Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Jun. 30, 2019 | Aug. 09, 2019 | |
Document And Entity Information | ||
Entity Registrant Name | Amerinac Holding Corp. | |
Entity Central Index Key | 0000936446 | |
Document Type | 10-Q | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Small Business | true | |
Entity Shell Company | false | |
Entity Emerging Growth Company | false | |
Entity Current Reporting Status | Yes | |
Document Period End Date | Jun. 30, 2019 | |
Entity Filer Category | Non-accelerated Filer | |
Document Fiscal Period Focus | Q2 | |
Document Fiscal Year Focus | 2019 | |
Entity Common Stock Shares Outstanding | 313,636 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) | Jun. 30, 2019 | Dec. 31, 2018 |
Current assets: | ||
Cash | $ 265,264 | $ 360,283 |
Accounts receivable (net of allowance for doubtful accounts of $78,753 as of June 30, 2019 and December 31, 2018.) | 78,753 | 3,801,166 |
Inventories (net of reserve for obsolesence of $158,009 and $151,009 as of June 30, 2019 and December 31, 2018.) | 5,836,154 | 5,580,942 |
Other current assets | 283,321 | 230,985 |
Total current assets | 12,106,156 | 9,973,376 |
Property, land and equipment - net | 6,051,989 | 6,125,183 |
Other assets: | ||
Customer lists - net of amortization | 1,608,583 | 1,708,084 |
Right-of-use asset | 1,208,613 | |
Deferred tax asset | 358,686 | |
Goodwill | 54,993 | 54,993 |
Other | 71,593 | 51,917 |
Total other assets | 2,943,782 | 2,173,680 |
Total | 21,101,927 | 18,272,239 |
Current liabilities: | ||
Line of credit | 745,431 | 1,092,058 |
Accounts payable and accrued expenses | 4,026,018 | 3,275,011 |
Notes payable, net- short term | 600,000 | 600,000 |
Finance leases payable - short term | 45,688 | 43,435 |
Operating leases payable - short term | 254,845 | |
Deferred revenue | 23,247 | |
Income taxes payable | 110,144 | 14,351 |
Total current liabilities | 5,805,373 | 5,024,855 |
Long-term liabilities: | ||
Notes payable, net of current portion | 3,804,830 | 4,069,990 |
Finance leases payable - net of current portion | 89,656 | 113,358 |
Operating leases payable - net of current portion | 1,000,193 | |
Deferred tax liability | 7,041 | |
Total long-term liabilities | 4,901,720 | 4,183,348 |
Total liabilities | 10,707,093 | 9,208,203 |
Commitments and contingencies | ||
Redeemable non-controlling interest | 1,071,729 | 757,778 |
Stockholders' equity: | ||
Common stock, $.001 par value; 1,500,000 shares authorized, 313,636 issued and outstanding at June 30, 2019 and December 31, 2018, respectively. | 313 | 313 |
Additional paid-in capital | 16,383,599 | 16,383,599 |
Accumulated deficit | (7,060,807) | (8,077,654) |
Total stockholders' equity | 8,306,258 | |
Total liabilities and stockholders' equity | $ 21,101,927 | $ 18,272,239 |
CONDENSED CONSOLIDATED BALANC_2
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) | Jun. 30, 2019 | Dec. 31, 2018 |
Stockholders' equity | ||
Common stock, par value | $ .001 | $ .001 |
Common stock, shares authorized | 1,500,000 | 1,500,000 |
Common stock, shares issued | 313,636 | 313,636 |
Common stock, shares outstanding | 30 | 30 |
Current assets | ||
Allowance For Doubtful Debtors | $ 78,753 | $ 78,753 |
Reserve for Obsolence | $ 158,009 | $ 151,009 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) | ||||
Net revenue | $ 4,176,218 | $ 11,310,897 | $ 8,494,047 | $ 22,013,681 |
Cost of goods sold | 9,253,072 | 9,475,915 | 19,169,449 | 17,891,455 |
Gross profit | 2,304,287 | 1,834,982 | 1,509,025 | 4,122,226 |
Operating expenses: | ||||
General and administrative expenses | 1,338,765 | 1,061,479 | 958,673 | 2,059,149 |
Professional and consulting fees | 81,137 | 36,835 | 38,926 | 214,942 |
Total operating expenses | 1,419,902 | 1,098,314 | 997,599 | 2,274,091 |
Income before other (expense) income | 884,385 | 736,668 | 511,426 | 1,848,135 |
Other (expense) income: | ||||
Interest | (118,635) | (363,774) | (728,925) | |
Other income | 278,244 | 288,596 | ||
Total other (expense) income | (118,635) | (85,530) | (240,430) | (440,329) |
Income before provision for income taxes | 765,750 | 651,138 | 1,792,318 | 1,407,806 |
Income tax expense | (199,054) | (131,557) | 461,520 | 131,557 |
Net income | 566,696 | 519,581 | 1,330,798 | 1,276,249 |
Non-controlling interest share of net income | 144,658 | 166,556 | 313,951 | 364,293 |
Net income attributable to Amerinac Holding Corp. shareholders | $ 422,038 | $ 353,025 | $ 1,016,847 | $ 911,956 |
Basic and diluted earnings per share applicable to common stockholders: | ||||
Earnings per share | $ 1.35 | $ 1.19 | $ 3.24 | $ 3.07 |
Weighted average shares outstanding: | ||||
Basic and diluted | 313,636 | 297,386 | 313,636 | 297,386 |
CONDENSED CONSOLIDATED STATEM_2
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY (Unaudited) - USD ($) | Total | Common Stock Shares | Additional Paid-in Capital | Accumulated Deficit |
Beginning Balance, shares at Jan. 01, 2018 | 297,386 | |||
Beginning Balance, amount at Jan. 01, 2018 | $ 5,630,190 | $ 297 | $ 15,733,615 | $ (10,103,722) |
Net income attributable to Amerinac, amount | ||||
Holding Corp. shareholders, amount | 911,956 | 911,956 | ||
Ending Balance, shares at Jun. 30, 2018 | 297,386 | |||
Ending Balance, amount at Jun. 30, 2018 | 6,542,146 | $ 297 | 15,733,615 | (9,191,766) |
Beginning Balance, shares at Apr. 01, 2018 | 297,386 | |||
Beginning Balance, amount at Apr. 01, 2018 | 6,189,121 | $ 297 | 15,733,615 | (9,544,791) |
Net income attributable to Amerinac, amount | ||||
Holding Corp. shareholders, amount | 353,025 | 353,025 | ||
Ending Balance, shares at Jun. 30, 2018 | 297,386 | |||
Ending Balance, amount at Jun. 30, 2018 | 6,542,146 | $ 297 | 15,733,615 | (9,191,766) |
Beginning Balance, shares at Jan. 01, 2019 | 313,636 | |||
Beginning Balance, amount at Jan. 01, 2019 | 8,306,258 | $ 313 | 16,383,599 | (8,077,654) |
Net income attributable to Amerinac, amount | ||||
Holding Corp. shareholders, amount | $ 1,016,847 | 1,016,847 | ||
Ending Balance, shares at Jun. 30, 2019 | 313,636 | 313,636 | ||
Ending Balance, amount at Jun. 30, 2019 | $ 313 | 16,383,599 | (7,060,807) | |
Beginning Balance, shares at Apr. 01, 2019 | 313,636 | |||
Beginning Balance, amount at Apr. 01, 2019 | 8,901,067 | $ 313 | 16,383,599 | (7,482,845) |
Net income attributable to Amerinac, amount | ||||
Holding Corp. shareholders, amount | $ 422,038 | 422,038 | ||
Ending Balance, shares at Jun. 30, 2019 | 313,636 | 313,636 | ||
Ending Balance, amount at Jun. 30, 2019 | $ 313 | $ 16,383,599 | $ (7,060,807) |
CONDENSED CONSOLIDATED STATEM_3
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) | 6 Months Ended | |
Jun. 30, 2019 | Jun. 30, 2018 | |
CASH FLOWS FROM OPERATING ACTIVITIES | ||
Net income | $ 1,330,798 | $ 1,276,249 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization | 407,055 | 372,328 |
Amortization of deferred financing fees | 34,840 | 66,666 |
Non-cash lease expense | 78,152 | |
Deferred income taxes | 365,727 | |
Inventory reserve | 7,000 | |
Changes in assets and liabilities: | ||
Increase in accounts receivable | (1,920,251) | (1,355,635) |
Increase in inventory | (262,212) | (71,663) |
Decrease in operating leases payable | (31,727) | |
(Increase) decrease in other current assets | (52,336) | 244,535 |
Increase in other assets | (19,676) | |
Increase in deferred revenue | 23,247 | |
Increase in income taxes payable | 95,793 | 131,557 |
Increase in accounts payable and accrued expenses | 751,007 | 125,372 |
Net cash provided by operating activities | 807,417 | 789,409 |
CASH FLOWS FROM INVESTING ACTIVITIES | ||
Proceeds from escrow receivable from sale | 500,000 | |
Purchase of property and equipment | (234,360) | (97,536) |
Net cash (used) provided in investing activities | (234,360) | 402,464 |
CASH FLOWS FROM FINANCING ACTIVITIES | ||
Net payments on line of credit | (346,627) | |
Payments on notes payable | (300,000) | |
Payments on finance leases | (21,449) | (873) |
Payments on notes payable - related party | (242,526) | |
Net cash used in financing activities | (668,076) | (243,399) |
(DECREASE) INCREASE IN CASH | (95,019) | 948,474 |
CASH - BEGINNING OF PERIOD | 360,283 | 348,398 |
CASH - END OF PERIOD | 265,264 | 1,296,872 |
Cash paid during the period for: | ||
Interest | 241,305 | 669,232 |
Non-cash financing activities: | ||
Operating lease asset obtained in exchange for operating lease obligation | 89,432 | |
Acquisition of equipment through finance lease | $ 162,903 |
SUMMARY OF BUSINESS
SUMMARY OF BUSINESS | 6 Months Ended |
Jun. 30, 2019 | |
SUMMARY OF BUSINESS | |
1. SUMMARY OF BUSINESS | Amerinac Holding Corp. and Subsidiaries (the Company) distributes high-quality, predominantly domestically-manufactured, technically complex, nut and bolt products and a proprietary locking washer product that are for industrial and commercial applications that require a high level of certified and assured quality. Additionally, the Company manufactures specialty stainless steel, and related products for steel mills, steel forging operations, and various metal fabrication facilities. The Companys operations are carried out through its wholly-owned distribution subsidiary Creative Assembly Systems, Inc (Creative Assembly) and its majority-owned subsidiary, Prime Metals Acquisition LLC, a Delaware limited liability company (PMAL). Creative Assembly is a value added distributor of proprietary and specialty fasteners primarily serving the heavy truck, automotive, transportation, and infrastructure industries. PMAL manufactures specialty ingot and electrode products which are supplied for investment castings, forging, ring rolling, and plate production. PMAL also manufactures shot products and master alloys which are sold to other melt shops, and provides manufacturing support services. The flexible manufacturing operations at PMAL enable the Company to offer a wide range of product grades in customer specific order quantities. The primary grade types include stainless steels, tool steels, nickel-based grades, cobalt based grades and some nonferrous alloys. The Company also offers toll conversion melting services. |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 6 Months Ended |
Jun. 30, 2019 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | Interim Consolidated Financial Statements The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) and in conformity with the instructions to Form 10-Q and Article 8 of Regulation S-X and the related rules and regulations of the Securities and Exchange Commission (SEC). Accordingly, certain information and note disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. However, we believe that the disclosures included in these unaudited condensed consolidated financial statements are adequate to make the information presented not misleading. The unaudited condensed consolidated financial statements included in this document have been prepared on the same basis as the annual consolidated financial statements, and in the Companys opinion reflect all adjustments, which include normal recurring adjustments necessary for a fair presentation in accordance with GAAP and SEC regulations for interim financial statements. The results for the six months ended June 30, 2019 are not necessarily indicative of the results that the Company will have for any subsequent period. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto for the year ended December 31, 2018 included in the Companys Annual Report on Form 10-K filed on March 26, 2019. Principles of Consolidation and Basis of Presentation The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly and majority owned subsidiaries. All inter-company accounts have been eliminated. Earnings Per Share Basic earnings per share is calculated by dividing net profit attributable to common stockholders by the weighted average number of outstanding common shares during the year. Basic earnings per share excludes any dilutive effects of options, warrants and other stock-based compensation, which are included in diluted earnings per share. When a company is in a loss situation, all outstanding dilutive shares are excluded from the calculation of diluted earnings because their inclusion would be antidilutive; and the basic and fully diluted common shares outstanding are stated to be the same. There were no dilutive shares as of June 30, 2019 and 2018. Use of Estimates The preparation of the unaudited condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. The most significant estimates relate to the useful lives and impairment considerations of long-lived and intangible assets, reserves for inventory and accounts receivable, going concern considerations, discount rates in connection with right-of-use assets and the valuation of redeemable non-controlling interest. Accounts Receivable and Allowance for Doubtful Accounts Accounts receivable are recorded net of reserves for sales returns and allowances and net of provisions for doubtful accounts. The Company records an allowance for doubtful accounts to allow for any amounts that may not be recoverable. The amount of the allowance is based on an analysis of the Companys prior collection experience, customer credit worthiness, and current economic trends. Based on managements review of accounts receivable, the Company carries an allowance for doubtful accounts of $78,753 as of June 30, 2019 and December 31, 2018. The Company determines receivables to be past due based on the payment terms of original invoices. Accounts are written off against the allowance when deemed uncollectable. Interest is not typically charged on past due receivables. Inventory For the Companys distribution subsidiary, Creative Assembly, inventories consist only of finished goods and are carried at the lower of cost on an average cost basis, or net realizable value. When necessary, management records an inventory reserve for estimated obsolescence or unmarketable inventory based upon the age of the respective part and the knowledge of future demand of inventory on hand as well as other market conditions and events. Management believes that the longer a part sits on the shelf the higher the likelihood that it will not sell in the future. This belief is not unique to the fastener industry. While management constantly assesses viability of a part within the customer base, it also believes that a reserve should be carried to reflect product that is aging out, as opposed to product that management identified based on a specific event. As of June 30, 2019, the Company had more than 4,000 unique part numbers on hand that had carrying value. Management believes that the two methods, specific identification and reserve based on age, to analyzing inventory will reflect the appropriate balance sheet value. As of June 30, 2019 and December 31, 2018, the inventory reserve for Creative Assembly was $75,160 and $68,160, respectively. For the Companys manufacturing subsidiary, PMAL, management believes volatility in the broader metal markets will have an impact on all aspects of raw material, work in process, and finished goods inventory. Management actively seeks to minimize inventory working capital, and increase inventory turns to eliminate any impacts from market fluctuations. As of June 30, 2019, the Companys manufacturing subsidiary had more than 500 unique metal chemistries it produced, but keeps minimal finished inventory on hand. For PMAL, inventories are carried at the lower of cost on an average cost basis, or net realizable value. When necessary, management records an inventory reserve for estimated obsolescence or unmarketable inventory based upon knowledge of future demand of inventory on hand as well other market conditions and events. As of June 30, 2019 and December 31, 2018, the inventory reserve for PMAL was $82,849. The Companys inventory consists of the following: June 30, 2019 December 31, 2018 Raw Materials $ 2,168,422 $ 2,133,311 Finished Goods 3,825,741 3,598,640 Reserves (158,009 ) (151,009 ) Total $ 5,836,154 $ 5,580,942 Property, Land and Equipment Property, land and equipment are stated at cost less accumulated depreciation and amortization. The Company computes depreciation and amortization using the straight-line method over the estimated useful lives of the assets acquired as follows: Leasehold improvements 5 years ** Furniture and fixtures 7 years Equipment and other 3-10 years Building 30 years ** Shorter of life or lease term. The carrying amount of all long-lived assets is evaluated when an indicator of impairment exists to determine whether adjustment to the useful life or to the unamortized balance is warranted. Such evaluation is based principally on the expected utilization of the long-lived assets. Concentration of Credit Risk At June 30, 2019, Remelt Sources, Inc., Universal Stainless & Alloy Products, PACCAR, Eastham Forge and Drive Automotive receivables were 17.8%, 13.4%, 11.9%, 11.2% and 10.2% of total receivables, respectively. At December 31, 2018, Remelt Sources, Inc., AMG-Vanadium, PACCAR, and Universal Stainless & Alloy Products receivables were 20.9%, 15.0%, 14.0%, and 13.0% of total receivables, respectively. For the six-month period ending June 30, 2019, Remelt Sources, Inc., AMG-Vanadium, PACCAR and Universal Stainless & Alloy Products accounted for 20.3%, 17.0%, 15.6%, and 12.0% of sales, respectively. For the three-month period ending June 30, 2019, Remelt Sources, Inc., AMG-Vanadium, PACCAR and Universal Stainless & Alloy Products accounted for 21.8%, 15.7%, 16.2%, and 10.8% of sales, respectively. For the six-month period ending June 30, 2018, Remelt Sources, Inc., AMG-Vanadium, Ametek, PACCAR and Universal Stainless & Alloy Products accounted for 19.5%, 16.4%, 15.1%, 13.7% and 12.5% of sales, respectively. For the three-month period ending June 30, 2018, Remelt Sources, Inc., Ametek, AMG-Vanadium, PACCAR and Universal Stainless & Alloy Products accounted for 21.1%, 18.7%, 14.2%, 14.1% and 11.4% of sales, respectively. Concentration of Suppliers For the six-month period ending June 30, 2019, no supplier represented more than 10% of purchases. For the three-month period ending June 30, 2019, no supplier represented more than 10% of purchases. For the six-month period ending June 30, 2018, no supplier represented more than 10% of purchases. For the three-month period ending June 30, 2018, no supplier represented more than 10% of purchases. At June 30, 2019, AVK represented approximately 16.9% of accounts payable. At December 31, 2018, AVK represented approximately 11.8% of accounts payable. Fair Value Measurements In accordance with the authoritative guidance for fair value measurements and the fair value election for financial assets and financial liabilities, a fair value measurement is determined based on the assumptions that a market participant would use in pricing an asset or liability. A three-tiered hierarchy was established that draws a distinction between market participant assumptions based on the following: i) observable inputs such as quoted prices in active markets (Level 1) ii) inputs other than quoted prices in active markets that are observable either directly or indirectly (Level 2) iii) unobservable inputs that require the Company to use present value and other valuation techniques in the determination of fair value (Level 3). Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Companys assessment of the significance of a particular input to the fair value measurements requires judgment, and may affect the valuation of the assets and liabilities being measured and their placement within the fair value hierarchy. Fair Value of Financial Instruments The carrying amounts reported in the unaudited condensed consolidated balance sheets for cash, accounts receivable, accounts payable and accrued liabilities approximate fair value because of the immediate or short-term maturity of the financial instruments. The Company believes that its indebtedness approximates fair value based on current yields for debt instruments with similar terms. Income Taxes The Company provides for income taxes under Accounting Standards Codification (ASC) Topic 740-10. ASC Topic 740-10 requires the use of an asset and liability approach in accounting for income taxes. Deferred tax assets and liabilities are recorded based on the differences between the financial statement and tax bases of assets and liabilities and the tax rates in effect when these differences are expected to reverse. Temporary differences relate primarily to different accounting methods used for depreciation and amortization of property and equipment. ASC Topic 740-10 requires the reduction of deferred tax assets by a valuation allowance if, based on the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. ASC Topic 740-10 clarifies the accounting for uncertainty in income tax positions, as defined. It requires, among other matters, that the Company recognize in our unaudited condensed consolidated financial statements, the impact of a tax position, if that position is more likely than not of being sustained on audit, based on the technical merits of the position. The Company analyzes the filing positions in all of the federal and state jurisdictions where the Company is required to file income tax returns, as well as all open tax years in these jurisdictions. As of June 30, 2019, the Company did not record any unrecognized tax benefits. The Companys policy, if it had unrecognized benefits, is to recognize accrued interest and penalties related to unrecognized tax benefits as interest expense and other expense, respectively. The Tax Cuts and Jobs Act (the Tax Act), enacted on December 22, 2017, among other things, permanently lowered the statutory federal corporate tax rate from 35% to 21%, effective for tax years including or beginning January 1, 2018. Under the guidance of ASC 740, Income Taxes, the Company revalued its net deferred tax assets on the date of enactment based on the reduction in the overall future tax benefit expected to be realized at the lower tax rate implemented by the new legislation. Although in the normal course of business the Company is required to make estimates and assumptions for certain tax items which cannot be fully determined at period end, the Company did not identify items for which the income tax effects of the Tax Act have not been completed as of June 30, 2019 and December 31, 2018 and, therefore, considers its accounting for the tax effects of the Tax Act on its deferred tax assets and liabilities to be complete as of June 30, 2019 and December 31, 2018. Revenue Recognition The Company accounts for revenue recognition in accordance with ASC Topic 606 (ASC 606). The core principle of ASC 606 is to recognize revenue when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services. ASC 606 defines a five-step process to achieve this core principle, which includes; (1) Identifying contracts with customers, (2) Identifying performance obligations within those contracts, (3) Determining the transaction price, (4) Allocating the transaction price to the performance obligations in the contract, which may include an estimate of variable consideration, and (5) Recognizing revenue when or as each performance obligation is satisfied. Revenue primarily consists of sales of fasteners, specialty ingot products and master alloys and tolling services. We generate our revenue primarily from the sale of finished products and tolling services to customers, therefore, the significant majority of our contracts are short-term in nature and have a single performance obligation to deliver products or services, in which our performance obligation is satisfied when control of the product is transferred to the customer or the service is performed. Some contracts contain a combination of product sales and services which are distinct and accounted for as separate performance obligations. Our performance obligations for services are satisfied when the services are rendered within the arranged service period. Tolling revenue is recognized when the tolling service is completed. Revenue is recognized when control transfers to our customers via shipment of products or delivery of services. Shipping and handling costs are considered fulfillment activities and as such are not accounted for as separate performance obligations. We measure revenue as the amount of consideration we expect to be entitled to receive in exchange for those goods or services, net of any variable considerations (e.g., rights to return product, sales incentives, others) and any taxes collected from customers and subsequently remitted to governmental authorities. The Company applied the practical expedient available under ASC 606 to disregard determining significant financing components if the good or service is transferred and payment is received within one year. We estimate product returns based on historical experience and record them on a gross basis. Substantially all of Creative Assembly customer returns relate to products that are returned under warranty obligations underwritten by manufacturers. Substantially all of PMAL customer returns relate to products which do not meet customer requirements and are replaced by the Company. We occasionally receive advance payments to secure product to be delivered in future periods. These advance payments are recorded as deferred revenue, and revenue is recognized as our performance obligations are satisfied throughout the term of the applicable contract. We may also purchase metal on our customers behalf, sell the unprocessed metal to our customer, and then process and ship the material, charging a processing fee at the time of shipment. For these specific non-tolling arrangements in which we purchase metal for a customer, a single performance obligation exists, and as a result, amounts invoiced to our customers for the metal purchased on their behalf is recorded as deferred revenue until the metal is processed and shipped. The Company recorded deferred revenue of $23,247 as of June 30, 2019. The Company did not record any deferred revenue as of December 31, 2018. Redeemable Non-controlling Interest Non-controlling interests that are not subject to redemption rights are classified in permanent equity. Redeemable non-controlling interests are classified outside of permanent equity on the unaudited condensed consolidated balance sheets. On August, 17, 2017, PMAL purchased substantially all of the assets of Prime Metals for $9.6 million in cash. To finance the purchase of the assets, PMAL entered into a credit agreement (the Credit Agreement) with SummitBridge National Investments V LLC (Summit) pursuant to which Summit made loans to PMAL: (1) a Term Loan in the amount of $4.5 million (Summit Term Loan A) and (2) a Term Loan in the amount of $3.5 million (Summit Term Loan B) (collectively, the Summit Loans). In addition, in consideration for Summit making the loans, PMAL issued membership interests representing 25% ownership of PMAL to an affiliate of Summit, SBN V PMA LLC (SBN) (the SBN Membership Interests). Pursuant to the terms of the Summit Loans and because PMAL repaid the Summit Loans within thirty-six (36) months of the origination of the Summit Loans, the SBN Membership Interests were reduced from 25% to 20% of PMAL as of September 1, 2018. PMAL has granted SBN a put right under the operating agreement for PMAL for the SBN Membership Interests. On August 31, 2018, the operating agreement for PMAL was amended to provide that on the earlier of November 30, 2021 or the date of a change in control of PMAL, SBN has the right but not the obligation to require PMAL to repurchase all of the SBN Membership Interests at market equity value (Market Equity Value). Market Equity Value shall be equal to the higher of (i) value of PMAL implied by a sale, (ii) 4.5 x EBITDA for the trailing twelve months plus cash, less all outstanding funded indebtedness or (iii) fair market value as determined by mutual agreement between PMAL and SBN, or failing that by an independent firm mutually agreed to. SBN has granted PMAL a call right under the operating agreement for PMAL for the SBN Membership Interests. On August 17, 2021, PMAL has the right but not the obligation to require SBN to sell all of the SBN Membership Interests at Market Equity Value. The Company has accounted for this in accordance with ASC 480-10-55-59, as a redeemable non-controlling interest. At acquisition $400,000 was recorded as SBNs PMAL equity ownership. This amount, plus SBNs pro rata net income allocation is reflected before stockholders equity as Redeemable Non-Controlling interest. The redeemable non-controlling interest was reduced for the reduction in membership interests from 25% to 20% in 2018, as noted above. SBNs pro-rata net income allocation was made at a rate of 25% through August 31, 2018 and 20% commencing September 1, 2018 in accordance with the reduction in membership interests. Recently Adopted Authoritative Pronouncements In February 2016, the Financial Accounting Standards Board (FASB) established Topic 842, Leases, by issuing Accounting Standards Update (ASU) No. 2016-02, which requires lessees to recognize leases on-balance sheet and disclose key information about leasing arrangements. Topic 842 was subsequently amended by ASU No. 2018-01, Land Easement Practical Expedient for Transition to Topic 842; ASU No. 2018-10, Codification Improvements to Topic 842, Leases; and ASU No. 2018-11, Targeted Improvements. The new standard establishes a right-of-use model (ROU) that requires a lessee to recognize a ROU asset and lease liability on the balance sheet for all leases with a term longer than 12 months. Leases will be classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the income statement. The new standard is effective on January 1, 2019. A modified retrospective transition approach is required, applying the new standard to all leases existing at the date of initial application. An entity may choose to use either (1) its effective date or (2) the beginning of the earliest comparative period presented in the financial statements as its date of initial application. If an entity chooses the second option, the transition requirements for existing leases also apply to leases entered into between the date of initial application and the effective date. The entity must also recast its comparative period financial statements and provide the disclosures required by the new standard for the comparative periods. The Company adopted the new standard on January 1, 2019 and used the effective date as the date of initial application. Consequently, financial information will not be updated and the disclosures required under the new standard will not be provided for dates and periods before January 1, 2019. The new standard provides a number of optional practical expedients in transition. The Company elects the package of practical expedients, which permits the Company not to reassess under the new standard prior conclusions about lease identification, lease classification and initial direct costs. Under this elected package of practical expedients, the Company does not separate non-lease components from the lease component. Therefore, all lease and non-lease components are combined and accounted for as a single lease component. On adoption, the Company recognized additional operating lease liabilities of approximately $251,000 with corresponding ROU assets of the same amount based on the present value of the remaining minimum rental payments under current leasing standards for existing operating leases. In June 2018, the FASB, issued ASU No. 2018-07 to simplify the accounting for share-based payments to nonemployees by aligning it with the accounting for share-based payments to employees, with certain exceptions. The new guidance expands the scope of ASC 718 to include share-based payments granted to nonemployees in exchange for goods or services used or consumed in an entitys own operations and supersedes the guidance in ASC 505-50. The guidance is effective for public business entities in annual periods beginning after December 15, 2018, and interim periods within those annual periods. Early adoption is permitted, including in an interim period for which financial statements have not been issued, but not before an entity adopts ASC 606. This was adopted on January 1, 2019 and did not have a material impact on the Companys financial position and results of operations. Recent Accounting Pronouncements In January 2017, the FASB issued ASU No. 2017-04, Intangibles-Goodwill and Other (Topic 350), which includes provisions intended to simplify the test for goodwill impairment. The standard is effective for annual periods beginning after December 15, 2019, with early adoption permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company does not expect the adoption of this standard to have a significant impact on its financial position and results of operations. No other recently issued accounting pronouncements had or are expected to have a material impact on the Companys unaudited condensed consolidated financial statements. |
PROPERTY, LAND AND EQUIPMENT
PROPERTY, LAND AND EQUIPMENT | 6 Months Ended |
Jun. 30, 2019 | |
PROPERTY, LAND AND EQUIPMENT | |
3. PROPERTY, LAND AND EQUIPMENT | The Companys 220,000 square foot facility is located at 101 Innovation Drive, Homer City, PA. The facility is located on approximately 38 acres and was purchased in 2007. The facility houses the manufacturing operations of PMAL. Depreciation expense was $307,554 and $206,162 for the six months ended June 30, 2019 and 2018. Depreciation expense was $155,455 and $70,696 for the three months ended June 30, 2019 and 2018. June 30, 2019 December 31, 2018 Land, buildings and improvements $ 3,419,779 $ 3,419,779 Equipment 3,698,189 3,463,829 Total 7,117,968 6,883,608 Less accumulated depreciation (1,065,979 ) (758,425 ) Net property, land and equipment $ 6,051,989 $ 6,125,183 As described in Note 7, the Company has $5,295,431 in notes secured against the property, land and equipment. |
ACCOUNTS PAYABLE AND ACCRUED EX
ACCOUNTS PAYABLE AND ACCRUED EXPENSES | 6 Months Ended |
Jun. 30, 2019 | |
ACCOUNTS PAYABLE AND ACCRUED EXPENSES | |
4. ACCOUNTS PAYABLE AND ACCRUED EXPENSES | Accounts payable and accrued expenses consists of the following as of June 30, 2019 and December 31, 2018: June 30, 2019 December 31, 2018 Accounts payable $ 3,478,306 $ 3,060,269 Interest 33,192 35,805 Salaries and bonus 495,000 116,930 Other 19,520 62,007 $ 4,026,018 $ 3,275,011 |
GOODWILL AND INTANGIBLE ASSETS
GOODWILL AND INTANGIBLE ASSETS | 6 Months Ended |
Jun. 30, 2019 | |
GOODWILL AND INTANGIBLE ASSETS | |
5. GOODWILL AND INTANGIBLE ASSETS | Information regarding our acquired intangible assets was as follows: Customer lists $ 1,990,000 Goodwill $ 54,993 The customer lists are estimated to have a useful life of 10 years. As of June 30, 2019, the value, net of amortization, of the customer list was $1,608,583. Amortization expense for the years ended December 31, 2019 through 2023 will be $199,000 per year. The Company will continue to expense $199,000 annually until 2027. Amortization expense was $99,501 for each of the six months ended June 30, 2019 and 2018 and $49,751 for each of the three months ended June 30, 2019 and 2018. |
LEASES
LEASES | 6 Months Ended |
Jun. 30, 2019 | |
LEASES | |
6. LEASES | Operating Leases The Company determines if a contract contains a lease at inception. US GAAP requires that the Companys leases be evaluated and classified as operating or finance leases for financial reporting purposes. The classification evaluation begins at the commencement date and the lease term used in the evaluation includes the non-cancellable period for which the Company has the right to use the underlying asset, together with renewal option periods when the exercise of the renewal option is reasonably certain and failure to exercise such option which result in an economic penalty. All of the Companys real estate leases are classified as operating leases. Most real estate leases include one or more options to renew, with renewal terms that generally can extend the lease term for an additional four to five years. The exercise of lease renewal options is at the Companys discretion. The Company evaluates renewal options at lease inception and on an ongoing basis, and includes renewal options that it is reasonably certain to exercise in its expected lease terms when classifying leases and measuring lease liabilities. Lease agreements generally do not require material variable lease payments, residual value guarantees or restrictive covenants. Leases recorded on the balance sheet consist of the following: Leases Classification on the Balance Sheet June 30, 2019 Assets Operating lease ROU assets Right-of-use asset $ 1,208,613 Finance lease ROU assets Property, land and equipment, net $ 150,966 Liabilities Current Operating Operating leases payable short term $ 254,845 Finance Finance leases payable short term $ 45,688 Noncurrent Operating Operating leases payable net of current portion $ 1,000,193 Finance Finance leases payable net of current portion $ 89,656 The Companys leases generally do not provide an implicit rate, and therefore the Company uses its incremental borrowing rate as the discount rate when measuring operating lease liabilities. The incremental borrowing rate represents an estimate of the interest rate the Company would incur at lease commencement to borrow an amount equal to the lease payments on a collateralized basis over the term of a lease within a particular currency environment. The Company used incremental borrowing rates as of January 1, 2019 for operating leases that commenced prior to that date. The Companys weighted average remaining lease term and weighted average discount rate for operating leases as of June 30, 2019 are: June 30, 2019 Weighted average remaining lease term 55.3 months Weighted average discount rate 5.63 % The components of lease expense, included in general and administrative expenses and interest expense on the unaudited condensed consolidated statements of income, are as follows: Three Months Ended June 30, 2019 Six Months Ended June 30, 2019 Operating lease cost: Operating lease cost $ 51,927 $ 89,432 Finance lease cost: Amortization of ROU assets 8,227 21,449 Interest expense 1,759 3,650 Total lease cost $ 61,913 $ 114,531 Supplemental disclosures of cash flow information related to leases for the six months ended June 30, 2019 were as follows: Cash paid for operating lease obligations was $52,633. Operating lease asset obtained for operating lease obligation was $1,277,143. The table below reconciles the undiscounted future minimum lease payments (displayed by year and in the aggregate) under noncancelable operating leases with terms of more than one year to the total operating lease liabilities recognized on the unaudited condensed consolidated balance sheets as of June 30, 2019: July 1, 2019 through December 31, 2019 $ 156,558 2020 313,115 2021 313,115 2022 287,448 2023 236,115 2024 118,058 Total undiscounted future minimum lease payments 1,424,408 Less: Imputed interest 169,370 Present value of operating lease obligations $ 1,255,038 The Company has two leased facilities, which are office, manufacturing and warehouse space. In some cases the Company is responsible for real estate taxes, utilities, and repairs under the terms of certain of the operating leases. Under the elected package of practical expedients, the Company does not separate non-lease components from the lease component. Therefore all lease and non-lease components are combined and accounted for as single lease component. The lease on our facility in Texas expired in February 2019. In May 2019, we entered into a new lease for a new Texas facility that commenced on May 1, 2019 and recorded a right of use asset and corresponding lease liability in the second quarter of 2019. This Texas facility lease calls for payments until expiration in 2024 totaling $576,180. The annual payments are $57,618 for the year 2019, $236,115 for each of the years 2020, 2021, 2022 and 2023 and $57,618 for the year 2024. Our Ohio facility calls for lease payments until expiration totaling $243,833. The annual payments are $77,000 for each of the years 2019, 2020 and 2021 and $57,750 for 2022. Lease expense was $54,883 for the six months ended June 30, 2018. Lease expense was $29,208 for the three months ended June 30, 2018. Lease expense for the six months ended June 30, 2019 includes $14,133 related to month to month lease expense in the Texas facility prior to commencement of the new agreement on May 1, 2019 as noted above. Finance and Capital Leases The below chart shows our obligations under finance and capital leases: Finance Leases June 30, 2019 Capital Leases December 31, 2018 Obligations under finance and capital leases $ 135,344 $ 156,793 Less: current portion 45,688 43,435 Long-term portion $ 89,656 $ 113,358 Future minimum repayments The table below presents the future minimum repayments of finance lease obligations for the Company as of June 30, 2019: Years ending December 31, Finance lease obligations as of June 30, 2019 2019 (remaining six months) $ 25,098 2020 50,200 2021 48,880 2022 21,397 Total future minimum repayments inclusive of interest 145,575 Interest 10,231 Total principal repayments $ 135,344 The Company entered into a finance lease for a forklift effective July 1, 2019. The lease runs for 49 months with an interest rate of 5.5% and a monthly payment of $399. Total payments will equal $19,534. The table below presents the future minimum repayments of capital lease obligations for the Company as of December 31, 2018: Years ending December 31, Capital lease obligations as of December 31, 2018 2019 $ 50,199 2020 50,199 2021 48,878 2022 21,396 Total future minimum repayments inclusive of interest 170,672 Interest 13,879 Total principal repayments $ 156,793 The Companys weighted average remaining lease term and weighted average discount rate for finance leases as of June 30, 2019 are: June 30, 2019 Weighted average remaining lease term 35 months Weighted average discount rate 4.93 % |
LONG-TERM DEBT AND LINE OF CRED
LONG-TERM DEBT AND LINE OF CREDIT | 6 Months Ended |
Jun. 30, 2019 | |
LONG-TERM DEBT AND LINE OF CREDIT | |
7. LONG-TERM DEBT AND LINE OF CREDIT | Summit Bridge Loans On August, 17, 2017, PMAL purchased substantially all of the assets of Prime Metals for $9.6 million in cash. To finance the purchase of the assets, on August 17, 2017, PMAL entered into the Credit Agreement with Summit pursuant to which made the Summit Loans to PMAL: (1) Summit Term Loan A and (2) Summit Term Loan B. In addition, in consideration for Summit making the Summit Loans, PMAL issued to SBN, the SBN Membership Interests. On August 31, 2018, PMAL fully repaid the Summit Loans. Summit Term Loan A accrued each month at either 17.5% interest per annum (with 12.5% payable monthly and 5.0% accruing to the outstanding balance of Term Loan A, payable at maturity) or 17.0% interest per annum, payable monthly. Summit Term Loan A had a Maturity date of August 17, 2020. Summit Term Loan A was secured against all of the assets of PMAL. Summit Term Loan B accrued each month at either 17.5% interest per annum (with 14.0% payable monthly and 3.5% accruing to the outstanding balance of Term Loan B, payable at maturity) or 17.0% interest per annum, payable monthly. Term Loan B had a Maturity date of August 17, 2020. Summit Term Loan B was secured against all of the assets of PMAL. The Company guaranteed payment of the Summit Loans pursuant to a Guaranty Agreement made by the Company as of August 17, 2017. The Credit Agreement also contained customary covenants, representations and warranties of the parties, including, among others (1) the grant by PMAL to Summit of a security interest on all of the assets of PMAL, (2) a pledge with respect to the equity interests in PMAL owned by the Company, and (3) an unconditional and irrevocable guaranty by the Company of the performance by PMAL of the obligations under the Credit Agreement. In addition, until all amounts under the Summit Loans were paid in full, PMAL agreed to comply with certain financial covenants that required PMAL to meet pre-established financial ratios. PMAL has granted SBN a put right under the operating agreement for PMAL for the SBN Membership Interests. On August 31, 2018, the operating agreement for PMAL was amended to provide that on the earlier of November 30, 2021 or the date of a change in control of PMAL, SBN has the right but not the obligation to require PMAL to repurchase all of the SBN Membership Interests at market equity value (Market Equity Value). Market Equity Value shall be equal to the higher of (i) value of PMAL implied by a sale, (ii) 4.5 x EBITDA for the trailing twelve months plus cash, less all outstanding funded indebtedness or (iii) fair market value as determined by mutual agreement between PMAL and SBN, or failing that by an independent firm mutually agreed to. SBN has granted PMAL a call right under the operating agreement for PMAL for the SBN Membership Interests. On August 17, 2021, PMAL has the right but not the obligation to require SBN to sell all of the SBN Membership Interests at Market Equity Value. The Company has accounted for this in accordance with ASC 480-10-55-59, as a redeemable non-controlling interest. At acquisition $400,000 was recorded as SBNs PMAL equity ownership. This amount, plus SBNs pro rata net income allocation is reflected before stockholders equity as Redeemable Non-Controlling interest. Due to the SBN Membership Interests, Summit is considered a related party of the Company for the purposes of these unaudited condensed consolidated financial statements. Pursuant to the terms of the Summit Loans and because PMAL repaid the Summit Loans within thirty-six (36) months of the origination of the Summit Loans, the SBN Membership Interests were reduced from 25% to 20% of PMAL as of September 1, 2018. SBNs pro-rata net income allocation was made at a rate of 25% through August 31, 2018 and 20% commencing September 1, 2018 in accordance with the reduction in membership interests. The following table shows the value of the non-controlling interests (NCI) for the six-month period ending June 30, 2019: Value of NCI at December 31, 2018 $ 757,778 PMAL Income from January 1, 2019 to June 30, 2019 attributable to NCI 313,951 Value of NCI at June 30, 2019 $ 1,071,729 The following table shows the value of the non-controlling interests (NCI) for the three-month period ending June 30, 2019: Value of NCI at March 31, 2019 $ 927,071 PMAL Income from April 1, 2019 to June 30, 2019 attributable to NCI 144,658 Value of NCI at June 30, 2019 $ 1,071,729 The following table shows the change in the value of the NCI for the six-month period ending of June 30, 2018: Value of NCI at December 31, 2017 $ 453,377 PMAL Income from January 1, 2018 to June 30, 2018 attributable to NCI 364,293 Value of NCI at June 30, 2018 $ 817,670 The following table shows the value of the non-controlling interests (NCI) for the three-month period ending June 30, 2018: Value of NCI at March 31, 2018 $ 651,114 PMAL Income from April 1, 2018 to June 30, 2018 attributable to NCI 166,556 Value of NCI at June 30, 2018 $ 817,670 Berkshire Loans On August 31, 2018, PMAL entered into a Loan and Security Agreement (the PMAL Loan and Security Agreement) with Berkshire Bank (Berkshire Bank) establishing: 1) a new revolving credit facility in an aggregate principal amount of up to $6.0 million (the Berkshire Revolving Loan), 2) a term loan in the amount of $3.5 million (Berkshire Term Loan A) and 3) a term loan in the amount of $1.5 million (Berkshire Term Loan B). Borrowings under the Berkshire Revolving Loan may be used to finance working capital and other general corporate purposes. The Berkshire Revolving Loan had a borrowing base of approximately $3.3 million on June 30, 2019 of which the Company had drawn $745,431. On August 31, 2018, pursuant to the PMAL Loan and Security Agreement, PMAL used an amount of $7,678,814 under the Loan and Security Agreement to fully repay the Summit Loans. Borrowings under the Berkshire Revolving Loan bear interest at a rate equal to the Intercontinental Exchange Benchmark Administration Ltd. London Interbank Offered Rate (ICE LIBOR) rate plus 3.25%, which was 5.69% at June 30, 2019. Berkshire Term Loan A and Berkshire Term Loan B bear interest at ICE LIBOR rate plus 4.25%, which was 6.69% at June 30, 2019. The outstanding principal amount of any borrowings under the Berkshire Revolving Loan will be due and payable on August 21, 2021, subject to an earlier maturity date upon an event of default (the Revolving Credit Maturity Date). Berkshire Term Loan A has a maturity date the earlier of (i) August 31, 2023 or (ii) the Revolving Credit Maturity Date. Berkshire Term Loan B has a maturity date the earlier of (i) August 31, 2023 or (ii) the Revolving Credit Maturity Date. The principal balance of Berkshire Term Loan A shall be paid in equal monthly installments of $41,667 commencing on October 1, 2018. Any unpaid principal and interest shall be due on the maturity date. The principal balance of Berkshire Term Loan B shall be paid in equal monthly installments of $8,334 commencing on October 1, 2018. Any unpaid principal and interest shall be due on the maturity date. The PMAL Loan and Security Agreement contains usual and customary covenants for financings of this type, including, among other things: (i) requirements to deliver financial statements, other reports and notices; (ii) restrictions on indebtedness; (iii) restrictions on dividends, distributions and redemptions of equity and repayment of subordinated indebtedness; (iv) restrictions on liens; (v) restrictions on making certain payments; (vi) restrictions on investments; (vii) restrictions on asset dispositions and other fundamental changes; and (viii) restrictions on transactions with affiliates. The PMAL Loan and Security Agreement contains certain financial covenants, including a cash flow coverage ratio and a tangible net worth requirement. Under the cash flow coverage covenant, PMAL shall maintain a quarterly cash flow coverage ratio of not less than 1.20 to 1.00. Under the tangible net worth covenant, PMAL shall maintain a tangible net worth of no less than $3.1 million. The tangible net worth amount required shall increase annually on each June 30 by 50% of PMALs prior years undistributed net income. As of June 30, 2019, PMAL was in compliance with the covenants contained within the PMAL Loan and Security Agreement. The obligations of PMAL under the PMAL Loan and Security Agreement are secured by liens and security interests on all assets of PMAL. Amerinac is a secured guarantor of the PMAL Loan and Security Agreement, and has pledged its equity in PMAL. The table below represents the future minimum repayments of Berkshire Term Loan A and Berkshire Term Loan B as of June 30, 2019. Years ending December 31, Term Loans Minimum Amortization 2019 (remaining six months) $ 300,000 2020 600,000 2021 3,650,000 Total 4,550,000 Unamortized debt and financing cost 145,170 Total (net of unamortized debt and financing cost) $ 4,404,830 As of June 30, 2019, the principal balance of Term Loan A was $3,125,000 and the principal balance of Term Loan B was $1,425,000. As of December 31, 2018, the principal balance of Term Loan A was $3,375,000 and the principal balance of Term Loan B was $1,475,000. The total amount of unamortized debt financing cost was $145,170 and $180,010 at June 30, 2019 and December 31, 2018, respectively. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 6 Months Ended |
Jun. 30, 2019 | |
COMMITMENTS AND CONTINGENCIES | |
8. COMMITMENTS AND CONTINGENCIES | Litigation The Company is subject to the possibility of claims and lawsuits arising in the normal course of business. In the opinion of management, the Company liability, if any, under existing claims, asserted or unasserted, would not have a material adverse effect on the Companys consolidated financial position or results of operations. Employment Agreements On November 10, 2017, John Wachter was appointed Chief Executive Officer of the Company. In connection with his appointment, the Company and Mr. Wachter entered into a written employment agreement (the Wachter Employment Agreement) for an initial three-year term, which provides for the following compensation terms for Mr. Wachter. Pursuant to the Wachter Employment Agreement, Mr. Wachter will receive a base salary of $100,000 per year, subject to increase, but not decrease, at the discretion of the Board. Mr. Wachter is eligible for a cash and stock bonus equal to ten to twenty percent of the Companys pre-tax profits over established pre-tax targets, at the end of each respective annual period. In addition, the Wachter Employment Agreement also provides for certain payments and benefits in the event of a termination of his employment under specific circumstances. If, during the term of the Wachter Employment Agreement, his employment is terminated by the Company other than for cause, by Mr. Wachter for good reason (each as defined in the Wachter Employment Agreement) or by failure by either party to renew the Wachter Employment Agreement after expiration of the employment term, he would be entitled to (1) a lump sum payment equal to two times his base salary at the rate in effect immediately prior to the termination date, and (2) any unpaid portion of any cash bonus for the annual period preceding the annual period in which such termination occurs that was earned but not paid. On November 10, 2017, William J. Golden was appointed Chief Financial Officer of the Company. Mr. Golden remains the Companys General Counsel. In connection with his appointment, the Company and Mr. Golden entered into a written employment agreement (the Golden Employment Agreement) for an initial three-year term, which provides for the following compensation terms for Mr. Golden. Pursuant to the Golden Employment Agreement, Mr. Golden will receive a base salary of $100,000 per year, subject to increase, but not decrease, at the discretion of the Board. Mr. Golden is eligible for a cash and stock bonus equal to ten to twenty percent of the Companys pre-tax profits over established pre-tax targets, at the end of each respective annual period. In addition, the Golden Employment Agreement also provides for certain payments and benefits in the event of a termination of his employment under specific circumstances. If, during the term of the Golden Employment Agreement, his employment is terminated by the Company other than for cause, by Mr. Golden for good reason (each as defined in the Golden Employment Agreement) or by failure by either party to renew the Golden Employment Agreement after expiration of the employment term, he would be entitled to (1) a lump sum payment equal to two times his base salary at the rate in effect immediately prior to the termination date, and (2) any unpaid portion of any cash bonus for the annual period preceding the annual period in which such termination occurs that was earned but not paid. The Compensation Committee adopted a 2017-2019 Amerinac Holding Corp. Executive Bonus Plan (the Executive Bonus Plan), which is subject to and governed by the terms of the 2017 Amerinac Holding Corp. 2017 Equity Incentive Plan. Certain key employees will participate in the Executive Bonus Plan. The Executive Bonus Plan is designed to (i) offer variable compensation primarily in equity of the Company if executives achieve annual target growth amounts and (ii) align the incentives of executives and shareholders. The Company will fund the annual corporate bonus pool with no more than 20% of the excess, if any, of the Companys yearly earnings before taxes minus a threshold amount. For 2019, the threshold amount will be $1,750,000. Pursuant to the Executive Bonus Plan, awards are paid out in a mix of cash and equity, with no less than 60% of corporate bonus pool to be in the form of newly issued restricted common stock, subject to the discretion of the Compensation Committee of the Board. All awards will be subject to threshold performance and high-water marks. As of December, 31, 2018, the Company had accrued $103,000 in bonus for Mssrs. Wachter and Golden. On March 25, 2019, the Board authorized the payment of these bonuses to be in cash and the bonuses were paid on April 12, 2019. For the six months ended June 30, 2019, the Company accrued an additional $177,000 for bonuses. At June 30, 2019, the Company had accrued $177,000 for bonuses to executives. In addition, the Company issued 625 shares to both Mr. Lamb and Mr. Garruto at the conclusion of their first year of service on the Board of Directors on December 31, 2018 pursuant to their independent director agreements, valued at $25,000 each. On December 21, 2018, Mssrs. Lamb and Garruto were re-elected to the Board for an additional 1-year term. At the end of the 2019 term, they will each receive $25,000 in stock. |
SEGMENT RESULTS
SEGMENT RESULTS | 6 Months Ended |
Jun. 30, 2019 | |
SEGMENT RESULTS | |
9. SEGMENT RESULTS | The Company manages its operations in two business segments which are defined as follows: · The Companys Creative Assembly subsidiary, which includes all distribution of proprietary and specialty fasteners primarily serving the heavy truck, automotive, transportation, and infrastructure industries. · The Companys PMAL subsidiary, which includes all our manufacturing of specialty ingot, electrode products, shot products, and master alloys in addition to toll conversion melting services. Segment information for the six months ended June 30, 2019 is as follows: CAS PMAL Net revenue $ 8,494,047 $ 15,568,280 Cost of goods sold 6,985,022 12,184,427 Gross profit 1,509,025 3,383,853 Operating expenses: General and administrative expenses 958,673 1,443,026 Professional and consulting fees 38,926 130,986 Total operating expenses 997,599 1,574,012 Income before other income (expense) $ 511,426 $ 1,809,841 Below is the Segment reconciliation to total net income Income from segments above $ 2,321,267 Non-allocated expenses Interest expense (240,430 ) General and administrative expenses (267,727 ) Professional and consulting fees (20,792 ) Total non-allocated expenses (528,949 ) Income before provision for income taxes $ 1,792,318 Segment information for the three months ended June 30, 2019 is as follows: CAS PMAL Net revenue $ 4,176,218 $ 7,381,141 Cost of goods sold 3,469,766 5,783,306 Gross profit 706,452 1,597,835 Operating expenses: General and administrative expenses 492,228 714,291 Professional and consulting fees 26,559 41,784 Total operating expenses 518,787 756,075 Income before other income (expense) $ 187,665 $ 841,760 Below is the Segment reconciliation to total net income Income from segments above $ 1,029,425 Non-allocated expenses Interest expense (118,635 ) General and administrative expenses (132,246 ) Professional and consulting fees (12,794 ) Total non-allocated expenses (263,675 ) Income before provision for income taxes $ 765,750 Segment information for the six months ended June 30, 2018 is as follows: CAS PMAL Net Revenue $ 5,199,535 $ 16,814,146 Cost of goods sold 4,100,740 13,790,715 Gross profit 1,098,795 3,023,431 Operating expenses: General and administrative expenses 850,623 1,018,912 Professional and consulting fees 40,677 104,584 Total operating expenses 891,300 1,123,496 Income before other income (expense) $ 207,495 $ 1,899,935 Below is the Segment reconciliation to total net income Income from segments above $ 2,107,430 Non-allocated expenses Interest expense (728,925 ) General and administrative expenses (259,295 ) Other income (expense) 288,596 Total non-allocated expenses (699,624 ) Income before $ 1,407,806 provision for income taxes Segment information for the three months ended June 30, 2018 is as follows: CAS PMAL Net Revenue $ 2,719,570 $ 8,591,327 Cost of goods sold 2,131,684 7,344,231 Gross profit 587,886 1,247,096 Operating expenses: General and administrative expenses 466,970 508,256 Professional and consulting fees 16,697 (16,314 ) Total operating expenses 483,667 491,942 Income before other income (expense) $ 104,219 $ 755,154 Below is the Segment reconciliation to total net income Income from segments above $ 859,373 Non-allocated expenses Interest expense - net (363,774 ) General and administrative expenses (86,253 ) Professional and consulting fees (36,452 ) Other income 278,244 Total (171,783 ) Income before provision for income taxes $ 651,138 Segment asset information for the Company is as follows: June 30, 2019 December 31, 2018 PMAL assets $ 14,221,255 $ 12,982,588 CAS assets 6,789,307 4,526,530 Corporate assets 91,365 763,121 Total assets $ 21,101,927 $ 18,272,239 |
INCOME TAXES
INCOME TAXES | 6 Months Ended |
Jun. 30, 2019 | |
INCOME TAXES | |
10. INCOME TAXES | Income taxes are provided for the tax effects of transactions reported in the unaudited condensed consolidated financial statements and consist of taxes currently due. For 2018, our current effective tax rate is lower than the Federal and state effect rate primarily to the release of a portion of the valuation allowance. Tax information for the six-months ended June 30, 2019 and 2018 is as follows: For the six months ended June 30, 2019 2018 Current income tax Federal $ - $ - State 95,793 131,557 City - - Total current income tax $ 95,793 $ 131,557 Deferred income tax Federal $ 329,154 $ - State 36,573 - City - - Total deferred income tax $ 365,727 $ - Total income tax expense $ 461,520 $ 131,557 The Companys deferred tax assets and liability relates mainly to a temporary timing difference in long-term assets. There were no significant uncertain tax positions taken, or expected to be taken, in a tax return that would be determined to be an unrecognized tax benefit taken or expected to be taken in a tax return that should have been recorded in the Companys unaudited condensed consolidated financial statements for the six months ended June 30, 2019 or 2018. Additionally, there were no interest or penalties outstanding as of or for each of the six months ended June 30, 2019 and 2018. The federal and state tax returns for the years ending December 31, 2015, 2016, and 2017 have been filed, but are still open to examination. Federal and state tax returns for the year ending December 31, 2018 have not been filed. |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 6 Months Ended |
Jun. 30, 2019 | |
SUBSEQUENT EVENTS | |
11. SUBSEQUENT EVENTS | On July 15, 2019, CAS entered into a Loan and Security Agreement (the CAS Loan and Security Agreement) with Berkshire Bank establishing a new revolving credit facility in an aggregate principal amount of up to $6.0 million (the CAS Revolving Loan). Borrowings under the CAS Revolving Loan may be used to finance working capital and other general corporate purposes. Borrowings under the CAS Revolving Loan bear interest at a rate equal to the ICE LIBOR rate plus 3.00%. The outstanding principal amount of any borrowings under the CAS Revolving Loan will be due and payable on July 15, 2022, subject to an earlier maturity date upon an event of default. Any unpaid principal and interest shall be due on the maturity date. The CAS Loan and Security Agreement contains usual and customary covenants for financings of this type, including, among other things: (i) requirements to deliver financial statements, other reports and notices; (ii) restrictions on indebtedness; (iii) restrictions on dividends, distributions and redemptions of equity and repayment of subordinated indebtedness; (iv) restrictions on liens; (v) restrictions on making certain payments; (vi) restrictions on investments; (vii) restrictions on asset dispositions and other fundamental changes; and (viii) restrictions on transactions with affiliates. The CAS Loan and Security Agreement contains certain financial covenants, including a cash flow coverage ratio and a tangible net worth requirement covenant. Under the cash flow coverage covenant, commencing with the fiscal quarter ending September 30, 2019, CAS shall maintain a quarterly cash flow coverage ratio of not less than 1.20 to 1.00. Under the tangible net worth covenant, commencing with the fiscal quarter ending December 31, 2019, CAS shall maintain a tangible net worth of no less than $1.5 million. The tangible net worth amount required shall increase annually on each June 30 by 50% of CASs prior years undistributed net income. The obligations of CAS under the CAS Loan and Security Agreement are secured by liens and security interests on all assets of CAS. The Company is a secured guarantor of the CAS Loan and Security Agreement, and has pledged its equity in CAS. Effective July 1, 2019, the Company and SBN entered into a Membership Interest Redemption Agreement (the Redemption Agreement) pursuant to which the Company will purchase the remaining SBN Membership Interests from SBN for a purchase price of $3,000,000. |
SUMMARY OF SIGNIFICANT ACCOUN_2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 6 Months Ended |
Jun. 30, 2019 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | |
Interim Consolidated Financial Statements | The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) and in conformity with the instructions to Form 10-Q and Article 8 of Regulation S-X and the related rules and regulations of the Securities and Exchange Commission (SEC). Accordingly, certain information and note disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. However, we believe that the disclosures included in these unaudited condensed consolidated financial statements are adequate to make the information presented not misleading. The unaudited condensed consolidated financial statements included in this document have been prepared on the same basis as the annual consolidated financial statements, and in the Companys opinion reflect all adjustments, which include normal recurring adjustments necessary for a fair presentation in accordance with GAAP and SEC regulations for interim financial statements. The results for the six months ended June 30, 2019 are not necessarily indicative of the results that the Company will have for any subsequent period. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto for the year ended December 31, 2018 included in the Companys Annual Report on Form 10-K filed on March 26, 2019. |
Principles of Consolidation and Basis of Presentation | The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly and majority owned subsidiaries. All inter-company accounts have been eliminated. |
Earnings Per Share | Basic earnings per share is calculated by dividing net profit attributable to common stockholders by the weighted average number of outstanding common shares during the year. Basic earnings per share excludes any dilutive effects of options, warrants and other stock-based compensation, which are included in diluted earnings per share. When a company is in a loss situation, all outstanding dilutive shares are excluded from the calculation of diluted earnings because their inclusion would be antidilutive; and the basic and fully diluted common shares outstanding are stated to be the same. There were no dilutive shares as of June 30, 2019 and 2018. |
Use of Estimates | The preparation of the unaudited condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. The most significant estimates relate to the useful lives and impairment considerations of long-lived and intangible assets, reserves for inventory and accounts receivable, going concern considerations, discount rates in connection with right-of-use assets and the valuation of redeemable non-controlling interest. |
Accounts Receivable and Allowance for Doubtful Accounts | Accounts receivable are recorded net of reserves for sales returns and allowances and net of provisions for doubtful accounts. The Company records an allowance for doubtful accounts to allow for any amounts that may not be recoverable. The amount of the allowance is based on an analysis of the Companys prior collection experience, customer credit worthiness, and current economic trends. Based on managements review of accounts receivable, the Company carries an allowance for doubtful accounts of $78,753 as of June 30, 2019 and December 31, 2018. The Company determines receivables to be past due based on the payment terms of original invoices. Accounts are written off against the allowance when deemed uncollectable. Interest is not typically charged on past due receivables. |
Inventory | For the Companys distribution subsidiary, Creative Assembly, inventories consist only of finished goods and are carried at the lower of cost on an average cost basis, or net realizable value. When necessary, management records an inventory reserve for estimated obsolescence or unmarketable inventory based upon the age of the respective part and the knowledge of future demand of inventory on hand as well as other market conditions and events. Management believes that the longer a part sits on the shelf the higher the likelihood that it will not sell in the future. This belief is not unique to the fastener industry. While management constantly assesses viability of a part within the customer base, it also believes that a reserve should be carried to reflect product that is aging out, as opposed to product that management identified based on a specific event. As of June 30, 2019, the Company had more than 4,000 unique part numbers on hand that had carrying value. Management believes that the two methods, specific identification and reserve based on age, to analyzing inventory will reflect the appropriate balance sheet value. As of June 30, 2019 and December 31, 2018, the inventory reserve for Creative Assembly was $75,160 and $68,160, respectively. For the Companys manufacturing subsidiary, PMAL, management believes volatility in the broader metal markets will have an impact on all aspects of raw material, work in process, and finished goods inventory. Management actively seeks to minimize inventory working capital, and increase inventory turns to eliminate any impacts from market fluctuations. As of June 30, 2019, the Companys manufacturing subsidiary had more than 500 unique metal chemistries it produced, but keeps minimal finished inventory on hand. For PMAL, inventories are carried at the lower of cost on an average cost basis, or net realizable value. When necessary, management records an inventory reserve for estimated obsolescence or unmarketable inventory based upon knowledge of future demand of inventory on hand as well other market conditions and events. As of June 30, 2019 and December 31, 2018, the inventory reserve for PMAL was $82,849. The Companys inventory consists of the following: June 30, 2019 December 31, 2018 Raw Materials $ 2,168,422 $ 2,133,311 Finished Goods 3,825,741 3,598,640 Reserves (158,009 ) (151,009 ) Total $ 5,836,154 $ 5,580,942 |
Property, Land and Equipment | Property, land and equipment are stated at cost less accumulated depreciation and amortization. The Company computes depreciation and amortization using the straight-line method over the estimated useful lives of the assets acquired as follows: Leasehold improvements 5 years ** Furniture and fixtures 7 years Equipment and other 3-10 years Building 30 years ** Shorter of life or lease term. The carrying amount of all long-lived assets is evaluated when an indicator of impairment exists to determine whether adjustment to the useful life or to the unamortized balance is warranted. Such evaluation is based principally on the expected utilization of the long-lived assets. |
Concentration of Credit Risk | At June 30, 2019, Remelt Sources, Inc., Universal Stainless & Alloy Products, PACCAR, Eastham Forge and Drive Automotive receivables were 17.8%, 13.4%, 11.9%, 11.2% and 10.2% of total receivables, respectively. At December 31, 2018, Remelt Sources, Inc., AMG-Vanadium, PACCAR, and Universal Stainless & Alloy Products receivables were 20.9%, 15.0%, 14.0%, and 13.0% of total receivables, respectively. For the six-month period ending June 30, 2019, Remelt Sources, Inc., AMG-Vanadium, PACCAR and Universal Stainless & Alloy Products accounted for 20.3%, 17.0%, 15.6%, and 12.0% of sales, respectively. For the three-month period ending June 30, 2019, Remelt Sources, Inc., AMG-Vanadium, PACCAR and Universal Stainless & Alloy Products accounted for 21.8%, 15.7%, 16.2%, and 10.8% of sales, respectively. For the six-month period ending June 30, 2018, Remelt Sources, Inc., AMG-Vanadium, Ametek, PACCAR and Universal Stainless & Alloy Products accounted for 19.5%, 16.4%, 15.1%, 13.7% and 12.5% of sales, respectively. For the three-month period ending June 30, 2018, Remelt Sources, Inc., Ametek, AMG-Vanadium, PACCAR and Universal Stainless & Alloy Products accounted for 21.1%, 18.7%, 14.2%, 14.1% and 11.4% of sales, respectively. |
Concentration of Suppliers | For the six-month period ending June 30, 2019, no supplier represented more than 10% of purchases. For the three-month period ending June 30, 2019, no supplier represented more than 10% of purchases. For the six-month period ending June 30, 2018, no supplier represented more than 10% of purchases. For the three-month period ending June 30, 2018, no supplier represented more than 10% of purchases. At June 30, 2019, AVK represented approximately 16.9% of accounts payable. At December 31, 2018, AVK represented approximately 11.8% of accounts payable. |
Fair Value Measurements | In accordance with the authoritative guidance for fair value measurements and the fair value election for financial assets and financial liabilities, a fair value measurement is determined based on the assumptions that a market participant would use in pricing an asset or liability. A three-tiered hierarchy was established that draws a distinction between market participant assumptions based on the following: i) observable inputs such as quoted prices in active markets (Level 1) ii) inputs other than quoted prices in active markets that are observable either directly or indirectly (Level 2) iii) unobservable inputs that require the Company to use present value and other valuation techniques in the determination of fair value (Level 3). Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Companys assessment of the significance of a particular input to the fair value measurements requires judgment, and may affect the valuation of the assets and liabilities being measured and their placement within the fair value hierarchy. |
Fair Value of Financial Instruments | The carrying amounts reported in the unaudited condensed consolidated balance sheets for cash, accounts receivable, accounts payable and accrued liabilities approximate fair value because of the immediate or short-term maturity of the financial instruments. The Company believes that its indebtedness approximates fair value based on current yields for debt instruments with similar terms. |
Income Taxes | The Company provides for income taxes under Accounting Standards Codification (ASC) Topic 740-10. ASC Topic 740-10 requires the use of an asset and liability approach in accounting for income taxes. Deferred tax assets and liabilities are recorded based on the differences between the financial statement and tax bases of assets and liabilities and the tax rates in effect when these differences are expected to reverse. Temporary differences relate primarily to different accounting methods used for depreciation and amortization of property and equipment. ASC Topic 740-10 requires the reduction of deferred tax assets by a valuation allowance if, based on the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. ASC Topic 740-10 clarifies the accounting for uncertainty in income tax positions, as defined. It requires, among other matters, that the Company recognize in our unaudited condensed consolidated financial statements, the impact of a tax position, if that position is more likely than not of being sustained on audit, based on the technical merits of the position. The Company analyzes the filing positions in all of the federal and state jurisdictions where the Company is required to file income tax returns, as well as all open tax years in these jurisdictions. As of June 30, 2019, the Company did not record any unrecognized tax benefits. The Companys policy, if it had unrecognized benefits, is to recognize accrued interest and penalties related to unrecognized tax benefits as interest expense and other expense, respectively. The Tax Cuts and Jobs Act (the Tax Act), enacted on December 22, 2017, among other things, permanently lowered the statutory federal corporate tax rate from 35% to 21%, effective for tax years including or beginning January 1, 2018. Under the guidance of ASC 740, Income Taxes, the Company revalued its net deferred tax assets on the date of enactment based on the reduction in the overall future tax benefit expected to be realized at the lower tax rate implemented by the new legislation. Although in the normal course of business the Company is required to make estimates and assumptions for certain tax items which cannot be fully determined at period end, the Company did not identify items for which the income tax effects of the Tax Act have not been completed as of June 30, 2019 and December 31, 2018 and, therefore, considers its accounting for the tax effects of the Tax Act on its deferred tax assets and liabilities to be complete as of June 30, 2019 and December 31, 2018. |
Revenue Recognition | The Company accounts for revenue recognition in accordance with ASC Topic 606 (ASC 606). The core principle of ASC 606 is to recognize revenue when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services. ASC 606 defines a five-step process to achieve this core principle, which includes; (1) Identifying contracts with customers, (2) Identifying performance obligations within those contracts, (3) Determining the transaction price, (4) Allocating the transaction price to the performance obligations in the contract, which may include an estimate of variable consideration, and (5) Recognizing revenue when or as each performance obligation is satisfied. Revenue primarily consists of sales of fasteners, specialty ingot products and master alloys and tolling services. We generate our revenue primarily from the sale of finished products and tolling services to customers, therefore, the significant majority of our contracts are short-term in nature and have a single performance obligation to deliver products or services, in which our performance obligation is satisfied when control of the product is transferred to the customer or the service is performed. Some contracts contain a combination of product sales and services which are distinct and accounted for as separate performance obligations. Our performance obligations for services are satisfied when the services are rendered within the arranged service period. Tolling revenue is recognized when the tolling service is completed. Revenue is recognized when control transfers to our customers via shipment of products or delivery of services. Shipping and handling costs are considered fulfillment activities and as such are not accounted for as separate performance obligations. We measure revenue as the amount of consideration we expect to be entitled to receive in exchange for those goods or services, net of any variable considerations (e.g., rights to return product, sales incentives, others) and any taxes collected from customers and subsequently remitted to governmental authorities. The Company applied the practical expedient available under ASC 606 to disregard determining significant financing components if the good or service is transferred and payment is received within one year. We estimate product returns based on historical experience and record them on a gross basis. Substantially all of Creative Assembly customer returns relate to products that are returned under warranty obligations underwritten by manufacturers. Substantially all of PMAL customer returns relate to products which do not meet customer requirements and are replaced by the Company. We occasionally receive advance payments to secure product to be delivered in future periods. These advance payments are recorded as deferred revenue, and revenue is recognized as our performance obligations are satisfied throughout the term of the applicable contract. We may also purchase metal on our customers behalf, sell the unprocessed metal to our customer, and then process and ship the material, charging a processing fee at the time of shipment. For these specific non-tolling arrangements in which we purchase metal for a customer, a single performance obligation exists, and as a result, amounts invoiced to our customers for the metal purchased on their behalf is recorded as deferred revenue until the metal is processed and shipped. The Company recorded deferred revenue of $23,247 as of June 30, 2019. The Company did not record any deferred revenue as of December 31, 2018. |
Redeemable Non-Controlling Interest | Non-controlling interests that are not subject to redemption rights are classified in permanent equity. Redeemable non-controlling interests are classified outside of permanent equity on the unaudited condensed consolidated balance sheets. On August, 17, 2017, PMAL purchased substantially all of the assets of Prime Metals for $9.6 million in cash. To finance the purchase of the assets, PMAL entered into a credit agreement (the Credit Agreement) with SummitBridge National Investments V LLC (Summit) pursuant to which Summit made loans to PMAL: (1) a Term Loan in the amount of $4.5 million (Summit Term Loan A) and (2) a Term Loan in the amount of $3.5 million (Summit Term Loan B) (collectively, the Summit Loans). In addition, in consideration for Summit making the loans, PMAL issued membership interests representing 25% ownership of PMAL to an affiliate of Summit, SBN V PMA LLC (SBN) (the SBN Membership Interests). Pursuant to the terms of the Summit Loans and because PMAL repaid the Summit Loans within thirty-six (36) months of the origination of the Summit Loans, the SBN Membership Interests were reduced from 25% to 20% of PMAL as of September 1, 2018. PMAL has granted SBN a put right under the operating agreement for PMAL for the SBN Membership Interests. On August 31, 2018, the operating agreement for PMAL was amended to provide that on the earlier of November 30, 2021 or the date of a change in control of PMAL, SBN has the right but not the obligation to require PMAL to repurchase all of the SBN Membership Interests at market equity value (Market Equity Value). Market Equity Value shall be equal to the higher of (i) value of PMAL implied by a sale, (ii) 4.5 x EBITDA for the trailing twelve months plus cash, less all outstanding funded indebtedness or (iii) fair market value as determined by mutual agreement between PMAL and SBN, or failing that by an independent firm mutually agreed to. SBN has granted PMAL a call right under the operating agreement for PMAL for the SBN Membership Interests. On August 17, 2021, PMAL has the right but not the obligation to require SBN to sell all of the SBN Membership Interests at Market Equity Value. The Company has accounted for this in accordance with ASC 480-10-55-59, as a redeemable non-controlling interest. At acquisition $400,000 was recorded as SBNs PMAL equity ownership. This amount, plus SBNs pro rata net income allocation is reflected before stockholders equity as Redeemable Non-Controlling interest. The redeemable non-controlling interest was reduced for the reduction in membership interests from 25% to 20% in 2018, as noted above. SBNs pro-rata net income allocation was made at a rate of 25% through August 31, 2018 and 20% commencing September 1, 2018 in accordance with the reduction in membership interests. |
Recently Adopted Authoritative Pronouncements | In February 2016, the Financial Accounting Standards Board (FASB) established Topic 842, Leases, by issuing Accounting Standards Update (ASU) No. 2016-02, which requires lessees to recognize leases on-balance sheet and disclose key information about leasing arrangements. Topic 842 was subsequently amended by ASU No. 2018-01, Land Easement Practical Expedient for Transition to Topic 842; ASU No. 2018-10, Codification Improvements to Topic 842, Leases; and ASU No. 2018-11, Targeted Improvements. The new standard establishes a right-of-use model (ROU) that requires a lessee to recognize a ROU asset and lease liability on the balance sheet for all leases with a term longer than 12 months. Leases will be classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the income statement. The new standard is effective on January 1, 2019. A modified retrospective transition approach is required, applying the new standard to all leases existing at the date of initial application. An entity may choose to use either (1) its effective date or (2) the beginning of the earliest comparative period presented in the financial statements as its date of initial application. If an entity chooses the second option, the transition requirements for existing leases also apply to leases entered into between the date of initial application and the effective date. The entity must also recast its comparative period financial statements and provide the disclosures required by the new standard for the comparative periods. The Company adopted the new standard on January 1, 2019 and used the effective date as the date of initial application. Consequently, financial information will not be updated and the disclosures required under the new standard will not be provided for dates and periods before January 1, 2019. The new standard provides a number of optional practical expedients in transition. The Company elects the package of practical expedients, which permits the Company not to reassess under the new standard prior conclusions about lease identification, lease classification and initial direct costs. Under this elected package of practical expedients, the Company does not separate non-lease components from the lease component. Therefore, all lease and non-lease components are combined and accounted for as a single lease component. On adoption, the Company recognized additional operating lease liabilities of approximately $251,000 with corresponding ROU assets of the same amount based on the present value of the remaining minimum rental payments under current leasing standards for existing operating leases. In June 2018, the FASB, issued ASU No. 2018-07 to simplify the accounting for share-based payments to nonemployees by aligning it with the accounting for share-based payments to employees, with certain exceptions. The new guidance expands the scope of ASC 718 to include share-based payments granted to nonemployees in exchange for goods or services used or consumed in an entitys own operations and supersedes the guidance in ASC 505-50. The guidance is effective for public business entities in annual periods beginning after December 15, 2018, and interim periods within those annual periods. Early adoption is permitted, including in an interim period for which financial statements have not been issued, but not before an entity adopts ASC 606. This was adopted on January 1, 2019 and did not have a material impact on the Companys financial position and results of operations. |
Recent Accounting Pronouncements | In January 2017, the FASB issued ASU No. 2017-04, Intangibles-Goodwill and Other (Topic 350), which includes provisions intended to simplify the test for goodwill impairment. The standard is effective for annual periods beginning after December 15, 2019, with early adoption permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company does not expect the adoption of this standard to have a significant impact on its financial position and results of operations. No other recently issued accounting pronouncements had or are expected to have a material impact on the Companys unaudited condensed consolidated financial statements. |
SUMMARY OF SIGNIFICANT ACCOUN_3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | |
Summary of inventory | June 30, 2019 December 31, 2018 Raw Materials $ 2,168,422 $ 2,133,311 Finished Goods 3,825,741 3,598,640 Reserves (158,009 ) (151,009 ) Total $ 5,836,154 $ 5,580,942 |
Estimated useful lives of the assets | Leasehold improvements 5 years ** Furniture and fixtures 7 years Equipment and other 3-10 years Building 30 years |
PROPERTY, LAND AND EQUIPMENT (T
PROPERTY, LAND AND EQUIPMENT (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
PROPERTY, LAND AND EQUIPMENT (Tables) | |
Property, Land and Equipment | June 30, 2019 December 31, 2018 Land, buildings and improvements $ 3,419,779 $ 3,419,779 Equipment 3,698,189 3,463,829 Total 7,117,968 6,883,608 Less accumulated depreciation (1,065,979 ) (758,425 ) Net property, land and equipment $ 6,051,989 $ 6,125,183 |
ACCOUNTS PAYABLE AND ACCRUED _2
ACCOUNTS PAYABLE AND ACCRUED EXPENSES (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
ACCOUNTS PAYABLE AND ACCRUED EXPENSES (Tables) | |
Accounts Payable And Accrued Expenses | June 30, 2019 December 31, 2018 Accounts payable $ 3,478,306 $ 3,060,269 Interest 33,192 35,805 Salaries and bonus 495,000 116,930 Other 19,520 62,007 $ 4,026,018 $ 3,275,011 |
GOODWILL AND INTANGIBLE ASSETS
GOODWILL AND INTANGIBLE ASSETS (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
GOODWILL AND INTANGIBLE ASSETS (Tables) | |
GOODWILL AND INTANGIBLE ASSETS | Customer lists $ 1,990,000 Goodwill $ 54,993 |
LEASES (Tables)
LEASES (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
LEASES | |
Schedule of operating leases recorded | Leases Classification on the Balance Sheet June 30, 2019 Assets Operating lease ROU assets Right-of-use asset $ 1,208,613 Finance lease ROU assets Property, land and equipment, net $ 150,966 Liabilities Current Operating Operating leases payable short term $ 254,845 Finance Finance leases payable short term $ 45,688 Noncurrent Operating Operating leases payable net of current portion $ 1,000,193 Finance Finance leases payable net of current portion $ 89,656 |
Schedule of weighted average discount rate for operating leases | June 30, 2019 Weighted average remaining lease term 55.3 months Weighted average discount rate 5.63 % |
Schedule of lease expense | Three Months Ended June 30, 2019 Six Months Ended June 30, 2019 Operating lease cost: Operating lease cost $ 51,927 $ 89,432 Finance lease cost: Amortization of ROU assets 8,227 21,449 Interest expense 1,759 3,650 Total lease cost $ 61,913 $ 114,531 |
Schedule of future minimum rental payments for operating leases | July 1, 2019 through December 31, 2019 $ 156,558 2020 313,115 2021 313,115 2022 287,448 2023 236,115 2024 118,058 Total undiscounted future minimum lease payments 1,424,408 Less: Imputed interest 169,370 Present value of operating lease obligations $ 1,255,038 |
Schedule of finance and Capital Leases | Finance Leases June 30, 2019 Capital Leases December 31, 2018 Obligations under finance and capital leases $ 135,344 $ 156,793 Less: current portion 45,688 43,435 Long-term portion $ 89,656 $ 113,358 |
Schedule of future minimum repayments of finance lease obligations | Years ending December 31, Finance lease obligations as of June 30, 2019 2019 (remaining six months) $ 25,098 2020 50,200 2021 48,880 2022 21,397 Total future minimum repayments inclusive of interest 145,575 Interest 10,231 Total principal repayments $ 135,344 |
Schedule of future minimum repayments of capital lease obligations | Years ending December 31, Capital lease obligations as of December 31, 2018 2019 $ 50,199 2020 50,199 2021 48,878 2022 21,396 Total future minimum repayments inclusive of interest 170,672 Interest 13,879 Total principal repayments $ 156,793 |
Schedule of weighted average discount rate for finance leases | June 30, 2019 Weighted average remaining lease term 35 months Weighted average discount rate 4.93 % |
LONG-TERM DEBT AND LINE OF CR_2
LONG-TERM DEBT AND LINE OF CREDIT (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
LONG-TERM DEBT AND LINE OF CREDIT (Tables) | |
Schedule of of the non-controlling interests | The following table shows the value of the non-controlling interests (NCI) for the six-month period ending June 30, 2019: Value of NCI at December 31, 2018 $ 757,778 PMAL Income from January 1, 2019 to June 30, 2019 attributable to NCI 313,951 Value of NCI at June 30, 2019 $ 1,071,729 The following table shows the value of the non-controlling interests (NCI) for the three-month period ending June 30, 2019: Value of NCI at March 31, 2019 $ 927,071 PMAL Income from April 1, 2019 to June 30, 2019 attributable to NCI 144,658 Value of NCI at June 30, 2019 $ 1,071,729 The following table shows the change in the value of the NCI for the six-month period ending of June 30, 2018: Value of NCI at December 31, 2017 $ 453,377 PMAL Income from January 1, 2018 to June 30, 2018 attributable to NCI 364,293 Value of NCI at June 30, 2018 $ 817,670 The following table shows the value of the non-controlling interests (NCI) for the three-month period ending June 30, 2018: Value of NCI at March 31, 2018 $ 651,114 PMAL Income from April 1, 2018 to June 30, 2018 attributable to NCI 166,556 Value of NCI at June 30, 2018 $ 817,670 |
Repayments of Berkshire Terms Loan A and Berkshire Term Loan B | Years ending December 31, Term Loans Minimum Amortization 2019 (remaining six months) $ 300,000 2020 600,000 2021 3,650,000 Total 4,550,000 Unamortized debt and financing cost 145,170 Total (net of unamortized debt and financing cost) $ 4,404,830 |
SEGMENT RESULTS (Tables)
SEGMENT RESULTS (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
SEGMENT RESULTS (Tables) | |
Schedule of Segment Information | Segment information for the six months ended June 30, 2019 is as follows: CAS PMAL Net revenue $ 8,494,047 $ 15,568,280 Cost of goods sold 6,985,022 12,184,427 Gross profit 1,509,025 3,383,853 Operating expenses: General and administrative expenses 958,673 1,443,026 Professional and consulting fees 38,926 130,986 Total operating expenses 997,599 1,574,012 Income before other income (expense) $ 511,426 $ 1,809,841 Below is the Segment reconciliation to total net income Income from segments above $ 2,321,267 Non-allocated expenses Interest expense (240,430 ) General and administrative expenses (267,727 ) Professional and consulting fees (20,792 ) Total non-allocated expenses (528,949 ) Income before provision for income taxes $ 1,792,318 Segment information for the three months ended June 30, 2019 is as follows: CAS PMAL Net revenue $ 4,176,218 $ 7,381,141 Cost of goods sold 3,469,766 5,783,306 Gross profit 706,452 1,597,835 Operating expenses: General and administrative expenses 492,228 714,291 Professional and consulting fees 26,559 41,784 Total operating expenses 518,787 756,075 Income before other income (expense) $ 187,665 $ 841,760 Below is the Segment reconciliation to total net income Income from segments above $ 1,029,425 Non-allocated expenses Interest expense (118,635 ) General and administrative expenses (132,246 ) Professional and consulting fees (12,794 ) Total non-allocated expenses (263,675 ) Income before provision for income taxes $ 765,750 Segment information for the six months ended June 30, 2018 is as follows: CAS PMAL Net Revenue $ 5,199,535 $ 16,814,146 Cost of goods sold 4,100,740 13,790,715 Gross profit 1,098,795 3,023,431 Operating expenses: General and administrative expenses 850,623 1,018,912 Professional and consulting fees 40,677 104,584 Total operating expenses 891,300 1,123,496 Income before other income (expense) $ 207,495 $ 1,899,935 Below is the Segment reconciliation to total net income Income from segments above $ 2,107,430 Non-allocated expenses Interest expense (728,925 ) General and administrative expenses (259,295 ) Other income (expense) 288,596 Total non-allocated expenses (699,624 ) Income before $ 1,407,806 provision for income taxes Segment information for the three months ended June 30, 2018 is as follows: CAS PMAL Net Revenue $ 2,719,570 $ 8,591,327 Cost of goods sold 2,131,684 7,344,231 Gross profit 587,886 1,247,096 Operating expenses: General and administrative expenses 466,970 508,256 Professional and consulting fees 16,697 (16,314 ) Total operating expenses 483,667 491,942 Income before other income (expense) $ 104,219 $ 755,154 Below is the Segment reconciliation to total net income Income from segments above $ 859,373 Non-allocated expenses Interest expense - net (363,774 ) General and administrative expenses (86,253 ) Professional and consulting fees (36,452 ) Other income 278,244 Total (171,783 ) Income before provision for income taxes $ 651,138 Segment asset information for the Company is as follows: June 30, 2019 December 31, 2018 PMAL assets $ 14,221,255 $ 12,982,588 CAS assets 6,789,307 4,526,530 Corporate assets 91,365 763,121 Total assets $ 21,101,927 $ 18,272,239 |
INCOME TAXES (Tables)
INCOME TAXES (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
INCOME TAXES (Tables) | |
Schedule of Components of income tax provision | For the six months ended June 30, 2019 2018 Current income tax Federal $ - $ - State 95,793 131,557 City - - Total current income tax $ 95,793 $ 131,557 Deferred income tax Federal $ 329,154 $ - State 36,573 - City - - Total deferred income tax $ 365,727 $ - Total income tax expense $ 461,520 $ 131,557 |
SUMMARY OF SIGNIFICANT ACCOUN_4
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - USD ($) | Jun. 30, 2019 | Dec. 31, 2018 |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | ||
Raw Materials | $ 2,168,422 | $ 2,133,311 |
Finished Goods | 3,825,741 | 3,598,640 |
Reserves | (158,009) | (151,009) |
Total | $ 5,836,154 | $ 5,580,942 |
SUMMARY OF SIGNIFICANT ACCOUN_5
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 1) | 6 Months Ended |
Jun. 30, 2019 | |
Leasehold improvements | |
Estimated useful lives of the assets | 5 years |
Furniture and fixtures | |
Estimated useful lives of the assets | 7 years |
Equipment and other | Minimum [Member] | |
Estimated useful lives of the assets | 3 years |
Equipment and other | Maximum [Member] | |
Estimated useful lives of the assets | 10 years |
Building [Member] | |
Estimated useful lives of the assets | 30 years |
SUMMARY OF SIGNIFICANT ACCOUN_6
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($) | 1 Months Ended | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||||
Aug. 31, 2018 | Jun. 30, 2019 | Mar. 31, 2019 | Mar. 31, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | Dec. 31, 2018 | Aug. 17, 2017 | |
Redeemable non-controlling interest equity value | $ 400,000 | $ 400,000 | ||||||
Statutory federal corporate tax rate, description | December 22, 2017, among other things, permanently lowered the statutory federal corporate tax rate from 35% to 21%, effective for tax years including or beginning January 1, 2018. | |||||||
Allowance for doubtful accounts | $ 78,753 | $ 78,753 | $ 78,753 | |||||
AMG-Vanadium [Member] | ||||||||
Concentration of credit risk, total sales | 15.70% | 21.10% | 17.00% | 19.50% | ||||
Outstanding accounts receivable | 10.20% | 15.00% | ||||||
Remelt Sources, Inc. [Member] | ||||||||
Concentration of credit risk, total sales | 21.80% | 18.70% | 20.30% | 16.40% | ||||
Outstanding accounts receivable | 17.80% | 20.90% | ||||||
PACCAR [Member] | ||||||||
Concentration of credit risk, total sales | 16.20% | 14.20% | 15.60% | 15.10% | ||||
Outstanding accounts receivable | 11.20% | 14.00% | ||||||
Universal Stainless & Alloy Products [Member] | ||||||||
Concentration of credit risk, total sales | 10.80% | 14.10% | 12.00% | 13.70% | ||||
Outstanding accounts receivable | 13.40% | 13.10% | ||||||
Ametek [Member] | ||||||||
Concentration of credit risk, total sales | 11.40% | 12.50% | ||||||
PMAL [Member] | ||||||||
Inventory reserve | $ 82,849 | $ 82,849 | $ 82,849 | |||||
Repurchase of Stock, value | $ 9,600,000 | |||||||
Equity investment ownership percentage | 25.00% | |||||||
Creative Assembly [Member] | ||||||||
Inventory reserve | $ 75,160 | $ 68,160 | $ 75,160 | $ 68,160 | ||||
AVK [Member] | ||||||||
Outstanding accounts payable percentage | 14.00% | 11.80% | ||||||
Maximum [Member] | ||||||||
Product distribution percentage | 10.00% | 10.00% | ||||||
Summit Bridge Loans [Member] | ||||||||
Repayment of related party debt description | The terms of the Summit Loans and because PMAL repaid the Summit Loans within thirty-six (36) months of the origination of the Summit Loans with the proceeds from the Berkshire Loans below, the SBN Membership Interests were reduced from 25% to 20% of PMAL as of September 1, 2018. | The terms of the Summit Loans and because PMAL repaid the Summit Loans within thirty-six (36) months of the origination of the Summit Loans with the proceeds from the Berkshire Loans below, the SBN Membership Interests were reduced from 25% to 20% of PMAL as of September 1, 2018. | ||||||
Summit Bridge Loans [Member] | SBN [Member] | ||||||||
Description for pro-rata net income allocation | SBN's pro-rata net income allocation was made at a rate of 25% through August 31, 2018 and 20% commencing September 1, 2018 in accordance with the reduction in membership interests |
PROPERTY, LAND AND EQUIPMENT (D
PROPERTY, LAND AND EQUIPMENT (Details) - USD ($) | Jun. 30, 2019 | Dec. 31, 2018 |
PROPERTY, LAND AND EQUIPMENT (Details) | ||
Land , buildings and improvements | $ 3,419,779 | $ 3,419,779 |
Equipment | 3,698,189 | 3,463,829 |
Total | 7,117,968 | 6,883,608 |
Less accumulated depreciation | (1,065,979) | (758,425) |
Net property, land and equipment | $ 6,051,989 | $ 6,125,183 |
PROPERTY, LAND AND EQUIPMENT _2
PROPERTY, LAND AND EQUIPMENT (Details Narrative) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019USD ($)ft² | Jun. 30, 2018USD ($) | Jun. 30, 2019USD ($)ft² | Jun. 30, 2018USD ($) | |
Company area | ft² | 220,000 | 220,000 | ||
Depreciation expense | $ 155,455 | $ 70,696 | $ 307,554 | $ 206,162 |
Property, Plant and Equipment [Member] | ||||
Proceeds on notes payable - related party | $ 5,295,431 |
ACCOUNTS PAYABLE AND ACCRUED _3
ACCOUNTS PAYABLE AND ACCRUED EXPENSES (Details) - USD ($) | Jun. 30, 2019 | Dec. 31, 2018 |
ACCOUNTS PAYABLE AND ACCRUED EXPENSES (Details) | ||
Accounts payable | $ 3,478,306 | $ 3,060,269 |
Interest | 33,192 | 35,805 |
Salaries and bonus | 495,000 | 116,930 |
Other | 19,520 | 62,007 |
Accounts payable and accrued expenses | $ 4,026,018 | $ 3,275,011 |
GOODWILL AND INTANGIBLE ASSET_2
GOODWILL AND INTANGIBLE ASSETS (Details) | 6 Months Ended |
Jun. 30, 2019USD ($) | |
GOODWILL AND INTANGIBLE ASSETS (Details) | |
Customer lists | $ 1,990,000 |
Goodwill | $ 54,993 |
GOODWILL AND INTANGIBLE ASSET_3
GOODWILL AND INTANGIBLE ASSETS (Details Narrative) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
GOODWILL AND INTANGIBLE ASSETS (Details Narrative) | ||||
Customer list estimated useful life | 10 years | |||
Customer list value, net of amortization | $ 1,608,583 | $ 1,608,583 | ||
Amortization expense description | Amortization expense for the years ended December 31, 2019 through 2023 will be $199,000 per year. The Company will continue to expense $199,000 annually until 2027. | |||
2019 | 199,000 | $ 199,000 | ||
2020 | 199,000 | 199,000 | ||
2021 | 199,000 | 199,000 | ||
2022 | 199,000 | 199,000 | ||
2023 and thereafter till 2027 | 199,000 | 199,000 | ||
Amortization of goodwill and intangible assets | $ 99,501 | $ 49,751 | $ 99,501 | $ 49,751 |
LEASES (Details)
LEASES (Details) - USD ($) | Jun. 30, 2019 | Mar. 31, 2019 | Dec. 31, 2018 |
LEASES (Details) | |||
Right-of-use asset | $ 1,208,613 | ||
Property, land and equipment, net | 150,966 | ||
Current | |||
Operating leases payable - short term | 156,558 | $ 254,845 | |
Finance leases payable - short term | 45,688 | ||
Noncurrent | |||
Operating leases payable - net of current portion | 1,000,193 | ||
Finance leases payable - net of current portion | $ 89,656 |
LEASES (Details 1)
LEASES (Details 1) | Jun. 30, 2019 | Mar. 31, 2019 |
LEASES (Details 1) | ||
Weighted average remaining lease term | 4 years | 3 years 6 months |
Weighted average discount rate |
LEASES (Details 2)
LEASES (Details 2) - USD ($) | 3 Months Ended | 6 Months Ended | |
Jun. 30, 2019 | Jun. 30, 2019 | Jun. 30, 2018 | |
Operating lease cost: | |||
Operating lease cost | $ 51,927 | $ 89,432 | |
Finance lease cost: | |||
Amortization of ROU assets | 8,227 | 21,449 | |
Interest expense | 1,759 | 3,650 | |
Total lease cost | $ 61,913 | $ 114,531 |
LEASES (Details 3)
LEASES (Details 3) - USD ($) | Jun. 30, 2019 | Mar. 31, 2019 |
July 1, 2019 through December 31, 2019 | $ 156,558 | $ 254,845 |
Operating Leases [Member] | ||
July 1, 2019 through December 31, 2019 | 156,558 | |
2020 | 313,115 | |
2021 | 118,058 | |
2022 | 287,448 | |
2023 | 236,115 | |
2024 | 118,058 | |
Total undiscounted future minimum lease payments | 1,424,408 | |
Less: Imputed interest | 169,370 | |
Present value of operating lease obligations | $ 1,255,038 |
LEASES (Details 4)
LEASES (Details 4) - USD ($) | Jun. 30, 2019 | Dec. 31, 2018 |
Less: current portion | $ 45,688 | |
Long-term portion | 89,656 | |
Finance Leases [Member] | ||
Obligations under finance and capital leases | 135,344 | |
Less: current portion | 45,688 | |
Long-term portion | 89,656 | |
Capital Leases [Member] | ||
Obligations under finance and capital leases | $ 156,793 | |
Less: current portion | 43,435 | |
Long-term portion | $ 113,358 |
LEASES (Details 5)
LEASES (Details 5) - USD ($) | Jun. 30, 2019 | Mar. 31, 2019 |
July 1, 2019 through December 31, 2019 | $ 156,558 | $ 254,845 |
Finance Lease Obligations [Member] | ||
July 1, 2019 through December 31, 2019 | 25,098 | |
2020 | 50,200 | |
2021 | 48,880 | |
2022 | 21,397 | |
Total future minimum repayments inclusive of interest | 145,573 | |
Interest | 10,231 | |
Total Principal Repayments | $ 135,344 |
LEASES (Details 6)
LEASES (Details 6) - Capital Lease Obligations [Member] | Dec. 31, 2018USD ($) |
2019 | $ 50,199 |
2020 | 50,199 |
2021 | 48,878 |
2022 | 21,396 |
Total future minimum repayments inclusive of interest | 170,672 |
Interest | 13,879 |
Total principal repayments | $ 156,793 |
LEASES (Details 7)
LEASES (Details 7) | Jun. 30, 2019 | Mar. 31, 2019 |
Weighted average remaining lease term | 4 years | 3 years 6 months |
Finance and Capital Leases [Member] | ||
Weighted average remaining lease term | 3 years 2 months | |
Weighted average discount rate | 4.93% |
LEASES (Details Narrative)
LEASES (Details Narrative) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Mar. 31, 2018 | Jun. 30, 2019 | Mar. 31, 2019 | Dec. 31, 2018 | |
Increase in operating leases payable | $ (15,763) | |||
Operating lease asset obtained in exchange for operating lease obligation | 1,277,143 | |||
2019 (remaining six months) | 254,845 | |||
July 1, 2019 through December 31, 2019 | 156,558 | $ 254,845 | ||
Texas Facility [Member] | ||||
July 1, 2019 through December 31, 2019 | 57,618 | |||
2020 | 236,115 | |||
2021 | 115,236 | |||
2022 | 115,236 | |||
2023 | 115,236 | |||
2024 | 57,618 | |||
Totaling leases | 576,180 | |||
Lease expense | 14,133 | |||
Ohio Facility [Member] | ||||
July 1, 2019 through December 31, 2019 | 77,000 | |||
2020 | 77,000 | |||
2021 | 77,000 | |||
2022 | 57,750 | |||
Totaling leases | 243,833 | |||
Lease expense | $ 29,208 |
LONG-TERM DEBT AND LINE OF CR_3
LONG-TERM DEBT AND LINE OF CREDIT (Details) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
LONG-TERM DEBT AND LINE OF CREDIT (Details) | ||||
Value of NCI at Beginning | $ 927,071 | $ 651,114 | $ 757,778 | |
PMAL Income attributable to NCI | 144,658 | $ 166,556 | 313,951 | $ 364,293 |
Value of NCI at Ending | $ 1,071,729 | $ 1,071,729 |
LONG-TERM DEBT AND LINE OF CR_4
LONG-TERM DEBT AND LINE OF CREDIT (Detail 3 ) - USD ($) | Jun. 30, 2019 | Mar. 31, 2019 | Dec. 31, 2018 |
July 1, 2019 through December 31, 2019 | $ 156,558 | $ 254,845 | |
Total | 21,101,927 | $ 18,272,239 | |
Term Loan A & B[Member] | |||
July 1, 2019 through December 31, 2019 | 300,000 | ||
2020 | 600,000 | ||
2021 | 3,650,000 | ||
Total | 4,550,000 | ||
Unamortized debt and financing cost | 145,170 | ||
Total (net of unamortized debt and financing cost) | $ 4,404,830 |
LONG-TERM DEBT AND LINE OF CR_5
LONG-TERM DEBT AND LINE OF CREDIT (Details Narrative) - USD ($) | 1 Months Ended | 3 Months Ended | 6 Months Ended | ||
Aug. 31, 2018 | Aug. 17, 2017 | Mar. 31, 2019 | Jun. 30, 2019 | Dec. 31, 2018 | |
Repayment of summit loans by PMAL | |||||
SBN's PMAL equity ownership, amount at acquisition | $ 1,071,729 | $ 757,778 | |||
Summit Bridge Loans [Member] | |||||
Repayment of related party debt, description | The terms of the Summit Loans and because PMAL repaid the Summit Loans within thirty-six (36) months of the origination of the Summit Loans with the proceeds from the Berkshire Loans below, the SBN Membership Interests were reduced from 25% to 20% of PMAL as of September 1, 2018. | The terms of the Summit Loans and because PMAL repaid the Summit Loans within thirty-six (36) months of the origination of the Summit Loans with the proceeds from the Berkshire Loans below, the SBN Membership Interests were reduced from 25% to 20% of PMAL as of September 1, 2018. | |||
Summit Bridge Loans [Member] | PMAL [Member] | |||||
SBN's PMAL equity ownership, amount at acquisition | $ 400,000 | ||||
Purchase price of Prime Metals | $ 9,600,000 | ||||
Summit Bridge Loans [Member] | SBN [Member] | |||||
Description for pro-rata net income allocation | SBN's pro-rata net income allocation was made at a rate of 25% through August 31, 2018 and 20% commencing September 1, 2018 in accordance with the reduction in membership interests | ||||
Loan and Security Agreement [Member] | |||||
Repayment of summit loans by PMAL | $ 7,678,814 | ||||
Description for cash flow coverage ratio under agreement | PMAL shall maintain a quarterly cash flow coverage ratio of not less than 1.20 to 1.00 | ||||
Description for tangible net worth under agreement | PMAL shall maintain a tangible net worth of no less than $3.1 million. The tangible net worth amount required shall increase annually on each June 30 by 50% of PMAL’s prior year’s undistributed net income. | ||||
Loan and Security Agreement [Member] | Berkshire Bank [Member] | |||||
Interest rate description | Borrowings under the Berkshire Revolving Loan bear interest at a rate equal to the Intercontinental Exchange Benchmark Administration Ltd. London Interbank Offered Rate (“ICE LIBOR”) rate plus 3.25%, which was 5.74% at March 31, 2019. | ||||
Unamortized fees | $ 162,591 | 180,010 | |||
Credit facility, amount borrowed amount | 504,534 | ||||
Loan and Security Agreement [Member] | Berkshire Bank [Member] | Revolving Credit Facility [Member] | |||||
Credit facility, amount borrowed amount | 504,534 | ||||
Credit facility, maximum borrowing capacity | $ 6,000,000 | 2,900,000 | |||
Loan and Security Agreement [Member] | Berkshire Term Loan B [Member] | |||||
Credit facility, maximum borrowing capacity | $ 1,500,000 | ||||
Maturity date description | Berkshire Term Loan B has a maturity date the earlier of (i) August 31, 2023 or (ii) the Revolving Credit Maturity Date. | ||||
Debt instrument periodic payments | $ 8,334 | ||||
Frequency of periodic payments | Monthly | ||||
Loan and Security Agreement [Member] | Berkshire Term Loan A [Member] | |||||
Credit facility, maximum borrowing capacity | $ 3,500,000 | ||||
Maturity date description | Berkshire Term Loan A has a maturity date the earlier of (i) August 31, 2023 or (ii) the Revolving Credit Maturity Date. | ||||
Debt instrument periodic payments | $ 41,667 | ||||
Frequency of periodic payments | Monthly | ||||
Loan and Security Agreement [Member] | Berkshire Term Loan A and B [Member] | |||||
Interest rate description | Berkshire Term Loan A and Berkshire Term Loan B bear interest at ICE LIBOR rate plus 4.25%, which was 6.69% at June 30, 2019. | ||||
Term Loan A [Member] | |||||
Term loan principal balance | 3,125,000 | $ 3,375,000 | |||
Term Loan A [Member] | Summit Bridge Loans [Member] | PMAL [Member] | |||||
Interest rate description | Summit Term Loan A accrued each month at either 17.5% interest per annum (with 12.5% payable monthly and 5.0% accruing to the outstanding balance of Term Loan A, payable at maturity) or 17.0% interest per annum, payable monthly. | ||||
Maturity date | Aug. 17, 2020 | ||||
Term Loan B [Member] | |||||
Term loan principal balance | $ 1,425,000 | ||||
Term Loan B [Member] | Summit Bridge Loans [Member] | PMAL [Member] | |||||
Interest rate description | Summit Term Loan B accrued each month at either 17.5% interest per annum (with 14.0% payable monthly and 3.5% accruing to the outstanding balance of Term Loan B, payable at maturity) or 17.0% interest per annum, payable monthly. | ||||
Maturity date | Aug. 17, 2020 |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Details Narrative) - USD ($) | Nov. 10, 2017 | Jun. 30, 2019 | Dec. 31, 2018 |
Common stock shares issued value | $ 313 | $ 313 | |
Accrued bonus | 177,000 | ||
Additional accrued bonuses | $ 177,000 | ||
Common stock shares issued | 313,636 | 313,636 | |
Independent Director Agreements [Member] | Mr. Garruto [Member] | |||
Common stock shares issued value | $ 25,000 | ||
Common stock shares issued | 625 | ||
Board members compensation | $ 25,000 | ||
Independent Director Agreements [Member] | Mr. Lamb [Member] | |||
Common stock shares issued value | $ 25,000 | ||
Common stock shares issued | 625 | ||
Board members compensation | 25,000 | ||
Employment Agreements [Member] | |||
Threshold amounts | $ 1,750,000 | ||
Employment Agreements [Member] | Mssrs. Wachter and Golden [Member] | |||
Accrued bonus | $ 103,000 | ||
Employment Agreements [Member] | Mr. Wachter [Member] | |||
Base salary | $ 100,000 | ||
Employment Agreements [Member] | Mr. Golden [Member] | |||
Base salary | $ 100,000 | ||
Executive Bonus Plan [Member] | |||
Bonus plan description | The Executive Bonus Plan, awards are paid out in a mix of cash and equity, with no less than 60% of corporate bonus pool to be in the form of newly issued restricted common stock, subject to the discretion of the Compensation Committee of the Board. | ||
Corporate Bonus Pool [Member] | |||
Bonus plan description | The Company will fund the annual corporate bonus pool with no more than 20% of the excess, if any, of the Company’s yearly earnings before taxes minus a threshold. amount |
SEGMENT RESULTS (Details)
SEGMENT RESULTS (Details) - USD ($) | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2019 | Jun. 30, 2018 | Mar. 31, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Net Revenue | $ 4,176,218 | $ 11,310,897 | $ 8,494,047 | $ 22,013,681 | |
Cost of goods sold | 9,253,072 | 9,475,915 | 19,169,449 | 17,891,455 | |
Gross profit | 2,304,287 | 1,834,982 | 1,509,025 | 4,122,226 | |
Operating expenses: | |||||
General and administrative expenses | 1,338,765 | 1,061,479 | 958,673 | 2,059,149 | |
Professional and consulting fees | 81,137 | 36,835 | 38,926 | 214,942 | |
Total operating expenses | 1,419,902 | 1,098,314 | 997,599 | 2,274,091 | |
Income before other income (expense) | 884,385 | 736,668 | 511,426 | 1,848,135 | |
Non-allocated expenses | |||||
Interest expense | (118,635) | $ (363,774) | (728,925) | ||
Creative Assembly [Member] | |||||
Net Revenue | 4,176,218 | $ 2,719,570 | 8,494,047 | 5,199,535 | |
Cost of goods sold | 3,469,766 | 2,131,684 | 6,985,022 | 4,100,740 | |
Gross profit | 706,452 | 587,886 | 1,509,025 | 1,098,795 | |
Operating expenses: | |||||
General and administrative expenses | 466,970 | 381,219 | 958,673 | 850,623 | |
Professional and consulting fees | 16,697 | 23,710 | 38,926 | 40,677 | |
Total operating expenses | 483,667 | 404,929 | 997,599 | 891,300 | |
Income before other income (expense) | 104,219 | 105,980 | 511,426 | 207,495 | |
PMAL [Member] | |||||
Net Revenue | 8,591,327 | 8,222,819 | 15,568,280 | 16,814,146 | |
Cost of goods sold | 7,344,231 | 6,446,484 | 12,184,427 | 13,790,715 | |
Gross profit | 1,247,096 | 1,776,335 | 3,383,853 | 3,023,431 | |
Operating expenses: | |||||
General and administrative expenses | 508,256 | 510,656 | 1,443,026 | 1,018,912 | |
Professional and consulting fees | (16,314) | 120,898 | 130,986 | 104,584 | |
Total operating expenses | 491,942 | 631,554 | 1,574,012 | 1,123,496 | |
Income before other income (expense) | 755,154 | 1,144,781 | 1,809,841 | 1,899,936 | |
Segment Reconciliation [Member] | |||||
Operating expenses: | |||||
Income from segments above | 859,373 | 859,373 | 2,321,267 | 2,107,430 | |
Non-allocated expenses | |||||
Interest expense | (363,774) | (363,774) | (240,430) | (728,925) | |
General and administrative expenses | (86,253) | (86,253) | (267,727) | (259,295) | |
Other income (expense) | 278,224 | ||||
Professional and consulting fees | (12,794) | (36,452) | (20,792) | 288,596 | |
Total non-allocated expenses | (263,675) | (171,783) | (528,949) | (699,624) | |
Income from continuing operations before provision for income taxes | $ 765,750 | $ 651,138 | $ 1,792,318 | $ 1,407,806 |
SEGMENT RESULTS (Details 1)
SEGMENT RESULTS (Details 1) - USD ($) | Jun. 30, 2019 | Dec. 31, 2018 |
Total | $ 21,101,927 | $ 18,272,239 |
Creative Assembly [Member] | ||
Total | 6,789,307 | 4,526,530 |
PMAL [Member] | ||
Total | 14,221,255 | 12,982,588 |
Corporate [Member] | ||
Total | $ 91,365 | $ 763,121 |
INCOME TAXES (Details)
INCOME TAXES (Details) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Current income tax | ||||
Federal | ||||
State | 95,793 | 131,557 | ||
City | ||||
Total Current income tax | 95,793 | 131,557 | ||
Deferred income tax | ||||
Federal | 329,154 | |||
State | 36,573 | |||
City | ||||
Total deferred income tax | 365,727 | |||
Total income tax expense | $ (199,054) | $ (131,557) | $ 461,520 | $ 131,557 |
SUBSEQUENT EVENTS (Detail Narra
SUBSEQUENT EVENTS (Detail Narrative) - Subsequent Event [Member] - Loan and securities agreement [Member] - USD ($) | 1 Months Ended | 6 Months Ended |
Jul. 15, 2019 | Jun. 30, 2019 | |
Revolving loan principal amount | $ 6,000,000 | |
Interest rate description | Borrowings under the CAS Revolving Loan bear interest at a rate equal to the ICE LIBOR rate plus 3.00%. | |
CAS Loan Security Agreement | The CAS Loan and Security Agreement contains certain financial covenants, including a cash flow coverage ratio and a tangible net worth requirement covenant. Under the cash flow coverage covenant, commencing with the fiscal quarter ending September 30, 2019, CAS shall maintain a quarterly cash flow coverage ratio of not less than 1.20 to 1.00. Under the tangible net worth covenant, commencing with the fiscal quarter ending December 31, 2019, CAS shall maintain a tangible net worth of no less than $1.5 million. The tangible net worth amount required shall increase annually on each June 30 by 50% of CAS’s prior years undistributed net income. |