Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2018 | Nov. 12, 2018 | |
Document And Entity Information | ||
Entity Registrant Name | CPI AEROSTRUCTURES INC | |
Entity Central Index Key | 889,348 | |
Document Type | 10-Q/A | |
Trading Symbol | CVU | |
Document Period End Date | Sep. 30, 2018 | |
Amendment Flag | true | |
Amendment Description | As previously disclosed in the Current Report on Form 8-K filed by CPI Aerostructures, Inc. (the "Company") on February 7, 2019, the audit committee of the Company's board of directors determined based on the recommendation of management in consultation with CohnReznick LLP, the Company's independent registered public accounting firm, that the Company's previously issued financial statements as of and for the three and nine months ended September 30, 2018, as originally filed with the Securities and Exchange Commission on November 13, 2018 (the "Original Form 10-Q"), should no longer be relied upon, due to an error that occurred in the Company's billing process and resulted in the overstatement of revenue for the three and nine months ended September 30, 2018. As a result, the Company is filing this Amendment No. 1 on Form 10-Q/A ("Amendment") to amend and restate the Original Form 10-Q. | |
Current Fiscal Year End Date | --12-31 | |
Entity's Reporting Status Current | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business | true | |
Entity Emerging Growth Company | false | |
Entity Common Stock, Shares Outstanding | 11,727,784 | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2,018 |
CONDENSED BALANCE SHEETS (Unaud
CONDENSED BALANCE SHEETS (Unaudited) - USD ($) | Sep. 30, 2018 | Dec. 31, 2017 | |
Current Assets: | |||
Cash | $ 828,594 | $ 1,430,877 | |
Accounts receivable, net of allowance for doubtful accounts of $275,000 and $150,000 as of September 30, 2018 and December 31, 2017, respectively | 6,364,186 | 5,379,821 | |
Contract assets | 113,167,705 | 111,158,551 | [1] |
Prepaid expenses and other current assets | 2,330,830 | 2,413,187 | |
Total current assets | 122,691,315 | 120,382,436 | |
Property and equipment, net | 2,696,344 | 2,046,942 | |
Deferred income taxes, net | 685,318 | 1,566,818 | |
Other assets | 286,527 | 188,303 | |
Total Assets | 126,359,504 | 124,184,499 | |
Current Liabilities: | |||
Accounts payable | 10,431,232 | 15,129,872 | |
Accrued expenses | 1,262,373 | 1,911,421 | |
Contract liabilities | 464,823 | 246,330 | [1] |
Current portion of long-term debt | 2,435,559 | 2,009,000 | |
Line of credit | 27,538,685 | 22,838,685 | |
Income tax payable | 109,327 | ||
Total current liabilities | 42,132,672 | 42,244,635 | |
Long-term debt, net of current portion | 5,667,915 | 7,019,468 | |
Other liabilities | 548,815 | 607,063 | |
Total Liabilities | 48,349,402 | 49,871,166 | |
Shareholders' Equity: | |||
Common stock - $.001 par value; authorized 50,000,000 shares, 8,953,137 and 8,864,319 shares, respectively, issued and outstanding | 8,950 | 8,863 | |
Additional paid-in capital | 54,352,614 | 53,770,618 | |
Retained earnings | 23,648,538 | 20,548,652 | |
Accumulated other comprehensive loss | (14,800) | ||
Total Shareholders' Equity | 78,010,102 | 74,313,333 | |
Total Liabilities and Shareholders' Equity | $ 126,359,504 | $ 124,184,499 | |
[1] | On January 1, 2018, as a result of the adoption of ASC 606, the Company reclassified costs and estimated earnings in excess of billings on uncompleted contracts to contract assets and billings in excess of costs and estimated earnings on uncompleted contracts to contract liabilities. |
CONDENSED BALANCE SHEETS (Una_2
CONDENSED BALANCE SHEETS (Unaudited) (Parenthetical) - USD ($) | Sep. 30, 2018 | Dec. 31, 2017 |
Statement of Financial Position [Abstract] | ||
Accounts receivable, net of allowance for doubtful | $ 275,000 | $ 150,000 |
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Common stock, authorized | 50,000,000 | 50,000,000 |
Common stock, issued | 8,953,137 | 8,864,319 |
Common stock, outstanding | 8,953,137 | 8,864,319 |
CONDENSED STATEMENTS OF INCOME
CONDENSED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (Unaudited) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Income Statement [Abstract] | ||||
Revenue | $ 19,017,301 | $ 20,706,460 | $ 57,470,163 | $ 57,471,112 |
Cost of revenue | 15,146,080 | 15,794,024 | 44,964,256 | 44,337,414 |
Gross profit | 3,871,221 | 4,912,436 | 12,505,907 | 13,133,698 |
Selling, general and administrative expenses | 2,584,560 | 2,044,304 | 7,192,159 | 6,210,380 |
Income from operations | 1,286,661 | 2,868,132 | 5,313,748 | 6,923,318 |
Interest expense | 574,765 | 402,619 | 1,438,862 | 1,258,857 |
Income before provision for income taxes | 711,896 | 2,465,513 | 3,874,886 | 5,664,461 |
Provision for income taxes | 126,000 | 770,000 | 775,000 | 1,954,000 |
Net income | 585,896 | 1,695,513 | 3,099,886 | 3,710,461 |
Other comprehensive income (loss), net of tax - Change in unrealized (gain) loss on interest rate swap | 20,600 | (2,300) | 14,800 | 1,900 |
Comprehensive income | $ 606,496 | $ 1,693,213 | $ 3,114,686 | $ 3,712,361 |
Income per common share - basic (in dollars per share) | $ 0.07 | $ 0.19 | $ 0.35 | $ 0.42 |
Income per common share - diluted (in dollars per share) | $ 0.07 | $ 0.19 | $ 0.35 | $ 0.42 |
Shares used in computing income per common share: | ||||
Basic (in shares) | 8,952,979 | 8,846,507 | 8,926,734 | 8,820,379 |
Diluted (in shares) | 8,977,075 | 8,872,810 | 8,951,640 | 8,841,397 |
CONDENSED STATEMENTS OF SHAREHO
CONDENSED STATEMENTS OF SHAREHOLDERS' EQUITY (UNAUDITED) - USD ($) | Common Stock [Member] | Additional Paid-In Capital [Member] | Retained Earnings [Member] | Accumulated Other Comprehensive Income (Loss) [Member] | Total |
Balance, beginning at Dec. 31, 2016 | $ 8,738 | $ 52,824,950 | $ 14,781,018 | $ (9,000) | $ 67,605,706 |
Balance, beginning (in shares) at Dec. 31, 2016 | 8,739,836 | ||||
Net income | 3,710,461 | 3,710,461 | |||
Change in unrealized loss from interest rate swap | 1,900 | 1,900 | |||
Stock-based compensation expense | $ 109 | 787,181 | 787,290 | ||
Stock-based compensation expense (in shares) | 106,981 | ||||
Balance, ending at Sep. 30, 2017 | $ 8,847 | 53,612,131 | 18,491,479 | (7,100) | 72,105,357 |
Balance, ending (in shares) at Sep. 30, 2017 | 8,846,817 | ||||
Balance, beginning at Dec. 31, 2017 | $ 8,863 | 53,770,618 | 20,548,652 | (14,800) | $ 74,313,333 |
Balance, beginning (in shares) at Dec. 31, 2017 | 8,864,319 | 8,864,319 | |||
Net income | 3,099,886 | $ 3,099,886 | |||
Change in unrealized loss from interest rate swap | 14,800 | 14,800 | |||
Common stock issued as employee compensation | $ 5 | 45,908 | 45,913 | ||
Common stock issued as employee compensation (in shares) | 5,130 | ||||
Stock-based compensation expense | $ 82 | 536,088 | 536,170 | ||
Stock-based compensation expense (in shares) | 83,668 | ||||
Balance, ending at Sep. 30, 2018 | $ 8,950 | $ 54,352,614 | $ 23,648,538 | $ 78,010,102 | |
Balance, ending (in shares) at Sep. 30, 2018 | 8,953,137 | 8,953,137 |
CONDENSED STATEMENTS OF CASH FL
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED) - USD ($) | 9 Months Ended | |
Sep. 30, 2018 | Sep. 30, 2017 | |
Cash flows from operating activities: | ||
Net income | $ 3,099,886 | $ 3,710,461 |
Adjustments to reconcile net income to net cash used in operating activities: | ||
Depreciation and amortization | 521,255 | 459,261 |
Debt issuance costs | 58,990 | 48,133 |
Deferred rent | (53,073) | (22,525) |
Loss on disposal of fixed asset | 21,010 | |
Stock-based compensation | 536,170 | 787,290 |
Common stock issued as employee compensation | 45,913 | |
Adjustment for maturity of interest rate swap | 20,600 | |
Bad debt expense | 125,000 | 150,000 |
Deferred income taxes | 881,500 | 1,802,128 |
Changes in operating assets and liabilities: | ||
(Increase) decrease in accounts receivable | (1,109,365) | 3,621,017 |
Increase in contract assets | (2,009,154) | (8,799,379) |
Decrease (increase) in prepaid expenses and other assets | 82,357 | (299,317) |
Decrease in accounts payable and accrued expenses | (5,347,688) | (888,218) |
Increase (decrease) in contract liabilities | 218,493 | (798,882) |
Decrease in other liabilities | (10,976) | |
Decrease in income taxes payable | (109,327) | |
Net cash used in operating activities | (3,049,419) | (209,021) |
Cash flows used in investing activities: | ||
Purchase of property and equipment | (521,499) | (240,916) |
Proceeds from sale of fixed asset | 42,480 | |
Net cash used in investing activities | (521,499) | (198,436) |
Cash flows from financing activities: | ||
Payments on long-term debt | (1,522,283) | (921,046) |
Proceeds from line of credit | 6,200,000 | 3,000,000 |
Payments on line of credit | (1,500,000) | (2,000,000) |
Debt issue costs paid | (209,082) | |
Net cash provided by financing activities | 2,968,635 | 78,954 |
Net decrease in cash | (602,283) | (328,503) |
Cash at beginning of period | 1,430,877 | 1,039,586 |
Cash at end of period | 828,594 | 711,083 |
Supplemental disclosures of cash flow information: | ||
Equipment acquired under capital lease | 649,158 | |
Noncash investing and financing activities: | ||
Interest | $ 1,601,144 | 1,172,964 |
Income taxes | $ 144,614 |
INTERIM FINANCIAL STATEMENTS
INTERIM FINANCIAL STATEMENTS | 9 Months Ended |
Sep. 30, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
INTERIM FINANCIAL STATEMENTS | 1. INTERIM FINANCIAL STATEMENTS The condensed financial statements of CPI Aerostructures, Inc. (the “Company”) as of September 30, 2018 and for the three and nine months ended September 30, 2018 and 2017 have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and note disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to those rules and regulations, although the Company believes that the disclosures made are adequate to make the information not misleading. The condensed balance sheet at December 31, 2017 has been derived from the audited financial statements at that date, but does not include all of the information and notes required by accounting principles generally accepted in the United States for complete financial statements. All adjustments that, in the opinion of management, are necessary for a fair presentation for the periods presented have been reflected. Such adjustments are of a normal, recurring nature. It is suggested that these condensed financial statements be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017. The results of operations for interim periods are not necessarily indicative of the operating results to be expected for the full year or any other interim period. The Company maintains its cash in two financial institutions. The balances are insured by the Federal Deposit Insurance Corporation. From time to time, the Company’s balances may exceed these limits. As of September 30, 2018, the Company had $748,470 of uninsured balances. The Company limits its credit risk by selecting financial institutions considered to be highly creditworthy. Effective January 1, 2018, the Company adopted Accounting Standards Codification Topic 606 Revenue from Contracts with Customers When changes are required for the estimated total revenue on a contract, these changes are recognized with an inception-to-date effect in the current period. Also, when estimates of total costs to be incurred exceed estimates of total revenue to be earned, a provision for the entire loss on the contract is recorded in the period in which the loss is determined. Following the adoption of ASC 606, the Company’s revenue recognition for all of its contracts remained materially consistent with historical practice and there was no material impact in the nine months ended September 30, 2018 condensed financial statements upon adoption. In compliance with ASC 606, costs and estimated earnings in excess of billings on uncompleted contracts, on the December 31, 2017 balance sheet, has been reclassified to contract assets. Additionally, billings in excess of costs and estimated earnings on uncompleted contracts and contract losses, on the December 31, 2017 balance sheet, have been combined and reclassified to contract liabilities. Restatement of Financial Statements The Company determined that its previously issued financial statements as of and for the three and nine months ended September 30, 2018, as originally filed with the Securities and Exchange Commission on November 13, 2018, should no longer be relied upon due to an error in the financial statements that was identified by management. The error occurred in the Company’s billing process and resulted in the overstatement of revenue for the three and nine months ended September 30, 2018. The identification of the error was made by management during the Company’s review of the billing process for the year ended December 31, 2018 in connection with the preparation of the Company’s 2018 financial statements. Management concluded that the error was limited to one instance and that the effect of correcting the error in the Company’s financial statements for the three and nine months ended September 30, 2018 is (i) a reduction of revenue and income before provision for income taxes of $927,257, (ii) a reduction of net income of $742,257 and (iii) a reduction of basic and fully diluted earnings per share of $0.08, for each such period. Additionally, as of September 30, 2018 there is (i) a reduction of contract assets of $927,257, (ii) an increase in deferred tax assets of $185,000 and (iii) a reduction of shareholders equity of $742,257. Accordingly, the Company’s condensed statement of income and comprehensive income for the three and nine months ended September 30, 2018 and the Company’s condensed statement of shareholder’s equity for the nine months ended September 30, 2018 have been restated to record the effect of the error. The error did not have a material impact on the Company’s condensed balance sheet as of September 30, 2018 or the condensed statement of cash flows for the nine months ended September 30, 2018, although certain adjustments have been made to each of those statements to correspond to the adjustments made to the condensed statement of income and comprehensive income and condensed statement of shareholder’s equity. On February 26, 2019 , BankUnited, N.A., as Sole Arranger, Administrative Agent, Collateral Agent, and Lender, and Citizens Bank, N.A., as Lender, agreed to waive the Company’s non-compliance with the leverage ratio financial covenant and the EBITDA financial covenant of the BankUnited Facility as of September 30, 2018. The Company originally received a waiver for non-compliance on November 9, 2018 and as a result of the aforementioned restatement, the Company recalculated its covenants and determined that there was a change in the amounts and that a revised waiver would be required. The following table summarizes the effects of the restatement resulting from the correction of this error. Nine Months Ended September 30, 2018 Previously Reported Adjustment Restated CONDENSED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME: Revenue $ 58,397,420 $ 927,257 $ 57,470,163 Gross profit 13,433,164 927,257 12,505,907 Net income 3,842,143 742,257 3,099,886 Comprehensive income $ 3,856,943 $ 742,257 $ 3,114,686 Earnings per common share – basic $ 0.43 $ 0.08 $ 0.35 Earnings per common share – diluted $ 0.43 $ 0.08 $ 0.35 CONDENSED STATEMENT OF SHAREHOLDERS’ EQUITY: Net income $ 3,842,143 $ 742,257 $ 3,099,886 Total shareholders’ equity $ 78,752,359 $ 742,257 $ 78,010,102 Three Months Ended Previously Adjustment Restated CONDENSED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME: Revenue $ 19,944,558 $ 927,257 $ 19,017,301 Gross profit 4,798,478 927,257 3,871,221 Net income 1,328,153 742,257 585,896 Comprehensive income $ 1,348,753 $ 742,257 $ 606,496 Earnings per common share – basic $ 0.15 $ 0.08 $ 0.07 Earnings per common share – diluted $ 0.15 $ 0.08 $ 0.07 |
ACCOUNTING STANDARDS
ACCOUNTING STANDARDS | 9 Months Ended |
Sep. 30, 2018 | |
Accounting Changes and Error Corrections [Abstract] | |
ACCOUNTING STANDARDS | 2. aCCOUNTING STANDARDS Recently Issued but not Adopted Accounting Pronouncements In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02, “Leases (Topic 842).” |
REVENUE RECOGNITION
REVENUE RECOGNITION | 9 Months Ended |
Sep. 30, 2018 | |
Revenue from Contract with Customer [Abstract] | |
REVENUE RECOGNITION | 3. REVENUE RECOGNITION The majority of the Company’s revenues are from long-term contracts with the U.S. government and commercial contractors. The contracts with the U.S. government typically are subject to the Federal Acquisition Regulation (“FAR”) which provides guidance on the types of costs that are allowable in establishing prices for goods and services provided under U.S. government contracts. The pricing for commercial contractors are based on the specific negotiations with each customer. The Company accounts for a contract when it has approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability of consideration is probable. To determine the proper revenue recognition method, the Company evaluates whether two or more contracts should be combined and accounted for as one single contract and whether the combined or single contract should be accounted for as more than one performance obligation. This evaluation requires significant judgment and the decision to combine a group of contracts or separate the combined or single contract into multiple performance obligations could change the amount of revenue and profit recorded in a given period. All of the Company’s current long-term contracts have a single performance obligation as the promise to transfer the goods or services are not separately identifiable from other promises in the contracts and, therefore, not distinct. The Company’s contracts are often modified to account for changes in contract specifications and requirements. The Company considers contract modifications to exist when the modification either creates new or changes the existing enforceable rights and obligations. All of the Company’s contract modifications are for goods or services that are not distinct from the existing contract due to the significant integration service provided in the context of the contract and are accounted for as if they were part of that existing contract. The effect of a contract modification on the transaction price and the measure of progress for the performance obligation to which it relates, is recognized as an adjustment to revenue (either as an increase in or a reduction of revenue) on a cumulative catch-up basis. Revenues for the Company’s long-term contracts are recognized over time as the Company performs its obligations because of continuous transfer of control to the customer. The continuous transfer of control to the customer is supported by clauses in contracts that either allow the customer to unilaterally terminate the contract for convenience, pay the Company for costs incurred plus a reasonable profit and the products and services have no alternative use or the customer controls the work in progress. Because of control transferring over time, revenue is recognized based on the extent of progress towards completion of the performance obligation. The selection of the method to measure progress towards completion requires judgment and is based on the nature of the products or services to be provided. The Company uses the cost-to-cost input method to measure of progress for its contracts because it best depicts the transfer of assets to the customer which occurs as the Company incurs costs on its contracts. In applying the cost-to-cost input method, the Company compares the actual costs incurred relative to the total estimated costs to determine its progress towards contract completion and to calculate the corresponding amount of estimated revenue and estimated gross profit recognized. For any costs incurred that do not contribute to a performance obligation, the Company excludes such costs from its input methods of revenue recognition as the amounts are not reflective in transferring control of the asset to the customer. Costs to fulfill include labor, materials and subcontractors’ costs, other direct costs and an allocation of indirect costs. Changes to the original estimates may be required during the life of the contract. Estimates are reviewed monthly and the effect of any change in the estimated gross margin for a contract is reflected in revenue in the period the change becomes known. Contract estimates involves considerable use of estimates in determining revenues, costs and profits and in assigning the amounts to accounting periods. As a result, there can be a significant disparity between earnings (both for accounting and tax purposes) as reported and actual cash received during any reporting period. The Company continually evaluates all of the issues related to the assumptions, risks and uncertainties inherent with the application of the cost-to-cost input method; however, it cannot be assured that estimates will be accurate. If estimates are not accurate or a contract is terminated, the Company is required to adjust revenue in later periods. Furthermore, even if estimates are accurate, there may be a shortfall in cash flow and the Company may need to borrow money, or seek access to other forms of liquidity, to fund its work in process or to pay taxes until the reported earnings materialize as actual cash receipts. For the Company’s uncompleted contracts, contract assets include unbilled amounts and when the estimated revenues recognized exceeds the amount billed to the customer and right to payment is not just subject to the passage of time. Amounts may not exceed their net realizable value. Contract assets are classified as current. The Company’s contract liabilities consist of billings in excess of estimated revenues recognized. Contract liabilities are classified as current. The Company’s contract assets and liabilities are reported in a net position on a contract-by-contract basis at the end of each reporting period. Revenue recognized for the three and nine months ended September 30, 2018, that was included in the contract liabilities at January 1, 2018 and January 1, 2017 was $151,109 and $399,381, respectively. The Company’s remaining performance obligations represents the transaction price of its long-term contracts for which work has not been performed. As of September 30, 2018, the aggregate amount of transaction price allocated to the remaining performance obligations was $77,440,322. The Company estimates that it expects to recognize approximately 31% of its remaining performance obligations in 2018 and 69% revenue in 2019. In addition, the Company recognizes revenue for parts supplied for certain MRO contracts at a point in time following the transfer of control to the customer, which typically occurs upon shipment or delivery depending on the terms of the underlying contract. Revenue from long-term contracts transferred to customers over time and revenue from MRO contracts transferred at a point in time accounted for approximately 97% and 3%, respectively, for the nine months ended September 30, 2018. Revenue by long-term contract type for the three and nine months ended September 30, 2018 (Restated) is as follows: For the Three For the Nine Government subcontracts $ 9,516,799 $ 28,288,457 Commercial contracts 7,536,697 22,363,979 Prime government contracts 1,963,805 6,877,727 $ 19,017,301 $ 57,470,163 |
STOCK-BASED COMPENSATION
STOCK-BASED COMPENSATION | 9 Months Ended |
Sep. 30, 2018 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
STOCK-BASED COMPENSATION | 4. stock-based compensation The Company accounts for stock-based compensation based on the fair value of the stock or stock-based instrument on the date of grant. In January 2018, the Company granted 58,578 restricted stock units (“RSUs”) to its board of directors as partial compensation for the 2018 year. In January 2017, the Company granted 59,395 RSUs to its board of directors as partial compensation for the 2017 year. RSUs vest quarterly on a straight-line basis over a one-year period. The Company’s net income for the nine months ended September 30, 2018 and 2017 includes approximately $491,500 and $517,000, respectively, of non-cash compensation expense related to the RSU grants to the board of directors. This expense is recorded as a component of selling, general and administrative expenses. In January 2018, the Company granted 5,130 shares of common stock to various employees. For the nine months ended September 30, 2018 approximately $10,000 of compensation expense is included in selling, general and administrative expenses and approximately $36,000 of compensation expense is included in cost of revenue for this grant. In January 2017, the Company granted 5,550 shares of common stock to various employees. For the nine months ended September 30, 2017, approximately $13,300 of compensation expense is included in selling, general and administrative expenses and approximately $37,500 of compensation expense is included in cost of revenue for this grant. In March 2018, the Company granted 68,764 shares of common stock to various employees. In the event that any of these employees voluntarily terminates their employment prior to certain dates, portions of the shares may be forfeited. In addition, if certain Company performance criterion are not achieved, portions of these shares may be forfeited. These shares will be expensed during various periods through March 2022 based upon the service and performance thresholds. For the nine months ended September 30, 2018, approximately $88,100 of compensation expense is included in selling, general and administrative expenses and approximately $18,400 of compensation expense is included in cost of revenue for this grant. In March 2017, the Company granted 73,060 shares of common stock to various employees. In the event that any of these employees voluntarily terminates their employment prior to certain dates, portions of the shares may be forfeited. In addition, if certain Company performance criterion are not achieved, portions of these shares may be forfeited. These shares will be expensed during various periods through March 2021 based upon the service and performance thresholds. For the nine months ended September 30, 2017, approximately $208,800 of compensation expense is included in selling, general and administrative expenses and approximately $44,100 of compensation expense is included in cost of revenue for this grant. In March 2018, 12,330 and 9,130 of the shares granted in 2016 and 2017, respectively, were forfeited because the Company failed to achieve certain performance criterion for the year ended December 31, 2017. In addition, on March 22, 2018, these employees returned 7,552 common shares, valued at approximately $62,000, to pay the employees’ withholding taxes. In March 2017, 12,330 of the shares granted in August of 2016 were forfeited because the Company failed to achieve certain performance criterion for the year ended December 31, 2016. In addition, on March 9, 2017, these employees returned 4,525 common shares, valued at approximately $33,000, to pay the employees’ withholding taxes. A summary of the status of the Company’s stock option plans as of September 30, 2018 and changes during the nine months ended September 30, 2018 is as follows: Options Weighted Weighted Aggregate Outstanding at beginning of period 78,064 $ 11.05 Outstanding and vested at end of period 78,064 $ 11.05 0.36 $ 61,250 During the nine months ended September30, 2018 and 2017, no stock options were granted or exercised. |
DERIVATIVE INSTRUMENTS AND FAIR
DERIVATIVE INSTRUMENTS AND FAIR VALUE | 9 Months Ended |
Sep. 30, 2018 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
DERIVATIVE INSTRUMENTS AND FAIR VALUE | 5. Derivative Instruments and Fair Value Our use of derivative instruments has been to hedge interest rates. These derivative contracts are entered into with a financial institution. We do not use derivative instruments for trading purposes and we have procedures in place to monitor and control their use. We record these derivative financial instruments on the condensed balance sheets at fair value. For derivative instruments that are designated and qualify as a cash flow hedge, the effective portion of the gain or loss on the derivative instrument is reported as a component of other comprehensive income (loss) and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. Any ineffective portion of the gain or loss on the derivative instrument for a cash flow hedge is recorded in the results of operations immediately. For derivative instruments not designated as hedging instruments, the gain or loss is recognized in the results of operations immediately. In May 2016, the Company entered into an interest rate swap with the objective of reducing its exposure to cash flow volatility arising from interest rate fluctuations associated with certain debt. The notional amount, maturity date, and currency of this contract match those of the underlying debt. The Company has designated this interest rate swap contract as a cash flow hedge. The Company measures ineffectiveness by comparing the cumulative change in the forward contact with the cumulative change in the hedged item. Fair Value At September 30, 2018 and December 31, 2017, the fair values of cash, accounts receivable, accounts payable and accrued expenses approximated their carrying values because of the short-term nature of these instruments. September 30, 2018 Carrying Amount Fair Value Debt Short-term borrowings and long-term debt $ 35,694,028 $ 35,694,028 December 31, 2017 Carrying Amount Fair Value Debt Short-term borrowings and long-term debt $ 31,893,894 $ 31,893,894 We estimated the fair value of debt using market quotes and calculations based on market rates. The following table presents the fair values of those financial liabilities measured on a recurring basis as of December 31, 2017: Fair Value Measurements December 31, 2017 Description Total Quoted Prices Significant Significant Interest Rate Swap, net $ 18,781 — $ 18,781 — Total $ 18,781 — $ 18,781 — The fair value of the Company’s interest rate swap was determined by comparing the fixed rate set at the inception of the transaction to the “replacement swap rate,” which represents the market rate for an offsetting interest rate swap with the same notional amounts and final maturity date. The market value is then determined by calculating the present value of the interest differential between the contractual swap and the replacement swap. As of December 31, 2017, $18,781 was included in other liabilities related to the fair value of the Company’s interest rate swap $15,000, net of tax of approximately $4,000, respectively, was included in Accumulated Other Comprehensive Loss. During the month of June, the interest rate swap matured and the Company realized a net gain of approximately $7,000. |
CONTRACT ASSETS AND CONTRACT LI
CONTRACT ASSETS AND CONTRACT LIABILITIES | 9 Months Ended |
Sep. 30, 2018 | |
Contract Assets And Contract Liabilities | |
CONTRACT ASSETS AND CONTRACT LIABILITIES | 6. Contract assets and contract liabilities Net Contract assets (liabilities) consist of the following: September 30, 2018 - Restated U.S. Government Commercial Total Contract assets $ 48,174,779 $ 64,992,926 $ 113,167,705 Contract liabilities (422,666 ) (42,157 ) (464,823 ) Net contract assets (liabilities) $ 47,752,113 $ 64,950,769 $ 112,702,882 December 31, 2017 (1) U.S. Government Commercial Total Contract assets $ 54,591,601 $ 56,566,950 $ 111,158,551 Contract liabilities (224,339 ) (21,991 ) (246,330 ) Net contract assets (liabilities) $ 54,367,262 $ 56,544,959 $ 110,912,221 (1) On January 1, 2018, as a result of the adoption of ASC 606, the Company reclassified costs and estimated earnings in excess of billings on uncompleted contracts to contract assets and billings in excess of costs and estimated earnings on uncompleted contracts to contract liabilities. The increase or decrease in the Company’s net contract assets (liabilities) from January 1, 2018 to September 30, 2018 was primarily due to costs incurred on newer programs, like the new design of the HondaJet engine inlet ($2.4 million increase), for which the Company has not begun billing on a steady rate. Additionally, we experienced some delays in shipping on the G650 program which increased contract assets by $5.8 million. This has been offset by a decrease in contract assets on our E-2D program ($4.2 million decrease) which is shipping on a regular schedule. U.S. government contracts includes contracts directly with the U.S. government and government subcontractors. Revisions in the estimated gross profits on contracts and contract amounts are made in the period in which the circumstances requiring the revisions occur. During the nine months ended September 30, 2018, the effect of such revisions in total estimated contract profits resulted in a decrease to the total gross profit to be earned on the contracts of approximately $683,000 from that which would have been reported had the revised estimates been used as the basis of recognition of contract profits in prior years. During the nine months ended September 30, 2017, the effect of such revisions was a decrease to total gross profit of approximately $1.7 million. Although management believes it has established adequate procedures for estimating costs to uncompleted open contracts, it is possible that additional significant costs could occur on contracts prior to completion. |
INCOME PER COMMON SHARE
INCOME PER COMMON SHARE | 9 Months Ended |
Sep. 30, 2018 | |
Earnings Per Share [Abstract] | |
INCOME PER COMMON SHARE | 7. income PER COMMON SHARE Basic income per common share is computed using the weighted average number of common shares outstanding. Diluted income per common share for the three and nine months ended September 30, 2018 and 2017 is computed using the weighted-average number of common shares outstanding adjusted for the incremental shares attributed to outstanding options to purchase common stock, as well as unvested RSUs. Incremental shares of 49,641 were used in the calculation of diluted income per common share in the three and nine months ended September 30, 2018. Incremental shares of 43,064 were not used in the calculation of diluted income per common share in the three and nine months ended September 30, 2018, as their exercise price was in excess of the Company’s average stock price for the respective period and, accordingly, these shares are not assumed to be exercised for the diluted earnings per share calculation, as they would be anti-dilutive. Incremental shares of 74,168 were used in the calculation of diluted income per common share in the three and nine months ended September 30, 2017. Incremental shares of 89,466 were not used in the calculation of diluted income per common share in the three and nine months ended September 30, 2017, as their exercise price was in excess of the Company’s average stock price for the respective period and, accordingly, these shares are not assumed to be exercised for the diluted earnings per share calculation, as they would be anti-dilutive. |
LINE OF CREDIT
LINE OF CREDIT | 9 Months Ended |
Sep. 30, 2018 | |
Line of Credit Facility [Abstract] | |
LINE OF CREDIT | 8. Line of credit On March 24, 2016, the Company entered into a Credit Agreement with BankUnited, N.A. as the sole arranger, administrative agent and collateral agent and Citzens Bank N.A. (the “BankUnited Facility”). The BankUnited Facility provides for a revolving credit loan commitment of $30 million (the “Revolving Loan”) and a $10 million term loan (“Term Loan”). The Revolving Loan bears interest at a rate based upon a pricing grid, as defined in the agreement. On August 15, 2018, the Company entered into a Third Amendment and Waiver to the Amended and Restated Credit Agreement (the “Amendment”) with the Lenders named therein and BankUnited, N.A., as sole arranger, agent, and collateral agent, dated as of March 24, 2016, as amended by the First Amendment and Waiver to the Amended and Restated Credit Agreement dated as of May 9, 2016, as further amended by the Second Amendment to the Amended and Restated Credit Agreement dated as of July 13, 2017 (collectively, the “Credit Agreement”). Under the Amendment, the parties amended the Credit Agreement by, among other things, (i) extending the maturity date of the Company’s existing $30 million Revolving Loan and its existing $10 million Term Loan to June 30, 2020, (ii) amending the leverage ratio covenant, (iii) amending the interest rates corresponding to the leverage ratio, (iv) waiving non-compliance with the leverage ratio covenant for the trailing four fiscal quarters ended March 31, 2018 and June 30, 2018, and (v) amending provisions relating to the consummation of a public offering of common stock so that if an offering results in gross proceeds of $7 million or more, (A) the Company will prepay the loans in an amount equal to 25% of net proceeds of the offering (with $1.2 million applied to the Term Loan and the remainder applied to the Revolving Loan) and (B) the Company will maintain a minimum of $3 million in either unrestricted cash in an account with BankUnited, N.A., or in availability under the Revolving Loan. Pursuant to the Amendment, the Company used an aggregate of $4.1 million of net offering proceeds of its recently completed public offering to make prepayments under the BankUnited Facility. See Note 12 Subsequent Events for further information. As of September 30, 2018, the Company was not in compliance with the leverage ratio financial covenant and the EBITDA financial covenant contained in the BankUnited Facility, as amended. The Bank has waived the provisions of these covenants as of September 30, 2018. As of September 30, 2018, the Company had $27.5 million outstanding under the Revolving Loan bearing interest at 5.75%. The BankUnited Facility is secured by all of the Company’s assets. |
LONG-TERM DEBT
LONG-TERM DEBT | 9 Months Ended |
Sep. 30, 2018 | |
Debt Disclosure [Abstract] | |
LONG-TERM DEBT | 9. LONG-TERM DEBT In May 2016, the Company entered into an interest rate swap with the objective of reducing its exposure to cash flow volatility arising from interest rate fluctuations associated with certain debt. The notional amount, maturity date and currency of this contract match those of the underlying debt. The Company has designated this interest rate swap contract as a cash flow hedge. The interest rate swap ended in accordance with its terms as of June 1, 2018. On August 15, 2018, the Company entered into a Third Amendment and Waiver to the Amended and Restated Credit Agreement (the “Amendment”) with the Lenders named therein and BankUnited, N.A., as sole arranger, agent, and collateral agent, dated as of March 24, 2016, as amended by the First Amendment and Waiver to the Amended and Restated Credit Agreement dated as of May 9, 2016, as further amended by the Second Amendment to the Amended and Restated Credit Agreement dated as of July 13, 2017 (collectively, the “Credit Agreement”). Under the Amendment, the parties amended the Credit Agreement by, among other things, (i) extending the maturity date of the Company’s existing $30 million Revolving Loan and its existing $10 million Term Loan to June 30, 2020, (ii) amending the leverage ratio covenant, (iii) amending the interest rates corresponding to the leverage ratio, (iv) waiving non-compliance with the leverage ratio covenant for the trailing four fiscal quarters ended March 31, 2018 and June 30, 2018, and (v) amending provisions relating to the consummation of a public offering of common stock so that if an offering results in gross proceeds of $7 million or more, (A) the Company will prepay the loans in an amount equal to 25% of net proceeds of the offering (with $1.2 million applied to the Term Loan and the remainder applied to the Revolving Loan) and (B) the Company will maintain a minimum of $3 million in either unrestricted cash in an account with BankUnited, N.A., or in availability under the Revolving Loan. The Company paid to BankUnited, N.A. commitment and agent fees in the amount of $201,666, together with out of pocket costs, expenses, and reasonable attorney’s fees incurred by BankUnited, N.A. in connection with the Amendment. The Company paid approximately $463,000 of total debt issuance costs in connection with the BankUnited Facility of which approximately $178,000 is included in other assets and $63,000 is a reduction of long-term debt at September 30, 2018. The Term Loan had an initial amount of $10 million, payable in monthly installments, as defined in the agreement, which matures on June 30, 2020. The maturities of long-term debt (excluding unamortized debt issuance costs) are as follows: Twelve months ending 2019 $ 2,435,559 2020 5,318,604 2021 187,413 2022 108,469 Thereafter 53,429 $ 8,103,474 In addition to the Term Loan, included in long-term debt at September 30, 2018 are capital leases and notes payable of $1,007,706 including a current portion of $335,559. |
MAJOR CUSTOMERS
MAJOR CUSTOMERS | 9 Months Ended |
Sep. 30, 2018 | |
Risks and Uncertainties [Abstract] | |
MAJOR CUSTOMERS | 10. MAJOR CUSTOMERS During the nine months ended September 30, 2018, the Company’s four largest commercial customers accounted for 25% 12%, 12% and 12% of revenue. During the nine months ended September 30, 2017, the Company’s four largest commercial customers accounted for 28%, 23%, 11% and 10% of revenue. In addition, during the nine months ended September 30, 2018 and 2017, 12% and 5% of revenue, respectively, was directly from the U.S. government. At September 30, 2018, 37%, 14%, 13% and 12% of contract assets were from the Company’s four largest commercial customers. At December 31, 2017, 32%, 20%, 12% and 10% of contract assets were from the Company’s four largest commercial customers. At September 30, 2018 and December 31, 2017, 7% and 4%, respectively, of contract assets were directly from the U.S. government. At September 30, 2018, 31%, 23%, 16% and 8% of our accounts receivable were from our four largest commercial customers. At December 31, 2017, 44%, 18% and 13% of accounts receivable were from our three largest commercial customers. |
LEGAL PROCEEDINGS
LEGAL PROCEEDINGS | 9 Months Ended |
Sep. 30, 2018 | |
Legal Proceedings | |
LEGAL PROCEEDINGS | 11. Legal Proceedings On July 5, 2018, the Company filed a complaint in the Supreme Court of the State of New York, County of New York, against Air Industries Group (“Air Industries”) relating to the previously announced Stock Purchase Agreement, dated as of March 21, 2018 (the “Agreement”) between the Company and Air Industries, pursuant to which Air Industries agreed to sell to us all of the shares of capital stock of its subsidiary, Welding Metallurgy, Inc. (“WMI”). The complaint alleges, among other things, that Air Industries willfully breached its contractual obligation to provide financial information required to fulfill key conditions for closing under the Agreement. Air Industries’ answer and counterclaims, filed on July 30, 2018, denies the allegations made by the Company in the complaint and alleges that the Company breached the Agreement and the covenant of good faith and fair dealing. On July 31, 2018, the Company filed a motion for preliminary injunction against Air Industries. The motion argued that the failure by Air Industries to provide financial data and other information necessary to close the transaction contemplated by the Agreement would cause irreparable injury to the Company. The Company sought an order directing Air Industries to furnish the Company with all previously requested financial, operating, and other data and information relating to WMI. See Note 12 Subsequent Events for further information subsequent to September 30, 2018 related to this litigation. In addition, for a discussion of the risks and uncertainties associated with this litigation and with the acquisition of WMI. The Company remains committed to completing the acquisition as soon as practicable. |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 9 Months Ended |
Sep. 30, 2018 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | 12. SUBSEQUENT EVENTS Litigation On October 2, 2018, the Company entered into a court-ordered stipulation (the “Stipulation and Order”) with Air Industries with respect to the litigation discussed above in Note 11 Legal Proceedings. As part of the Stipulation and Order, Air Industries has withdrawn its purported termination of the Agreement. Among other things, the Stipulation and Order requires Air Industries to deliver to the Company within 45 days audited, unqualified financial statements of WMI for 2017 certified by Air Industries’ auditor. Subject to fulfillment of other conditions to closing set forth in the Agreement, the parties agreed that the acquisition will close within three weeks after the Company receives the audited financial statements. The Company also agreed to promptly amend the Agreement to reflect the terms of the Stipulation and Order. The Court will retain jurisdiction of the case for all purposes, including enforcing the terms of the Stipulation and Order. On November 9, 2018, the Court ordered an amendment to the Agreement (the “Amendment”). The Amendment provides that Rotenberg Meril Solomon Bertiger Gutilla, P.C. (“RM”) will replace CohnReznick LLP as auditors of WMI’s financial statements, consisting of the balance sheet as at December 31, 2017 and the related statements of income, retained earnings, stockholder’s equity, and cash flows for the year then ended. The Amendment provides that RM’s auditor’s report shall be delivered on or before November 16, 2018, and shall be unqualified in all respects, except that a “going concern” opinion will be considered unqualified. The Company and Air Industries agreed to share equally all fees and expenses charged by RM and all fees and expenses previously charged by CohnReznick LLP. Public Offering On October 19, 2018 the Company completed an underwritten public offering of 2,760,000 shares of its common stock, including 360,000 shares pursuant to the underwriters’ full exercise of their over-allotment option, at a public offering price of $6.25 per share. The Company’s net proceeds from the offering, after deducting underwriting discounts, commissions, and other offering expenses, were approximately $16.10 million. The Company anticipates using the net proceeds for general corporate purposes, which may include working capital, capital expenditures, debt repayment, or strategic acquisitions. On October 19, 2018, the Company used $4.1 million of the net offering proceeds for prepayments of loans under the BankUnited Facility, as amended, including $1.2 million applied to the term loan and $2.9 million applied to the revolving line of credit. BankUnited Facility On February 26, 2019 , BankUnited, N.A., as Sole Arranger, Administrative Agent, Collateral Agent, and Lender, and Citizens Bank, N.A., as Lender, agreed to waive the Company’s non-compliance with the leverage ratio financial covenant and the EBITDA financial covenant of the BankUnited Facility as of September 30, 2018. The Company originally received a waiver for non-compliance on November 9, 2018 and as a result of the aforementioned restatement, the Company recalculated its covenants and determined that there was a change in the amounts and that a revised waiver would be required. |
INTERIM FINANCIAL STATEMENTS (T
INTERIM FINANCIAL STATEMENTS (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Summary of effects of the restatement from correction of this error | The following table summarizes the effects of the restatement resulting from the correction of this error. Nine Months Ended September 30, 2018 Previously Reported Adjustment Restated CONDENSED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME: Revenue $ 58,397,420 $ 927,257 $ 57,470,163 Gross profit 13,433,164 927,257 12,505,907 Net income 3,842,143 742,257 3,099,886 Comprehensive income $ 3,856,943 $ 742,257 $ 3,114,686 Earnings per common share – basic $ 0.43 $ 0.08 $ 0.35 Earnings per common share – diluted $ 0.43 $ 0.08 $ 0.35 CONDENSED STATEMENT OF SHAREHOLDERS’ EQUITY: Net income $ 3,842,143 $ 742,257 $ 3,099,886 Total shareholders’ equity $ 78,752,359 $ 742,257 $ 78,010,102 Three Months Ended Previously Adjustment Restated CONDENSED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME: Revenue $ 19,944,558 $ 927,257 $ 19,017,301 Gross profit 4,798,478 927,257 3,871,221 Net income 1,328,153 742,257 585,896 Comprehensive income $ 1,348,753 $ 742,257 $ 606,496 Earnings per common share – basic $ 0.15 $ 0.08 $ 0.07 Earnings per common share – diluted $ 0.15 $ 0.08 $ 0.07 |
REVENUE RECOGNITION (Tables)
REVENUE RECOGNITION (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Revenue from Contract with Customer [Abstract] | |
Schedule of revenue by long-term contract type | Revenue by long-term contract type for the three and nine months ended September 30, 2018 (Restated) is as follows: For the Three For the Nine Government subcontracts $ 9,516,799 $ 28,288,457 Commercial contracts 7,536,697 22,363,979 Prime government contracts 1,963,805 6,877,727 $ 19,017,301 $ 57,470,163 |
STOCK-BASED COMPENSATION (Table
STOCK-BASED COMPENSATION (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Schedule of stock options plans activity | A summary of the status of the Company’s stock option plans as of September 30, 2018 and changes during the nine months ended September 30, 2018 is as follows: Options Weighted average exercise price Weighted average remaining contractual term (in years) Aggregate intrinsic value Outstanding at beginning of period 78,064 $ 11.05 Outstanding and vested at end of period 78,064 $ 11.05 0.36 $ 61,250 |
DERIVATIVE INSTRUMENTS AND FA_2
DERIVATIVE INSTRUMENTS AND FAIR VALUE (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Schedule of fair values | At September 30, 2018 and December 31, 2017, the fair values of cash, accounts receivable, accounts payable and accrued expenses approximated their carrying values because of the short-term nature of these instruments. September 30, 2018 Carrying Amount Fair Value Debt Short-term borrowings and long-term debt $ 35,694,028 $ 35,694,028 December 31, 2017 Carrying Amount Fair Value Debt Short-term borrowings and long-term debt $ 31,893,894 $ 31,893,894 |
Schedule of financial liabilities measured on recurring basis | The following table presents the fair values of those financial liabilities measured on a recurring basis as of December 31, 2017: Fair Value Measurements December 31, 2017 Description Total Quoted Prices Significant Significant Interest Rate Swap, net $ 18,781 — $ 18,781 — Total $ 18,781 — $ 18,781 — |
CONTRACT ASSETS AND CONTRACT _2
CONTRACT ASSETS AND CONTRACT LIABILITIES (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Contract Assets And Contract Liabilities Tables Abstract | |
Schedule of net contract assets (liabilities) | Net Contract assets (liabilities) consist of the following: September 30, 2018 - Restated U.S. Government Commercial Total Contract assets $ 48,174,779 $ 64,992,926 $ 113,167,705 Contract liabilities (422,666 ) (42,157 ) (464,823 ) Net contract assets (liabilities) $ 47,752,113 $ 64,950,769 $ 112,702,882 December 31, 2017 (1) U.S. Government Commercial Total Contract assets $ 54,591,601 $ 56,566,950 $ 111,158,551 Contract liabilities (224,339 ) (21,991 ) (246,330 ) Net contract assets (liabilities) $ 54,367,262 $ 56,544,959 $ 110,912,221 (1) On January 1, 2018, as a result of the adoption of ASC 606, the Company reclassified costs and estimated earnings in excess of billings on uncompleted contracts to contract assets and billings in excess of costs and estimated earnings on uncompleted contracts to contract liabilities. |
LONG-TERM DEBT (Tables)
LONG-TERM DEBT (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Debt Disclosure [Abstract] | |
Schedule of maturities of long-term debt | The maturities of long-term debt (excluding unamortized debt issuance costs) are as follows: Twelve months ending September 30, 2019 $ 2,435,559 2020 5,318,604 2021 187,413 2022 108,469 Thereafter 53,429 $ 8,103,474 |
INTERIM FINANCIAL STATEMENTS (D
INTERIM FINANCIAL STATEMENTS (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | Dec. 31, 2017 | Dec. 31, 2016 | |
CONDENSED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME: | ||||||
Revenue | $ 19,017,301 | $ 20,706,460 | $ 57,470,163 | $ 57,471,112 | ||
Gross profit | 3,871,221 | 4,912,436 | 12,505,907 | 13,133,698 | ||
Net income | 585,896 | 1,695,513 | 3,099,886 | 3,710,461 | ||
Comprehensive income | $ 606,496 | $ 1,693,213 | $ 3,114,686 | $ 3,712,361 | ||
Earnings per common share - basic (in dollars per share) | $ 0.07 | $ 0.19 | $ 0.35 | $ 0.42 | ||
Earnings per common share - diluted (in dollars per share) | $ 0.07 | $ 0.19 | $ 0.35 | $ 0.42 | ||
CONDENSED STATEMENT OF SHAREHOLDERS' EQUITY: | ||||||
Total shareholders' equity | $ 78,010,102 | $ 72,105,357 | $ 78,010,102 | $ 72,105,357 | $ 74,313,333 | $ 67,605,706 |
Previously Reported [Member] | ||||||
CONDENSED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME: | ||||||
Revenue | 19,944,558 | 58,397,420 | ||||
Gross profit | 4,798,478 | 13,433,164 | ||||
Net income | 1,328,153 | 3,842,143 | ||||
Comprehensive income | 1,348,753 | $ 3,856,943 | ||||
Earnings per common share - basic (in dollars per share) | $ 0.43 | |||||
Earnings per common share - diluted (in dollars per share) | $ 0.43 | |||||
CONDENSED STATEMENT OF SHAREHOLDERS' EQUITY: | ||||||
Total shareholders' equity | 78,752,359 | $ 78,752,359 | ||||
Adjustment [Member] | ||||||
CONDENSED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME: | ||||||
Revenue | 927,257 | 927,257 | ||||
Gross profit | 927,257 | 927,257 | ||||
Net income | 742,257 | 742,257 | ||||
Comprehensive income | 742,257 | $ 742,257 | ||||
Earnings per common share - basic (in dollars per share) | $ 0.08 | |||||
Earnings per common share - diluted (in dollars per share) | $ 0.08 | |||||
CONDENSED STATEMENT OF SHAREHOLDERS' EQUITY: | ||||||
Total shareholders' equity | $ 742,257 | $ 742,257 |
INTERIM FINANCIAL STATEMENTS _2
INTERIM FINANCIAL STATEMENTS (Details Narrative) | Sep. 30, 2018USD ($)Number |
Interim Financial Statements | |
Cash, uninsured amount | $ | $ 748,470 |
Number of Financial Institutions where cash is maintained | Number | 2 |
REVENUE RECOGNITION (Details)
REVENUE RECOGNITION (Details) - USD ($) | 3 Months Ended | 9 Months Ended |
Sep. 30, 2018 | Sep. 30, 2018 | |
Revenue by long-term contract type | $ 19,017,301 | $ 57,470,163 |
Government Subcontracts [Member] | ||
Revenue by long-term contract type | 9,516,799 | 28,228,457 |
Commercial Contracts [Member] | ||
Revenue by long-term contract type | 7,536,697 | 22,363,979 |
Prime Government Contracts [Member] | ||
Revenue by long-term contract type | $ 1,963,805 | $ 6,877,727 |
REVENUE RECOGNITION (Details Na
REVENUE RECOGNITION (Details Narrative) | 3 Months Ended | 9 Months Ended |
Sep. 30, 2018USD ($) | Sep. 30, 2018USD ($) | |
Revenue recognized that was included in contrcat liabilities | $ 151,109 | $ 399,381 |
Remaining performance obligations | $ 77,440,322 | $ 77,440,322 |
2018 [Member] | ||
Expect remaining performance obligation (percent) | 31.00% | |
Performance Obligation Year | 2,018 | 2,018 |
2019 [Member] | ||
Expect remaining performance obligation (percent) | 69.00% | |
Performance Obligation Year | 2,019 | 2,019 |
Transferred over Time [Member] | ||
Revenue from long-term contracts (percent) | 97.00% | |
Transferred at Point in Time [Member] | ||
Revenue from MRO contracts (percent) | 3.00% |
STOCK-BASED COMPENSATION (Detai
STOCK-BASED COMPENSATION (Details) - Stock Option Plans [Member] | 9 Months Ended |
Sep. 30, 2018USD ($)$ / sharesshares | |
Options, Outstanding | |
Outstanding at beginning | shares | 78,064 |
Outstanding and vested at end of period | shares | 78,064 |
Options, Outstanding, Weighted Average Exercise Price | |
Outstanding at beginning | $ / shares | $ 11.05 |
Outstanding and vested at end of period | $ / shares | $ 11.05 |
Options, Weighted Average Remaining Contractual Term | |
Outstanding and vested at end of period | 4 months 10 days |
Options, Aggregate Intrinsic Value | |
Outstanding and vested at end of period | $ | $ 61,250 |
STOCK-BASED COMPENSATION (Det_2
STOCK-BASED COMPENSATION (Details Narrative) - USD ($) | Mar. 22, 2018 | Mar. 09, 2017 | Sep. 30, 2018 | Jan. 31, 2018 | Sep. 30, 2017 | Jan. 31, 2017 | Sep. 30, 2018 | Sep. 30, 2017 |
Restricted Stock Units (RSUs) [Member] | Director [Member] | ||||||||
Restricted stock units granted | 58,578 | 59,395 | ||||||
Vesting period | 1 year | 1 year | ||||||
Restricted Stock Units (RSUs) [Member] | Director [Member] | Selling, General and Administrative Expenses [Member] | ||||||||
Stock-based compensation | $ 491,500 | $ 517,000 | ||||||
Stock Awards [Member] | Employees [Member] | ||||||||
Number of common shares granted | 5,130 | 5,550 | ||||||
Stock Awards [Member] | Employees [Member] | Selling, General and Administrative Expenses [Member] | ||||||||
Stock-based compensation | 10,000 | 13,300 | ||||||
Stock Awards [Member] | Employees [Member] | Cost of Sales [Member] | ||||||||
Stock-based compensation | $ 36,000 | 37,500 | ||||||
Stock Awards [Member] | Employees [Member] | ||||||||
Number of common shares granted | 68,764 | 73,060 | ||||||
Stock awards forfeited (shares) | 12,330 | 9,130 | ||||||
Number of shares returned for employee's withholding taxes (shares) | 7,552 | |||||||
Value of shares returned for employee's withholding taxes | $ 62,000 | |||||||
Stock Awards [Member] | Employees [Member] | Selling, General and Administrative Expenses [Member] | ||||||||
Stock-based compensation | $ 88,100 | 208,800 | ||||||
Stock Awards [Member] | Employees [Member] | Cost of Sales [Member] | ||||||||
Stock-based compensation | $ 18,400 | $ 44,100 | ||||||
Stock Awards [Member] | Employees [Member] | ||||||||
Stock awards forfeited (shares) | 12,330 | |||||||
Number of shares returned for employee's withholding taxes (shares) | 4,525 | |||||||
Value of shares returned for employee's withholding taxes | $ 33,000 |
DERIVATIVE INSTRUMENTS AND FA_3
DERIVATIVE INSTRUMENTS AND FAIR VALUE (Details) - USD ($) | Sep. 30, 2018 | Dec. 31, 2017 |
Carrying Amount [Member] | ||
Short-term borrowings and long-term debt | $ 35,694,028 | $ 31,893,894 |
Fair Value [Member] | ||
Short-term borrowings and long-term debt | $ 35,694,028 | $ 31,893,894 |
DERIVATIVE INSTRUMENTS AND FA_4
DERIVATIVE INSTRUMENTS AND FAIR VALUE (Details 1) | Dec. 31, 2017USD ($) |
Interest Rate Swap | $ 18,781 |
Recurring Basis [Member] | |
Interest Rate Swap | 18,781 |
Total | 18,781 |
Recurring Basis [Member] | Significant Other Observable Inputs (Level 2) [Member] | |
Interest Rate Swap | 18,781 |
Total | $ 18,781 |
DERIVATIVE INSTRUMENTS AND FA_5
DERIVATIVE INSTRUMENTS AND FAIR VALUE (Details Narrative) - USD ($) | Sep. 30, 2018 | Dec. 31, 2017 |
Derivative Instruments And Fair Value | ||
Fair value of interest rate swap | $ 18,781 | |
Accumulated other comprehensive loss, net of tax | 15,000 | |
Accumulated other comprehensive loss, tax | $ 4,000 | |
Gain on interest rate swap | $ 7,000 |
CONTRACT ASSETS AND CONTRACT _3
CONTRACT ASSETS AND CONTRACT LIABILITIES (Details) - USD ($) | Sep. 30, 2018 | Dec. 31, 2017 | [1] |
Operating Leased Assets [Line Items] | |||
Contract assets | $ 113,167,705 | $ 111,158,551 | |
Contract liabilities | (464,823) | (246,330) | |
Net contract assets (liabilities) | 112,702,882 | 110,912,221 | |
US Government [Member] | |||
Operating Leased Assets [Line Items] | |||
Contract assets | 49,102,036 | 54,591,601 | |
Contract liabilities | (422,666) | (224,339) | |
Net contract assets (liabilities) | 48,679,370 | 54,367,262 | |
Commercial [Member] | |||
Operating Leased Assets [Line Items] | |||
Contract assets | 64,992,926 | 56,566,950 | |
Contract liabilities | (42,157) | (21,991) | |
Net contract assets (liabilities) | $ 64,950,769 | $ 56,544,959 | |
[1] | On January 1, 2018, as a result of the adoption of ASC 606, the Company reclassified costs and estimated earnings in excess of billings on uncompleted contracts to contract assets and billings in excess of costs and estimated earnings on uncompleted contracts to contract liabilities. |
CONTRACT ASSETS AND CONTRACT _4
CONTRACT ASSETS AND CONTRACT LIABILITIES (Details Narrative) | 9 Months Ended |
Sep. 30, 2018USD ($) | |
Decrease total gross profit | $ 1,700,000 |
Decrease total gross profit earned on the contracts | 683,000 |
Honda Jet Engine Inlet [Member] | |
Increase (decrease) and in contract assets | 2,400,000 |
G 650 Program[Member] | |
Increase (decrease) and in contract assets | 5,800,000 |
E-2D Program[Member] | |
Increase (decrease) and in contract assets | $ (4,200,000) |
INCOME PER COMMON SHARE (Detail
INCOME PER COMMON SHARE (Details Narrative) - shares | 9 Months Ended | |
Sep. 30, 2018 | Sep. 30, 2017 | |
Earnings Per Share [Abstract] | ||
Incremental common shares attributable to dilutive effect of share-based payment arrangements (shares) | 49,641 | 74,168 |
Antidilutive securities excluded from computation of earnings per share (shares) | 43,064 | 89,466 |
LINE OF CREDIT (Details Narrati
LINE OF CREDIT (Details Narrative) - USD ($) | Oct. 19, 2018 | Aug. 15, 2018 | Sep. 30, 2018 | Dec. 31, 2017 | Sep. 30, 2017 | Dec. 31, 2016 | Mar. 24, 2016 |
Oustanding loans | $ 27,538,685 | $ 22,838,685 | |||||
Unrestricted cash | 828,594 | $ 1,430,877 | $ 711,083 | $ 1,039,586 | |||
Bank United [Member] | Term loan [Member] | |||||||
Repayments of debt | $ 1,200,000 | ||||||
Revolving Credit Facility [Member] | Subsequent Event [Member] | |||||||
Repayments of debt | $ 4,100,000 | ||||||
Revolving Credit Facility [Member] | Bank United [Member] | |||||||
Line of credit facility, maximum borrowing capacity | $ 30,000,000 | ||||||
Line of credit facility, maturity date | Jun. 30, 2020 | ||||||
Proceeds from of common stock | $ 7,000,000 | ||||||
Unrestricted cash | $ 3,000,000 | ||||||
Revolving Credit Facility [Member] | Amendment - Bank United [Member] | |||||||
Oustanding loans | $ 27,500,000 | ||||||
Line of credit facility, interest rate at period end | 5.75% | ||||||
Term loan [Member] | Bank United [Member] | |||||||
Debt instrument, face amount | $ 10,000,000 |
LONG-TERM DEBT (Details)
LONG-TERM DEBT (Details) | Sep. 30, 2018USD ($) |
Twelve months ending September 30, | |
2,019 | $ 2,435,559 |
2,020 | 5,318,604 |
2,021 | 187,413 |
2,022 | 108,469 |
Thereafter | 53,429 |
Total maturities | $ 8,103,474 |
LONG-TERM DEBT (Details Narrati
LONG-TERM DEBT (Details Narrative) - USD ($) | Aug. 15, 2018 | Mar. 24, 2016 | Sep. 30, 2018 | Dec. 31, 2017 | Sep. 30, 2017 | Dec. 31, 2016 |
Unrestricted cash | $ 828,594 | $ 1,430,877 | $ 711,083 | $ 1,039,586 | ||
Payments of debt issuance costs | 209,082 | |||||
Capital leases and notes payable | 1,007,706 | |||||
Capital leases and notes payable, current | 335,559 | |||||
Bank United [Member] | ||||||
Commitment and agent fees | 201,666 | |||||
Bank United [Member] | Revolving Credit Facility [Member] | ||||||
Line of credit facility, maximum borrowing capacity | $ 30,000,000 | |||||
Line of credit facility, maturity date | Jun. 30, 2020 | |||||
Proceeds from of common stock | $ 7,000,000 | |||||
Unrestricted cash | 3,000,000 | |||||
Bank United [Member] | Term loan [Member] | ||||||
Debt instrument, face amount | 10,000,000 | |||||
Payments of debt issuance costs | $ 463,000 | |||||
Debt issuance costs | 178,000 | |||||
Debt issuance costs, reduction of long-term debt | $ 63,000 | |||||
Bank United [Member] | Term loan [Member] | ||||||
Repayments of debt | $ 1,200,000 |
MAJOR CUSTOMERS (Details Narrat
MAJOR CUSTOMERS (Details Narrative) - Number | 9 Months Ended | 12 Months Ended | |
Sep. 30, 2018 | Sep. 30, 2017 | Dec. 31, 2017 | |
Revenue [Member] | |||
Concentration Risk [Line Items] | |||
Number of large commercial customers | 4 | 4 | |
Revenue [Member] | Customer One [Member] | |||
Concentration Risk [Line Items] | |||
Concentration risk, percentage | 25.00% | 28.00% | |
Revenue [Member] | Customer Two [Member] | |||
Concentration Risk [Line Items] | |||
Concentration risk, percentage | 12.00% | 23.00% | |
Revenue [Member] | Customer Three [Member] | |||
Concentration Risk [Line Items] | |||
Concentration risk, percentage | 12.00% | ||
Revenue [Member] | Customer Four [Member] | |||
Concentration Risk [Line Items] | |||
Concentration risk, percentage | 12.00% | 11.00% | |
Revenue [Member] | Customer Four [Member] | |||
Concentration Risk [Line Items] | |||
Concentration risk, percentage | 10.00% | ||
Revenue [Member] | US Government Concentration Risk [Member] | |||
Concentration Risk [Line Items] | |||
Concentration risk, percentage | 12.00% | 5.00% | |
Contract Assets [Member] | |||
Concentration Risk [Line Items] | |||
Number of large commercial customers | 4 | 4 | |
Contract Assets [Member] | Customer One [Member] | |||
Concentration Risk [Line Items] | |||
Concentration risk, percentage | 37.00% | 32.00% | |
Contract Assets [Member] | Customer Two [Member] | |||
Concentration Risk [Line Items] | |||
Concentration risk, percentage | 14.00% | 20.00% | |
Contract Assets [Member] | Customer Three [Member] | |||
Concentration Risk [Line Items] | |||
Concentration risk, percentage | 13.00% | 12.00% | |
Contract Assets [Member] | Customer Four [Member] | |||
Concentration Risk [Line Items] | |||
Concentration risk, percentage | 12.00% | 10.00% | |
Contract Assets [Member] | US Government Concentration Risk [Member] | |||
Concentration Risk [Line Items] | |||
Concentration risk, percentage | 7.00% | 4.00% | |
Accounts Receivable [Member] | Customer One [Member] | |||
Concentration Risk [Line Items] | |||
Concentration risk, percentage | 31.00% | 44.00% | |
Accounts Receivable [Member] | Customer Two [Member] | |||
Concentration Risk [Line Items] | |||
Concentration risk, percentage | 23.00% | 18.00% | |
Accounts Receivable [Member] | Customer Three [Member] | |||
Concentration Risk [Line Items] | |||
Concentration risk, percentage | 16.00% | 13.00% | |
Accounts Receivable [Member] | Customer Four [Member] | |||
Concentration Risk [Line Items] | |||
Concentration risk, percentage | 8.00% |
SUBSEQUENT EVENTS (Details Narr
SUBSEQUENT EVENTS (Details Narrative) - USD ($) | Oct. 19, 2018 | Sep. 30, 2018 | Sep. 30, 2017 |
Repayments of debt | $ 1,522,283 | $ 921,046 | |
Subsequent Event [Member] | Revolving Credit Facility [Member] | |||
Repayments of debt | $ 4,100,000 | ||
Subsequent Event [Member] | Revolving Credit Facility [Member] | Amendment - Bank United [Member] | |||
Repayments of debt | 2,900,000 | ||
Subsequent Event [Member] | Term loan [Member] | Bank United [Member] | |||
Repayments of debt | $ 1,200,000 | ||
Subsequent Event [Member] | Underwritten Public Offering [Member] | |||
Number of shares issued in transaction | 2,760,000 | ||
Price per share (in dollars per share) | $ 6.25 | ||
Proceeds from public offering | $ 16,100,000 | ||
Subsequent Event [Member] | Over-Allotment Option [Member] | |||
Number of shares issued in transaction | 360,000 |