Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Jun. 30, 2017 | Jul. 27, 2017 | |
Document And Entity Information | ||
Entity Registrant Name | MECHANICAL TECHNOLOGY INC | |
Entity Central Index Key | 64,463 | |
Current Fiscal Year End Date | --12-31 | |
Amendment Flag | false | |
Document Type | 10-Q | |
Document Period End Date | Jun. 30, 2017 | |
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 | 9,145,768 | |
Document Fiscal Period Focus | Q2 | |
Document Fiscal Year Focus | 2,017 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets (Unaudited) - USD ($) $ in Thousands | Jun. 30, 2017 | Dec. 31, 2016 |
Current Assets: | ||
Cash | $ 3,398 | $ 3,381 |
Accounts receivable | 1,075 | 881 |
Inventories | 697 | 676 |
Prepaid expenses and other current assets | 64 | 82 |
Total Current Assets | 5,234 | 5,020 |
Property, plant and equipment, net | 133 | 160 |
Total Assets | 5,367 | 5,180 |
Current Liabilities: | ||
Accounts payable | 356 | 124 |
Accrued liabilities | 855 | 906 |
Total Current Liabilities | 1,211 | 1,030 |
Commitments and Contingencies (Note 8) | ||
Stockholders' Equity: | ||
Common stock, par value $0.01 per share, authorized 75,000,000; 10,161,261 issued in 2017 and 10,026,136 issued in 2016 | 102 | 100 |
Additional paid-in capital | 138,899 | 138,794 |
Accumulated deficit | (121,081) | (120,980) |
Common stock in treasury, at cost, 1,015,493 shares | (13,764) | (13,764) |
Total stockholders' equity | 4,156 | 4,150 |
Total Liabilities and Stockholders' Equity | $ 5,367 | $ 5,180 |
Condensed Consolidated Balance3
Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - $ / shares | Jun. 30, 2017 | Dec. 31, 2016 |
Statement of Financial Position [Abstract] | ||
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common Stock, shares authorized | 75,000,000 | 75,000,000 |
Common Stock, shares issued | 10,161,261 | 10,026,136 |
Common Stock, shares outstanding | 9,145,768 | 9,010,643 |
Treasury stock, shares | 1,015,493 | 1,015,493 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations (Unaudited) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
Income Statement [Abstract] | ||||
Product revenue | $ 1,893 | $ 1,808 | $ 3,190 | $ 3,033 |
Operating costs and expenses: | ||||
Cost of product revenue | 537 | 608 | 1,041 | 1,245 |
Research and product development expenses | 296 | 310 | 610 | 644 |
Selling, general and administrative expenses | 747 | 781 | 1,635 | 1,616 |
Operating income (loss) | 313 | 109 | (96) | (472) |
Other expense, net | 0 | (1) | (5) | (6) |
Net income (loss) | $ 313 | $ 108 | $ (101) | $ (478) |
Income (loss) per share (Basic) | $ .03 | $ .02 | $ (.01) | $ (.09) |
Income (loss) per share (Diluted) | $ .03 | $ .02 | $ (.01) | $ (.09) |
Weighted average shares outstanding (Basic) | 9,137,497 | 5,248,482 | 9,081,451 | 5,250,892 |
Weighted average shares outstanding (Diluted) | 9,398,330 | 5,422,842 | 9,081,451 | 5,250,892 |
Condensed Consolidated Stateme5
Condensed Consolidated Statements of Changes in Equity (Unaudited) - USD ($) $ in Thousands | Common Stock | Additional Paid-In Capital [Member] | Retained Earnings / Accumulated Deficit [Member] | Treasury Stock [Member] | Total |
Beginning Balance at Dec. 31, 2015 | $ 63 | $ 135,839 | $ (120,621) | $ (13,754) | $ 1,527 |
Beginning Balance (in shares) at Dec. 31, 2015 | 6,263,975 | 1,005,092 | |||
Net loss | (359) | ||||
Stock based compensation | 449 | 449 | |||
Issuance of shares - stock purchase, shares | 3,750,000 | ||||
Issuance of shares - stock purchase, value | $ 37 | 2,700 | 2,737 | ||
Costs of stock purchase | (201) | (201) | |||
Issuance of shares - option exercises, shares | 12,161 | ||||
Issuance of shares - option exercises, value | 7 | 7 | |||
Purchase of common stock for treasury, shares | 10,401 | ||||
Purchase of common stock for treasury, value | $ (10) | (10) | |||
Ending Balance at Dec. 31, 2016 | $ 100 | 138,794 | (120,980) | $ (13,764) | 4,150 |
Ending Balance (in shares) at Dec. 31, 2016 | 10,026,136 | 1,015,493 | |||
Net loss | (101) | (101) | |||
Stock based compensation | 31 | 31 | |||
Costs of stock purchase | (25) | (25) | |||
Issuance of shares - option exercises, shares | 135,125 | ||||
Issuance of shares - option exercises, value | $ 2 | 99 | 101 | ||
Ending Balance at Jun. 30, 2017 | $ 102 | $ 138,899 | $ (121,081) | $ (13,764) | $ 4,156 |
Ending Balance (in shares) at Jun. 30, 2017 | 10,161,261 | 1,015,493 |
Condensed Consolidated Stateme6
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands | 6 Months Ended | |
Jun. 30, 2017 | Jun. 30, 2016 | |
Operating Activities | ||
Net loss | $ (101) | $ (478) |
Adjustments to reconcile net loss to net cash (used in) provided by operating activities: | ||
Depreciation | 41 | 42 |
Loss on disposal of equipment | 0 | 6 |
Bad debt recovery | 0 | (21) |
Stock based compensation | 31 | 90 |
Provision for excess and obsolete inventories | (36) | 152 |
Changes in operating assets and liabilities: | ||
Accounts receivable | (194) | 355 |
Inventories | 15 | (336) |
Prepaid expenses and other current assets | 18 | 11 |
Accounts payable | 232 | 145 |
Accrued liabilities | (51) | 189 |
Net cash (used in) provided by operating activities | (45) | 155 |
Investing Activities | ||
Purchases of equipment | (14) | (78) |
Net cash used in investing activities | (14) | (78) |
Financing Activities | ||
Costs of stock purchase | (25) | 0 |
Purchases of common stock for treasury | 0 | (10) |
Proceeds from stock option exercises | 101 | 0 |
Net cash provided by (used in) financing activities | 76 | (10) |
Increase in cash | 17 | 67 |
Cash - beginning of period | 3,381 | 462 |
Cash - end of period | $ 3,398 | $ 529 |
1. Nature of Operations
1. Nature of Operations | 6 Months Ended |
Jun. 30, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Nature of Operations | Description of Business Mechanical Technology, Incorporated (MTI or the Company), a New York corporation, was incorporated in 1961. The Company’s core business is conducted through MTI Instruments, Inc. (MTI Instruments), a wholly-owned subsidiary. MTI Instruments was incorporated in New York on March 8, 2000 and is a supplier of precision linear displacement sensors, instruments and system solutions, vibration measurement and system balancing solutions, precision tensile measurement systems and wafer inspection tools, serving markets that require 1) the precise measurements and control of products and processes in automated manufacturing, assembly, and consistent operation of complex machinery, 2) engine balancing and vibration analysis systems for both military and commercial aircraft, 3) metrology tools for semiconductor and solar wafer characterization, and 4) tensile stage systems for materials testing and precision linear displacement gauges all for use in academic and industrial research and development settings. Liquidity The Company has historically incurred significant losses primarily due to its past efforts to fund direct methanol fuel cell product development and commercialization programs, and had an accumulated deficit of approximately $121.1 million as of June 30, 2017. As of June 30, 2017, we had working capital of approximately $4.0 million, no debt, $22 thousand in commitments for capital expenditures and approximately $3.4 million of cash available to fund our operations. Based on the Company’s projected cash requirements for operations and capital expenditures, its available cash of approximately $3.4 million and our projected 2017 and 2018 cash flows pursuant to management’s plans, management believes it will have adequate resources to fund operations and capital expenditures for the year ending December 31, 2017 and through the end of the third quarter of 2018. If cash generated from operations is insufficient to satisfy the Company’s operational working capital and capital expenditure requirements, the Company may be required to obtain credit facilities, if available, to fund these initiatives. The Company has no other formal commitments for funding its future needs at this time and any additional financing during 2017 and through the end of the third quarter of 2018, if required, may not be available to us on acceptable terms or at all. |
2. Basis of Presentation
2. Basis of Presentation | 6 Months Ended |
Jun. 30, 2017 | |
Accounting Policies [Abstract] | |
Basis of Presentation | In the opinion of management, the Company’s condensed consolidated financial statements reflect all adjustments, which are of a normal recurring nature, necessary for a fair statement of the results for the periods presented in accordance with United States of America Generally Accepted Accounting Principles (U.S. GAAP) and with the instructions to Form 10-Q in Article 10 of the Securities and Exchange Commission’s (SEC) Regulation S-X. The results of operations for the interim periods presented are not necessarily indicative of results for the full year. Certain information and footnote disclosures normally included in the annual consolidated financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016. The information presented in the accompanying condensed consolidated balance sheet as of December 31, 2016 has been derived from the Company’s audited consolidated financial statements. All other information has been derived from the Company’s unaudited condensed consolidated financial statements for the three and six months ended June 30, 2017 and June 30, 2016. Principles of Consolidation The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, MTI Instruments. All intercompany balances and transactions are eliminated in consolidation. |
3. Accounts Receivable
3. Accounts Receivable | 6 Months Ended |
Jun. 30, 2017 | |
Receivables [Abstract] | |
Accounts Receivable | Accounts receivables consist of the following at: (Dollars in thousands) June 30, 2017 December 31, 2016 U.S. and State Government $ 191 $ 103 Commercial 884 778 Allowance for doubtful accounts – – Total $ 1,075 $ 881 For the six months ended June 30, 2017 and 2016, the largest commercial customer represented 8.6% and 14.0%, respectively, and the largest governmental agency represented 27.6% and 1.3%, respectively, of the Company’s product revenue. As of June 30, 2017 and December 31, 2016, the largest commercial receivable represented 13.6% and 23.0%, respectively, and the largest governmental receivable represented 17.8% and 11.6%, respectively, of the Company’s accounts receivable. |
4. Inventories
4. Inventories | 6 Months Ended |
Jun. 30, 2017 | |
Inventory Disclosure [Abstract] | |
Inventories | Inventories consist of the following at: (Dollars in thousands) June 30, 2017 December 31, 2016 Finished goods $ 237 $ 244 Work in process 120 143 Raw materials 340 289 Total $ 697 $ 676 |
5. Property, Plant and Equipmen
5. Property, Plant and Equipment | 6 Months Ended |
Jun. 30, 2017 | |
Property, Plant and Equipment [Abstract] | |
Property, Plant and Equipment | Property, plant and equipment consist of the following at: (Dollars in thousands) June 30, 2017 December 31, 2016 Leasehold improvements $ 39 $ 39 Computers and related software 1,075 1,068 Machinery and equipment 885 892 Office furniture and fixtures 25 25 2,024 2,024 Less: Accumulated depreciation 1,891 1,864 $ 133 $ 160 Depreciation expense was $41 thousand and $85 thousand for the six months ended June 30 , 2017 and the year ended December 31, 2016, respectively. |
6. Income Taxes
6. Income Taxes | 6 Months Ended |
Jun. 30, 2017 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | We have adopted the provisions of accounting standard update (ASU) 2016-09 as of the beginning of the current fiscal year, which requires recognition through opening retained earnings of any pre-adoption date net operating loss (NOL) carryforwards from nonqualified stock options for excess tax benefits that were not previously recognized because the related tax deduction had not reduced taxes payable and other employee share-based payments, as well as recognition of all income tax effects from share-based payments arising on or after January 1, 2017 (our adoption date) in income tax expense. As a result, we recognized through opening retained earnings $1.3 million of pre-adoption date NOL carryforwards with remaining carryforward periods of more than 10 years (the corresponding deferred tax asset is $457 thousand). We recorded a full valuation allowance for this deferred tax asset. In addition, we realized shortfall tax expense of $19 thousand during the three months ended June 30, 2017 and windfall tax benefits of $2 thousand during the three months ended March 31, 2017, which we recognized as discrete period income tax and benefit, respectively, as required by the ASU. During the three and six months ended June 30, 2017, the Company’s effective income tax rate was 0%. The projected annual effective tax rate is less than the Federal statutory rate of 34%, primarily due to the change in the valuation allowance, as well as changes to estimated taxable income for 2017 and permanent differences. For the three and six months ended June 30, 2016, the Company’s effective income tax rate was 0%. There was no income tax expense for the three and six months ended June 30, 2017 or June 30, 2016. The Company provides for recognition of deferred tax assets if the realization of such assets is more likely than not to occur in accordance with accounting standards that address income taxes. Significant management judgment is required in determining the period in which the reversal of a valuation allowance should occur. The Company has considered all available evidence, both positive and negative, such as historical levels of income and future forecasts of taxable income amongst other items, in determining its valuation allowance. In addition, the Company’s assessment requires us to schedule future taxable income in accordance with accounting standards that address income taxes to assess the appropriateness of a valuation allowance which further requires the exercise of significant management judgment. The Company believes that the accounting estimate for the valuation of deferred tax assets is a critical accounting estimate, because judgment is required in assessing the likely future tax consequences of events that have been recognized in our financial statements or tax returns. The Company based the estimate of deferred tax assets and liabilities on current tax laws and rates and, in certain cases, business plans and other expectations about future outcomes. In the event that actual results differ from these estimates or the Company adjusts these estimates in future periods, the Company may need to adjust the recorded valuation allowance, which could materially impact our financial position and results of operations. The Company has recorded a full valuation allowance at June 30, 2017 and December 31, 2016 for its deferred tax assets. The valuation allowance was $19.1 million at June 30, 2017 and $18.6 million at December 31, 2016. We will continue to evaluate the ability to realize our deferred tax assets and related valuation allowance on a quarterly basis. |
7. Stockholders' Equity
7. Stockholders' Equity | 6 Months Ended |
Jun. 30, 2017 | |
Equity [Abstract] | |
Stockholders' Equity | Common Stock The Company has one class of common stock, par value $.01. Each share of the Company’s common stock is entitled to one vote on all matters submitted to stockholders. As of June 30, 2017 and December 31, 2016, there were 9,145,768 and 9,010,643 shares of common stock, respectively, issued and outstanding. Reservation of Shares The Company had reserved common shares for future issuance as follows as of June 30 , 2017: Stock options outstanding 985,553 Common stock available for future equity awards or issuance of options 67,161 Number of common shares reserved 1,052,714 Income (Loss) per Share The Company computes basic income (loss) per common share by dividing net income (loss) by the weighted average number of common shares outstanding during the reporting period. Diluted income (loss) per share reflects the potential dilution, if any, computed by dividing income (loss) by the combination of dilutive common share equivalents, comprised of shares issuable under outstanding investment rights, warrants and the Company’s share-based compensation plans, and the weighted average number of common shares outstanding during the reporting period. Dilutive common share equivalents include the dilutive effect of in-the-money stock options, which are calculated based on the average share price for each period using the treasury stock method. Under the treasury stock method, the exercise price of a stock option, the amount of compensation cost, if any, for future service that the Company has not yet recognized, and the amount of windfall tax benefits that would be recorded in additional paid-in capital for the periods presented prior to the adoption of ASU 2016-09 on January 1, 2017, if any, when the stock option is exercised are assumed to be used to repurchase shares in the current period. Not included in the computation of earnings per share, assuming dilution, for the six months ended June 30, 2017, were options to purchase 985,553 shares of the Company’s common stock. These potentially dilutive items were excluded because the Company incurred a loss during the period and their inclusion would be anti-dilutive. Not included in the computation of earnings per share, assuming dilution, for the three months ended June 30, 2017, were options to purchase 273,589 shares, respectively of the Company’s common stock. These potentially dilutive items were excluded even though the average market price of the common stock exceeded the exercise prices for a portion of the options because the calculation of incremental shares resulted in an anti-dilutive effect. Not included in the computation of earnings per share, assuming dilution, for the six months ended June 30, 2016, were options to purchase 1,177,065 shares of the Company’s common stock. These potentially dilutive items were excluded because the Company incurred a loss during the period and their inclusion would be anti-dilutive. Not included in the computation of earnings per share, assuming dilution, for the three months ended June 30, 2016, were options to purchase 768,501 shares, respectively of the Company’s common stock. These potentially dilutive items were excluded even though the average market price of the common stock exceeded the exercise prices for a portion of the options because the calculation of incremental shares resulted in an anti-dilutive effect. |
8. Commitments and Contingencie
8. Commitments and Contingencies | 6 Months Ended |
Jun. 30, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments: Leases The Company and its subsidiary lease certain manufacturing, laboratory and office facilities. The lease provides for the Company to pay its allocated share of insurance, taxes, maintenance and other costs of the leased property. Future minimum rental payments required under non-cancelable operating leases (with initial or remaining lease terms in excess of one year) as of June 30, 2017 are: $110 thousand remaining in 2017; $221 thousand in 2018; and $207 thousand in 2019. Warranties Product warranty liabilities are included in “Accrued liabilities” in the Condensed Consolidated Balance Sheets. Below is a reconciliation of changes in product warranty liabilities: (Dollars in thousands) Six Months Ended 2017 2016 Balance, January 1 $ 14 $ 16 Accruals for warranties issued 8 7 Settlements made (in cash or in kind) (10 ) (3 ) Balance, end of period $ 12 $ 20 Employment Agreement On May 5, 2017, the Company entered into an employment agreement with one employee. The agreement provides for an initial term ending December 31, 2018, and, unless either party provides written notice that the agreement will not be renewed, is renewed for an additional year on December 31, 2018 and each subsequent December 31; such non-renewal may be for any or for no stated reason. The agreement provides for certain payments upon termination of employment under certain circumstances. As of June 30, 2017, the Company’s potential minimum obligation to this employee was approximately $199 thousand. Separation Agreement Our former President and Chief Executive Officer Kevin G. Lynch, who resigned from these positions on January 18, 2017, was not entitled to any post-termination payments or benefits under the terms of his employment arrangement. However, the Company entered into a separation agreement with Mr. Lynch, as of February 1, 2017, that entitles him to be paid the compensation he was receiving at his termination ($11,488.47 bi-weekly) from his January 18, 2017 termination date through June 30, 2017, as well as reimbursement for COBRA medical insurance coverage through December 31, 2017. Under the terms of this separation agreement, as of June 30, 2017, Mr. Lynch is entitled to remaining payments aggregating $5 thousand, assuming he complies with the terms of the separation agreement. The separation agreement also includes confidentiality provisions and Mr. Lynch’s release of any claims against the Company and agreement not to bring suit against the Company and its affiliates. Contingencies: Legal We are subject to legal proceedings, claims and liabilities which arise in the ordinary course of business. When applicable, we accrue for losses associated with legal claims when such losses are probable and can be reasonably estimated. These accruals are adjusted as additional information becomes available or circumstances change. Legal fees are charged to expense as they are incurred. |
9. Stock Based Compensation
9. Stock Based Compensation | 6 Months Ended |
Jun. 30, 2017 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Stock Based Compensation | During 2016, the Company granted 261,000 options to purchase the Company’s common stock from the Mechanical Technology Incorporated 2014 Equity Incentive Plan (2014 Plan), which generally vest 25% on each of the first four anniversaries of the date of the award. The exercise price of these options is $0.78 per share and was based on the closing market price of the Company’s common stock on the date of grant. Using a Black-Scholes Option Pricing Model, the weighted average fair value of these options is $0.74 per share and was estimated at the date of grant. These options became immediately vested in conjunction with the change in control provision (as defined in the 2014 Plan) as a result of the Brookstone Partners Acquisition XXIV, LLC purchase of shares of our common stock on October 21, 2016. During 2016, the Company granted 2,000 options to purchase the Company’s common stock from the Mechanical Technology Incorporated 2012 Equity Incentive Plan, which generally vest 25% on each of the first four anniversaries of the date of the award. The exercise price of these options is $0.78 per share and was based on the closing market price of the Company’s common stock on the date of grant. Using a Black-Scholes Option Pricing Model, the weighted average fair value of these options is $0.74 per share and was estimated at the date of grant. |
10. Related Party Transactions
10. Related Party Transactions | 6 Months Ended |
Jun. 30, 2017 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | MeOH Power, Inc. The Company records its investment in MeOH Power, Inc. using the equity method of accounting. The fair value of the Company’s interest in MeOH Power, Inc. has been determined to be $0 as of June 30, 2017 and December 31, 2016, based on MeOH Power, Inc.’s net position and expected cash flows. A s of , 2017, the Company retained its ownership of approximately 47.5% of outstanding common stock, or 75,049,937 shares. The Company previously held warrants to purchase 31,904,136 shares of common stock of MeOH Power, Inc., which expired in December 2016. On December 18, 2013, MeOH Power, Inc. MeOH Power, Inc. MeOH Power, Inc. MeOH Power, Inc. MeOH Power, Inc Legal Services During the three and six months ended June 30, 2017, the Company incurred $5 thousand and $9 thousand, respectively, to Couch White, LLP for legal services associated with contract review. No such legal fees were incurred during the three and six months ended June 30, 2016. A partner at Couch White, LLP is an immediate family member of one of our Directors. |
11. Effect of Recent Accounting
11. Effect of Recent Accounting Updates | 6 Months Ended |
Jun. 30, 2017 | |
Accounting Changes and Error Corrections [Abstract] | |
Effect of Recent Accounting Updates | Accounting Updates Not Yet Effective Changes to U.S. GAAP are established by the Financial Accounting Standards Board (the FASB) in the form of ASUs to the FASB’s Accounting Standards Codification. The Company considered the applicability and impact of all ASUs. ASUs not mentioned below were assessed and determined to be either not applicable or are expected to have minimal impact on our consolidated financial position or results of operations. In May 2014, the FASB issued ASU 2014-09 (Revenue from Contracts with Customers (Topic 606)) and issued subsequent amendments to the initial guidance in August 2015, March 2016, April 2016, May 2016 and December 2016 within ASU 2015-14, ASU 2016-08, ASU 2016-10, ASU 2016-12 and ASU 2016-20, respectively (ASU 2014-09, ASU 2015-14, ASU 2016-08, ASU 2016-10, ASU 2016-12 and ASU 2016-20, respectively, and collectively, Topic 606) to clarify the principles for recognizing revenue and to develop a common revenue standard for GAAP and International Financial Reporting Standards. Topic 606 supersedes nearly all existing revenue recognition guidance under GAAP. Topic 606 is principles-based and provides a five-step model to determine when and how revenue is recognized. It is possible more judgment and estimates may be required within the revenue recognition process than are required under existing GAAP. The core principle is that a company should recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. To achieve that core principle, an entity should apply the following steps: Step 1: Identify the contract(s) with a customer. Step 2: Identify the performance obligations in the contract. Step 3: Determine the transaction price. Step 4: Allocate the transaction price to the performance obligations in the contract. Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation. Topic 606 also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. This standard, as amended, will be effective for the Company for annual and interim reporting periods beginning after December 15, 2017. This standard may be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized as of the date of initial application. Early adoption is permitted, but no earlier than calendar 2017. This standard could impact the timing and amounts of revenue recognized. The Company is currently evaluating the impact of this standard on its consolidated financial statements. The Company has not yet selected a transition method and in preparation for our adoption of the new standard in our 2018 fiscal year, we are obtaining representative samples of contracts and other forms of agreements with our customers in the U.S. and international locations and are evaluating the provisions contained therein in light of the five-step model specified by this standard. While we do not believe there will be a material impact to our revenues upon adoption, we are continuing to evaluate the impact to our revenues and our preliminary assessments are subject to change. We are also continuing to evaluate the provisions of Topic 606 related to costs for obtaining customer contracts. In January 2016, the FASB issued ASU 2016-01 (Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Liabilities) the main objective of which is to enhance the reporting model for financial instruments to provide users of financial statements with more decision-useful information and address certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. This standard will be effective for the Company for annual and interim reporting periods beginning on or after December 15, 2017, and early adoption is permitted. The Company is currently evaluating the impact of this standard but we do not expect the adoption of it to have a material impact on its consolidated financial statements. In February 2016, the FASB issued ASU 2016-02 (Leases (Topic 842)), which requires lessees to recognize a right-of-use asset and a lease liability on their balance sheet for virtually all of their leases (other than leases that meet the definition of a short-term lease). The lease liability will be equal to the present value of lease payments and the right-of-use asset will be based on the lease liability, subject to adjustment such as for initial direct costs. For income statement purposes, this standard retains a dual model similar to ASC 840, requiring leases to be classified as either operating or finance. For lessees, operating leases will result in straight-line expense (similar to current accounting by lessees for operating leases under ASC 840) while finance leases will result in a front-loaded expense pattern (similar to current accounting by lessees for capital leases under ASC 840). While this standard maintains similar accounting for lessors as under ASC 840, this standard reflects updates to, among other things, align with certain changes to the lessee model. This standard will be effective for the Company for annual and interim reporting periods beginning on or after December 15, 2018, and early adoption is permitted. Although we have not completed our assessment, we believe adoption of this standard may have a significant impact on our consolidated balance sheets. However, we do not expect the adoption to change the recognition, measurement or presentation of lease expense within our consolidated statements of operations or the consolidated statements of cash flows. We currently expect that most of our operating lease commitments will be subject to the new standard and recognized as operating lease liabilities and right-of-use assets upon our adoption of the standard, which will increase our total assets and total liabilities that we report relative to such amounts prior to adoption. Information about our undiscounted future lease payments and the timing of those payments is in Note 8, Commitments and Contingencies. In August 2016, the FASB issued ASU 2016-15 (Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments), which clarifies the treatment of several cash flow categories. In addition, ASU 2016-15 clarifies that when cash receipts and cash payments have aspects of more than one class of cash flows and cannot be separated, classification will depend on the predominant source or use. This standard will be effective for the Company for annual and interim reporting periods beginning after December 15, 2017, and early adoption is permitted. This standard should be applied using a retrospective transition method to each period presented. The Company is currently evaluating the impact of this standard on its consolidated financial statements. In May 2017, the FASB issued ASU 2017-09 (Compensation-Stock Compensation (Topic 718): Scope of Modification Accounting), which provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. This standard will be effective for the Company for annual and interim reporting periods beginning after December 15, 2017, and early adoption is permitted. This standard should be applied prospectively to an award modified on or after the adoption date. The Company will evaluate the impact of this standard on its consolidated financial statements at the time of adoption, if applicable. Accounting Updates Recently Adopted by the Company On January 1, 2017, we adopted ASU 2015-11 (Inventory (Topic 330): Simplifying the Measurement of Inventory), which applies to inventory that is measured using first-in, first-out (FIFO) or average cost. As required by ASU 2015-11, we measure inventory that is within scope at the lower of cost and net realizable value, which is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. Subsequent measurement was unchanged for inventory that is measured using last-in, last-out (LIFO). The Company adopted this standard on a prospective basis. The adoption of this standard did not have a material impact on its consolidated financial statements. On January 1, 2017, we adopted ASU 2015-17 (Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes). The amendments in this standard require entities that present a classified balance sheet to classify all deferred tax liabilities and assets as a noncurrent amount. The requirement that deferred tax liabilities and assets of a tax-paying component of an entity be offset and presented as a single amount was not affected by the amendments in this standard. Additionally, the amendments in this standard align the deferred income tax presentation with the requirements in International Accounting Standards (IAS) 1 (Presentation of Financial Statements). The Company adopted this standard on a prospective basis. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements as its deferred tax assets and liabilities are currently in a full valuation allowance. Prior periods were not retrospectively adjusted. On January 1, 2017, we adopted ASU 2016-09 (Compensation–Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting). As required by ASU 2016-09, all income tax effects of awards, including excess tax benefits, recognized on stock-based compensation expense are reflected in the condensed consolidated statements of operations as a component of the provision for income taxes on a prospective basis. As required by ASU 2016-09, all tax related cash flows recognized on stock-based compensation expense are classified as an operating activity in our condensed consolidated statements of cash flows on a prospective basis. Accordingly, prior periods have not been adjusted. Additionally, ASU 2016-09 allows companies to make a policy election to account for forfeitures either upon occurrence or by estimating forfeitures. We have elected to continue estimating forfeitures expected to occur in order to determine the amount of compensation cost to be recognized each period. See Note 6 above for additional information. On January 1, 2017, we adopted ASU 2017-03 (Accounting Changes and Error Corrections (Topic 250) and Investments – Equity Method and Joint Ventures (Topic 323); Amendments to SEC Paragraphs Pursuant to Staff Announcements at the September 22, 2016 and November 17, 2016 Emerging Issues Task Force (EITF) Meetings (SEC Update)), which amends certain topics of the ASC as defined in this ASU and also adds an SEC paragraph and amends other topics pursuant to an SEC Staff Announcement made at the September 22, 2016 EITF meeting. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements. There have been no other significant changes in our reported financial position or results of operations and cash flows as a result of our adoption of new accounting pronouncements or changes to our significant accounting policies that were disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2016. |
2. Accounting Policies (Policie
2. Accounting Policies (Policies) | 6 Months Ended |
Jun. 30, 2017 | |
Accounting Policies [Abstract] | |
Basis of Presentation | In the opinion of management, the Company’s condensed consolidated financial statements reflect all adjustments, which are of a normal recurring nature, necessary for a fair statement of the results for the periods presented in accordance with United States of America Generally Accepted Accounting Principles (U.S. GAAP) and with the instructions to Form 10-Q in Article 10 of the Securities and Exchange Commission’s (SEC) Regulation S-X. The results of operations for the interim periods presented are not necessarily indicative of results for the full year. Certain information and footnote disclosures normally included in the annual consolidated financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016. The information presented in the accompanying condensed consolidated balance sheet as of December 31, 2016 has been derived from the Company’s audited consolidated financial statements. All other information has been derived from the Company’s unaudited condensed consolidated financial statements for the three and six months ended June 30, 2017 and June 30, 2016. |
Principles of Consolidation | Principles of Consolidation The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, MTI Instruments. All intercompany balances and transactions are eliminated in consolidation. |
3. Accounts Receivables (Tables
3. Accounts Receivables (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Receivables [Abstract] | |
Schedule of accounts receivables | (Dollars in thousands) June 30, 2017 December 31, 2016 U.S. and State Government $ 191 $ 103 Commercial 884 778 Allowance for doubtful accounts – – Total $ 1,075 $ 881 |
4. Inventories (Tables)
4. Inventories (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Inventory Disclosure [Abstract] | |
Schedule of inventory | (Dollars in thousands) June 30, 2017 December 31, 2016 Finished goods $ 237 $ 244 Work in process 120 143 Raw materials 340 289 Total $ 697 $ 676 |
5. Property, Plant and Equipm21
5. Property, Plant and Equipment (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Property, Plant and Equipment [Abstract] | |
Schedule of Property, Plant and Equipment | (Dollars in thousands) June 30, 2017 December 31, 2016 Leasehold improvements $ 39 $ 39 Computers and related software 1,075 1,068 Machinery and equipment 885 892 Office furniture and fixtures 25 25 2,024 2,024 Less: Accumulated depreciation 1,891 1,864 $ 133 $ 160 |
7. Stockholders' Equity (Tables
7. Stockholders' Equity (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Equity [Abstract] | |
Schedule of reserved common shares | Stock options outstanding 985,553 Common stock available for future equity awards or issuance of options 67,161 Number of common shares reserved 1,052,714 |
8. Commitments and Contingenc23
8. Commitments and Contingencies (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | |
Schedule of product warranty liabilities | (Dollars in thousands) Six Months Ended 2017 2016 Balance, January 1 $ 14 $ 16 Accruals for warranties issued 8 7 Settlements made (in cash or in kind) (10 ) (3 ) Balance, end of period $ 12 $ 20 |
1. Nature of Operations (Detail
1. Nature of Operations (Details Narrative) - USD ($) $ in Thousands | Jun. 30, 2017 | Dec. 31, 2016 | Jun. 30, 2016 | Dec. 31, 2015 |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||||
Accumulated deficit | $ (121,081) | $ (120,980) | ||
Working capital | 4,000 | |||
Cash | 3,398 | $ 3,381 | $ 529 | $ 462 |
Commitments for capital expenditures | $ 22 |
3. Accounts Receivable (Details
3. Accounts Receivable (Details) - USD ($) $ in Thousands | Jun. 30, 2017 | Dec. 31, 2016 |
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Allowance for doubtful accounts | $ 0 | $ 0 |
Accounts receivable, net | 1,075 | 881 |
U.S. and State Government [Member] | ||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Accounts receivable, gross | 191 | 103 |
Commercial [Member] | ||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Accounts receivable, gross | $ 884 | $ 778 |
3. Accounts Receivable (Detai26
3. Accounts Receivable (Details Narrative) | 6 Months Ended | 12 Months Ended | |
Jun. 30, 2017 | Jun. 30, 2016 | Dec. 31, 2016 | |
Sales Revenue, Segment [Member] | Commercial [Member] | |||
Concentration Risk [Line Items] | |||
Concentration risk (as a percent) | 8.60% | 14.00% | |
Sales Revenue, Segment [Member] | Governmental Agency [Member] | |||
Concentration Risk [Line Items] | |||
Concentration risk (as a percent) | 27.60% | 1.30% | |
Accounts Receivable [Member] | Commercial [Member] | |||
Concentration Risk [Line Items] | |||
Concentration risk (as a percent) | 13.60% | 23.00% | |
Accounts Receivable [Member] | Governmental Agency [Member] | |||
Concentration Risk [Line Items] | |||
Concentration risk (as a percent) | 17.80% | 11.60% |
4. Inventories (Details)
4. Inventories (Details) - USD ($) $ in Thousands | Jun. 30, 2017 | Dec. 31, 2016 |
Inventory Disclosure [Abstract] | ||
Finished goods | $ 237 | $ 244 |
Work in process | 120 | 143 |
Raw materials | 340 | 289 |
Total | $ 697 | $ 676 |
5. Property, Plant and Equipm28
5. Property, Plant and Equipment (Details) - USD ($) $ in Thousands | Jun. 30, 2017 | Dec. 31, 2016 |
Property, Plant and Equipment [Line Items] | ||
Property, plant and equipment, gross | $ 2,024 | $ 2,024 |
Less: Accumulated depreciation | 1,891 | 1,864 |
Property, plant and equipment, net | 133 | 160 |
Leasehold improvements [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property, plant and equipment, gross | 39 | 39 |
Computers and related software [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property, plant and equipment, gross | 1,075 | 1,068 |
Machinery and equipment [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property, plant and equipment, gross | 885 | 892 |
Office furniture and fixtures [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property, plant and equipment, gross | $ 25 | $ 25 |
5. Property, Plant and Equipm29
5. Property, Plant and Equipment (Details Narrative) - USD ($) $ in Thousands | 6 Months Ended | 12 Months Ended | |
Jun. 30, 2017 | Jun. 30, 2016 | Dec. 31, 2016 | |
Property, Plant and Equipment [Abstract] | |||
Depreciation expense | $ 41 | $ 42 | $ 85 |
6. Income Taxes (Details Narrat
6. Income Taxes (Details Narrative) - USD ($) $ in Thousands | Jun. 30, 2017 | Dec. 31, 2016 |
Income Tax Disclosure [Abstract] | ||
Net operating loss carryforwards | $ 1,300 | |
Deferred net operating loss carryforwards | 457 | |
Valuation allowance | $ 19,100 | $ 18,600 |
6. Income Taxes (Details Narr31
6. Income Taxes (Details Narrative 2) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2017 | Mar. 31, 2017 | Jun. 30, 2017 | Jun. 30, 2016 | |
Income Tax Disclosure [Abstract] | ||||
Shortfall tax expense | $ 19 | |||
Windfall tax benefit | $ 2 | |||
Effective income tax rate (as a percent) | 0.00% | 0.00% | 0.00% | |
Federal statutory rate (as a percent) | 34.00% | |||
Income tax expense | $ 0 | $ 0 | $ 0 |
7. Stockholders' Equity (Detail
7. Stockholders' Equity (Details) | Jun. 30, 2017shares |
Equity [Abstract] | |
Stock options outstanding | 985,553 |
Common stock available for future equity awards or issuance of options | 67,161 |
Number of common shares reserved | 1,052,714 |
7. Stockholders' Equity (Deta33
7. Stockholders' Equity (Details Narrative) - $ / shares | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | Dec. 31, 2016 | |
Equity [Abstract] | |||||
Common stock par value (in dollars per share) | $ 0.01 | $ 0.01 | $ 0.01 | ||
Common stock shares issued | 10,161,261 | 10,161,261 | 10,026,136 | ||
Common stock shares outstanding | 9,145,768 | 9,145,768 | 9,010,643 | ||
Potentially dilutive items excluded from computation of earnings per share (in shares) | 273,589 | 768,501 | 985,553 | 1,177,065 |
8. Commitments and Contingenc34
8. Commitments and Contingencies (Details) - USD ($) | 6 Months Ended | |
Jun. 30, 2017 | Jun. 30, 2016 | |
Commitments and Contingencies Disclosure [Abstract] | ||
Balance, beginning of period | $ 14 | $ 16 |
Accruals for warranties issued | 8 | 7 |
Settlements made (in cash or in kind) | (10) | (3) |
Balance, end of period | $ 12 | $ 20 |
8. Commitments and Contingenc35
8. Commitments and Contingencies (Details Narrative) | 6 Months Ended |
Jun. 30, 2017USD ($) | |
Future minimum rental payments required under non-cancelable operating leases | |
Remaining in 2017 | $ 110 |
2,018 | 221 |
2,019 | 207 |
Amounts due to employees | 199 |
Separation agreement | $ 5 |
9. Stock Based Compensation (De
9. Stock Based Compensation (Details Narrative) | 12 Months Ended |
Dec. 31, 2016$ / sharesshares | |
2014 Equity Incentive Plan [Member] | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Number of option shares granted | shares | 261,000 |
Weighted average exercise price shares granted (in dollars per share) | $ .78 |
Weighted average fair value shares granted (in dollars per share) | $ 0.74 |
2012 Equity Incentive Plan [Member] | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Number of option shares granted | shares | 2,000 |
Weighted average exercise price shares granted (in dollars per share) | $ 0.78 |
Weighted average fair value shares granted (in dollars per share) | $ 0.74 |
10. Related Party Transactions
10. Related Party Transactions (Details Narrative) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | |
Jun. 30, 2017 | Jun. 30, 2017 | Dec. 31, 2016 | |
Common stock authorized | 75,000,000 | 75,000,000 | 75,000,000 |
Couch White LLP [Member] | |||
Legal services expense | $ 5 | $ 9 | |
MeOH Power, Inc. [Member] | |||
Equity ownership percentage | 47.50% | 47.50% | |
Fair value of investment | $ 0 | $ 0 | $ 0 |
Common stock authorized | 240,000,000 | 240,000,000 | |
MeOH Power, Inc. [Member] | Senior Demand Promissory Note [Member] | |||
Debt principal and interest available for conversion | $ 280 | $ 280 | $ 275 |
MeOH Power, Inc. [Member] | Common Stock [Member] | |||
Stock owned in subsidiary | 75,049,937 | 75,049,937 |