NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS
Interim Financial Statements
The accompanying unaudited consolidated
financial statements of Technical Communications Corporation and its wholly-owned subsidiary (collectively the “Company”
or “TCC”) include all adjustments which are, in the opinion of management, necessary for a fair presentation of the
financial position and results of operations for the periods presented and in order to make the financial statements not misleading.
All such adjustments are of a normal recurring nature. Interim results are not necessarily indicative of the results to be expected
for the fiscal year ending September 29, 2018.
Certain footnote disclosures normally included
in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted as
allowed by Securities and Exchange Commission (“SEC”) rules and regulations. The accompanying unaudited consolidated
financial statements should be read in conjunction with the Company’s consolidated financial statements and the notes thereto
in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2017 as filed with the SEC.
We follow accounting standards set by the
Financial Accounting Standards Board, commonly referred to as the FASB. The FASB sets generally accepted accounting principles
(“GAAP”) that we follow to ensure we consistently report our financial condition, results of operations, and cash flows.
References to GAAP issued by the FASB in these footnotes are to the
FASB Accounting Standards Codification
TM
-
sometimes referred to as the Codification or ASC.
Liquidity
and Ability to Continue as a Going Concern
The Company has
suffered recurring losses from operations and had an accumulated deficit of $875,000 at December 30, 2017. These factors raise
substantial doubt about the Company's ability to continue as a going concern within one year from the issuance date of the unaudited
consolidated financial statements. The unaudited consolidated financial statements do not include any adjustments to reflect the
uncertainty about the Company’s ability to continue as a going concern.
We
anticipate that our principal sources of liquidity will only be sufficient to fund our activities through December 31, 2018. In
order to have sufficient cash to fund our operations beyond December 31, 2018, we will need to secure new customer contracts, raise
additional equity or debt capital or reduce expenses, including payroll and payroll-related expenses.
In
order to have sufficient capital resources to fund operations, the Company has been working diligently to secure several large
orders with new and existing customers. In addition we are also pursuing raising capital through equity or debt arrangements. Although
we believe our ability to secure such new business or raise new capital is likely, we cannot provide assurances we will be able
to do so.
Should
we be unsuccessful in these efforts, we would then be forced to implement headcount reductions, employee furloughs and/or reduced
hours for certain employees.
|
NOTE 1.
|
Summary of Significant Accounting Policies
and Significant Judgments and Estimates
|
Basis of Presentation
The accompanying unaudited consolidated
financial statements include the accounts of the Company and its wholly-owned subsidiary. All significant intercompany accounts
and transactions have been eliminated in consolidation.
The discussion and analysis of our financial
condition and results of operations are based on our unaudited consolidated financial statements, which have been prepared in accordance
with GAAP. The preparation of these unaudited consolidated financial statements requires management to make estimates and judgments
that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date
of the financial statements and the reported revenues and expenses during the reporting periods.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS (Cont’d)
On an ongoing basis, management evaluates
its estimates and judgments, including but not limited to those related to revenue recognition, inventory reserves, receivable
reserves, marketable securities, impairment of long-lived assets, income taxes, fair value of financial instruments and stock-based
compensation. Management bases its estimates on historical experience and on various other factors that are believed to be reasonable
under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities
that are not readily apparent from other sources. By their nature, estimates are subject to an inherent degree of uncertainty.
Actual results may differ from these estimates under different assumptions or conditions.
The accounting policies that management
believes are most critical to aid in fully understanding and evaluating our reported financial results include the following:
Revenue Recognition
Product revenue is recognized when there
is persuasive evidence of an arrangement, the fee is fixed or determinable, delivery of the product and passage of title to the
customer has occurred and we have determined that collection of the fee is probable. Title to the product generally passes upon
shipment of the product, as the products are shipped freight on board shipping point, except for certain foreign shipments for
which title passes upon entry of the product into the first port in the buyer’s country. If the product requires installation
to be performed by TCC, or other acceptance criteria exist, all revenue related to the product is deferred and recognized upon
completion of the installation or satisfaction of the customer acceptance criteria. We provide for a warranty reserve at the time
the product revenue is recognized.
We perform funded research and development
and technology development for commercial companies and government agencies under both cost reimbursement and fixed-price contracts.
Cost reimbursement contracts provide for the reimbursement of allowable costs and, in some situations, the payment of a fee. These
contracts may contain incentive clauses providing for increases or decreases in the fee depending on how actual costs compare with
a budget. Revenue from cost reimbursement contracts is recognized as services are performed. On fixed-price contracts that are
expected to exceed one year in duration, revenue is recognized pursuant to the proportional performance method based upon the proportion
of actual costs incurred to date to the total estimated costs for the contract. In each type of contract, we receive periodic progress
payments or payments upon reaching interim milestones, and we retain the rights to the intellectual property developed in government
contracts. All payments to TCC for work performed on contracts with agencies of the U.S. government are subject to audit and adjustment
by the Defense Contract Audit Agency, the U.S. Government Accountability Office and other agencies. Adjustments are recognized
in the period made. There have been no government audits in recent years and the Company believes the result of such audits, should
they occur, would not have a material adverse effect on its financial position or results of operations. When current estimates
of total contract revenue and contract costs for a product development contract indicate a loss, a provision for the entire loss
on the contract is recorded. Any losses incurred in performing funded research and development projects are recognized as funded
research and development expenses.
Cost of product revenue includes material,
labor and overhead. Costs incurred in connection with funded research and development are included in cost of sales.
Product
development costs are charged to billable engineering services, bid and proposal efforts or business development activities, as
appropriate. Product development costs charged to billable projects are recorded as cost of sales; engineering costs charged to
bid and proposal efforts are recorded as selling expenses; and product development costs charged to business development activities
are recorded as marketing expenses. Product development costs consist primarily of costs associated with personnel, outside contractor
and engineering services, supplies and materials.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS (Cont’d)
Inventories
We value our inventory at the lower of
cost (based on the first-in, first-out method) to purchase and/or manufacture and net realizable value (based on the estimated
selling prices, less reasonably predictable costs of completion, disposal, and transportation.) of the inventory. We periodically
review inventory quantities on hand and record a provision for excess and/or obsolete inventory based primarily on our estimated
forecast of product demand, as well as historical usage. The Company evaluates the carrying value of inventory on a quarterly basis
to determine whether the carrying value is in excess of net realizable value. To the extent that net realizable value is less than
the associated carrying values, inventory carrying values are written down. In addition, the Company makes judgments as to future
demand requirements and compares those with the current or committed inventory levels. Reserves are established for inventory levels
that exceed future demand. It is possible that additional reserves above those already established may be required in the future
if market conditions for our products should deteriorate.
Accounts Receivable
Accounts receivable are reduced by an allowance
for amounts that may become uncollectible in the future. The estimated allowance for uncollectible amounts is based primarily on
a specific analysis of accounts in the receivable portfolio and historical write-off experience. While management believes no allowance
is currently needed, if the financial condition of our customers were to deteriorate, resulting in an impairment of their ability
to make payments, additional allowances may be required, which would reduce net income.
In
addition, if the Company becomes aware of a customer’s inability to meet its financial obligations, a specific write-off
is recorded in that amount.
Accounting for Income Taxes
The preparation of our unaudited consolidated
financial statements requires us to estimate our income taxes in each of the jurisdictions in which we operate, including those
outside the United States, which may subject the Company to certain risks that ordinarily would not be expected in the United States.
The income tax accounting process involves estimating our actual current exposure together with assessing temporary differences
resulting from differing treatments of items, such as inventory obsolescence and stock-based compensation, for tax and accounting
purposes. These differences result in the recognition of deferred tax assets and liabilities. We must then record a valuation allowance
to reduce our deferred tax assets to the amount that is more likely than not to be realized.
Significant management judgment is required
in determining our provision for income taxes, our deferred tax assets and liabilities, and any valuation allowance recorded against
deferred tax assets. At December 30, 2017 and September 30, 2017, we recorded a full valuation allowance against our net deferred
tax assets of approximately $4.7 million due to uncertainties related to our ability to realize these assets. The valuation allowance
is based on our estimates of taxable income by jurisdiction and the period over which our deferred tax assets will be recoverable.
In the event that actual results differ from these estimates or we adjust these estimates in future periods, we may need to adjust
our valuation allowance, which could materially impact our financial position and results of operations.
The Company follows FASB ASC 740-10,
Income
Taxes
, relative to uncertain tax positions. This standard provides detailed guidance for the financial statement recognition,
measurement and disclosure of uncertain tax positions recognized in the financial statements. Uncertain tax positions must meet
a recognition threshold of more-likely-than-not in order for those tax positions to be recognized in the financial statements.
Due to the nature of our current operations
in foreign countries (selling products into these countries with the assistance of local representatives), the Company has not
been subject to any foreign taxes in recent years, and it is not anticipated that we will be subject to foreign taxes in the near
future.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS (Cont’d)
Fair Value Measurements
In determining fair value measurements,
the Company follows the provisions of FASB ASC 820,
Fair Value Measurements and Disclosures
. FASB ASC 820 defines fair value,
establishes a framework for measuring fair value under GAAP and enhances disclosures about fair value measurements. The topic provides
a consistent definition of fair value which focuses on an exit price, which is the price that would be received to sell an asset
or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The topic also prioritizes,
within the measurement of fair value, the use of market-based information over entity-specific information and establishes a three-level
hierarchy for fair value measurements based on the nature of inputs used in the valuation of an asset or liability as of the measurement
date. At December 30, 2017 and September 30, 2017, the carrying amounts of cash and cash equivalents, restricted cash, accounts
receivable, marketable securities, other current assets, accounts payable and accrued liabilities approximate fair value because
of their short-term nature.
The three-level hierarchy is as follows:
Level 1 -
|
Pricing inputs are quoted prices available in active markets for identical assets or liabilities as of the measurement date.
|
Level 2 -
|
Pricing inputs are quoted prices for similar assets or liabilities, or inputs that are observable, either directly or indirectly, for substantially the full term through corroboration with observable market data.
|
Level 3 -
|
Pricing inputs are unobservable for the assets or liabilities, that is, inputs that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability.
|
In certain cases, the inputs used to measure
fair value may fall into different levels of the fair value hierarchy. In such cases, an asset’s or liability’s level
within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement.
The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires
judgment, and considers factors specific to the investment.
The Company’s held to maturity securities
are comprised of investments in municipal bonds. These securities represent ownership in individual bonds issued by municipalities
within the United States. The value of these securities is disclosed in Note 6. The Company’s available for sale securities
consist of mutual funds held in money market mutual funds in a brokerage account, which are classified as cash equivalents and
measured at fair value.
The Company assesses the levels of the
investments at each measurement date, and transfers between levels are recognized on the actual date of the event or change in
circumstances that caused the transfer in accordance with the Company’s accounting policy regarding the recognition of transfers
between levels of the fair value hierarchy. During the three month period ended December 30, 2017 and the year ended September
30, 2017, there were no transfers between levels.
The following table sets forth by level,
within the fair value hierarchy, the assets measured at fair value on a recurring basis as of December 30, 2017 and September 30,
2017, in accordance with the fair value hierarchy as defined above. As of December 30, 2017 and September 30, 2017, the Company
did not hold any assets classified as Level 2 or Level 3.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS (Cont’d)
|
|
|
|
|
Quoted Prices in
|
|
|
|
|
|
|
|
|
|
Active Markets for
|
|
|
Significant Other
|
|
|
|
|
|
|
Identical Assets
|
|
|
Observable Inputs
|
|
|
|
Total
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
December 30, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Equivalents
|
|
|
|
|
|
|
|
|
|
|
|
|
Mutual funds:
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds
|
|
$
|
1,007,294
|
|
|
$
|
1,007,294
|
|
|
$
|
-
|
|
Total mutual funds
|
|
|
1,007,294
|
|
|
|
1,007,294
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
1,007,294
|
|
|
$
|
1,007,294
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Equivalents
|
|
|
|
|
|
|
|
|
|
|
|
|
Mutual funds:
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds
|
|
$
|
851,195
|
|
|
$
|
851,195
|
|
|
$
|
-
|
|
Total mutual funds
|
|
|
851,195
|
|
|
|
851,195
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
851,195
|
|
|
$
|
851,195
|
|
|
$
|
-
|
|
There were no assets or liabilities measured
at fair value on a nonrecurring basis at December 30, 2017 or September 30, 2017.
Stock-Based Compensation
Stock-based compensation cost is measured
at the grant date based on the calculated fair value of the award. The expense is recognized over the participant’s requisite
service period, generally the vesting period of the award. The related excess tax benefit received upon the exercise of stock options,
if any, is reflected in the Company’s statement of cash flows as a financing activity. There were no excess tax benefits
recorded during the three month periods ended December 30, 2017 and December 31, 2016.
The Company uses the Black-Scholes option
pricing model as the method for determining the estimated fair value of its stock awards. The Black-Scholes method of valuation
requires several assumptions: (1) the expected term of the stock award, (2) the expected future stock price volatility over the
expected term, (3) a risk-free interest rate and (4) the expected dividend rate.
The expected term represents the expected
period of time the Company believes the options will be outstanding based on historical information. Estimates of expected future
stock price volatility are based on the historic volatility of the Company’s common stock, and the risk free interest rate
is based on the U.S. Treasury Note rate. The Company utilizes a forfeiture rate based on an analysis of its actual experience.
The forfeiture rate is not material to the calculation of share-based compensation. There were 500 options granted during the three
month period ended December 30, 2017 and none during the three month period ended December 31, 2016.
The following table summarizes stock-based
compensation costs included in the Company’s consolidated statements of operations for the three month periods ended December
30, 2017 and December 31, 2016:
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
Selling, general and administrative expenses
|
|
$
|
3,905
|
|
|
$
|
2,740
|
|
Product development expenses
|
|
|
272
|
|
|
|
272
|
|
Total share-based compensation expense before taxes
|
|
$
|
4,177
|
|
|
$
|
3,012
|
|
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS (Cont’d)
As of December 30, 2017 and December 31,
2016, there was $51,651 and $43,006, respectively, of unrecognized compensation expense related to options outstanding. The unrecognized
compensation expense will be recognized over the remaining requisite service period. As of December 30, 2017 and December 31, 2016,
the weighted average period over which the compensation expense is expected to be recognized is 3.4 and 3.8 years, respectively.
The Technical Communications Corporation
2005 Non-Statutory Stock Option Plan and 2010 Equity Incentive Plan were outstanding at December 30, 2017. There are an aggregate
of 600,000 shares authorized for issuance under these plans, of which options to purchase 246,781 shares were outstanding at December
30, 2017. Vesting periods are at the discretion of the Board of Directors and typically range between zero and five years. Options
under these plans are granted with an exercise price equal to fair market value at time of grant and have a term of ten years from
the date of grant.
As of December 30, 2017, there were 240,219
shares available for grant under the 2010 Equity Incentive Plan. The 2005 Non-Statutory Stock Option Plan has expired and options
are no longer available for grant under such plan.
The following table summarizes stock option
activity during the first three months of fiscal 2018:
|
|
Options Outstanding
|
|
|
Number of Shares
|
|
|
Weighted Average
|
|
|
Weighted Average
|
|
|
Unvested
|
|
|
Vested
|
|
|
Total
|
|
|
Exercise Price
|
|
|
Contractual Life
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding, September 30, 2017
|
|
|
34,200
|
|
|
|
212,081
|
|
|
|
246,281
|
|
|
$
|
8.36
|
|
|
3.95 years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Grants
|
|
|
500
|
|
|
|
-
|
|
|
|
500
|
|
|
|
4.85
|
|
|
|
Vested
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
Exercises
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
Cancellations/forfeitures
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding, December 30, 2017
|
|
|
34,700
|
|
|
|
212,081
|
|
|
|
246,781
|
|
|
$
|
8.35
|
|
|
3.72 years
|
Information related to the stock options
vested and expected to vest as of December 30, 2017 is as follows:
|
|
|
|
|
Weighted-Average
|
|
|
|
|
|
|
|
|
Exercisable
|
|
|
|
|
|
|
Remaining
|
|
|
Weighted
|
|
|
Exercisable
|
|
|
Weighted-
|
|
Range of
|
|
Number of
|
|
|
Contractual
|
|
|
Average
|
|
|
Number of
|
|
|
Average
|
|
Exercise Prices
|
|
Shares
|
|
|
Life (years)
|
|
|
Exercise Price
|
|
|
Shares
|
|
|
Exercise Price
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$2.01 - $3.00
|
|
|
28,000
|
|
|
|
8.62
|
|
|
$
|
2.70
|
|
|
|
2,800
|
|
|
$
|
2.90
|
|
$4.01 - $5.00
|
|
|
41,000
|
|
|
|
4.70
|
|
|
|
4.53
|
|
|
|
32,100
|
|
|
|
4.65
|
|
$5.01 - $10.00
|
|
|
59,000
|
|
|
|
2.66
|
|
|
|
7.55
|
|
|
|
58,400
|
|
|
|
7.56
|
|
$10.01 - $15.00
|
|
|
118,781
|
|
|
|
2.75
|
|
|
|
11.40
|
|
|
|
118,781
|
|
|
|
11.40
|
|
|
|
|
246,781
|
|
|
|
3.72
|
|
|
$
|
8.35
|
|
|
|
212,081
|
|
|
$
|
9.21
|
|
The aggregate intrinsic value of the Company’s
“in-the-money” outstanding and exercisable options as of December 30, 2017 and December 31, 2016 was $482,282 and $0,
respectively. Nonvested stock options are subject to the risk of forfeiture until the fulfillment of specified conditions.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS (Cont’d)
Inventories consisted of the following:
|
|
December 30, 2017
|
|
|
September 30, 2017
|
|
|
|
|
|
|
|
|
Finished goods
|
|
$
|
8,015
|
|
|
$
|
20,759
|
|
Work in process
|
|
|
264,166
|
|
|
|
383,216
|
|
Raw materials
|
|
|
1,130,307
|
|
|
|
954,369
|
|
|
|
$
|
1,402,488
|
|
|
$
|
1,358,344
|
|
The Company has not recorded an income
tax benefit on its net loss for the three month periods ended December 30, 2017 and December 31, 2016 due to its uncertain realizability.
During previous fiscal years, the Company recorded a valuation allowance for the full amount of its net deferred tax assets since
it could not predict the realization of these assets.
On December 22, 2017, the Tax Cuts and
Jobs Act (“the Act”) was signed into law by the President of the United States. The Act includes a number of changes,
including the lowering of the U.S. corporate tax rate from 35% to 21%, effective January 1, 2018, The Company has determined and
completed the accounting for certain income tax effects of the Act in applying FASB ASC 740 to the current reporting period. As
the Company records a valuation allowance for its entire deferred income tax asset, there was no impact to the reported amounts
in these unaudited consolidated financial statements as a result of the Act.
Outstanding potentially dilutive stock
options, which were not included in the net loss per share amounts as their effect would have been anti-dilutive, were as follows:
246,781 shares at December 30, 2017 and 242,281 shares at December 31, 2016.
|
NOTE 5.
|
Major
Customers and Export Sales
|
During the three months ended December
30, 2017, the Company had one customer that represented 81% of net sales as compared to the three months ended December 31, 2016,
during which two customers represented 96% (84% and 12%, respectively) of net sales.
A breakdown of foreign and domestic net
sales for first quarters of fiscal 2018 and 2017 is as follows:
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
Domestic
|
|
$
|
987,535
|
|
|
$
|
531,789
|
|
Foreign
|
|
|
129,058
|
|
|
|
99,832
|
|
Total sales
|
|
$
|
1,116,593
|
|
|
$
|
631,621
|
|
The
Company sold products into four countries during the three month period ended December 30, 2017 and three countries during the
three month period ended December 31, 2016. A sale is attributed to a foreign country based on the location of the contracting
party. Domestic revenue may include the sale of products shipped through domestic resellers or manufacturers to international destinations.
The table below summarizes our foreign revenues by country as a percentage of total foreign revenue for the first quarters of fiscal
2018 and 2017.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS (Cont’d)
|
|
Fiscal Year
|
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
Philippines
|
|
|
54
|
%
|
|
|
-
|
|
Jordan
|
|
|
10
|
%
|
|
|
78
|
%
|
Taiwan
|
|
|
-
|
|
|
|
16
|
%
|
Saudi Arabia
|
|
|
27
|
%
|
|
|
6
|
%
|
Egypt
|
|
|
9
|
%
|
|
|
-
|
|
A summary of foreign revenue, as a percentage of total foreign
revenue by geographic area, for the first quarters of fiscal 2018 and 2017 is as follows:
|
|
Fiscal Year
|
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
Mid-East and Africa
|
|
|
46
|
%
|
|
|
84
|
%
|
Far East
|
|
|
54
|
%
|
|
|
16
|
%
|
|
NOTE 6.
|
Cash
Equivalents and Marketable Securities
|
The Company considers all highly liquid
instruments with an original maturity of three months or less to be cash equivalents. Cash equivalents are invested in money market
mutual funds. Money market mutual funds held in a brokerage account are considered available for sale. The Company accounts for
marketable securities in accordance with FASB ASC 320,
Investments—Debt and Equity Securities.
All marketable securities
must be classified as one of the following: held to maturity, available for sale, or trading. The Company classifies its marketable
securities as either available for sale or held to maturity.
Available for sale securities are carried
at fair value, with unrealized holding gains and losses reported in stockholders’ equity as a separate component of accumulated
other comprehensive income (loss). Held to maturity securities are carried at amortized cost. The cost of securities sold is determined
based on the specific identification method. Realized gains and losses, and declines in value judged to be other than temporary,
are included in investment income.
As of December 30, 2017, available for sale securities consisted
of the following:
|
|
|
|
|
Gross Unrealized
|
|
|
Estimated
|
|
|
|
|
|
|
|
Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
Fair Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market mutual funds
|
|
$
|
1,007,294
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
1,007,294
|
|
|
|
|
|
As of December 30, 2017, held to maturity securities consisted
of the following:
|
|
|
|
|
Accrued
|
|
|
Amortization
|
|
|
Amortized
|
|
|
Unrealized
|
|
|
Estimated
|
|
|
|
Cost
|
|
|
Interest
|
|
|
Bond Premium
|
|
|
Cost
|
|
|
Losses
|
|
|
Fair Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Municipal bonds
|
|
$
|
234,273
|
|
|
$
|
3,694
|
|
|
$
|
33,286
|
|
|
$
|
204,681
|
|
|
$
|
(101
|
)
|
|
$
|
204,580
|
|
As of September 30, 2017, available for sale securities consisted
of the following:
|
|
|
|
|
Accrued
|
|
|
Gross Unrealized
|
|
|
Estimated
|
|
|
|
Cost
|
|
|
Interest
|
|
|
Gains
|
|
|
Losses
|
|
|
Fair Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market mutual funds
|
|
$
|
851,195
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
851,195
|
|
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS (Cont’d)
As of September 30, 2017, held to maturity securities consisted
of the following:
|
|
|
|
|
Accrued
|
|
|
Amortization
|
|
|
Amortized
|
|
|
Unrealized
|
|
|
Estimated
|
|
|
|
Cost
|
|
|
Interest
|
|
|
Bond Premium
|
|
|
Cost
|
|
|
Gains
|
|
|
Fair Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Municipal bonds
|
|
$
|
412,366
|
|
|
$
|
6,986
|
|
|
$
|
59,099
|
|
|
$
|
360,253
|
|
|
$
|
216
|
|
|
$
|
360,469
|
|
The contractual maturities of held to maturity
securities as of December 30, 2017 were all within one year.
The Company’s available for sale securities were included
in the cash and cash equivalents caption in the consolidated balance sheets.
|
NOTE
7
|
Cost
Method Investment
|
On October 30, 2014, the Company made an
investment of $275,000 to purchase 11,000 shares of common stock of PulsedLight, Inc., an early stage start-up company located
in Bend, Oregon. The investment represented a 10.8% ownership stake in the company at the time of purchase and was accounted for
utilizing the cost method of accounting. On January 12, 2016, the Company entered into an agreement to sell its shares in PulsedLight.
The net proceeds to the Company after closing costs and certain liabilities amounted to $737,283, of which the Company received
$661,466 at closing and of which $75,817 was deposited in an escrow account in accordance with the terms of the sale that required
10% of the proceeds to be held in escrow for one year. The escrow balance as of December 31, 2016 is included in other current
assets within the accompanying consolidated balance sheet. The escrow balance was received by the Company in January 2017.