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Note 2 - Revised Prior Period Financial Statements | 12 Months Ended
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Dec. 31, 2022
Notes to Financial Statements |
Error Correction [Text Block] |
2. | Revised Prior Period Financial Statements
During the financial close for the fiscal year ended December 31, 2022, the Company discovered certain errors related to foreign currency translation in relation to our unconsolidated affiliate operations in India. In periods prior to January 1, 2021, the Company should have recognized approximately $773,000 loss in accumulated other comprehensive income (“AOCI”) related to changes in foreign currency exchange rates as our unconsolidated affiliate operation are in India. For the year ended December 31, 2021, the Company should have recognized an additional loss of approximately $96,000 for a total loss in AOCI of approximately $869,000. As a result, the Company adjusted its value in equity investment in unconsolidated affiliate in total assets and accumulated other comprehensive loss (“AOCL”) in shareholders’ equity on the balance sheet, and on the consolidated statements of shareholder’s equity. As the resulting foreign currency translation gains or losses are deferred as AOCL and reclassified to earnings only upon sale or liquidation of that business, the Company has included the adjustments in the consolidated statements of comprehensive income (loss). There was no impact on retained earnings because, as stated above, the effect on earnings is only recorded upon sale or liquidation of our unconsolidated affiliate. These revisions resulted in a decrease in equity investment of unconsolidated affiliate, an increase in accumulated other comprehensive loss and a decrease in total shareholders’ equity, but no effect on net income, earnings per share or cash flows. Management has determined that this revision was not material on a quantitative or qualitative basis to the prior period financial statements based on our analysis performed in accordance with the guidance provided by SEC Staff Accounting Bulletins No. 99 – Materiality and No. 108 – Considering the Effects of Prior Year Misstatements. However, management has determined that the cumulative effect of the errors was material on the current year balance sheet. As discussed at Note 7, the Company owns an equity investment in an unconsolidated affiliate that is based in India. U.S. generally accepted accounting principles (“U.S. GAAP”) requires that the investment be adjusted each period to reflect changes in its value in dollars due to fluctuation in the exchange rate with the Indian rupee, with an offsetting entry to other comprehensive loss. Since the inception of the investment in 2005 through 2021, these required adjustments erroneously were not recorded. The Company has determined that the impact of adjustments relating to the corrections of this accounting error is not material to previously issued annual audited and unaudited financial statements and as such no restatement was necessary. Correcting prior year financial statements for immaterial errors would not require previously filed reports to be amended. Such correction may be made the next time the registrant files the prior year financial statements. However, correcting the cumulative error in the current year would be material to the current year. Accordingly, these misstatements were corrected and the adjustments are reflected in the related periods as noted below. The correction of these errors and the adjustments for these changes to the Company’s previously issued audited annual consolidated financial statements are shown in the table below, and the correction of these errors and the adjustments to the previously issued unaudited quarterly consolidated financial statements are shown in Note 19 to the financial statements.
Consolidated Balance Sheets |  |  |  |  |  |  |  |  |  |  |  |
|  | Previously |  |  | (1) |  |  |  |  |
|  | Reported |  |  | Adjustments |  |  | Revised |
As of December 31, 2021 |  |  |  |  |  |  |  |  |  |  |  |
Assets |  |  |  |  |  |  |  |  |  |  |  |
Current assets: |  |  |  |  |  |  |  |  |  |  |  |
Cash and cash equivalents |  | $ | 16,307,000 |  |  | $ | - |  |  | $ | 16,307,000 |
Accounts receivable, net of allowance for doubtful accounts of $64,000 as of December 31, 2021 and $71,000 as of December 31, 2020 |  |  | 3,397,000 |  |  |  | - |  |  |  | 3,397,000 |
Accounts receivable, related party |  |  | 1,383,000 |  |  |  | - |  |  |  | 1,383,000 |
Inventories |  |  | 24,969,000 |  |  |  | - |  |  |  | 24,969,000 |
Prepaid expenses |  |  | 6,943,000 |  |  |  | - |  |  |  | 6,943,000 |
Total current assets |  |  | 52,999,000 |  |  |  | - |  |  |  | 52,999,000 |
Property and equipment, net |  |  | 6,064,000 |  |  |  | - |  |  |  | 6,064,000 |
Goodwill |  |  | 55,000 |  |  |  | - |  |  |  | 55,000 |
Definite-lived intangible assets, net |  |  | 3,000 |  |  |  | - |  |  |  | 3,000 |
Right-of-use assets |  |  | 2,648,000 |  |  |  | - |  |  |  | 2,648,000 |
Equity investment in unconsolidated affiliate |  |  | 6,120,000 |  |  |  | (869,000 | ) |  |  | 5,251,000 |
Total assets |  | $ | 67,889,000 |  |  | $ | (869,000 | ) |  | $ | 67,020,000 |
Liabilities and Shareholders' Equity |  |  |  |  |  |  |  |  |  |  |  |
Current liabilities: |  |  |  |  |  |  |  |  |  |  |  |
Accounts payable |  | $ | 528,000 |  |  | $ | - |  |  | $ | 528,000 |
Accrued liabilities |  |  | 1,250,000 |  |  |  | - |  |  |  | 1,250,000 |
Lease liabilities |  |  | 883,000 |  |  |  | - |  |  |  | 883,000 |
Total current liabilities |  |  | 2,661,000 |  |  |  | - |  |  |  | 2,661,000 |
Lease liabilities, net of current portion |  |  | 1,817,000 |  |  |  | - |  |  |  | 1,817,000 |
Deferred income tax liabilities, net |  |  | 791,000 |  |  |  | - |  |  |  | 791,000 |
Total liabilities |  |  | 5,269,000 |  |  |  | - |  |  |  | 5,269,000 |
Commitments and contingincies |  |  |  |  |  |  |  |  |  |  |  |
Shareholders' equity: |  |  |  |  |  |  |  |  |  |  |  |
Common stock, $.01 par value: 50,000,000 shares authorized; 13,115,341 shares outstanding as of December 31, 2021 |  |  | 132,000 |  |  |  | - |  |  |  | 132,000 |
Retained earnings |  |  | 62,488,000 |  |  |  | - |  |  |  | 62,488,000 |
Accumulated other comprehensive loss |  |  | - |  |  |  | (869,000 | ) |  |  | (869,000 | )
Total shareholders' equity |  |  | 62,620,000 |  |  |  | (869,000 | ) |  |  | 61,751,000 |
Total liabilities and shareholders' equity |  | $ | 67,889,000 |  |  | $ | (869,000 | ) |  | $ | 67,020,000 |
| (1) | Equity investment in unconsolidated affiliate and accumulated other comprehensive loss have been adjusted by a total of $869,000, of which $773,000 pertains to periods prior to 2021 and $96,000 pertains to 2021.
footnote
Consolidated Statements of Comprehensive Income |  |  |  |  |  |  |  |  |  |  |  |
|  | Year Ended December 31, 2021 |
|  | Previously |  |  |  |  |  |  |  |  |
|  | Reported |  |  | Adjustments |  |  | Revised |
Net Income |  | $ | 6,756,000 |  |  | $ | - |  |  | $ | 6,756,000 |
Other comprehensive loss- foreign currency translation loss |  |  | - |  |  |  | (96,000 | ) |  |  | (96,000 | )
Comprehensive income |  | $ | 6,756,000 |  |  | $ | (96,000 | ) |  | $ | 6,660,000 |
Consolidated Statements of Shareholder's Equity |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Accumulated |  |  |  |  |
|  |  |  |  |  |  |  |  |  | Additional |  |  |  |  |  |  | Other |  |  |  |  |
|  | Common Stock |  |  | Paid-in |  |  | Retained |  |  | Comprehensive |  |  |  |  |
|  | Shares |  |  | Amount |  |  | Capital |  |  | Earnings |  |  | Loss* |  |  | Total |
Balance as of December 31, 2020 as revised |  |  | 13,419,847 |  |  | $ | 135,000 |  |  | $ | 409,000 |  |  | $ | 58,986,000 |  |  | $ | (773,000 | ) |  | $ | 58,757,000 |
Common stock repurchased and retired |  |  | (439,000 | ) |  |  | (4,000 | ) |  |  | (1,150,000 | ) |  |  | (3,254,000 | ) |  |  | - |  |  |  | (4,408,000 | )
Options exercised |  |  | 134,494 |  |  |  | 1,000 |  |  |  | 426,000 |  |  |  | - |  |  |  | - |  |  |  | 427,000 |
Share-based compensation expense |  |  | - |  |  |  | - |  |  |  | 315,000 |  |  |  | - |  |  |  | - |  |  |  | 315,000 |
Total comprehensive income (loss) as revised |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 6,756,000 |  |  |  | (96,000 | ) |  |  | 6,660,000 |
Balance as of December 31, 2021 as revised |  |  | 13,115,341 |  |  | $ | 132,000 |  |  | $ | - |  |  | $ | 62,488,000 |  |  | $ | (869,000 | ) |  | $ | 61,751,000 |
* This was previously reported as $0 and the total column has also been updated for this change to AOCL. The correcting adjustments had no effect on prior year’s Consolidated Statements of Income or Consolidated Statements of Cash Flows.

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