Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Apr. 30, 2018 | Jun. 29, 2018 | Oct. 30, 2017 | |
Document and Entity Information [Abstract] | |||
Entity Registrant Name | TOROTEL INC | ||
Entity Central Index Key | 98,752 | ||
Current Fiscal Year End Date | --04-30 | ||
Entity Filer Category | Smaller Reporting Company | ||
Document Type | 10-K/A | ||
Document Period End Date | Apr. 30, 2018 | ||
Document Fiscal Year Focus | 2,018 | ||
Document Fiscal Period Focus | FY | ||
Amendment Flag | false | ||
Entity Current Reporting Status | Yes | ||
Entity Common Stock, Shares Outstanding | 5,995,750 | ||
Entity Well-known Seasoned Issuer | No | ||
Entity Voluntary Filers | No | ||
Entity Public Float | $ 3,597,450 |
CONSOLIDATED CONDENSED BALANCE
CONSOLIDATED CONDENSED BALANCE SHEETS - USD ($) | Apr. 30, 2018 | Apr. 30, 2017 |
Current assets: | ||
Cash | $ 575,000 | $ 298,000 |
Trade receivables, net | 2,193,000 | 2,007,000 |
Inventories | 2,362,000 | 2,739,000 |
Prepaid expenses and other current assets | 238,000 | 217,000 |
Property held for sale | 694,000 | 688,000 |
Assets, Current | 6,062,000 | 5,949,000 |
Leasehold improvements | 616,000 | 532,000 |
Equipment | 3,951,000 | 3,718,000 |
Property, Plant and Equipment, Gross, Total | 4,567,000 | 4,250,000 |
Less accumulated depreciation | 3,235,000 | 2,937,000 |
Property, plant and equipment, net | 1,332,000 | 1,313,000 |
Deferred income taxes | 68,000 | 747,000 |
Other assets | 209,000 | 256,000 |
Total Assets | 7,671,000 | 8,265,000 |
Current liabilities: | ||
Current maturities of long-term debt | 1,706,000 | 603,000 |
Trade accounts payable | 1,045,000 | 1,204,000 |
Accrued liabilities | 817,000 | 319,000 |
Customer deposits | 219,000 | 33,000 |
Liabilities, Current | 3,787,000 | 2,159,000 |
Long-term debt, less current maturities | 130,000 | 445,000 |
Stockholders' equity: | ||
Common stock; par value $0.01; 6,000,000 shares authorized; 5,995,750 shares issued and outstanding | 60,000 | 60,000 |
Capital in excess of par value | 12,437,000 | 12,329,000 |
Accumulated deficit | (8,743,000) | (6,728,000) |
Stockholders' Equity | 3,754,000 | 5,661,000 |
Total Liabilities and Stockholders' Equity | $ 7,671,000 | $ 8,265,000 |
CONSOLIDATED CONDENSED BALANCE3
CONSOLIDATED CONDENSED BALANCE SHEETS (PARENTHETICAL) - $ / shares | Apr. 30, 2018 | Apr. 30, 2017 |
Stockholders' equity: | ||
Common stock, par value | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 6,000,000 | 6,000,000 |
Common stock, shares issued | 5,995,750 | 5,995,750 |
Common stock, shares outstanding | 5,995,750 | 5,995,750 |
CONSOLIDATED CONDENSED STATEMEN
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS - USD ($) | 12 Months Ended | |
Apr. 30, 2018 | Apr. 30, 2017 | |
CONSOLIDATED STATEMENTS OF OPERATIONS | ||
Net sales | $ 18,396,000 | $ 16,302,000 |
Cost of goods sold | 13,615,000 | 11,047,000 |
Gross profit | 4,781,000 | 5,255,000 |
Operating expenses: | ||
Engineering | 1,082,000 | 906,000 |
Selling, general and administrative | 4,967,000 | 4,738,000 |
Operating expenses | 6,049,000 | 5,644,000 |
Loss from operations | (1,268,000) | (389,000) |
Other expense: | ||
Interest expense, net | 74,000 | 24,000 |
Gain on asset disposal | (8,000) | |
Loss before provision (credit) for income taxes | (1,334,000) | (413,000) |
Provision (benefit) for income taxes | 681,000 | (152,000) |
Net loss | $ (2,015,000) | $ (261,000) |
Basic loss per share | $ (0.38) | $ (0.05) |
CONSOLIDATED STATEMENT OF CHANG
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY - USD ($) | Common Stock | Excess of Par Value | Accumulated Deficit | Treasury Stock, at cost | Total |
Balance beginning of year at Apr. 30, 2016 | $ 60,000 | $ 12,277,000 | $ (6,467,000) | $ (9,000) | $ 5,861,000 |
Balance beginning of year (in shares) at Apr. 30, 2016 | 5,983,545 | 5,615,750 | |||
Stock compensation earned | 61,000 | $ 61,000 | |||
Shares reverted | (350,000) | 350,000 | |||
Shares released and issued | (9,000) | $ 9,000 | |||
Shares released and issued (in shares) | 362,205 | ||||
Net loss | (261,000) | $ (261,000) | |||
Balance end of year at Apr. 30, 2017 | $ 60,000 | 12,329,000 | (6,728,000) | $ 5,661,000 | |
Balance end of year (in shares) at Apr. 30, 2017 | 5,995,750 | 5,995,750 | |||
Stock compensation earned | 108,000 | $ 108,000 | |||
Net loss | (2,015,000) | (2,015,000) | |||
Balance end of year at Apr. 30, 2018 | $ 60,000 | $ 12,437,000 | $ (8,743,000) | $ 3,754,000 | |
Balance end of year (in shares) at Apr. 30, 2018 | 5,995,750 | 5,995,750 |
CONSOLIDATED CONDENSED STATEME6
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS - USD ($) | 12 Months Ended | |
Apr. 30, 2018 | Apr. 30, 2017 | |
Cash flows from operating activities: | ||
Net loss | $ (2,015,000) | $ (261,000) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Stock compensation cost amortized | 108,000 | 61,000 |
Depreciation | 314,000 | 265,000 |
Gain on disposal of equipment | (8,000) | |
Deferred income taxes | 679,000 | (155,000) |
Increase (decrease) in cash flows from operations resulting from changes in: | ||
Trade receivables | (186,000) | (105,000) |
Inventories | 377,000 | (1,036,000) |
Prepaid expenses and other assets | 20,000 | (156,000) |
Trade accounts payable | (159,000) | 440,000 |
Accrued liabilities | 498,000 | (149,000) |
Customer deposits | 186,000 | 4,000 |
Net cash used in operating activities | (186,000) | (1,092,000) |
Cash flows from investing activities: | ||
Capital expenditures | (122,000) | (946,000) |
Proceeds from disposal of equipment | 22,000 | |
Net cash used in investing activities | (100,000) | (946,000) |
Cash flows from financing activities: | ||
Principal payments on long-term debt | (132,000) | (99,000) |
Payments on capital lease obligations | (55,000) | |
Proceeds from long-term debt | 124,000 | |
Proceeds from line of credit | 750,000 | 465,000 |
Net cash provided by financing activities | 563,000 | 490,000 |
Net increase (decrease) in cash | 277,000 | (1,548,000) |
Cash, beginning of period | 298,000 | 1,846,000 |
Cash, end of period | 575,000 | 298,000 |
Cash paid during the year for: | ||
Interest | 74,000 | 24,000 |
Income taxes | 101,000 | |
Non-cash investing and financing activities: | ||
Property, plant and equipment reclassified as held for sale | 6,000 | $ 688,000 |
Equipment financed with proceeds from capital lease | $ 225,000 |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended |
Apr. 30, 2018 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 1—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Torotel, Inc. ("Torotel") conducts business primarily through its wholly owned subsidiary, Torotel Products, Inc. ("Torotel Products"). Torotel specializes in the custom design and manufacture of a wide variety of precision magnetic components, consisting of transformers, inductors, reactors, chokes, toroidal coils, high voltage transformers, dry-type transformers and electro-mechanical assemblies for use in aerospace, industrial and military electronics. Principles of Consolidation The consolidated financial statements include the accounts of Torotel and its wholly owned subsidiary, Torotel Products. All significant inter-company accounts and transactions have been eliminated in consolidation. Use of Estimates The preparation of the 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 certain reported amounts and disclosures. Significant estimates used in preparing these consolidated financial statements include those assumed in computing the valuation allowance of inventory, the allowance for doubtful accounts receivable, the valuation allowance on deferred income tax assets, and the reserve for warranty costs. Accordingly, actual results could differ from those estimates. Any changes in estimates are recorded in the period in which they become known. Credit Risk Financial instruments that potentially subject us to concentrations of credit risk consist principally of cash and accounts receivable. We grant unsecured credit to most of our customers. We do not believe that we are exposed to any extraordinary credit risk as a result of this policy. At various times, and at April 30, 2018 and 2017, cash balances exceeded federally insured limits. We have not experienced any losses in the cash accounts and we do not believe we are exposed to any significant credit risk with respect to our cash. Fair Value of Financial Instruments We determine fair value by utilizing a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three levels as follows: Level 1. Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets. Level 2. Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. Level 3. Inputs to the valuation methodology are unobservable and significant to the fair value measurement. The fair value hierarchy gives the highest priority to Level 1 inputs and the lowest priority to Level 3 inputs. In determining fair value, we utilize valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible as well as consider counterparty credit risk in the assessment of fair value. The carrying amounts of certain financial instruments, including cash, trade receivables and trade accounts payable approximate fair value due to their short maturities. As of April 30, 2018 and 2017, the amount of our long-term debt approximates fair value based on the present value of estimated future cash flows using a discount rate commensurate with a borrowing rate available to us. The inputs used to estimate the fair value of long-term debt are considered Level 2 inputs. Treasury Stock We utilize the weighted average cost method in accounting for treasury stock transactions. Revenue Recognition Revenue is recognized when a fixed price contract or purchase order exists; delivery has occurred; and collection is reasonably assured. Selling terms are generally FOB Shipping Point so we consider our products delivered once they have been shipped and title and risk of loss have been transferred. Allowance for Doubtful Accounts Gross trade accounts receivable are offset with an allowance for doubtful accounts. The allowance for doubtful accounts is our best estimate of the amount of probable credit losses in our existing accounts receivable. We review the allowance for doubtful accounts on a regular basis, and all past due balances are reviewed individually for collectability. Account balances are charged against the allowance when placed for collection. Recoveries of receivables previously written off are recorded when received. The majority of the customer accounts are considered past due after the invoice becomes older than the customer's credit terms. Interest is not charged on past due accounts. The allowance for doubtful accounts as of April 30, 2018 and 2017 was $12,000 and $12,000, respectively. Inventories Inventories are stated at the lower of cost or net realizable value. Cost is determined using a FIFO approximated weighted average cost method of valuation. Our industry is characterized by short-term customer commitments and changes in demand, as well as other market considerations. Provisions for obsolete and excess inventory are based on reviews of inventory usage, quantities on hand and latest product demand information from customers. Inventories are reviewed in detail utilizing a 12-month time horizon. Individual part numbers that have not had any usage or purchases in a 12-month time period and do not have any known usage requirements are categorized as obsolete; individual part numbers having more than a 12-month supply based on the current year's usage are categorized as excess. Once specific inventory has been identified as excess or obsolete, the cost of the identified inventory is fully reserved and the cost of the inventory is not recovered until it is sold. The reserve balance is analyzed for adequacy as part of the inventory review each quarter. The reserve for inventory as of April 30, 2018 and 2017 was $364,000 and $261,000, respectively. Property, Plant and Equipment Property, plant and equipment are carried at cost. Depreciation and amortization are provided in amounts sufficient to relate the costs of depreciable assets to operations primarily using the straight-line method over estimated useful lives of three to five years for equipment and three and a half to twenty years for buildings and improvements. Cash For purposes of the consolidated statements of cash flows, we consider all short-term investments and demand deposits purchased with original maturity dates of three months or less to be cash. Income Taxes Our annual tax rate is based on our income, statutory tax rates and tax planning opportunities available to us in the various jurisdictions in which we operate. Significant judgment is required in determining our annual tax rate and in evaluating our tax positions. An estimated effective tax rate for a year is applied to our quarterly operating results. In the event there is a significant or unusual item recognized in our quarterly operating results, the tax attributable to that item is separately calculated and recorded at the same time as that item. Tax law requires items to be included in our tax returns at different times than the items are reflected in our financial statements. As a result, our annual tax rate reflected in our financial statements is different than that reported in our tax returns (our cash tax rate). Some of these differences are permanent, such as expenses that are not deductible in our tax return, and some differences reverse over time, such as depreciation expense. These temporary differences create deferred tax assets and liabilities. Deferred tax assets generally represent items that can be used as a tax deduction or credit in our tax returns in future years for which we have already recorded the tax benefit in our statement of operations. We establish valuation allowances for our deferred tax assets if, based on the available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax liabilities generally represent tax expense recognized in our financial statements for which payment has been deferred, or expense for which we have already taken a deduction in our tax return but have not yet recognized as expense in our financial statements. The accounting for uncertainty in income taxes requires a more-likely-than-not threshold for financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. If necessary, we record a liability for the difference between the benefit recognized and measured for financial statement purposes and the tax position taken or expected to be taken on our tax return. To the extent that our assessment of such tax positions changes, the change in estimate is recorded in the period in which the determination is made. If applicable in a given year, tax-related interest and penalties are classified as a component of income tax expense. Advertising Costs Advertising costs are expensed as incurred. For the years ended April 30, 2018 and 2017 advertising costs were $22,000 and $6,000, respectively. Warranty Costs We maintain a reserve for estimated warranty costs associated with products returned from customers. A limited warranty is provided for a period of one year which requires us to repair or replace defective products at no cost to the customer. The warranty reserve is based on historical experience and reflects management's best estimate of probable liability under the product warranties. Share-Based Compensation We have a share-based compensation plan that includes restricted stock, which is described more fully in Note 7 of the Notes to the Consolidated Financial Statements. We account for the share-based compensation plan in accordance with authoritative guidance under which the estimated fair value of share-based awards granted under our share-based compensation plan is recognized as compensation expense over the vesting period of the award. New Accounting Guidance In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers, Topic 606 (“ASC 606”). The standard is effective for reporting periods beginning after December 15, 2017. Torotel has evaluated the transition method to be used and the impact of adoption of this standard on its consolidated financial statements. As part of the evaluation and transition process, no significant implementation matters have been identified as needing to be addressed. In applying ASC 606, revenue is recognized when control of promised goods or services transfers to a customer and is recognized in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. The major provisions of the new standard include: the determination of enforceable rights and obligations between parties; the identification of performance obligations including those related to material right obligations; the allocation of consideration based upon relative standalone selling price; accounting for variable consideration; the determination of whether performance obligations are satisfied over time or at a point in time; and enhanced disclosure requirements. ASC 606 will be effective for Torotel beginning May 1, 2018 and permits two methods of adoption: retrospectively to each prior reporting period presented (“full retrospective method”) or retrospectively with the cumulative effect of the initial application recognized at the date of initial application (“modified retrospective method”). Torotel will adopt the standard using the full retrospective method and will record an adjustment to Retained Earnings for the effect of the initial application on April 30, 2017 for the cumulative portion earned through the end of fiscal year 2017, and will record a second adjustment on April 30, 2018 for the portion earned during fiscal year 2018 (the “Transition Adjustments”). Torotel has reviewed all of its contracts with customers and has implemented the required process, data, and system changes to comply with the requirements of ASC 606. Prior to adoption, revenue has historically been recognized when a fixed price contract or purchase order exists; delivery has occurred; and collection was reasonably assured. Upon adoption, ASC 606 will be applied by analyzing each contract, or a combination of contracts, to determine if revenue is recognized over time or at a point in time. Torotel has determined that some of its contracts will have performance obligations that are satisfied over time and some at a point in time based on when performance obligations have been satisfied by the transfer of control of the goods and services to the customer. For performance obligations that are satisfied over time, Torotel will use an input method as the basis for recognizing revenue. Input methods recognize revenue on the basis of an entity’s efforts or inputs toward satisfying a performance obligation (for example, resources consumed, labor hours expended, costs incurred, time lapsed, or machine hours used) relative to the total expected inputs to satisfy the performance obligation. Torotel will generally use costs incurred as the measure of performance; and therefore will generally not defer any production costs. Performance obligations that are not recognized over time will be recognized at the point in time when performance obligations have been satisfied by the transfer of control to the customer. ASC 606 requires Torotel to allocate contract consideration to performance obligations on the basis of their relative standalone selling price. Torotel has determined that certain contracts require a deferral of revenues due to the requirement to allocate revenue based upon relative standalone selling price. Accordingly, contract liabilities will be established at the Transition Date to defer revenue that was previously recognized under ASC 605 (“legacy GAAP”). We have completed our preliminary assessment of adopting ASC 606 on our 2018 and 2017 operating results, and have presented selected recast, unaudited financial data in the following table. The impact of adopting ASC 606 on our 2018 and 2017 operating results may not be indicative of the adoption impacts in future periods or of our operating performance. Unaudited 2018 2017 Net sales $ 18,469,000 $ 17,395,000 Earnings (loss) from operations (1,280,000) 147,000 ASC 340-40 was added by ASC 606, and becomes effective for reporting periods beginning after December 15, 2017. ACC 340-40 provides guidance on contract costs that are not within the scope of other authoritative literature, and is applied to costs to obtain or fulfill a contract if existing guidance is not applicable. Torotel’s accounting for preproduction, tooling, and certain other costs is expected to continue under existing guidance, since the costs generally do not fall within the scope of ASC 340-40. Torotel anticipates that in fiscal year 2019, revenue and gross margin for certain contracts that would not have been recognized under legacy GAAP will be accelerated because of the allocation of revenue to performance obligations based upon relative standalone selling price. The enhanced disclosure requirements of ASC 606 include discussions on the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. Torotel expects the disclosures to include qualitative and quantitative information about its contracts with customers; information about contract assets and liabilities; information about the performance obligation for customer contracts; and, the significant judgments made in applying the guidance in ASC 606. This will result in changes to Torotel’s existing disclosures, as well as new disclosures, which will impact the information reported in Torotel’s financial statements. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), in order to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet for those leases classified as operating leases under previous GAAP. ASU 2016-02 requires that a lessee should recognize a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term on the balance sheet. ASU 2016-02 requires expanded disclosures about the nature and terms of lease agreements and is effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period. Early adoption is permitted. Torotel is currently evaluating the potential impact of this standard on its consolidated financial statements. Torotel anticipates the impact will be material to the consolidated financial statements for reporting periods beginning after December 15, 2018, due to the building lease amendment executed on October 31, 2016. The status of the implementation effort is in the preliminary stage. No significant implementation matters have been identified as needing to be addressed. |
INVENTORIES
INVENTORIES | 12 Months Ended |
Apr. 30, 2018 | |
INVENTORIES | |
INVENTORIES | NOTE 2—INVENTORIES The following table summarizes the components of inventories, as of April 30 of each year: 2018 2017 Raw materials $ 1,278,000 $ 1,305,000 Work in process 635,000 826,000 Finished goods 449,000 608,000 $ 2,362,000 $ 2,739,000 |
FINANCING AGREEMENTS
FINANCING AGREEMENTS | 12 Months Ended |
Apr. 30, 2018 | |
FINANCING AGREEMENTS | |
FINANCING AGREEMENTS | NOTE 3—FINANCING AGREEMENTS On September 27, 2010, Torotel Products entered into a financing agreement (the “agreement”) with Commerce Bank, N.A (the “Bank”). The agreement provides for a revolving line of credit, a guidance line of credit, and a real estate term loan. Torotel serves as an additional guarantor to all notes described below. A summary of the notes issued under the agreement are provided below: 2018 2017 4.05% mortgage note payable in monthly installments of $4,873, including interest, with final payment of $349,000 due January 27, 2019 $ 373,000 $ 415,000 4.00% working capital line of credit with a maturity date of October 20, 2018 751,000 465,000 4.00% building line of credit with a maturity date of October 20, 2018 465,000 - Capital lease obligations (see Note 5) 170,000 - Borrowings under an equipment financing line of credit: 4.75% note payable in monthly installments of $2,269, including interest, with final payment made on May 27, 2018 2,000 28,000 3.75% note payable in monthly installments of $2,112, including interest, with final payment made on April 10, 2018 - 25,000 4.05% note payable in monthly installments of $3,680, including interest, with final payment due January 10, 2020 75,000 115,000 Total long-term debt 1,836,000 1,048,000 Less current installments 1,706,000 603,000 Long-term debt, excluding current installments $ 130,000 $ 445,000 Under the financing agreement with the Bank, prepayment of the mortgage note up to $100,000 per year is allowed without penalty so long as these funds are generated through internal cash flow and not borrowed from a separate financial institution. The mortgage note is cross collateralized and cross defaulted with all other credit facilities of Torotel Products and is secured by a first real estate mortgage on the property located at 620 North Lindenwood Drive in Olathe, Kansas. Two separate promissory notes have been delivered by Torotel Products under the working capital line of credit, and amounts under this working capital revolving line of credit are available for working capital purposes. As of April 30, 2018, Torotel Products has only drawn upon the promissory note that matures on October 20, 2018 and no amounts were outstanding under the promissory note that matured on April 30, 2018. The working capital revolving line of credit is renewable annually. The associated interest rate of both promissory notes is equal to the greater of the floating Commerce Bank Prime Rate (4.75% as of April 30, 2018) or a floor of 4% (as listed above). Monthly repayments of interest only are required under both promissory notes with the principal due at maturity. The maximum borrowing of this line of credit is $1,250,000. This revolving line of credit is cross collateralized and cross defaulted with all other credit facilities and arrangements of Torotel Products with the Bank and is secured by a first lien on all business assets of Torotel Products. This working capital line of credit is scheduled to mature on October 20, 2018, and Torotel Products expects to negotiate an extension of that maturity date on similar terms. On March 31, 2017, Torotel Products entered into a $500,000 building revolving line of credit, which is available for working capital purposes and is renewable annually. The associated interest rate is equal to the greater of the floating Commerce Bank Prime Rate (4.75% as of April 30, 2018) or a floor of 4% (as listed above). Monthly repayments of interest only are required with the principal due at maturity. The maximum borrowing of this line of credit is $500,000. This facility is cross collateralized and cross defaulted with all other facilities and is secured by a first lien on the building located at 620 North Lindenwood Drive in Olathe, Kansas. This revolving line of credit is scheduled to mature on October 20, 2018, and Torotel Products expects to negotiate an extension of that maturity date on similar terms. The equipment note is a guidance line of credit to be used for equipment purchases. Monthly repayments consisting of both interest and principal are required. This note is cross collateralized and cross defaulted with all other facilities of Torotel Products and is secured by a purchase money security interest in the assets purchased as well as a first lien on all business assets of Torotel Products. The maximum borrowing of this line of credit is $500,000. Torotel Products is required to comply with specified financial covenants of the financing agreement with Commerce Bank. As of April 30, 2018, Torotel Products was not in compliance with the covenants in such financing agreement that require a ratio of EBITDA (as defined in the financing agreement) to fixed charge coverage (as defined in the financing agreement) in excess of 1.100 to 1.000, and that Torotel maintain a minimum Tangible Net Worth (as defined in the financing agreement) of $4,500,000. A waiver for non-compliance with these covenants was received from Commerce Bank for the period ending April 30, 2018. The amount of long-term debt maturities by year is as follows: Year Ending April 30, Amount 2019 $ 1,706,000 2020 100,000 2021 30,000 $ 1,836,000 Irrevocable Standby Letter of Credit Under the terms of a lease amendment for its building located at 520 N. Rogers Road in Olathe, Kansas (see Note 5), Torotel initially provided the landlord an irrevocable standby letter of credit in the amount of $350,000 as additional security, with the letter of credit requirement being reduced to $300,000 in accordance with the third amendment to the lease entered into on August 30, 2017 (the “Third Amendment”), The balance under the letter of credit will automatically reduce in accordance with the below schedule if not drawn upon: Date of Reduction Amount of Reduction Balance of Letter of Credit January 1, 2020 $ 75,000 $ 225,000 January 1, 2021 75,000 150,000 January 1, 2022 75,000 75,000 January 1, 2023 75,000 - |
INCOME TAXES
INCOME TAXES | 12 Months Ended |
Apr. 30, 2018 | |
INCOME TAXES | |
INCOME TAXES | NOTE 4—INCOME TAXES The components of the provision (benefit) for income taxes are as follows: 2018 2017 Current tax expense Federal $ — $ 2,000 State 2,000 1,000 2,000 3,000 Deferred tax expense (benefit) Federal (137,000) State 67,000 (18,000) (155,000) Total income tax provision (benefit) $ 681,000 $ The provision for income taxes reflected in the consolidated statements of operations differs from the amounts computed at the federal statutory tax rates. The principal differences between our statutory income tax expense and the effective provision for income taxes are summarized as follows: 2018 2017 Computed tax expense at statutory rates $ (405,000) $ (144,000) Permanent differences 11,000 6,000 State tax and credits (49,000) (18,000) Provision to return adjustment 6,000 4,000 Impact of federal rate change 467,000 — Increase in valuation allowance 651,000 — $ 681,000 $ (152,000) We have available as benefits to reduce future income taxes, subject to applicable limitations, estimated federal net operating loss carryforward amounts as described below. Net Operating Loss Year of Expiration Carryforwards 2027 $ 94,000 2030 28,000 2032 298,000 2037 960,000 2038 909,000 $ 2,289,000 The following table summarizes the components of the net deferred income tax asset: 2018 2017 Net operating loss carryforwards $ 574,000 $ 420,000 Inventory valuation reserve 98,000 101,000 Loss on equity and impairment in investee 301,000 437,000 Tax credit carryforward 68,000 68,000 Other 115,000 158,000 1,156,000 1,184,000 Less: valuation allowance (1,088,000) (437,000) $ 68,000 $ 747,000 On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act makes broad and complex changes to the U.S. tax code, including, but not limited to, (1) reducing the U.S. federal corporate tax rate from 35 percent to 21 percent effective for tax years beginning after January 1, 2018; (2) extending bonus depreciation that will allow for full expensing of qualified property; and, (3) eliminating the corporate alternative minimum tax (AMT) and changing how existing AMT credits can be realized. The corporate tax rate change is administratively effective at the beginning of our fiscal year, using a blended statutory rate of 30.4% for the annual period. The SEC issued Staff Accounting Bulletin No. 118 (‘SAB 118’) to address the application of accounting for the tax effects of the Tax Act. SAB 118 provides a measurement period that should not extend beyond one year from the Tax Act enactment date for companies to complete the accounting under ASC 740. In accordance with SAB 118, a company must reflect the income tax effects of those aspects of the Act for which the accounting under ASC 740 is complete. To the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements. The Company has considered SAB 118 and believes the accounting for the income tax effects of the Act is substantially complete and appropriately reflected in the financial statements for the period ended April 30, 2018. The Company’s financial statements for the year ended April 30, 2018, reflect certain effects of the Act, which includes a reduction in the corporate tax rate from 34% to 21%, as well as other changes. As a result of the changes to tax laws and tax rates under the Act, the Company incurred incremental income tax expense of $467,000 during the year ended April 30, 2018, which consisted primarily of the remeasurement of deferred tax assets and liabilities from a 34% to a 21% tax rate. As of April 30, 2018, the Company has federal minimum tax credit carryforwards of $68,000. As a result of The Act, the federal minimum tax credits will be fully refunded to the Company by 2021 if not fully utilized. We record deferred income tax assets to the extent we believe these assets will more likely than not be realized. In making such determination, we consider all available positive and negative evidence. Positive evidence includes, but is not limited to the following: cumulative earnings in recent years, earnings expected in future years, excess appreciated asset value over the tax basis and positive industry trends. Negative evidence includes, but is not limited to the following: cumulative losses in recent years, earnings expected in future years, a history of operating losses or tax credit carryforwards expiring, and adverse industry trends. Cumulative losses in recent years are significant negative evidence when determining the need for a valuation allowance. During the fourth quarter of the fiscal year ending April 30, 2018 the Company determined that is was no longer in a positive cumulative earnings position for the three-year period ended April 30, 2018. The Company is anticipating increased demand over the next few fiscal years related to continuing business in the aerospace and defense markets, but has not yet executed contracts. Therefore, this expected growth is not sufficient positive evidence to outweigh the negative evidence. Given the significance of the negative evidence, the Company concluded that it is no longer more likely than not that it will realize a portion of its deferred tax assets, with exception of the AMT credit. As a result, the Company increased the valuation allowance by an additional $651,000 during the fourth quarter of fiscal year 2018, resulting in a nearly full valuation allowance against the Company’s deferred tax assets as of April 30, 2018. The increase in the valuation allowance resulted in an increase in income tax expense of $651,000. The Company's determination of the realizable deferred tax assets requires the exercise of significant judgment, based in part on business plans and expectations about future outcomes. In the event the actual results differ from these estimates in future periods, the Company may need to adjust the valuation allowance, which could materially impact our financial position and results of operations. The Company will continue to assess the need for a valuation allowance in future periods. As of April 30, 2018 and 2017, the Company maintained a valuation allowance of $1,088,000 and $437,000, respectively, for its deferred tax assets. As of April 30, 2018, the federal tax returns for the fiscal years ended 2015 through 2017 remain subject to examination and assessment. Fiscal years ending before 2015 remain open solely for purposes of examination of our loss and credit carryforwards. As of April 30, 2018, the Company has no federal or state examinations ongoing. We recognize accrued interest and penalties related to unrecognized tax benefits, as well as interest received from favorable tax settlements, within income tax expense. As of April 30, 2018 and 2017, we recorded no accrued interest or penalties related to uncertain tax positions. We expect no significant change in the amount of unrecognized tax benefit, accrued interest or penalties within the next twelve months. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 12 Months Ended |
Apr. 30, 2018 | |
COMMITMENTS AND CONTINGENCIES. | |
COMMITMENTS AND CONTINGENCIES | NOTE 5—COMMITMENTS AND CONTINGENCIES As part of our ongoing operations, we enter into arrangements that obligate us to make future payments to various parties. Some of these contractual obligations are not reflected on the accompanying consolidated balance sheets due to the nature of the obligations. Such obligations include operating leases for production space and for equipment. On July 10, 2014, we entered into a real estate lease agreement in Hatfield, Pennsylvania to lease approximately 5,000 square feet for manufacturing electromechanical assemblies and other transformers. This agreement commenced on August 1, 2014 and continues through July 31, 2019. On October 31, 2016, Torotel entered into the Second Amendment (“Second Amendment”) to the lease for its Rogers Road facility located in Olathe, Kansas. The Second Amendment became effective as of April 1, 2017, and served to extend the lease term through December 31, 2026 and expand the leased space from approximately 14,137 square feet to approximately 72,388 square feet. The Second Amendment provides that through December 31, 2018, the monthly base rate is $26,844, and subsequently through December 31, 2019, the monthly base rate is $29,257, escalating annually thereafter as previously disclosed in our other public filings. The Second Amendment required Torotel to increase its security deposit from $12,750 to $55,000 and provide a letter of credit as additional security. Additionally, the Second Amendment addressed other terms and conditions by which Torotel is leasing the facility or terminate the lease, and provided Torotel two separate options to extend the lease term for additional five year periods. Future minimum lease payments on operating leases are as follows: Capital Operating Fiscal Years Ending April 30, Leases Leases 2019 $ 87,000 $ 413,000 2020 75,000 407,000 2021 31,000 402,000 2022 — 427,000 2023 — 442,000 2024 — 452,000 2025 — 456,000 2026 — 467,000 2027 — 350,000 193,000 3,816,000 Less: Amounts representing interest (23,000) — Total $ 170,000 $ 3,816,000 The gross amount of assets recorded under capital leases amounted to $225,000 of equipment. Minimum rent payments under operating leases are recognized on a straight-line basis over the term of the lease including any periods free of rent. Total rent expense for all operating leases for the fiscal years ended April 30, 2018 and 2017 was $596,000 and $246,000, respectively. As of April 30, 2018, the property owned by Torotel at 620 N. Lindenwood in Olathe, Kansas had a net carrying value of approximately $694,000, and is listed on the market for immediate sale. The property is currently accounted for as a capital asset at historical cost less depreciation. Torotel is subject to legal proceedings and claims that arise in the normal course of business. It is the opinion of management that the disposition or ultimate resolution of such claims and lawsuits will not have a material adverse effect on the financial position or results of operations of Torotel. |
EMPLOYEE INCENTIVE PLANS
EMPLOYEE INCENTIVE PLANS | 12 Months Ended |
Apr. 30, 2018 | |
EMPLOYEE INCENTIVE PLANS | |
EMPLOYEE INCENTIVE PLANS | NOTE 6—EMPLOYEE INCENTIVE PLANS Short-term Cash Incentive Plan The Short-term Cash Incentive Plan ("STIP") became effective for fiscal year 2008. The purpose of the STIP is to promote the long-term financial performance of Torotel by providing key employees with the opportunity to earn cash awards for accomplishing annual goals for Return on Capital Employed ("ROCE") as defined in the STIP. For the years ended April 30, 2018 and 2017, total short-term cash incentive plan expense was $0 and $0, respectively. Long-term Incentive Plans The Long-term Incentive Plans ("LTIPs"), which consist of a Stock Award Plan and a Long-term Cash Incentive Plan, also became effective for fiscal year 2008. The purpose of the LTIPs is to provide incentives that will attract and retain highly competent persons as key employees to promote the long-term financial performance of Torotel by providing key employees an opportunity to earn stock and cash awards for accomplishing long-range goals for sales growth, earnings growth, ROCE and debt to equity, as defined and measured in each of the Stock Award Plan and the Long-term Cash Incentive Plan. Stock Award Plan The Stock Award Plan ("SAP"), which did not require shareholder approval, provides key employees the opportunity to acquire common stock of Torotel pursuant to awards earned for accomplishing goals that promote the long-term financial performance of Torotel. Under the terms of the SAP, stock awards are in the form of restricted stock having a 5-year restriction period, which shall lapse, based on certain conditions as outlined in the SAP. All stock awards are represented by a Restricted Stock Agreement, which afford the grantees all of the rights of a stockholder with respect to the award shares, including the right to vote such shares and to receive dividends and other distributions payable with respect to such shares since the date of award. Long-term Cash Incentive Plan The Long-term Cash Incentive Plan ("LTCIP") provides key employees with the opportunity to earn cash awards for accomplishing plan goals based on predetermined targets for average annual sales and earnings growth, ROCE and debt to equity. Under the terms of the LTCIP, awards will not be paid if Torotel's performance on any LTCIP metric is less than the threshold level of performance defined for that LTCIP metric. For the years ended April 30, 2018 and 2017, total long-term cash incentive plan expense was $0 for both years. Performance Bonus We provided discretionary performance bonuses for employees not participating in the above incentive plans. Total expense for these bonuses was $71,000 and $0 for the years ended April 30, 2018 and 2017. 401(k) Retirement Plan We have a 401(k) Retirement Plan for Torotel’s employees. Employer contributions to that plan are at the discretion of the Board of Directors. Employer contributions to the plan for the years ended April 30, 2018 and 2017 were $137,000 and $86,000, respectively. |
RESTRICTED STOCK AGREEMENTS
RESTRICTED STOCK AGREEMENTS | 12 Months Ended |
Apr. 30, 2018 | |
RESTRICTED STOCK AGREEMENTS | |
RESTRICTED STOCK AGREEMENTS | NOTE 7—RESTRICTED STOCK AGREEMENTS Restricted Stock Agreements, and stock awards thereunder, are authorized by the Compensation and Nominating Committee (the "Committee") and the Board of Directors of Torotel (the "Board"). The terms of the Restricted Stock Agreements afford the grantees all of the rights of a stockholder with respect to the award shares, including the right to vote such shares and to receive dividends and other distributions payable with respect to such shares since the date of award. Under the terms of each agreement, the non-vested shares are restricted as to disposition and subject to forfeiture under certain circumstances. The Restricted Stock Agreements further provide, subject to certain conditions, that if prior to all of the restricted shares having vested, we undergo a change in control, then all of the restricted shares shall be vested and no longer subject to restrictions under the Restricted Stock Agreements. The restricted shares are treated as non-vested stock; accordingly, the fair value of the restricted stock at the date of award is offset against capital in excess of par value in the accompanying consolidated balance sheets under stockholders' equity. Restricted Stock Grants The Shares were granted subject to restrictions that prohibit them from being sold, assigned, pledged or otherwise disposed of until the restrictions lapse. The restrictions will lapse on the fifth anniversary of the date of grant if during the five year restriction period, (1) the Company's cumulative annual growth in revenue is at least 10%, and (2) the average economic value added as a percentage of revenue is at least 2%. The economic value added, which attempts to capture the true economic profit, will be calculated as the operating profit less the cost of capital with adjustments made for taxes. The restrictions will also lapse, if prior to the fifth anniversary of the date of grant, (1) the grantee's employment with the Company is terminated by reason of disability, (2) the grantee dies, or (3) the Committee, in its sole discretion, terminates the restrictions. If the restrictions on the Shares have not lapsed by the fifth anniversary of the date of grant, the Shares will be forfeited to the Company. For the years ended April 30, 2018 and 2017, total stock award plan expense was $0 and $0, respectively. Stock Compensation Costs and Restricted Stock Activity Total stock compensation cost for the twelve months ended April 30, 2018 and 2017 was $108,000 and $61,000, respectively. Restricted stock activity for each twelve month period through April 30 is summarized as follows: 2018 2017 Restricted Weighted Restricted Weighted Shares Average Shares Average Under Grant Under Grant Option Price Option Price Outstanding at May 1 730,000 $ 0.740 350,000 $ 0.500 Granted — — 730,000 0.740 Forfeited — — (350,000) 0.500 Outstanding at April 30 730,000 $ 0.740 730,000 $ 0.740 |
STOCKHOLDERS' EQUITY
STOCKHOLDERS' EQUITY | 12 Months Ended |
Apr. 30, 2018 | |
STOCKHOLDERS' EQUITY | |
STOCKHOLDERS' EQUITY | NOTE 8—STOCKHOLDERS' EQUITY The changes in shares of common stock outstanding as of April 30 of each year are summarized as follows: 2018 2017 Balance, May 1 5,615,750 Shares released from treasury for restricted stock grants — 717,795 Newly issued shares for restricted stock grants — 12,205 Shares reverted to treasury for restricted stock forfeitures — (350,000) Balance, April 30 5,995,750 5,995,750 |
EARNINGS PER SHARE
EARNINGS PER SHARE | 12 Months Ended |
Apr. 30, 2018 | |
EARNINGS PER SHARE | |
EARNINGS PER SHARE | NOTE 9—EARNINGS (LOSS) PER SHARE Basic and diluted earnings per share are computed using the two-class method. The two-class method is an earnings allocation formula that determines net income per share for each class of common stock and participating security according to dividends declared and participation rights in undistributed earnings. Per share amounts are computed by dividing net income attributable to common shareholders by the weighted average shares outstanding during each period. The basic earnings (loss) per common share were computed as follows: Year Ended 2018 2017 Net loss $ (2,015,000) $ (261,000) Amounts allocated to participating securities (nonvested restricted shares) — — Net loss attributable to common shareholders $ (2,015,000) $ (261,000) Basic weighted average common shares 5,265,750 5,123,000 Earnings (loss) per share attributable to common shareholders: Basic loss per share $ (0.38) $ (0.05) ASC 260, Earnings per Share, provides that unvested share-based payment awards that contain non-forfeitable rights to dividends are considered to be participating securities and must be included in the computation of earnings per share pursuant to the two-class method. Diluted earnings per share is not presented as we do not have any shares considered incremental and dilutive. |
ACCRUED LIABILITIES
ACCRUED LIABILITIES | 12 Months Ended |
Apr. 30, 2018 | |
ACCRUED LIABILITIES | |
ACCRUED LIABILITIES | NOTE 10—ACCRUED LIABILITIES Accrued liabilities as of April 30 of each year consist of the following: 2018 2017 Employee related expenses: Accrued payroll $ 167,000 $ 68,000 Accrued payroll taxes 13,000 5,000 Accrued employee benefits 129,000 136,000 $ 309,000 $ 209,000 Other, including interest: Warranty reserve $ 300,000 $ 24,000 Property taxes 18,000 20,000 Deferred rent 129,000 7,000 Other 61,000 59,000 $ 508,000 $ 110,000 $ 817,000 $ 319,000 The changes in warranty reserve as of April 30 of each year are summarized as follows: 2018 2017 Balance, May 1 $ 24,000 $ 67,000 Credit memos issued (52,000) (161,000) Provision for warranty accrual 328,000 118,000 Balance, April 30 $ 300,000 $ 24,000 |
CUSTOMER DEPOSITS
CUSTOMER DEPOSITS | 12 Months Ended |
Apr. 30, 2018 | |
CUSTOMER DEPOSITS | |
CUSTOMER DEPOSITS | NOTE 11—CUSTOMER DEPOSITS For certain customers, we collect payment at the time the order is placed. These deposits are classified as a liability and will be recognized as revenue at the time of shipment in accordance with our revenue recognition policy. As of April 30, 2018 and April 30, 2017 we had approximately $219,000 and $33,000, respectively in customer deposits related to this arrangement. |
SELF-INSURANCE CAPTIVE
SELF-INSURANCE CAPTIVE | 12 Months Ended |
Apr. 30, 2018 | |
SELF-INSURANCE CAPTIVE | |
SELF-INSURANCE CAPTIVE | NOTE 12—SELF-INSURANCE CAPTIVE We are a member of a limited liability company formed as an insurance association captive (the "captive") in order to provide partially self-insured health benefits to our employees that elect coverage under the plan. Our membership percentage in this captive is approximately 0.5% and represents an investment of $87,000. Therefore, our investment is accounted for utilizing the cost method of accounting. Our risk of loss is limited to our investment in the captive and we are not required to fund additional capital to the captive in the event of negative capital accounts. Our share of net income from the captive is based on our ratio of contribution to the captive. No income has been allocated in either fiscal year 2018 or 2017. We maintain a reserve for incurred but not reported medical claims and claim development. Our reserve is an estimate based on historical experience and other assumptions, some of which are subjective. We adjust our self-insured medical benefits reserve as we experience changes due to medical inflation, changes in the number of plan participants and changes to specific cases. Our total reserve for these claims for the fiscal years ended April 30, 2018 and 2017 was $25,000 and $28,000 respectively. |
NET SALES BY PRODUCT LINE AND G
NET SALES BY PRODUCT LINE AND GEOGRAPHY | 12 Months Ended |
Apr. 30, 2018 | |
NET SALES BY PRODUCT LINE AND GEOGRAPHY | |
NET SALES BY PRODUCT LINE AND GEOGRAPHY | NOTE 13—NET SALES BY PRODUCT LINE AND GEOGRAPHY Torotel’s net sales by product line and geography for the periods presented were as follows: Years ended April 30, 2018 2017 Magnetic components $ 9,251,000 $ 7,924,000 Potted coil assembly 5,962,000 5,268,000 Electro-mechanical assemblies 3,060,000 3,098,000 Large transformers 123,000 12,000 Total $ 18,396,000 $ 16,302,000 Years ended April 30, 2018 2017 Domestic $ 16,236,556 $ 14,755,000 Foreign 2,159,444 1,547,000 Total consolidated net sales $ 18,396,000 $ 16,302,000 Torotel currently has a primary base of approximately 19 customers that provide nearly 90% of its annual sales volume. Sales to two major customers as a percentage of consolidated net sales for the fiscal year ended April 30, 2018 was 34% and 18% respectively. Sales to two major customers as a percentage of consolidated net sales for the fiscal year ended April 30, 2017 was 34% and 23% respectively. Trade receivables from one major customer as a percentage of consolidated net trade receivables for the fiscal years ended April 30, 2018 and 2017 was 36% and 27%, respectively. |
SUMMARY OF SIGNIFICANT ACCOUN20
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended |
Apr. 30, 2018 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Principles of Consolidation | Principles of Consolidation The consolidated financial statements include the accounts of Torotel and its wholly owned subsidiary, Torotel Products. All significant inter-company accounts and transactions have been eliminated in consolidation. |
Use of Estimates | Use of Estimates The preparation of the 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 certain reported amounts and disclosures. Significant estimates used in preparing these consolidated financial statements include those assumed in computing the valuation allowance of inventory, the allowance for doubtful accounts receivable, the valuation allowance on deferred income tax assets, and the reserve for warranty costs. Accordingly, actual results could differ from those estimates. Any changes in estimates are recorded in the period in which they become known |
Credit Risk | Credit Risk Financial instruments that potentially subject us to concentrations of credit risk consist principally of cash and accounts receivable. We grant unsecured credit to most of our customers. We do not believe that we are exposed to any extraordinary credit risk as a result of this policy. At various times, and at April 30, 2018 and 2017, cash balances exceeded federally insured limits. We have not experienced any losses in the cash accounts and we do not believe we are exposed to any significant credit risk with respect to our cash. |
Fair Value of Financial Instruments | Fair Value of Financial Instruments We determine fair value by utilizing a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three levels as follows: Level 1. Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets. Level 2. Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. Level 3. Inputs to the valuation methodology are unobservable and significant to the fair value measurement. The fair value hierarchy gives the highest priority to Level 1 inputs and the lowest priority to Level 3 inputs. In determining fair value, we utilize valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible as well as consider counterparty credit risk in the assessment of fair value. The carrying amounts of certain financial instruments, including cash, trade receivables and trade accounts payable approximate fair value due to their short maturities. As of April 30, 2018 and 2017, the amount of our long-term debt approximates fair value based on the present value of estimated future cash flows using a discount rate commensurate with a borrowing rate available to us. The inputs used to estimate the fair value of long-term debt are considered Level 2 inputs. |
Treasury Stock | Treasury Stock We utilize the weighted average cost method in accounting for treasury stock transactions |
Revenue Recognition | Revenue Recognition Revenue is recognized when a fixed price contract or purchase order exists; delivery has occurred; and collection is reasonably assured. Selling terms are generally FOB Shipping Point so we consider our products delivered once they have been shipped and title and risk of loss have been transferred. |
Allowance for Doubtful Accounts | Allowance for Doubtful Accounts Gross trade accounts receivable are offset with an allowance for doubtful accounts. The allowance for doubtful accounts is our best estimate of the amount of probable credit losses in our existing accounts receivable. We review the allowance for doubtful accounts on a regular basis, and all past due balances are reviewed individually for collectability. Account balances are charged against the allowance when placed for collection. Recoveries of receivables previously written off are recorded when received. The majority of the customer accounts are considered past due after the invoice becomes older than the customer's credit terms. Interest is not charged on past due accounts. The allowance for doubtful accounts as of April 30, 2018 and 2017 was $12,000 and $12,000, respectively. |
Inventories | Inventories Inventories are stated at the lower of cost or net realizable value. Cost is determined using a FIFO approximated weighted average cost method of valuation. Our industry is characterized by short-term customer commitments and changes in demand, as well as other market considerations. Provisions for obsolete and excess inventory are based on reviews of inventory usage, quantities on hand and latest product demand information from customers. Inventories are reviewed in detail utilizing a 12-month time horizon. Individual part numbers that have not had any usage or purchases in a 12-month time period and do not have any known usage requirements are categorized as obsolete; individual part numbers having more than a 12-month supply based on the current year's usage are categorized as excess. Once specific inventory has been identified as excess or obsolete, the cost of the identified inventory is fully reserved and the cost of the inventory is not recovered until it is sold. The reserve balance is analyzed for adequacy as part of the inventory review each quarter. The reserve for inventory as of April 30, 2018 and 2017 was $364,000 and $261,000, respectively. |
Property, Plant and Equipment | Property, Plant and Equipment Property, plant and equipment are carried at cost. Depreciation and amortization are provided in amounts sufficient to relate the costs of depreciable assets to operations primarily using the straight-line method over estimated useful lives of three to five years for equipment and three and a half to twenty years for buildings and improvements |
Cash and Cash Equivalents | Cash For purposes of the consolidated statements of cash flows, we consider all short-term investments and demand deposits purchased with original maturity dates of three months or less to be cash. |
Income Taxes | Income Taxes Our annual tax rate is based on our income, statutory tax rates and tax planning opportunities available to us in the various jurisdictions in which we operate. Significant judgment is required in determining our annual tax rate and in evaluating our tax positions. An estimated effective tax rate for a year is applied to our quarterly operating results. In the event there is a significant or unusual item recognized in our quarterly operating results, the tax attributable to that item is separately calculated and recorded at the same time as that item. Tax law requires items to be included in our tax returns at different times than the items are reflected in our financial statements. As a result, our annual tax rate reflected in our financial statements is different than that reported in our tax returns (our cash tax rate). Some of these differences are permanent, such as expenses that are not deductible in our tax return, and some differences reverse over time, such as depreciation expense. These temporary differences create deferred tax assets and liabilities. Deferred tax assets generally represent items that can be used as a tax deduction or credit in our tax returns in future years for which we have already recorded the tax benefit in our statement of operations. We establish valuation allowances for our deferred tax assets if, based on the available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax liabilities generally represent tax expense recognized in our financial statements for which payment has been deferred, or expense for which we have already taken a deduction in our tax return but have not yet recognized as expense in our financial statements. The accounting for uncertainty in income taxes requires a more-likely-than-not threshold for financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. If necessary, we record a liability for the difference between the benefit recognized and measured for financial statement purposes and the tax position taken or expected to be taken on our tax return. To the extent that our assessment of such tax positions changes, the change in estimate is recorded in the period in which the determination is made. If applicable in a given year, tax-related interest and penalties are classified as a component of income tax expense. |
Advertising Costs | Advertising Costs Advertising costs are expensed as incurred. For the years ended April 30, 2018 and 2017 advertising costs were $22,000 and $6,000, respectively. |
Warranty Costs | Warranty Costs We maintain a reserve for estimated warranty costs associated with products returned from customers. A limited warranty is provided for a period of one year which requires us to repair or replace defective products at no cost to the customer. The warranty reserve is based on historical experience and reflects management's best estimate of probable liability under the product warranties. |
Share-Based Compensation | Share-Based Compensation We have a share-based compensation plan that includes restricted stock, which is described more fully in Note 7 of the Notes to the Consolidated Financial Statements. We account for the share-based compensation plan in accordance with authoritative guidance under which the estimated fair value of share-based awards granted under our share-based compensation plan is recognized as compensation expense over the vesting period of the award. |
New Accounting Guidance | New Accounting Guidance In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers, Topic 606 (“ASC 606”). The standard is effective for reporting periods beginning after December 15, 2017. Torotel has evaluated the transition method to be used and the impact of adoption of this standard on its consolidated financial statements. As part of the evaluation and transition process, no significant implementation matters have been identified as needing to be addressed. In applying ASC 606, revenue is recognized when control of promised goods or services transfers to a customer and is recognized in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. The major provisions of the new standard include: the determination of enforceable rights and obligations between parties; the identification of performance obligations including those related to material right obligations; the allocation of consideration based upon relative standalone selling price; accounting for variable consideration; the determination of whether performance obligations are satisfied over time or at a point in time; and enhanced disclosure requirements. ASC 606 will be effective for Torotel beginning May 1, 2018 and permits two methods of adoption: retrospectively to each prior reporting period presented (“full retrospective method”) or retrospectively with the cumulative effect of the initial application recognized at the date of initial application (“modified retrospective method”). Torotel will adopt the standard using the full retrospective method and will record an adjustment to Retained Earnings for the effect of the initial application on April 30, 2017 for the cumulative portion earned through the end of fiscal year 2017, and will record a second adjustment on April 30, 2018 for the portion earned during fiscal year 2018 (the “Transition Adjustments”). Torotel has reviewed all of its contracts with customers and has implemented the required process, data, and system changes to comply with the requirements of ASC 606. Prior to adoption, revenue has historically been recognized when a fixed price contract or purchase order exists; delivery has occurred; and collection was reasonably assured. Upon adoption, ASC 606 will be applied by analyzing each contract, or a combination of contracts, to determine if revenue is recognized over time or at a point in time. Torotel has determined that some of its contracts will have performance obligations that are satisfied over time and some at a point in time based on when performance obligations have been satisfied by the transfer of control of the goods and services to the customer. For performance obligations that are satisfied over time, Torotel will use an input method as the basis for recognizing revenue. Input methods recognize revenue on the basis of an entity’s efforts or inputs toward satisfying a performance obligation (for example, resources consumed, labor hours expended, costs incurred, time lapsed, or machine hours used) relative to the total expected inputs to satisfy the performance obligation. Torotel will generally use costs incurred as the measure of performance; and therefore will generally not defer any production costs. Performance obligations that are not recognized over time will be recognized at the point in time when performance obligations have been satisfied by the transfer of control to the customer. ASC 606 requires Torotel to allocate contract consideration to performance obligations on the basis of their relative standalone selling price. Torotel has determined that certain contracts require a deferral of revenues due to the requirement to allocate revenue based upon relative standalone selling price. Accordingly, contract liabilities will be established at the Transition Date to defer revenue that was previously recognized under ASC 605 (“legacy GAAP”). We have completed our preliminary assessment of adopting ASC 606 on our 2018 and 2017 operating results, and have presented selected recast, unaudited financial data in the following table. The impact of adopting ASC 606 on our 2018 and 2017 operating results may not be indicative of the adoption impacts in future periods or of our operating performance. Unaudited 2018 2017 Net sales $ 18,469,000 $ 17,395,000 Earnings (loss) from operations (1,280,000) 147,000 ASC 340-40 was added by ASC 606, and becomes effective for reporting periods beginning after December 15, 2017. ACC 340-40 provides guidance on contract costs that are not within the scope of other authoritative literature, and is applied to costs to obtain or fulfill a contract if existing guidance is not applicable. Torotel’s accounting for preproduction, tooling, and certain other costs is expected to continue under existing guidance, since the costs generally do not fall within the scope of ASC 340-40. Torotel anticipates that in fiscal year 2019, revenue and gross margin for certain contracts that would not have been recognized under legacy GAAP will be accelerated because of the allocation of revenue to performance obligations based upon relative standalone selling price. The enhanced disclosure requirements of ASC 606 include discussions on the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. Torotel expects the disclosures to include qualitative and quantitative information about its contracts with customers; information about contract assets and liabilities; information about the performance obligation for customer contracts; and, the significant judgments made in applying the guidance in ASC 606. This will result in changes to Torotel’s existing disclosures, as well as new disclosures, which will impact the information reported in Torotel’s financial statements. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), in order to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet for those leases classified as operating leases under previous GAAP. ASU 2016-02 requires that a lessee should recognize a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term on the balance sheet. ASU 2016-02 requires expanded disclosures about the nature and terms of lease agreements and is effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period. Early adoption is permitted. Torotel is currently evaluating the potential impact of this standard on its consolidated financial statements. Torotel anticipates the impact will be material to the consolidated financial statements for reporting periods beginning after December 15, 2018, due to the building lease amendment executed on October 31, 2016. The status of the implementation effort is in the preliminary stage. No significant implementation matters have been identified as needing to be addressed. |
SUMMARY OF SIGNIFICANT ACCOUN21
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 12 Months Ended |
Apr. 30, 2018 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Schedule of New Accounting Pronouncements and Changes in Accounting Principles | Unaudited 2018 2017 Net sales $ 18,469,000 $ 17,395,000 Earnings (loss) from operations (1,280,000) 147,000 |
INVENTORIES (Tables)
INVENTORIES (Tables) | 12 Months Ended |
Apr. 30, 2018 | |
INVENTORIES | |
Table summarizing the components of inventories | 2018 2017 Raw materials $ 1,278,000 $ 1,305,000 Work in process 635,000 826,000 Finished goods 449,000 608,000 $ 2,362,000 $ 2,739,000 |
FINANCING AGREEMENTS (Tables)
FINANCING AGREEMENTS (Tables) | 12 Months Ended |
Apr. 30, 2018 | |
FINANCING AGREEMENTS | |
Summary of the notes within the financing agreement | 2018 2017 4.05% mortgage note payable in monthly installments of $4,873, including interest, with final payment of $349,000 due January 27, 2019 $ 373,000 $ 415,000 4.00% working capital line of credit with a maturity date of October 20, 2018 751,000 465,000 4.00% building line of credit with a maturity date of October 20, 2018 465,000 - Capital lease obligations (see Note 5) 170,000 - Borrowings under an equipment financing line of credit: 4.75% note payable in monthly installments of $2,269, including interest, with final payment made on May 27, 2018 2,000 28,000 3.75% note payable in monthly installments of $2,112, including interest, with final payment made on April 10, 2018 - 25,000 4.05% note payable in monthly installments of $3,680, including interest, with final payment due January 10, 2020 75,000 115,000 Total long-term debt 1,836,000 1,048,000 Less current installments 1,706,000 603,000 Long-term debt, excluding current installments $ 130,000 $ 445,000 |
Long-term debt maturities by year | Year Ending April 30, Amount 2019 $ 1,706,000 2020 100,000 2021 30,000 $ 1,836,000 |
Schedule of letter of credit outstanding balance | Date of Reduction Amount of Reduction Balance of Letter of Credit January 1, 2020 $ 75,000 $ 225,000 January 1, 2021 75,000 150,000 January 1, 2022 75,000 75,000 January 1, 2023 75,000 - |
INCOME TAXES (Tables)
INCOME TAXES (Tables) | 12 Months Ended |
Apr. 30, 2018 | |
INCOME TAXES | |
Components of the provision (benefit) for income taxes | 2018 2017 Current tax expense Federal $ — $ 2,000 State 2,000 1,000 2,000 3,000 Deferred tax expense (benefit) Federal (137,000) State 67,000 (18,000) (155,000) Total income tax provision (benefit) $ 681,000 $ |
Summary of the principal differences between statutory income tax expense and effective provision for income taxes | 2018 2017 Computed tax expense at statutory rates $ (405,000) $ (144,000) Permanent differences 11,000 6,000 State tax and credits (49,000) (18,000) Provision to return adjustment 6,000 4,000 Impact of federal rate change 467,000 — Increase in valuation allowance 651,000 — $ 681,000 $ (152,000) |
Summary of net operating loss carryforwards | Net Operating Loss Year of Expiration Carryforwards 2027 $ 94,000 2030 28,000 2032 298,000 2037 960,000 2038 909,000 $ 2,289,000 |
Summary of the components of the net deferred income tax asset | 2018 2017 Net operating loss carryforwards $ 574,000 $ 420,000 Inventory valuation reserve 98,000 101,000 Loss on equity and impairment in investee 301,000 437,000 Tax credit carryforward 68,000 68,000 Other 115,000 158,000 1,156,000 1,184,000 Less: valuation allowance (1,088,000) (437,000) $ 68,000 $ 747,000 |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Tables) | 12 Months Ended |
Apr. 30, 2018 | |
COMMITMENTS AND CONTINGENCIES. | |
Future minimum lease payments under non-cancellable operating leases | Future minimum lease payments on operating leases are as follows: Capital Operating Fiscal Years Ending April 30, Leases Leases 2019 $ 87,000 $ 413,000 2020 75,000 407,000 2021 31,000 402,000 2022 — 427,000 2023 — 442,000 2024 — 452,000 2025 — 456,000 2026 — 467,000 2027 — 350,000 193,000 3,816,000 Less: Amounts representing interest (23,000) — Total $ 170,000 $ 3,816,000 |
RESTRICTED STOCK AGREEMENTS (Ta
RESTRICTED STOCK AGREEMENTS (Tables) | 12 Months Ended |
Apr. 30, 2018 | |
RESTRICTED STOCK AGREEMENTS | |
Summary of restricted stock activity | 2018 2017 Restricted Weighted Restricted Weighted Shares Average Shares Average Under Grant Under Grant Option Price Option Price Outstanding at May 1 730,000 $ 0.740 350,000 $ 0.500 Granted — — 730,000 0.740 Forfeited — — (350,000) 0.500 Outstanding at April 30 730,000 $ 0.740 730,000 $ 0.740 |
STOCKHOLDERS' EQUITY (Tables)
STOCKHOLDERS' EQUITY (Tables) | 12 Months Ended |
Apr. 30, 2018 | |
STOCKHOLDERS' EQUITY | |
Summary of changes in shares of common stock outstanding | 2018 2017 Balance, May 1 5,615,750 Shares released from treasury for restricted stock grants — 717,795 Newly issued shares for restricted stock grants — 12,205 Shares reverted to treasury for restricted stock forfeitures — (350,000) Balance, April 30 5,995,750 5,995,750 |
EARNINGS PER SHARE (Tables)
EARNINGS PER SHARE (Tables) | 12 Months Ended |
Apr. 30, 2018 | |
EARNINGS PER SHARE | |
Computation of earnings (loss) per common share | Year Ended 2018 2017 Net loss $ (2,015,000) $ (261,000) Amounts allocated to participating securities (nonvested restricted shares) — — Net loss attributable to common shareholders $ (2,015,000) $ (261,000) Basic weighted average common shares 5,265,750 5,123,000 Earnings (loss) per share attributable to common shareholders: Basic loss per share $ (0.38) $ (0.05) |
ACCRUED LIABILITIES (Tables)
ACCRUED LIABILITIES (Tables) | 12 Months Ended |
Apr. 30, 2018 | |
ACCRUED LIABILITIES | |
Accrued liabilities as of year end | 2018 2017 Employee related expenses: Accrued payroll $ 167,000 $ 68,000 Accrued payroll taxes 13,000 5,000 Accrued employee benefits 129,000 136,000 $ 309,000 $ 209,000 Other, including interest: Warranty reserve $ 300,000 $ 24,000 Property taxes 18,000 20,000 Deferred rent 129,000 7,000 Other 61,000 59,000 $ 508,000 $ 110,000 $ 817,000 $ 319,000 |
Schedule of changes in warranty reserve | 2018 2017 Balance, May 1 $ 24,000 $ 67,000 Credit memos issued (52,000) (161,000) Provision for warranty accrual 328,000 118,000 Balance, April 30 $ 300,000 $ 24,000 |
NET SALES BY PRODUCT LINE AND30
NET SALES BY PRODUCT LINE AND GEOGRAPHY (Tables) | 12 Months Ended |
Apr. 30, 2018 | |
NET SALES BY PRODUCT LINE AND GEOGRAPHY | |
Schedule of net sales by product line | Years ended April 30, 2018 2017 Magnetic components $ 9,251,000 $ 7,924,000 Potted coil assembly 5,962,000 5,268,000 Electro-mechanical assemblies 3,060,000 3,098,000 Large transformers 123,000 12,000 Total $ 18,396,000 $ 16,302,000 |
Schedule of net sales by geography | Years ended April 30, 2018 2017 Domestic $ 16,236,556 $ 14,755,000 Foreign 2,159,444 1,547,000 Total consolidated net sales $ 18,396,000 $ 16,302,000 |
SUMMARY OF SIGNIFICANT ACCOUN31
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - USD ($) | 12 Months Ended | |
Apr. 30, 2018 | Apr. 30, 2017 | |
Significant accounting policies and useful lives | ||
Allowance for doubtful accounts | $ 12,000 | $ 12,000 |
Inventory time horizon for excess and obsolete review | 12 months | |
Individual parts time horizon to review for obsolete inventory | 12 months | |
Individual parts time horizon to review for excess inventory | 12 months | |
Inventory Reserves | $ 364,000 | 261,000 |
Advertising costs | $ 22,000 | $ 6,000 |
Provided limited warranty period | 1 year | |
Equipment | Minimum | ||
Significant accounting policies and useful lives | ||
Estimated useful lives | 3 years | |
Equipment | Maximum | ||
Significant accounting policies and useful lives | ||
Estimated useful lives | 5 years | |
Buildings and improvements | Minimum | ||
Significant accounting policies and useful lives | ||
Estimated useful lives | 3 years 6 months | |
Buildings and improvements | Maximum | ||
Significant accounting policies and useful lives | ||
Estimated useful lives | 20 years |
SUMMARY OF SIGNIFICANT ACCOUN32
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - New Accounting Guidance (Details) - USD ($) | 12 Months Ended | |
Apr. 30, 2018 | Apr. 30, 2017 | |
New Accounting Pronouncements or Change in Accounting Principle | ||
Net sales | $ 18,396,000 | $ 16,302,000 |
Earnings (loss) from operations | (1,268,000) | (389,000) |
Accounting Standards Update 2014-09 [Member] | ||
New Accounting Pronouncements or Change in Accounting Principle | ||
Net sales | 18,469,000 | 17,395,000 |
Earnings (loss) from operations | $ (1,280,000) | $ 147,000 |
INVENTORIES (Details)
INVENTORIES (Details) - USD ($) | Apr. 30, 2018 | Apr. 30, 2017 |
INVENTORIES | ||
Raw materials | $ 1,278,000 | $ 1,305,000 |
Work in process | 635,000 | 826,000 |
Finished goods | 449,000 | 608,000 |
Inventories | $ 2,362,000 | $ 2,739,000 |
FINANCING AGREEMENTS (Details)
FINANCING AGREEMENTS (Details) - USD ($) | 12 Months Ended | ||
Apr. 30, 2018 | Apr. 30, 2017 | Mar. 31, 2017 | |
Long-term indebtedness | |||
Total long-term debt | $ 1,836,000 | $ 1,048,000 | |
Less current installments | 1,706,000 | 603,000 | |
Long-term debt, excluding current installments | 130,000 | 445,000 | |
Minimum Tangible Net Worth | 4,500,000 | ||
Mortgage note payable | |||
Long-term indebtedness | |||
Annual prepayment limit | 100,000 | ||
Capital Leases | |||
Long-term indebtedness | |||
Total long-term debt | 170,000 | ||
Note payable 4.05 percent | Mortgage note payable | |||
Long-term indebtedness | |||
Total long-term debt | $ 373,000 | 415,000 | |
Rate | 4.05% | ||
Monthly installments | $ 4,873 | ||
Final payment | $ 349,000 | ||
Working line of credit 4.00 percent | Minimum | |||
Long-term indebtedness | |||
Rate | 4.00% | ||
Working line of credit 4.00 percent | Prime Rate | |||
Long-term indebtedness | |||
Rate | 4.75% | ||
Working line of credit 4.00 percent | Line of Credit | |||
Long-term indebtedness | |||
Total long-term debt | $ 751,000 | 465,000 | |
Rate | 4.00% | ||
Maximum borrowing | $ 1,250,000 | ||
Building line of credit 4.00 percent | Minimum | |||
Long-term indebtedness | |||
Rate | 4.00% | ||
Building line of credit 4.00 percent | Prime Rate | |||
Long-term indebtedness | |||
Rate | 4.75% | ||
Building line of credit 4.00 percent | Line of Credit | |||
Long-term indebtedness | |||
Total long-term debt | $ 465,000 | ||
Rate | 4.00% | ||
Maximum borrowing | $ 500,000 | ||
Note payable 4.75 percent | Note Payable | |||
Long-term indebtedness | |||
Total long-term debt | $ 2,000 | 28,000 | |
Rate | 4.75% | ||
Monthly installments | $ 2,269 | ||
Note payable 3.75 percent | Note Payable | |||
Long-term indebtedness | |||
Total long-term debt | 25,000 | ||
Rate | 3.75% | ||
Monthly installments | $ 2,112 | ||
Note payable 4.05 percent | Note Payable | |||
Long-term indebtedness | |||
Total long-term debt | $ 75,000 | $ 115,000 | |
Rate | 4.05% | ||
Monthly installments | $ 3,680 | ||
Equipment line of credit | |||
Long-term indebtedness | |||
Equipment financing maximum borrowing | $ 500,000 |
FINANCING AGREEMENTS (MATURITIE
FINANCING AGREEMENTS (MATURITIES OF LONG-TERM DEBT (Details) - USD ($) | Apr. 30, 2018 | Apr. 30, 2017 |
Long-term debt maturities by year | ||
2,019 | $ 1,706,000 | |
2,020 | 100,000 | |
2,021 | 30,000 | |
Total long-term debt | $ 1,836,000 | $ 1,048,000 |
FINANCING AGREEMENTS (IRREVOCAB
FINANCING AGREEMENTS (IRREVOCABLE STANDBY LETTER OF CREDIT (Details) | Jan. 01, 2023USD ($) | Jan. 01, 2022USD ($) | Jan. 01, 2021USD ($) | Jan. 01, 2020USD ($) | Apr. 30, 2018 | Aug. 31, 2017USD ($) | Aug. 30, 2017USD ($) |
Minimum | |||||||
Long-term indebtedness | |||||||
Ratio of EBITDA to fixed charge coverage | 1.100 | ||||||
Maximum | |||||||
Long-term indebtedness | |||||||
Ratio of EBITDA to fixed charge coverage | 1 | ||||||
Irrevocable Standby Letter of Credit | |||||||
Long-term indebtedness | |||||||
Principal amount | $ 300,000 | $ 350,000 | |||||
Irrevocable Standby Letter of Credit | Forecast | |||||||
Long-term indebtedness | |||||||
Amount of Reduction | $ 75,000 | $ 75,000 | $ 75,000 | $ 75,000 | |||
Balance of Letter of Credit | $ 75,000 | $ 150,000 | $ 225,000 |
INCOME TAXES (Details)
INCOME TAXES (Details) - USD ($) | 12 Months Ended | |
Apr. 30, 2018 | Apr. 30, 2017 | |
Current tax expense | ||
Federal | $ 2,000 | |
State | $ 2,000 | 1,000 |
Current tax expense (benefit) | 2,000 | 3,000 |
Deferred tax expense (benefit) | ||
Federal | 612,000 | (137,000) |
State | 67,000 | (18,000) |
Deferred tax expense | 679,000 | (155,000) |
Total income tax provision (benefit) | $ 681,000 | $ (152,000) |
INCOME TAXES (STATUTORY RATE RE
INCOME TAXES (STATUTORY RATE RECONCILIATION) (Details) - USD ($) | 12 Months Ended | |
Apr. 30, 2018 | Apr. 30, 2017 | |
Income Tax Reconciliation | ||
Computed tax expense at statutory rates | $ (405,000) | $ (144,000) |
Permanent differences | 11,000 | 6,000 |
State tax and credits | (49,000) | (18,000) |
Provision to return adjustment | 6,000 | 4,000 |
Impact of federal rate change | 467,000 | |
Increase in valuation allowance | 651,000 | |
Total income tax provision (benefit) | $ 681,000 | $ (152,000) |
INCOME TAXES (NET OPERATING LOS
INCOME TAXES (NET OPERATING LOSS CARRYFORWARDS) (Details) - Federal | 12 Months Ended |
Apr. 30, 2018USD ($) | |
Estimated federal net operating | |
Net Operating Loss Carryforwards | $ 2,289,000 |
Tax Year 2027 | |
Estimated federal net operating | |
Year of Expiration | Apr. 30, 2027 |
Net Operating Loss Carryforwards | $ 94,000 |
Tax Year 2030 | |
Estimated federal net operating | |
Year of Expiration | Apr. 30, 2030 |
Net Operating Loss Carryforwards | $ 28,000 |
Tax Year 2032 | |
Estimated federal net operating | |
Year of Expiration | Apr. 30, 2032 |
Net Operating Loss Carryforwards | $ 298,000 |
Tax Year 2038 | |
Estimated federal net operating | |
Year of Expiration | Apr. 30, 2038 |
Net Operating Loss Carryforwards | $ 909,000 |
INCOME TAXES (COMPONENTS OF DEF
INCOME TAXES (COMPONENTS OF DEFERRED TAX ASSETS AND LIABILITIES) (Details) - USD ($) | Apr. 30, 2018 | Apr. 30, 2017 |
INCOME TAXES | ||
Net operating loss carryforwards | $ 574,000 | $ 420,000 |
Inventory valuation reserve | 98,000 | 101,000 |
Loss on equity and impairment in investee | 301,000 | 437,000 |
Tax credit carryforward | 68,000 | 68,000 |
Other | 115,000 | 158,000 |
Gross deferred income tax asset | 1,156,000 | 1,184,000 |
Less: valuation allowance | (1,088,000) | (437,000) |
Net deferred income tax assets | $ 68,000 | $ 747,000 |
INCOME TAXES (NARRATIVE) (Detai
INCOME TAXES (NARRATIVE) (Details) - USD ($) | Dec. 22, 2017 | Oct. 31, 2016 | Apr. 30, 2018 | Dec. 31, 2017 | Apr. 30, 2018 | Apr. 30, 2017 |
INCOME TAXES | ||||||
Federal statutory income tax rate (as a percent) | 35.00% | 21.00% | 34.00% | |||
Blended statutory tax rate | 30.40% | |||||
Impact of federal rate change | $ 467,000 | |||||
Federal tax credit carryforwards | $ 68,000 | 68,000 | ||||
Increase in valuation allowance | 651,000 | |||||
Increase in income tax expense | 651,000 | |||||
Valuation allowance | 1,088,000 | 1,088,000 | $ 437,000 | |||
Accrued interest and penalties | $ 0 | $ 0 | $ 0 | |||
Extension of lease term | 5 years | 12 months | 12 months |
COMMITMENTS AND CONTINGENCIES42
COMMITMENTS AND CONTINGENCIES (Details) | Jan. 01, 2017USD ($)ft² | Oct. 31, 2016USD ($)ft² | Jul. 10, 2014ft² | Dec. 31, 2019USD ($) | Apr. 30, 2018USD ($) | Apr. 30, 2017USD ($) | Dec. 31, 2018USD ($) |
Commitments and contingencies | |||||||
Real estate lease agreement (in square feet) | ft² | 72,388 | 14,137 | |||||
Extension of lease term | 5 years | 12 months | 12 months | ||||
Equipment | $ 3,951,000 | $ 3,718,000 | |||||
Security deposit | $ 55,000 | $ 12,750 | |||||
Property held for sale | 694,000 | 688,000 | |||||
Future minimum lease payments under non-cancellable operating leases | |||||||
2,019 | 413,000 | ||||||
2,020 | 407,000 | ||||||
2,021 | 402,000 | ||||||
2,022 | 427,000 | ||||||
2,023 | 442,000 | ||||||
2,024 | 452,000 | ||||||
2,025 | 456,000 | ||||||
2,026 | 467,000 | ||||||
2,027 | 350,000 | ||||||
Total | 3,816,000 | ||||||
Capital Leases | |||||||
2,019 | 87,000 | ||||||
2,020 | 75,000 | ||||||
2,021 | 31,000 | ||||||
Total | 193,000 | ||||||
Interest Portion of Minimum Lease Payments | (23,000) | ||||||
Presents value of minimum capital lease payments | 170,000 | ||||||
Forecast | |||||||
Commitments and contingencies | |||||||
Monthly base rate | $ 29,257 | $ 26,844 | |||||
Bergey Road Associates | |||||||
Commitments and contingencies | |||||||
Real estate lease agreement (in square feet) | ft² | 5,000 | ||||||
Assets recorded under capital lease | |||||||
Commitments and contingencies | |||||||
Equipment | 225,000 | ||||||
Operating Leases | |||||||
Commitments and contingencies | |||||||
Operating Leases, Rent Expense, Net | $ 596,000 | $ 246,000 |
EMPLOYEE INCENTIVE PLANS (Detai
EMPLOYEE INCENTIVE PLANS (Details) - USD ($) | 12 Months Ended | |
Apr. 30, 2018 | Apr. 30, 2017 | |
401(k) Retirement Plan | ||
Employee incentive plans | ||
Employer contributions | $ 137,000 | $ 86,000 |
Performance Bonus | ||
Employee incentive plans | ||
Discretionary bonus expense | 71,000 | 0 |
Short Term Cash Incentive Plan | ||
Employee incentive plans | ||
Incentive plan expense | $ 0 | 0 |
Stock Award Plan | Restricted Stock | ||
Employee incentive plans | ||
Restriction period of awards | 5 years | |
Long Term Cash Incentive Plan | ||
Employee incentive plans | ||
Incentive plan expense | $ 0 | $ 0 |
RESTRICTED STOCK AGREEMENTS (De
RESTRICTED STOCK AGREEMENTS (Details) | Sep. 21, 2016employeeshares | Apr. 30, 2018USD ($)$ / sharesshares | Apr. 30, 2017USD ($)$ / sharesshares |
Share-based Compensation Arrangement by Share-based Payment Award | |||
Stock compensation cost amortized | $ | $ 108,000 | $ 61,000 | |
Restricted Shares Under Option | |||
Outstanding at beginning of period | 730,000 | 350,000 | |
Granted | 730,000 | ||
Forfeited | (350,000) | ||
Outstanding at end of period | 730,000 | 730,000 | |
Weighted Average Grant Price | |||
Outstanding at beginning of period, Weighted Average Grant Price (in dollars per share) | $ / shares | $ 0.740 | $ 0.500 | |
Granted, Weighted Average Grant Price (in dollars per share) | $ / shares | 0.740 | ||
Forfeited, Weighted Average Grant Price (in dollars per share) | $ / shares | 0.500 | ||
Outstanding at end of period, Weighted Average Grant Price (in dollars per share) | $ / shares | $ 0.740 | $ 0.740 | |
2016 Restricted Stock Grants | Minimum | |||
Share-based Compensation Arrangement by Share-based Payment Award | |||
Cumulative annual growth in revenue (as a percentage) | 10.00% | ||
Average economic value added as percentage of revenue (as a percentage) | 2.00% | ||
Stock Award Plan | |||
Share-based Compensation Arrangement by Share-based Payment Award | |||
Restriction period of awards | 5 years | ||
Allocated Share-based Compensation Expense | $ | $ 0 | $ 0 | |
Stock Award Plan | Restricted Stock | Three Key Employees | |||
Share-based Compensation Arrangement by Share-based Payment Award | |||
Number of key employees receiving award under plan | employee | 3 | ||
Aggregate amount of restricted stock awards authorized | 730,000 | ||
Number of shares expected to revert during fiscal year | 350,000 |
STOCKHOLDERS' EQUITY (Details)
STOCKHOLDERS' EQUITY (Details) | 12 Months Ended |
Apr. 30, 2017shares | |
Increase (Decrease) in Stockholders' Equity | |
Balance beginning of year (in shares) | 5,615,750 |
Shares released from treasury for restricted stock grants | 717,795 |
Newly issued shares for restricted stock grants | 12,205 |
Shares reverted to treasury for restricted stock forfeitures | (350,000) |
Balance end of year (in shares) | 5,995,750 |
EARNINGS PER SHARE (Details)
EARNINGS PER SHARE (Details) - USD ($) | 12 Months Ended | |
Apr. 30, 2018 | Apr. 30, 2017 | |
EARNINGS PER SHARE | ||
Net loss | $ (2,015,000) | $ (261,000) |
Net loss attributable to common shareholders | $ (2,015,000) | $ (261,000) |
Basic weighted average common shares | 5,265,750 | 5,123,000 |
Earnings (loss) per share attributable to common shareholders: | ||
Basic loss per share | $ (0.38) | $ (0.05) |
ACCRUED LIABILITIES (Details)
ACCRUED LIABILITIES (Details) - USD ($) | 12 Months Ended | |
Apr. 30, 2018 | Apr. 30, 2017 | |
Employee related expenses: | ||
Accrued payroll | $ 167,000 | $ 68,000 |
Accrued payroll taxes | 13,000 | 5,000 |
Accrued employee benefits | 129,000 | 136,000 |
Total employee related expenses | 309,000 | 209,000 |
Other, including interest: | ||
Warranty reserve | 300,000 | 24,000 |
Property taxes | 18,000 | 20,000 |
Deferred rent | 129,000 | 7,000 |
Other | 61,000 | 59,000 |
Total other | 508,000 | 110,000 |
Total accrued liabilities | 817,000 | 319,000 |
Changes in warranty reserve | ||
Balance, May 1 | 24,000 | 67,000 |
Credit memos issued | (52,000) | (161,000) |
Provision for warranty accrual | 328,000 | 118,000 |
Balance, April 30 | $ 300,000 | $ 24,000 |
CUSTOMER DEPOSITS (Details)
CUSTOMER DEPOSITS (Details) - USD ($) | Apr. 30, 2018 | Apr. 30, 2017 |
CUSTOMER DEPOSITS | ||
Customer Advances, Current | $ 219,000 | $ 33,000 |
SELF-INSURANCE CAPTIVE (Details
SELF-INSURANCE CAPTIVE (Details) - Captive Insurance LLC - USD ($) | 12 Months Ended | |
Apr. 30, 2018 | Apr. 30, 2017 | |
Self-insurance captive | ||
Membership percentage | 0.50% | |
Investment | $ 87,000 | |
Investment income | 0 | $ 0 |
Self-insured medical benefits reserve | $ 25,000 | $ 28,000 |
NET SALES BY PRODUCT LINE AND50
NET SALES BY PRODUCT LINE AND GEOGRAPHY (Details) - USD ($) | 12 Months Ended | |
Apr. 30, 2018 | Apr. 30, 2017 | |
Revenue from External Customer | ||
Net sales | $ 18,396,000 | $ 16,302,000 |
Magnetic components | ||
Revenue from External Customer | ||
Net sales | 9,251,000 | 7,924,000 |
Potted coil assembly | ||
Revenue from External Customer | ||
Net sales | 5,962,000 | 5,268,000 |
Electro-mechanical assemblies | ||
Revenue from External Customer | ||
Net sales | 3,060,000 | 3,098,000 |
Large transformers | ||
Revenue from External Customer | ||
Net sales | 123,000 | 12,000 |
Total Torotel products | ||
Revenue from External Customer | ||
Net sales | $ 18,396,000 | $ 16,302,000 |
NET SALES BY PRODUCT LINE AND51
NET SALES BY PRODUCT LINE AND GEOGRAPHY (Details) | 12 Months Ended | |
Apr. 30, 2018USD ($)customer | Apr. 30, 2017USD ($)customer | |
Revenue from External Customer | ||
Net sales | $ | $ 18,396,000 | $ 16,302,000 |
Number of customers for given percentage annual sales volume | customer | 19 | |
Annual sales volume percentage | 90.00% | |
Number of major customers for given percentage consolidated net sales | customer | 2 | 2 |
Number of major customer | customer | 1 | 1 |
Major Customer One | ||
Revenue from External Customer | ||
Consolidated net sales percentage | 34.00% | 34.00% |
Consolidated net trade receivables | 36 | 27 |
Major Customer Two | ||
Revenue from External Customer | ||
Consolidated net sales percentage | 18.00% | 23.00% |
Domestic | ||
Revenue from External Customer | ||
Net sales | $ | $ 16,236,556 | $ 14,755,000 |
Foreign | ||
Revenue from External Customer | ||
Net sales | $ | $ 2,159,444 | $ 1,547,000 |