | Inventories, which are presented net of allowance for obsolete and slow-moving inventory, consisted of the following: December 31, 2017 2016 Finished goods $ 2,825 $ 3,216 Work in process 7,111 6,612 Raw materials 4,422 4,171 $ 14,358 $ 13,999 Changes in the allowance for obsolete and slow-moving inventory are as follows: Years Ended December 31, 2017 2016 Balance, beginning of year $ 1,607 $ 1,685 Charged to cost of sales 149 180 Disposal of inventory (967 ) (258 ) Balance, end of year $ 789 $ 1,607 Following leadership changes, in the third quarter of 2017, the Company launched a comprehensive evaluation of its products, markets and strategies through the remainder of the year. As a result of this evaluation, the Company recognized a direct charge to cost of products of $3,200 to write-off inventory with limited customer market opportunities, primarily due to concerns regarding technology and production costs. For the years ended December 31, 2016 and 2017, the Company wrote off obsolete inventory that had been fully allowed for previously, which had no material impact to the Company’s consolidated balance sheets or consolidated statements of operations. |
3. Allowance for Doubtful Accou
3. Allowance for Doubtful Accounts | 12 Months Ended |
Dec. 31, 2017 | |
Notes to Financial Statements | |
3. Allowance for Doubtful Accounts | Changes in the allowance for doubtful accounts are composed of the following: Years Ended December 31, 2017 2016 Balance, beginning of year $ 50 $ 49 Provision for doubtful accounts — 17 Uncollectible accounts written off — (16 ) Balance, end of year $ 50 $ 50 |
4. Property, Plant and Equipmen
4. Property, Plant and Equipment, net | 12 Months Ended |
Dec. 31, 2017 | |
Property, Plant and Equipment [Abstract] | |
4. Property, Plant and Equipment, net | Property, plant and equipment, net include the following: December 31, 2017 2016 Leasehold improvements $ 422 $ 392 Machinery and equipment 8,970 8,548 Less accumulated depreciation and amortization (7,191 ) (6,454 ) Property, plant and equipment, net $ 2,201 $ 2,486 Depreciation and amortization expense relating to property, plant and equipment for the years ended December 31, 2017 and 2016 was approximately $808 and $748, respectively. |
5. Debt
5. Debt | 12 Months Ended |
Dec. 31, 2017 | |
Notes to Financial Statements | |
5. Debt | The Company has a revolving credit facility with Silicon Valley Bank with a maximum borrowing availability of $1,000 and a maturity date of December 26, 2018. The Loan and Security Agreement governing the revolving credit facility contains customary borrowing terms and conditions, including the accuracy of representations and warranties, compliance with financial maintenance and restrictive covenants and the absence of events of default. Pursuant to the Loan and Security Agreement, the Company is permitted to pay cash dividends, the total of which may not exceed $5,000 in the aggregate during any twelve-month period, so long as an event of default does not exist at the time of such dividend and would not exist after giving effect to such dividend. The variable rate at which borrowings under the credit facility bear interest is the Wall Street Journal The financial maintenance covenants, required to be maintained at all times and tested quarterly (or, for the “quick ratio” covenant, monthly, if any obligations are outstanding), include: (1) a ratio of “quick assets to current liabilities” minus “deferred revenue” (all as defined in the Loan and Security Agreement) of at least 1.25:1.00 and (2) “maximum total leverage” (as defined in the Loan and Security Agreement) of no greater total indebtedness than 3 times adjusted EBITDA. The Company’s obligations are collateralized by substantially all of the Company’s assets, principally accounts receivable and inventory. The Company was in compliance with all covenants under the Loan and Security Agreement as of December 31, 2017. The Company had no borrowings outstanding under the credit facility as of December 31, 2017, and $1,000 was available for borrowing. |
6. Investment in Securities
6. Investment in Securities | 12 Months Ended |
Dec. 31, 2017 | |
Investment In Securities | |
6. Investment in Securities | As of December 31, 2017, the Company, through its wholly-owned subsidiary, held approximately 1.3 million shares of Iteris, Inc. (Nasdaq: ITI) (“Iteris”). At December 31, 2017, the corresponding unrealized gain of approximately $2,257, net of tax of $2,428, is included in accumulated other comprehensive income as a separate component of stockholders’ equity. There was no impact to the Company’s consolidated statements of operations. On July 29, 2016, the Company, one of the Company’s significant stockholders, and certain of their affiliates entered into an agreement with Iteris. Pursuant to the agreement, a Director of the Company, who is an executive, co-founder and partner of the significant stockholder that is party to the agreement, was appointed to the Board of Directors of Iteris. The significant stockholder of the Company did not stand for re-election to the Iteris Board of Directors. As of November 8, 2017, the date of Iteris’ annual meeting of stockholders, the significant stockholder of the Company was no longer a member of the Iteris Board of Directors. |
7. Leases
7. Leases | 12 Months Ended |
Dec. 31, 2017 | |
Leases [Abstract] | |
7. Leases | The Company leases approximately 54,000 square feet of industrial space in West Melbourne, Florida, under a non-cancellable operating lease. The lease has the expiration date of June 30, 2020. Rental, maintenance and tax expenses for this facility were approximately $472 and $475 in 2017 and 2016, respectively. The Company also leases 8,100 square feet of office space in Lawrence, Kansas, under a non-cancellable operating lease, to accommodate a portion of the Company’s engineering team. The lease has the expiration date of December 31, 2019. Rental, maintenance and tax expenses for this facility were approximately $108 in 2017 and 2016. The following table summarizes future minimum rental payments under these leases as of December 31, 2017: 2018 $ 577 2019 577 2020 234 Thereafter — $ 1,388 |
8. Income Taxes
8. Income Taxes | 12 Months Ended |
Dec. 31, 2017 | |
Notes to Financial Statements | |
8. Income Taxes | The income tax expense is summarized as follows: Years Ended December 31, 2017 2016 Current: Federal $ (11 ) $ 61 State 10 11 (1 ) 72 Deferred: Federal (1,780 ) 1,296 State (43 ) 215 Impact of rate change 665 — (1,158 ) 1,511 $ (1,159 ) $ 1,583 A reconciliation of the statutory U.S. income tax rate to the effective income tax rate follows: Years Ended December 31, 2017 2016 Statutory U.S. income tax rate (34.00 )% 34.00 % State taxes, net of federal benefit (1.37 )% 2.33 % Non-deductible items 0.52 % 0.54 % Change in valuation allowance (0.25 )% 1.78 % Change in net operating loss carryforwards and tax credits (3.27 )% (1.65 )% Other 0.25 % 0.13 % Effective income tax rate (38.12 )% 37.13 % The components of the deferred income tax assets (liabilities) are as follows: Years Ended December 31, 2017 2016 Deferred tax assets: Operating loss carryforwards $ 1,874 $ 1,035 R&D Tax Credit 1,478 1,310 AMT Tax Credit 352 364 Section 263A costs 315 502 R&D costs 335 690 Amortization 24 34 Asset reserves: Bad debts 12 18 Inventory allowance 182 574 Accrued expenses: Non-qualified stock options 86 86 Compensation 165 261 Warranty 465 415 Deferred tax assets 5,288 5,289 Less state valuation allowance (64 ) (76 ) Total deferred tax assets 5,224 5,213 Deferred tax liabilities: Depreciation (338 ) (626 ) Total deferred tax liabilities (338 ) (626 ) Net deferred tax assets (before unrealized gain) 4,886 4,587 Deferred tax liability: unrealized gain (1,569 ) (1,169 ) Net deferred tax assets $ 3,317 $ 3,418 As of December 31, 2017, the Company had a net deferred tax asset of approximately $4,886 offset by deferred tax liabilities of $1,569 derived from the unrealized gain on available-for-sale securities. This asset is primarily composed of net operating loss carryforwards (“NOLs”), research and development costs, and an allowance for inventory. The NOLs total $6,478 for federal and $13,949 for state purposes, with expirations starting in 2018 for state purposes. During 2016, the Company utilized $2,954, adjusted to final tax return, of its NOLs and during 2017, the Company generated $4,654 of additional NOLs. The deferred tax asset amounts are based upon management’s conclusions regarding, among other considerations, the Company’s current and anticipated customer base, contracts, and product introductions, certain tax planning strategies, and management’s estimates of future earnings based on information currently available, as well as recent operating results during 2017, 2016, and 2015. GAAP requires that all positive and negative evidence be analyzed to determine if, based on the weight of available evidence, the Company is more likely than not to realize the benefit of the deferred tax asset. Management’s analysis of all available evidence, both positive and negative, provides support that the Company does not have the ability to generate sufficient taxable income in the necessary period to utilize the entire benefit for the deferred tax asset. Management asserts that it is more likely than not that approximately $64 of the Company’s deferred tax asset will not be realized due to the inability to generate sufficient Florida taxable income in the necessary period to fully utilize its Florida NOLs. Should the factors underlying management’s analysis change, future valuation adjustments to the Company’s net deferred tax asset may be necessary. If future losses are incurred, it may be necessary to record an additional valuation allowance related to the Company’s net deferred tax asset recorded as of December 31, 2017. It cannot presently be estimated what, if any, changes to the valuation of the Company’s deferred tax asset may be deemed appropriate in the future. The 2017 federal and state NOL and tax credit carryforwards could be subject to limitation if, within any three-year period prior to the expiration of the applicable carryforward period, there is a greater than 50% change in ownership of the Company. For the years ended December 31, 2017 and 2016, the Company incurred $49 and $61, respectively, in alternative minimum tax expense in connection with the federal limitation on alternative tax net operating loss carryforwards. No alternative minimum tax expense is expected in 2017 due to the NOLs generated. The Company performed a comprehensive review of its portfolio of uncertain tax positions in accordance with recognition standards established by GAAP. In this regard, an uncertain tax position represents the Company’s expected treatment of a tax position taken in a filed tax return or planned to be taken in a future tax return that has not been reflected in measuring income tax expense for financial reporting purposes. As a result of this review, on January 1, 2018, the Company is not aware of any uncertain tax positions that would require additional liabilities or which such classification would be required. The amount of unrecognized tax positions did not change as of December 31, 2017 and the Company does not believe there will be any material changes in its unrecognized tax positions over the next twelve months. Penalties and tax-related interest expense, of which there were no material amounts for the year ended December 31, 2017, are reported as a component of income tax expense (benefit). The Company files federal income tax returns, as well as multiple state and local jurisdiction tax returns. A number of years may elapse before an uncertain tax position is audited and finally resolved. While it is often difficult to predict the final outcome or the timing of resolution on any particular uncertain tax position, the Company believes that its allowances for income taxes reflect the most probable outcome. The Company adjusts these allowances, as well as the related interest, in light of changing facts and circumstances. The resolution of a matter would be recognized as an adjustment to the provision for income taxes and the effective tax rate in the period of resolution. The calendar years 2014, 2015, and 2016 are still open to IRS examination under the statute of limitations. The last IRS examination on the Company’s 2007 calendar year was closed with no change. |
9. Income per Share
9. Income per Share | 12 Months Ended |
Dec. 31, 2017 | |
Notes to Financial Statements | |
9. Income per Share | The following table sets forth the computation of basic and diluted income per share: Years Ended December 31, 2017 2016 Numerator: Net (loss) income from continuing operations numerator for basic and diluted earnings per share $ (3,626 ) $ 2,689 Denominator: Denominator for basic earnings per share weighted average shares 13,624,649 13,734,873 Effect of dilutive securities: Stock options — 88,118 Denominator for diluted earnings per share weighted average shares 13,624,649 13,822,991 Basic income per share $ (0.27 ) $ 0.20 Diluted income per share $ (0.27 ) $ 0.19 Approximately 354,500 stock options and 21,201 RSUs for the year ended December 31, 2017 and 90,000 stock options and zero RSUs for the year ended December 31, 2016, were excluded from the calculation because they were anti-dilutive. |
10. Share-Based Employee Compen
10. Share-Based Employee Compensation | 12 Months Ended |
Dec. 31, 2017 | |
Notes to Financial Statements | |
10. Share-Based Employee Compensation | The Company has an employee and non-employee director incentive compensation equity plan. Related to these programs, the Company recorded $55 and $49 of share-based employee compensation expense during the years ended December 31, 2017 and 2016, respectively, which is included as a component of cost of products and SG&A expenses in the accompanying consolidated statements of operations. No amount of share-based employee compensation expense was capitalized as part of capital expenditures or inventory for the years presented. The Company uses the Black-Scholes-Merton option valuation model to calculate the fair value of a stock option grant. The share-based employee compensation expense recorded in the years ended December 31, 2017 and 2016 was calculated using the assumptions noted in the following table. Expected volatilities are based on the historical volatility of the Company’s common stock over the period of time commensurate with the expected life of the stock options. The dividend yield assumption is based on the Company’s expectations of dividend payouts at the grant date. In 2017, the Company paid dividends on January 13, for a dividend declared in 2016, April 17, July 17 and October 16. In 2017, the Company’s board of directors also declared a quarterly dividend that was paid on January 16, 2018. The Company has estimated its future stock option exercises. The expected term of option grants is based upon the observed and expected time to the date of post vesting exercises and forfeitures of options by the Company’s employees. The risk-free interest rate is derived from the average U.S. Treasury rate for the period, which approximates the rate at the time of the stock option grant. FY 2017 FY 2016 Expected Volatility 53.6 % 60.7 % Expected Dividends 5.0 % 2.0 % Expected Term (in years) 3.0-6.5 3.0-6.5 Risk-Free Rate 2.10 % 1.35 % Estimated Forfeitures 0.0 % 0.0 % A summary of stock option activity under the Company’s equity compensation plans as of December 31, 2017, and changes during the year ended December 31, 2017, are presented below: As of January 1, 2017 Stock Options Wgt. Avg. Exercise Price ($) Per Share Wgt. Avg. Remaining Contractual Life (Years) Wgt Avg. Grant Date Fair Value ($) Per Share Aggregate Intrinsic Value ($) Outstanding 311,000 3.48 — 1.96 — Vested 231,000 3.30 — 1.97 — Nonvested 80,000 4.01 — 1.93 — Period activity Issued 248,500 4.84 — 1.54 — Exercised 125,000 2.88 — 1.62 — Forfeited 80,000 4.31 — 1.95 — Expired — — — — — As of December 31, 2017 Outstanding 354,500 4.46 7.35 1.79 34,660 Vested 113,000 3.75 3.15 2.23 34,660 Nonvested 241,500 4.80 9.31 1.58 — Outstanding: Range of Exercise Prices ($) Per Share Stock Options Outstanding Wgt. Avg. Exercise Price ($) Per Share Wgt. Avg. Remaining Contractual Life (Years) 1.89 3.83 36,000 2.67 5.91 4.07 5.10 318,500 4.67 7.51 354,500 4.46 7.35 Exercisable: Range of Exercise Prices ($) Per Share Stock Options Exercisable Wgt. Avg. Exercise Price ($) 1.89 3.83 28,000 2.33 4.07 5.10 85,000 4.21 113,000 3.75 The weighted-average grant-date fair value per option granted during the years ended December 31, 2017 and 2016 was $1.58 and $1.93, respectively. The aggregate intrinsic value of stock options exercised during the years ended December 31, 2017 and 2016 was approximately $107 and $82, respectively. In connection with the restricted stock units granted to non-employee directors, the Company accrues compensation expense based on the estimated number of shares expected to be issued utilizing the most current information available to the Company at the date of the financial statements. The Company estimates the fair value of the restricted stock unit awards based upon the market price of the underlying common stock on the date of grant. |
11. Significant Customers
11. Significant Customers | 12 Months Ended |
Dec. 31, 2017 | |
Notes to Financial Statements | |
11. Significant Customers | Sales to the U.S. Government represented approximately 38% and 58% of the Company’s total sales for the years ended December 31, 2017 and 2016, respectively. These sales were primarily to the various government agencies, including those within the United States Department of Defense, the United States Forest Service, the United States Department of Interior, and the United States Department of Homeland Security. |
12. Retirement Plan
12. Retirement Plan | 12 Months Ended |
Dec. 31, 2017 | |
Notes to Financial Statements | |
12. Retirement Plan | The Company sponsors a participant contributory retirement (401(k)) plan, which is available to all employees. The Company’s contribution to the plan is either a percentage of the participant’s contribution (50% of the participant’s contribution up to a maximum of 6%) or a discretionary amount. For the years ended December 31, 2017 and 2016, total contributions made by the Company were $136 and $121, respectively. |
13. Commitments and Contingenci
13. Commitments and Contingencies | 12 Months Ended |
Dec. 31, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | |
13. Commitments and Contingencies | Royalty Commitment In 2002, the Company entered into a technology license related to its development of digital products. Under this agreement, the Company is obligated to pay a royalty for each product sold that utilizes the technology covered by this agreement. The Company paid $136 and $243 for the years ended December 31, 2017 and 2016, respectively. The agreement has an indefinite term, and can be terminated by either party under certain conditions. Purchase Commitments The Company has purchase commitments for inventory totaling $12,376 as of December 31, 2017. Self-Insured Health Benefits The Company maintains a self-insured health benefit plan for its employees. This plan is administered by a third party. As of December 31, 2017, the plan had a stop-loss provision insuring losses beyond $80 per employee per year and an aggregate stop-loss of $1,397. As of December 31, 2017 and 2016, the Company recorded an accrual for estimated claims in the amount of approximately $113 and $172, respectively, in accrued other expenses and other current liabilities on the Company’s consolidated balance sheets. Liability for Product Warranties Changes in the Company’s liability for its standard two-year product warranties during the years ended December 31, 2017 and 2016 are as follows: Balance at Beginning of Year Warranties Issued Warranties Settled Balance at End of Year 2017 $ 650 $ 1,945 $ (1,206 ) $ 1,389 2016 $ 538 $ 709 $ (597 ) $ 650 Legal Proceedings From time to time the Company may be involved in various claims and legal actions arising in the ordinary course of its business. On March 28, 2017, The Sales Group, Inc. (“TSG”) filed a lawsuit in the U.S. District Court for the Central District of California against the Company. TSG was a sales representative of the Company that the Company terminated in March 2017. TSG asserted claims against the Company for alleged breach of oral contract, violation of the California and Arizona sales representative statutes, and an accounting of alleged unpaid sales commissions. TSG’s complaint sought damages in the amount of $6,090 for alleged unpaid past and future sales commissions. On April 3, 2017, counsel for TSG sent the Company a letter outlining additional alleged grounds for recovery against the Company and offering to settle the litigation in exchange for the continued payment of sales commissions to TSG for a negotiated period, a buyout of TSG’s alleged rights for a negotiated sum or reinstatement of TSG for a period of at least 2.5 years with commission rates equal to those in effect at the time of TSG’s termination. The matter was mediated on November 14, 2017, during which the parties agreed to a settlement. On December 19, 2017, the Company entered into a settlement agreement with TSG, pursuant to which TSG agreed to dismiss with prejudice its lawsuit filed against the Company. Pursuant to the settlement agreement, the Company agreed to pay an amount of $900 to TSG on or before December 31, 2017. The Company also agreed to pay to TSG commissions, at the rates in effect since February 7, 2013, on all orders for the Company’s products received and accepted by the Company from the states of Arizona, California, Nevada and Hawaii from January 1, 2018 through December 31, 2018, other than for (i) sales of the Company’s products to federal government agencies and offices, (ii) sales of the Company’s products to other end-users, excepting state and local government agencies and offices, and (iii) sales of parts or service, including warranty service. These commissions were estimated to total approximately $536, which was recorded as an expense in December 2017. In addition, if at any time on or before December 31, 2018, the Company completes a change-in-control transaction, then the Company will pay to TSG an amount equal to $2,000, less the amount of commissions paid by the Company with respect to 2018, as described above. The settlement agreement settles all claims raised by TSG in its lawsuit against the Company. There were no other pending material claims or legal matters as of December 31, 2017. |
14. Capital Program
14. Capital Program | 12 Months Ended |
Dec. 31, 2017 | |
Capital Program | |
14. Capital Program | In May 2016, the Company implemented a capital return program that included a stock repurchase program and a quarterly dividend. Under the program, the Company’s Board of Directors approved the repurchase of up to 500,000 shares of the Company’s common stock pursuant to a stock repurchase plan in conformity with the provisions of Rule 10b5-1 and Rule 10b-18 promulgated under the Securities Exchange Act of 1934, as amended. Pursuant to the program, the Company’s Board of Directors approved three quarterly dividends of $0.09 per share of the Company’s common stock. The dividends were paid on June 17, 2016, September 16, 2016 and January 13, 2017 to shareholders of record as of June 1, 2016, September 1, 2016 and January 3, 2017, respectively. In June 2017, the Board of Directors approved the increase in the Company’s capital return program, authorizing the repurchase of 500,000 shares of the Company’s common stock in addition to the 500,000 shares originally authorized, for a total repurchase authorization of 1 million shares, pursuant to a stock repurchase plan in conformity with the provisions of Rule 10b5-1 and Rule 10b-18 promulgated under the Securities Exchange Act of 1934, as amended. The repurchase program has no termination date. Pursuant to the capital return program, during 2017, the Company’s Board of Directors declared quarterly dividends on the Company’s common stock of $0.09 per share on March 17, and $0.02 per share on June 14, September 18 and December 6. The dividends were payable to shareholders of record as of March 31, 2017, June 30, 2017, October 2, 2017 and January 2, 2018, respectively. These dividends were paid on April 17, 2017, July 17, 2017, October 16, 2017 and January 16, 2018. |
15. Subsequent Event
15. Subsequent Event | 12 Months Ended |
Dec. 31, 2017 | |
Subsequent Event | |
15. Subsequent Event | On January 1, 2018, the Company adopted ASU 2016-1 “Financial Instruments,” which amended the guidance in U.S. GAAP on the classification and measurement of financial instruments. Changes to the prior guidance primarily affected the accounting for equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. In addition, the ASU clarified guidance related to the valuation allowance assessment when recognizing deferred tax assets resulting from unrealized losses on available-for-sale debt securities. Upon its adoption, the Company applied the amendments by means of a cumulative-effect adjustment to the balance sheet at the beginning of the first reporting period in which the guidance was effective. On January 1, 2018, the Company adopted the new guidance and, consequently, the Company recognized approximately $4,300 of net unrealized gain in its retained earnings balance. During January and February 2018, the Company sold 1,317,503 shares of Iteris, which cost $2,398, for approximately $8,334 of proceeds and will report a loss on the sales of approximately $708. |
1. Summary of Significant Acc23
1. Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 2017 | |
Summary Of Significant Accounting Policies Policies | |
Description of Business | The primary business of RELM Wireless Corporation and its subsidiaries (collectively, the “Company”) is the designing, manufacturing and marketing of wireless communications equipment consisting primarily of two-way land mobile radios and related products, which are sold in two primary markets: (1) the government and public safety market and (2) the business and industrial market. The Company has only one reportable business segment. |
Principles of Consolidation | The accounts of the Company have been included in the accompanying consolidated financial statements. All significant intercompany balances and transactions have been eliminated in consolidation. |
Inventories | Inventories are stated at the lower of cost (determined by the average cost method) or net realizable value. Freight costs are classified as a component of cost of products in the accompanying consolidated statements of operations. The allowance for slow-moving, excess, or obsolete inventory is used to state the Company’s inventories at the lower of cost or market. Because the amount of inventory that will actually be recouped through sales cannot be known with certainty at any particular time, the Company relies on past sales experience, future sales forecasts, and its strategic business plans. Generally, in analyzing inventory levels, inventory is classified as having been used or unused during the past year. The Company then establishes a reserve based upon several factors, including, but not limited to, business forecasts, inventory quantities and historic usage profile. Supplemental to the aforementioned analysis, specific inventory items are reviewed individually by management. Based on the review, considering business levels, future prospects, new products and technology changes, management, using its business judgment, may adjust the valuation of specific inventory items to reflect an accurate valuation. Management also performs a determination of net realizable value for all finished goods with a selling price below cost. For all such items, the inventory is valued at not more than the selling price less cost, if any, to sell. |
Property, Plant and Equipment | Property, plant and equipment is carried at cost. Expenditures for maintenance, repairs and minor renewals are expensed as incurred. When properties are retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the respective accounts and the resulting gain or loss is reflected in operations for the period. Depreciation and amortization are generally computed on the straight-line method using lives of 3 to 10 years for machinery and equipment and 5 to 6 years for leasehold improvements. |
Impairment of Long-Lived Assets | Management regularly reviews long-lived assets and intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets which considers the discounted future net cash flows. No long-lived assets were considered impaired at December 31, 2017 and 2016. |
Cash Equivalents | The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. |
Allowance for Doubtful Accounts | The Company records an allowance for doubtful accounts based on specifically identified amounts that the Company believes to be uncollectible. The Company also records an additional allowance based on certain percentages of the Company’s aged receivables, which are determined based on historical experience and the Company’s assessment of the general financial conditions affecting the Company’s customer base. If the Company’s actual collections experience changes, revisions to the Company’s allowance may be required. After all attempts to collect a receivable have failed, the receivable is written off against the allowance. Based on the information available, management believes the allowance for doubtful accounts as of December 31, 2017 and 2016 is adequate. |
Revenue Recognition | Sales revenue is recognized when the earnings process is complete and collection is reasonably assured. The earnings process is generally complete when the product is shipped or received by the customer, depending upon whether the title to the goods, as well as the risks and benefits of ownership, are transferred to the customer at point of shipment or point of delivery. However, sales to the federal government are recognized when the products are delivered. For extended warranties, sales revenue associated with the warranty is deferred at the time of sale and later recognized on a straight-line basis over the extended warranty period. The Company periodically reviews its revenue recognition procedures to assure that such procedures are in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Surcharges collected on certain sales to government customers and remitted to governmental agencies are not included in revenues or in costs and expenses. |
Income Taxes | The Company accounts for income taxes using the asset and liability method specified by GAAP. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using the enacted tax rates expected to apply in the period in which the deferred tax asset or liability is expected to be realized. The effect of changes in net deferred tax assets and liabilities is recognized on the Company’s consolidated balance sheets and consolidated statements of operations in the period in which the change is recognized. Valuation allowances are provided to the extent that impairment of tax assets are more likely than not. In determining whether a tax asset is realizable, the Company considers, among other things, estimates of future earnings based on information currently available, current and anticipated customers, contracts and new product introductions, as well as recent operating results during 2017 and 2016 and certain tax planning strategies. If the Company fails to achieve the future results anticipated in the calculation and valuation of net deferred tax assets, the Company may be required to adjust the valuation allowance related to its deferred tax assets in the future. On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “2017 Tax Act”). The 2017 Tax Act makes broad and complex changes to the U.S. tax code, including, but not limited to, (1) reducing the U.S. federal corporate tax rate from 35% to 21%; (2) eliminating the corporate alternative minimum tax (“AMT”) and changing how existing AMT credits can be realized; and (3) changing rules related to uses and limitations of net operating loss carryforwards created in tax years beginning after December 31, 2017. In connection with the Company’s initial analysis of the impact of the 2017 Tax Act, the Company has recorded a discrete net tax expense of $665 in the year ended December 31, 2017 for the effect of the corporate rate reduction. The net tax expense primarily relates to a reduction in the deferred tax assets of $1,524 and a reduction in the deferred tax liability related to unrealized gain on available-for-sale securities of $(859). |
Concentration of Credit Risk | The Company performs periodic credit evaluations of its customers’ financial condition and generally does not require collateral. At December 31, 2017 and 2016, accounts receivable from governmental customers were approximately $2,663 and $1,090, respectively. Generally, receivables are due within 30 days. Credit losses relating to customers have been consistently within management’s expectations. The Company primarily maintains cash balances at one financial institution. Accounts are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250. From time to time, the Company has had cash in financial institutions in excess of federally insured limits. As of December 31, 2017, the Company had cash and cash equivalents in excess of FDIC limits of $7,053. |
Manufacturing and Raw Materials | The Company relies upon a limited number of manufacturers to produce its products and on a limited number of component suppliers. Some of these manufacturers and suppliers are in other countries. Approximately 65.7% of the Company’s material, subassembly and product procurements in 2017 were sourced internationally, of which approximately 61.6% were sourced from three suppliers. For 2016, approximately 76.3% of the Company’s material, subassembly and product procurements were sourced internationally, of which approximately 70% were sourced from three suppliers. Purchase orders denominated in U.S. dollars are placed with these suppliers from time to time and there are no guaranteed supply arrangements or commitments. |
Use of 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 at the date of the consolidated financial statements and the reported amounts of sales and expenses during the reporting period. Significant estimates include accounts receivable allowances, inventory obsolescence allowance, warranty allowance, capitalized software costs and income tax accruals. Actual results could differ from those estimates. |
Fair Value of Financial Instruments | The Company’s financial instruments consist of cash and cash equivalents, trade accounts receivable, available-for-sale securities, accounts payable, accrued expenses and other liabilities. As of December 31, 2017 and 2016, the carrying amount of cash and cash equivalents, trade accounts receivable, accounts payable, accrued expenses and other liabilities approximated their respective fair value due to the short-term nature and maturity of these instruments. The Company uses observable market data or assumptions (Level 1 inputs, as defined in accounting guidance) that it believes market participants would use in pricing the available-for-sale securities. There were no sales of available-for-sale securities, nor gains or losses reclassified out of accumulated other comprehensive income as a result of an other-than-temporary impairment of the available-for-sale securities. There were no transfers of available-for-sale securities between Level 1 and Level 2 during the year ended December 31, 2017. |
Available-For-Sale Securities | Investments reported on the December 31, 2017 and 2016 consolidated balance sheets consist of marketable equity securities of a publicly held company. As of December 31, 2017 and 2016, the investment cost was $2,402 and $3,242, respectively. Management intends to hold such securities for a sufficient period in which to realize a reasonable return, which periods may range between one to several years, although there is no assurance that positive returns will be realized or that such securities will not be liquidated in a shorter-than-expected time frame to accommodate future liquidity requirements. For year ended December 31, 2017, investments were classified as current and available-for-sale. Investments are marked to market at each measurement date, with unrealized gains or losses presented as adjustments to accumulated other comprehensive income or loss. |
Shipping and Handling Costs | Shipping and handling costs are classified as a part of cost of products in the accompanying consolidated statements of operations for the years ended December 31, 2017 and 2016. Amounts billed to a customer, if any, for shipping and handling are reported as a revenue. |
Advertising and Promotion Costs | The cost for advertising and promotion is expensed as incurred. Advertising and promotion expenses are classified as part of selling, general and administrative (“SG&A”) expenses in the accompanying consolidated statements of operations. For the years ended December 31, 2017 and 2016, such expenses totaled $424 and $334, respectively. |
Engineering, Research and Development Costs | Included in SG&A expenses for the years ended December 31, 2017 and 2016 are engineering, research and development costs of $5,000 and $4,123, respectively. |
Share-Based Compensation | The Company accounts for share-based arrangements in accordance with GAAP, which requires a public entity to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award (with limited exceptions). That cost will be recognized over the period during which the employee is required to provide service in exchange for the award requisite service period (usually the vesting period). No compensation cost is recognized for equity instruments for which employees do not render the requisite service. Employee share purchase plans will not result in recognition of compensation cost if certain conditions are met. |
Restricted Stock Units | On June 15, 2017, the Company granted to each non-employee director restricted stock units (“RSUs”) with a grant fair value of $20 per award, which will vest in full on June 15, 2018, subject to continued service through such vesting date. |
Earnings Per Share | Earnings per share amounts are computed and presented for all periods in accordance with GAAP. |
Other Comprehensive Income (Loss) | Other comprehensive income (loss) consists of net income (loss) and unrealized gain on available-for-sale securities, net of taxes. |
Product Warranty | The Company offers two-year warranties to its customers, depending on the specific product and terms of the customer purchase agreement. The Company’s typical warranties require it to repair and replace defective products during the warranty period at no cost to the customer. At the time the product revenue is recognized, the Company records a liability for estimated costs under its warranties. The costs are estimated based on historical experience. The Company periodically assesses the adequacy of its recorded liability for product warranties and adjusts the amount as necessary. |
Reclassifications | Certain prior year amounts have been reclassified to conform to the current year presentation. These reclassifications had no impact on previously reported net income for the year ended December 31, 2016. |
Recent Accounting Pronouncements | In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09 on “Revenue from Contracts with Customers,” which provides for a single, principles-based model for revenue recognition and replaces the existing revenue recognition guidance. In August 2015, the FASB issued ASU 2015-14, which delays the effective date of ASU 2014-09 by one year. The guidance is effective for annual and interim periods beginning on or after December 15, 2017, and will replace most existing revenue recognition guidance under U.S. GAAP when it becomes effective. This ASU requires additional disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and estimates and changes in those estimates. It permits the use of either a retrospective or cumulative effect transition method. The Company will adopt ASU 2014-09 in the first quarter of 2018 and apply the modified retrospective approach. Because the Company’s primary source of revenues is from shipments of products, the Company does not expect the impact on its consolidated financial statements to be material. In July 2015, the FASB issued ASU 2015-11, “ ,” In January 2016, the FASB issued ASU 2016-01 “Financial Instruments,” which amends the guidance in U.S. GAAP on the classification and measurement of financial instruments. Changes to the current guidance primarily affect the accounting for equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. In addition, the ASU clarifies guidance related to the valuation allowance assessment when recognizing deferred tax assets resulting from unrealized losses on available-for-sale debt securities. The new standard is effective for fiscal years and interim periods beginning after December 15, 2017, and upon adoption, an entity should apply the amendments by means of a cumulative-effect adjustment to the balance sheet at the beginning of the first reporting period in which the guidance is effective. Early adoption is not permitted except for the provision to record fair value changes for financial liabilities under the fair value option resulting from instrument-specific credit risk in other comprehensive income. On January 1, 2018, the Company adopted the new guidance and, consequently, the Company has recognized approximately $4,300 of net unrealized gain in its retained earnings balance. In February 2016, the FASB issued ASU 2016-02, “Leases,” which amends leasing guidance by requiring companies to recognize a right-of-use asset and a lease liability for all operating and capital (finance) leases with lease terms greater than twelve months. The lease liability will be equal to the present value of lease payments. The lease asset will be based on the lease liability, subject to adjustment, such as for initial direct costs. For income statement purposes, leases will continue to be classified as operating or capital (finance), with lease expense in both cases calculated substantially the same as under the prior leasing guidance. The updated guidance is effective for interim and annual periods beginning after December 15, 2018, with early adoption permitted. The Company expects this will result in the recognition of right-of-use assets and lease liabilities not currently recorded on the consolidated financial statements under existing accounting guidance, but the Company is still evaluating all the Company’s contractual arrangements and the impact that adoption of ASU 2016-02 will have on the Company’s consolidated financial statements. In March 2016, the FASB issued ASU 2016-09, “Improvements to Employee Share-Based Payment Accounting.” The guidance is effective for annual reporting periods beginning after December 15, 2016 and interim periods within those fiscal years with early adoption permitted. The Company has adopted the new guidance with no material impact on its consolidated financial statements. The Company does not discuss recent pronouncements that are not anticipated to have an impact on or are unrelated to its financial condition, results of operations, cash flows or disclosures. |
2. Inventories, net (Tables)
2. Inventories, net (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Inventories Net Tables | |
Schedule of components of inventory | December 31, 2017 2016 Finished goods $ 2,825 $ 3,216 Work in process 7,111 6,612 Raw materials 4,422 4,171 $ 14,358 $ 13,999 |
Schedule of changes in allowance for obsolete or slow moving inventory | Years Ended December 31, 2017 2016 Balance, beginning of year $ 1,607 $ 1,685 Charged to cost of sales 149 180 Disposal of inventory (967 ) (258 ) Balance, end of year $ 789 $ 1,607 |
3. Allowance for Doubtful Acc25
3. Allowance for Doubtful Accounts (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Allowance For Doubtful Accounts Tables | |
Schedule of Allowance for Doubtful Accounts | Years Ended December 31, 2017 2016 Balance, beginning of year $ 50 $ 49 Provision for doubtful accounts — 17 Uncollectible accounts written off — (16 ) Balance, end of year $ 50 $ 50 |
4. Property, Plant and Equipm26
4. Property, Plant and Equipment, net (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Property Plant And Equipment Net Tables | |
Schedule of Property, Plant, and Equipment | December 31, 2017 2016 Leasehold improvements $ 422 $ 392 Machinery and equipment 8,970 8,548 Less accumulated depreciation and amortization (7,191 ) (6,454 ) Property, plant and equipment, net $ 2,201 $ 2,486 |
7. Leases (Tables)
7. Leases (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Leases Tables | |
Schedule of future minimum rental payments | 2018 $ 577 2019 577 2020 234 Thereafter — $ 1,388 |
8. Income Taxes (Tables)
8. Income Taxes (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Income Taxes Tables | |
Schedule of income tax expense/benefit | Years Ended December 31, 2017 2016 Current: Federal $ (11 ) $ 61 State 10 11 (1 ) 72 Deferred: Federal (1,780 ) 1,296 State (43 ) 215 Impact of rate change 665 — (1,158 ) 1,511 $ (1,159 ) $ 1,583 |
Schedule of effective income tax rate | Years Ended December 31, 2017 2016 Statutory U.S. income tax rate (34.00 )% 34.00 % State taxes, net of federal benefit (1.37 )% 2.33 % Non-deductible items 0.52 % 0.54 % Change in valuation allowance (0.25 )% 1.78 % Change in net operating loss carryforwards and tax credits (3.27 )% (1.65 )% Other 0.25 % 0.13 % Effective income tax rate (38.12 )% 37.13 % |
Schedule of deferred tax assets and liabilities | Years Ended December 31, 2017 2016 Deferred tax assets: Operating loss carryforwards $ 1,874 $ 1,035 R&D Tax Credit 1,478 1,310 AMT Tax Credit 352 364 Section 263A costs 315 502 R&D costs 335 690 Amortization 24 34 Asset reserves: Bad debts 12 18 Inventory allowance 182 574 Accrued expenses: Non-qualified stock options 86 86 Compensation 165 261 Warranty 465 415 Deferred tax assets 5,288 5,289 Less state valuation allowance (64 ) (76 ) Total deferred tax assets 5,224 5,213 Deferred tax liabilities: Depreciation (338 ) (626 ) Total deferred tax liabilities (338 ) (626 ) Net deferred tax assets (before unrealized gain) 4,886 4,587 Deferred tax liability: unrealized gain (1,569 ) (1,169 ) Net deferred tax assets $ 3,317 $ 3,418 |
9. Income per Share (Tables)
9. Income per Share (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Income Per Share Tables | |
Schedule of computation of basic and diluted income per share | Years Ended December 31, 2017 2016 Numerator: Net (loss) income from continuing operations numerator for basic and diluted earnings per share $ (3,626 ) $ 2,689 Denominator: Denominator for basic earnings per share weighted average shares 13,624,649 13,734,873 Effect of dilutive securities: Stock options — 88,118 Denominator for diluted earnings per share weighted average shares 13,624,649 13,822,991 Basic income per share $ (0.27 ) $ 0.20 Diluted income per share $ (0.27 ) $ 0.19 |
10. Share-Based Employee Comp30
10. Share-Based Employee Compensation (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Share-based Employee Compensation Tables | |
Schedule of risk free interest rates | FY 2017 FY 2016 Expected Volatility 53.6 % 60.7 % Expected Dividends 5.0 % 2.0 % Expected Term (in years) 3.0-6.5 3.0-6.5 Risk-Free Rate 2.10 % 1.35 % Estimated Forfeitures 0.0 % 0.0 % |
Schedule of stock option activity | As of January 1, 2017 Stock Options Wgt. Avg. Exercise Price ($) Per Share Wgt. Avg. Remaining Contractual Life (Years) Wgt Avg. Grant Date Fair Value ($) Per Share Aggregate Intrinsic Value ($) Outstanding 311,000 3.48 — 1.96 — Vested 231,000 3.30 — 1.97 — Nonvested 80,000 4.01 — 1.93 — Period activity Issued 248,500 4.84 — 1.54 — Exercised 125,000 2.88 — 1.62 — Forfeited 80,000 4.31 — 1.95 — Expired — — — — — As of December 31, 2017 Outstanding 354,500 4.46 7.35 1.79 34,660 Vested 113,000 3.75 3.15 2.23 34,660 Nonvested 241,500 4.80 9.31 1.58 — |
Schedule of outstanding options by exercise price range | Outstanding: Range of Exercise Prices ($) Per Share Stock Options Outstanding Wgt. Avg. Exercise Price ($) Per Share Wgt. Avg. Remaining Contractual Life (Years) 1.89 3.83 36,000 2.67 5.91 4.07 5.10 318,500 4.67 7.51 354,500 4.46 7.35 |
Schedule of exercisable options by exercise price range | Exercisable: Range of Exercise Prices ($) Per Share Stock Options Exercisable Wgt. Avg. Exercise Price ($) 1.89 3.83 28,000 2.33 4.07 5.10 85,000 4.21 113,000 3.75 |
13. Commitments and Contingen31
13. Commitments and Contingencies (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Commitments And Contingencies Tables | |
Schedule for product warranties | Balance at Beginning of Year Warranties Issued Warranties Settled Balance at End of Year 2017 $ 650 $ 1,945 $ (1,206 ) $ 1,389 2016 $ 538 $ 709 $ (597 ) $ 650 |
1. Summary of Significant Acc32
1. Summary of Significant Accounting Policies (Details Narrative 1) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Summary Of Significant Accounting Policies Details Narrative 1 | ||
Advertising costs | $ 424 | $ 334 |
Engineering, research and development costs | $ 5,000 | $ 4,123 |
2. Inventories, net (Details)
2. Inventories, net (Details) - USD ($) $ in Thousands | Dec. 31, 2017 | Dec. 31, 2016 |
Inventories Net Details | ||
Finished goods | $ 2,825 | $ 3,216 |
Work in process | 7,111 | 6,612 |
Raw materials | 4,422 | 4,171 |
Total Inventory | $ 14,358 | $ 13,999 |
2. Inventories, net (Details 1)
2. Inventories, net (Details 1) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Inventories Net Details 1 | ||
Balance, beginning of year | $ 1,607 | $ 1,685 |
Charged to cost of sales | 149 | 180 |
Disposal of inventory | (967) | (258) |
Balance, end of year | $ 789 | $ 1,607 |
3. Allowance for Doubtful Acc35
3. Allowance for Doubtful Accounts (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Allowance For Doubtful Accounts Details | ||
Balance, beginning of year | $ 50 | $ 49 |
Provision for doubtful accounts | 0 | 17 |
Uncollectible accounts written off | 0 | (16) |
Balance, end of year | $ 50 | $ 50 |
4. Property, Plant and Equipm36
4. Property, Plant and Equipment, net (Details) - USD ($) $ in Thousands | Dec. 31, 2017 | Dec. 31, 2016 |
Property Plant And Equipment Net Details | ||
Leasehold improvements | $ 422 | $ 392 |
Machinery and equipment | 8,970 | 8,548 |
Less accumulated depreciation and amortization | (7,191) | (6,454) |
Property, plant and equipment, net | $ 2,201 | $ 2,486 |
4. Property, Plant and Equipm37
4. Property, Plant and Equipment, net (Details Narrative) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Property Plant And Equipment Net Details Narrative | ||
Depreciation and amortization expense | $ 808 | $ 748 |
7. Leases (Details)
7. Leases (Details) $ in Thousands | Dec. 31, 2017USD ($) |
Leases Details | |
2,018 | $ 577 |
2,019 | 577 |
2,020 | 234 |
Thereafter | |
Leases, Net | $ 1,388 |
8. Income Taxes (Details)
8. Income Taxes (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Current: | ||
Federal | $ (11) | $ 61 |
State | 10 | 11 |
Total, Current | (1) | 72 |
Federal | (1,780) | 1,296 |
State | (43) | 215 |
Impact of rate change | 665 | 0 |
Total, Deferred | (1,158) | 1,511 |
Total, Current and Deferred | $ (1,159) | $ 1,583 |
8. Income Taxes (Details 1)
8. Income Taxes (Details 1) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Income Taxes Details 1 | ||
Statutory U.S. income tax rate | (34.00%) | 34.00% |
States taxes, net of federal benefit | (1.37%) | 2.33% |
Non-deductible items | 0.52% | 0.54% |
Change in valuation allowance | (0.25%) | 1.78% |
Change in net operating loss carryforwards and tax credits | (3.27%) | (1.65%) |
Other | 0.25% | 0.13% |
Effective income tax rate | (38.12%) | 37.13% |
8. Income Taxes (Details 2)
8. Income Taxes (Details 2) - USD ($) $ in Thousands | Dec. 31, 2017 | Dec. 31, 2016 |
Deferred tax assets: | ||
Operating loss carryforwards | $ 1,874 | $ 1,035 |
R&D tax credit | 1,478 | 1,310 |
AMT tax credit | 352 | 364 |
Section 263A costs | 315 | 502 |
R&D costs | 335 | 690 |
Amortization | 24 | 34 |
Asset reserves: | ||
Bad debts | 12 | 18 |
Inventory reserve | 182 | 574 |
Accrued expenses: | ||
Non-qualified stock options | 86 | 86 |
Compensation | 165 | 261 |
Warranty | 465 | 415 |
Deferred tax assets | 5,288 | 5,289 |
Less state valuation allowance | (64) | (76) |
Total deferred tax assets | 5,224 | 5,213 |
Deferred tax liabilities: | ||
Depreciation | (338) | (626) |
Total deferred tax liabilities | (338) | (626) |
Net deferred tax assets (before unrealized gain) | 4,886 | 4,587 |
Deferred tax liability: unrealized gain | (1,569) | (1,169) |
Net deferred tax assets | $ 3,317 | $ 3,418 |
8. Income Taxes (Details Narrat
8. Income Taxes (Details Narrative) - USD ($) $ in Thousands | Dec. 31, 2017 | Dec. 31, 2016 |
Net deferred tax assets | $ 3,317 | $ 3,418 |
Federal | ||
Net operating loss carryforward | 6,478 | |
State | ||
Net operating loss carryforward | $ 13,949 |
9. Income per Share (Details)
9. Income per Share (Details) - USD ($) $ / shares in Units, $ in Thousands | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Numerator: | ||
Net income from continuing operations numerator for basic and diluted earnings per share | $ (3,626) | $ 2,689 |
Denominator: | ||
Denominator for basic earnings per share weighted average shares | 13,624,649 | 13,734,873 |
Effect of dilutive securities: | ||
Stock Options | 0 | 88,118 |
Denominator | ||
Denominator for diluted earnings per share weighted average shares | 13,624,649 | 13,822,991 |
Basic income per share | $ (0.27) | $ .20 |
Diluted income per share | $ (0.27) | $ 0.19 |
9. Income per Share (Details Na
9. Income per Share (Details Narrative) - shares | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Stock Options | ||
Antidilutive Securities Excluded from Earning Per Share | 354,500 | 90,000 |
RSUs | ||
Antidilutive Securities Excluded from Earning Per Share | 21,201 | 0 |
10. Share-Based Employee Comp45
10. Share-Based Employee Compensation (Details) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Expected Volatility | 53.60% | 60.70% |
Expected Dividends | 5.00% | 2.00% |
Risk-Free Rate | 2.10% | 1.35% |
Estimated forfeitures | 0.00% | 0.00% |
Minimum [Member] | ||
Expected Term (in years) | 3 years | 3 years |
Maximum [Member] | ||
Expected Term (in years) | 6 years 6 months | 6 years 6 months |
10. Share-Based Employee Comp46
10. Share-Based Employee Compensation (Details 1) $ / shares in Units, $ in Thousands | 12 Months Ended |
Dec. 31, 2017USD ($)$ / sharesshares | |
Notes to Financial Statements | |
Outstanding Stock Options | shares | 311,000 |
Vested Stock Options | shares | 231,000 |
Nonvested Stock Options | shares | 80,000 |
Issued Stock Options | shares | 248,500 |
Exercised Stock Options | shares | 125,000 |
Forfeited Stock Options | shares | 80,000 |
Expired Stock Options | shares | 0 |
Outstanding Stock Options | shares | 354,500 |
Vested Stock Options | shares | 113,000 |
Nonvested Stock Options | shares | 241,500 |
Outstanding Wgt. Avg. Exercise Price | $ 3.48 |
Vested Wgt. Avg. Exercise Price | 3.30 |
Nonvested Wgt. Avg. Exercise Price | 4.01 |
Issued Wgt. Avg. Exercise Price | 4.84 |
Exercised Wgt. Avg. Exercise Price | 2.88 |
Forfeited Wgt. Avg. Exercise Price | 4.31 |
Expired Wgt. Avg. Exercise Price | 0 |
Outstanding Wgt. Avg. Exercise Price | 4.46 |
Vested Wgt. Avg. Exercise Price | 3.75 |
Nonvested Wgt. Avg. Exercise Price | $ 4.80 |
Outstanding Contractual Life | 7 years 4 months 6 days |
Vested Contractual Life | 3 years 1 month 24 days |
Nonvested Contractual Life | 9 years 3 months 22 days |
Outstanding Grant Date Fair Value | $ 1.96 |
Vested Grant Date Fair Value | 1.97 |
Nonvested Grant Date Fair Value | 1.93 |
Issued Grant Date Fair Value | 1.54 |
Exercised Grant Date Fair Value | 1.62 |
Forfeited Grant Date Fair Value | 1.95 |
Expired Grant Date Fair Value | 0 |
Outstanding Grant Date Fair Value | 1.79 |
Vested Grant Date Fair Value | 2.23 |
Nonvested Grant Date Fair Value | $ 1.58 |
Outstanding Aggregate Intrinsic Value | $ | $ 0 |
Vested Aggregate Intrinsic Value | $ | 0 |
Nonvested Aggregate Intrinsic Value | $ | $ 0 |
Issued Aggregate Intrinsic Value | $ 0 |
Exercised Aggregate Intrinsic Value | $ | $ 0 |
Forfeited Aggregate Intrinsic Value | $ 0 |
Expired Aggregate Intrinsic Value | $ 0 |
Outstanding Aggregate Intrinsic Value | $ | $ 34,660 |
Vested Aggregate Intrinsic Value | $ | 34,660 |
Nonvested aggregate intrinsic value | $ | $ 0 |
10. Share-Based Employee Comp47
10. Share-Based Employee Compensation (Details 2) - $ / shares | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Number of Options Outstanding | 354,500 | 311,000 |
Weighted Average Exercise Price, outstanding | $ 4.46 | |
Weighted Average Remaining Contractual Life (in Years) | 7 years 4 months 6 days | |
Stock Options Exercisable | 113,000 | |
Weighted Average Exercise Price, exercisable | $ 3.75 | |
Option 1 | ||
Exercise Price, minimum | 1.89 | |
Exercise Price, maximum | $ 3.83 | |
Number of Options Outstanding | 36,000 | |
Weighted Average Exercise Price, outstanding | $ 2.67 | |
Weighted Average Remaining Contractual Life (in Years) | 5 years 10 months 28 days | |
Stock Options Exercisable | 28,000 | |
Weighted Average Exercise Price, exercisable | $ 2.33 | |
Option 2 | ||
Exercise Price, minimum | 4.07 | |
Exercise Price, maximum | $ 5.10 | |
Number of Options Outstanding | 318,500 | |
Weighted Average Exercise Price, outstanding | $ 4.67 | |
Weighted Average Remaining Contractual Life (in Years) | 7 years 6 months 4 days | |
Stock Options Exercisable | 85,000 | |
Weighted Average Exercise Price, exercisable | $ 4.21 |
11. Significant Customers (Deta
11. Significant Customers (Details Narrative) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Significant Customers Details Narrative | ||
Sales to United States Government | 38.00% | 58.00% |
12. Retirement Plan (Details Na
12. Retirement Plan (Details Narrative) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Retirement Plan Details Narrative | ||
Defined Contribution to Retirement Plan | $ 136 | $ 121 |
13. Commitments and Contingen50
13. Commitments and Contingencies (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Commitments And Contingencies Details | ||
Warranties, Beginning | $ 650 | $ 538 |
Warranties Issued | 1,945 | 709 |
Warranties Settled | (1,206) | (597) |
Warranties, Ending | $ 1,389 | $ 650 |
13. Commitments and Contingen51
13. Commitments and Contingencies (Details Narrative) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Commitments And Contingencies Details Narrative | ||
Royalty Commitment | $ 136 | $ 243 |
Purchase commitment of inventory | $ 12,376 |