Document and Entity Information
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Document and Entity Information
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6 Months Ended | |
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Jun. 30, 2017
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Aug. 11, 2017
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| Document and Entity Information [Abstract] | ||
| Entity Registrant Name | MICRON SOLUTIONS INC /DE/ | |
| Entity Central Index Key | 0000819689 | |
| Current Fiscal Year End Date | --12-31 | |
| Entity Filer Category | Smaller Reporting Company | |
| Document Type | 10-Q | |
| Document Period End Date | Jun. 30, 2017 | |
| Document Fiscal Year Focus | 2017 | |
| Document Fiscal Period Focus | Q2 | |
| Amendment Flag | false | |
| Entity Common Stock, Shares Outstanding | 2,820,999 |
Condensed Consolidated Balance Sheets
Condensed Consolidated Balance Sheets (Parenthetical)
Condensed Consolidated Statements of Operations
Condensed Consolidated Statements of Cash Flows
Basis of Presentation
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Basis of Presentation
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6 Months Ended |
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Jun. 30, 2017
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| Basis of Presentation [Abstract] | |
| Basis of Presentation | The consolidated financial statements (the "financial statements") include the accounts of Micron Solutions, Inc.® (“Micron Solutions”) and its subsidiary, Micron Products, Inc.® ("Micron" and together with Micron Solutions, the “Company”). All intercompany balances and transactions have been eliminated in consolidation. The unaudited interim condensed consolidated financial statements and related notes have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC"). Accordingly, certain information and footnote disclosures normally included in complete financial statements prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") have been omitted pursuant to such rules and regulations. These financial statements and related notes should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2016 filed with the SEC on March 22, 2017. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. The Company's balance sheet at December 31, 2016 has been derived from the audited financial statements at that date, but does not include all the information and footnotes required by GAAP for complete financial statements. The information presented reflects, in the opinion of the management of the Company, all adjustments necessary for a fair presentation of the financial results for the interim periods presented. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Recent Accounting Pronouncements In the normal course of business, management evaluates all new accounting pronouncements issued by the Financial Accounting Standard Board (“FASB”), Securities and Exchange Commission (“SEC”), Emerging Issues Task Force (“EITF”), or other authoritative accounting bodies to determine the potential impact they may have on the Company’s Consolidated Financial Statements. Based upon this review, except as noted below, management does not expect any of the recently issued accounting pronouncements, which have not already been adopted, to have a material impact on the Company’s consolidated financial statements. ASU No. 2016-02, “Leases (Topic 842)” In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842),” which requires companies to recognize all leases as assets and liabilities on the consolidated balance sheet. The standard retains a distinction between finance leases and operating leases, and the classification criteria for distinguishing between finance leases and operating leases are substantially similar to the classification criteria for distinguishing between capital leases and operating leases in the current accounting literature. The result of retaining a distinction between finance leases and operating leases is that under the lessee accounting model in Topic 842, the effect of leases in a consolidated statement of comprehensive income and a consolidated statement of cash flows is largely unchanged from previous GAAP. The amendments in this standard are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Earlier application is permitted. As of the date of this report, the Company is the lessee of office equipment in a single operating lease and is the lessee of a parking lot as well as storage units. The Company is not a lessor in any arrangements. The Company is evaluating other supplier relationships to determine if such arrangements constitute a lease per this guidance. The Company expects to complete is evaluation prior to the end of 2017 and will evaluate the impact of adoption at that time. The Company does not expect any material impact on reporting or on the results of operations. ASU No. 2014-09, “Revenue from Contracts with Customers” (“ASU 2014-09”) In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers” (“ASU 2014-09”). The core principle behind ASU No. 2014-09 is that an entity should recognize revenue in an amount that reflects the consideration to which the entity expects to be entitled in exchange for delivering goods and services. This model involves a five-step process that includes identifying the contract with the customer, identifying the performance obligations in the contract, determining the transaction price, allocating the transaction price to the performance obligations in the contract and recognizing revenue when the entity satisfies the performance obligations. This ASU allows two methods of adoption; a full retrospective approach where historical financial information is presented in accordance with the new standard, and a modified retrospective approach where this ASU is applied to the most current period presented in the financial statements. In August 2015, the FASB issued ASU No 2015-14 “Revenue from Contracts with Customers: Deferral of the Effective Date,” which deferred the effective date of ASU 2014-09 to annual reporting periods beginning after December 15, 2017, with earlier application permitted as of annual reporting periods beginning after December 15, 2016. As of the date of this report the Company has established a multi-disciplinary team including members of executive management, accounting, sales, operations and IT which is expected to begin implementation of a transition plan to the new guidance in the third quarter. The team will evaluate all supply and manufacturing agreements with customers as well as the nature of other arrangements and relationships between the Company and all other customers (“arrangements”), to determine if a contract, as defined by the guidance, exists. After evaluating the arrangements, the Company will determine the appropriate treatment for revenue recognition per the guidance compared to the Company’s present revenue recognition policy is outlined in the Company's Annual Report on Form 10-K for the year ended December 31, 2016 filed with the SEC on March 22, 2017. As of the date of this report, given the scope of the new standard, the Company is currently unable to provide a reasonable estimate regarding the financial impact or which method of adoption will be elected. Operating matters and liquidity On June 16, 2017 the Company’s credit facility (see Note 6) was renewed for 90 days, expiring September 30, 2017. At June 30, 2017, the outstanding balance on the Company’s revolver was $2,670,000 with $728,879 of borrowing capacity. As of the June 30, 2017 testing date, the Company was in compliance with the terms of the credit facility except with respect to the debt service coverage ratio covenant. Non-compliance with the covenant entitles the bank to declare a default and seek immediate repayment of all outstanding balances. As of the date of these financial statements, the bank has indicated that they will not demand repayment of the outstanding balances. The Company is in discussion with the bank to obtain a waiver of non-compliance with the covenant. Concurrently, the Company is working with bank on extending the credit facility beyond September 30, 2017. As a result of the non-compliance with the debt service coverage ratio covenant, all of the Company’s bank debt has been classified as current liabilities as of June 30, 2017. The Company believes that it will be able to obtain the waiver of non-compliance and extension of the credit facility beyond September 30, 2017, and anticipates that cash flows from its operations, together with its existing working capital, increased booked orders and other resources will be sufficient to fund operations at current levels and repay debt obligations over the next twelve months; however, there can be no assurance that the Company will be able to do so. Assessment of going concern The Company follows accounting standard ASU No. 2014-15, ― Presentation of Financial Statements - Going Concern (Subtopic 205-40), Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. The new accounting standard requires management to evaluate whether there are conditions that give rise to substantial doubt as to the Company’s ability to continue as a going concern within one year from the date of issuance of these financial statements. Substantial doubt exists when conditions and events, considered in the aggregate, indicate that it is probable that a company will be unable to meet its obligations as they become due within one year after the financial statement issuance date. Management evaluations include identifying relevant conditions and events that were known and reasonably knowable as of the date these financial statements have been issued. At December 31, 2016, the Company identified certain conditions and events which in the aggregate required management to perform an assessment of the Company’s ability to continue as a going concern. These conditions included the Company’s ability to renew the credit facility which was maturing in June 2017, negative financial history and the Company’s limited liquidity to meet the working capital needs to support the Company’s operations. While the Company was successful in renewing the credit facility for an additional 90 days, to September 30, 2017, similar conditions exist as of June 30, 2017. As of the June 30, 2017 testing date, the Company was in compliance with the terms of the credit facility except with respect to the debt service coverage ratio covenant. The Company is in discussions with the bank to obtain a waiver of such non-compliance and extension of the credit facility beyond September 30, 2017. Management’s assessment included an analysis of the Company’s first half 2017 results and financial forecasts looking forward twelve months from the date of these financial statements. During the first half of 2017, the Company made strategic decisions to take on new large orders, at aggressive initial pricing, in order to land follow-on orders with lower material costs. During this period the Company incurred extraordinary costs related to the starting up of these new customers, including increased scrap, tooling, labor, rework, expediting charges from suppliers, shift premiums and overtime, in order to meet customer delivery requirements. The Company landed the follow-on orders with the lower material costs and mitigated the startup costs of these new products. The second half 2017 and 2018 forecasts reflect the expected results of austerity measures and productivity improvements implemented, beginning in the second quarter of 2017, which are expected to improve gross margin, reduce operating expenses and return the Company to profitability. These include more efficient use of labor by reducing overtime and modifying production schedules, process improvements, improved material yields, and decreased overhead expenses in part by compensation reductions for all salaried personnel including executive officers. In July 2017, the Company engaged Bonifacio Consulting Services, LLC (“BCS”), a manufacturing consultancy firm with a focus on plastics, medical devices, contract manufacturing and outsourcing to analyze and benchmark the Company’s operations, suggest business development strategies and improve operating performance. Management’s assessment also considered the Company’s history of meeting financial covenants and being able to renew and refinance its debt obligations. Based on the expected extension of the Company’s credit facility beyond September 30, 2017, certain austerity measures and improvements as noted above, cash forecasts, the expected fulfillment of booked orders from existing customers and new customer prospects and the engagement of BCS, the Company expects to continue to meet its obligations for the next twelve months. The financial statements do not include any adjustment that might result from the outcome of this uncertainty. Prior period adjustment In the three months ended June 30, 2017, the Company identified $84,721 of cost of goods sold related to revenue recognized in the first quarter of 2017. The statement of operations for the three months ended June 30, 2017 has been adjusted for these amounts so as to accurately present the results of operations for the second quarter of 2017. The statement of operations for the six months ended June 30, 2017 is presented including these amounts on a year to date basis. The Company concluded that the correction of this error was immaterial, both quantitatively and qualitatively, to all relevant periods. The impact of the adjustment on first quarter results is an increase in net loss to $298,436 from $213,715.
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Earnings Per Share (_EPS_)
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Earnings Per Share ("EPS")
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Jun. 30, 2017
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| Earnings Per Share ("EPS") [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Earnings Per Share ("EPS") | 2. Earnings per Share ("EPS") Basic earnings (loss) per share is computed by dividing net income (loss) available to common shareholders by the weighted average number of common shares outstanding. The computation of diluted earnings (loss) per share is similar to the computation of basic earnings (loss) per share except that the denominator is increased to include the average number of additional common shares that would have been outstanding if the dilutive potential common shares had been issued. In addition, the numerator is adjusted for any changes in net income (loss) that would result from the assumed conversions of those potential shares. The following table presents the calculation of both basic and diluted EPS:
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Inventories
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Inventories
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Jun. 30, 2017
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| Inventories [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Inventories | 3. Inventories Inventories consist of the following:
Silver included in raw materials, work-in-process and finished goods inventory had an estimated cost of $583,733 and $521,745 as of June 30, 2017 and December 31, 2016, respectively.
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Property, Plant and Equipment, net
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Property, Plant and Equipment, net
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Jun. 30, 2017
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| Property, Plant and Equipment, net [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Property, Plant and Equipment, net | 4. Property, Plant and Equipment, net Property, plant and equipment, net consist of the following:
For the three months ended June 30, 2017 and 2016, the Company recorded depreciation expense of $406,761 and $361,001, respectively. For the six months ended June 30, 2017 and 2016, the Company recorded depreciation expense of $801,881 and $744,561, respectively
In January 2016, the Company entered into a Purchase and Sale Agreement (Agreement) with a Buyer (collectively the “Parties”) to sell two unoccupied buildings, with approximately 52,000 square feet, and land, at its Fitchburg, Massachusetts campus. In December 2016, the Parties entered into a First Amendment to the Purchase and Sale Agreement (the First Amendment) which extended the time to close to January 13, 2018. As part of the consideration for extending the Agreement the Buyer agreed to pay certain extension fees.
In January 2017, the Parties entered into a Second Amendment to the Purchase and Sale Agreement (the Second Amendment) to further extend the time to close to July 2018. The Second Amendment permits the Buyer to assign the Agreement to a third party and extends the extension fees through July 2018 or the culmination of the agreement. At June 30, 2017 and December 31, 2016, the real estate under agreement was classified as Assets Held for Sale valued at $688,750. The carrying value approximated the fair value less the cost to sell.
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Intangible Assets, net
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Intangible Assets, net
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Jun. 30, 2017
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| Intangibles Assets, net | 5. Intangible Assets, net The Company assesses the impairment of long-lived assets and intangible assets with finite lives annually or whenever events or changes in circumstances indicate that the carrying value may not be fully recoverable. For the three and six months ended June 30, 2017 and 2016, the Company did not impair any intangible assets. Intangible assets consist of the following:
For the three months ended June 30, 2017 and 2016, the Company recorded amortization expense of $547 and $1,006, respectively. For the six months ended June 30, 2017 and 2016, the Company recorded amortization expense of $987 and $2,013, respectively.
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Debt
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Debt
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Jun. 30, 2017
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| Debt | 6. Debt The following table sets forth the items which comprise debt for the Company:
Bank Debt The Company has a multi-year credit facility with a Massachusetts based bank. This credit facility consists of a revolving line of credit (the "revolver"), a commercial term loan and an equipment line of credit. The debt is secured by substantially all assets of the Company with the exception of real property. On June 16, 2017, the credit facility was renewed for a 90 day term, expiring September 30, 2017. The Company is in discussion with the bank to extend the credit facility beyond September 30, 2017. Revolver The revolver provides for borrowings up to 80% of eligible accounts receivable and 50% of eligible raw materials inventory. The interest rate on the revolver is calculated at the bank's prime rate plus 0.25% (4.50% at June 30, 2017). Amounts available to borrow under the revolver are $728,879 at June 30, 2017. Commercial term loan In November 2016, the Company refinanced its bank term debt, including the commercial term loan and three equipment term loans, along with $500,000 from the revolver, into a new $2,481,943 consolidated five year commercial term loan with a maturity date in November 2021. The interest rate on the loan is a fixed 4.65% per annum and the loan requires monthly payments of principal and interest of approximately $46,500. Equipment line of credit In November 2016, the Company entered into an equipment line of credit that allows for advances of up to $1.0 million under the Company's multi-year credit facility. The term of this equipment line of credit is six years, maturing in November 2022, inclusive of a maximum one-year draw period. Repayment shall consist of monthly interest only payments, equal to the bank's prime rate plus 0.25% as to each advance commencing on the date of the loan through the earlier of: (i) one year from the date of the loan or (ii) the date upon which the equipment line of credit is fully advanced (the “Conversion Date”). On the Conversion Date, principal and interest payments will be due and payable monthly in an amount sufficient to pay the loan in full based upon an amortization schedule commensurate with the remaining term of the loan. At June 30, 2017, $504,781 has been drawn on the equipment line of credit. At December 31, 2016, $102,500 had been drawn on the equipment line of credit. Debt issuance costs The amount of the commercial term loan presented in the table above is net of debt issuance costs of $33,565 and $45,858 at June 30, 2017 and December 31, 2016 respectively. Bank covenants The credit facility contains both financial and non-financial covenants. The financial covenants include maintaining certain debt coverage and leverage ratios. The non-financial covenants relate to various matters including notice prior to executing further borrowings and security interests, mergers or consolidations, acquisitions, guarantees, sales of assets other than in the normal course of business, leasing, changes in ownership and payment of dividends. As of the June 30, 2017 testing date, the Company was in compliance with the terms of the credit facility except with respect to the debt service coverage ratio covenant. As a result, all of the Company’s bank debt has been classified as current liabilities as of June 30, 2017. The Company is in discussions with the bank to obtain a waiver of non-compliance with the covenant. Other Debt Equipment notes In January 2013, the Company entered into two equipment notes totaling $272,500 with a financing company to acquire production equipment. The notes bear interest at the fixed rate of 4.66% and require monthly payments of principal and interest of approximately $5,000 over a five year term maturing in January 2018. Subordinated promissory notes In December 2013, the Company completed a private offering in which the Company sold an aggregate of $500,000 in subordinated promissory notes. The unsecured notes required quarterly interest-only payments at a rate of 10% per annum for the first two years. In December 2015, the interest rate increased to 12% per annum. The Company’s two largest beneficial owners of stock and a director participated in the private offering as follows: REF Securities, LLP, beneficial owner with Rodd E. Friedman of approximately 13% of the Company’s common stock, invested $100,000 in the offering; the Chambers Medical Foundation (the “Foundation”), beneficial owner of approximately 10% of the Company’s common stock, invested $100,000 in the offering; and Mr. E.P. Marinos, a director, invested $50,000 in the offering. The Company’s Chairman of the Board is a co-trustee of the Foundation but has held no dispositive powers since his appointment as such. On July 21, 2017, Mr. Rodd E. Friedman, the principal of REF Securities, LLP was appointed to the Board of Directors of the Company (see Note 10).
In October 2016, the Company and six of the seven investors in the private offering, aggregating $450,000 of the notes, including the three related parties holding $250,000 of the notes, agreed to extend the maturity dates of the notes to December 31, 2018 at a rate of 10% per annum. One investor did not extend the maturity date and that $50,000 note was paid at maturity in December 2016. The notes are subordinated to all indebtedness of the Company pursuant to its multi-year bank credit facility. In connection with the subordinated promissory notes, the Company issued 100,000 warrants to purchase the Company's common stock, including 20,000 warrants to REF Securities, LLP, 20,000 warrants to the Foundation and 10,000 warrants to Mr. Marinos. The warrants were exercisable through December 2016 at an exercise price of $3.51 per share. In 2014, 30,000 warrants were exercised, including 20,000 by the Foundation. No warrants were exercised in 2015 or 2016. In October 2016, in connection with the extension of the maturity dates of the subordinated promissory notes, the expiration date of the remaining 70,000 warrants was extended to December 31, 2018. The exercise price remained unchanged at $3.51 per share. The 70,000 warrants remain unexercised at June 30, 2017. In the fourth quarter of 2016, the Company calculated the incremental fair value of extending the expiration date of the Notes and Warrants and determined that the amendment represented a debt modification in accordance with the guidance outlined in ASC-470, “Debt”. Using the Black-Scholes model, and the 10% test, the Company determined that the incremental fair value of the warrants to be $18,310 which was recorded as a reduction against the Notes and an increase in Additional Paid-in Capital. The discount on the notes is being recognized as non-cash interest expense over the term of the notes. The Company recorded $6,146 and $6,921 for three and six months ended June 30, 2017 and 2016 of non-cash interest expense related to the amortization of the discount. The unamortized discount which is net against the outstanding balance of the subordinated promissory notes is $13,529 at June 30, 2017 and $17,989 at December 31, 2016.
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Income Taxes
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Income Taxes
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6 Months Ended |
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Jun. 30, 2017
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| Income Taxes [Abstract] | |
| Income Taxes | 7. Income Taxes No provision for income taxes has been recorded in the three or six months ended June 30, 2017 or 2016, respectively. The Company has a full valuation allowance against its deferred tax assets as of June 30, 2017 and December 31, 2016. At June 30, 2017, the Company has federal and state net operating loss carryforwards totaling $9,124,000 and $8,196,000, respectively, which begin to expire in 2030. The Company also has federal and state tax credit carryovers of $303,000 and $357,000 respectively. The federal and state tax credits begin to expire in 2026 and 2027, respectively.
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Commitments and Contingencies
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Commitments and Contingencies
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6 Months Ended |
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Jun. 30, 2017
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| Commitments and Contingencies [Abstract] | |
| Commitments and Contingencies | 8. Commitments and Contingencies Legal matters In the ordinary course of its business, the Company is involved in various legal proceedings involving a variety of matters. The Company does not believe there are any pending legal proceedings that will have a material impact on the Company’s financial position or results of operations. Off-balance sheet arrangements In the second quarter of 2016 the Company consolidated its operating leases. Lease expense under all operating leases was approximately $5,884 and $5,113 for the three months ended June 30, 2017 and 2016, respectively, and $13,114 and $14,444 for the six months ended June 30, 2017 and 2016, respectively.
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Shareholders' Equity
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Shareholders' Equity
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Jun. 30, 2017
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| Shareholders' Equity [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shareholders' Equity | 9. Shareholders’ Equity Stock options and share-based incentive plan The following table sets forth the stock option transactions for the six months ended June 30, 2017:
For the three months ended June 30, 2017 and 2016, share-based compensation expense related to stock options amounted to $6,196 and $15,133, respectively. For the six months ended June 30, 2017 and 2016, share based compensation expense related to stock options amounted to $21,167 and $30,591, respectively. Share based compensation is included in general and administrative expenses. For the three months ended June 30, 2016 no options were granted, exercised or expired. For the three months ended June 30, 2017, 4,000 options were forfeited due to an employee termination. For the six months ended June 30, 2017, no options were granted or expired and 4,000 options were forfeited. For the six months ended June 30, 2016, 15,000 options were exercised generating proceeds of $51,150. Warrants For the three months ended June 30, 2017 and 2016, there were no warrants exercised. As of June 30, 2017, 70,000 warrants remain unexercised, including 20,000 held by the Company’s largest beneficial owner, REF Securities, LLP with Mr. Rodd E. Friedman, and 10,000 held by Mr. E. P. Marinos, a director of the Company. The warrants expire in December 2018. Common Stock For the three months ended June 30, 2017, the Company did not issue any shares. For the six months ended June 30, 2017, the Company issued 4,360 shares of the Company’s common stock, pursuant to the 2010 Equity Incentive Plan, with a fair value of $11,250 for director fees in lieu of cash payments. For the six months ended June 30, 2016, there were no such stock grants.
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Subsequent Events
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Subsequent Events
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6 Months Ended |
|---|---|
|
Jun. 30, 2017
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| Subsequent Events [Abstract] | |
| Subsequent Events | 10. Subsequent Events Appointment of Director On July 21, 2017, the Company appointed Mr. Rodd E. Friedman to the Board of Directors. Mr. Friedman is the principal of REF Securities, LLP. Mr. Friedman and REF Securities beneficially own approximately 13% of the outstanding shares of the Company as of June 30, 2017.
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Basis of Presentation (Policies)
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Basis of Presentation (Policies)
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6 Months Ended |
|---|---|
|
Jun. 30, 2017
|
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| Accounting Policies [Abstract] | |
| Recently Accounting Pronouncements | Recent Accounting Pronouncements In the normal course of business, management evaluates all new accounting pronouncements issued by the Financial Accounting Standard Board (“FASB”), Securities and Exchange Commission (“SEC”), Emerging Issues Task Force (“EITF”), or other authoritative accounting bodies to determine the potential impact they may have on the Company’s Consolidated Financial Statements. Based upon this review, except as noted below, management does not expect any of the recently issued accounting pronouncements, which have not already been adopted, to have a material impact on the Company’s consolidated financial statements. ASU No. 2016-02, “Leases (Topic 842)” In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842),” which requires companies to recognize all leases as assets and liabilities on the consolidated balance sheet. The standard retains a distinction between finance leases and operating leases, and the classification criteria for distinguishing between finance leases and operating leases are substantially similar to the classification criteria for distinguishing between capital leases and operating leases in the current accounting literature. The result of retaining a distinction between finance leases and operating leases is that under the lessee accounting model in Topic 842, the effect of leases in a consolidated statement of comprehensive income and a consolidated statement of cash flows is largely unchanged from previous GAAP. The amendments in this standard are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Earlier application is permitted. As of the date of this report, the Company is the lessee of office equipment in a single operating lease and is the lessee of a parking lot as well as storage units. The Company is not a lessor in any arrangements. The Company is evaluating other supplier relationships to determine if such arrangements constitute a lease per this guidance. The Company expects to complete is evaluation prior to the end of 2017 and will evaluate the impact of adoption at that time. The Company does not expect any material impact on reporting or on the results of operations. ASU No. 2014-09, “Revenue from Contracts with Customers” (“ASU 2014-09”) In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers” (“ASU 2014-09”). The core principle behind ASU No. 2014-09 is that an entity should recognize revenue in an amount that reflects the consideration to which the entity expects to be entitled in exchange for delivering goods and services. This model involves a five-step process that includes identifying the contract with the customer, identifying the performance obligations in the contract, determining the transaction price, allocating the transaction price to the performance obligations in the contract and recognizing revenue when the entity satisfies the performance obligations. This ASU allows two methods of adoption; a full retrospective approach where historical financial information is presented in accordance with the new standard, and a modified retrospective approach where this ASU is applied to the most current period presented in the financial statements. In August 2015, the FASB issued ASU No 2015-14 “Revenue from Contracts with Customers: Deferral of the Effective Date,” which deferred the effective date of ASU 2014-09 to annual reporting periods beginning after December 15, 2017, with earlier application permitted as of annual reporting periods beginning after December 15, 2016. As of the date of this report the Company has established a multi-disciplinary team including members of executive management, accounting, sales, operations and IT which is expected to begin implementation of a transition plan to the new guidance in the third quarter. The team will evaluate all supply and manufacturing agreements with customers as well as the nature of other arrangements and relationships between the Company and all other customers (“arrangements”), to determine if a contract, as defined by the guidance, exists. After evaluating the arrangements, the Company will determine the appropriate treatment for revenue recognition per the guidance compared to the Company’s present revenue recognition policy is outlined in the Company's Annual Report on Form 10-K for the year ended December 31, 2016 filed with the SEC on March 22, 2017. As of the date of this report, given the scope of the new standard, the Company is currently unable to provide a reasonable estimate regarding the financial impact or which method of adoption will be elected.
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| Operating Matters And Liquidity | Operating matters and liquidity On June 16, 2017 the Company’s credit facility (see Note 6) was renewed for 90 days, expiring September 30, 2017. At June 30, 2017, the outstanding balance on the Company’s revolver was $2,670,000 with $728,879 of borrowing capacity. As of the June 30, 2017 testing date, the Company was in compliance with the terms of the credit facility except with respect to the debt service coverage ratio covenant. Non-compliance with the covenant entitles the bank to declare a default and seek immediate repayment of all outstanding balances. As of the date of these financial statements, the bank has indicated that they will not demand repayment of the outstanding balances. The Company is in discussion with the bank to obtain a waiver of non-compliance with the covenant. Concurrently, the Company is working with bank on extending the credit facility beyond September 30, 2017. As a result of the non-compliance with the debt service coverage ratio covenant, all of the Company’s bank debt has been classified as current liabilities as of June 30, 2017. The Company believes that it will be able to obtain the waiver of non-compliance and extension of the credit facility beyond September 30, 2017, and anticipates that cash flows from its operations, together with its existing working capital, increased booked orders and other resources will be sufficient to fund operations at current levels and repay debt obligations over the next twelve months; however, there can be no assurance that the Company will be able to do so.
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| Assessment Of Going Concern | Assessment of going concern The Company follows accounting standard ASU No. 2014-15, ― Presentation of Financial Statements - Going Concern (Subtopic 205-40), Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. The new accounting standard requires management to evaluate whether there are conditions that give rise to substantial doubt as to the Company’s ability to continue as a going concern within one year from the date of issuance of these financial statements. Substantial doubt exists when conditions and events, considered in the aggregate, indicate that it is probable that a company will be unable to meet its obligations as they become due within one year after the financial statement issuance date. Management evaluations include identifying relevant conditions and events that were known and reasonably knowable as of the date these financial statements have been issued. At December 31, 2016, the Company identified certain conditions and events which in the aggregate required management to perform an assessment of the Company’s ability to continue as a going concern. These conditions included the Company’s ability to renew the credit facility which was maturing in June 2017, negative financial history and the Company’s limited liquidity to meet the working capital needs to support the Company’s operations. While the Company was successful in renewing the credit facility for an additional 90 days, to September 30, 2017, similar conditions exist as of June 30, 2017. As of the June 30, 2017 testing date, the Company was in compliance with the terms of the credit facility except with respect to the debt service coverage ratio covenant. The Company is in discussions with the bank to obtain a waiver of such non-compliance and extension of the credit facility beyond September 30, 2017. Management’s assessment included an analysis of the Company’s first half 2017 results and financial forecasts looking forward twelve months from the date of these financial statements. During the first half of 2017, the Company made strategic decisions to take on new large orders, at aggressive initial pricing, in order to land follow-on orders with lower material costs. During this period the Company incurred extraordinary costs related to the starting up of these new customers, including increased scrap, tooling, labor, rework, expediting charges from suppliers, shift premiums and overtime, in order to meet customer delivery requirements. The Company landed the follow-on orders with the lower material costs and mitigated the startup costs of these new products. The second half 2017 and 2018 forecasts reflect the expected results of austerity measures and productivity improvements implemented, beginning in the second quarter of 2017, which are expected to improve gross margin, reduce operating expenses and return the Company to profitability. These include more efficient use of labor by reducing overtime and modifying production schedules, process improvements, improved material yields, and decreased overhead expenses in part by compensation reductions for all salaried personnel including executive officers. In July 2017, the Company engaged Bonifacio Consulting Services, LLC (“BCS”), a manufacturing consultancy firm with a focus on plastics, medical devices, contract manufacturing and outsourcing to analyze and benchmark the Company’s operations, suggest business development strategies and improve operating performance. Management’s assessment also considered the Company’s history of meeting financial covenants and being able to renew and refinance its debt obligations. Based on the expected extension of the Company’s credit facility beyond September 30, 2017, certain austerity measures and improvements as noted above, cash forecasts, the expected fulfillment of booked orders from existing customers and new customer prospects and the engagement of BCS, the Company expects to continue to meet its obligations for the next twelve months. The financial statements do not include any adjustment that might result from the outcome of this uncertainty.
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| Prior Period Adjustment | Prior period adjustment In the three months ended June 30, 2017, the Company identified $84,721 of cost of goods sold related to revenue recognized in the first quarter of 2017. The statement of operations for the three months ended June 30, 2017 has been adjusted for these amounts so as to accurately present the results of operations for the second quarter of 2017. The statement of operations for the six months ended June 30, 2017 is presented including these amounts on a year to date basis. The Company concluded that the correction of this error was immaterial, both quantitatively and qualitatively, to all relevant periods. The impact of the adjustment on first quarter results is an increase in net loss to $298,436 from $213,715.
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Earnings Per Share (Tables)
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Earnings Per Share (Tables)
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Jun. 30, 2017
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| Earnings Per Share ("EPS") [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Calculation of basic and diluted EPS |
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Inventories (Tables)
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Inventories (Tables)
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Jun. 30, 2017
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| Inventories |
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Property, Plant and Equipment, net (Tables)
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Property, Plant and Equipment, net (Tables)
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Jun. 30, 2017
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Intangible Assets, net (Tables)
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Intangible Assets, net (Tables)
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Jun. 30, 2017
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| Intangibles Assets |
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Debt (Tables)
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Debt (Tables)
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Jun. 30, 2017
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| Debt [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Summary of Debt |
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Shareholders' Equity (Tables)
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Shareholders' Equity (Tables)
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Jun. 30, 2017
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| Shareholders' Equity [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock Option Transactions |
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Basis of Presentation (Details)
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Basis of Presentation (Details) (USD $)
|
3 Months Ended | 6 Months Ended | ||||
|---|---|---|---|---|---|---|
|
Jun. 30, 2017
|
Mar. 31, 2017
|
Jun. 30, 2016
|
Jun. 30, 2017
|
Jun. 30, 2016
|
Dec. 31, 2016
|
|
| Revolving line of credit | $ 2,670,000 | $ 2,670,000 | $ 1,785,795 | |||
| Cost of sales | 5,008,889 | 4,184,263 | 9,620,492 | 8,482,425 | ||
| Net loss | (511,453) | 298,436 | 62,113 | (809,890) | (322,035) | |
| Scenario, Previously Reported [Member] | ||||||
| Net loss | 213,715 | |||||
| Restatement Adjustment [Member] | ||||||
| Cost of sales | 84,721 | |||||
| Revolving Credit Facility [Member] | ||||||
| Debt instrument, renewal period | 90 days | |||||
| Line of credit, maturity date | Sep. 30, 2017 | |||||
| Revolving line of credit | 2,670,000 | 2,670,000 | ||||
| Amount available under line of credit facility | $ 728,879 | $ 728,879 | ||||
Earnings Per share (Calculation of basic and diluted EPS) (Details)
Inventories (Details)
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Inventories (Details) (USD $)
|
Jun. 30, 2017
|
Dec. 31, 2016
|
|---|---|---|
| Inventories [Abstract] | ||
| Raw materials | $ 799,698 | $ 1,027,474 |
| Work-in-process | 624,983 | 537,858 |
| Finished goods | 1,829,583 | 1,494,753 |
| Total | 3,254,264 | 3,060,085 |
| Silver inventory | $ 583,733 | $ 521,745 |
Property, Plant and Equipment, net (Narrative) (Details)
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Property, Plant and Equipment, net (Narrative) (Details) (USD $)
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1 Months Ended | 3 Months Ended | 6 Months Ended | |||
|---|---|---|---|---|---|---|
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Jan. 31, 2016
item
sqft
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Jun. 30, 2017
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Jun. 30, 2016
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Jun. 30, 2017
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Jun. 30, 2016
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Dec. 31, 2016
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| Property, Plant and Equipment, net [Abstract] | ||||||
| Depreciation expense | $ 406,761 | $ 361,001 | $ 801,881 | $ 744,561 | ||
| Number of unoccupied buildings with letter of intent to sale | 2 | |||||
| Area of building | 52,000 | |||||
| Assets held for sale, net | $ 688,750 | $ 688,750 | $ 688,750 | |||
Property, Plant and Equipment, net (Property, Plant and Equipment, net) (Details)
Intangible Assets, net (Narrative) (Details)
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Intangible Assets, net (Narrative) (Details) (USD $)
|
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
|
Jun. 30, 2017
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Jun. 30, 2016
|
Jun. 30, 2017
|
Jun. 30, 2016
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| Intangible Assets, net [Abstract] | ||||
| Intangible asset impairment | $ 0 | $ 0 | $ 0 | $ 0 |
| Amortization expense | $ 547 | $ 1,006 | $ 987 | $ 2,013 |
Intangible Assets, net (Intangible Assets) (Details)
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Intangible Assets, net (Intangible Assets) (Details) (USD $)
|
6 Months Ended | |
|---|---|---|
|
Jun. 30, 2017
|
Dec. 31, 2016
|
|
| Intangible Assets [Line Items] | ||
| Gross | $ 55,126 | $ 39,831 |
| Accumulated Amortization | 10,725 | 9,738 |
| Net | 44,401 | 30,093 |
| Patents and Trademarks [Member] | ||
| Intangible Assets [Line Items] | ||
| Estimated Useful Life (in years) | 10 years | |
| Gross | 26,290 | 26,290 |
| Accumulated Amortization | 10,617 | 9,738 |
| Net | 15,673 | 16,552 |
| Patents and Trademarks Pending | ||
| Intangible Assets [Line Items] | ||
| Gross | 25,568 | 13,541 |
| Net | 25,568 | 13,541 |
| Trade Names [Member] | ||
| Intangible Assets [Line Items] | ||
| Gross | 3,268 | |
| Accumulated Amortization | 108 | |
| Net | $ 3,160 |
Debt (Bank Debt Narrative) (Details)
Debt (Other Debt Narrative) (Details)
Debt (Summary of Debt) (Details)
Income Taxes (Details)
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Income Taxes (Details) (USD $)
|
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
|
Jun. 30, 2017
|
Jun. 30, 2016
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Jun. 30, 2017
|
Jun. 30, 2016
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| Income Taxes [Line Items] | ||||
| Income tax provision (benefit) | ||||
| Federal Tax Authority [Member] | ||||
| Income Taxes [Line Items] | ||||
| Tax credit carryforwards | 303,000 | 303,000 | ||
| State Jurisdiction [Member] | ||||
| Income Taxes [Line Items] | ||||
| Tax credit carryforwards | 357,000 | 357,000 | ||
| Federal Tax Authority [Member] | ||||
| Income Taxes [Line Items] | ||||
| Net operating loss carryforwards | 9,124,000 | 9,124,000 | ||
| State Jurisdiction [Member] | ||||
| Income Taxes [Line Items] | ||||
| Net operating loss carryforwards | $ 8,196,000 | $ 8,196,000 | ||
Commitments and Contingencies (Details)
|
Commitments and Contingencies (Details) (USD $)
|
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
|
Jun. 30, 2017
|
Jun. 30, 2016
|
Jun. 30, 2017
|
Jun. 30, 2016
|
|
| Commitments and Contingencies [Abstract] | ||||
| Operating lease expense, office equipment | $ 5,884 | $ 5,113 | $ 13,114 | $ 14,444 |
Shareholders' Equity (Narrative) (Details)
Shareholders' Equity (Stock Option Transactions) (Details)
Subsequent Events (Details)
|
Subsequent Events (Details)
|
6 Months Ended |
|---|---|
|
Jun. 30, 2017
|
|
| Subsequent Events [Abstract] | |
| Minority ownership percentage | 13.00% |