ý |
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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☐ |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Delaware
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38-1799862
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(State or Other Jurisdiction of
Incorporation or Organization) |
(I.R.S. Employer
Identification No.) |
2525 Shader Road, Orlando, Florida
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32804
|
||
(Address of Principal Executive Offices)
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(Zip Code)
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Title of each class
|
Name of each exchange on which registered
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Common Stock, $0.01 Par Value
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NYSE MKT
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Page
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PART I
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||||
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Item 1.
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Business.
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1
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|||
Item 1A.
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Risk Factors.
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6
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|||
Item 1B.
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Unresolved Staff Comments.
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14
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|||
Item 2.
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Properties.
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14
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|||
Item 3.
|
Legal Proceedings.
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14
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|||
Item 4.
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Mine Safety Disclosures.
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14
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|||
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|
||||
PART II
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|
||||
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||||
Item 5.
|
Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
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15
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|||
Item 6.
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Selected Financial Data.
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16
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|||
Item 7.
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Management's Discussion and Analysis of Financial Condition and Results of Operations.
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17
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|||
Item 7A.
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Quantitative and Qualitative Disclosures About Market Risk.
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20
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|||
Item 8.
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Financial Statements and Supplementary Data.
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20
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|||
Item 9.
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Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.
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20
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|||
Item 9A.
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Controls and Procedures.
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20
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|||
Item 9B.
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Other Information.
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21
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|||
|
|
||||
PART III
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|
||||
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|
||||
Item 10.
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Directors and Executive Officers and Corporate Governance.
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21
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|||
Item 11.
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Executive Compensation.
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21
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|||
Item 12.
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Security Ownership Of Certain Beneficial Owners and Management and Related Stockholder Matters.
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21
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|||
Item 13.
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Certain Relationships and Related Transactions, and Director Independence.
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21
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|||
Item 14.
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Principal Accountant Fees and Services.
|
21
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|||
|
|
||||
PART IV
|
|
||||
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|
||||
Item 15.
|
Exhibits and Financial Statement Schedules.
|
22
|
|||
Item 16.
|
Form 10-K Summary
|
24
|
Item 1.
|
Business.
|
‒ |
The diversion of our management's attention from the management of our existing business to the integration of the operations and personnel of the acquired or combined business or joint venture;
|
‒ |
General economic conditions affecting the availability of long-term or short-term credit facilities, the purchasing and payment patterns of our customers, or the requirements imposed by our suppliers;
|
‒ |
Changes in financial estimates or investment recommendations by securities analysts relating to our common stock;
|
‒ |
Announcements by us or our competitors of significant contracts, acquisitions, strategic partnerships, joint ventures or capital commitments; and
|
Item 1B.
|
Unresolved Staff Comments.
|
Item 2.
|
Properties.
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Item 3.
|
Legal Proceedings.
|
Item 4.
|
Mine Safety Disclosures.
|
Item 5.
|
Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
|
Fiscal Year 2017
|
High
|
Low
|
||||||
First Quarter (1)
|
$
|
5.49
|
$
|
4.40
|
||||
|
||||||||
Fiscal Year 2016
|
High
|
Low
|
||||||
First Quarter
|
$
|
4.09
|
$
|
2.86
|
||||
Second Quarter
|
3.83
|
3.05
|
||||||
Third Quarter
|
4.36
|
3.12
|
||||||
Fourth Quarter
|
5.83
|
3.62
|
||||||
|
||||||||
Fiscal Year 2015
|
High
|
Low
|
||||||
First Quarter
|
$
|
4.30
|
$
|
3.53
|
||||
Second Quarter
|
5.47
|
3.82
|
||||||
Third Quarter
|
5.11
|
3.42
|
||||||
Fourth Quarter
|
4.15
|
3.51
|
Period
|
Total Number of Shares Purchased (1)
|
Average
Price Paid per Share
|
Total Number of Shares Purchased as Part of Publicly Announced Programs
|
Maximum Number of Shares that May Yet Be Purchased Under the Programs
|
||||||||||||
October 1, 2016 to October 31, 2016
|
500
|
$
|
4.15
|
500
|
458,966
|
|||||||||||
November 1, 2016 to November 30, 2016
|
550
|
3.86
|
550
|
458,416
|
||||||||||||
December 1, 2016 to December 31, 2016
|
—
|
—
|
—
|
458,416
|
||||||||||||
1,050
|
$
|
4.00
|
1,050
|
—
|
(1)
|
All of the shares purchased during the quarter ended December 31, 2016, were purchased under our publicly announced repurchase program described above.
|
Year ended December 31,
|
||||||||||||||||||||
(in thousands, except share and per share data)
|
||||||||||||||||||||
2016
|
2015
|
2014
|
2013
|
2012
|
||||||||||||||||
Revenues
|
$
|
20,891
|
$
|
20,713
|
$
|
23,013
|
$
|
26,201
|
$
|
29,706
|
||||||||||
Operating loss (a)
|
(161
|
)
|
(788
|
)
|
(2,829
|
)
|
(4,164
|
)
|
(1,782
|
)
|
||||||||||
Loss before income taxes
|
(17
|
)
|
(703
|
)
|
(2,829
|
)
|
(4,271
|
)
|
(1,844
|
)
|
||||||||||
Benefit (provision) for income taxes
|
165
|
(8
|
)
|
4
|
(3,948
|
)
|
524
|
|||||||||||||
Net income (loss)
|
$
|
148
|
$
|
(711
|
)
|
$
|
(2,825
|
)
|
$
|
(8,219
|
)
|
$
|
(1,320
|
)
|
||||||
Weighted average number of shares use basic EPS calculation
|
2,665,043
|
2,640,803
|
2,595,988
|
2,595,362
|
2,593,741
|
|||||||||||||||
Weighted average number of shares used in the diluted EPS calculation
|
2,665,730
|
2,640,803
|
2,595,988
|
2,595,362
|
2,593,741
|
|||||||||||||||
Per common share:
|
||||||||||||||||||||
Basic and diluted net income (loss) per common share
|
$
|
0.06
|
$
|
(0.27
|
)
|
$
|
(1.09
|
)
|
$
|
(3.17
|
)
|
$
|
(0.51
|
)
|
||||||
December 31,
|
||||||||||||||||||||
(in thousands)
|
||||||||||||||||||||
2016
|
2015
|
2014
|
2013
|
2012
|
||||||||||||||||
Cash and cash equivalents
|
$
|
2,778
|
$
|
5,553
|
$
|
5,192
|
$
|
7,183
|
$
|
8,625
|
||||||||||
Working capital
|
10,135
|
9,876
|
9,909
|
12,446
|
16,624
|
|||||||||||||||
Total assets
|
16,646
|
15,803
|
17,262
|
21,263
|
29,593
|
|||||||||||||||
Total long-term debt (including curren portion)
|
—
|
—
|
—
|
—
|
58
|
|||||||||||||||
Stockholders' equity (b)
|
$
|
13,891
|
$
|
13,727
|
$
|
14,237
|
$
|
16,755
|
$
|
24,614
|
Item 7.
|
Management's Discussion and Analysis of Financial Condition and Results of Operations.
|
Item 7A.
|
Quantitative and Qualitative Disclosures About Market Risk.
|
Item 8.
|
Financial Statements and Supplementary Data.
|
Item 9.
|
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.
|
Item 9A.
|
Controls and Procedures.
|
Item 9B.
|
Other Information.
|
Item 15.
|
Exhibits and Financial Statement Schedules.
|
(a)
|
List of documents filed as part of this report:
|
Exhibit No.
|
Description
|
||
2.1
|
Asset Purchase Agreement, dated as of January 31, 2014, made by and between M-tron Industries, Inc. and Trilithic, Inc. (incorporated by reference to Exhibit 2.1 to the Company's Quarterly Report on Form 10-Q filed with the SEC on May 15, 2014).
|
||
3.1
|
Certificate of Incorporation of The LGL Group, Inc. (incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K filed with the SEC on August 31, 2007).
|
||
3.2
|
The LGL Group, Inc. By-Laws (incorporated by reference to Exhibit 3.2 to the Company's Current Report on Form 8-K filed with the SEC on August 31, 2007).
|
||
3.3
|
The LGL Group, Inc. Amendment No. 1 to By-Laws (incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K filed with the SEC on June 17, 2014).
|
||
4.1
|
Warrant Agreement, dated as of July 30, 2013, by and among The LGL Group, Inc., Computershare Inc. and Computershare Trust Company, N.A. (incorporated by reference to Exhibit 4.1 to the Company's Quarterly Report on Form 10-Q filed with the SEC on August 14, 2013).
|
||
10.1
|
The LGL Group, Inc. 401(k) Savings Plan (incorporated by reference to Exhibit 10(b) to the Company's Annual Report on Form 10-K filed with the SEC on April 1, 1996).
|
10.2
|
The LGL Group, Inc. 2001 Equity Incentive Plan adopted December 10, 2001 (incorporated by reference to Exhibit 4 to the Company's Registration Statement on Form S-8 filed with the SEC on December 29, 2005).
|
||
10.3
|
Form of Restricted Stock Agreement (2001 Equity Incentive Plan) by and between The LGL Group, Inc. and each of its directors (incorporated by reference to Exhibit 10.10 to the Company's Annual Report on Form 10-K filed with the SEC on March 24, 2011).
|
||
10.4
|
Form of Restricted Stock Agreement (2001 Equity Incentive Plan) by and between The LGL Group, Inc. and each of its executive officers (incorporated by reference to Exhibit 10.11 to the Company's Annual Report on Form 10-K filed with the SEC on March 24, 2011).
|
||
10.5
|
The LGL Group, Inc. Amended and Restated 2011 Incentive Plan (incorporated by reference to Annex A of the Company's Definitive Proxy Statement with respect to the Company's 2016 Annual Meeting of Stockholders, filed on April 29, 2016).
|
||
10.6
|
Form of Stock Option Agreement (2011 Incentive Plan) (incorporated by reference to Exhibit 4.2 to the Company's Registration Statement on Form S-8 filed with the SEC on December 30, 2011).
|
||
10.7
|
Form of Restricted Stock Agreement (2011 Incentive Plan) (incorporated by reference to Exhibit 4.3 to the Company's Registration Statement on Form S-8 filed with the SEC on December 30, 2011).
|
||
10.8
|
Form of Indemnification Agreement by and between The LGL Group, Inc. and its executive officers and directors (incorporated by reference to Exhibit 10.9 to the Company's Annual Report on Form 10-K filed with the SEC on March 24, 2011).
|
||
10.9
|
Offer of Employment Letter, effective as of October 1, 2013, by and between The LGL Group, Inc. and Michael J. Ferrantino (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed with the SEC on October 7, 2013).
|
||
10.10
|
Agreement and Release, dated May 27, 2014, by and between Gregory P. Anderson and The LGL Group, Inc. (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed with the SEC on May 28, 2014).
|
||
10.11
|
Agreement and Release, dated May 27, 2014, by and between James L. Williams and The LGL Group, Inc. (incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed with the SEC on May 28, 2014).
|
||
10.12
|
Registration Rights Agreement, dated as of September 19, 2013, by and between the Company and Venator Merchant Fund L.P. (incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed with the SEC on September 19, 2013).
|
||
10.13
|
Loan Agreement, dated as of September 30, 2014, by and between M-tron Industries, Inc. and City National Bank of Florida (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed with the SEC on October 2, 2014).
|
||
10.14
|
Revolving Promissory Note, dated as of September 30, 2014, by and between M-tron Industries, Inc. and City National Bank of Florida (incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed with the SEC on October 2, 2014).
|
||
10.15
|
Cash Collateral Agreement, dated as of September 30, 2014, by and between M-tron Industries, Inc. and City National Bank of Florida (incorporated by reference to Exhibit 10.3 to the Company's Current Report on Form 8-K filed with the SEC on October 2, 2014).
|
||
21.1
|
Subsidiaries of The LGL Group, Inc.*
|
||
23.1
|
Consent of Independent Registered Public Accounting Firm – RSM US LLP.*
|
31.1
|
Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
|
||
31.2
|
Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
|
||
32.1
|
Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**
|
||
32.2
|
Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**
|
||
101.INS
|
XBRL Instance Document*
|
||
101.SCH
|
XBRL Taxonomy Extension Schema Document*
|
||
101.CAL
|
XBRL Taxonomy Extension Calculation Linkbase Document*
|
||
101.DEF
|
XBRL Taxonomy Extension Definition Linkbase Document*
|
||
101.LAB
|
XBRL Taxonomy Extension Label Linkbase Document*
|
||
101.PRE
|
XBRL Taxonomy Extension Presentation Linkbase Document*
|
Item 16.
|
Form 10-K Summary.
|
|
THE LGL GROUP, INC.
|
||
|
|
||
|
|
||
March 29, 2017
|
By:
|
/s/ Michael J. Ferrantino, Sr.
|
|
|
|
Michael J. Ferrantino, Sr.
|
|
|
|
President and Chief Executive Officer
(Principal Executive Officer)
|
|
|
|
|
SIGNATURE
|
CAPACITY
|
DATE
|
|
|
|
/s/ Michael J. Ferrantino, Sr.
|
President and Chief Executive Officer
|
March 29, 2017
|
MICHAEL J. FERRANTINO, SR.
|
(Principal Executive Officer)
|
|
/s/ Patti A. Smith
|
Chief Financial Officer
|
March 29, 2017
|
PATTI A. SMITH
|
(Principal Financial Officer)
|
|
/s/ Marc J. Gabelli
|
Director
|
March 29, 2017
|
MARC J. GABELLI
|
|
|
/s/ Timothy Foufas
|
Director
|
March 29, 2017
|
TIMOTHY FOUFAS
|
|
|
/s/ Donald H. Hunter
|
Director
|
March 29, 2017
|
DONALD H. HUNTER
|
|
|
/s/ Manjit Kalha
|
Director
|
March 29, 2017
|
MANJIT KALHA
|
|
|
/s/ Frederic V. Salerno
|
Director
|
March 29, 2017
|
FREDERIC V. SALERNO
|
|
|
/s/ Hendi Susanto
|
Director
|
March 29, 2017
|
HENDI SUSANTO
|
|
|
/s/ Antonio Visconti
|
Director
|
March 29, 2017
|
ANTONIO VISCONTI
|
|
|
December 31,
|
||||||||
ASSETS
|
2016
|
2015
|
||||||
Current Assets:
|
||||||||
Cash and cash equivalents
|
$
|
2,778
|
$
|
5,553
|
||||
Marketable securities
|
2,770
|
56
|
||||||
Accounts receivable, net of allowances of $31 and $34, respectively
|
3,504
|
2,606
|
||||||
Inventories, net
|
3,638
|
3,546
|
||||||
Prepaid expenses and other current assets
|
200
|
191
|
||||||
Total Current Assets
|
12,890
|
11,952
|
||||||
Property, Plant and Equipment
|
||||||||
Land
|
633
|
633
|
||||||
Buildings and improvements
|
3,966
|
3,938
|
||||||
Machinery and equipment
|
16,849
|
16,633
|
||||||
Gross property, plant and equipment
|
21,448
|
21,204
|
||||||
Less: accumulated depreciation
|
(18,737
|
)
|
(18,039
|
)
|
||||
Net property, plant, and equipment
|
2,711
|
3,165
|
||||||
Intangible assets, net
|
628
|
475
|
||||||
Deferred income taxes, net
|
214
|
—
|
||||||
Other assets
|
203
|
211
|
||||||
Total Assets
|
$
|
16,646
|
$
|
15,803
|
||||
LIABILITIES AND STOCKHOLDERS' EQUITY
|
||||||||
Current Liabilities:
|
||||||||
Accounts payable
|
$
|
1,525
|
$
|
987
|
||||
Accrued compensation and commissions expense
|
942
|
769
|
||||||
Other accrued expenses
|
288
|
320
|
||||||
Total Current Liabilities
|
2,755
|
2,076
|
||||||
Commitments and Contingencies (Note K)
|
||||||||
Stockholders' Equity
|
||||||||
Common stock, $0.01 par value - 10,000,000 shares authorized; 2,757,050 shares issued and 2,675,466 shares outstanding at December 31, 2016, and 2,745,098 shares issued and 2,665,434 shares outstanding at December 31, 2015
|
27
|
27
|
||||||
Additional paid-in capital
|
29,173
|
29,106
|
||||||
Accumulated deficit
|
(14,726
|
)
|
(14,874
|
)
|
||||
Treasury stock, 81,584 and 79,664 shares held in treasury at cost at December 31, 2016 and 2015, respectively
|
(580
|
)
|
(572
|
)
|
||||
Accumulated other comprehensive (loss) income
|
(3
|
)
|
40
|
|||||
Total Stockholders' Equity
|
13,891
|
13,727
|
||||||
Total Liabilities and Stockholders' Equity
|
$
|
16,646
|
$
|
15,803
|
Years Ended December 31,
|
||||||||
2016
|
2015
|
|||||||
REVENUES
|
$
|
20,891
|
$
|
20,713
|
||||
Costs and expenses:
|
||||||||
Manufacturing cost of sales
|
13,858
|
13,863
|
||||||
Engineering, selling and administrative
|
7,194
|
7,638
|
||||||
OPERATING LOSS
|
(161
|
)
|
(788
|
)
|
||||
Other Income (Expense):
|
||||||||
Interest expense, net
|
(22
|
)
|
(32
|
)
|
||||
Other income, net
|
166
|
117
|
||||||
Total Other Income, Net
|
144
|
85
|
||||||
LOSS BEFORE INCOME TAXES
|
(17
|
)
|
(703
|
)
|
||||
Income tax benefit (provision)
|
165
|
(8
|
)
|
|||||
NET INCOME (LOSS)
|
$
|
148
|
$
|
(711
|
)
|
|||
Basic per share information:
|
||||||||
Weighted average number of shares used in basic EPS calculation
|
2,665,043
|
2,640,803
|
||||||
Net income (loss)
|
$
|
0.06
|
$
|
(0.27
|
)
|
|||
Diluted per share information:
|
||||||||
Weighted average number of shares used in diluted EPS calculation
|
2,665,730 | 2,640,803 | ||||||
Net income (loss)
|
$
|
0.06
|
$
|
(0.27
|
)
|
Years Ended December 31,
|
||||||||
2016
|
2015
|
|||||||
NET INCOME (LOSS)
|
$
|
148
|
$
|
(711
|
)
|
|||
Other comprehensive loss:
|
||||||||
Unrealized loss on available-for-sale securities, net
|
(43
|
)
|
(4
|
)
|
||||
TOTAL OTHER COMPREHENSIVE LOSS
|
(43
|
)
|
(4
|
)
|
||||
COMPREHENSIVE INCOME (LOSS)
|
$
|
105
|
$
|
(715
|
)
|
Shares of Common Stock Outstanding
|
Common Stock
|
Additional Paid-In Capital
|
Accumulated Deficit
|
Treasury
Stock
|
Accumulated Other Comprehensive Income (Loss)
|
Total
|
||||||||||||||||||||||
Balance at December 31, 2014
|
2,616,485
|
$
|
27
|
$
|
28,901
|
$
|
(14,163
|
)
|
$
|
(572
|
)
|
$
|
44
|
$
|
14,237
|
|||||||||||||
Net loss
|
—
|
—
|
—
|
(711
|
)
|
—
|
—
|
(711
|
)
|
|||||||||||||||||||
Other comprehensive loss
|
—
|
—
|
—
|
—
|
—
|
(4
|
)
|
(4
|
)
|
|||||||||||||||||||
Stock-based compensation
|
48,949
|
—
|
265
|
—
|
—
|
—
|
265
|
|||||||||||||||||||||
Warrant dividend issuance costs
|
—
|
—
|
(60
|
)
|
—
|
—
|
—
|
(60
|
)
|
|||||||||||||||||||
Balance at December 31, 2015
|
2,665,434
|
27
|
29,106
|
(14,874
|
)
|
(572
|
)
|
40
|
13,727
|
|||||||||||||||||||
Net income
|
—
|
—
|
—
|
148
|
—
|
—
|
148
|
|||||||||||||||||||||
Other comprehensive loss
|
—
|
—
|
—
|
—
|
—
|
(43
|
)
|
(43
|
)
|
|||||||||||||||||||
Stock-based compensation
|
11,952
|
—
|
67
|
—
|
—
|
—
|
67
|
|||||||||||||||||||||
Purchase of treasury stock
|
(1,920
|
)
|
—
|
—
|
—
|
(8
|
)
|
—
|
(8
|
)
|
||||||||||||||||||
Balance at December 31, 2016
|
2,675,466
|
$
|
27
|
$
|
29,173
|
$
|
(14,726
|
)
|
$
|
(580
|
)
|
$
|
(3
|
)
|
$
|
13,891
|
Years Ended December 31,
|
||||||||
2016
|
2015
|
|||||||
OPERATING ACTIVITIES
|
||||||||
Net income (loss)
|
$
|
148
|
$
|
(711
|
)
|
|||
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
|
||||||||
Depreciation
|
704
|
804
|
||||||
Amortization of finite-lived intangible assets
|
68
|
66
|
||||||
Gain on disposal of assets
|
(110
|
)
|
(67
|
)
|
||||
Impairment of note receivable
|
—
|
43
|
||||||
Stock-based compensation
|
67
|
265
|
||||||
Bargain purchase gain
|
(4
|
)
|
—
|
|||||
Deferred income tax benefit
|
(214
|
)
|
—
|
|||||
Dividend from marketable securities
|
(62
|
)
|
—
|
|||||
Changes in operating assets and liabilities:
|
||||||||
(Increase) decrease in accounts receivable, net
|
(890
|
)
|
660
|
|||||
(Increase) decrease in inventories, net
|
(62
|
)
|
625
|
|||||
(Increase) decrease in prepaid expenses and other assets
|
(1
|
)
|
13
|
|||||
Increase (decrease) in accounts payable, accrued compensation and commissions expense and other accrued liabilities
|
634
|
(1,009
|
)
|
|||||
Net cash provided by operating activities
|
278
|
689
|
||||||
INVESTING ACTIVITIES
|
||||||||
Purchase of marketable securities
|
(2,695
|
)
|
—
|
|||||
Capital expenditures
|
(172
|
)
|
(422
|
)
|
||||
Acquisition of a business
|
(295
|
)
|
—
|
|||||
Other
|
117
|
94
|
||||||
Net cash used in investing activities
|
(3,045
|
)
|
(328
|
)
|
||||
FINANCING ACTIVITIES
|
||||||||
Purchase of treasury stock
|
(8
|
)
|
—
|
|||||
Net cash used in financing activities
|
(8
|
)
|
—
|
|||||
(Decrease) increase in cash and cash equivalents
|
(2,775
|
)
|
361
|
|||||
Cash and cash equivalents at beginning of year
|
5,553
|
5,192
|
||||||
Cash and cash equivalents at end of year
|
$
|
2,778
|
$
|
5,553
|
||||
Supplemental Disclosure:
|
||||||||
Cash paid for interest
|
$
|
17
|
$
|
21
|
||||
Cash paid for income taxes
|
$
|
52
|
$
|
30
|
Supplemental Schedule of Noncash Investing Activities:
|
||||||||
Acquisition of a business:
|
||||||||
Fair value of equipment acquired
|
$
|
85
|
$
|
—
|
||||
Fair value of intangible assets acquired
|
214
|
—
|
||||||
Current assets acquired
|
45
|
—
|
||||||
Current liabilities assumed
|
(45
|
)
|
—
|
|||||
Bargain purchase gain
|
(4
|
)
|
—
|
|||||
Cash consideration paid
|
$
|
295
|
$
|
—
|
Owned By The LGL Group, Inc.
|
||||
M-tron Industries, Inc.
|
100.0
|
%
|
||
Piezo Technology, Inc.
|
100.0
|
%
|
||
Piezo Technology India Private Ltd.
|
99.0
|
%
|
||
M-tron Asia, LLC
|
100.0
|
%
|
||
M-tron Industries, Ltd.
|
100.0
|
%
|
||
GC Opportunities Ltd.
|
100.0
|
%
|
||
M-tron Services, Ltd.
|
100.0
|
%
|
||
Precise Time and Frequency, LLC
|
100.0
|
%
|
||
Lynch Systems, Inc.
|
100.0
|
%
|
2017
|
$
|
75
|
||
2018
|
75
|
|||
2019
|
75
|
|||
2020
|
75
|
|||
2021
|
75
|
|||
Thereafter
|
213
|
|||
Total
|
$
|
588
|
·
|
persuasive evidence that an arrangement exists;
|
·
|
delivery has occurred;
|
·
|
the seller's price to the buyer is fixed and determinable; and
|
·
|
collectability is reasonably assured.
|
·
|
seller's price to the buyer is fixed or determinable at the date of sale;
|
·
|
buyer has paid the seller, or the buyer is obligated to pay the seller and the obligation is not contingent on resale of the product;
|
·
|
buyer's obligation to the seller would not be changed in the event of theft or physical destruction or damage of the product;
|
·
|
buyer acquiring the product for resale has economic substance apart from that provided by the seller;
|
·
|
seller does not have obligations for future performance; and
|
·
|
the amount of future returns can be reasonably estimated.
|
Years Ended December 31,
|
||||||||
2016
|
2015
|
|||||||
Weighted average shares outstanding - basic
|
2,665,043
|
2,640,803
|
||||||
Effect of diluted securities
|
687
|
—
|
||||||
Weighted average shares outstanding - diluted
|
2,665,730
|
2,640,803
|
Purchase consideration
|
$
|
295
|
||
|
||||
Net assets acquired:
|
||||
Current assets
|
45
|
|||
Fixed assets
|
85
|
|||
Intangible assets
|
214
|
|||
Current liabilities
|
(45
|
)
|
||
Net assets acquired
|
$
|
299
|
||
|
||||
Bargain purchase gain
|
$
|
(4
|
)
|
|
Year Ended
December 31, 2016
|
|||||||||||
|
Historical
|
Pro Forma Adjustments
|
Pro Forma
|
|||||||||
|
||||||||||||
Revenue
|
$
|
21,129
|
$
|
-
|
$
|
21,129
|
||||||
Net income
|
$
|
136
|
$
|
25
|
$
|
161
|
||||||
|
||||||||||||
Basic net income per share
|
$
|
0.05
|
$
|
0.01
|
$
|
0.06
|
||||||
Diluted net income per share
|
$
|
0.05
|
$
|
0.01
|
$
|
0.06
|
|
Year Ended
December 31, 2015
|
|||||||||||
|
Historical
|
Pro Forma Adjustments
|
Pro Forma
|
|||||||||
|
||||||||||||
Revenue
|
$
|
21,443
|
$
|
-
|
$
|
21,443
|
||||||
Net loss
|
$
|
(752
|
)
|
$
|
(55
|
)
|
$
|
(807
|
)
|
|||
|
||||||||||||
Basic net loss per share
|
$
|
(0.29
|
)
|
$
|
(0.01
|
)
|
$
|
(0.30
|
)
|
|||
Diluted net loss per share
|
$
|
(0.29
|
)
|
$
|
(0.01
|
)
|
$
|
(0.30
|
)
|
December 31,
|
||||||||
2016
|
2015
|
|||||||
(in thousands)
|
||||||||
Raw materials
|
$
|
1,408
|
$
|
1,418
|
||||
Work in process
|
1,306
|
1,325
|
||||||
Finished goods
|
924
|
803
|
||||||
Total Inventories, net
|
$
|
3,638
|
$
|
3,546
|
2016
|
2015
|
|||||||
Expected volatility
|
31
|
%
|
32% – 50
|
%
|
||||
Dividend rate
|
0
|
%
|
0
|
%
|
||||
Expected term (in years)
|
3.25 – 3.55
|
3.55
|
||||||
Risk-free rate
|
0.92% – 1.49
|
%
|
1.06% – 1.25
|
%
|
||||
Forfeiture rate
|
0% – 25
|
%
|
0% – 10
|
%
|
Number of
Stock
Options
|
Weighted
Average
Exercise
Price
|
Weighted Average Remaining Contractual Term
|
Aggregate Intrinsic
Value
|
|||||||||||||
Outstanding at December 31, 2015
|
194,726
|
9.27
|
$
|
—
|
||||||||||||
Granted during 2016
|
64,442
|
4.61
|
—
|
|||||||||||||
Exercised during 2016
|
—
|
—
|
—
|
|||||||||||||
Forfeited during 2016
|
(82,824
|
)
|
14.94
|
—
|
||||||||||||
Expired during 2016
|
—
|
—
|
—
|
|||||||||||||
Outstanding at December 31, 2016
|
176,344
|
$
|
4.90
|
3.4
|
$
|
—
|
||||||||||
Exercisable at December 31, 2016
|
79,733
|
$
|
5.06
|
2.8
|
$
|
—
|
Number of Stock Awards
|
Weighted Average Grant Date Fair Value
|
|||||||
Unvested at December 31, 2015
|
845
|
$
|
5.81
|
|||||
Granted during 2016
|
11,952
|
5.02
|
||||||
Vested during 2016
|
(12,797
|
)
|
5.07
|
|||||
Forfeited during 2016
|
—
|
—
|
||||||
Unvested at December 31, 2016
|
—
|
$
|
—
|
2016
|
2015
|
|||||||
(in thousands)
|
||||||||
Current:
|
||||||||
Federal
|
$
|
—
|
$
|
—
|
||||
State and local
|
8
|
8
|
||||||
Foreign
|
41
|
—
|
||||||
Total Current
|
49
|
8
|
||||||
Deferred:
|
||||||||
Federal
|
(211
|
)
|
(292
|
)
|
||||
State and local
|
267
|
(12
|
)
|
|||||
Foreign
|
55
|
(1
|
)
|
|||||
Total before change in valuation allowance
|
111
|
(305
|
)
|
|||||
Change in Valuation Allowance
|
(325
|
)
|
305
|
|||||
Net Deferred
|
(214
|
)
|
—
|
|||||
$
|
(165
|
)
|
$
|
8
|
2016
|
2015
|
|||||||
(in thousands)
|
||||||||
Tax provision at expected statutory rate
|
$
|
(8
|
)
|
$
|
(239
|
)
|
||
State taxes, net of federal benefit
|
(25
|
)
|
4
|
|||||
Permanent differences
|
6
|
8
|
||||||
Credits
|
(123
|
)
|
(97
|
)
|
||||
Foreign tax expense, and other
|
11
|
27
|
||||||
True-up to State NOL
|
299
|
—
|
||||||
Change in valuation allowance
|
(325
|
)
|
305
|
|||||
(Benefit) provision for income taxes
|
$
|
(165
|
)
|
$
|
8
|
December 31, 2016
|
December 31, 2015
|
|||||||||||||||
Deferred Tax
|
Deferred Tax
|
|||||||||||||||
Asset
|
Liability
|
Asset
|
Liability
|
|||||||||||||
(in thousands)
|
||||||||||||||||
Inventory reserve
|
$
|
1,083
|
$
|
—
|
$
|
1,179
|
$
|
—
|
||||||||
Fixed assets
|
—
|
151
|
—
|
230
|
||||||||||||
Other reserves and accruals
|
213
|
—
|
173
|
—
|
||||||||||||
Stock-based compensation
|
384
|
—
|
380
|
—
|
||||||||||||
Undistributed foreign earnings
|
—
|
144
|
—
|
97
|
||||||||||||
Other
|
—
|
56
|
—
|
68
|
||||||||||||
Tax credit carry-forwards
|
1,921
|
—
|
1,840
|
—
|
||||||||||||
Federal tax loss carry-forwards
|
3,428
|
—
|
3,270
|
—
|
||||||||||||
State tax loss carry-forwards
|
627
|
—
|
915
|
—
|
||||||||||||
Foreign tax loss carry-forwards
|
214
|
—
|
269
|
—
|
||||||||||||
Total deferred income taxes
|
7,870
|
$
|
351
|
8,026
|
$
|
395
|
||||||||||
Valuation allowance
|
(7,305
|
)
|
(7,631
|
)
|
||||||||||||
Net deferred tax assets
|
$
|
214
|
$
|
—
|
Level 1 |
Level 2 |
Level 3 |
Total
December 31, 2016
|
|||||||||||||
Marketable Securities (equity securities)
|
$
|
2,770
|
$
|
—
|
$
|
—
|
$
|
2,770
|
||||||||
U.S. Treasury securities (cash equivalents)
|
$
|
1,002
|
$
|
—
|
$
|
—
|
$
|
1,002
|
(Level 1) |
(Level 2)
|
(Level 3) |
Total
December 31, 2015
|
|||||||||||||
Marketable Securities (equity securities)
|
$
|
56
|
$
|
—
|
$
|
—
|
$
|
56
|
||||||||
U.S. Treasury securities (cash equivalents)
|
$
|
4,089
|
$
|
—
|
$
|
—
|
$
|
4,089
|
Years Ended December 31,
|
||||||||
2016
|
2015
|
|||||||
(in thousands)
|
||||||||
Revenues from Operations
|
||||||||
Electronic components
|
$
|
20,691
|
$
|
20,713
|
||||
Electronic instruments
|
200
|
—
|
||||||
Total consolidated revenues
|
$
|
20,891
|
20,713
|
|||||
Operating Income (Loss) from Operations
|
||||||||
Electronic components
|
$
|
1,011
|
$
|
309
|
||||
Electronic instruments
|
(61
|
)
|
—
|
|||||
Unallocated corporate expense
|
(1,111
|
)
|
(1,097
|
)
|
||||
Consolidated total operating loss
|
(161
|
)
|
(788
|
)
|
||||
Interest expense, net
|
(22
|
)
|
(32
|
)
|
||||
Other income, net
|
166
|
117
|
||||||
Total other income
|
144
|
85
|
||||||
Loss Before Income Taxes
|
$
|
(17
|
)
|
$
|
(703
|
)
|
||
Capital Expenditures
|
||||||||
Electronic components
|
$
|
162
|
$
|
412
|
||||
Electronic instruments
|
—
|
—
|
||||||
General corporate
|
10
|
10
|
||||||
Total capital expenditures
|
$
|
172
|
$
|
422
|
||||
Total Assets
|
||||||||
Electronic components
|
$
|
9,015
|
$
|
8,266
|
||||
Electronic instruments
|
531
|
—
|
||||||
General corporate
|
7,100
|
7,537
|
||||||
Consolidated total assets
|
$
|
16,646
|
$
|
15,803
|
Years Ended December 31,
|
||||||||
2016
|
2015
|
|||||||
(in thousands)
|
||||||||
Malaysia
|
$
|
3,240
|
$
|
2,455
|
||||
China
|
315
|
778
|
||||||
All other foreign countries
|
2,443
|
2,220
|
||||||
Total foreign revenues
|
$
|
5,998
|
$
|
5,453
|
Exhibit No.
|
Description
|
||
2.1
|
Asset Purchase Agreement, dated as of January 31, 2014, made by and between M-tron Industries, Inc. and Trilithic, Inc. (incorporated by reference to Exhibit 2.1 to the Company's Quarterly Report on Form 10-Q filed with the SEC on May 15, 2014).
|
||
3.1
|
Certificate of Incorporation of The LGL Group, Inc. (incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K filed with the SEC on August 31, 2007).
|
||
3.2
|
The LGL Group, Inc. By-Laws (incorporated by reference to Exhibit 3.2 to the Company's Current Report on Form 8-K filed with the SEC on August 31, 2007).
|
||
3.3
|
The LGL Group, Inc. Amendment No. 1 to By-Laws (incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K filed with the SEC on June 17, 2014).
|
||
4.1
|
Warrant Agreement, dated as of July 30, 2013, by and among The LGL Group, Inc., Computershare Inc. and Computershare Trust Company, N.A. (incorporated by reference to Exhibit 4.1 to the Company's Quarterly Report on Form 10-Q filed with the SEC on August 14, 2013).
|
||
10.1
|
The LGL Group, Inc. 401(k) Savings Plan (incorporated by reference to Exhibit 10(b) to the Company's Annual Report on Form 10-K filed with the SEC on April 1, 1996).
|
||
10.2
|
The LGL Group, Inc. 2001 Equity Incentive Plan adopted December 10, 2001 (incorporated by reference to Exhibit 4 to the Company's Registration Statement on Form S-8 filed with the SEC on December 29, 2005).
|
||
10.3
|
Form of Restricted Stock Agreement (2001 Equity Incentive Plan) by and between The LGL Group, Inc. and each of its directors (incorporated by reference to Exhibit 10.10 to the Company's Annual Report on Form 10-K filed with the SEC on March 24, 2011).
|
||
10.4
|
Form of Restricted Stock Agreement (2001 Equity Incentive Plan) by and between The LGL Group, Inc. and each of its executive officers (incorporated by reference to Exhibit 10.11 to the Company's Annual Report on Form 10-K filed with the SEC on March 24, 2011).
|
||
10.5
|
The LGL Group, Inc. Amended and Restated 2011 Incentive Plan (incorporated by reference to Annex A of the Company's Definitive Proxy Statement with respect to the Company's 2016 Annual Meeting of Stockholders, filed on April 29, 2016).
|
||
10.6
|
Form of Stock Option Agreement (2011 Incentive Plan) (incorporated by reference to Exhibit 4.2 to the Company's Registration Statement on Form S-8 filed with the SEC on December 30, 2011).
|
||
10.7
|
Form of Restricted Stock Agreement (2011 Incentive Plan) (incorporated by reference to Exhibit 4.3 to the Company's Registration Statement on Form S-8 filed with the SEC on December 30, 2011).
|
||
10.8
|
Form of Indemnification Agreement by and between The LGL Group, Inc. and its executive officers and directors (incorporated by reference to Exhibit 10.9 to the Company's Annual Report on Form 10-K filed with the SEC on March 24, 2011).
|
||
10.9
|
Offer of Employment Letter, effective as of October 1, 2013, by and between The LGL Group, Inc. and Michael J. Ferrantino (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed with the SEC on October 7, 2013).
|
||
10.10
|
Agreement and Release, dated May 27, 2014, by and between Gregory P. Anderson and The LGL Group, Inc. (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed with the SEC on May 28, 2014).
|
10.11
|
Agreement and Release, dated May 27, 2014, by and between James L. Williams and The LGL Group, Inc. (incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed with the SEC on May 28, 2014).
|
||
10.12
|
Registration Rights Agreement, dated as of September 19, 2013, by and between the Company and Venator Merchant Fund L.P. (incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed with the SEC on September 19, 2013).
|
||
10.13
|
Loan Agreement, dated as of September 30, 2014, by and between M-tron Industries, Inc. and City National Bank of Florida (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed with the SEC on October 2, 2014).
|
||
10.14
|
Revolving Promissory Note, dated as of September 30, 2014, by and between M-tron Industries, Inc. and City National Bank of Florida (incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed with the SEC on October 2, 2014).
|
||
10.15
|
Cash Collateral Agreement, dated as of September 30, 2014, by and between M-tron Industries, Inc. and City National Bank of Florida (incorporated by reference to Exhibit 10.3 to the Company's Current Report on Form 8-K filed with the SEC on October 2, 2014).
|
||
21.1
|
Subsidiaries of The LGL Group, Inc.*
|
||
23.1
|
Consent of Independent Registered Public Accounting Firm – RSM US LLP.*
|
||
31.1
|
Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
|
||
31.2
|
Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
|
||
32.1
|
Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**
|
||
32.2
|
Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**
|
||
101.INS
|
XBRL Instance Document*
|
||
101.SCH
|
XBRL Taxonomy Extension Schema Document*
|
||
101.CAL
|
XBRL Taxonomy Extension Calculation Linkbase Document*
|
||
101.DEF
|
XBRL Taxonomy Extension Definition Linkbase Document*
|
||
101.LAB
|
XBRL Taxonomy Extension Label Linkbase Document*
|
||
101.PRE
|
XBRL Taxonomy Extension Presentation Linkbase Document*
|
Subsidiary Name
|
State or Country of Organization
|
Owned by The LGL Group
|
|||
M-tron Industries, Inc.
|
Delaware
|
100.0
|
%
|
||
Piezo Technology, Inc.
|
Florida
|
100.0
|
%
|
||
Piezo Technology India Private Ltd
|
India
|
99.0
|
%
|
||
M-tron Asia, LLC
|
Hong Kong
|
100.0
|
%
|
||
M-tron Industries, Ltd.
|
Hong Kong
|
100.0
|
%
|
||
GC Opportunities Ltd.
|
Mauritius
|
100.0
|
%
|
||
M-tron Services, Ltd.
|
Hong Kong
|
100.0
|
%
|
||
Precise Time and Frequency, LLC | Delaware | 100.0 | % | ||
Lynch Systems, Inc.
|
South Dakota
|
100.0
|
%
|
1 | I have reviewed this annual report on Form 10-K of The LGL Group, Inc. for the year ended December 31, 2016; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
March 29, 2017
|
/s/ Michael J. Ferrantino, Sr. | |||
Name:
|
Michael J. Ferrantino, Sr.
|
|||
Title:
|
Executive Chairman and Chief Executive Officer
(Principal Executive Officer)
|
1 | I have reviewed this annual report on Form 10-K of The LGL Group, Inc. for the year ended December 31, 2016; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
March 29, 2017
|
/s/ Patti A. Smith | |||
Name:
|
Patti A. Smith
|
|||
Title:
|
Chief Financial Officer
(Principal Financial Officer)
|
1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
March 29, 2017
|
/s/ Michael J. Ferrantino, Sr. | |||
Name:
|
Michael J. Ferrantino, Sr.
|
|||
Title:
|
Executive Chairman and Chief Executive Officer
(Principal Executive Officer)
|
1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
March 29, 2017
|
/s/ Patti A. Smith | |||
Name:
|
Patti A. Smith
|
|||
Title:
|
Chief Financial Officer
(Principal Financial Officer)
|
Document and Entity Information - USD ($) |
12 Months Ended | |
---|---|---|
Dec. 31, 2016 |
Mar. 21, 2017 |
|
Document and Entity Information [Abstract] | ||
Entity Registrant Name | LGL GROUP INC | |
Entity Central Index Key | 0000061004 | |
Current Fiscal Year End Date | --12-31 | |
Entity Well-known Seasoned Issuer | No | |
Entity Voluntary Filers | No | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Smaller Reporting Company | |
Entity Public Float | $ 13,163,000 | |
Entity Common Stock, Shares Outstanding | 2,675,466 | |
Document Fiscal Year Focus | 2016 | |
Document Fiscal Period Focus | FY | |
Document Type | 10-K | |
Amendment Flag | false | |
Document Period End Date | Dec. 31, 2016 |
Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands |
Dec. 31, 2016 |
Dec. 31, 2015 |
---|---|---|
Current Assets: | ||
Accounts receivable, allowances | $ 31 | $ 34 |
Stockholders' Equity | ||
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized (in shares) | 10,000,000 | 10,000,000 |
Common stock, shares issued (in shares) | 2,757,050 | 2,745,098 |
Common stock, shares outstanding (in shares) | 2,675,466 | 2,665,434 |
Treasury stock, (in shares) | 81,584 | 79,664 |
Consolidated Statements of Operations - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
|
CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED [Abstract] | ||
REVENUES | $ 20,891 | $ 20,713 |
Cost and expenses: | ||
Manufacturing cost of sales | 13,858 | 13,863 |
Engineering, selling and administrative | 7,194 | 7,638 |
OPERATING LOSS | (161) | (788) |
Other Income (Expense): | ||
Interest expense, net | (22) | (32) |
Other income, net | 166 | 117 |
Total Other Income, Net | 144 | 85 |
LOSS BEFORE INCOME TAXES | (17) | (703) |
Income tax benefit (provision) | 165 | (8) |
NET INCOME (LOSS) | $ 148 | $ (711) |
Weighted average number of shares used in basic EPS calculation | 2,665,043 | 2,640,803 |
Weighted Average Number of Shares Outstanding, Diluted | 2,665,730 | 2,640,803 |
BASIC AND DILUTED NET INCOME (LOSS) PER COMMON SHARE | $ 0.06 | $ (0.27) |
Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
|
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - UNAUDITED [Abstract] | ||
NET INCOME (LOSS) | $ 148 | $ (711) |
Other comprehensive loss: | ||
Unrealized loss on available-for-sale securities, net | (43) | (4) |
TOTAL OTHER COMPREHENSIVE LOSS | (43) | (4) |
COMPREHENSIVE INCOME (LOSS) | $ 105 | $ (715) |
Consolidated Statement of Stockholder's Equity - USD ($) $ in Thousands |
Common Stock [Member] |
Additional Paid-in Capital [Member] |
Accumulated Deficit [Member] |
Treasury Stock [Member] |
Accumulated Other Comprehensive Loss [Member] |
Total |
---|---|---|---|---|---|---|
Balance at Dec. 31, 2014 | $ 27 | $ 28,901 | $ (14,163) | $ (572) | $ 44 | $ 14,237 |
Balance (in shares) at Dec. 31, 2014 | 2,616,485 | |||||
Net income (loss) | (711) | (711) | ||||
Other comprehensive loss | (4) | (4) | ||||
Stock-based compensation | 265 | 265 | ||||
Stock-based compensation (in shares) | 48,949 | |||||
Warrant dividend issuance costs | (60) | (60) | ||||
Balance at Dec. 31, 2015 | $ 27 | 29,106 | (14,874) | (572) | 40 | $ 13,727 |
Balance (in shares) at Dec. 31, 2015 | 2,665,434 | 2,665,434 | ||||
Net income (loss) | 148 | $ 148 | ||||
Other comprehensive loss | (43) | (43) | ||||
Stock-based compensation | 67 | 67 | ||||
Stock-based compensation (in shares) | 11,952 | |||||
Purchase of treasury stock | (8) | (8) | ||||
Purchase of common stock for treasury (in shares) | (1,920) | |||||
Balance at Dec. 31, 2016 | $ 27 | $ 29,173 | $ (14,726) | $ (580) | $ (3) | $ 13,891 |
Balance (in shares) at Dec. 31, 2016 | 2,675,466 | 2,675,466 |
Accounting And Reporting Policies |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounting And Reporting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounting and Reporting Policies | A. Accounting and Reporting Policies Organization The LGL Group, Inc. (the "Company"), incorporated in 1928 under the laws of the State of Indiana and reincorporated under the laws of the State of Delaware in 2007, is a holding company with subsidiaries engaged in the designing, manufacturing and marketing of highly-engineered , high reliabilty frequency and spectrum control products used to control the frequency or timing of signals in electronic circuits and in the design of high performance Frequency and Time Reference Standards that form the basis for timing and synchronization in various applications. As of December 31, 2016, the subsidiaries of the Company are as follows:
The Company operates through its two principal subsidiaries, M-tron Industries, Inc. ("MtronPTI"), which includes the operations of Piezo Technology, Inc. ("PTI") and M-tron Asia, LLC ("Mtron"), and Precise Time and Frequency, LLC ("PTF"), a newly formed subsidiary, to hold the assets of Precise Time and Frequency, Inc., as discussed in Note B below. The Company has operations in Orlando, Florida, Yankton, South Dakota, Wakefield, Massachusetts and Noida, India. MtronPTI also has sales offices in Sacramento, California, Austin, Texas and Hong Kong. Principles of Consolidation The consolidated financial statements include the accounts of the Company and entities for which it has control. Material intercompany transactions and accounts have been eliminated in consolidation. Reclassification of Prior Year Presentation Certain prior year amounts have been reclassified for consistency with the current year presentation. These reclassifications had no effect on the reported results of operations. As of December 31, 2016, the Company included accrued warranty expense with other accrued expenses on the accompanying consolidated balance sheet. Previously, it had been reported as a separate line item. This change in classification does not affect previously reported Consolidated Statements of Cash Flows, or Consolidated Statements of Operations for any period. Uses of Estimates The preparation of the consolidated financial statements in conformity with U.S. generally accepted accounting principles ("GAAP") requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Cash and Cash Equivalents Cash and cash equivalents consist of highly-liquid investments with a maturity of less than three months when purchased. Marketable Securities Marketable debt and equity securities are categorized as available for-sale-securities and are reported at fair value. Unrealized gains and losses related to changes in the fair value of available-for-sale securities are recognized in accumulated other comprehensive income (loss) within stockholders' equity. Accounts Receivable Accounts receivable, on a consolidated basis, consists principally of amounts due from both domestic and foreign customers. Credit is extended based on an evaluation of the customer's financial condition and collateral is not required. In relation to export sales, the Company requires letters of credit supporting a significant portion of the sales price prior to production to limit exposure to credit risk. Certain credit sales are made to industries that are subject to cyclical economic changes. The Company maintains allowances for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. These allowances are maintained at a level that management believes is sufficient to cover potential credit losses. Estimates are based on historical collection experience, current trends, credit policy and the relationship between accounts receivable and revenues. In determining these estimates, the Company examines historical write-offs of its receivables and reviews each customer's account to identify any specific customer collection issues. If the financial condition of its customers were to deteriorate, resulting in an impairment of their ability to make payment, additional allowances might be required. Inventories Inventories are valued at the lower of cost or market value using the FIFO (first-in, first-out) method. The Company maintains a reserve for inventory based on estimated losses that result from inventory that becomes obsolete or for which the Company has excess inventory levels as of period end. In determining these estimates, the Company performs an analysis on current demand and usage for each inventory item over historical time periods. Based on that analysis, the Company reserves a percentage of the inventory amount within each time period based on historical demand and usage patterns of specific items in inventory. Property, Plant and Equipment, Net Property, plant and equipment are recorded at cost less accumulated depreciation and include expenditures for major improvements. Maintenance and repairs are charged to operations as incurred. Depreciation is computed for financial reporting purposes using the straight-line method over the estimated useful lives of the assets, which range from 5 years to 35 years for buildings and improvements, and from 3 to 10 years for other fixed assets. Property, plant, and equipment are periodically reviewed for indicators of impairment. If any such indicators were noted, the Company would assess the appropriateness of the assets' carrying value and record any impairment at that time. Depreciation expense from operations was approximately $704,000 for 2016 and $804,000 for 2015. Warranties The Company offers a standard one-year warranty. The Company tests its products prior to shipment in order to ensure that they meet each customer's requirements based upon specifications received from each customer at the time its order is received and accepted. The Company's customers may request to return products for various reasons, including, but not limited to, the customers' belief that the products are not performing to specification. The Company's return policy states that it will accept product returns only with prior authorization and if the product does not meet customer specifications, in which case the product would be replaced or repaired. To accommodate the Company's customers, each request for return is reviewed, and if and when it is approved, a return materials authorization ("RMA") is issued to the customer. Each month the Company records a specific warranty reserve for approved RMAs covering products that have not yet been returned. The Company does not maintain a general warranty reserve because, historically, valid warranty returns resulting from a product not meeting specifications or being non-functional have been de minimis. As of December 31, 2016 and 2015, accrued warranty expense was $80,000 and $126,000, respectively, and included with other accrued expenses in the accompanying consolidated balance sheets. Intangible Assets Intangible assets are recorded at cost less accumulated amortization. Amortization is computed for financial reporting purposes using the straight-line method over the estimated useful lives of the assets, which range up to 10 years. The intangible assets consist of intellectual property and goodwill. The net carrying value of the amortizable intangible assets was $588,000 and $435,000 as of December 31, 2016 and 2015, respectively. Goodwill, which is not amortizable, was $40,000 as of December 31, 2016 and 2015. The estimated aggregate amortization expense for intangible assets, excluding goodwill, for each of the remaining years of the estimated useful life is as follows (in thousands):
Revenue Recognition The Company recognizes revenue from the sale of its products in accordance with the criteria in Accounting Standards Codification ("ASC") 605, Revenue Recognition, which are:
The Company meets these conditions upon shipment because title and risk of loss passes to the customer at that time. However, the Company offers a limited right of return and/or authorized price protection provisions in its agreements with certain electronic component distributors who resell the Company's products to original equipment manufacturers or electronic manufacturing services companies. As a result, the Company estimates and records a reserve for future returns and other charges against revenue at the time of shipment consistent with the terms of sale. The reserve is estimated based on historical experience with each respective distributor. The Company recognizes revenue related to transactions with a right of return and/or authorized price protection provisions when the following conditions are met:
Shipping Costs Amounts billed to customers related to shipping and handling are classified as revenue, and the Company's shipping and handling costs are included in manufacturing cost of sales. Research and Development Costs Research and development costs are charged to operations as incurred. Such costs were approximately $1,906,000 and $1,964,000 in 2016 and 2015, respectively, and are included within engineering, selling and administrative expenses. Advertising Expense Advertising costs are charged to operations as incurred. Such costs were $50,000 in 2016, compared with $146,000 in 2015, and are included within engineering, selling and administrative expenses. Stock-Based Compensation The Company measures the cost of employee services in exchange for an award of equity instruments based on the grant-date fair value of the award and recognizes the cost over the requisite service period, typically the vesting period. The Company estimates the fair value of stock options on the grant date using the Black-Scholes-Merton option-pricing model. The Black-Scholes-Merton option-pricing model requires subjective assumptions, including future stock price volatility and expected time to exercise, which greatly affect the calculated values. There is no expected dividend rate. Historical Company information was the basis for the expected volatility assumption as the Company believes that the historical volatility over the life of the option is indicative of expected volatility in the future. The risk-free interest rate is based on the U.S. Treasury zero-coupon rates with a remaining term equal to the expected term of the option. The Company also estimates forfeitures at the time of grant and revises, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Based on past history of actual performance, forfeiture rates ranging from zero to twenty five percent have been assumed for the years ended December 31, 2016 and 2015. Restricted stock awards are made at a value equal to the market price of the Company's common stock on the date of the grant. Earnings Per Share The Company computes earnings per share in accordance with ASC 260, Earnings Per Share ("ASC 260"). Basic earnings per share is computed by dividing net earnings by the weighted average number of common shares outstanding during the period. Diluted earnings per share adjusts basic earnings per share for the effects of stock options and other potentially dilutive financial instruments, only in the periods in which the effects are dilutive. Shares of stock granted to members of the Board of Directors (the "Board") as a portion of their director fees are deemed to be participating as defined by ASC 260 and therefore are included in the computation of basic earnings per share. For the years ended December 31, 2016 and 2015, there were options to purchase 166,996 shares and 194,726 shares, respectively, of common stock and warrants to purchase 519,241 shares of common stock that were excluded from the diluted earnings per share computation because the impact of the assumed exercise of such stock options would have been anti-dilutive.
Income Taxes The Company's deferred income tax assets represent (a) temporary differences between the financial statement carrying amount and the tax basis of existing assets and liabilities that will result in deductible amounts in future years, and (b) the tax effects of net operating loss carry-forwards. In assessing the realizability of deferred tax assets in accordance with the provisions of ASC 740, Income Taxes ("ASC 740"), the Company considers whether it is more likely than not that some portion or all of the deferred tax assets will or will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become realizable. During the year ended December 31, 2016, based upon the weighting of positive and negative evidence, the Company has determined the results of future operations of one of its foreign subsidiaries will generate enough taxable income that it is more likely than not that deferred tax assets of $214,000 generated from foreign NOLs, can be utilized in the foreseeable future. Accordingly, a valuation allowance previously established for this tax benefit has been reversed. The Company has also determined that a full valuation against the remaining net deferred tax assets is required and has recorded a valuation allowance to reduce deferred tax assets to the amount that is more likely than not to be realized. Should a change in circumstances lead to a change in judgment about the ability to realize deferred tax assets in future years, the Company will adjust related valuation allowances in the period that the change in circumstances occurs, along with a corresponding increase or charge to income. The Company recognizes interest and/or penalties, if any, related to income tax matters in income tax expense. Concentration Risk In 2016, the Company's largest customer, an electronics contract manufacturing company, accounted for $3,275,000, or 15.7% of the Company's total revenues, compared to $2,627,000, or 12.7%, in 2015. A significant portion of the Company's accounts receivable is concentrated with a relatively small number of customers. As of December 31, 2016, four of the Company's largest customers accounted for approximately $1,242,000, or 35.1% of accounts receivable. As of December 31, 2015, three of the Company's largest customers accounted for approximately $819,000, or 31.4% of accounts receivable. The Company carefully evaluates the creditworthiness of its customers in deciding to extend credit, and utilizes letters of credit to further limit credit risk for export sales. As a result of these policies, the Company has experienced very low historical bad debt expense and believes the related risk to be minimal. At various times throughout the year and at December 31, 2016, some deposits held at financial institutions were in excess of federally insured limits. The Company has not experienced any losses related to these balances and believes the related risk to be minimal. Segment Information The Company reports segment information in accordance with ASC 280, Segment Information ("ASC 280"). ASC 280 requires companies to report financial and descriptive information for each identified operating segment based on management's internal organizational decision-making structure. Management has identified the segments of electronic components and electronic instruments. Impairments of Long-Lived Assets Long-lived assets, including intangible assets subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. Long-lived assets are grouped with other assets to the lowest level to which identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities. Management assesses the recoverability of the carrying cost of the assets based on a review of projected undiscounted cash flows. If an asset is held for sale, management reviews its estimated fair value less cost to sell. Fair value is determined using pertinent market information, including appraisals or broker's estimates, and/or projected discounted cash flows. In the event an impairment loss is identified, it is recognized based on the amount by which the carrying value exceeds the estimated fair value of the long-lived asset. Financial Instruments Cash and cash equivalents, trade accounts receivable, short-term borrowings, trade accounts payable, and accrued expenses are carried at cost, which approximates fair value due to the short-term maturity of these instruments. Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash, cash equivalents and trade accounts receivable. The Company maintains cash and cash equivalents and short-term investments with various financial institutions. The Company's policy is designed to limit exposure to any one institution. At times, such amounts may exceed federally insured limits. Foreign Currency Translation The assets and liabilities of international operations are re-measured at the exchange rates in effect at the balance sheet date for monetary assets and liabilities and at historical rates for non-monetary assets and liabilities, with the related re-measurement gains or losses reported within the consolidated statement of operations. The results of international operations are re-measured at the monthly average exchange rates. The Company's foreign subsidiaries and respective operations' functional currency is the U.S. dollar. The Company has determined this based upon the majority of transactions with customers as well as inter-company transactions and parental support being based in U.S. dollars. The Company has recognized a re-measurement loss of ($2,000) and a re-measurement gain of $35,000, in 2016 and 2015, respectively, which is included within other income, net in the consolidated statements of operations. Recently Issued Accounting Pronouncements In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows – (Topic 230): Classification of Certain Cash Receipts and Cash Payments. ASU 2016-15 addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice. ASU 2016-15 is effective for fiscal years, and for interim periods within those years, beginning after December 15, 2017. Early application is permitted. The Company is currently evaluating the potential effect of this ASU on its consolidated financial statements. In March 2016, the Financial Accounting Standards Board (the "FASB") issued ASU 2016–09, "Compensation – Stock Compensation (Topic 718): Improvements to Employee Share–Based Payment Accounting" ("ASU 2016–09"). ASU 2016-9 simplifies the accounting for share–based payment award transactions including: income tax consequences, classification of awards as either equity or liabilities and classification on the statement of cash flows. ASU 2016–09 is effective for fiscal years beginning after December 15, 2016. The Company is currently evaluating the requirements of ASU 2016–09, but does not believe the final result will have a material impact on our consolidated financial statements. In February 2016, the FASB issued ASU 2016–02, "Leases (Topic 842)." The objective of this update is to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. This ASU is effective for fiscal years beginning after December 15, 2018, including interim periods within those annual periods and is to be applied utilizing a modified retrospective approach. The Company does not expect this standard to have a material impact on our consolidated financial statements because there are no material operating leases. In January 2016, the FASB issued ASU No. 2016–01, "Financial Instruments – Recognition and Measurement of Financial Assets and Financial Liabilities (Topic 825)" ("ASU 2016-01"). ASU No. 2016–01 revises the classification and measurement of investments in certain equity investments and the presentation of certain fair value changes for certain financial liabilities measured at fair value. ASU No. 2016–01 requires the change in fair value of many equity investments to be recognized in net income. ASU No. 2016–01 is effective for interim and annual periods beginning after December 15, 2017, with early adoption permitted. Adopting ASU No. 2016–01 may result in a cumulative effect adjustment to the Company's retained earnings as of the beginning of the year of adoption. The Company is currently evaluating the potential effects of adopting the provisions of ASU No. 2016–01. In November 2015, the FASB issued ASU No. 2015-17 "Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes," which simplifies the presentation of deferred income taxes. Under the new accounting standard, deferred tax assets and liabilities are required to be classified as noncurrent, eliminating the prior requirement to separate deferred tax assets and liabilities into current and noncurrent. The new guidance is effective for financial statements issued for annual periods beginning after December 15, 2016, and interim periods within those annual periods, with early adoption permitted. The standard may be adopted prospectively or retrospectively to all periods presented. The Company is currently assessing the timing of adoption of the new guidance, but does not expect it will have a material impact on its consolidated financial statements. In August 2014, the FASB issued ASU No. 2014-15, "Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern," ("ASU 2014-15") which provides guidance on determining when and how to disclose going concern uncertainties in the financial statements. The new standard requires management to perform interim and annual assessments of an entity's ability to continue as a going concern within one year of the date the financial statements are issued. An entity must provide certain disclosures if conditions or events raise substantial doubt about the entity's ability to continue as a going concern. ASU 2014-15 applies to all entities and is effective for annual periods ending after December 15, 2016, and interim periods thereafter, with early adoption permitted. The Company has adopted this guidance as of December 31, 2016 and it did not have a material impact on its financial statements. In May 2014, the FASB issued ASU No. 2014–09, "Revenue from Contracts with Customers ("ASU 2014-09")", also known as the "New Revenue Standard". This update is the result of a collaborative effort by the FASB and the International Accounting Standards Board to simplify revenue recognition guidance, remove inconsistencies in the application of revenue recognition, and to improve comparability of revenue recognition practices across entities, industries, jurisdictions, and capital markets. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to receive for those goods or services. The New Revenue Standard is applied through the following five-step process: 1. Identify the contract(s) with a customer. 2. Identify the performance obligation in the contract. 3. Determine the transaction price. 4. Allocate the transaction price to the performance obligations in the contract. 5. Recognize revenue when (or as) the entity satisfies a performance obligation. For a public entity, this update is effective for annual and interim reporting periods beginning after December 15, 2017 with early adoption permitted. This standard can be applied on either a retrospective or modified retrospective approach. Through the course of 2016 a number of ASU's have been issued which further refine the original guidance issued under ASU 2014-09 and are effective in conjunction with this original standard. The Company is determining its implementation approach and evaluating the potential impacts of the new standard on its existing revenue recognition policies and procedures. The Company's revenues are generally derived from purchase orders and standard contracts and performance obligation criteria is normally met at shipping point with no other material performance obligation. No other new accounting pronouncements issued or effective during the fiscal year have had or are expected to have a material impact on the Company's consolidated financial statements. |
Business Combination |
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Business Combination [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business Combination | B. Business Combination On September 2, 2016, PTF acquired certain assets and assumed certain liabilities of Precise Time and Frequency, Inc. ("PTF Inc.") for cash consideration of $295,000 (the "PTF Acquisition"). The PTF Acquisition was accounted for under the acquisition method of accounting for business combinations pursuant to the provisions of ASC 805, Business Combinations, ("ASC 805"). The acquisition method of accounting requires, among other things, that the assets acquired and liabilities assumed in a business combination be measured at their fair values as of the closing date of the acquisition. The acquired assets include intellectual property and equipment that will support the Company's strategy to be a broader based supplier of highly engineered products for the generation, synchronization and control of timing and frequency. The intangible assets acquired are being amortized over a weighted average period of ten years. The Company believes this product line will complement the complete line of frequency control products that MtronPTI currently provides. The following is a summary of the preliminary purchase price allocation to the estimated fair values of assets acquired and liabilites assumed in the PTF Acquisition (in thousands):
The assets acquired and liabilites assumed by PTF were done so through the distressed sale of PTF Inc. and resulted in a bargain purchase gain which is recorded in other income (expense), net in the accompanying consolidated statement of operations for the year ended December 31, 2016. Management estimated the fair value of net assets acquired using valuation techniques including income, cost and market approaches. In estimating the fair value of acquired assets and assumed liabilities, the fair value estimates are based on, but not limited to, expected future revenues and cash flows, expected future growth rates and estimated discount rates. The following table sets forth certain unaudited pro forma information for the year ended December 31, 2016 and 2015 assuming that the PTF Acquisition occurred on January 1, 2015 (in thousands, except per share data):
The pro forma adjustments include amortization expense related to the acquired intangible assets and an adjustment to remove acquisition related expenses incurred in 2016 that for pro forma purposes should be reflected in 2015. The net sales included in the Company's consolidated statement of operations which were generated by the PTF Acquisition from the acquisition closing date of September 2, 2016 through December 31, 2016 was $200,000. The losses included in the Company's consolidated statement of operations derived from the PTF Acquisition's business from the acquisition closing date to December 31, 2016 were ($57,000). Acquisition-related costs are those costs the acquirer incurs to effect a business combination, including advisory, legal, accounting, valuation, and other professional or consulting fees. The Company incurred a total of approximately $38,000 of acquisition-related costs which were charged to engineering, general and administrative expenses during the year ended December 31, 2016. |
Inventories |
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Inventories [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventories | C. Inventories The Company reduces the value of its inventories to market value when the market value is believed to be less than the cost of the item. The inventory reserve for obsolescence as of December 31, 2016 and 2015 was $2,773,000 and $3,016,000, respectively.
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Related Party Transactions |
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Dec. 31, 2016 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | D. Related Party Transactions As of December 31, 2016 approximately $1,002,000 was invested in a United States Treasury money market fund which is included in cash and cash equivalents on the accompanying balance sheet. Also, as of December 31, 2016, approximately $2,714,000 was invested in a market neutral mutual fund which is included in marketable securities on the accompanying balance sheet. Amounts invested in the market neutral mutual fund generated $62,000 of investment income that is classified as other income, net on the accompanying consolidated statement of operations. As of December 31, 2015 approximately $4,089,000 was invested in a United States Treasury money market fund. These funds are managed by a related entity (the "Fund Manager") which is related through a common director. One of the Company's directors, who is also a 10% stockholder, currently serves as an executive officer of the Fund Manager. The fund transactions in 2016 and 2015 were directed solely at the discretion of Company management. |
Stock-Based Compensation |
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Stock-Based Compensation | E. Stock-Based Compensation On August 4, 2011, the Company's stockholders approved the 2011 Incentive Plan. 500,000 shares of common stock were authorized for issuance under the 2011 Incentive Plan. On June 16, 2016, the Company's stockholders approved the Amended and Restated 2011 Incentive Plan which increased the shares of common stock authorized for issuance to 750,000 shares of common stock. The Company believes that such awards better align the interests of its employees with those of its shareholders. Option awards are generally granted with an exercise price 10 % above the market price of the Company's stock at the date of grant; those option awards generally have 5-year contractual terms and generally vest over three years. Restricted stock awards are granted at a value equal to the market price of the Company's common stock on the date of grant. The following table summarizes the inputs to the option valuation model for the options granted during the years ended December 31, 2016 and 2015:
The Company bases expected volatility on the weighted average historical stock volatility of the Company's common stock. There is no dividend rate. The expected term utilizes historical data to estimate the period of time that the options are expected to remain unexercised. The Company bases risk-free rates on the U.S. Treasury zero-coupon rates with a remaining term equal to the expected term of the option. The Company also estimates forfeitures at the time of grant and revises, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The following table summarizes information about stock options outstanding and exercisable at December 31, 2016 as well as activity during the year then ended:
The weighted-average grant-date fair value of options granted during the years 2016 and 2015 was $1.04 and $0.99, respectively. As of December 31, 2016, there was approximately $56,000 of total unrecognized compensation expense related to unvested share-based compensation arrangements. The following table summarizes information about the Company's unvested stock awards as of December 31, 2016, as well as activity during the year then ended:
As of December 31, 2016, there were no unvested share-based compensation arrangements granted under the Amended and Restated 2011 Incentive Plan. The total fair value of shares vested during the year ended December 31, 2016, was approximately $65,000. The Amended and Restated 2011 Incentive Plan had 432,723 shares remaining available for future issuance at December 31, 2016. |
Income Taxes |
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Income Taxes [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Taxes | F. Income Taxes Income tax (benefit) provision for the years ended December 31, 2016 and 2015 is as follows:
A reconciliation of the (benefit) provision for income taxes and the amount computed by applying the statutory federal income tax rate to income before income taxes:
Loss before income taxes from domestic operations was ($434,000) and ($731,000) in 2016 and 2015, respectively. Income before income taxes from foreign operations was $417,000 and $28,000 in 2016 and 2015, respectively. At December 31, 2016, U.S. income taxes benefit have been provided on approximately $153,000 of losses of the Company's foreign subsidiaries, because these losses are not considered to be indefinitely reinvested. As of December 31, 2016, earnings of non-U.S. subsidiaries considered to be indefinitely reinvested totaled $628,000. No provision for U.S. income taxes has been provided thereon. Upon distribution of those earnings in the form of dividends or otherwise, the Company would be subject to U.S. taxes, reduced by any foreign tax credits available. It is not practicable to estimate the amount of additional tax that might be payable on this undistributed foreign income. The Company has a total federal net operating loss ("NOL") carry-forward of $10,075,000 as of December 31, 2016. This federal NOL carry-forward expires through 2036 if not utilized prior to that date. The Company has total state NOL carry-forwards of $16,263,000 as of December 31, 2016. These state NOL carry-forwards expire through 2036 if not utilized prior to that date. The Company has research and development tax credit carry-forwards of approximately $1,450,000 at December 31, 2016, that can be used to reduce future income tax liabilities and expire principally between 2020 and 2036. The Company has foreign tax credit carry-forwards of approximately $359,000 at December 31, 2016, that are available to reduce future U.S. income tax liabilities subject to certain limitations. These foreign tax credit carry-forwards expire at various times between 2018 and 2020. Additionally, the Company has federal alternative minimum tax ("AMT") credits of approximately $111,000 at December 31, 2016, that are available to offset future federal tax liabilities, and have no expiration. In assessing the realizability of deferred tax assets, the Company considers whether it is more likely than not that some portion or all of the deferred tax assets will or will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become realizable. During the year ended December 31, 2016, based upon the weighting of positive and negative evidence, the Company has determined the results of future operations of one of its foreign subsidiaries will generate enough taxable income that it is more likely than not that deferred tax assets of $214,000, generated from foreign NOLs, can be utilized in the foreseeable future. Accordingly, the valuation allowance previously established for this tax benefit has been reversed. The Company has also determined that a full valuation against the remaining net deferred tax assets is required and has recorded a valuation allowance to reduce deferred tax assets to the amount that is more likely than not to be realized. Should a change in circumstances lead to a change in judgment about the ability to realize deferred tax assets in future years, the Company will adjust related valuation allowances in the period that the change in circumstances occurs, along with a corresponding increase or charge to income. The Company recognizes interest and/or penalties, if any, related to income tax matters in income tax expense. Deferred income taxes for 2016 and 2015 were provided for the temporary differences between the financial reporting basis and the tax basis of the Company's assets and liabilities. Tax effects of temporary differences and carry-forwards at December 31, 2016 and 2015, were as follows:
At December 31, 2016, the net deferred tax assets of $214,000 presented in the Company's balance sheet comprises deferred tax assets of $565,000, offset by deferred tax liabilities of $351,000. At December 31, 2015, the net deferred tax assets of $0 presented in the Company's balance sheet comprises deferred tax assets of $395,000, offset by deferred tax liabilities of $395,000. The Company will recognize any interest and penalties related to unrecognized tax positions in income tax expense. At the date of adoption of ASC 740, the Company did not have a liability for unrecognized tax positions. In addition, the Company did not record any increases or decreases to its liability for unrecognized tax positions during the years ended December 31, 2016 or 2015. Accordingly, the Company has not accrued for any interest and penalties as of December 31, 2016 or 2015. The Company does not anticipate any change in its liability for unrecognized tax positions over the next fiscal year. The Company files income tax returns in the U.S. federal, various state, Hong Kong and India jurisdictions. The statute of limitations for assessment by the Internal Revenue Service ("IRS") and state tax authorities is open for tax years ended December 31, 2012, 2013 and 2014, although carry-forward attributes that were generated prior to tax year 2012, including NOL carry-forwards and tax credits, may still be adjusted upon examination by the IRS or state tax authorities if they either have been or will be used in a future period. The Company is generally subject to examinations by foreign tax authorities from 2010 to the present. |
CNB Loan |
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Dec. 31, 2016 | |
CNB Loan [Abstract] | |
CNB Loan | G. CNB Loan On December 31, 2016, MtronPTI renewed its Loan Agreement (the "CNB Loan Agreement"), with City National Bank of Florida ("City National"). The CNB Loan Agreement provides for a revolving line of credit in the amount of $3.0 million (the "CNB Revolver"), which bears interest at a variable rate equal to 30-day LIBOR plus 200 basis points to be set on the first day of each month, and expires on September 30, 2018. The CNB Loan Agreement also provides that MtronPTI will pay City National a fee equal to 0.75% per year on the daily unused amount. The Company's obligations under the CNB Loan Agreement are secured only by cash collateral and do not require any other liens. At December 31, 2016 and December 31, 2015, there was no balance outstanding under the CNB Revolver and no associated restricted cash. |
Stockholders' Equity |
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Dec. 31, 2016 | |
Stockholders' Equity [Abstract] | |
Stockholders' Equity | H. Stockholders' Equity On August 29, 2011, the Board authorized the Company to repurchase up to 100,000 shares of its common stock in accordance with applicable securities laws. This authorization increased the total number of shares authorized and available for repurchase under the Company's existing share repurchase program to 540,000 shares, at such times, amounts and prices as the Company shall deem appropriate. As of December 31, 2016, the Company had repurchased a total of 81,584 shares of common stock at a cost of $580,000, which shares are currently held in treasury. On August 6, 2013, the Company distributed 12,981,025 warrants to purchase shares of the Company's common stock as a dividend to holders of the Company's common stock on July 29, 2013, the record date for the dividend. Stockholders received five warrants for each share of the Company's common stock owned on the record date. When exercisable, 25 warrants will entitle their holder to purchase one share of the Company's common stock at an exercise price of $7.50 per share (subject to adjustment). The warrants are "European style warrants" and will only become exercisable on the earlier of (i) their expiration date, August 6, 2018, and (ii) such date that the 30-day volume weighted average price per share, or VWAP, of the Company's common stock is greater than or equal to $15.00 (subject to adjustment). Once the warrants become exercisable, they may be exercised in accordance with the terms of the warrant agreement between the Company and the warrant agent until their expiration at 5:00 p.m., Eastern Time, on the expiration date. |
Fair Value Measurements |
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Fair Value Measurements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurements | I. Fair Value Measurements Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value guidance identifies three primary valuation techniques: the market approach, the income approach and the cost approach. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities. The income approach uses valuation techniques to convert future amounts such as cash flows or earnings, to a single present amount. The measurement is based on the value indicated by current market expectations about those future amounts. The cost approach is based on the amount that currently would be required to replace the service capacity of an asset. The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The fair value hierarchy gives the highest priority to observable inputs such as quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The maximization of observable inputs and the minimization of the use of unobservable inputs are required. Classification within the fair value hierarchy is based upon the objectivity of the inputs that are significant to the valuation of an asset or liability as of the measurement date. The three levels within the fair value hierarchy are characterized as follows: Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include: quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability; and inputs that are derived principally from or corroborated by observable market data by correlation or other means. Level 3 - Unobservable inputs for the asset or liability for which there is little, if any, market activity for the asset or liability at the measurement date. Unobservable inputs reflect the Company's own assumptions about what market participants would use to price the asset or liability. These inputs may include internally developed pricing models, discounted cash flow methodologies, as well as instruments for which the fair value determination requires significant management judgment. Assets To estimate the market value of its marketable securities, the Company obtains current market pricing from quoted market sources or uses pricing for identical securities. Assets measured at fair value on a recurring basis are summarized below.
There were no transfers from level 2 to level 3 during the period. There were no level 2 or 3 assets as of December 31, 2016 or 2015. The Company also has assets that may be subject to measurement at fair value on a non-recurring basis, including goodwill and intangible assets, and other long-lived assets. There were no liabilities subject to fair value on a non-recurring or recurring basis as of December 31, 2016 and 2015. The Company reviews goodwill annually and the carrying value of long-lived assets whenever events and circumstances indicate that the carrying amounts of the assets may not be recoverable. If it is determined that the assets are impaired, the carrying value would be reduced to estimated fair value. |
Employee Benefit Plans |
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Dec. 31, 2016 | |
Employee Benefit Plans [Abstract] | |
Employee Benefit Plans | J. Employee Benefit Plans The Company offers a defined contribution plan for eligible employees, in which the Company makes discretionary contributions up to 50% of the first 6% of eligible compensation contributed by participants. The Company contributed approximately $107,000 and $112,000 in discretionary contributions during 2016 and 2015, respectively. Participants vest in employer contributions starting after their second year of service at 20% increments vesting 100% in year six. |
Commitments and Contingencies |
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Dec. 31, 2016 | |
Commitments and Contingencies [Abstract] | |
Commitments and Contingencies | K. Commitments and Contingencies In the normal course of business, the Company and its subsidiaries may become defendants in certain product liability, patent infringement, worker claims and other litigation. The Company records a liability when it is probable that a loss has been incurred and the amount is reasonably estimable. The Company is not involved in any legal proceedings other than routine litigation arising in the normal course of business, none of which the Company believes will have a material adverse effect on the Company's business, financial condition or results of operations. Rent Expense Rent expense under operating leases was $249,000 and $196,000 for the years ended December 31, 2016 and 2015, respectively. The Company leases certain property and equipment, including warehousing, and sales and distribution equipment, under operating leases that extend from one to two years. Certain of these leases have renewal options. |
Segment Information |
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Segment Information | L. Segment Information The Company has identified two reportable business segments from operations: electronic components, which includes all products manufactured and sold by MtronPTI, and electronic instruments, which includes all products manufactured and sold by PTF. The Company's foreign operations in Hong Kong and India exist under MtronPTI. Operating income (loss) is equal to revenues less cost of sales and operating expenses, excluding investment income, interest expense, and income taxes. Identifiable assets of the segment are those used in its operations and exclude general corporate assets. General corporate assets are principally cash and cash equivalents, short-term investments and certain other investments and receivables.
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Foreign Revenues |
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Foreign Revenues [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Foreign Revenues | M. Domestic and Foreign Revenues For the years ended December 31, 2016 and 2015, domestic revenues were $14,893,000 and $15,260,000, respectively and foreign revenues were $5,998,000 and $5,453,000, respectively. Significant foreign revenues from operations (10% or more of foreign sales) were as follows:
The Company allocates its foreign revenue based on the customer's ship-to location. |
Accounting And Reporting Policies (Policies) |
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Accounting And Reporting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Principles of Consolidation | Principles of Consolidation The consolidated financial statements include the accounts of the Company and entities for which it has control. Material intercompany transactions and accounts have been eliminated in consolidation. |
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Uses of Estimates | The preparation of the consolidated financial statements in conformity with U.S. generally accepted accounting principles ("GAAP") requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. |
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Cash and Cash Equivalents | Cash and Cash Equivalents Cash and cash equivalents consist of highly-liquid investments with a maturity of less than three months when purchased. |
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Accounts Receivable | Accounts Receivable Accounts receivable, on a consolidated basis, consists principally of amounts due from both domestic and foreign customers. Credit is extended based on an evaluation of the customer's financial condition and collateral is not required. In relation to export sales, the Company requires letters of credit supporting a significant portion of the sales price prior to production to limit exposure to credit risk. Certain credit sales are made to industries that are subject to cyclical economic changes. The Company maintains allowances for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. These allowances are maintained at a level that management believes is sufficient to cover potential credit losses. Estimates are based on historical collection experience, current trends, credit policy and the relationship between accounts receivable and revenues. In determining these estimates, the Company examines historical write-offs of its receivables and reviews each customer's account to identify any specific customer collection issues. If the financial condition of its customers were to deteriorate, resulting in an impairment of their ability to make payment, additional allowances might be required. |
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Inventories | Inventories Inventories are valued at the lower of cost or market value using the FIFO (first-in, first-out) method. The Company maintains a reserve for inventory based on estimated losses that result from inventory that becomes obsolete or for which the Company has excess inventory levels as of period end. In determining these estimates, the Company performs an analysis on current demand and usage for each inventory item over historical time periods. Based on that analysis, the Company reserves a percentage of the inventory amount within each time period based on historical demand and usage patterns of specific items in inventory. |
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Property, Plant and Equipment, Net | Property, Plant and Equipment, Net Property, plant and equipment are recorded at cost less accumulated depreciation and include expenditures for major improvements. Maintenance and repairs are charged to operations as incurred. Depreciation is computed for financial reporting purposes using the straight-line method over the estimated useful lives of the assets, which range from 5 years to 35 years for buildings and improvements, and from 3 to 10 years for other fixed assets. Property, plant, and equipment are periodically reviewed for indicators of impairment. If any such indicators were noted, the Company would assess the appropriateness of the assets' carrying value and record any impairment at that time. Depreciation expense from operations was approximately $704,000 for 2016 and $804,000 for 2015. |
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Warranties | Warranties The Company offers a standard one-year warranty. The Company tests its products prior to shipment in order to ensure that they meet each customer's requirements based upon specifications received from each customer at the time its order is received and accepted. The Company's customers may request to return products for various reasons, including, but not limited to, the customers' belief that the products are not performing to specification. The Company's return policy states that it will accept product returns only with prior authorization and if the product does not meet customer specifications, in which case the product would be replaced or repaired. To accommodate the Company's customers, each request for return is reviewed, and if and when it is approved, a return materials authorization ("RMA") is issued to the customer. Each month the Company records a specific warranty reserve for approved RMAs covering products that have not yet been returned. The Company does not maintain a general warranty reserve because, historically, valid warranty returns resulting from a product not meeting specifications or being non-functional have been de minimis. As of December 31, 2016 and 2015, accrued warranty expense was $80,000 and $126,000, respectively, and included with other accrued expenses in the accompanying consolidated balance sheets. |
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Intangible Assets Disclosure | Intangible Assets Intangible assets are recorded at cost less accumulated amortization. Amortization is computed for financial reporting purposes using the straight-line method over the estimated useful lives of the assets, which range up to 10 years. The intangible assets consist of intellectual property and goodwill. The net carrying value of the amortizable intangible assets was $588,000 and $435,000 as of December 31, 2016 and 2015, respectively. Goodwill, which is not amortizable, was $40,000 as of December 31, 2016 and 2015. |
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Revenue Recognition | The Company recognizes revenue from the sale of its products in accordance with the criteria in Accounting Standards Codification ("ASC") 605, Revenue Recognition, which are:
The Company meets these conditions upon shipment because title and risk of loss passes to the customer at that time. However, the Company offers a limited right of return and/or authorized price protection provisions in its agreements with certain electronic component distributors who resell the Company's products to original equipment manufacturers or electronic manufacturing services companies. As a result, the Company estimates and records a reserve for future returns and other charges against revenue at the time of shipment consistent with the terms of sale. The reserve is estimated based on historical experience with each respective distributor. The Company recognizes revenue related to transactions with a right of return and/or authorized price protection provisions when the following conditions are met:
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Shipping Costs | Shipping Costs Amounts billed to customers related to shipping and handling are classified as revenue, and the Company's shipping and handling costs are included in manufacturing cost of sales. |
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Research and Development Costs | Research and Development Costs Research and development costs are charged to operations as incurred. Such costs were approximately $1,906,000 and $1,964,000 in 2016 and 2015, respectively, and are included within engineering, selling and administrative expenses. |
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Advertising Expense | Advertising Expense Advertising costs are charged to operations as incurred. Such costs were $50,000 in 2016, compared with $146,000 in 2015, and are included within engineering, selling and administrative expenses. |
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Stock-Based Compensation | Stock-Based Compensation The Company measures the cost of employee services in exchange for an award of equity instruments based on the grant-date fair value of the award and recognizes the cost over the requisite service period, typically the vesting period. The Company estimates the fair value of stock options on the grant date using the Black-Scholes-Merton option-pricing model. The Black-Scholes-Merton option-pricing model requires subjective assumptions, including future stock price volatility and expected time to exercise, which greatly affect the calculated values. There is no expected dividend rate. Historical Company information was the basis for the expected volatility assumption as the Company believes that the historical volatility over the life of the option is indicative of expected volatility in the future. The risk-free interest rate is based on the U.S. Treasury zero-coupon rates with a remaining term equal to the expected term of the option. The Company also estimates forfeitures at the time of grant and revises, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Based on past history of actual performance, forfeiture rates ranging from zero to twenty five percent have been assumed for the years ended December 31, 2016 and 2015. Restricted stock awards are made at a value equal to the market price of the Company's common stock on the date of the grant. |
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Earnings Per Share | Earnings Per Share The Company computes earnings per share in accordance with ASC 260, Earnings Per Share ("ASC 260"). Basic earnings per share is computed by dividing net earnings by the weighted average number of common shares outstanding during the period. Diluted earnings per share adjusts basic earnings per share for the effects of stock options and other potentially dilutive financial instruments, only in the periods in which the effects are dilutive. Shares of stock granted to members of the Board of Directors (the "Board") as a portion of their director fees are deemed to be participating as defined by ASC 260 and therefore are included in the computation of basic earnings per share. For the years ended December 31, 2016 and 2015, there were options to purchase 166,996 shares and 194,726 shares, respectively, of common stock and warrants to purchase 519,241 shares of common stock that were excluded from the diluted earnings per share computation because the impact of the assumed exercise of such stock options would have been anti-dilutive.
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Income Taxes | Income Taxes The Company's deferred income tax assets represent (a) temporary differences between the financial statement carrying amount and the tax basis of existing assets and liabilities that will result in deductible amounts in future years, and (b) the tax effects of net operating loss carry-forwards. In assessing the realizability of deferred tax assets in accordance with the provisions of ASC 740, Income Taxes ("ASC 740"), the Company considers whether it is more likely than not that some portion or all of the deferred tax assets will or will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become realizable. During the year ended December 31, 2016, based upon the weighting of positive and negative evidence, the Company has determined the results of future operations of one of its foreign subsidiaries will generate enough taxable income that it is more likely than not that deferred tax assets of $214,000 generated from foreign NOLs, can be utilized in the foreseeable future. Accordingly, a valuation allowance previously established for this tax benefit has been reversed. The Company has also determined that a full valuation against the remaining net deferred tax assets is required and has recorded a valuation allowance to reduce deferred tax assets to the amount that is more likely than not to be realized. Should a change in circumstances lead to a change in judgment about the ability to realize deferred tax assets in future years, the Company will adjust related valuation allowances in the period that the change in circumstances occurs, along with a corresponding increase or charge to income. The Company recognizes interest and/or penalties, if any, related to income tax matters in income tax expense. |
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Concentration Risk | Concentration Risk In 2016, the Company's largest customer, an electronics contract manufacturing company, accounted for $3,275,000, or 15.7% of the Company's total revenues, compared to $2,627,000, or 12.7%, in 2015. A significant portion of the Company's accounts receivable is concentrated with a relatively small number of customers. As of December 31, 2016, four of the Company's largest customers accounted for approximately $1,242,000, or 35.1% of accounts receivable. As of December 31, 2015, three of the Company's largest customers accounted for approximately $819,000, or 31.4% of accounts receivable. The Company carefully evaluates the creditworthiness of its customers in deciding to extend credit, and utilizes letters of credit to further limit credit risk for export sales. As a result of these policies, the Company has experienced very low historical bad debt expense and believes the related risk to be minimal. At various times throughout the year and at December 31, 2016, some deposits held at financial institutions were in excess of federally insured limits. The Company has not experienced any losses related to these balances and believes the related risk to be minimal. |
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Segment Information | Segment Information The Company reports segment information in accordance with ASC 280, Segment Information ("ASC 280"). ASC 280 requires companies to report financial and descriptive information for each identified operating segment based on management's internal organizational decision-making structure. Management has identified the segments of electronic components and electronic instruments. |
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Impairments of Long-Lived Assets | Impairments of Long-Lived Assets Long-lived assets, including intangible assets subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. Long-lived assets are grouped with other assets to the lowest level to which identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities. Management assesses the recoverability of the carrying cost of the assets based on a review of projected undiscounted cash flows. If an asset is held for sale, management reviews its estimated fair value less cost to sell. Fair value is determined using pertinent market information, including appraisals or broker's estimates, and/or projected discounted cash flows. In the event an impairment loss is identified, it is recognized based on the amount by which the carrying value exceeds the estimated fair value of the long-lived asset. |
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Financial Instruments | Financial Instruments Cash and cash equivalents, trade accounts receivable, short-term borrowings, trade accounts payable, and accrued expenses are carried at cost, which approximates fair value due to the short-term maturity of these instruments. Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash, cash equivalents and trade accounts receivable. The Company maintains cash and cash equivalents and short-term investments with various financial institutions. The Company's policy is designed to limit exposure to any one institution. At times, such amounts may exceed federally insured limits. |
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Foreign Currency Translation | Foreign Currency Translation The assets and liabilities of international operations are re-measured at the exchange rates in effect at the balance sheet date for monetary assets and liabilities and at historical rates for non-monetary assets and liabilities, with the related re-measurement gains or losses reported within the consolidated statement of operations. The results of international operations are re-measured at the monthly average exchange rates. The Company's foreign subsidiaries and respective operations' functional currency is the U.S. dollar. The Company has determined this based upon the majority of transactions with customers as well as inter-company transactions and parental support being based in U.S. dollars. The Company has recognized a re-measurement loss of ($2,000) and a re-measurement gain of $35,000, in 2016 and 2015, respectively, which is included within other income, net in the consolidated statements of operations. |
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Recently Issued Accounting Pronouncements | Recently Issued Accounting Pronouncements In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows – (Topic 230): Classification of Certain Cash Receipts and Cash Payments. ASU 2016-15 addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice. ASU 2016-15 is effective for fiscal years, and for interim periods within those years, beginning after December 15, 2017. Early application is permitted. The Company is currently evaluating the potential effect of this ASU on its consolidated financial statements. In March 2016, the Financial Accounting Standards Board (the "FASB") issued ASU 2016–09, "Compensation – Stock Compensation (Topic 718): Improvements to Employee Share–Based Payment Accounting" ("ASU 2016–09"). ASU 2016-9 simplifies the accounting for share–based payment award transactions including: income tax consequences, classification of awards as either equity or liabilities and classification on the statement of cash flows. ASU 2016–09 is effective for fiscal years beginning after December 15, 2016. The Company is currently evaluating the requirements of ASU 2016–09, but does not believe the final result will have a material impact on our consolidated financial statements. In February 2016, the FASB issued ASU 2016–02, "Leases (Topic 842)." The objective of this update is to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. This ASU is effective for fiscal years beginning after December 15, 2018, including interim periods within those annual periods and is to be applied utilizing a modified retrospective approach. The Company does not expect this standard to have a material impact on our consolidated financial statements because there are no material operating leases. In January 2016, the FASB issued ASU No. 2016–01, "Financial Instruments – Recognition and Measurement of Financial Assets and Financial Liabilities (Topic 825)" ("ASU 2016-01"). ASU No. 2016–01 revises the classification and measurement of investments in certain equity investments and the presentation of certain fair value changes for certain financial liabilities measured at fair value. ASU No. 2016–01 requires the change in fair value of many equity investments to be recognized in net income. ASU No. 2016–01 is effective for interim and annual periods beginning after December 15, 2017, with early adoption permitted. Adopting ASU No. 2016–01 may result in a cumulative effect adjustment to the Company's retained earnings as of the beginning of the year of adoption. The Company is currently evaluating the potential effects of adopting the provisions of ASU No. 2016–01. In November 2015, the FASB issued ASU No. 2015-17 "Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes," which simplifies the presentation of deferred income taxes. Under the new accounting standard, deferred tax assets and liabilities are required to be classified as noncurrent, eliminating the prior requirement to separate deferred tax assets and liabilities into current and noncurrent. The new guidance is effective for financial statements issued for annual periods beginning after December 15, 2016, and interim periods within those annual periods, with early adoption permitted. The standard may be adopted prospectively or retrospectively to all periods presented. The Company is currently assessing the timing of adoption of the new guidance, but does not expect it will have a material impact on its consolidated financial statements. In August 2014, the FASB issued ASU No. 2014-15, "Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern," ("ASU 2014-15") which provides guidance on determining when and how to disclose going concern uncertainties in the financial statements. The new standard requires management to perform interim and annual assessments of an entity's ability to continue as a going concern within one year of the date the financial statements are issued. An entity must provide certain disclosures if conditions or events raise substantial doubt about the entity's ability to continue as a going concern. ASU 2014-15 applies to all entities and is effective for annual periods ending after December 15, 2016, and interim periods thereafter, with early adoption permitted. The Company has adopted this guidance as of December 31, 2016 and it did not have a material impact on its financial statements. In May 2014, the FASB issued ASU No. 2014–09, "Revenue from Contracts with Customers ("ASU 2014-09")", also known as the "New Revenue Standard". This update is the result of a collaborative effort by the FASB and the International Accounting Standards Board to simplify revenue recognition guidance, remove inconsistencies in the application of revenue recognition, and to improve comparability of revenue recognition practices across entities, industries, jurisdictions, and capital markets. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to receive for those goods or services. The New Revenue Standard is applied through the following five-step process: 1. Identify the contract(s) with a customer. 2. Identify the performance obligation in the contract. 3. Determine the transaction price. 4. Allocate the transaction price to the performance obligations in the contract. 5. Recognize revenue when (or as) the entity satisfies a performance obligation. For a public entity, this update is effective for annual and interim reporting periods beginning after December 15, 2017 with early adoption permitted. This standard can be applied on either a retrospective or modified retrospective approach. Through the course of 2016 a number of ASU's have been issued which further refine the original guidance issued under ASU 2014-09 and are effective in conjunction with this original standard. The Company is determining its implementation approach and evaluating the potential impacts of the new standard on its existing revenue recognition policies and procedures. The Company's revenues are generally derived from purchase orders and standard contracts and performance obligation criteria is normally met at shipping point with no other material performance obligation. No other new accounting pronouncements issued or effective during the fiscal year have had or are expected to have a material impact on the Company's consolidated financial statements. |
Business Combination (Policies) |
12 Months Ended |
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Dec. 31, 2016 | |
Business Combination [Abstract] | |
Business Combination | On September 2, 2016, PTF acquired certain assets and assumed certain liabilities of Precise Time and Frequency, Inc. ("PTF Inc.") for cash consideration of $295,000 (the "PTF Acquisition"). The PTF Acquisition was accounted for under the acquisition method of accounting for business combinations pursuant to the provisions of ASC 805, Business Combinations, ("ASC 805"). The acquisition method of accounting requires, among other things, that the assets acquired and liabilities assumed in a business combination be measured at their fair values as of the closing date of the acquisition. |
Accounting And Reporting Policies (Tables) |
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Accounting And Reporting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Subsidiaries of the Company | As of December 31, 2016, the subsidiaries of the Company are as follows:
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Future Amortization Expense of Finite-Lived Intangible Assets | The estimated aggregate amortization expense for intangible assets, excluding goodwill, for each of the remaining years of the estimated useful life is as follows (in thousands):
Revenue Recognition |
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Reconciliation of Basic to Diluted Weighted Average Shares Outstanding |
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Business Combination (Tables) |
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Business Combination [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Estimated Fair Values of Assets Acquired and Liabilities Assumed | The following is a summary of the preliminary purchase price allocation to the estimated fair values of assets acquired and liabilites assumed in the PTF Acquisition (in thousands):
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Certain Unaudited Pro Forma Information | The following table sets forth certain unaudited pro forma information for the year ended December 31, 2016 and 2015 assuming that the PTF Acquisition occurred on January 1, 2015 (in thousands, except per share data):
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Inventories (Tables) |
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Dec. 31, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventories [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of inventories | The Company reduces the value of its inventories to market value when the market value is believed to be less than the cost of the item. The inventory reserve for obsolescence as of December 31, 2016 and 2015 was $2,773,000 and $3,016,000, respectively.
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Stock-Based Compensation (Tables) |
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Dec. 31, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-Based Compensation [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of inputs to option valuation model for options granted | The following table summarizes the inputs to the option valuation model for the options granted during the years ended December 31, 2016 and 2015:
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Information about stock options outstanding and exercisable | The following table summarizes information about stock options outstanding and exercisable at December 31, 2016 as well as activity during the year then ended:
The weighted-average grant-date fair value of options granted during the years 2016 and 2015 was $1.04 and $0.99, respectively. As of December 31, 2016, there was approximately $56,000 of total unrecognized compensation expense related to unvested share-based compensation arrangements. |
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Restricted stock grants outstanding and activity | The following table summarizes information about the Company's unvested stock awards as of December 31, 2016, as well as activity during the year then ended:
As of December 31, 2016, there were no unvested share-based compensation arrangements granted under the Amended and Restated 2011 Incentive Plan. The total fair value of shares vested during the year ended December 31, 2016, was approximately $65,000. |
Income Taxes (Tables) |
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Income Taxes [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Tax effects of temporary differences and carry-forwards | Income tax (benefit) provision for the years ended December 31, 2016 and 2015 is as follows:
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Provision (benefit) for income taxes | A reconciliation of the (benefit) provision for income taxes and the amount computed by applying the statutory federal income tax rate to income before income taxes:
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Reconciliation of provision (benefit) for income taxes | Deferred income taxes for 2016 and 2015 were provided for the temporary differences between the financial reporting basis and the tax basis of the Company's assets and liabilities. Tax effects of temporary differences and carry-forwards at December 31, 2016 and 2015, were as follows:
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Fair Value Measurements (Tables) |
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Dec. 31, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Assets measured at fair value on recurring basis | Assets To estimate the market value of its marketable securities, the Company obtains current market pricing from quoted market sources or uses pricing for identical securities. Assets measured at fair value on a recurring basis are summarized below.
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Segment Information (Tables) |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Operating income (loss) and identifiable assets |
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Foreign Revenues (Tables) |
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Dec. 31, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Foreign Revenues [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Significant foreign revenues from operations | For the years ended December 31, 2016 and 2015, domestic revenues were $14,893,000 and $15,260,000, respectively and foreign revenues were $5,998,000 and $5,453,000, respectively. Significant foreign revenues from operations (10% or more of foreign sales) were as follows:
The Company allocates its foreign revenue based on the customer's ship-to location. |
Inventories (Details) - USD ($) |
Dec. 31, 2016 |
Dec. 31, 2015 |
---|---|---|
Classification of inventories [Abstract] | ||
Raw materials | $ 1,408,000 | $ 1,418,000 |
Work in process | 1,306,000 | 1,325,000 |
Finished goods | 924,000 | 803,000 |
Total Inventories, net | 3,638,000 | 3,546,000 |
Inventory reserve for obsolescence | $ 2,773,000 | $ 3,016,000 |
Related Party Transactions (Details) $ in Thousands |
12 Months Ended | |
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Dec. 31, 2015
USD ($)
Director
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Dec. 31, 2016
USD ($)
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Related Party Transaction [Line Items] | ||
Amount invested in Mutual Fund | $ 0 | $ 2,714 |
Amount invested in United States Treasury money market funds | $ 4,089 | $ 1,002 |
Number of common directors | Director | 1 | |
Percentage of stockholders controlling a related party | 10.00% | 10.00% |
CNB Loan (Details) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
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Debt Instrument [Line Items] | ||
Line of credit facility associated restricted cash | $ 2,770 | $ 56 |
CNB Revolver [Member] | ||
Debt Instrument [Line Items] | ||
Line of credit | $ 3,000 | |
Debt instrument maturity date | Sep. 30, 2018 | |
Percentage of commitment fee on unused capacity | 0.75% | |
Line of credit facility amount outstanding | $ 0 | 0 |
Line of credit facility associated restricted cash | $ 0 | $ 0 |
CNB Revolver [Member] | 30-day LIBOR [Member] | ||
Debt Instrument [Line Items] | ||
Basis spread on variable rate | 2.00% |
Stockholders' Equity (Details) - USD ($) $ / shares in Units, $ in Thousands |
12 Months Ended | |||
---|---|---|---|---|
Dec. 31, 2016 |
Dec. 31, 2013 |
Dec. 31, 2015 |
Aug. 29, 2011 |
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Equity, Class of Treasury Stock [Line Items] | ||||
Number of shares authorized and available for repurchase (in shares) | 540,000 | 100,000 | ||
Treasury stock, shares (in shares) | 81,584 | 79,664 | ||
Value of repurchased common stock | $ 580 | $ 572 | ||
Number of warrants received for each share of common stock (in shares) | 5 | |||
Number of warrants that entitle holder to purchase one share of common stock (in shares) | 25 | |||
Warrant exercise price (in dollars per share) | $ 7.50 | |||
Minimum volume weighted average price per share (in dollars per share) | $ 15.00 | |||
Additional shares sold through exercise by underwriter of over-allotment option (in shares) | 0 | |||
Total warrants distributed (in shares) | 12,981,025 |
Employee Benefit Plans (Details) - USD ($) |
12 Months Ended | |
---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
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Employee Benefit Plans [Abstract] | ||
Employer matching contribution, percentage | 50.00% | |
Employer matching contribution of employees' contribution, percentage | 6.00% | |
Employer matching contribution amount | $ 107,000 | $ 112,000 |
Annual vesting percentage of employer contributions | 20.00% | |
Vesting period of employer matching contributions | 6 years | |
Vesting percentage of employer contributions by year six | 100.00% |
Commitments and Contingencies (Details) - USD ($) |
12 Months Ended | |
---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
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Operating Leased Assets [Line Items] | ||
Rent expense under operating leases | $ 249,000 | $ 196,000 |
Minimum [Member] | ||
Operating Leased Assets [Line Items] | ||
Term of operating leases | 1 year | |
Maximum [Member] | ||
Operating Leased Assets [Line Items] | ||
Term of operating leases | 2 years |
Foreign Revenues (Details) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
|
Significant Foreign Revenues: | ||
Revenues from operations | $ 20,891 | $ 20,713 |
Malaysia [Member] | ||
Significant Foreign Revenues: | ||
Revenues from operations | 3,240 | 2,455 |
China [Member] | ||
Significant Foreign Revenues: | ||
Revenues from operations | 315 | 778 |
All other foreign countries [Member] | ||
Significant Foreign Revenues: | ||
Revenues from operations | 2,443 | 2,220 |
Foreign [Member] | ||
Significant Foreign Revenues: | ||
Revenues from operations | $ 5,998 | 5,453 |
Portion of foreign sales | 10.00% | |
Domestic [Member] | ||
Significant Foreign Revenues: | ||
Revenues from operations | $ 14,893 | $ 15,260 |
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