| Document and Entity Information - shares | 3 Months Ended | |
| Mar. 31, 2015 | Apr. 11, 2016 | |
| Document And Entity Information | ||
| Entity Registrant Name | Precision Aerospace Components, Inc. | |
| Entity Central Index Key | 936,446 | |
| Document Type | 10-Q | |
| Document Period End Date | Mar. 31, 2015 | |
| Amendment Flag | false | |
| Current Fiscal Year End Date | --12-31 | |
| Is Entity a Well-known Seasoned Issuer? | No | |
| Is Entity a Voluntary Filer? | No | |
| Is Entity's Reporting Status Current? | No | |
| Entity Filer Category | Smaller Reporting Company | |
| Entity Common Stock, Shares Outstanding | 99,501,998 | |
| Document Fiscal Period Focus | Q1 | |
| Document Fiscal Year Focus | 2,015 |
| CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) | Mar. 31, 2015 | Dec. 31, 2014 |
| Current assets: | ||
| Cash | $ 95,768 | $ 65,613 |
| Accounts receivable (net of allowance for doubtful accounts of $129,357 as of March 31, 2015 and December 31, 2014 respectively) | 3,103,096 | 1,920,249 |
| Inventories (net of reserve for obsolesence of $4,326,371 and $4,133,189 as of March 31, 2015 and December 31, 2014 respectively) | 9,589,303 | 9,639,107 |
| Other current assets | 339,171 | 200,890 |
| Total Current Assets | 13,127,338 | 11,825,859 |
| Property and equipment - net | 30,913 | 38,065 |
| Other assets: Deposits | 7,298 | 7,298 |
| Total assets | 13,165,549 | 11,871,222 |
| Current liabilities: | ||
| Accounts payable and accrued expenses | $ 4,176,442 | 3,922,641 |
| Current portion of term loan | $ 729,166 | |
| Put option | $ 165,650 | |
| Income taxes payable | 98,358 | $ 80,807 |
| Loan from shareholder | 285,000 | 535,000 |
| Line of credit | 7,144,827 | |
| Total current liabilities | 4,725,450 | $ 12,412,442 |
| Long-term liabilities: Notes payable | 8,395,203 | |
| Total liabilities | 13,120,653 | $ 12,412,442 |
| Stockholders' equity (deficiency): | ||
| Common stock, $.001 par value; 100,000,000 shares authorized at March 31, 2015 and December 31, 2014; 99,501,998 and 4,471,349 shares issued and outstanding, respectively | 99,502 | 4,472 |
| Additional paid-in capital | 11,894,048 | 11,507,209 |
| Accumulated deficit | (11,948,654) | (12,058,846) |
| Total stockholders' equity (deficiency) | 44,896 | (541,220) |
| Total liabilities and stockholders' equity (deficiency) | $ 13,165,549 | 11,871,222 |
| Preferred Stock A [Member] | ||
| Stockholders' equity (deficiency): | ||
| Preferred Stock | $ 1,337 | |
| Preferred Stock B [Member] | ||
| Stockholders' equity (deficiency): | ||
| Preferred Stock | ||
| Preferred Stock C [Member] | ||
| Stockholders' equity (deficiency): | ||
| Preferred Stock | $ 4,608 |
| CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) | Mar. 31, 2015 | Dec. 31, 2014 |
| Net of allowance for doubtful accounts | $ 129,357 | $ 129,357 |
| Net of reserve for obsolesence | $ 4,326,371 | $ 4,133,189 |
| Stockholders Equity | ||
| Common Stock Par Value | $ .001 | $ 0.001 |
| Common Stock Authorized | 100,000,000 | 100,000,000 |
| Common Stock Issued | 99,501,998 | 4,471,349 |
| Common Stock Outstanding | 99,501,998 | 4,471,349 |
| Preferred Stock A [Member] | ||
| Stockholders Equity | ||
| Preferred Stock Par Value | $ 0.001 | $ 0.001 |
| Preferred Stock Shares Authorized | 1,400,000 | 1,400,000 |
| Preferred Stock Shares Issued | 0 | 1,336,703 |
| Preferred Stock Shares Outstanding | 0 | 1,336,703 |
| Preferred Stock Liquidation preference | $ 982,477 | $ 982,477 |
| Preferred Stock B [Member] | ||
| Stockholders Equity | ||
| Preferred Stock Par Value | $ .001 | $ .001 |
| Preferred Stock Shares Authorized | 2,900,000 | 2,900,000 |
| Preferred Stock Shares Issued | 0 | 0 |
| Preferred Stock Shares Outstanding | 0 | 0 |
| Preferred Stock C [Member] | ||
| Stockholders Equity | ||
| Preferred Stock Par Value | $ .001 | $ .001 |
| Preferred Stock Shares Authorized | 4,825,000 | 4,825,000 |
| Preferred Stock Shares Issued | 0 | 4,608,675 |
| Preferred Stock Shares Outstanding | 0 | 4,608,675 |
| Preferred Stock Liquidation preference | $ 3,387,376 | $ 3,387,376 |
| CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) | 3 Months Ended | |
| Mar. 31, 2015 | Mar. 31, 2014 | |
| Condensed Consolidated Statements Of Operations | ||
| Net revenue | $ 6,758,239 | $ 6,619,437 |
| Cost of goods sold | 5,228,804 | 4,928,103 |
| Gross profit | 1,529,435 | 1,691,334 |
| Operating expenses: | ||
| General and administrative expenses | 1,034,245 | 1,362,335 |
| Professional and consulting fees | 46,350 | 144,397 |
| Depreciation and amortization | 9,538 | 5,159 |
| Total Operating Expenses | 1,090,133 | 1,511,891 |
| Income (Loss) before other income (expense) | 439,302 | 179,443 |
| Other expense: Interest - net | (302,980) | (148,802) |
| Income (Loss) before provision for income taxes | 136,322 | 30,641 |
| Provision for income taxes | (26,130) | (11,718) |
| Net income (loss) applicable to common stockholders | $ 110,192 | $ 18,923 |
| Net income (loss) per share applicable to common stockholders | ||
| Basic | $ 0 | $ 0.01 |
| Diluted | $ 0 | |
| Weighted average shares outstanding - basic | 83,663,557 | 4,283,960 |
| Weighted average shares outstanding - diluted | 83,663,557 | 13,523,078 |
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) | 3 Months Ended | |
| Mar. 31, 2015 | Mar. 31, 2014 | |
| CASH FLOWS FROM OPERATING ACTIVITIES | ||
| Net income (loss) | $ 110,192 | $ 18,923 |
| Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||
| Depreciation and amortization | 9,538 | $ 5,159 |
| Amortization of deferred financing costs | $ 26,295 | |
| Stock based compensation | $ 1,644 | |
| Inventory writedown and reserve | $ 193,182 | 194,287 |
| Changes in assets and liabilities: | ||
| Increase in accounts receivable | (1,182,847) | (905,104) |
| Increase in inventory | (143,378) | (284,401) |
| (Increase) decrease in other current assets | (138,281) | 4,634 |
| Increase in taxes payable | 17,551 | 49,864 |
| Increase in accounts payable and accrued expenses | 253,801 | 320,318 |
| Net cash used in operating activities | (853,947) | (594,676) |
| CASH FLOWS FROM INVESTING ACTIVITIES | ||
| Purchase of property and equipment | (2,385) | (509) |
| Net cash (used in) investing activities | (2,385) | $ (509) |
| CASH FLOWS FROM FINANCING ACTIVITIES | ||
| Net proceeds from note payable | 8,578,558 | |
| Net (payment) proceeds of line of credit | (7,144,827) | $ 1,117,399 |
| Payment on shareholder loan | (250,000) | |
| Proceeds from issuance of common stock | 431,923 | |
| Payments on term loan payable | (729,167) | $ (312,501) |
| Net cash provided by (used in) financing activities | 886,487 | 804,898 |
| INCREASE IN CASH AND CASH EQUIVALENTS | 30,155 | 209,713 |
| CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD | 65,613 | 68,778 |
| CASH AND CASH EQUIVALENTS - END OF PERIOD | 95,768 | 278,491 |
| Cash paid during the period for: | ||
| Interest | $ 287,128 | $ 148,802 |
| Income taxes | ||
| Non-cash investing and financing activities: | ||
| Issuance of common stock for closing costs | $ 44,000 | |
| Put option with note payable | $ 165,650 | |
| SUMMARY OF BUSINESS | 3 Months Ended |
| Mar. 31, 2015 | |
| Notes to Financial Statements | |
| 1. SUMMARY OF BUSINESS | Precision Aerospace Components, Inc. and Subsidiaries (the "Company") distributes high-quality, predominantly domestically-manufactured, technically complex, nut and bolt products and a proprietary locking washer product that are used primarily for aerospace and military applications and for industrial/commercial applications that require a high level of certified and assured quality. The Company's operations are carried out through its wholly-owned distribution subsidiaries, Aero-Missile Components, Inc. ("Aero-Missile"), Freundlich Supply Company, Inc. ("Freundlich"),Creative Assembly Systems, Inc. ("Creative Assembly") and Tiger-Tight Corp. ("Tiger-Tight"). Aero-Missile and Freundlich both have stocking distributor relationships with a number of United States fastener manufacturers and sell high technology, specially engineered fasteners - nuts and bolts - predominantly to all levels of the aviation industries (original equipment manufacturers, maintenance and repair organizations, and other distributors as well as to the United States Department of Defense ("Department of Defense"). Creative Assembly Systems, Inc. Creative Assembly is a value added distributor of proprietary and specialty fasteners primarily serving the heavy truck, automotive, transportation, and infrastructure industries. Tiger-Tight was the exclusive North American master distributor of the Tiger-Tight locking washer.In the first quarter of 2015, the Company cancelled the master distribution agreement due to lack of sales. The Company will continue to evaluate opportunities to supply the product into production, but without the master distributor agreement. The Company's products are manufactured, by others, to exacting specifications and are made from materials that provide the strength and reliability required for their aerospace and industrial applications. On January 16, 2015, Precision Group Holdings LLC ("PGH") and C3 Capital Partners III, L.P. ("C3") refinanced the outstanding debt of the Company and purchased approximately 85,791,534 newly issued shares of restricted Common Stock of the Company representing approximately 86.22% of the outstanding shares of Common Stock of the Company. The Company will increase its authorized shares of Common Stock from 100,000,000 shares to 800,000,000 so as to be able to issue the additional shares of Common Stock to PGH and C3. Upon the additional issuance of common stock, PGH and C3 will collectively own 98.1% of the shares of Common Stock of the Company. (See Note 3) |
| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 3 Months Ended |
| Mar. 31, 2015 | |
| Notes to Financial Statements | |
| 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | Interim Consolidated Financial Statements The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") and in conformity with the instructions to Form 10-Q and Article 8 of Regulation S-X and the related rules and regulations of the Securities and Exchange Commission ("SEC"). Accordingly, certain information and note disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. However, we believe that the disclosures included in these financial statements are adequate to make the information presented not misleading. The unaudited condensed consolidated financial statements included in this document have been prepared on the same basis as the annual consolidated financial statements, and in the Company's opinion reflect all adjustments, which include normal recurring adjustments necessary for a fair presentation in accordance with GAAP and SEC regulations for interim financial statements. The results for the three months ended March 31, 2015 are not necessarily indicative of the results that the Company will have for any subsequent period. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto for the year ended December 31, 2014 included in the Company's Comprehensive Annual Report on Form 10-K filed on December 22, 2015. Earnings (Loss) Per Share Basic earnings (loss) per share is calculated by dividing net profit attributable to common stockholders by the weighted average number of outstanding common shares during the year. Basic earnings (loss) per share excludes any dilutive effects of options, warrants and other stock-based compensation, which are included in diluted earnings per share. When a company is in a loss situation, all outstanding dilutive shares are excluded from the calculation of diluted earnings because their inclusion would be antidilutive; and the basic and fully diluted common shares outstanding are stated to be the same. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. The significant estimates are the useful lives of tangible and intangible assets, reserves for inventory and the valuation of intangible assets. Inventory Inventories are carried at the lower of cost on an average cost basis, or market. When necessary, management records an inventory reserve for estimated obsolescence or unmarketable inventory based upon knowledge of future demand of inventory on hand as well as other market conditions and events. In 2013, the Company increased its inventory reserve in the amount of approximately $2,900,000. In 2014, the Company increased its inventory reserve in the amount of approximately $900,000. The Company has adopted an inventory reserve methodology that factors age of a part in relation to value. As of December 31, 2014 and March 31, 2015, the inventory reserve was $4,133,189 and $4,326,371 respectively. Management believes that the longer a part sits on the shelf the higher the likelihood that it will not sell in the future. This belief is not unique to the fastener industry. While management constantly assesses viability of a part within the customer base, it also believes that a reserve should be carried to reflect product that is aging out, as opposed to product that management identified based on a specific event. As of March 31, 2015, the Company had more than 40,000 unique part numbers on hand that had carrying value. Management believes that the two methods, specific identification and reserve based on age, to analyzing inventory will reflect the appropriate balance sheet value. Concentration of Credit Risk For the three month period ending March 31, 2015 sales to The United States Department of Defense accounted for 12% of total sales, versus 13% of sales for the prior three month period ending March 31, 2014. For the three month period ending March 31, 2015 sales to PACCAR accounted for 22% of total sales, versus 18% of sales for the prior three month period ending March 31, 2014. No other customer accounted for greater than 10% of the Company's total sales and the Company has no substantial concentrations of credit risk in its trade receivables. Concentration of Suppliers The Company's top twenty suppliers represent approximately 76% of product distributed for the three months ending March 31, 2015. The Company's top twenty suppliers represent approximately 75% of product distributed for the three months ending March 31, 2014. The Company's two largest suppliers, SPS Technologies and AVK, represent approximately 42.7% of product distributed for the three months ending March 31, 2015. The Company's two largest suppliers, SPS Technologies and AVK, represent approximately 41% of product distributed for the three months ending March 31, 2014. For nearly all suppliers, the Company looks to have secondary supply outlets. However, manufacturing issues with any supplier could cause temporary disruptions to the Company. Fair Value of Financial Assets and Liabilities In accordance with the authoritative guidance for fair value measurements and the fair value election for financial assets and financial liabilities, a fair value measurement is determined based on the assumptions that a market participant would use in pricing an asset or liability. A three-tiered hierarchy was established that draws a distinction between market participant assumptions based on the following: i) observable inputs such as quoted prices in active markets (Level 1) ii) inputs other than quoted prices in active markets that are observable either directly or indirectly (Level 2) iii) unobservable inputs that require the Company to use present value and other valuation techniques in the determination of fair value (Level 3). Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measure. The Company's assessment of the significance of a particular input to the fair value measurements requires judgment, and may affect the valuation of the assets and liabilities being measured and their placement within the fair value hierarchy. C3 Put C3, our subordinated lender, maintains their right to force the Company to repurchase its shares upon certain triggering events, which can be found in Exhibit 10.2 to that amended Form 8-K/A, filed on August 18, 2015. The Company maintains a liability on its balance sheet that reflects the fair value of the put option. To arrive at this liability the Company performed a valuation based on comparable company metrics. This technique would be considered a Level 3 fair market value approach. The Company performed its valuation in accordance with FASB's "ASC 820 Fair Value Measurements." The technique used was a multiple of earnings before interest, taxes, depreciation and amortization ("EBITDA"). The Company subtracted the total outstanding debt and added back the available cash to arrive at the fair value of the put option. The Company made certain customary adjustments to EBITDA in order to provide a more accurate representation in regards to the Company's financial situation. For the period ending March 31, 2015 the Company's valuation estimate was based on the equity valuation that PGH and C3 paid for their respective shares on January 16. It was the opinion of the Company's management that there were no significant changes in the first 74 days of the recapitalization. The Company recorded debt discount of $165,650 based on the C3 Put's fair value at issuance. This amount will be amortized over the life of the Company's five year subordinated notes. Tax Policy Note The Company provides for income taxes under ASC Topic 740-10. ASC Topic 740-10 requires the use of an asset and liability approach in accounting for income taxes. Deferred tax assets and liabilities are recorded based on the differences between the financial statement and tax bases of assets and liabilities and the tax rates in effect when these differences are expected to reverse. Temporary differences relate primarily to different accounting methods used for depreciation and amortization of property and equipment and deferred compensation. ASC Topic 740-10 requires the reduction of deferred tax assets by a valuation allowance if, based on the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. ASC Topic 740-10 clarifies the accounting for uncertainty in income tax positions, as defined. It requires, among other matters, that the Company recognize in our financial statements, the impact of a tax position, if that position is more likely than not of being sustained on audit, based on the technical merits of the position. The Company analyzes the filing positions in all of the federal and state jurisdictions where the Company is required to file income tax returns, as well as all open tax years in these jurisdictions. As of March 31, 2015, the Company did not record any unrecognized tax benefits. The Company's policy, if it had unrecognized benefits, is to recognize accrued interest and penalties related to unrecognized tax benefits as interest expense and other expense, respectively. |
| LONG-TERM DEBT AND LINE OF CREDIT | 3 Months Ended |
| Mar. 31, 2015 | |
| Notes to Financial Statements | |
| 3. LONG-TERM DEBT AND LINE OF CREDIT | Newstar Debt During 2012, in conjunction with its acquisition of the assets within Aero-Missile and Creative Assembly, the Company recapitalized its existing debt and paid for the acquisition with a new credit facility (the "Newstar Facility") consisting of a $2.5 million term loan (the "NewStar Term Loan") and a $10 million revolving loan (the "Newstar Revolving Loan") arranged and administered by Newstar Business Credit, LLC ("Newstar"). Borrowings under the Newstar Facility were governed by that Loan and Security Agreement by and between Precision Aerospace Components, Inc., as Parent and an Obligor, Freundlich Supply Company, Inc, Tiger-Tight Corp., Apace Acquisition I, Inc., Apace Acquisition II, Inc. as Borrowers, Newstar Business Credit, LLC, as Administrative Agent, and the Lenders from time to time party hereto dated as of May 25, 2012 (the "Newstar Credit Agreement"). On May 25, 2012, Apace Acquisition I, Inc. changed its name to Aero-Missile Components, Inc. and Apace Acquisition II, Inc changed its name to Creative Assembly Systems, Inc. Borrowings under the Newstar Credit Agreement bore interest, at the Company's election, at a rate tied to one of the following rates, in each case plus a specified margin: (i) the prime lending rate, but not less than 3.25%, or (ii) adjusted one-month LIBOR, plus 3.5%. The interest margin for each such type of borrowing varied from 1.50% to 7.60%, depending on the Company's Fixed Charge Coverage Ratio. At the end of 2014, the interest rate on the Newstar Term Loan was 11.1%. On the Newstar Revolving Loan the interest rate was 8%. As of December 31, 2014, approximately $7,873,994 was outstanding on the Newstar Facility, of which $729,167 was the term loan, at a weighted interest rate of 8.30%. All Newstar debt was due May 25, 2015. The Company violated several financial covenants under the Newstar Credit Agreement after the acquisition of Aero-Missile and Creative Assembly. The Newstar Credit Agreement was amended on July 27, 2012, approximately two months after its acquisition of Aero-Missile and Creative Assembly. Between May 25, 2012 and December 31, 2014, the Newstar Credit Agreement was amended thirteen (13) times. On May 1, 2014, pursuant to the eighth amendment to the Newstar Credit Agreement, Newstar required the Company to engage an investment bank to explore strategic alternatives. Up until this point, the Company's leadership and board of directors failed to attract any capital or provide any long term solutions to the Company's status of default. The Company retained Variant Capital Advisors ("Variant") on May 13, 2014 as the Company's investment bank. Pursuant to the engagement letter executed between the Company and Variant, the Company, starting in June 2014 owed Variant a retainer of $10,000 per month. The retainer fee was never paid and accrued monthly. In addition, Variant was owed a transaction fee equal to 5% of the value of any recapitalization or refinancing transaction. On January 16, 2015, the Company and Variant agreed to a liquidated transaction fee of $400,000 for all amounts due to Variant under the engagement letter, payable over several months. As of August 31, 2015, the Company has paid the entire $400,000 due to Variant. Banyan Crest Capital LLC On or about January 7, 2015, the entire Newstar Facility was sold to Banyan Crest Capital LLC ("Banyan"). Newstar resigned as administrative agent for the Newstar Facility and Banyan assumed the role as administrative agent of the Newstar Facility on January 7. On January 7, 2015 Banyan mailed a notice of foreclosure to the Company pursuant to Article 9 of the Uniform Commercial Code. The foreclosure sale was scheduled for January 17, 2015. On January 16, 2015, PGH and C3 re-financed the Company's defaulted loan and injected additional funds for working capital. On January 16, 2015, Company paid the entire balance of the Newstar Facility to Banyan. Emergency Refinancing On or about January 10, 2015, the Company contacted Polymathes Capital about avoiding the foreclosure sale scheduled for January 17, 2015. On January 16, 2015 (the "Effective Date"), the Company together with all of its wholly owned subsidiaries, entered into definitive agreements with Precision Group Holdings LLC ("PGH") and C3 Capital Partners III L.P. ("C3") to effectuate a series of transactions to recapitalize the Company (the "Transactions" or the "Emergency Refinancing"). As part of the Transactions, on the Effective Date, PGH and C3 purchased 77,791,534 newly issued shares of restricted Common Stock of the Company for $431,923. (See Stock Purchase Agreement below) In addition, C3 was granted 8,000,000 newly issued shares of restricted Common Stock of the Company in consideration for providing two loans to the Company in the aggregate amount of $9,000,000. The newly issued shares collectively represent approximately 86.22% of the outstanding shares of Common Stock of the Company. Pursuant to the Transactions, the Company will increase its authorized shares of Common Stock from 100,000,000 shares to 800,000,000 so as to be able to issue an additional grant of equity to C3 of 51,825,111 shares of Common Stock and sell an additional 595,988,880 shares of Common Stock to PGH and C3 for a total purchase price of $68,257. Upon the consummation of the Transactions, PGH and C3 will collectively own 98.1% of the shares of Common Stock of the Company. Securities Purchase Agreement On the Effective Date, the Company and its Subsidiaries entered into a Securities Purchase Agreement (the "Securities Purchase Agreement) with C3, pursuant to which the Company and its Subsidiaries authorized the issuance and sale to C3 of (1) a Senior Secured Note issued by the Subsidiaries in the amount of $5,500,000 ("Note A"), (2) a Subordinated Secured Note issued by the Subsidiaries in the amount of $3,500,000 ("Note B"), and (3) 8 million shares of unregistered Common Stock for a loan from C3. In addition, in partial consideration for providing the two loans the Company will issue an additional number of shares of unregistered Common Stock to C3 at the Second Closing that, together with the initial issuance of 8 million shares, will cause C3 to have received 8% of the total Common Stock of Precision after the Second Closing (collectively, the "Granted Equity"). In addition, the Company issued C3 shares of unregistered Common Stock pursuant to the Stock Purchase Agreement (see below) (the "Purchased Equity"). The issuance and sale of the Granted Equity was a private placement exempt from registration pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended. Note A will accrue at 11% interest per annum, with 10% payable monthly and 1% accruing to the outstanding balance of Note A, payable at maturity. Note A has a Maturity Date of January 16, 2020. If Note A principal is prepaid from a recapitalization of outside capital, a prepayment penalty will apply on the following schedule: (1) 5% of the amount prepaid until the first anniversary of Note A, (2) 4% of the amount prepaid after the first anniversary until the second anniversary of Note A, (3) 3% of the amount prepaid after the second anniversary of Note A until the third anniversary of Note A, (4) 2% of the amount prepaid after third anniversary of Note A until the fourth anniversary of Note A, and (5) 1% of the amount prepaid after the fourth anniversary of Note A until the Maturity Date. Note A is secured against all of the assets of the Company and its Subsidiaries. On March 31, 2015, Note A had a principal balance of $5,500,000. Note B will accrue at 14% interest per annum. Note B has a Maturity Date of January 16, 2020. If Note B principal is prepaid from a recapitalization of outside capital, a prepayment penalty will apply on the following schedule: (1) 3% of the amount prepaid until the first anniversary of Note B, (2) 2% of the amount prepaid after the first anniversary until the second anniversary of Note B, and (3) 1% of the amount prepaid after the second anniversary of Note A until the third anniversary of Note B. Note B is secured against all of the assets of the Company and its Subsidiaries. On March 31, 2015, Note B had a principal balance of $3,500,000. Under the Securities Purchase Agreement, so long as Note A remains outstanding, C3 will have the right to control the Company's board of directors, which will be limited to no more than five (5) members during this time. Once Note A is paid in full and for so long as Note B remains outstanding, C3 will have the right to elect and control one (1) member seat of the Company's board. The Company has granted C3 a put right under the Securities Purchase Agreement for the Common Stock C3 has received (whether by purchase or grant) at any time after the earlier to occur of (1) the fifth (5th ) anniversary of the closing of the Securities Purchase Agreement for Common Stock (for Granted Equity), (2) the seventh (7th) anniversary of the closing of the Securities Purchase Agreement (for Purchased Equity), (3) payment in full of the amounts owed under Note A and Note B, or (4) upon an Event of Default, as defined in the Securities Purchase Agreement. The put right may be exercised by C3 for all or a portion of the Common Stock at an agreed upon valuation of the Company. The Securities Purchase Agreement also contains customary covenants, representations and warranties of the parties, including, among others, (1) the grant by the Company to C3 of a lienon all of the assets of the Company and its Subsidiaries, (2) a pledge with respect to all of the issued and outstanding equity interests of the Company and its Subsidiaries to secure the obligations under the Securities Purchase Agreement of the Company and its Subsidiaries, (3) an unconditional and irrevocable guarantee by the Company of the performance of the obligations under the Securities Purchase Agreement of the Company and its Subsidiaries, (3) non-compete agreements with certain executive officers of the Company, and (4) the assignment to C3 of key-man life insurance policies for certain of the Company's executive officers. In addition, until all amounts under Note A and Note B are paid in full, the Company has also agreed to comply with certain financial covenants that require the Company to meet pre-established financial ratios. C3 requires the company to maintain a fixed charge coverage ratio of 1.5 to 1, and a net debt to EBITDA ratio of 3 to 1 for the year of 2015, dropping to 2.75 to 1 for the year 2016. For the purposes of calculating EBITDA, the Company makes certain adjustments and add backs for expenses that are deemed one time. As of the current date, the Company was in compliance with its financial covenants with the exception that net debt to EBITDA exceeded the ratio of 3 to 1 for all quarters of 2015. C3 has waived this covenant default for the entire year of 2015. The Company is also required to conduct its business in the ordinary course and take certain actions only with C3's prior consent. In conjunction with the Securities Purchase Agreement, the parties entered into other Transaction Agreements on the Effective Date, including a Security Agreement and Subordination Agreement, whereby (1) C3 was granted a security interest in all existing and future property of the Company and its Subsidiaries to secure the performance by the Company and its Subsidiaries of their Obligations under the Securities Purchase Agreement and (2) all current and future debt owed to certain of the Company creditors became subordinate and subject in right and time of payment to the prior payment in full of all current and future indebtedness owed to C3. Stock Purchase Agreement On the Effective Date as noted above, concurrently with the execution of the Securities Purchase Agreement, the Company entered into a Stock Purchase Agreement by and among Andrew S. Prince, Donald Barger, and David Walters (the "Precision Shareholders"), and C3 and Holdings (the "Stock Purchase Agreement"). Pursuant to the Stock Purchase Agreement, Holdings and C3 agreed to purchase a total of 673,780,414 restricted shares of Common Stock for an aggregate purchase price of $500,000 in two installments. The First Closing occurred on the Effective Date resulting in an issuance of 21,003,714 shares of restricted Common Stock to C3 for a purchase price of $116,571 and 56,787,820 shares of restricted Common Stock to Holdings for a purchase price of $315,172. The Second Closing is to occur between 20 and 22 calendar days from the date the necessary disclosures are distributed to Company shareholders in connection with the Certificate Amendment (described below). Upon the Second Closing, the Company shall issue the number of shares of restricted Common Stock to C3 and Holdings to cause C3 and Holdings to collectively own 90.1% of the outstanding shares of Common Stock on a fully diluted basis for a purchase price equal to $68,257. The issuance and sale of the restricted shares of Common Stock in each installment was, or will be in the case of the second installment, a private placement exempt from registration pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended. In order to effect the second installment of restricted Common Stock, the Company must amend its certificate of incorporation ("Certificate Amendment") to increase the authorized shares of Common Stock from 100,000,000 shares to 800,000,000 shares. The Certificate Amendment was approved by the Company's Shareholders on the Effective Date and will become effective immediately prior to the Second Closing after the necessary information statement is filed with the SEC pursuant to Section 14(c) of the Exchange Act and distributed to Company shareholders. The Company has agreed to indemnify C3 and Holdings for all damages, costs, obligations, liabilities, losses, expenses, and fees arising out of a breach of any of the Company's representations, warranties, covenants, or other agreements contained in the Stock Purchase Agreement. The Stock Purchase Agreement also contains customary covenants, representations and warranties of the parties. Shareholder Agreement On January 16, 2015, the Company, Holdings, and C3 entered into a Shareholder Agreement setting forth the relative rights of the parties with regard to, among other things, the transfer or other disposition of securities of the Company, capital calls, and the governance of the Company. Under the Shareholder Agreement, C3 and Holdings may transfer shares subject to certain rights of first refusal, and tag along-take along rights of the other shareholder. C3 will be permitted to elect one (1) director of the Company and each of its subsidiaries for so long as C3 owns shares of Common Stock and allowed to designate two (2) observers to attend all meetings of the Company's board of directors and one (1) observer for each of the Company's subsidiaries. Certain Company actions including, amongst others, amendments to the Company's organizational documents, bankruptcy filings or other similar liquidation events, the redemption or repurchase of shares of Common Stock, the payment of dividends or other distributions, the issuance of additional shares of Common Stock, incurring indebtedness in excess of $100,000 or entering into a transaction with Company affiliates will require C3's prior written consent. Conversion of Preferred Stock to Common Stock On January 16, 2015, the majority of shareholders of the Company's Series A Convertible Preferred Stock agreed to amend the Statements of Designation to automatically convert all of the outstanding shares of the Company's Series A Convertible Preferred Stock into shares of common stock at a fixed ratio of 1.554. On January 16, 2015, the majority of shareholders of the Company's Series C Convertible Preferred Stock agreed to amend the Statements of Designation to automatically convert all of the outstanding shares of the Company's Series C Convertible Preferred Stock into shares of common stock at a fixed ratio of 1.554. As a result of this transaction, the Company recorded the transfer between the two equity instruments on its financial statements as this transaction was intended to be a value for value exchange. In addition, as a result of this transaction, there are no shares of Series A Convertible Preferred Stock, Series B Convertible Preferred Stock or Series C Convertible Preferred Stock issued or outstanding. Refinancing with Webster Business Credit Corporation On August 25, 2015, the Company established a new revolving credit facility in an aggregate principal amount of up to $7.5 million (the "WBCC Revolving Loan") by entering into a Credit Agreement (the "WBCC Credit Agreement") with Webster Business Credit Corporation, as Lender ("WBCC"). The Company's wholly owned subsidiaries, Freundlich Supply Company, Inc., Tiger-Tight Corp., Aero-Missile Components, Inc., and Creative Assembly Systems serve as guarantors of the WBCC Revolving. Borrowings under the WBCC Revolving Loan may be used to finance working capital and other general corporate purposes. On August 25, 2015, pursuant to the WBCC Credit Agreement, the Company used an initial advance of $5,125,000.00 under the Revolving Loan to repay $5,000,000 of principal on Note A issued by the Subsidiaries in favor of C3 Capital Partners III, L.P. A principal balance of $500,000 remains on Note A. Pursuant to the partial repayment to C3, the Company incurred a $250,000 prepayment penalty, of which $125,000 was paid to C3 on August 25, 2015. The remaining $125,000 was due in installments during the fourth quarter of 2015, during which $25,000 was paid and the remainder was accrued. Borrowings under the WBCC Credit Agreement bear interest, at the Company's election, at a rate tied to one of the following rates: (i) the prime lending rate plus 1.25% or (ii) the adjusted daily LIBOR rate plus 2.75%. Borrowings under the WBCC Credit Agreement are senior to Note A and Note B The outstanding principal amount of any borrowings under the WBCC Revolving Loan will be due and payable on August 25, 2018, subject to an earlier maturity date upon an event of default. The WBCC Credit Agreement contains usual and customary covenants for financings of this type, including, among other things: (i) requirements to deliver financial statements, other reports and notices; (ii) restrictions on indebtedness; (iii) restrictions on dividends, distributions and redemptions of equity and repayment of subordinated indebtedness; (iv) restrictions on liens; (v) restrictions on making certain payments; (vi) restrictions on investments; (vii) restrictions on asset dispositions and other fundamental changes; and (viii) restrictions on transactions with affiliates. The WBCC Credit Agreement contains certain financial covenants, including a minimum fixed charge coverage ratio. As of the current date, the Company was in compliance with these metrics. Additionally, the WBCC Credit Agreement contained a covenant which required the Company to have implemented a new inventory management and accounting system by December 31, 2015. As of the current date, the Company was not in compliance with this covenant. As of the current date, the Company has begun implementation of the new system and WBCC has taken no action. The Company anticipates completing implementation of the new system by June 30, 2016. The obligations of the Company and its Subsidiaries under the WBCC Credit Agreement are secured by liens and security interests on all assets of the Company and its Subsidiaries, including a pledge of 100% of the equity of the Subsidiaries. Under the WBCC Credit Agreement, the Company is dependent upon its line of credit to maintain appropriate liquidity. All of the Company's cash flow from operations is required to be swept to its line of credit. The availability from its line is dependent upon accounts receivable and inventory. Under the WBCC Credit Agreement, the Company's interest rate for the WBCC Revolving Loan is linked to indices. Changes in the indices would cause an increase in interest expense. The Company's interest rate on Note A and Note B with C3 is fixed and not linked to indices. Management Services Agreement On January 16, 2015, the Company and Polymathes Capital, LLC, an affiliate of Holdings, ("Consultant"), entered into a Management Services Agreement whereby the Company engaged the Consultant to provide financing and management consulting services to the Company and its Subsidiaries on a month-to-month basis. The consulting fee is $100,000 per annum, payable in monthly increments. |
| COMMITMENTS AND CONTINGENCIES | 3 Months Ended |
| Mar. 31, 2015 | |
| Notes to Financial Statements | |
| 4. COMMITMENTS AND CONTINGENCIES | Operating Leases The Company has six facilities, which are primarily office and warehouse space. These facilities are all leased under operating leases, that are either month-to-month or less than one year in duration. In some cases the Company is responsible for real estate taxes, utilities, and repairs under the terms of certain of the operating leases. Litigation The Company is subject to the possibility of claims and lawsuits arising in the normal course of business. In the opinion of management, the Company liability, if any, under existing claims, asserted or unasserted, would not have a material adverse effect on the Company's consolidated financial position or results of operations. Employment Agreements During 2010, the Company entered into an employment agreement with its President and Chief Executive Officer. In the event of the termination of the agreement under certain circumstances the Company could be liable for up to twelve months' salary. On January 16, 2015, Andrew Prince resigned as President and Chief Executive Officer. In consideration for his resignation without termination payments, the Company entered into a two-year financial consulting agreement with Mr. Prince that entitles him to a minimum of $100,000 in consulting fees payable by January 16, 2017. |
| RELATED PARTY TRANSACTIONS | 3 Months Ended |
| Mar. 31, 2015 | |
| Notes to Financial Statements | |
| 5. RELATED PARTY TRANSACTIONS | During April 2013, our former primary shareholder and former CEO entered into a short term agreement to make a loan to the Company (the "Prince Note"). The outstanding balance for the loan is approximately $0.535 million with an original maturity date of October 14, 2013. The loan had a stated interest rate of 10%. These funds were used in order to satisfy certain vendor obligations. The loans were to be collateralized by certain inventory purchases to be held by the shareholder. The inventory would be available to be sold by the Company in the normal course of business. All amounts borrowed by the Company are considered loans for accounting purposes and are repayable on demand from available operating funds. These loans were approved by Newstar. On the Effective Date, the Company paid $250,000 due and payable on the Prince Note. In addition, the Company and Mr. Prince agreed to amend the Prince Note to have an outstanding balance of $285,000 with an interest rate of one-half percent (0.50%) per annum with interest payable monthly. Beginning in February 2015, the Company agreed to pay 0.7% of its aggregate gross sales on the Prince Note until the Prince Note is repaid. If aggregate gross sales exceed $30,000,000 for calendar year 2015, the Company will make a one-time payment of $130,000 for interest recoupment. If aggregate gross sales do not exceed $30,000,000 for calendar year 2015 but exceed $34,000,000 for calendar year 2016, the Company will make a one-time payment of $130,000 for interest recoupment. On March 31, 2015, the Prince Note had a principal balance of $285,000 remaining. On June 26, 2015, the Company entered into a short term agreement with C3 and PGH to provide $250,000 in the form of two $125,000 draws. The intent of the note was to provide short term financing to bridge the Company's cash flow needs. By September 30, 2015, the entire note was repaid. |
| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 3 Months Ended |
| Mar. 31, 2015 | |
| Summary Of Significant Accounting Policies Policies | |
| Interim Consolidated Financial Statements | The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") and in conformity with the instructions to Form 10-Q and Article 8 of Regulation S-X and the related rules and regulations of the Securities and Exchange Commission ("SEC"). Accordingly, certain information and note disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. However, we believe that the disclosures included in these financial statements are adequate to make the information presented not misleading. The unaudited condensed consolidated financial statements included in this document have been prepared on the same basis as the annual consolidated financial statements, and in the Company's opinion reflect all adjustments, which include normal recurring adjustments necessary for a fair presentation in accordance with GAAP and SEC regulations for interim financial statements. The results for the three months ended March 31, 2015 are not necessarily indicative of the results that the Company will have for any subsequent period. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto for the year ended December 31, 2014 included in the Company's Comprehensive Annual Report on Form 10-K filed on December 22, 2015. |
| Earnings (Loss) Per Share | Basic earnings (loss) per share is calculated by dividing net profit attributable to common stockholders by the weighted average number of outstanding common shares during the year. Basic earnings (loss) per share excludes any dilutive effects of options, warrants and other stock-based compensation, which are included in diluted earnings per share. When a company is in a loss situation, all outstanding dilutive shares are excluded from the calculation of diluted earnings because their inclusion would be antidilutive; and the basic and fully diluted common shares outstanding are stated to be the same. |
| Use of Estimates | The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. The significant estimates are the useful lives of tangible and intangible assets, reserves for inventory and the valuation of intangible assets. |
| Inventory | Inventories are carried at the lower of cost on an average cost basis, or market. When necessary, management records an inventory reserve for estimated obsolescence or unmarketable inventory based upon knowledge of future demand of inventory on hand as well as other market conditions and events. In 2013, the Company increased its inventory reserve in the amount of approximately $2,900,000. In 2014, the Company increased its inventory reserve in the amount of approximately $900,000. The Company has adopted an inventory reserve methodology that factors age of a part in relation to value. As of December 31, 2014 and March 31, 2015, the inventory reserve was $4,133,189 and $4,326,371 respectively. Management believes that the longer a part sits on the shelf the higher the likelihood that it will not sell in the future. This belief is not unique to the fastener industry. While management constantly assesses viability of a part within the customer base, it also believes that a reserve should be carried to reflect product that is aging out, as opposed to product that management identified based on a specific event. As of March 31, 2015, the Company had more than 40,000 unique part numbers on hand that had carrying value. Management believes that the two methods, specific identification and reserve based on age, to analyzing inventory will reflect the appropriate balance sheet value. |
| Concentration of Credit Risk | For the three month period ending March 31, 2015 sales to The United States Department of Defense accounted for 12% of total sales, versus 13% of sales for the prior three month period ending March 31, 2014. For the three month period ending March 31, 2015 sales to PACCAR accounted for 22% of total sales, versus 18% of sales for the prior three month period ending March 31, 2014. No other customer accounted for greater than 10% of the Company's total sales and the Company has no substantial concentrations of credit risk in its trade receivables. |
| Concentration of Suppliers | The Company's top twenty suppliers represent approximately 76% of product distributed for the three months ending March 31, 2015. The Company's top twenty suppliers represent approximately 75% of product distributed for the three months ending March 31, 2014. The Company's two largest suppliers, SPS Technologies and AVK, represent approximately 42.7% of product distributed for the three months ending March 31, 2015. The Company's two largest suppliers, SPS Technologies and AVK, represent approximately 41% of product distributed for the three months ending March 31, 2014. For nearly all suppliers, the Company looks to have secondary supply outlets. However, manufacturing issues with any supplier could cause temporary disruptions to the Company. |
| Fair Value of Financial Assets and Liabilities | In accordance with the authoritative guidance for fair value measurements and the fair value election for financial assets and financial liabilities, a fair value measurement is determined based on the assumptions that a market participant would use in pricing an asset or liability. A three-tiered hierarchy was established that draws a distinction between market participant assumptions based on the following: i) observable inputs such as quoted prices in active markets (Level 1) ii) inputs other than quoted prices in active markets that are observable either directly or indirectly (Level 2) iii) unobservable inputs that require the Company to use present value and other valuation techniques in the determination of fair value (Level 3). Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measure. The Company's assessment of the significance of a particular input to the fair value measurements requires judgment, and may affect the valuation of the assets and liabilities being measured and their placement within the fair value hierarchy. |
| C3 Put | C3, our subordinated lender, maintains their right to force the Company to repurchase its shares upon certain triggering events, which can be found in Exhibit 10.2 to that amended Form 8-K/A, filed on August 18, 2015. The Company maintains a liability on its balance sheet that reflects the fair value of the put option. To arrive at this liability the Company performed a valuation based on comparable company metrics. This technique would be considered a Level 3 fair market value approach. The Company performed its valuation in accordance with FASB's "ASC 820 Fair Value Measurements." The technique used was a multiple of earnings before interest, taxes, depreciation and amortization ("EBITDA"). The Company subtracted the total outstanding debt and added back the available cash to arrive at the fair value of the put option. The Company made certain customary adjustments to EBITDA in order to provide a more accurate representation in regards to the Company's financial situation. For the period ending March 31, 2015 the Company's valuation estimate was based on the equity valuation that PGH and C3 paid for their respective shares on January 16. It was the opinion of the Company's management that there were no significant changes in the first 74 days of the recapitalization. The Company recorded debt discount of $165,650 based on the C3 Put's fair value at issuance. This amount will be amortized over the life of the Company's five year subordinated notes. |
| Tax Policy Note | The Company provides for income taxes under ASC Topic 740-10. ASC Topic 740-10 requires the use of an asset and liability approach in accounting for income taxes. Deferred tax assets and liabilities are recorded based on the differences between the financial statement and tax bases of assets and liabilities and the tax rates in effect when these differences are expected to reverse. Temporary differences relate primarily to different accounting methods used for depreciation and amortization of property and equipment and deferred compensation. ASC Topic 740-10 requires the reduction of deferred tax assets by a valuation allowance if, based on the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. ASC Topic 740-10 clarifies the accounting for uncertainty in income tax positions, as defined. It requires, among other matters, that the Company recognize in our financial statements, the impact of a tax position, if that position is more likely than not of being sustained on audit, based on the technical merits of the position. The Company analyzes the filing positions in all of the federal and state jurisdictions where the Company is required to file income tax returns, as well as all open tax years in these jurisdictions. As of March 31, 2015, the Company did not record any unrecognized tax benefits. The Company's policy, if it had unrecognized benefits, is to recognize accrued interest and penalties related to unrecognized tax benefits as interest expense and other expense, respectively. |
| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($) | 3 Months Ended | ||
| Mar. 31, 2015 | Mar. 31, 2014 | Dec. 31, 2014 | |
| Concentration Risk [Line Items] | |||
| Inventory Reserve | $ 4,326,371 | $ 4,133,189 | |
| SPS Technologies and AVK [Member] | |||
| Concentration Risk [Line Items] | |||
| Concentration of suppliers, product distributed | 42.70% | 41.00% | |
| United States Department of Defense [Member] | |||
| Concentration Risk [Line Items] | |||
| Concentration of credit risk, total sales | 12.00% | 13.00% | |
| PACCAR [Member] | |||
| Concentration Risk [Line Items] | |||
| Concentration of credit risk, total sales | 22.00% | 18.00% | |
| Top Twenty Suppliers [Member] | |||
| Concentration Risk [Line Items] | |||
| Concentration of suppliers, product distributed | 76.00% | 75.00% | |
| LONG-TERM DEBT AND LINE OF CREDIT (Details Narrative) - USD ($) | Mar. 31, 2015 | Dec. 31, 2014 |
| Current portion of term loan | $ 729,166 | |
| Term loan interest rate | 8.30% | |
| Newstar Facility [Member] | ||
| Amount outstanding | $ 7,873,994 | |
| Note A [Member] | ||
| Amount outstanding | $ 5,500,000 | |
| Note B [Member] | ||
| Amount outstanding | $ 3,500,000 |
| RELATED PARTY TRANSACTIONS (Details Narrative) - USD ($) | Mar. 31, 2015 | Dec. 31, 2014 |
| Loan from shareholder | $ 285,000 | $ 535,000 |
| Prince Note [Member] | ||
| Loan from shareholder | $ 285,000 |
