Nevada
|
83-4064262
|
(State
or other jurisdiction of
|
(I.R.S.
Employer
|
incorporation
or organization)
|
Identification
No.)
|
Large
accelerated filer
|
☐
|
Accelerated
filer
|
☐
|
Non-accelerated
filer
|
☑
|
Smaller
reporting company
|
☑
|
|
|
Emerging
growth company
|
☐
|
Title
of Each Class
|
|
Trading
Symbol(s)
|
|
Name of
Each Exchange on Which Registered
|
Common
Stock, par value $.60 per share
|
|
BKTI
|
|
NYSE
American
|
|
March
31,
2019
|
December
31,
2018
|
|
(Unaudited)
|
|
ASSETS
|
|
|
|
|
|
Current
assets:
|
|
|
Cash and cash
equivalents
|
$7,540
|
$11,268
|
Trade accounts
receivable, net
|
5,045
|
5,721
|
Inventories,
net
|
12,162
|
11,466
|
Prepaid expenses
and other current assets
|
2,544
|
2,401
|
Total current
assets
|
27,291
|
30,856
|
|
|
|
Property, plant and
equipment, net
|
3,302
|
2,729
|
Right-of-use (ROU)
asset
|
2,746
|
—
|
Investment in
securities
|
2,511
|
1,919
|
Deferred tax
assets, net
|
3,850
|
3,495
|
Other
assets
|
191
|
192
|
Total
assets
|
$39,891
|
$39,191
|
|
||
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
Current
liabilities:
|
|
|
Accounts
payable
|
$6,197
|
$5,595
|
Accrued
compensation and related taxes
|
1,063
|
2,014
|
Accrued warranty
expense
|
1,458
|
1,546
|
Accrued other
expenses and other current liabilities
|
224
|
292
|
Dividends
payable
|
254
|
256
|
Short-term
lease liability
|
291
|
—
|
Deferred
revenue
|
184
|
180
|
Total current
liabilities
|
9,671
|
9,883
|
|
|
|
Long-term lease
liability
|
2,455
|
—
|
Deferred
revenue
|
1,888
|
1,596
|
Total
liabilities
|
14,014
|
11,479
|
Commitments and
contingencies
|
|
|
Stockholders’
equity:
|
|
|
Preferred stock;
$1.00 par value; 1,000,000 authorized shares; none issued or
outstanding
|
—
|
—
|
Common stock; $.60
par value; 20,000,000 authorized shares; 13,883,937 and 13,882,937
issued; and 12,740,894 and 12,817,829 outstanding shares at March
31, 2019 and December 31, 2018, respectively
|
8,330
|
8,330
|
Additional paid-in
capital
|
25,941
|
25,867
|
Accumulated
deficit
|
(3,965)
|
(2,393)
|
Treasury stock, at
cost, 1,143,043 and 1,065,108 shares at March 31, 2019 and December
31, 2018, respectively
|
(4,429)
|
(4,092)
|
Total
stockholders’ equity
|
25,877
|
27,712
|
Total liabilities
and stockholders’ equity
|
$39,891
|
$39,191
|
|
Three Months
Ended
|
|
|
March
31,
2019
|
March
31,
2018
|
|
|
|
Sales,
net
|
$7,644
|
$11,746
|
Expenses
|
|
|
Cost of
products
|
5,207
|
6,909
|
Selling, general
and administrative
|
4,755
|
4,089
|
Total
expenses
|
9,962
|
10,998
|
|
|
|
Operating (loss)
income
|
(2,318)
|
748
|
|
|
|
Other income
(expense):
|
|
|
Interest
income
|
55
|
17
|
Gain (loss) on
investment in securities
|
592
|
(1,146)
|
Gain on disposal of
property, plant and equipment
|
3
|
—
|
Other
expense
|
(5)
|
(168)
|
Total other income
(expense)
|
645
|
(1,297)
|
|
|
|
Loss before income
taxes
|
(1,673)
|
(549)
|
|
|
|
Income tax
benefit
|
355
|
106
|
|
|
|
Net
loss
|
$(1,318)
|
$(443)
|
|
|
|
Net loss per
share-basic
|
$(0.10)
|
$(0.03)
|
Net loss per
share-diluted
|
$(0.10)
|
$(0.03)
|
Weighted average
shares outstanding-basic
|
12,761,713
|
13,754,119
|
Weighted average
shares outstanding-diluted
|
12,761,713
|
13,754,119
|
|
Three Months
Ended
|
|
|
March
31,
2019
|
March
31,
2018
|
Operating
activities
|
|
|
Net
loss
|
$(1,318)
|
$(443)
|
Adjustments to
reconcile net loss to net cash used in operating
activities:
|
|
|
Inventories
allowances
|
19
|
(31)
|
Deferred
tax benefit
|
(355)
|
(106)
|
Depreciation and
amortization
|
256
|
211
|
Share-based
compensation expense
|
31
|
21
|
Restricted
stock unit compensation expense
|
41
|
34
|
(Gain)
loss on investment in securities
|
(592)
|
1,146
|
Changes in
operating assets and liabilities:
|
|
|
Trade accounts
receivable
|
676
|
(2,184)
|
Inventories
|
(715)
|
(929)
|
Prepaid expenses
and other current assets
|
(143)
|
12
|
Other
assets
|
1
|
7
|
Accounts
payable
|
602
|
(1,116)
|
Accrued
compensation and related taxes
|
(951)
|
(76)
|
Accrued warranty
expense
|
(88)
|
58
|
Deferred
revenue
|
296
|
281
|
Accrued other
expenses and other current liabilities
|
(68)
|
(203)
|
Net
cash used in operating activities
|
(2,308)
|
(3,318)
|
|
|
|
Investing
activities
|
|
|
Purchases of
property, plant and equipment
|
(829)
|
(143)
|
Investment in
securities
|
—
|
(3,333)
|
Proceeds from sale
of available-for-sale securities
|
—
|
8,335
|
Net
cash (used in) provided by investing activities
|
(829)
|
4,859
|
|
|
|
Financing
activities
|
|
|
Proceeds from
issuance of common stock
|
2
|
—
|
Cash dividends
declared and paid
|
(256)
|
(273)
|
Repurchase of
common stock
|
(337)
|
(357)
|
Net
cash used in financing activities
|
(591)
|
(630)
|
|
|
|
Net change in cash
and cash equivalents
|
(3,728)
|
911
|
Cash and cash
equivalents, beginning of period
|
11,268
|
7,147
|
Cash and cash
equivalents, end of period
|
$7,540
|
$8,058
|
|
|
|
Supplemental
disclosure
|
|
|
Cash paid for
interest
|
$—
|
$—
|
Income tax
paid
|
$—
|
$—
|
Non-cash
financing activity
|
|
|
Restricted stock
units issued
|
$—
|
$—
|
Cashless exercise
of stock options and related conversion of net shares to
stockholders’ equity
|
$—
|
$—
|
|
March
31,
2019
|
December
31,
2018
|
Finished
goods
|
$3,612
|
$2,004
|
Work in
process
|
5,274
|
5,750
|
Raw
materials
|
3,276
|
3,712
|
|
$12,162
|
$11,466
|
|
Common Stock
Shares
|
Common
Stock Amount
|
Additional Paid-In
Capital
|
Accumulated
Deficit
|
Accumulated Other
Comprehensive Income
|
Treasury
Stock
|
Total
|
Balance at December
31, 2017
|
13,844,584
|
$8,307
|
$25,642
|
$(5,450)
|
$4,318
|
$(810)
|
$32,007
|
Share-based
compensation expense
|
—
|
—
|
21
|
—
|
—
|
—
|
21
|
Restricted stock
unit compensation expense
|
—
|
—
|
34
|
—
|
—
|
—
|
34
|
Dividends declared
($0.02 per share)
|
—
|
—
|
—
|
(271)
|
—
|
—
|
(271)
|
Net
loss
|
—
|
—
|
—
|
(443)
|
—
|
—
|
(443)
|
Effect of adoption
of ASU 2016-01
|
—
|
—
|
—
|
4,318
|
(4,318)
|
—
|
—
|
Repurchase of
common stock
|
—
|
—
|
—
|
—
|
—
|
(357)
|
(357)
|
Balance at March
31, 2018
|
13,844,584
|
$8,307
|
$25,697
|
$(1,846)
|
$—
|
$(1,167)
|
$30,991
|
|
Common Stock
Shares
|
Common Stock
Amount
|
Additional
Paid-In Capital
|
Accumulated
Deficit
|
Treasury
Stock
|
Total
|
Balance at December
31, 2018
|
13,882,937
|
$8,330
|
$25,867
|
$(2,393)
|
$(4,092)
|
$27,712
|
Stock options
exercised and issued
|
1,000
|
—
|
2
|
—
|
—
|
2
|
Share-based
compensation expense
|
—
|
—
|
31
|
—
|
—
|
31
|
Restricted stock
unit compensation expense
|
—
|
—
|
41
|
—
|
—
|
41
|
Dividends declared
($0.02 per share)
|
—
|
—
|
—
|
(254)
|
—
|
(254)
|
Net
loss
|
—
|
—
|
—
|
(1,318)
|
—
|
(1,318)
|
Repurchase of
common stock
|
—
|
—
|
—
|
—
|
(337)
|
(337)
|
Balance at March
31, 2019
|
13,883,937
|
$8,330
|
$25,941
|
$(3,965)
|
$(4,429)
|
$25,877
|
|
Three
Months Ended
|
|
|
March
31, 2019
|
March 31,
2018
|
Numerator:
|
|
|
Net loss (numerator
for basic and diluted earnings per share)
|
$(1,318)
|
$(443)
|
Denominator:
|
|
|
Denominator for
basic earnings per share weighted average shares
|
12,761,713
|
13,754,119
|
Effect of dilutive
securities:
|
|
|
Options and
restricted stock units
|
—
|
—
|
Denominator:
|
|
|
Denominator for
diluted earnings per share weighted average shares
|
12,761,713
|
13,754,119
|
Basic loss per
share
|
$(0.10)
|
$(0.03)
|
Diluted loss per
share
|
$(0.10)
|
$(0.03)
|
As of
January 1, 2019
|
Stock
Options
|
Wgt.
Avg.
Exercise
Price
($)
Per
Share
|
Wgt.
Avg.
Remaining
Contractual
Life
(Years)
|
Wgt.
Avg.
Grant
Date
Fair Value
($)
Per
Share
|
Aggregate
Intrinsic
Value
($)
|
Outstanding
|
460,500
|
4.22
|
—
|
1.76
|
—
|
Vested
|
156,900
|
4.03
|
—
|
2.05
|
—
|
Nonvested
|
303,600
|
4.32
|
—
|
1.61
|
—
|
|
|
|
|
|
|
Period
activity
|
|
|
|
|
|
Issued
|
90,000
|
4.07
|
—
|
1.62
|
—
|
Exercised
|
1,000
|
1.89
|
—
|
0.71
|
—
|
Forfeited
|
12,500
|
5.10
|
—
|
1.37
|
—
|
Expired
|
—
|
—
|
—
|
—
|
—
|
|
|
|
|
|
|
As
of March 31, 2019
|
|
|
|
|
|
Outstanding
|
537,000
|
4.18
|
7.34
|
1.83
|
155,100
|
Vested
|
198,800
|
4.14
|
4.66
|
1.95
|
74,420
|
Nonvested
|
338,200
|
4.20
|
8.91
|
1.76
|
80,680
|
|
Three Months
ended
March
31,
2019
|
|
|
Operating lease
cost
|
$134
|
Short-term lease
cost
|
4
|
Variable lease
cost
|
32
|
Total lease
cost
|
$170
|
|
Three Months
ended
March
31,
2019
|
Cash paid for
amounts included in the measurement of lease
liabilities:
|
|
Operating
cash flows (fixed payments)
|
$118
|
Operating
cash flows (liability reduction)
|
78
|
|
|
Right-of-use assets
obtained in exchange for lease obligations:
|
|
Operating
leases
|
2,840
|
|
March
31,
2019
|
|
|
Weighted average
remaining lease term (in years)
|
7.96
|
Weighted average
discount rate
|
5.50%
|
|
March 31,
2019
|
Remaining nine months of 2019
|
$354
|
2020
|
401
|
2021
|
431
|
2022
|
439
|
2023
|
448
|
Thereafter
|
1,410
|
Total
payments
|
3,483
|
Less:
imputed interest
|
737
|
Total
liability
|
$2,746
|
|
Percentage of
Sales
Three Months
Ended
|
|
|
March
31,
2019
|
March
31,
2018
|
Sales
|
100.0%
|
100.0%
|
Cost of
products
|
(68.1)
|
(58.8)
|
Gross
margin
|
31.9
|
41.2
|
Selling, general
and administrative expenses
|
(62.2)
|
(34.8)
|
Other income
(expense)
|
8.4
|
(11.1)
|
Loss before income
taxes
|
(21.9)
|
(4.7)
|
Income tax
benefit
|
4.7
|
0.9
|
Net
loss
|
(17.2)%
|
(3.8)%
|
Total Number of Shares Purchased
|
Average Price Paid Per Share (1)
|
Total Number of Shares Purchased as Part of Publicly Announced
Plans or Programs (2)
|
Maximum Number of Shares that May Yet Be Purchased Under Publicly
Announced Plans or Programs (2)
|
|
01/01/19-01/31/19
|
55,033
|
$4.38
|
55,033
|
330,459
|
02/01/19-02/28/19
|
10,354
|
$3.96
|
10,354
|
320,105
|
03/01/19-03/31/19
|
12,548
|
$4.33
|
12,548
|
307,557
|
Total
|
77,935
|
$4.22
|
77,935
|
|
Exhibit
Number
|
|
Description
|
|
Agreement
and Plan of Merger, dated as of March 28, 2019, by and among BK
Technologies, Inc., BK Technologies Corporation and BK Merger Sub,
Inc. (Incorporated by reference from Exhibit 2.1 to the
Company’s Current Report on Form 8-K12B filed March 28,
2019)
|
|
|
Articles
of Merger, filed with the Nevada Secretary of State on March 28,
2019 (Incorporated by reference from Exhibit 3.1 to the
Company’s Current Report on Form 8-K12B filed March 28,
2019)
|
|
|
Articles
of Incorporation of BK Technologies Corporation (Incorporated by
reference from Exhibit 3.2 to the Company’s Current Report on
Form 8-K12B filed March 28, 2019)
|
|
|
Bylaws
of BK Technologies Corporation (Incorporated by reference from
Exhibit 3.3 to the Company’s Current Report on Form 8-K12B
filed March 28, 2019)
|
|
|
Form of
Common Stock Certificate of BK Technologies Corporation
(Incorporated by reference from Exhibit 4.1 to the Company’s
Current Report on Form 8-K12B filed March 28, 2019)
|
|
|
Employment
Agreement, executed March 20, 2019, by and between the Company and
Timothy A. Vitou (Incorporated by reference from Exhibit 10.1 to
the Company’s Current Report on Form 8-K filed March 21,
2019)
|
|
|
Employment
Agreement, executed March 20, 2019, by and between the Company and
William P. Kelly (Incorporated by reference from Exhibit 10.2 to
the Company’s Current Report on Form 8-K filed March 21,
2019)
|
|
|
Employment
Agreement, executed March 20, 2019, by and between the Company and
Randy Willis (Incorporated by reference from Exhibit 10.3 to the
Company’s Current Report on Form 8-K filed March 21,
2019)
|
|
|
Employment
Agreement, executed March 20, 2019, by and between the Company and
James R. Holthaus (Incorporated by reference from Exhibit 10.4 to
the Company’s Current Report on Form 8-K filed March 21,
2019)
|
|
|
Omnibus
Amendment to Incentive Compensation Plans, dated as of March 28,
2019, by and between BK Technologies, Inc. and BK Technologies
Corporation (Incorporated by reference from Exhibit 10.1 to the
Company’s Current Report on Form 8-K12B filed March 28,
2019)
|
|
|
Form of
Stock Option Agreement under the BK Technologies Corporation 2017
Incentive Compensation Plan (Incorporated by reference from Exhibit
10.2 to the Company’s Current Report on Form 8-K12B filed
March 28, 2019)
|
|
|
Form of
Restricted Share Agreement under the BK Technologies Corporation
2017 Incentive Compensation Plan (Incorporated by reference from
Exhibit 10.3 to the Company’s Current Report on Form 8-K12B
filed March 28, 2019)
|
|
|
Form of
Restricted Stock Unit Agreement under the BK Technologies
Corporation 2017 Incentive Compensation Plan (Incorporated by
reference from Exhibit 10.4 to the Company’s Current Report
on Form 8-K12B filed March 28, 2019)
|
|
|
Amended
and Restated Loan and Security Agreement, dated as of March 28,
2019, by and among Silicon Valley Bank, BK Technologies, Inc. and
RELM Communications, Inc. (Incorporated by reference from Exhibit
10.1 to the Company’s Current Report on Form 8-K filed April
2, 2019)
|
|
Certification
of Principal Executive Officer Pursuant to Item 601(b)(31) of
Regulation S-K, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
|
|
Certification
of Principal Financial Officer Pursuant to Item 601(b)(31) of
Regulation S-K, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
|
|
|
Certification
of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002 (furnished pursuant to Item 601(b) (32) of Regulation
S-K)
|
|
|
Certification
of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002 (furnished pursuant to Item 601(b) (32) of Regulation
S-K)
|
|
Exhibit
101.INS
|
|
XBRL
Instance Document
|
Exhibit
101.SCH
|
|
XBRL
Taxonomy Extension Schema Document
|
Exhibit
101.CAL
|
|
XBRL
Taxonomy Extension Calculation Linkbase Document
|
Exhibit
101.LAB
|
|
XBRL
Taxonomy Extension Label Linkbase Document
|
Exhibit
101.PRE
|
|
XBRL
Taxonomy Extension Presentation Linkbase Document
|
Exhibit
101.DEF
|
|
XBRL
Taxonomy Definition Linkbase Document
|
|
BK TECHNOLOGIES CORPORATION
|
|
(The “Registrant”)
|
|
|
Date:
May 8, 2019
|
By:/s/
Timothy A.
Vitou
|
|
Timothy
A. Vitou
President
(Principal
executive officer and duly
authorized
officer)
|
|
|
Date:
May 8, 2019
|
By:/s/
William P.
Kelly
|
|
William
P. Kelly
Executive Vice
President and
Chief
Financial Officer
(Principal
financial and accounting
officer
and duly authorized officer)
|
|
|
Document and Entity Information - shares |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Apr. 26, 2019 |
|
Document And Entity Information | ||
Entity Registrant Name | BK Technologies Corp | |
Entity Central Index Key | 0000002186 | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2019 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Is Entity's Reporting Status Current? | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Emerging Growth Company | false | |
Entity Small Business | true | |
Entity Common Stock, Shares Outstanding | 12,716,514 | |
Document Fiscal Period Focus | Q1 | |
Document Fiscal Year Focus | 2019 |
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares |
Mar. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Stockholders equity: | ||
Preferred stock, par value | $ 1.00 | $ 1.00 |
Preferred stock, authorized shares | 1,000,000 | 1,000,000 |
Preferred stock, issued shares | 0 | 0 |
Preferred stock, outstanding shares | 0 | 0 |
Common stock, par value | $ .60 | $ .60 |
Common stock, authorized shares | 20,000,000 | 20,000,000 |
Common stock, issued shares | 13,883,937 | 13,882,937 |
Common stock, outstanding shares | 12,740,894 | 12,817,829 |
Treasury stock, shares | 1,143,043 | 1,065,108 |
Condensed Consolidated Statements of Income (Unaudited) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Income Statement [Abstract] | ||
Sales, net | $ 7,644 | $ 11,746 |
Expenses | ||
Cost of products | 5,207 | 6,909 |
Selling, general and administrative | 4,755 | 4,089 |
Total expenses | 9,962 | 10,998 |
Operating (loss) income | (2,318) | 748 |
Other income (expense): | ||
Interest income | 55 | 17 |
Gain (loss) on investment in securities | 592 | (1,146) |
Gain on disposal of property, plant and equipment | 3 | 0 |
Other expense | (5) | (168) |
Total other income (expense) | 645 | (1,297) |
Loss before income taxes | (1,673) | (549) |
Income tax benefit | 355 | 106 |
Net loss | $ (1,318) | $ (443) |
Net earnings per share-basic | $ (0.10) | $ (0.03) |
Net earnings per share-diluted | $ (0.10) | $ (0.03) |
Weighted average shares outstanding-basic | 12,761,713 | 13,754,119 |
Weighted average shares outstanding-diluted | 12,761,713 | 13,754,119 |
1. Condensed Consolidated Financial Statements |
3 Months Ended |
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Mar. 31, 2019 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
NOTE 1 - Condensed Consolidated Financial Statements | Basis of Presentation The condensed consolidated balance sheet as of March 31, 2019, the condensed consolidated statements of operations for the three months ended March 31, 2019 and 2018, and the condensed consolidated statements of cash flows for the three months ended March 31, 2019 and 2018 have been prepared by BK Technologies Corporation (the “Company” or “we”), and are unaudited. On March 28, 2019, BK Technologies, Inc., the predecessor of BK Technologies Corporation, implemented a holding company reorganization, which resulted in BK Technologies Corporation becoming the direct parent company of, and the successor issuer to, BK Technologies, Inc. For the purpose of this report, references to “we” or the “Company” or its management or business at any period prior to the holding company reorganization (March 28, 2019) refer to those of BK Technologies, Inc. as the predecessor company and its subsidiaries and thereafter to those of BK Technologies Corporation and its subsidiaries, except as otherwise specified or to the extent the context otherwise indicates. See Note 2 (Significant Events and Transactions) of the Notes to these condensed consolidated financial statements for additional information regarding the holding company reorganization. In the opinion of management, all adjustments, which include normal recurring adjustments, necessary for a fair presentation have been made. All intercompany transactions and balances have been eliminated in consolidation. The condensed consolidated balance sheet at December 31, 2018 has been derived from the Company’s audited consolidated financial statements at that date. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been condensed or omitted. It is suggested that these condensed consolidated financial statements be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018, as filed with the Securities and Exchange Commission (“SEC”). The results of operations for the three months ended March 31, 2019 are not necessarily indicative of the operating results for a full year. Revenue Recognition Effective January 1, 2018, the Company adopted Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers, and the additional related ASUs (“ASC 606”), which replaced existing revenue guidance and outlines a single set of comprehensive principles for recognizing revenue under U.S. GAAP. The Company elected the modified retrospective method upon adoption with no impact to the opening retained earnings or revenue reported. These standards provide guidance on recognizing revenue, including a five-step method to determine when revenue recognition is appropriate: Step 1: Identify the contract with the customer; Step 2: Identify the performance obligations in the contract; Step 3: Determine the transaction price; Step 4: Allocate the transaction price to the performance obligations; and Step 5: Recognize revenue as the Company satisfies a performance obligation. ASC 606 provides that revenue is recognized when control of the promised goods or services is transferred to customers at an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. We generally satisfy performance obligations upon shipment of the product or service to the customer. This is consistent with the time in which the customer obtains control of the product or service. For extended warranties, sales revenue associated with the warranty is deferred at the time of sale and later recognized on a straight-line basis over the extended warranty period. Some contracts include installation services, which are completed in a short period of time and the revenue is recognized when the installation is complete. Principles of Consolidation The Company consolidates entities in which it has a controlling financial interest. The Company determines whether it has a controlling financial interest in an entity by first evaluating whether the entity is a variable interest entity (“VIE”) or a voting interest entity. VIEs are entities in which (i) the total equity investment at risk is not sufficient to enable the entity to finance its activities independently, or (ii) the at-risk equity holders do not have the normal characteristics of a controlling financial interest. A controlling financial interest in a VIE is present when an enterprise has one or more variable interests that have both (i) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance, and (ii) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE. The enterprise with a controlling financial interest is the primary beneficiary and consolidates the VIE. Voting interest entities lack one or more of the characteristics of a VIE. The usual condition for a controlling financial interest is ownership of a majority voting interest for a corporation or a majority of kick-out or participating rights for a limited partnership. When the Company does not have a controlling financial interest in an entity but exerts significant influence over the entity’s operating and financial policies (generally defined as owning a voting or economic interest of between 20% to 50%), the Company’s investment is accounted for under the equity method of accounting. If the Company does not have a controlling financial interest in, or exert significant influence over, an entity, the Company accounts for its investment at fair value, if the fair value option was elected, or at cost. The Company has an investment in 1347 Property Insurance Holdings, Inc., made through FGI 1347 Holdings, LP, a consolidated VIE. Fair Value The Company’s financial instruments consist of cash and cash equivalents, trade accounts receivable, investment in securities, accounts payable, accrued expenses and other liabilities. As of March 31, 2019 and December 31, 2018, the carrying amount of cash and cash equivalents, trade accounts receivable, accounts payable, accrued expenses and other liabilities approximated their respective fair value due to the short-term nature and maturity of these instruments. The Company uses observable market data or assumptions (Level 1 inputs, as defined in accounting guidance) that it believes market participants would use in pricing the investment in securities. There were no transfers of investment in securities between Level 1 and Level 2 during the three months ended March 31, 2019 or 2018. Available-For-Sale Securities On January 1, 2018, the Company adopted ASU 2016-01 “Financial Instruments,” which amended the guidance in U.S. GAAP regarding the classification and measurement of financial instruments. Changes to the prior guidance primarily affected the accounting for equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. In addition, the ASU clarified guidance related to the valuation allowance assessment when recognizing deferred tax assets resulting from unrealized losses on available-for-sale debt securities. Upon its adoption, the Company applied the amendments by means of a cumulative-effect adjustment to the balance sheet at the beginning of the first reporting period in which the guidance was effective. On January 1, 2018, the Company recognized approximately $4,300 of net unrealized gain in its accumulated deficit balance. During the first quarter of 2018, the Company sold 1,317,503 shares of Iteris, Inc. (Nasdaq: ITI), which cost $2,402, for approximately $8,335 of proceeds and reported a loss on the sales of approximately $849. Recently Adopted Accounting Pronouncements In February 2016, the FASB issued ASU 2016-02 “Leases,” which amends leasing guidance by requiring companies to recognize a right-of-use asset and a lease liability for all operating and capital (finance) leases with lease terms greater than twelve months. The lease liability is equal to the present value of lease payments. The lease asset is based on the lease liability, subject to adjustment, such as for initial direct costs. For income statement purposes, leases continue to be classified as operating or capital (finance), with lease expense in both cases calculated substantially the same as under the prior leasing guidance. The updated guidance is effective for interim and annual periods beginning after December 15, 2018. The Company adopted the new guidance on January 1, 2019. Adoption resulted in the recognition of right-of-use assets and lease liabilities on the condensed consolidated financial statements. Based on the Company’s lease portfolio as of March 31, 2019, which consists solely of operating leases, the Company recognized approximately $2,746 of right-of-use assets and lease liabilities on its consolidated financial statements. Refer to Note 12 (Leases) for further details. In August 2018, the SEC adopted the final rule under SEC Release No. 33-10532, “Disclosure Update and Simplification”, amending certain disclosure requirements that were redundant, duplicative, overlapping, outdated or superseded. In addition, the amendments expanded the disclosure requirements on the analysis of stockholders’ equity for interim financial statements. Under the amendments, an analysis of changes in each caption of stockholders’ equity presented in the balance sheet must be provided in a note or separate statement. The analysis should present a reconciliation of the beginning balance to the ending balance of each period for which a statement of comprehensive income is required to be filed. This final rule is effective for all filings made on or after November 5, 2018. Given the effective date and the proximity to most filers’ quarterly reports, the SEC permitted deferring the presentation of interim changes in stockholders’ equity in Forms 10-Q until the quarter that begins after the date of adoption, November 5, 2018. The Company adopted this rule in the first quarter of 2019, and its adoption did not have a material impact on its consolidated financial statements. Note 7 (Stockholders’ Equity) of the Notes to these condensed consolidated financial statements summarizes changes in stockholders’ equity. Recent Accounting Pronouncements The Company does not discuss recent pronouncements that are not anticipated to have an impact on or are unrelated to its financial condition, results of operations, cash flows or disclosures. |
2. Significant Events and Transactions |
3 Months Ended |
---|---|
Mar. 31, 2019 | |
Significant Events And Transactions | |
NOTE 2 - Significant Events and Transactions | On March 28, 2019, the Company implemented a holding company reorganization. The reorganization created a new holding company, BK Technologies Corporation, which became the new parent company of BK Technologies, Inc. The holding company reorganization was intended to create a more efficient corporate structure and increase operational flexibility. The Company did not incur any material operational or financial impacts. The holding company reorganization was effected through a merger transaction among BK Technologies, Inc., BK Technologies Corporation, then a wholly-owned subsidiary of BK Technologies, Inc., and a former direct, wholly-owned subsidiary of BK Technologies Corporation that merged with and into BK Technologies, Inc., with BK Technologies, Inc. surviving as a wholly-owned subsidiary of BK Technologies Corporation. The merger was a tax-free transaction for U.S. federal income tax purposes for the Company’s stockholders. No stockholder vote of the Company was required to effect the merger transaction. As part of the holding company reorganization, stockholders of BK Technologies, Inc. became stockholders of BK Technologies Corporation, on a one-for-one basis, with the same number of shares and same ownership percentage of common stock that they held immediately prior to the holding company reorganization. Following the reorganization, BK Technologies Corporation replaced BK Technologies, Inc. as the publicly traded entity, and shares of BK Technologies Corporation were listed on the NYSE American under the symbol “BKTI,” which is the same symbol as previously used by BK Technologies, Inc. The Company’s common stock was assigned a new CUSIP Number: 05587G 104. The holding company has the same directors and executive officers as its predecessor, BK Technologies, Inc. In March 2019, BK Technologies, Inc. made a dividend payment of $256 to BK Technologies Corporation as the holding company for the payment of quarterly dividends to stockholders. Pursuant to the Company’s capital return program, the Company’s Board of Directors declared a quarterly dividend of $0.02 per share of the Company’s common stock in March 2019 to stockholders of record as of April 1, 2019. These dividends were paid on April 15, 2019. |
3. Allowance for Doubtful Accounts |
3 Months Ended |
---|---|
Mar. 31, 2019 | |
Allowance For Doubtful Accounts | |
NOTE 3 - Allowance for Doubtful Accounts | The allowance for doubtful accounts on trade receivables was approximately $50 on gross trade receivables of $5,095 and $5,771 at March 31, 2019 and December 31, 2018, respectively. This allowance is used to state trade receivables at a net realizable value or the amount that the Company estimates will be collected of the Company’s gross trade receivables. |
4. Inventories, net |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||
Inventory Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||
NOTE 4 - Inventories, net | The components of inventories, net of allowances for slow-moving, excess or obsolete inventory, consist of the following:
Allowances for slow-moving, excess, or obsolete inventory are used to state the Company’s inventories at the lower of cost or net realizable value. The allowances were approximately $648 at March 31, 2019, compared with approximately $629 at December 31, 2018. |
5. Income Taxes |
3 Months Ended |
---|---|
Mar. 31, 2019 | |
Income Tax Disclosure [Abstract] | |
NOTE 5 - Income Taxes | The Company recorded an income tax benefit of approximately $355 for the three months ended March 31, 2019, compared with approximately $106 for the same period last year. The Company’s income tax provision is based on management’s estimate of the effective tax rate for the full year. The tax provision in any period will be affected by, among other things, permanent, as well as temporary differences in the deductibility of certain items, in addition to changes in tax legislation. As a result, the Company may experience significant fluctuations in the effective book tax rate (that is, tax expense divided by pre-tax book income) from period to period. As of March 31, 2019, the Company’s net deferred tax assets totaled approximately $3.9 million, and were primarily derived from research and development tax credits, accrued expenses and net operating loss carryforwards (“NOLs”). In order to fully utilize the net deferred tax assets, the Company will need to generate sufficient taxable income in future years. The Company analyzed all positive and negative evidence to determine if, based on the weight of available evidence, it is more likely than not to realize the benefit of the net deferred tax assets. The recognition of the net deferred tax assets and related tax benefits is based upon the Company’s conclusions regarding, among other considerations, estimates of future earnings based on information currently available and current and anticipated customers, contracts and product introductions, as well as historical operating results and certain tax planning strategies. Based on the analysis of all available evidence, both positive and negative, the Company has concluded that it has the ability to generate sufficient taxable income in the necessary period to utilize the entire benefit for the deferred tax asset. The Company cannot presently estimate what, if any, changes to the valuation of our deferred tax assets may be deemed appropriate in the future. If the Company incurs future losses, it may be necessary to record a valuation allowance related to the deferred tax assets recognized as of March 31, 2019. |
6. Investment in Securities |
3 Months Ended |
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Mar. 31, 2019 | |
Schedule of Investments [Abstract] | |
NOTE 6 - Investment in Securities | The Company has an investment in a limited partnership, FGI 1347 Holdings, LP, of which the Company is the sole limited partner. FGI 1347 Holdings, LP, was established for the purpose of investing in securities. As of March 31, 2019, the Company indirectly held approximately $212 in cash and 477,282 shares of 1347 Property Insurance Holdings, Inc. (Nasdaq: PIH) with fair value of $2,511, through an investment in FGI 1347 Holdings, LP. These shares were purchased in March and May 2018 for approximately $3,741. For the three months ended March 31, 2019 and 2018, the Company recognized an unrealized gain on the investment of approximately $592 and an unrealized loss of $297, respectively. Affiliates of Fundamental Global Investors, LLC serve as the general partner and the investment manager of FGI 1347 Holdings, LP, and the Company is the sole limited partner. As of March 31, 2019, the Company and the affiliates of Fundamental Global Investors, LLC, including without limitation Ballantyne Strong, Inc., beneficially owned in the aggregate 2,714,362 shares of PIH’s common stock, representing approximately 45.1% of PIH’s outstanding shares. Fundamental Global with its affiliates is the largest stockholder of the Company. Mr. Kyle Cerminara, Chairman of the Company’s Board of Directors, is Chief Executive Officer, Co-Founder and Partner of Fundamental Global Investors, LLC and serves as Chief Executive Officer and Chairman of the Board of Directors of Ballantyne Strong. Mr. Lewis M. Johnson, Co-Chairman of the Company, is President, Co-Founder and Partner of Fundamental Global Investors, LLC and serves as Co-Chairman of the Board of Directors of Ballantyne Strong. Messrs. Cerminara and Johnson also serve as Chairman and Co-Chairman, respectively, of the Board of Directors of PIH. |
7. Stockholders' Equity |
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Stockholders' equity: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
NOTE 7 - Stockholders' Equity | The changes in condensed consolidated stockholders’ equity for the three months ended March 31, 2019 and 2018 are as follows:
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8. Loss per Share |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
NOTE 8 - Loss per Share | The following table sets forth the computation of basic and diluted loss per share:
Approximately 537,500 stock options and 148,598 restricted stock units for the three months ended March 31, 2019, and 438,500 stock options and 30,570 restricted stock units for the three months ended March 31, 2018, were excluded from the calculation because they were anti-dilutive. |
9. Non-Cash Share-Based Employee Compensation |
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Compensation Related Costs [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
NOTE 9 - Non-Cash Share-Based Employee Compensation | The Company has an employee and non-employee director share-based incentive compensation plan. Related to these programs, the Company recorded non-cash share-based employee compensation expense of $31 for the three months ended March 31, 2019, compared with $21 for the same period last year. The Company considers its non-cash share-based employee compensation expenses as a component of cost of products and selling, general and administrative expenses. There was no non-cash share-based employee compensation expense capitalized as part of capital expenditures or inventory for the periods presented. The Company uses the Black-Scholes-Merton option valuation model to calculate the fair value of a stock option grant. The non-cash share-based employee compensation expense recorded in the three months ended March 31, 2019 was calculated using certain assumptions. Such assumptions are described more comprehensively in Note 10 (Share-Based Employee Compensation) so the Notes to the Company’s consolidated financial statements included in its Annual Report on Form 10-K for the fiscal year ended December 31, 2018. A summary of activity under the Company’s stock option plans during the three months ended March 31, 2019 is presented below:
Restricted Stock Units On September 6, 2018, the Company granted to each non-employee director restricted stock units with a grant fair value of $20 per award (resulting in total aggregate grant-date fair value of $140), which will vest in five equal annual installments beginning with the first anniversary of the grant date, subject to the director’s continued service through such date, provided that, if the director makes himself available and consents to be nominated by the Company for continued service as a director, but is not nominated for the Board for election by shareholders, other than for good reason as determined by the Board in its discretion, then the restricted stock units shall vest in full as of the director’s last date of service as a director of the Company. On June 4, 2018, the Company granted to each non-employee director restricted stock units with a grant fair value of $20 per award (resulting in total aggregate grant-date fair value of $140), which will vest on June 4, 2019, subject to continued service through such vesting date. On June 15, 2017, the Company granted to each non-employee director restricted stock units with a grant fair value of $20 per award (resulting in total aggregate grant-date fair value of $140), which vested on June 15, 2018. The Company recorded non-cash restricted stock unit compensation expense of $41 for the three months ended March 31, 2019, compared with $34 for the same period last year. |
10. Commitments and Contingencies |
3 Months Ended |
---|---|
Mar. 31, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
NOTE 10 - Commitments and Contingencies | From time to time, the Company may be involved in various claims and legal actions arising in the ordinary course of its business. There were no pending material claims or legal matters as of March 31, 2019. Purchase Commitments As of March 31, 2019, the Company had purchase orders to suppliers for inventory of approximately $15,071. Significant Customers Sales to United States government agencies represented approximately $5,401 (70.7%) of the Company’s total net sales for the three months ended March 31, 2019, compared with approximately $3,993 (34.0%) for the same period last year. Accounts receivable from agencies of the United States government were $4,255 as of March 31, 2019, compared with approximately $1,928 at the same date last year. |
11. Debt |
3 Months Ended |
---|---|
Mar. 31, 2019 | |
Debt Disclosure [Abstract] | |
NOTE 11 - Debt | On March 28, 2019, BK Technologies, Inc., a wholly-owned subsidiary of BK Technologies Corporation (the “Company”), RELM Communications, Inc., a subsidiary of BK Technologies, Inc., and Silicon Valley Bank, as lender (“SVB”), entered into an Amended and Restated Loan and Security Agreement (the “Loan and Security Agreement”). The Loan and Security Agreement replaced BK Technologies, Inc.’s prior Loan and Security Agreement with SVB (the “Prior Agreement”) under which its secured revolving credit facility (the “Credit Facility”) was maintained. Pursuant to the Loan and Security Agreement, the Credit Facility continues to provide BK Technologies, Inc. with a maximum borrowing availability of $1,000 and BK Technologies, Inc. continues to be subject to substantially the same customary borrowing terms and conditions under the Credit Facility as it was under the Prior Agreement, including the accuracy of representations and warranties, compliance with financial maintenance and restrictive covenants and the absence of events of default. Pursuant to the Loan and Security Agreement, payment of cash dividends, in the aggregate not to exceed $5,000 during any twelve-month period, is permitted so long as an event of default does not exist at the time of such dividend and would not exist after giving effect to such dividend. Any borrowings under the Credit Facility will bear interest at the variable interest rate equal to 25 basis points above the Wall Street Journal prime rate. The maturity date of the Credit Facility has been extended to December 26, 2019. The financial maintenance covenants, required to be maintained at all times and tested quarterly (or, for the “Adjusted Quick Ratio” covenant, monthly, if any obligations are outstanding), include: (1) a ratio of “Quick Assets” to the sum of “Current Liabilities” plus outstanding borrowings to SVB to the extent not included in “Current Liabilities” minus the current portion of “Deferred Revenue” (all as defined in the Loan and Security Agreement) of at least 1.25:1.00; provided that “Net Cash” (defined as the difference between unrestricted cash on deposit with SVB minus any outstanding advances under the Credit Facility) is required to be at least $1,000; and (2) maximum “Total Leverage” (as defined in the Loan and Security Agreement) of no greater total consolidated “Indebtedness” than 3 times “Adjusted EBITDA” (all as defined in the Loan and Security Agreement). BK Technologies, Inc.’s obligations are collateralized by substantially all of its assets, principally accounts receivable and inventory. BK Technologies, Inc. was in compliance with all covenants under the Loan and Security Agreement as of the date of filing this report. As of the date of filing this Current Report, there were no borrowings outstanding under the Credit Facility. |
12. Leases |
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Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
NOTE 12 - Leases | The Company adopted ASU No. 2016-02, “Leases” (Topic 842) on January 1, 2019 and applied the modified retrospective approach to adoption whereby the standard is applied only to the current period. The Company leases manufacturing and office facilities and equipment under operating leases and determines if an arrangement is a lease at inception. Right-of-use ("ROU") assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent its obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term.
As most of its leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. The Company has lease agreements with lease and non-lease components, which are accounted for separately.
Lease costs consist of the following:
Supplemental cash flow information related to leases was as follows:
Other information related to operating leases was as follows:
Maturity of lease liabilities as of March 31, 2019 are as follows
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1. Condensed Consolidated Financial Statements (Policies) |
3 Months Ended |
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Mar. 31, 2019 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation | The condensed consolidated balance sheet as of March 31, 2019, the condensed consolidated statements of operations for the three months ended March 31, 2019 and 2018, and the condensed consolidated statements of cash flows for the three months ended March 31, 2019 and 2018 have been prepared by BK Technologies Corporation (the “Company” or “we”), and are unaudited. On March 28, 2019, BK Technologies, Inc., the predecessor of BK Technologies Corporation, implemented a holding company reorganization, which resulted in BK Technologies Corporation becoming the direct parent company of, and the successor issuer to, BK Technologies, Inc. For the purpose of this report, references to “we” or the “Company” or its management or business at any period prior to the holding company reorganization (March 28, 2019) refer to those of BK Technologies, Inc. as the predecessor company and its subsidiaries and thereafter to those of BK Technologies Corporation and its subsidiaries, except as otherwise specified or to the extent the context otherwise indicates. See Note 2 (Significant Events and Transactions) of the Notes to these condensed consolidated financial statements for additional information regarding the holding company reorganization. In the opinion of management, all adjustments, which include normal recurring adjustments, necessary for a fair presentation have been made. All intercompany transactions and balances have been eliminated in consolidation. The condensed consolidated balance sheet at December 31, 2018 has been derived from the Company’s audited consolidated financial statements at that date. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been condensed or omitted. It is suggested that these condensed consolidated financial statements be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018, as filed with the Securities and Exchange Commission (“SEC”). The results of operations for the three months ended March 31, 2019 are not necessarily indicative of the operating results for a full year. |
Revenue Recognition | Effective January 1, 2018, the Company adopted Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers, and the additional related ASUs (“ASC 606”), which replaced existing revenue guidance and outlines a single set of comprehensive principles for recognizing revenue under U.S. GAAP. The Company elected the modified retrospective method upon adoption with no impact to the opening retained earnings or revenue reported. These standards provide guidance on recognizing revenue, including a five-step method to determine when revenue recognition is appropriate: Step 1: Identify the contract with the customer; Step 2: Identify the performance obligations in the contract; Step 3: Determine the transaction price; Step 4: Allocate the transaction price to the performance obligations; and Step 5: Recognize revenue as the Company satisfies a performance obligation. ASC 606 provides that revenue is recognized when control of the promised goods or services is transferred to customers at an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. We generally satisfy performance obligations upon shipment of the product or service to the customer. This is consistent with the time in which the customer obtains control of the product or service. For extended warranties, sales revenue associated with the warranty is deferred at the time of sale and later recognized on a straight-line basis over the extended warranty period. Some contracts include installation services, which are completed in a short period of time and the revenue is recognized when the installation is complete. |
Principles of Consolidation | The Company consolidates entities in which it has a controlling financial interest. The Company determines whether it has a controlling financial interest in an entity by first evaluating whether the entity is a variable interest entity (“VIE”) or a voting interest entity. VIEs are entities in which (i) the total equity investment at risk is not sufficient to enable the entity to finance its activities independently, or (ii) the at-risk equity holders do not have the normal characteristics of a controlling financial interest. A controlling financial interest in a VIE is present when an enterprise has one or more variable interests that have both (i) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance, and (ii) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE. The enterprise with a controlling financial interest is the primary beneficiary and consolidates the VIE. Voting interest entities lack one or more of the characteristics of a VIE. The usual condition for a controlling financial interest is ownership of a majority voting interest for a corporation or a majority of kick-out or participating rights for a limited partnership. When the Company does not have a controlling financial interest in an entity but exerts significant influence over the entity’s operating and financial policies (generally defined as owning a voting or economic interest of between 20% to 50%), the Company’s investment is accounted for under the equity method of accounting. If the Company does not have a controlling financial interest in, or exert significant influence over, an entity, the Company accounts for its investment at fair value, if the fair value option was elected, or at cost. The Company has an investment in 1347 Property Insurance Holdings, Inc., made through FGI 1347 Holdings, LP, a consolidated VIE. |
Fair Value | The Company’s financial instruments consist of cash and cash equivalents, trade accounts receivable, investment in securities, accounts payable, accrued expenses and other liabilities. As of March 31, 2019 and December 31, 2018, the carrying amount of cash and cash equivalents, trade accounts receivable, accounts payable, accrued expenses and other liabilities approximated their respective fair value due to the short-term nature and maturity of these instruments. The Company uses observable market data or assumptions (Level 1 inputs, as defined in accounting guidance) that it believes market participants would use in pricing the investment in securities. There were no transfers of investment in securities between Level 1 and Level 2 during the three months ended March 31, 2019 or 2018. |
Available-For-Sale Securities | On January 1, 2018, the Company adopted ASU 2016-01 “Financial Instruments,” which amended the guidance in U.S. GAAP regarding the classification and measurement of financial instruments. Changes to the prior guidance primarily affected the accounting for equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. In addition, the ASU clarified guidance related to the valuation allowance assessment when recognizing deferred tax assets resulting from unrealized losses on available-for-sale debt securities. Upon its adoption, the Company applied the amendments by means of a cumulative-effect adjustment to the balance sheet at the beginning of the first reporting period in which the guidance was effective. On January 1, 2018, the Company recognized approximately $4,300 of net unrealized gain in its accumulated deficit balance. During the first quarter of 2018, the Company sold 1,317,503 shares of Iteris, Inc. (Nasdaq: ITI), which cost $2,402, for approximately $8,335 of proceeds and reported a loss on the sales of approximately $849. |
Recent Accounting Pronouncements | Recently Adopted Accounting Pronouncements In February 2016, the FASB issued ASU 2016-02 “Leases,” which amends leasing guidance by requiring companies to recognize a right-of-use asset and a lease liability for all operating and capital (finance) leases with lease terms greater than twelve months. The lease liability is equal to the present value of lease payments. The lease asset is based on the lease liability, subject to adjustment, such as for initial direct costs. For income statement purposes, leases continue to be classified as operating or capital (finance), with lease expense in both cases calculated substantially the same as under the prior leasing guidance. The updated guidance is effective for interim and annual periods beginning after December 15, 2018. The Company adopted the new guidance on January 1, 2019. Adoption resulted in the recognition of right-of-use assets and lease liabilities on the condensed consolidated financial statements. Based on the Company’s lease portfolio as of March 31, 2019, which consists solely of operating leases, the Company recognized approximately $2,746 of right-of-use assets and lease liabilities on its consolidated financial statements. Refer to Note 12 (Leases) for further details. In August 2018, the SEC adopted the final rule under SEC Release No. 33-10532, “Disclosure Update and Simplification”, amending certain disclosure requirements that were redundant, duplicative, overlapping, outdated or superseded. In addition, the amendments expanded the disclosure requirements on the analysis of stockholders’ equity for interim financial statements. Under the amendments, an analysis of changes in each caption of stockholders’ equity presented in the balance sheet must be provided in a note or separate statement. The analysis should present a reconciliation of the beginning balance to the ending balance of each period for which a statement of comprehensive income is required to be filed. This final rule is effective for all filings made on or after November 5, 2018. Given the effective date and the proximity to most filers’ quarterly reports, the SEC permitted deferring the presentation of interim changes in stockholders’ equity in Forms 10-Q until the quarter that begins after the date of adoption, November 5, 2018. The Company adopted this rule in the first quarter of 2019, and its adoption did not have a material impact on its consolidated financial statements. Note 7 (Stockholders’ Equity) of the Notes to these condensed consolidated financial statements summarizes changes in stockholders’ equity. Recent Accounting Pronouncements The Company does not discuss recent pronouncements that are not anticipated to have an impact on or are unrelated to its financial condition, results of operations, cash flows or disclosures. |
4. Inventories, net (Tables) |
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Mar. 31, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||
Inventory Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||
Components of inventory |
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7. Stockholders' Equity (Tables) |
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Changes in consolidated stockholders' equity |
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8. Loss per Share (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Computation of basic and diluted income per share |
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9. Non-Cash Share-Based Employee Compensation (Tables) |
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A summary of stock option activity |
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12. Leases (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Leases [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Lease cost |
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Supplemental cash flow information related to leases |
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Other information related to operating leases |
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Maturity of lease liabilities |
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3. Allowance for Doubtful Accounts (Details Narrative) - USD ($) $ in Thousands |
Mar. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Allowance For Doubtful Accounts | ||
Allowance for doubtful accounts on trade receivables | $ 50 | $ 50 |
Accounts receivable, gross | $ 5,095 | $ 5,771 |
4. Inventories, net (Details) - USD ($) $ in Thousands |
Mar. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Inventory Disclosure [Abstract] | ||
Finished goods | $ 3,612 | $ 2,004 |
Work in process | 5,274 | 5,750 |
Raw materials | 3,276 | 3,712 |
Total inventory | $ 12,162 | $ 11,466 |
4. Inventories, net (Details Narrative) - USD ($) $ in Thousands |
Mar. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Inventory Disclosure [Abstract] | ||
Reserves for slow-moving, excess, or obsolete inventory | $ 648 | $ 629 |
5. Income Taxes (Details Narrative) - USD ($) $ in Thousands |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
Dec. 31, 2018 |
|
Income Tax Disclosure [Abstract] | |||
Income tax expense | $ 355 | $ 106 | |
Net deferred tax assets | $ 3,850 | $ 3,495 |
8. Loss per Share (Details) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Numerator: | ||
Net loss (numerator for basic and diluted earnings per share) | $ (1,318) | $ (443) |
Denominator: | ||
Denominator for basic earnings per share weighted average shares | 12,761,713 | 13,754,119 |
Effect of dilutive securities: | ||
Options and restricted stock units | 0 | 0 |
Denominator | ||
Denominator for diluted earnings per share weighted average shares | 12,761,713 | 13,754,119 |
Basic income per share | $ (0.10) | $ (0.03) |
Diluted income per share | $ (0.10) | $ (0.03) |
11. Debt (Details Narrative) - SiliconValleyBankMember $ in Thousands |
3 Months Ended |
---|---|
Mar. 31, 2019
USD ($)
| |
Credit facility with maximum borrowing | $ 1,000 |
Maturity date | 12-26-2019 |
Revolving credit outstanding balance | $ 0 |
Borrowing available under the revolving credit facility | $ 1,000 |
12. Leases (Details) $ in Thousands |
3 Months Ended |
---|---|
Mar. 31, 2019
USD ($)
| |
Leases [Abstract] | |
Operating lease cost | $ 134 |
Short-term lease cost | 4 |
Variable lease cost | 32 |
Total lease cost | $ 170 |
12. Leases (Details 1) $ in Thousands |
3 Months Ended |
---|---|
Mar. 31, 2019
USD ($)
| |
Cash paid for amounts included in the measurement of lease liabilities: | |
Operating cash flows (fixed payments) | $ 118 |
Operating cash flows (liability reduction) | 78 |
Right-of-use assets obtained in exchange for lease obligations: | |
Operating leases | $ 2,840 |
12. Leases (Details 2) |
Mar. 31, 2019 |
---|---|
Leases [Abstract] | |
Weighted average remaining lease term (in years) | 7 years 11 months 16 days |
Weighted average discount rate | 5.50% |
12. Leases (Details 3) $ in Thousands |
Mar. 31, 2019
USD ($)
|
---|---|
Leases [Abstract] | |
Remaining nine months of 2019 | $ 354 |
2020 | 401 |
2021 | 431 |
2022 | 439 |
2023 | 448 |
Thereafter | 1,410 |
Total payments | 3,483 |
Less: imputed interest | 737 |
Total liability | $ 2,746 |
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