Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Dec. 31, 2019 | Feb. 20, 2020 | Jun. 28, 2019 | |
Document And Entity Information | |||
Entity Registrant Name | BK Technologies Corp | ||
Entity Central Index Key | 0000002186 | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 2019 | ||
Amendment Flag | false | ||
Current Fiscal Year End Date | --12-31 | ||
Is Entity a Well-known Seasoned Issuer? | No | ||
Is Entity a Voluntary Filer? | No | ||
Is Entity's Reporting Status Current? | Yes | ||
Entity Filer Category | Non-accelerated Filer | ||
Entity Emerging Growth Company | false | ||
Entity Small Business | true | ||
Entity Shell Company | false | ||
Entity Public Float | $ 27,554,176 | ||
Entity Common Stock, Shares Outstanding | 12,548,094 | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2019 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) $ in Thousands | Dec. 31, 2019 | Dec. 31, 2018 |
Current assets: | ||
Cash and cash equivalents | $ 4,676 | $ 11,268 |
Trade accounts receivable, net | 3,964 | 5,721 |
Inventories, net | 13,513 | 11,466 |
Prepaid expenses and other current assets | 1,733 | 2,401 |
Total current assets | 23,886 | 30,856 |
Property, plant and equipment, net | 3,964 | 2,729 |
Right-of-use (ROU) asset | 2,885 | 0 |
Investment in securities | 2,635 | 1,919 |
Deferred tax assets, net | 4,373 | 3,495 |
Other assets | 197 | 192 |
Total assets | 37,940 | 39,191 |
Current liabilities: | ||
Accounts payable | 5,310 | 5,595 |
Accrued compensation and related taxes | 1,271 | 2,014 |
Accrued warranty expense | 1,248 | 1,546 |
Accrued other expenses and other current liabilities | 479 | 292 |
Dividends payable | 252 | 256 |
Short-term lease liability | 369 | 0 |
Note payable-current portion | 78 | 0 |
Deferred revenue | 369 | 180 |
Total current liabilities | 9,376 | 9,883 |
Note payable, net of current portion | 328 | 0 |
Long-term lease liability | 2,606 | 0 |
Deferred revenue | 2,354 | 1,596 |
Total liabilities | 14,664 | 11,479 |
Commitments and contingencies | ||
Stockholders' equity: | ||
Preferred stock; $1.00 par value; 1,000,000 authorized shares: none issued or outstanding | 0 | 0 |
Common stock; $.60 par value; 20,000,000 authorized shares; 13,929,381 and 13,882,937 issued and 12,596,923 and 12,817,829 outstanding shares at December 31, 2019 and 2018, respectively | 8,357 | 8,330 |
Additional paid-in capital | 26,095 | 25,867 |
Retained earnings | (6,043) | (2,393) |
Treasury stock, at cost, 1,332,458 and 1,065,108 shares at December 31, 2019 and 2018, respectively | (5,133) | (4,092) |
Total stockholders' equity | 23,276 | 27,712 |
Total liabilities and stockholders' equity | $ 37,940 | $ 39,191 |
Condensed Consolidated Balanc_2
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares | Dec. 31, 2019 | Dec. 31, 2018 |
Stockholders equity: | ||
Preferred stock, par value | $ 1 | $ 1 |
Preferred stock, authorized shares | 1,000,000 | 1,000,000 |
Preferred stock, issued shares | 0 | 0 |
Preferred stock, outstanding shares | 0 | 0 |
Common stock, par value | $ 0.60 | $ 0.60 |
Common stock, authorized shares | 20,000,000 | 20,000,000 |
Common stock, issued shares | 13,929,381 | 13,882,937 |
Common stock, outstanding shares | 12,596,923 | 12,817,829 |
Treasury stock, shares | 1,332,458 | 1,065,108 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Income Statement [Abstract] | ||
Sales, net | $ 40,100 | $ 49,380 |
Expenses | ||
Cost of products | 24,449 | 29,403 |
Selling, general and administrative | 20,036 | 17,552 |
Total expenses | 44,485 | 46,955 |
Operating income (loss) | (4,385) | 2,425 |
Other income (expense): | ||
Interest income | 150 | 102 |
Gain (loss) gain on investment in securities | 716 | (2,671) |
Other expense | (104) | (328) |
Total other income (expense) | 762 | (2,897) |
Loss before income taxes | (3,623) | (472) |
Income tax benefit | 987 | 277 |
Net loss | $ (2,636) | $ (195) |
Net loss per share-basic | $ (0.21) | $ (0.01) |
Net loss per share-diluted | $ (0.21) | $ (0.01) |
Weighted average shares outstanding-basic | 12,705 | 13,464 |
Weighted average shares outstanding-diluted | 12,705 | 13,464 |
Condensed Consolidated Statem_2
Condensed Consolidated Statements of Stockholders Equity - USD ($) $ in Thousands | Common Stock | Additional Paid-In Capital | Accumulated Deficit | Accumulated Other Comprehensive Income | Treasury Stock (Deficit) | Total |
Beginning balance, shares at Dec. 31, 2017 | 13,844,584 | |||||
Beginning balance, amount at Dec. 31, 2017 | $ 8,307 | $ 25,642 | $ (5,450) | $ 4,318 | $ (810) | $ 32,007 |
Restricted stock units issued, shares | 38,353 | |||||
Restricted stock units issued, amount | $ 23 | (23) | 0 | |||
Share-based compensation expense | 95 | 95 | ||||
Restricted stock unit compensation expense | 153 | 153 | ||||
Dividends declared | (1,066) | (1,066) | ||||
Net loss | (195) | (195) | ||||
Effect of adoption of ASU 2016-01 | 4,318 | (4,318) | 0 | |||
Repurchase of common stock | (3,282) | (3,282) | ||||
Ending balance, shares at Dec. 31, 2018 | 13,882,937 | |||||
Ending balance, amount at Dec. 31, 2018 | $ 8,330 | 25,867 | (2,393) | 0 | (4,092) | 27,712 |
Stock options exercised, shares | 1,000 | |||||
Stock options exercised, amount | $ 0 | 2 | 2 | |||
Restricted stock units issued, shares | 45,444 | |||||
Restricted stock units issued, amount | $ 27 | (27) | 0 | |||
Share-based compensation expense | 148 | 148 | ||||
Restricted stock unit compensation expense | 105 | 105 | ||||
Dividends declared | (1,014) | (1,014) | ||||
Net loss | (2,636) | (2,636) | ||||
Repurchase of common stock | (1,041) | (1,041) | ||||
Ending balance, shares at Dec. 31, 2019 | 13,929,381 | |||||
Ending balance, amount at Dec. 31, 2019 | $ 8,357 | $ 26,095 | $ (6,043) | $ 0 | $ (5,133) | $ 23,276 |
Condensed Consolidated Statem_3
Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Operating activities | ||
Net loss | $ (2,636) | $ (195) |
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | ||
Inventory allowance | 194 | (38) |
Deferred tax benefit | (878) | (178) |
Depreciation and amortization | 1,219 | 921 |
Share-based compensation expense | 148 | 95 |
Restricted stock unit compensation expense | 105 | 153 |
Loss (gain) on sale of available-for-sale securities | 0 | 849 |
Unrealized (gain) loss on investment in securities | (716) | 1,822 |
Changes in operating assets and liabilities: | ||
Trade accounts receivable | 1,757 | (197) |
Inventories | (2,241) | 2,930 |
Prepaid expenses and other current assets | 669 | (1,629) |
Other assets | (5) | 53 |
Lease liability | 90 | 0 |
Accounts payable | (285) | (376) |
Accrued compensation and related taxes | (743) | 650 |
Accrued warranty expense | (298) | 157 |
Deferred revenue | 947 | 1,138 |
Accrued other expenses and other current liabilities | 187 | (867) |
Net cash provided by (used in) operating activities | (2,486) | 5,288 |
Investing activities | ||
Purchases of property, plant and equipment | (2,455) | (1,396) |
Investment in securities | 0 | (3,741) |
Proceeds from sale of available-for-sale securities | 0 | 8,335 |
Net cash used in investing activities | (2,455) | 3,198 |
Financing activities | ||
Dividends paid | (1,018) | (1,083) |
Repurchase of common stock | (1,041) | (3,282) |
Proceeds from issuance of common stock | 2 | 0 |
Proceeds from debt | 425 | 0 |
Repayment of debt | (19) | 0 |
Net cash used in financing activities | (1,651) | (4,365) |
Net change in cash and cash equivalents | (6,592) | 4,121 |
Cash and cash equivalents, beginning of year | 11,268 | 7,147 |
Cash and cash equivalents, end of year | 4,676 | 11,268 |
Supplemental disclosure | ||
Cash paid for income taxes | 0 | 0 |
Interest paid | 10 | 0 |
Non-cash financing activity | ||
Restricted stock units issued | $ 147 | $ 140 |
1. Summary of Significant Accou
1. Summary of Significant Accounting Policies | 12 Months Ended |
Dec. 31, 2019 | |
Accounting Policies [Abstract] | |
1. Summary of Significant Accounting Policies | Description of Business BK Technologies Corporation (collectively with its subsidiaries, the “Company”) is a holding company. The primary business of its wholly-owned operating subsidiary, BK Technologies, Inc., is the designing, manufacturing and marketing of wireless communications equipment primarily consisting of two-way land mobile radios and related products, which are sold in two primary markets: (1) the government and public safety market, and (2) the business and industrial market. The Company has only one reportable business segment. On March 28, 2019, BK Technologies, Inc., the predecessor of BK Technologies Corporation, implemented a holding company reorganization, which resulted in BK Technologies Corporation becoming the direct parent company of, and the successor issuer to, BK Technologies, Inc. For the purpose of this report, references to the “Company” or its management or business at any period prior to the holding company reorganization (March 28, 2019) refer to those of BK Technologies, Inc. as the predecessor company and its subsidiaries and thereafter to those of BK Technologies Corporation and its subsidiaries, except as otherwise specified or to the extent the context otherwise indicates. Principles of Consolidation The accounts of the Company have been included in the accompanying consolidated financial statements. All significant intercompany balances and transactions have been eliminated in consolidation. The Company consolidates entities in which it has a controlling financial interest. The Company determines whether it has a controlling financial interest in an entity by first evaluating whether the entity is a variable interest entity (“VIE”) or a voting interest entity. VIEs are entities in which (i) the total equity investment at risk is not sufficient to enable the entity to finance its activities independently, or (ii) the at-risk equity holders do not have the normal characteristics of a controlling financial interest. A controlling financial interest in a VIE is present when an enterprise has one or more variable interests that have both (i) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance, and (ii) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE. The enterprise with a controlling financial interest is the primary beneficiary and consolidates the VIE. Voting interest entities lack one or more of the characteristics of a VIE. The usual condition for a controlling financial interest is ownership of a majority voting interest for a corporation or a majority of kick-out or participating rights for a limited partnership. When the Company does not have a controlling financial interest in an entity but exerts significant influence over the entity’s operating and financial policies (generally defined as owning a voting or economic interest of between 20% to 50%), the Company’s investment is accounted for under the equity method of accounting. If the Company does not have a controlling financial interest in, or exert significant influence over, an entity, the Company accounts for its investment at fair value, if the fair value option was elected, or at cost. The Company has an investment in 1347 Property Insurance Holdings, Inc., made through FGI 1347 Holdings, LP, a consolidated VIE. Inventories Inventories are stated at the lower of cost (determined by the average cost method) or net realizable value. Freight costs are classified as a component of cost of products in the accompanying consolidated statements of operations. The allowance for slow-moving, excess, or obsolete inventory is used to state the Company’s inventories at the lower of cost or net realizable value. Because the amount of inventory that will actually be recouped through sales cannot be known with certainty at any particular time, the Company relies on past sales experience, future sales forecasts, and its strategic business plans. Generally, in analyzing inventory levels, inventory is classified as having been used or unused during the past year. The Company then establishes an allowance based upon several factors, including, but not limited to, business forecasts, inventory quantities and historic usage profile. Supplemental to the aforementioned analysis, specific inventory items are reviewed individually by management. Based on the review, considering business levels, future prospects, new products and technology changes, management, using its business judgment, may adjust the valuation of specific inventory items to reflect an accurate valuation estimate. Management also performs a determination of net realizable value for all finished goods with a selling price below cost. For all such items, the inventory is valued at not more than the selling price less cost, if any, to sell. Property, Plant and Equipment Property, plant and equipment is carried at cost less accumulated depreciation. Expenditures for maintenance, repairs and minor renewals are expensed as incurred. When assets are retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the respective accounts and the resulting gain or loss is reflected in operations for the period. Depreciation and amortization are generally computed on the straight-line method using lives of 3 to 10 years for machinery and equipment and 5 to 8 years for leasehold improvements. Impairment of Long-Lived Assets Management regularly reviews long-lived assets and intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured as the amount by which the carrying amount of the assets exceeds their fair value, which considers the discounted future net cash flows. No long-lived assets were considered impaired at December 31, 2019 and 2018. Cash Equivalents The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. Allowance for Doubtful Accounts The Company records an allowance for doubtful accounts based on specifically identified amounts that the Company believes to be uncollectible. The Company also records an additional allowance based on certain percentages of the Company’s aged receivables, which are determined based on historical experience and the Company’s assessment of the general financial conditions affecting the Company’s customer base. If the Company’s actual collections experience changes, revisions to the Company’s allowance may be required. After all attempts to collect a receivable have failed, the receivable is written off against the allowance. Based on the information available, management believes the allowance for doubtful accounts as of December 31, 2019 and 2018 is adequate. Revenue Recognition Effective January 1, 2018, the Company adopted Accounting Standards Update (“ASU”) 2014-09, “Revenue from Contracts with Customers” and the additional related ASUs (“ASC 606”), which replaced existing revenue guidance and outlines a single set of comprehensive principles for recognizing revenue under accounting principles generally accepted in the United States of America (“GAAP”). The Company elected the modified retrospective method upon adoption, with no impact to the opening retained earnings or revenue reported. These standards provide guidance on recognizing revenue, including a five-step method to determine when revenue recognition is appropriate: Step 1: Identify the contract with the customer; Step 2: Identify the performance obligations in the contract; Step 3: Determine the transaction price; Step 4: Allocate the transaction price to the performance obligations; and Step 5: Recognize revenue as the Company satisfies a performance obligation. ASC 606 provides that sales revenue is recognized when control of the promised goods or services is transferred to customers at an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. The Company generally satisfies performance obligations upon shipment of the product or service to the customer. This is consistent with the time in which the customer obtains control of the product or service. For extended warranties, sales revenue associated with the warranty is deferred at the time of sale and later recognized on a straight-line basis over the extended warranty period. Some contracts include installation services, which are completed in a short period of time and the revenue is recognized when the installation is complete. Customary payment terms are granted to customers, based on credit evaluations. Currently, the Company does not have any contracts where revenue is recognized, but the customer payment is contingent on a future event. The Company periodically reviews its revenue recognition procedures to assure that such procedures are in accordance with GAAP. Surcharges collected on certain sales to government customers and remitted to governmental agencies are not included in revenues or in costs and expenses. Income Taxes The Company accounts for income taxes using the asset and liability method specified by GAAP. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using the enacted tax rates expected to apply in the period in which the deferred tax asset or liability is expected to be realized. The effect of changes in net deferred tax assets and liabilities is recognized on the Company’s consolidated balance sheets and consolidated statements of operations in the period in which the change is recognized. Valuation allowances are provided to the extent that impairment of tax assets is more likely than not. In determining whether a tax asset is realizable, the Company considers, among other things, estimates of future earnings based on information currently available, current and anticipated customers, contracts and new product introductions, as well as recent operating results and certain tax planning strategies. If the Company fails to achieve the future results anticipated in the calculation and valuation of net deferred tax assets, the Company may be required to increase the valuation allowance related to its deferred tax assets in the future. On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “2017 Tax Act”). The 2017 Tax Act makes broad and complex changes to the U.S. tax code, including, but not limited to, (1) reducing the U.S. federal corporate tax rate from 35% to 21%; (2) eliminating the corporate alternative minimum tax (“AMT”) and changing how existing AMT credits can be realized; and (3) changing rules related to uses and limitations of net operating loss carryforwards created in tax years beginning after December 31, 2017. In connection with the Company’s initial analysis of the impact of the 2017 Tax Act, the Company recorded a discrete net tax expense of $665 in the year ended December 31, 2017 for the effect of the corporate rate reduction, which was finalized as of December 31, 2018. The net tax expense primarily relates to a reduction in the deferred tax assets of $1,524 and a reduction in the deferred tax liability related to unrealized gain on available-for-sale securities of $(859). Concentration of Credit Risk The Company performs periodic credit evaluations of its customers’ financial condition and generally does not require collateral. At December 31, 2019 and 2018, accounts receivable from governmental customers were approximately $353 and $3,331, respectively. Generally, receivables are due within 30 days. Credit losses relating to customers have been consistently within management’s expectations. The Company primarily maintains cash balances at one financial institution. Accounts are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250. From time to time, the Company has had cash in financial institutions in excess of federally insured limits. As of December 31, 2019, the Company had cash and cash equivalents in excess of FDIC limits of $5,009. Manufacturing and Raw Materials The Company relies upon a limited number of manufacturers to produce its products and on a limited number of component suppliers. Some of these manufacturers and suppliers are in other countries. Approximately 67.0% of the Company’s material, subassembly and product procurements in 2019 were sourced internationally, of which approximately 64.0% were sourced from three suppliers. For 2018, approximately 66.8% of the Company’s material, subassembly and product procurements were sourced internationally, of which approximately 60.0%were sourced from two suppliers. Purchase orders denominated in U.S. dollars are placed with these suppliers from time to time and there are no guaranteed supply arrangements or commitments. Use of Estimates 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 at the date of the consolidated financial statements and the reported amounts of sales and expenses during the reporting period. Significant estimates include accounts receivable allowances, inventory obsolescence allowance, warranty allowance, and income tax accruals. Actual results could differ from those estimates. Fair Value of Financial Instruments The Company’s financial instruments consist of cash and cash equivalents, trade accounts receivable, investment in securities, accounts payable, accrued expenses and other liabilities. As of December 31, 2019 and 2018, the carrying amount of cash and cash equivalents, trade accounts receivable, accounts payable, accrued expenses and other liabilities approximated their respective fair value due to the short-term nature and maturity of these instruments. The Company uses observable market data or assumptions (Level 1 inputs, as defined in accounting guidance) that it believes market participants would use in pricing the investment in securities. There were no sales of investment in securities as a result of an other-than-temporary impairment of the securities. There were no transfers of investments in securities between Level 1 and Level 2 during the years ended December 31, 2019 and 2018. Available-For-Sale Securities Investments reported on the December 31, 2017 balance sheet consisted of marketable equity securities of a publicly held company, Iteris, Inc. (Nasdaq: ITI). As of December 31, 2017, the investment cost was $2,402. On January 1, 2018, the Company adopted ASU 2016-01 “Financial Instruments,” which amended the guidance in GAAP regarding the classification and measurement of financial instruments. Changes to the prior guidance primarily affected the accounting for equity investments, financial liabilities under the fair value option and the presentation and disclosure requirements for financial instruments. In addition, the ASU clarified guidance related to the valuation allowance assessment when recognizing deferred tax assets resulting from unrealized losses on available-for-sale debt securities. Upon its adoption, the Company applied the amendments by means of a cumulative-effect adjustment to the balance sheet at the beginning of the first reporting period in which the guidance was effective. On January 1, 2018, the Company recognized approximately $4,300 of net unrealized gain in its accumulated deficit balance. During the first quarter of 2018, the Company sold 1,317,503 shares of Iteris, Inc., which cost $2,402, for approximately $8,335 of proceeds and reported a loss on the sale of approximately $849. Shipping and Handling Costs Shipping and handling costs are classified as a part of cost of products in the accompanying consolidated statements of operations for the years ended December 31, 2019 and 2018. Amounts billed to a customer, if any, for shipping and handling are reported as revenue. Advertising and Promotion Costs The cost for advertising and promotion is expensed as incurred. Advertising and promotion expenses are classified as part of selling, general and administrative (“SG&A”) expenses in the accompanying consolidated statements of operations. For the years ended December 31, 2019 and 2018, such expenses totaled $555 and $597, respectively. Engineering, Research and Development Costs Included in SG&A expenses for the years ended December 31, 2019 and 2018 are engineering, research and development costs of $9,803 and $7,768, respectively. Share-Based Compensation The Company accounts for share-based arrangements in accordance with GAAP, which requires a public entity to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award (with limited exceptions). That cost will be recognized over the period during which the employee is required to provide service in exchange for the award requisite service period (usually the vesting period). No compensation cost is recognized for equity instruments for which employees do not render the requisite service. Restricted Stock Units On September 6, 2019, the Company granted to each non-employee director restricted stock units with a grant fair value of $40 per award (resulting in total aggregate grant-date fair value of $280), which will vest in five equal, annual installments beginning with the first anniversary of the grant date, subject to the director’s continued service through such date, provided that, if the director makes himself available and consents to be nominated by the Company for continued service as a director, but is not nominated for the Board for election by shareholders, other than for good reason, as determined by the Board in its discretion, then the restricted stock units shall vest in full as of the director’s last date of service as a director of the Company. On September 6, 2018, the Company granted to each non-employee director restricted stock units with a grant fair value of $20 per award (resulting in total aggregate grant-date fair value of $140), which vest in five equal, annual installments beginning with the first anniversary of the grant date, subject to the director’s continued service through such date, provided that, if the director makes himself available and consents to be nominated by the Company for continued service as a director, but is not nominated for the Board for election by shareholders, other than for good reason, as determined by the Board in its discretion, then the restricted stock units vest in full as of the director’s last date of service as a director of the Company. On September 6, 2019, which was the first anniversary of the grant date, the first tranche of the September 2018 restricted stock units vested. On June 4, 2018, the Company granted to each non-employee director restricted stock units with a grant fair value of $20 per award (resulting in total aggregate grant-date fair value of $140), which vested on June 4, 2019, subject to continued service through such vesting date. On June 15, 2017, the Company granted to each non-employee director restricted stock units with a grant fair value of $20 per award (resulting in total aggregate grant-date fair value of $140), which vested on June 15, 2018. The Company recorded non-cash restricted stock unit compensation expense of $105 and $153 for the years ended December 31, 2019 and 2018, respectively. Earnings (Loss) Per Share Earnings (loss) per share amounts are computed and presented for all periods in accordance with GAAP. Comprehensive Loss Comprehensive loss was equal to net loss for the years ended December 31, 2019 and 2018. Product Warranty The Company offers two-year warranties to its customers, depending on the specific product and terms of the customer purchase agreement. The Company’s typical warranties require it to repair and replace defective products during the warranty period at no cost to the customer. At the time the product revenue is recognized, the Company records a liability for estimated costs under its warranties. The costs are estimated based on historical experience. The Company periodically assesses the adequacy of its recorded liability for product warranties and adjusts the amount as necessary. Recently Adopted Accounting Pronouncements In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU 2014-09 on “Revenue from Contracts with Customers,” which provided for a single, principles-based model for revenue recognition and replaced the existing revenue recognition guidance. In August 2015, the FASB issued ASU 2015-14, which delayed the effective date of ASU 2014-09 by one year. The guidance became effective for annual and interim periods beginning on or after December 15, 2017, and replaced most existing revenue recognition guidance under GAAP when it became effective. This ASU required additional disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and estimates and changes in those estimates. It permitted the use of either a retrospective or cumulative effect transition method. The Company adopted ASU 2014-09 in the first quarter of 2018 and applied the modified retrospective approach. Because the Company’s primary source of revenues is from shipments of products, the adoption of ASU 2014-09 did not have a material impact on its consolidated financial statements. See Note 1, under “Revenue Recognition,” for additional information. In January 2016, the FASB issued ASU 2016-01 “Financial Instruments,” which amended the guidance in GAAP on the classification and measurement of financial instruments. Changes to the previous guidance primarily affected the accounting for equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. In addition, the ASU clarified guidance related to the valuation allowance assessment when recognizing deferred tax assets resulting from unrealized losses on available-for-sale debt securities. The new standard became effective for fiscal years and interim periods beginning after December 15, 2017, and upon adoption, an entity was required to apply the amendments by means of a cumulative-effect adjustment to the balance sheet at the beginning of the first reporting period in which the guidance is effective. On January 1, 2018, the Company adopted the new guidance and, consequently, the Company recognized approximately $4,300 of net unrealized gain in its accumulated deficit balance. In August 2018, the FASB issued ASU 2018-15, “Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract,” to help entities evaluate the accounting for fees paid by a customer in a cloud computing arrangement (hosting arrangement) by providing guidance for determining when the arrangement includes a software license. The amendments in ASU 2018-15 align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal use software license). The accounting for the service element of a hosting arrangement that is a service contract is not affected by the amendments in ASU 2018-15. The amendments in ASU 2018-15 will become effective for fiscal years and interim periods beginning after December 15, 2019. Early adoption is permitted, including adoption in any interim period. The Company adopted the new guidance in the fourth quarter of 2018, with no material impact on its consolidated financial statements and related disclosures. In February 2016, the FASB issued ASU 2016-02 “Leases,” which amended leasing guidance by requiring companies to recognize a right-of-use (“ROU”) asset and a lease liability for all operating and capital (finance) leases with lease terms greater than twelve months. The lease liability is equal to the present value of lease payments. The lease asset is based on the lease liability, subject to adjustment, such as for initial direct costs. For income statement purposes, leases continue to be classified as operating or capital (finance), with lease expense in both cases calculated substantially the same as under the prior leasing guidance. The updated guidance became effective for interim and annual periods beginning after December 15, 2018. The Company adopted the new guidance on January 1, 2019. Adoption resulted in the recognition of ROU assets and lease liabilities on the consolidated financial statements. Based on the Company’s lease portfolio as of December 31, 2019, which consisted solely of operating leases, the Company recognized approximately $2,885 of ROU assets and $2,975 of lease liabilities on its consolidated financial statements as of December 31, 2019. Refer to Note 7 (Leases) for further details on leases. Recent Accounting Pronouncements The Company does not discuss recent pronouncements that are not anticipated to have an impact on or are unrelated to its financial condition, results of operations, cash flows or disclosures. |
2. Inventories, net
2. Inventories, net | 12 Months Ended |
Dec. 31, 2019 | |
Inventory Disclosure [Abstract] | |
2. Inventories, net | Inventories, which are presented net of allowance for obsolete and slow-moving inventory, consisted of the following: December 31, 2019 2018 Finished goods $ 3,864 $ 2,004 Work in process 6,122 5,750 Raw materials 3,527 3,712 $ 13,513 $ 11,466 Changes in the allowance for obsolete and slow-moving inventory are as follows: Years Ended December 31, 2019 2018 Balance, beginning of year $ 629 $ 789 Charged to cost of sales 194 (38 ) Disposal of inventory — (122 ) Balance, end of year $ 823 $ 629 For the year ended December 31, 2018, the Company wrote off obsolete inventory that had been fully allowed for previously, which had no material impact to the Company’s consolidated balance sheets or consolidated statements of operations. |
3. Allowance for Doubtful Accou
3. Allowance for Doubtful Accounts | 12 Months Ended |
Dec. 31, 2019 | |
Allowance for Credit Loss [Abstract] | |
3. Allowance for Doubtful Accounts | Changes in the allowance for doubtful accounts are composed of the following: Years Ended December 31, 2019 2018 Balance, beginning of year $ 50 $ 50 Provision for doubtful accounts — — Uncollectible accounts written off — — Balance, end of year $ 50 $ 50 |
4. Property, Plant and Equipmen
4. Property, Plant and Equipment, net | 12 Months Ended |
Dec. 31, 2019 | |
Property, Plant and Equipment [Abstract] | |
4. Property, Plant and Equipment, net | Property, plant and equipment, net include the following: December 31, 2019 2018 Leasehold improvements $ 732 $ 542 Machinery and equipment 12,430 10,224 Less accumulated depreciation and amortization (9,198 ) (8,037 ) Property, plant and equipment, net $ 3,964 $ 2,729 Depreciation and amortization expense relating to property, plant and equipment for the years ended December 31, 2019 and 2018 was approximately $1,219 and $868, respectively. |
5. Debt
5. Debt | 12 Months Ended |
Dec. 31, 2019 | |
Debt Disclosure [Abstract] | |
5. Debt | On January 30, 2020, BK Technologies, Inc., a wholly-owned subsidiary of the Company, entered into a $5,000 Credit Agreement and a related Line of Credit Note (the “Note” and collectively with the Credit Agreement, the “Credit Agreement”) with JPMorgan Chase Bank, N.A. (“JPMC”). The Credit Agreement provides for a revolving line of credit of up to $5,000, with availability under the line of credit subject to a borrowing base calculated as a percentage of accounts receivable and inventory. The line of credit will expire on January 31, 2021. Proceeds of borrowings under the Credit Agreement may be used for general corporate purposes. The line of credit is collateralized by a blanket lien on all personal property of BK Technologies, Inc. pursuant to the terms of the Continuing Security Agreement with the Lender. The Company and each subsidiary of BK Technologies, Inc. are guarantors of BK Technologies, Inc.’s obligations under the Credit Agreement, in accordance with the terms of the Continuing Guaranty. Borrowings under the Credit Agreement will bear interest at a rate per annum equal to one-month LIBOR or zero if the LIBOR is less than zero) plus a margin of 1.90%. The line of credit is to be repaid in monthly payments of interest only, payable in arrears, commencing on February 1, 2020, with all outstanding principal and interest to be payable in full at maturity. The Credit Agreement contains certain customary restrictive covenants, including restrictions on liens, indebtedness, loans and guarantees, acquisitions and mergers, sales of assets, and stock repurchases by BK Technologies, Inc. The Credit Agreement contains one financial covenant requiring BK Technologies, Inc. to maintain a tangible net worth of at least $20,000 at any fiscal quarter end. The Credit Agreement provides for customary events of default, including: (1) failure to pay principal, interest or fees under the Credit Agreement when due and payable; (2) failure to comply with other covenants and agreements contained in the Credit Agreement and the other documents executed in connection therewith; (3) the making of false or inaccurate representations and warranties; (4) defaults under other agreements with JPMC or under other debt or other obligations of BK Technologies, Inc.; (5) money judgments and material adverse changes; (6) a change in control or ceasing to operate business in the ordinary course; and (7) certain events of bankruptcy or insolvency. Upon the occurrence of an event of default, JPMC may declare the entire unpaid balance immediately due and payable and/or exercise any and all remedial and other rights under the Credit Agreement. On September 25, 2019, BK Technologies, Inc., a wholly-owned subsidiary of BK Technologies Corporation, and U.S. Bank Equipment Finance, a division of U.S. Bank National Association, as a lender, entered into a Master Loan Agreement in the amount of $425 to finance various items of equipment. The loan is collateralized by the equipment purchased using the proceeds. The Master Loan Agreement is payable in 60 monthly principal and interest payments of approximately $8 beginning on October 25, 2019 and maturing on September 25, 2024, and bears a fixed interest rate of 5.11%. On March 28, 2019, BK Technologies, Inc., a wholly-owned subsidiary of the Company, RELM Communications, Inc., a wholly-owned subsidiary of BK Technologies, Inc., and Silicon Valley Bank, as lender (“SVB”), entered into an Amended and Restated Loan and Security Agreement (the “Loan and Security Agreement”). The Loan and Security Agreement replaced BK Technologies, Inc.’s prior Loan and Security Agreement with SVB (the “Prior Agreement”) under which its collateralized revolving credit facility (the “Credit Facility”) was maintained. The Loan and Security Agreement matured on December 26, 2019, and the Company elected not to renew it. Pursuant to the Loan and Security Agreement, the Credit Facility provided BK Technologies, Inc. with a maximum borrowing availability of $1,000 and BK Technologies, Inc. was subject to substantially the same customary borrowing terms and conditions under the Credit Facility as it was under the Prior Agreement, including the accuracy of representations and warranties, compliance with financial maintenance and restrictive covenants and the absence of events of default. Pursuant to the Loan and Security Agreement, payment of cash dividends, in the aggregate not to exceed $5,000 during any twelve-month period, was permitted so long as an event of default did not exist at the time of such dividend and would not exist after giving effect to such dividend. The variable rate at which borrowings under the Credit Facility were to bear interest was The Wall Street Journal The financial maintenance covenants, which were required to be maintained at all times and tested quarterly (or, for the “Adjusted Quick Ratio” covenant, monthly, if any obligations were outstanding), included: (1) a ratio of “Quick Assets” to the sum of “Current Liabilities” plus outstanding borrowings to SVB to the extent not included in “Current Liabilities” minus the current portion of “Deferred Revenue” (all as defined in the Loan and Security Agreement) of at least 1.25:1.00 and (2) maximum “Total Leverage” (as defined in the Loan and Security Agreement) of no greater total consolidated “Indebtedness” than 3 times “Adjusted EBITDA” (all as defined in the Loan and Security Agreement). BK Technologies, Inc.’s obligations were collateralized by substantially all of its assets, principally accounts receivable and inventory. BK Technologies, Inc. was in compliance with all covenants under the Loan and Security Agreement when it matured on December 26, 2019. BK Technologies, Inc. had no borrowings outstanding under the credit facility at the time it matured. |
6. Investment in Securities
6. Investment in Securities | 12 Months Ended |
Dec. 31, 2019 | |
Investments [Abstract] | |
6. Investment in Securities | The Company has an investment in a limited partnership, FGI 1347 Holdings, LP, of which the Company is the sole limited partner. FGI 1347 Holdings, LP was established for the purpose of investing in securities. As of December 31, 2019, the Company indirectly held approximately $190 in cash and 477,282 shares of 1347 Property Insurance Holdings, Inc. (Nasdaq: PIH) with fair value of $2,635, through an investment in FGI 1347 Holdings, LP. These shares were purchased in March and May 2018 for approximately $3,741. As of December 31, 2019 and 2018, the unrealized loss on the investment was approximately $1,106 and $1,822, respectively. During the years ended December 31, 2019 and 2018, the Company recognized a gain of approximately $716 and a loss of approximately of $1,822, respectively, due to changes in the unrealized loss on investment in securities. Affiliates of Fundamental Global Investors, LLC serve as the general partner and the investment manager of FGI 1347 Holdings, LP, and the Company is the sole limited partner. As of December 31, 2019, the Company and the affiliates of Fundamental Global Investors, LLC, including, without limitation, Ballantyne Strong, Inc., beneficially owned in the aggregate 2,714,362 shares of PIH’s common stock, representing approximately 45.1% of PIH’s outstanding shares. Fundamental Global with its affiliates is the largest stockholder of the Company. Mr. Kyle Cerminara, Chairman of the Company’s Board of Directors, is Chief Executive Officer, Co-Founder and Partner of Fundamental Global Investors, LLC and serves as Chief Executive Officer and Chairman of the Board of Directors of Ballantyne Strong. Mr. Lewis M. Johnson, Co-Chairman of the Company, is President, Co-Founder and Partner of Fundamental Global Investors, LLC and serves as Co-Chairman of Ballantyne Strong. Messrs. Cerminara and Johnson also serve as Chairman and Co-Chairman, respectively, of the Board of Directors of PIH. |
7. Leases
7. Leases | 12 Months Ended |
Dec. 31, 2019 | |
Leases [Abstract] | |
7. Leases | The Company leases approximately 54,000 square feet (not in thousands) of industrial space in West Melbourne, Florida, under a non-cancellable operating lease. The lease has the expiration date of June 30, 2027. Rental, maintenance, and tax expenses for this facility were approximately $502 and $490 in 2019 and 2018, respectively. The Company also leases 8,100 square feet (not in thousands) of office space in Lawrence, Kansas, to accommodate a portion of the Company’s engineering team. In November 2019, this lease was amended to extend the lease term until December 31, 2021. Rental, maintenance and tax expenses for this facility were approximately $108 in 2019 and 2018. In February 2020, the Company entered into a lease for 6,857 (not in thousands) square feet of office space at Sawgrass Technology Park, 1619 NW 136th Avenue in Sunrise, Florida, for a period of 64 months. Annual rental, maintenance and tax expenses for the facility will be approximately $196 for the first year, increasing by approximately 3% for each subsequent twelve month period. The Company adopted ASU No. 2016-02, “Leases” (Topic 842) on January 1, 2019 and applied the modified retrospective approach to adoption whereby the standard is applied only to the current and future periods. The Company leases manufacturing and office facilities and equipment under operating leases and determines if an arrangement is a lease at inception. ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent its obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. As most of its leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. The Company has lease agreements with lease and non-lease components, which are accounted for separately. Lease costs consist of the following: December 31, 2019 Operating lease cost $ 573 Short-term lease cost 2 Variable lease cost 128 Total lease cost $ 703 Supplemental cash flow information related to leases was as follows: December 31, 2019 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows (fixed payments) $ 522 Operating cash flows (liability reduction) $ 369 Other information related to operating leases was as follows: December 31, 2019 Weighted average remaining lease term (in years) 6.23 Weighted average discount rate 5.50 % Maturity of lease liabilities as of December 31, 2019 were as follows: December 31, 2019 2020 $ 522 2021 552 2022 439 2023 448 2024 456 Thereafter 1,190 Total payments 3,607 Less: imputed interest 632 Total liability $ 2,975 |
8. Income Taxes
8. Income Taxes | 12 Months Ended |
Dec. 31, 2019 | |
Income Tax Disclosure [Abstract] | |
8. Income Taxes | The income tax benefit is summarized as follows: Years Ended December 31, 2019 2018 Current: Federal $ (107 ) $ (110 ) State (3 ) 10 (110 ) (100 ) Deferred: Federal (889 ) (280 ) State 12 103 (877 ) (177 ) $ (987 ) $ (277 ) A reconciliation of the statutory U.S. income tax rate to the effective income tax rate follows: Years Ended December 31, 2019 2018 Statutory U.S. income tax rate (21.00 )% (21.00 )% State taxes, net of federal benefit (1.21 )% 1.75 % Permanent differences 0.61 % 3.52 % Change in valuation allowance 0.00 % (13.53 )% Change in net operating loss carryforwards and tax credits (5.50 )% (33.48 )% Other (0.14 )% 4.02 % Effective income tax rate (27.24 )% (58.72 )% The components of the deferred income tax assets (liabilities) are as follows: Years Ended December 31, 2019 2018 Deferred tax assets: Operating loss carryforwards $ 1,347 $ 313 R&D Tax Credit 1,678 1,394 AMT Tax Credit 72 179 Section 263A costs 294 252 R&D costs 110 224 Amortization 24 24 Unrealized loss 252 422 Asset reserves: Bad debts 11 12 Inventory allowance 187 146 Accrued expenses: Non-qualified stock options 132 112 Compensation 132 140 Warranty 904 764 Deferred tax assets 5,143 3,982 Less state valuation allowance — — Total deferred tax assets 5,143 3,982 Deferred tax liabilities: Depreciation (770 ) (487 ) Total deferred tax liabilities (770 ) (487 ) Net deferred tax assets (before unrealized gain) 4,373 3,495 Deferred tax liability: unrealized gain — — Net deferred tax assets $ 4,373 $ 3,495 As of December 31, 2019, the Company had a net deferred tax asset of approximately $5,143 offset by deferred tax liabilities of $770 derived from accelerated tax depreciation. This asset is primarily composed of net operating loss carryforwards (“NOLs”), research and development tax credits and costs, and deferred revenue. The NOLs total approximately $4,857 for federal and $7,526 for state purposes, with expirations starting in 2020 for state purposes. State NOLs of $1,209 expired in 2019. During 2018, the Company generated no additional NOLs and during 2019, the Company generated $4,857 of additional federal NOLs. The deferred tax asset amounts are based upon management’s conclusions regarding, among other considerations, the Company’s current and anticipated customer base, contracts, and product introductions, certain tax planning strategies, and management’s estimates of future earnings based on information currently available, as well as recent operating results during 2019, 2018, and 2017. GAAP requires that all positive and negative evidence be analyzed to determine if, based on the weight of available evidence, the Company is more likely than not to realize the benefit of the deferred tax asset. Management’s analysis of all available evidence, both positive and negative, provides support that the Company has the ability to generate sufficient taxable income in the necessary period to utilize the entire benefit for the deferred tax asset. Should the factors underlying management’s analysis change, future valuation adjustments to the Company’s net deferred tax asset may be necessary. If future losses are incurred, it may be necessary to record a valuation allowance related to the Company’s net deferred tax asset recorded as of December 31, 2019. It cannot presently be estimated what, if any, changes to the valuation of the Company’s deferred tax asset may be deemed appropriate in the future. The 2019 federal and state NOLs and tax credit carryforwards could be subject to limitation if, within any three-year period prior to the expiration of the applicable carryforward period, there is a greater than 50% change in ownership of the Company. For the year ended December 31, 2019, the Company is expecting a refund of a portion of the alternative minimum tax credits of approximately $72 (net). The alternative minimum tax legislation was repealed by the 2017 Tax Act. The Company performed a comprehensive review of its portfolio of uncertain tax positions in accordance with recognition standards established by GAAP. In this regard, an uncertain tax position represents the Company’s expected treatment of a tax position taken in a filed tax return or planned to be taken in a future tax return that has not been reflected in measuring income tax expense for financial reporting purposes. As a result of this review, on January 1, 2020, the Company is not aware of any uncertain tax positions that would require additional liabilities or which such classification would be required. The amount of unrecognized tax positions did not change as of December 31, 2019, and the Company does not believe there will be any material changes in its unrecognized tax positions over the next twelve months. Penalties and tax-related interest expense, of which there were no material amounts for the years ended December 31, 2019 and 2018, are reported as a component of income tax expense (benefit). The Company files federal income tax returns, as well as multiple state and local jurisdiction tax returns. A number of years may elapse before an uncertain tax position is audited and finally resolved. While it is often difficult to predict the final outcome or the timing of resolution on any particular uncertain tax position, the Company believes that its allowances for income taxes reflect the most probable outcome. The Company adjusts these allowances, as well as the related interest, in light of changing facts and circumstances. The resolution of a matter would be recognized as an adjustment to the provision for income taxes and the effective tax rate in the period of resolution. The calendar years 2016, 2017, and 2018 are still open to IRS examination under the statute of limitations. The last IRS examination on the Company’s 2007 calendar year was closed with no change. |
9. Loss per Share
9. Loss per Share | 12 Months Ended |
Dec. 31, 2019 | |
Earnings Per Share [Abstract] | |
9. Loss per Share | The following table sets forth the computation of basic and diluted loss per share: Years Ended December 31, 2019 2018 Numerator: Net loss from continuing operations numerator for basic and diluted earnings per share $ (2,636 ) $ (195 ) Denominator: Denominator for basic loss per share weighted average shares 12,705,304 13,463,826 Effect of dilutive securities: Stock options — — Denominator for diluted loss per share weighted average shares 12,705,304 13,463,826 Basic loss per share $ (0.21 ) $ (0.01 ) Diluted loss per share $ (0.21 ) $ (0.01 ) Approximately 569,500 stock options and 0 restricted stock units for the year ended December 31, 2019 and 460,500 stock options and 24,066 restricted stock units for the year ended December 31, 2018, were excluded from the calculation because they were anti-dilutive. |
10. Share-Based Employee Compen
10. Share-Based Employee Compensation | 12 Months Ended |
Dec. 31, 2019 | |
Employee Benefit and Share-based Payment Arrangement, Noncash Expense [Abstract] | |
10. Share-Based Employee Compensation | The Company has an employee and non-employee director incentive compensation equity plan. Related to these programs, the Company recorded $148 and $95 of share-based employee compensation expense during the years ended December 31, 2019 and 2018, respectively, which is included as a component of cost of products and SG&A expenses in the accompanying consolidated statements of operations. No amount of share-based employee compensation expense was capitalized as part of capital expenditures or inventory for the years presented. The Company uses the Black-Scholes-Merton option valuation model to calculate the fair value of a stock option grant. The share-based employee compensation expense recorded in the years ended December 31, 2019 and 2018 was calculated using the assumptions noted in the following table. Expected volatilities are based on the historical volatility of the Company’s common stock over the period of time, commensurate with the expected life of the stock options. The dividend yield assumption is based on the Company’s expectations of dividend payouts at the grant date. In 2019, the Company paid dividends on January 16, for a dividend declared in 2018, April 15, July 15 and October 15. In December 2019, the Company’s Board of Directors also declared a quarterly dividend that was paid on January 17, 2020. The Company has estimated its future stock option exercises. The expected term of option grants is based upon the observed and expected time to the date of post vesting exercises and forfeitures of options by the Company’s employees. The risk-free interest rate is derived from the average U.S. Treasury rate for the period, which approximates the rate at the time of the stock option grant. FY 2019 FY 2018 Expected Volatility 49.0 % 51.9 % Expected Dividends 2.0 % 2.0 % Expected Term (in years) 6.5 6.5 Risk-Free Rate 2.36 % 2.76 % Estimated Forfeitures 0.0 % 0.0 % A summary of stock option activity under the Company’s equity compensation plans as of December 31, 2019, and changes during the year ended December 31, 2019, are presented below: As of January 1, 2019 Stock Options Wgt. Avg. Exercise Price ($) Per Share Wgt. Avg. Remaining Contractual Life (Years) Wgt. Avg. Grant Date Fair Value ($) Per Share Aggregate Intrinsic Value ($) Outstanding 460,500 4.22 — 1.76 — Vested 156,900 4.03 — 2.05 — Nonvested 303,600 4.32 — 1.61 — Period activity Issued 150,000 4.01 — 1.64 — Exercised 1,000 1.89 — 0.71 — Forfeited 40,000 4.35 — 1.49 — Expired — — — — — As of December 31, 2019 Outstanding 569,500 4.16 6.82 1.75 24,000 Vested 214,800 4.12 4.20 1.95 24,000 Nonvested 354,700 4.18 8.40 1.63 — Outstanding: Range of Exercise Prices ($) Per Share Stock Options Outstanding Wgt. Avg. Exercise Price ($) Per Share Wgt. Avg. Remaining Contractual Life (Years) 2.23 3.83 175,000 3.50 7.68 4.07 5.10 394,500 4.45 6.44 569,500 4.16 6.82 Exercisable: Range of Exercise Prices ($) Per Share Stock Options Exercisable Wgt. Avg. Exercise Price ($) Per Share 2.23 3.83 53,000 3.03 4.07 5.10 161,800 4.48 214,800 4.12 The weighted-average grant-date fair value per option granted during the years ended December 31, 2019 and 2018 was $1.64 and $1.61, respectively. The aggregate intrinsic value of stock options exercised during the years ended December 31, 2019 and 2018 was approximately $1 and $0, respectively. In connection with the restricted stock units granted to non-employee directors, the Company accrues compensation expense based on the estimated number of shares expected to be issued, utilizing the most current information available to the Company at the date of the consolidated financial statements. The Company estimates the fair value of the restricted stock unit awards based upon the market price of the underlying common stock on the date of grant. As of December 31, 2019 and 2018, there was approximately $982 and $703, respectively, of total unrecognized compensation cost related to non-vested share-based compensation arrangements, including stock options and restricted stock units. This compensation cost is expected to be recognized approximately over four years. |
11. Significant Customers
11. Significant Customers | 12 Months Ended |
Dec. 31, 2019 | |
Risks and Uncertainties [Abstract] | |
11. Significant Customers | Sales to the U.S. Government represented approximately 49.1% and 40.0% of the Company’s total sales for the years ended December 31, 2019 and 2018, respectively. These sales were primarily to the various government agencies, including those within the United States Department of Defense, the United States Forest Service, the United States Department of Interior, and the United States Department of Homeland Security. |
12. Retirement Plan
12. Retirement Plan | 12 Months Ended |
Dec. 31, 2019 | |
Defined Benefit Plans and Other Postretirement Benefit Plans Disclosures [Abstract] | |
12. Retirement Plan | The Company sponsors a participant contributory retirement 401(k) plan, which is available to all employees. The Company’s contribution to the plan is either a percentage of the participant’s contribution (50% of the participant’s contribution up to a maximum of 6%) or a discretionary amount. For the years ended December 31, 2019 and 2018, total contributions made by the Company were $164 and $144, respectively. |
13. Commitments and Contingenci
13. Commitments and Contingencies | 12 Months Ended |
Dec. 31, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
13. Commitments and Contingencies | Royalty Commitment In 2002, the Company entered into a technology license related to its development of digital products. Under this agreement, the Company is obligated to pay a royalty for each product sold that utilizes the technology covered by this agreement. The Company paid $133 and $164 for the years ended December 31, 2019 and 2018, respectively. The agreement has an indefinite term, and can be terminated by either party under certain conditions. Purchase Commitments The Company has purchase commitments for inventory totaling $5,324 as of December 31, 2019. Self-Insured Health Benefits The Company maintains a self-insured health benefit plan for its employees. This plan is administered by a third party. As of December 31, 2019, the plan had a stop-loss provision insuring losses beyond $80 per employee per year and an aggregate stop-loss of $1,437. As of December 31, 2019 and 2018, the Company recorded an accrual for estimated claims in the amount of approximately $165 and $165, respectively, in accrued other expenses and other current liabilities on the Company’s consolidated balance sheets. Liability for Product Warranties Changes in the Company’s liability for its standard two-year product warranties during the years ended December 31, 2019 and 2018 are as follows: Balance at Beginning of Year Warranties Issued Warranties Settled Balance at End of Year 2019 $ 1,546 $ 606 $ (904 ) $ 1,248 2018 $ 1,389 $ 1,329 $ (1,172 ) $ 1,546 Legal Proceedings From time to time the Company may be involved in various claims and legal actions arising in the ordinary course of its business. There were no other pending material claims or legal matters as of December 31, 2019. |
14. Capital Program
14. Capital Program | 12 Months Ended |
Dec. 31, 2019 | |
Capital Program | |
14. Capital Program | In May 2016, the Company implemented a capital return program that included a stock repurchase program and a quarterly dividend. Under the program, the Company’s Board of Directors approved the repurchase of up to 500,000 shares of the Company’s common stock pursuant to a stock repurchase plan in conformity with the provisions of Rule 10b5-1 and Rule 10b-18 promulgated under the Securities Exchange Act of 1934, as amended. In June 2017, the Board of Directors approved an increase in the Company’s capital return program, authorizing the repurchase of 500,000 shares of the Company’s common stock in addition to the 500,000 shares originally authorized, for a total repurchase authorization of 1 million shares, pursuant to a stock repurchase plan in conformity with the provisions of Rule 10b5-1 and Rule 10b-18 promulgated under the Securities Exchange Act of 1934, as amended. The repurchase program has no termination date. Pursuant to the capital return program, during 2018, the Company’s Board of Directors declared quarterly dividends on the Company’s common stock of $0.02 per share on March 14, June 4, September 6 and December 7. The dividends were payable to stockholders of record as of April 2, 2018, July 2, 2018, October 1, 2018 and January 2, 2019, respectively. These dividends were paid on April 16, 2018, July 16, 2018, October 15, 2018 and January 16, 2019. Pursuant to the capital return program, during 2019, the Company’s Board of Directors declared quarterly dividends on the Company’s common stock of $0.02 per share on March 5, June 10, September 12 and December 5. The dividends were payable to stockholders of record as of April 1, 2019, July 1, 2019, October 1, 2019 and January 3, 2020, respectively. These dividends were paid on April 15, 2019, July 15, 2019, October 15, 2019 and January 17, 2020. In addition, the Company declared a quarterly dividend of $0.02 per share of common stock on March 2, 2020, to be paid on April 13, 2020 to holders of record as of March 31, 2020. |
1. Summary of Significant Acc_2
1. Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 2019 | |
Accounting Policies [Abstract] | |
Description of Business | BK Technologies Corporation (collectively with its subsidiaries, the “Company”) is a holding company. The primary business of its wholly-owned operating subsidiary, BK Technologies, Inc., is the designing, manufacturing and marketing of wireless communications equipment primarily consisting of two-way land mobile radios and related products, which are sold in two primary markets: (1) the government and public safety market, and (2) the business and industrial market. The Company has only one reportable business segment. On March 28, 2019, BK Technologies, Inc., the predecessor of BK Technologies Corporation, implemented a holding company reorganization, which resulted in BK Technologies Corporation becoming the direct parent company of, and the successor issuer to, BK Technologies, Inc. For the purpose of this report, references to the “Company” or its management or business at any period prior to the holding company reorganization (March 28, 2019) refer to those of BK Technologies, Inc. as the predecessor company and its subsidiaries and thereafter to those of BK Technologies Corporation and its subsidiaries, except as otherwise specified or to the extent the context otherwise indicates. |
Principles of Consolidation | The accounts of the Company have been included in the accompanying consolidated financial statements. All significant intercompany balances and transactions have been eliminated in consolidation. The Company consolidates entities in which it has a controlling financial interest. The Company determines whether it has a controlling financial interest in an entity by first evaluating whether the entity is a variable interest entity (“VIE”) or a voting interest entity. VIEs are entities in which (i) the total equity investment at risk is not sufficient to enable the entity to finance its activities independently, or (ii) the at-risk equity holders do not have the normal characteristics of a controlling financial interest. A controlling financial interest in a VIE is present when an enterprise has one or more variable interests that have both (i) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance, and (ii) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE. The enterprise with a controlling financial interest is the primary beneficiary and consolidates the VIE. Voting interest entities lack one or more of the characteristics of a VIE. The usual condition for a controlling financial interest is ownership of a majority voting interest for a corporation or a majority of kick-out or participating rights for a limited partnership. When the Company does not have a controlling financial interest in an entity but exerts significant influence over the entity’s operating and financial policies (generally defined as owning a voting or economic interest of between 20% to 50%), the Company’s investment is accounted for under the equity method of accounting. If the Company does not have a controlling financial interest in, or exert significant influence over, an entity, the Company accounts for its investment at fair value, if the fair value option was elected, or at cost. The Company has an investment in 1347 Property Insurance Holdings, Inc., made through FGI 1347 Holdings, LP, a consolidated VIE. |
Inventories | Inventories are stated at the lower of cost (determined by the average cost method) or net realizable value. Freight costs are classified as a component of cost of products in the accompanying consolidated statements of operations. The allowance for slow-moving, excess, or obsolete inventory is used to state the Company’s inventories at the lower of cost or net realizable value. Because the amount of inventory that will actually be recouped through sales cannot be known with certainty at any particular time, the Company relies on past sales experience, future sales forecasts, and its strategic business plans. Generally, in analyzing inventory levels, inventory is classified as having been used or unused during the past year. The Company then establishes an allowance based upon several factors, including, but not limited to, business forecasts, inventory quantities and historic usage profile. Supplemental to the aforementioned analysis, specific inventory items are reviewed individually by management. Based on the review, considering business levels, future prospects, new products and technology changes, management, using its business judgment, may adjust the valuation of specific inventory items to reflect an accurate valuation estimate. Management also performs a determination of net realizable value for all finished goods with a selling price below cost. For all such items, the inventory is valued at not more than the selling price less cost, if any, to sell. |
Property, Plant and Equipment | Property, plant and equipment is carried at cost less accumulated depreciation. Expenditures for maintenance, repairs and minor renewals are expensed as incurred. When assets are retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the respective accounts and the resulting gain or loss is reflected in operations for the period. Depreciation and amortization are generally computed on the straight-line method using lives of 3 to 10 years for machinery and equipment and 5 to 8 years for leasehold improvements. |
Impairment of Long-Lived Assets | Management regularly reviews long-lived assets and intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured as the amount by which the carrying amount of the assets exceeds their fair value, which considers the discounted future net cash flows. No long-lived assets were considered impaired at December 31, 2019 and 2018. |
Cash Equivalents | The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. |
Allowance for Doubtful Accounts | The Company records an allowance for doubtful accounts based on specifically identified amounts that the Company believes to be uncollectible. The Company also records an additional allowance based on certain percentages of the Company’s aged receivables, which are determined based on historical experience and the Company’s assessment of the general financial conditions affecting the Company’s customer base. If the Company’s actual collections experience changes, revisions to the Company’s allowance may be required. After all attempts to collect a receivable have failed, the receivable is written off against the allowance. Based on the information available, management believes the allowance for doubtful accounts as of December 31, 2019 and 2018 is adequate. |
Revenue Recognition | Effective January 1, 2018, the Company adopted Accounting Standards Update (“ASU”) 2014-09, “Revenue from Contracts with Customers” and the additional related ASUs (“ASC 606”), which replaced existing revenue guidance and outlines a single set of comprehensive principles for recognizing revenue under accounting principles generally accepted in the United States of America (“GAAP”). The Company elected the modified retrospective method upon adoption, with no impact to the opening retained earnings or revenue reported. These standards provide guidance on recognizing revenue, including a five-step method to determine when revenue recognition is appropriate: Step 1: Identify the contract with the customer; Step 2: Identify the performance obligations in the contract; Step 3: Determine the transaction price; Step 4: Allocate the transaction price to the performance obligations; and Step 5: Recognize revenue as the Company satisfies a performance obligation. ASC 606 provides that sales revenue is recognized when control of the promised goods or services is transferred to customers at an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. The Company generally satisfies performance obligations upon shipment of the product or service to the customer. This is consistent with the time in which the customer obtains control of the product or service. For extended warranties, sales revenue associated with the warranty is deferred at the time of sale and later recognized on a straight-line basis over the extended warranty period. Some contracts include installation services, which are completed in a short period of time and the revenue is recognized when the installation is complete. Customary payment terms are granted to customers, based on credit evaluations. Currently, the Company does not have any contracts where revenue is recognized, but the customer payment is contingent on a future event. The Company periodically reviews its revenue recognition procedures to assure that such procedures are in accordance with GAAP. Surcharges collected on certain sales to government customers and remitted to governmental agencies are not included in revenues or in costs and expenses. |
Income Taxes | The Company accounts for income taxes using the asset and liability method specified by GAAP. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using the enacted tax rates expected to apply in the period in which the deferred tax asset or liability is expected to be realized. The effect of changes in net deferred tax assets and liabilities is recognized on the Company’s consolidated balance sheets and consolidated statements of operations in the period in which the change is recognized. Valuation allowances are provided to the extent that impairment of tax assets is more likely than not. In determining whether a tax asset is realizable, the Company considers, among other things, estimates of future earnings based on information currently available, current and anticipated customers, contracts and new product introductions, as well as recent operating results and certain tax planning strategies. If the Company fails to achieve the future results anticipated in the calculation and valuation of net deferred tax assets, the Company may be required to increase the valuation allowance related to its deferred tax assets in the future. On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “2017 Tax Act”). The 2017 Tax Act makes broad and complex changes to the U.S. tax code, including, but not limited to, (1) reducing the U.S. federal corporate tax rate from 35% to 21%; (2) eliminating the corporate alternative minimum tax (“AMT”) and changing how existing AMT credits can be realized; and (3) changing rules related to uses and limitations of net operating loss carryforwards created in tax years beginning after December 31, 2017. In connection with the Company’s initial analysis of the impact of the 2017 Tax Act, the Company recorded a discrete net tax expense of $665 in the year ended December 31, 2017 for the effect of the corporate rate reduction, which was finalized as of December 31, 2018. The net tax expense primarily relates to a reduction in the deferred tax assets of $1,524 and a reduction in the deferred tax liability related to unrealized gain on available-for-sale securities of $(859). |
Concentration of Credit Risk | The Company performs periodic credit evaluations of its customers’ financial condition and generally does not require collateral. At December 31, 2019 and 2018, accounts receivable from governmental customers were approximately $353 and $3,331, respectively. Generally, receivables are due within 30 days. Credit losses relating to customers have been consistently within management’s expectations. The Company primarily maintains cash balances at one financial institution. Accounts are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250. From time to time, the Company has had cash in financial institutions in excess of federally insured limits. As of December 31, 2019, the Company had cash and cash equivalents in excess of FDIC limits of $5,009. |
Manufacturing and Raw Materials | The Company relies upon a limited number of manufacturers to produce its products and on a limited number of component suppliers. Some of these manufacturers and suppliers are in other countries. Approximately 67.0% of the Company’s material, subassembly and product procurements in 2019 were sourced internationally, of which approximately 64.0% were sourced from three suppliers. For 2018, approximately 66.8% of the Company’s material, subassembly and product procurements were sourced internationally, of which approximately 60.0%were sourced from two suppliers. Purchase orders denominated in U.S. dollars are placed with these suppliers from time to time and there are no guaranteed supply arrangements or commitments. |
Use of Estimates | 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 at the date of the consolidated financial statements and the reported amounts of sales and expenses during the reporting period. Significant estimates include accounts receivable allowances, inventory obsolescence allowance, warranty allowance, and income tax accruals. Actual results could differ from those estimates. |
Fair Value of Financial Instruments | The Company’s financial instruments consist of cash and cash equivalents, trade accounts receivable, investment in securities, accounts payable, accrued expenses and other liabilities. As of December 31, 2019 and 2018, the carrying amount of cash and cash equivalents, trade accounts receivable, accounts payable, accrued expenses and other liabilities approximated their respective fair value due to the short-term nature and maturity of these instruments. The Company uses observable market data or assumptions (Level 1 inputs, as defined in accounting guidance) that it believes market participants would use in pricing the investment in securities. There were no sales of investment in securities as a result of an other-than-temporary impairment of the securities. There were no transfers of investments in securities between Level 1 and Level 2 during the years ended December 31, 2019 and 2018. |
Available-For-Sale Securities | Investments reported on the December 31, 2017 balance sheet consisted of marketable equity securities of a publicly held company, Iteris, Inc. (Nasdaq: ITI). As of December 31, 2017, the investment cost was $2,402. On January 1, 2018, the Company adopted ASU 2016-01 “Financial Instruments,” which amended the guidance in GAAP regarding the classification and measurement of financial instruments. Changes to the prior guidance primarily affected the accounting for equity investments, financial liabilities under the fair value option and the presentation and disclosure requirements for financial instruments. In addition, the ASU clarified guidance related to the valuation allowance assessment when recognizing deferred tax assets resulting from unrealized losses on available-for-sale debt securities. Upon its adoption, the Company applied the amendments by means of a cumulative-effect adjustment to the balance sheet at the beginning of the first reporting period in which the guidance was effective. On January 1, 2018, the Company recognized approximately $4,300 of net unrealized gain in its accumulated deficit balance. During the first quarter of 2018, the Company sold 1,317,503 shares of Iteris, Inc., which cost $2,402, for approximately $8,335 of proceeds and reported a loss on the sale of approximately $849. |
Shipping and Handling Costs | Shipping and handling costs are classified as a part of cost of products in the accompanying consolidated statements of operations for the years ended December 31, 2019 and 2018. Amounts billed to a customer, if any, for shipping and handling are reported as revenue. |
Advertising and Promotion Costs | The cost for advertising and promotion is expensed as incurred. Advertising and promotion expenses are classified as part of selling, general and administrative (“SG&A”) expenses in the accompanying consolidated statements of operations. For the years ended December 31, 2019 and 2018, such expenses totaled $555 and $597, respectively. |
Engineering, Research and Development Costs | Included in SG&A expenses for the years ended December 31, 2019 and 2018 are engineering, research and development costs of $9,803 and $7,768, respectively. |
Share-Based Compensation | The Company accounts for share-based arrangements in accordance with GAAP, which requires a public entity to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award (with limited exceptions). That cost will be recognized over the period during which the employee is required to provide service in exchange for the award requisite service period (usually the vesting period). No compensation cost is recognized for equity instruments for which employees do not render the requisite service. |
Restricted Stock Units | On September 6, 2019, the Company granted to each non-employee director restricted stock units with a grant fair value of $40 per award (resulting in total aggregate grant-date fair value of $280), which will vest in five equal, annual installments beginning with the first anniversary of the grant date, subject to the director’s continued service through such date, provided that, if the director makes himself available and consents to be nominated by the Company for continued service as a director, but is not nominated for the Board for election by shareholders, other than for good reason, as determined by the Board in its discretion, then the restricted stock units shall vest in full as of the director’s last date of service as a director of the Company. On September 6, 2018, the Company granted to each non-employee director restricted stock units with a grant fair value of $20 per award (resulting in total aggregate grant-date fair value of $140), which vest in five equal, annual installments beginning with the first anniversary of the grant date, subject to the director’s continued service through such date, provided that, if the director makes himself available and consents to be nominated by the Company for continued service as a director, but is not nominated for the Board for election by shareholders, other than for good reason, as determined by the Board in its discretion, then the restricted stock units vest in full as of the director’s last date of service as a director of the Company. On September 6, 2019, which was the first anniversary of the grant date, the first tranche of the September 2018 restricted stock units vested. On June 4, 2018, the Company granted to each non-employee director restricted stock units with a grant fair value of $20 per award (resulting in total aggregate grant-date fair value of $140), which vested on June 4, 2019, subject to continued service through such vesting date. On June 15, 2017, the Company granted to each non-employee director restricted stock units with a grant fair value of $20 per award (resulting in total aggregate grant-date fair value of $140), which vested on June 15, 2018. The Company recorded non-cash restricted stock unit compensation expense of $105 and $153 for the years ended December 31, 2019 and 2018, respectively. |
Earnings (Loss) Per Share | Earnings (loss) per share amounts are computed and presented for all periods in accordance with GAAP. |
Other Comprehensive Loss | Comprehensive loss was equal to net loss for the years ended December 31, 2019 and 2018. |
Product Warranty | The Company offers two-year warranties to its customers, depending on the specific product and terms of the customer purchase agreement. The Company’s typical warranties require it to repair and replace defective products during the warranty period at no cost to the customer. At the time the product revenue is recognized, the Company records a liability for estimated costs under its warranties. The costs are estimated based on historical experience. The Company periodically assesses the adequacy of its recorded liability for product warranties and adjusts the amount as necessary. |
Recent Accounting Pronouncements | In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU 2014-09 on “Revenue from Contracts with Customers,” which provided for a single, principles-based model for revenue recognition and replaced the existing revenue recognition guidance. In August 2015, the FASB issued ASU 2015-14, which delayed the effective date of ASU 2014-09 by one year. The guidance became effective for annual and interim periods beginning on or after December 15, 2017, and replaced most existing revenue recognition guidance under GAAP when it became effective. This ASU required additional disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and estimates and changes in those estimates. It permitted the use of either a retrospective or cumulative effect transition method. The Company adopted ASU 2014-09 in the first quarter of 2018 and applied the modified retrospective approach. Because the Company’s primary source of revenues is from shipments of products, the adoption of ASU 2014-09 did not have a material impact on its consolidated financial statements. See Note 1, under “Revenue Recognition,” for additional information. In January 2016, the FASB issued ASU 2016-01 “Financial Instruments,” which amended the guidance in GAAP on the classification and measurement of financial instruments. Changes to the previous guidance primarily affected the accounting for equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. In addition, the ASU clarified guidance related to the valuation allowance assessment when recognizing deferred tax assets resulting from unrealized losses on available-for-sale debt securities. The new standard became effective for fiscal years and interim periods beginning after December 15, 2017, and upon adoption, an entity was required to apply the amendments by means of a cumulative-effect adjustment to the balance sheet at the beginning of the first reporting period in which the guidance is effective. On January 1, 2018, the Company adopted the new guidance and, consequently, the Company recognized approximately $4,300 of net unrealized gain in its accumulated deficit balance. In August 2018, the FASB issued ASU 2018-15, “Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract,” to help entities evaluate the accounting for fees paid by a customer in a cloud computing arrangement (hosting arrangement) by providing guidance for determining when the arrangement includes a software license. The amendments in ASU 2018-15 align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal use software license). The accounting for the service element of a hosting arrangement that is a service contract is not affected by the amendments in ASU 2018-15. The amendments in ASU 2018-15 will become effective for fiscal years and interim periods beginning after December 15, 2019. Early adoption is permitted, including adoption in any interim period. The Company adopted the new guidance in the fourth quarter of 2018, with no material impact on its consolidated financial statements and related disclosures. In February 2016, the FASB issued ASU 2016-02 “Leases,” which amended leasing guidance by requiring companies to recognize a right-of-use (“ROU”) asset and a lease liability for all operating and capital (finance) leases with lease terms greater than twelve months. The lease liability is equal to the present value of lease payments. The lease asset is based on the lease liability, subject to adjustment, such as for initial direct costs. For income statement purposes, leases continue to be classified as operating or capital (finance), with lease expense in both cases calculated substantially the same as under the prior leasing guidance. The updated guidance became effective for interim and annual periods beginning after December 15, 2018. The Company adopted the new guidance on January 1, 2019. Adoption resulted in the recognition of ROU assets and lease liabilities on the consolidated financial statements. Based on the Company’s lease portfolio as of December 31, 2019, which consisted solely of operating leases, the Company recognized approximately $2,885 of ROU assets and $2,975 of lease liabilities on its consolidated financial statements as of December 31, 2019. Refer to Note 7 (Leases) for further details on leases. Recent Accounting Pronouncements The Company does not discuss recent pronouncements that are not anticipated to have an impact on or are unrelated to its financial condition, results of operations, cash flows or disclosures. |
2. Inventories, net (Tables)
2. Inventories, net (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Inventory Disclosure [Abstract] | |
Schedule of components of inventory | December 31, 2019 2018 Finished goods $ 3,864 $ 2,004 Work in process 6,122 5,750 Raw materials 3,527 3,712 $ 13,513 $ 11,466 |
Schedule of changes in allowance for obsolete or slow moving inventory | Years Ended December 31, 2019 2018 Balance, beginning of year $ 629 $ 789 Charged to cost of sales 194 (38 ) Disposal of inventory — (122 ) Balance, end of year $ 823 $ 629 |
3. Allowance for Doubtful Acc_2
3. Allowance for Doubtful Accounts (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Allowance for Credit Loss [Abstract] | |
Schedule of allowance for doubtful accounts | Years Ended December 31, 2019 2018 Balance, beginning of year $ 50 $ 50 Provision for doubtful accounts — — Uncollectible accounts written off — — Balance, end of year $ 50 $ 50 |
4. Property, Plant and Equipm_2
4. Property, Plant and Equipment, net (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Property, Plant and Equipment [Abstract] | |
Schedule of property, plant, and equipment | December 31, 2019 2018 Leasehold improvements $ 732 $ 542 Machinery and equipment 12,430 10,224 Less accumulated depreciation and amortization (9,198 ) (8,037 ) Property, plant and equipment, net $ 3,964 $ 2,729 |
7. Leases (Tables)
7. Leases (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Leases [Abstract] | |
Lease costs | December 31, 2019 Operating lease cost $ 573 Short-term lease cost 2 Variable lease cost 128 Total lease cost $ 703 |
Supplemental cash flow information | Supplemental cash flow information related to leases was as follows: December 31, 2019 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows (fixed payments) $ 522 Operating cash flows (liability reduction) $ 369 Other information related to operating leases was as follows: December 31, 2019 Weighted average remaining lease term (in years) 6.23 Weighted average discount rate 5.50 % |
Schedule of future minimum rental payments | December 31, 2019 2020 $ 522 2021 552 2022 439 2023 448 2024 456 Thereafter 1,190 Total payments 3,607 Less: imputed interest 632 Total liability $ 2,975 |
8. Income Taxes (Tables)
8. Income Taxes (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Income Tax Disclosure [Abstract] | |
Schedule of income tax expense/benefit | Years Ended December 31, 2019 2018 Current: Federal $ (107 ) $ (110 ) State (3 ) 10 (110 ) (100 ) Deferred: Federal (889 ) (280 ) State 12 103 (877 ) (177 ) $ (987 ) $ (277 ) |
Schedule of effective income tax rate | Years Ended December 31, 2019 2018 Statutory U.S. income tax rate (21.00 )% (21.00 )% State taxes, net of federal benefit (1.21 )% 1.75 % Permanent differences 0.61 % 3.52 % Change in valuation allowance 0.00 % (13.53 )% Change in net operating loss carryforwards and tax credits (5.50 )% (33.48 )% Other (0.14 )% 4.02 % Effective income tax rate (27.24 )% (58.72 )% |
Schedule of deferred tax assets and liabilities | Years Ended December 31, 2019 2018 Deferred tax assets: Operating loss carryforwards $ 1,347 $ 313 R&D Tax Credit 1,678 1,394 AMT Tax Credit 72 179 Section 263A costs 294 252 R&D costs 110 224 Amortization 24 24 Unrealized loss 252 422 Asset reserves: Bad debts 11 12 Inventory allowance 187 146 Accrued expenses: Non-qualified stock options 132 112 Compensation 132 140 Warranty 904 764 Deferred tax assets 5,143 3,982 Less state valuation allowance — — Total deferred tax assets 5,143 3,982 Deferred tax liabilities: Depreciation (770 ) (487 ) Total deferred tax liabilities (770 ) (487 ) Net deferred tax assets (before unrealized gain) 4,373 3,495 Deferred tax liability: unrealized gain — — Net deferred tax assets $ 4,373 $ 3,495 |
9. Loss per Share (Tables)
9. Loss per Share (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Earnings Per Share [Abstract] | |
Schedule of computation of basic and diluted income per share | Years Ended December 31, 2019 2018 Numerator: Net loss from continuing operations numerator for basic and diluted earnings per share $ (2,636 ) $ (195 ) Denominator: Denominator for basic loss per share weighted average shares 12,705,304 13,463,826 Effect of dilutive securities: Stock options — — Denominator for diluted loss per share weighted average shares 12,705,304 13,463,826 Basic loss per share $ (0.21 ) $ (0.01 ) Diluted loss per share $ (0.21 ) $ (0.01 ) |
10. Share-Based Employee Comp_2
10. Share-Based Employee Compensation (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Employee Benefit and Share-based Payment Arrangement, Noncash Expense [Abstract] | |
Schedule of risk free interest rates | FY 2019 FY 2018 Expected Volatility 49.0 % 51.9 % Expected Dividends 2.0 % 2.0 % Expected Term (in years) 6.5 6.5 Risk-Free Rate 2.36 % 2.76 % Estimated Forfeitures 0.0 % 0.0 % |
Schedule of stock option activity | As of January 1, 2019 Stock Options Wgt. Avg. Exercise Price ($) Per Share Wgt. Avg. Remaining Contractual Life (Years) Wgt. Avg. Grant Date Fair Value ($) Per Share Aggregate Intrinsic Value ($) Outstanding 460,500 4.22 — 1.76 — Vested 156,900 4.03 — 2.05 — Nonvested 303,600 4.32 — 1.61 — Period activity Issued 150,000 4.01 — 1.64 — Exercised 1,000 1.89 — 0.71 — Forfeited 40,000 4.35 — 1.49 — Expired — — — — — As of December 31, 2019 Outstanding 569,500 4.16 6.82 1.75 24,000 Vested 214,800 4.12 4.20 1.95 24,000 Nonvested 354,700 4.18 8.40 1.63 — |
Schedule of outstanding options by exercise price range | Range of Exercise Prices ($) Per Share Stock Options Outstanding Wgt. Avg. Exercise Price ($) Per Share Wgt. Avg. Remaining Contractual Life (Years) 2.23 3.83 175,000 3.50 7.68 4.07 5.10 394,500 4.45 6.44 569,500 4.16 6.82 |
Schedule of exercisable options by exercise price range | Range of Exercise Prices ($) Per Share Stock Options Exercisable Wgt. Avg. Exercise Price ($) Per Share 2.23 3.83 53,000 3.03 4.07 5.10 161,800 4.48 214,800 4.12 |
13. Commitments and Contingen_2
13. Commitments and Contingencies (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
Schedule for product warranties | Balance at Beginning of Year Warranties Issued Warranties Settled Balance at End of Year 2019 $ 1,546 $ 606 $ (904 ) $ 1,248 2018 $ 1,389 $ 1,329 $ (1,172 ) $ 1,546 |
1. Summary of Significant Acc_3
1. Summary of Significant Accounting Policies (Details Narrative) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Accounting Policies [Abstract] | ||
Advertising costs | $ 555 | $ 597 |
Engineering, research and development costs | $ 9,803 | $ 7,768 |
2. Inventories, net (Details)
2. Inventories, net (Details) - USD ($) $ in Thousands | Dec. 31, 2019 | Dec. 31, 2018 |
Inventory Disclosure [Abstract] | ||
Finished goods | $ 3,864 | $ 2,004 |
Work in process | 6,122 | 5,750 |
Raw materials | 3,527 | 3,712 |
Total Inventory | $ 13,513 | $ 11,466 |
2. Inventories, net (Details 1)
2. Inventories, net (Details 1) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Inventory Disclosure [Abstract] | ||
Balance, beginning of year | $ 629 | $ 789 |
Charged to cost of sales | 194 | (38) |
Disposal of inventory | 0 | (122) |
Balance, end of year | $ 823 | $ 629 |
3. Allowance for Doubtful Acc_3
3. Allowance for Doubtful Accounts (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Allowance for Credit Loss [Abstract] | ||
Balance, beginning of year | $ 50 | $ 50 |
Provision for doubtful accounts | 0 | 0 |
Uncollectible accounts written off | 0 | 0 |
Balance, end of year | $ 50 | $ 50 |
4. Property, Plant and Equipm_3
4. Property, Plant and Equipment, net (Details) - USD ($) $ in Thousands | Dec. 31, 2019 | Dec. 31, 2018 |
Property, Plant and Equipment [Abstract] | ||
Leasehold improvements | $ 732 | $ 542 |
Machinery and equipment | 12,430 | 10,224 |
Less accumulated depreciation and amortization | (9,198) | (8,037) |
Property, plant and equipment, net | $ 3,964 | $ 2,729 |
4. Property, Plant and Equipm_4
4. Property, Plant and Equipment, net (Details Narrative) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Property, Plant and Equipment [Abstract] | ||
Depreciation and amortization expense | $ 1,219 | $ 868 |
7. Leases (Details)
7. Leases (Details) $ in Thousands | 12 Months Ended |
Dec. 31, 2019USD ($) | |
Leases [Abstract] | |
Operating lease cost | $ 573 |
Short-term lease cost | 2 |
Variable lease cost | 128 |
Total lease cost | $ 703 |
7. Leases (Details 1)
7. Leases (Details 1) $ in Thousands | 12 Months Ended |
Dec. 31, 2019USD ($) | |
Cash paid for amounts included in the measurement of lease liabilities: | |
Operating cash flows (fixed payments) | $ 522 |
Operating cash flows (liability reduction) | $ 369 |
Weighted average remaining lease term (in years) | 6 years 2 months 23 days |
Weighted average discount rate | 5.50% |
7. Leases (Details 2)
7. Leases (Details 2) $ in Thousands | Dec. 31, 2019USD ($) |
Leases [Abstract] | |
2020 | $ 522 |
2021 | 552 |
2022 | 439 |
2023 | 448 |
2024 | 456 |
Thereafter | 1,190 |
Total payments | 3,607 |
Less: imputed interest | 632 |
Leases, net | $ 2,975 |
8. Income Taxes (Details)
8. Income Taxes (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Current: | ||
Federal | $ (107) | $ (110) |
State | (3) | 10 |
Total, current | (110) | (100) |
Federal | (889) | (280) |
State | 12 | 103 |
Total, deferred | (877) | (177) |
Total, current and deferred | $ (987) | $ (277) |
8. Income Taxes (Details 1)
8. Income Taxes (Details 1) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Income Tax Disclosure [Abstract] | ||
Statutory U.S. income tax rate | (21.00%) | (21.00%) |
States taxes, net of federal benefit | (1.21%) | 1.75% |
Non-deductible items | 0.61% | 3.52% |
Change in valuation allowance | 0.00% | (13.53%) |
Change in net operating loss carryforwards and tax credits | (5.50%) | (33.48%) |
Other | (0.14%) | 4.02% |
Effective income tax rate | (27.24%) | (58.72%) |
8. Income Taxes (Details 2)
8. Income Taxes (Details 2) - USD ($) $ in Thousands | Dec. 31, 2019 | Dec. 31, 2018 |
Deferred tax assets: | ||
Operating loss carryforwards | $ 1,347 | $ 313 |
R&D tax credit | 1,678 | 1,394 |
AMT tax credit | 72 | 179 |
Section 263A costs | 294 | 252 |
R&D costs | 110 | 224 |
Amortization | 24 | 24 |
Unrealized loss | 252 | 422 |
Asset reserves: | ||
Bad debts | 11 | 12 |
Inventory allowance | 187 | 146 |
Accrued expenses: | ||
Non-qualified stock options | 132 | 112 |
Compensation | 132 | 140 |
Warranty | 904 | 764 |
Deferred tax assets | 5,143 | 3,982 |
Less state valuation allowance | 0 | 0 |
Total deferred tax assets | 5,143 | 3,982 |
Deferred tax liabilities: | ||
Depreciation | (770) | (487) |
Total deferred tax liabilities | (770) | (487) |
Net deferred tax assets (before unrealized gain) | 4,373 | 3,495 |
Deferred tax liability: unrealized gain | 0 | 0 |
Net deferred tax assets | $ 4,373 | $ 3,495 |
8. Income Taxes (Details Narrat
8. Income Taxes (Details Narrative) - USD ($) $ in Thousands | Dec. 31, 2019 | Dec. 31, 2018 |
Net deferred tax assets | $ 5,143 | $ 3,982 |
Federal | ||
Net operating loss carryforward | 4,857 | |
State | ||
Net operating loss carryforward | $ 7,526 |
9. Loss per Share (Details)
9. Loss per Share (Details) - USD ($) $ / shares in Units, $ in Thousands | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Numerator: | ||
Net income from continuing operations numerator for basic and diluted earnings per share | $ (2,636) | $ (195) |
Denominator: | ||
Denominator for basic earnings per share weighted average shares | 12,705,304 | 13,463,826 |
Effect of dilutive securities: | ||
Stock Options | 0 | 0 |
Denominator | ||
Denominator for diluted earnings per share weighted average shares | 12,705,304 | 13,463,826 |
Basic income per share | $ (0.21) | $ (0.01) |
Diluted income per share | $ (0.21) | $ (0.01) |
9. Loss per Share (Details Narr
9. Loss per Share (Details Narrative) - shares | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Stock Options | ||
Antidilutive securities excluded from earnings per share | 569,500 | 460,500 |
RSUs | ||
Antidilutive securities excluded from earnings per share | 0 | 24,066 |
10. Share-Based Employee Comp_3
10. Share-Based Employee Compensation (Details) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Expected volatility | 49.00% | 51.90% |
Expected dividends | 2.00% | 2.00% |
Expected term (in years) | 6 years 6 months | 6 years 6 months |
Risk-free rate | 2.36% | 2.76% |
Estimated forfeitures | 0.00% | 0.00% |
10. Share-Based Employee Comp_4
10. Share-Based Employee Compensation (Details 1) $ / shares in Units, $ in Thousands | 12 Months Ended |
Dec. 31, 2019USD ($)$ / sharesshares | |
Employee Benefit and Share-based Payment Arrangement, Noncash Expense [Abstract] | |
Outstanding stock options | shares | 460,500 |
Vested stock options | shares | 156,900 |
Nonvested stock options | shares | 303,600 |
Issued stock options | shares | 150,000 |
Exercised stock options | shares | 1,000 |
Forfeited stock options | shares | 40,000 |
Expired stock options | shares | |
Outstanding stock options | shares | 569,500 |
Vested stock options | shares | 214,800 |
Nonvested stock options | shares | 354,700 |
Outstanding wgt. avg. exercise price | $ 4.22 |
Vested wgt. avg. exercise price | 4.03 |
Nonvested wgt. avg. exercise price | 4.32 |
Issued wgt. avg. exercise price | 4.01 |
Exercised wgt. avg. exercise price | 1.89 |
Forfeited wgt. avg. exercise price | 4.35 |
Expired wgt. avg. exercise price | |
Outstanding wgt. avg. exercise price | 4.16 |
Vested wgt. avg. exercise price | 4.12 |
Nonvested wgt. avg. exercise price | $ 4.18 |
Outstanding contractual life | 6 years 9 months 25 days |
Vested contractual life | 4 years 2 months 12 days |
Nonvested contractual life | 4 years 2 months 5 days |
Outstanding grant date fair value | $ 1.76 |
Vested grant date fair value | 2.05 |
Nonvested grant date fair value | 1.61 |
Issued grant date fair value | 1.64 |
Exercised grant date fair value | 0.71 |
Forfeited grant date fair value | 1.49 |
Expired grant date fair value | |
Outstanding grant date fair value | 1.75 |
Vested grant date fair value | 1.95 |
Nonvested grant date fair value | $ 1.63 |
Outstanding aggregate intrinsic value | $ | |
Vested aggregate intrinsic value | $ | |
Nonvested aggregate intrinsic value | $ | |
Issued aggregate intrinsic value | |
Exercised aggregate intrinsic value | $ | |
Forfeited aggregate intrinsic value | |
Expired aggregate intrinsic value | |
Outstanding aggregate intrinsic value | $ | $ 24,000 |
Vested aggregate intrinsic value | $ | 24,000 |
Nonvested aggregate intrinsic value | $ |
10. Share-Based Employee Comp_5
10. Share-Based Employee Compensation (Details 2) - $ / shares | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Number of options outstanding | 569,500 | 460,500 |
Weighted average exercise price, outstanding | $ 4.16 | |
Weighted average remaining contractual life (in years) | 6 years 9 months 25 days | |
Stock options exercisable | 214,800 | |
Weighted average exercise price, exercisable | $ 4.12 | |
Option 1 | ||
Exercise price, minimum | 2.23 | |
Exercise price, maximum | $ 3.83 | |
Number of options outstanding | 175,000 | |
Weighted average exercise price, outstanding | $ 3.50 | |
Weighted average remaining contractual life (in years) | 7 years 8 months 5 days | |
Stock options exercisable | 53,000 | |
Weighted average exercise price, exercisable | $ 3.03 | |
Option 2 | ||
Exercise price, minimum | 4.07 | |
Exercise price, maximum | $ 5.10 | |
Number of options outstanding | 394,500 | |
Weighted average exercise price, outstanding | $ 4.45 | |
Weighted average remaining contractual life (in years) | 6 years 5 months 8 days | |
Stock options exercisable | 161,800 | |
Weighted average exercise price, exercisable | $ 4.48 |
11. Significant Customers (Deta
11. Significant Customers (Details Narrative) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Risks and Uncertainties [Abstract] | ||
Sales to United States Government | 49.10% | 40.00% |
12. Retirement Plan (Details Na
12. Retirement Plan (Details Narrative) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Defined Benefit Plans and Other Postretirement Benefit Plans Disclosures [Abstract] | ||
Defined contribution to retirement plan | $ 164 | $ 144 |
13. Commitments and Contingen_3
13. Commitments and Contingencies (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | ||
Warranties, beginning | $ 1,546 | $ 1,389 |
Warranties issued | 606 | 1,329 |
Warranties settled | (904) | (1,172) |
Warranties, ending | $ 1,248 | $ 1,546 |
13. Commitments and Contingen_4
13. Commitments and Contingencies (Details Narrative) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | ||
Royalty commitment | $ 133 | $ 164 |
Purchase commitment of inventory | $ 5,324 |