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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 9 Months Ended
Sep. 30, 2014
Summary Of Significant Accounting Policies  
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principal Business Activities

 

The Company, through AIM, is primarily engaged in manufacturing aircraft structural parts, and assemblies for prime defense contractors in the aerospace industry in the United States. Welding and AMK are specialty welding and products providers whose significant customers include the world's largest aircraft manufacturers, subcontractors, and original equipment manufacturers. NTW is a manufacturer of aerospace components, principally landing gear for F-16 and F-18 fighter aircraft.  The Company's customers consist mainly of publicly-traded companies in the aerospace industry.  Eur-Pac, as discussed above, specializes in military packaging and supplies.

 

Inventory Valuation

 

Inventory at September 30, 2014 and 2013 was computed based on a “gross profit” method.

 

The Company valued inventory at December 31, 2013 at the lower of cost on a first-in-first-out basis or market.

 

Credit and Concentration Risks

 

There were three customers that represented 68.3% and 58.9% of total net sales for the three months ended September 30, 2014 and 2013, respectively. This is set forth in the table below.

 

Customer   Percentage of  Net Sales
    2014   2013
    (Unaudited)   (Unaudited)
         
1   30.1   21.6
2   27.6   26.7
3   10.6   **
4   *   10.6
         
* Customer was less than 10% of net sales for the quarter ended September 30, 2014
** Customer was less than 10% of net sales for the quarter ended September 30, 2013

 

There were two customers that represented 48.8% of net sales and three customers that represented 58.7% of net sales for the nine months ended September 30, 2014 and 2013, respectively. This is set forth in the table below.

 

 

Customer   Percentage of  Net Sales
    2014   2013
    (Unaudited)   (Unaudited)
         
1   30.0   27.5
2   18.8   19.1
3   *   12.1
         
* Customer was less than 10% of net sales for the nine months ended September 30, 2014

 

 

There were four customers that represented 73.3% and two customers that represented 42.9% of gross accounts receivable at September 30, 2014 and December 31, 2013, respectively. This is set forth in the table below.

 

    Percentage of
Customer   Gross Accounts Receivable
    September 30,   December 31,
    2014   2013
    (Unaudited)    
         
1   25.0   20.1
2   24.7   22.8
3   12.0   *
4   11.6   *
         
* Customer was less than 10% of gross accounts receivables at December 31, 2013

 

The Company has occasionally maintained balances in its bank accounts that were in excess of the FDIC limit.  The Company has not experienced any losses on these accounts.

 

AIM has several sole-source suppliers of various parts that are used in one or more of its products. If any of these sole source suppliers were to go out of business or be unable to provide it parts for any reason, AIM would be required to develop new suppliers or to re-engineer its products, or both, which could delay shipment of products and have a material adverse effect on its operating results.

 

Earnings per share

 

Basic earnings per share is computed by dividing the net income applicable to common stockholders by the weighted-average number of shares of common stock outstanding for the period. Potentially dilutive shares, using the treasury stock method, are included in the diluted per-share calculation for all periods when the effect of their inclusion is dilutive.

 

 

The following is a reconciliation of the denominators of basic and diluted earnings per share computations:

 

    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
    2014     2013     2014     2013  
    (Unaudited)     (Unaudited)     (Unaudited)     (Unaudited)  
Weighted average shares outstanding used to compute basic earning per share     7,092,655       5,711,093       6,415,402       5,711,093  
Effect of dilutive stock options and warrants     296,031       142,922       296,341       116,944  
Weighted average shares outstanding and dilutive securities used to compute dilutive earnings per share     7,388,686       5,854,015       6,711,743       5,828,037  


The following securities have been excluded from the calculation as their effect would be anti-dilutive:

 

    Three and Nine Months Ended  
    September 30,     September 30,  
    2014     2013  
    (Unaudited)     (Unaudited)  
Stock Options     17,048       17,048  
Warrants     46,800       -  
      63,848       17,048  

 

Stock-Based Compensation

 

The Company accounts for stock-based compensation in accordance with FASB ASC 718, "Compensation – Stock Compensation." Under the fair value recognition provision of the ASC, stock-based compensation cost is estimated at the grant date based on the fair value of the award. The Company estimates the fair value of stock options and warrants granted using the Black-Scholes-Merton option pricing model. Stock-based compensation amounted to $10,000 and $9,000 for the three months ended September 30, 2014 and 2013, respectively, and $25,000 and $15,000 for the nine months ended September 30, 2014 and 2013 respectively, and was included in operating expenses on the accompanying Condensed Consolidated Statement of Income.

 

Goodwill

 

Goodwill represents the excess of the acquisition cost of businesses over the fair value of the identifiable net assets acquired. The goodwill amount of $4,620,000 relates to the acquisition of WMI ($291,000), NTW ($162,000), Woodbine ($2,402,000), Eur-Pac ($1,659,000) and ECC ($106,000). Goodwill is not amortized, but is tested at least annually for impairment, or if circumstances occur that more likely than not will reduce the fair value of the reporting unit below its carrying amount.  

 

The Company has determined that there has been no impairment of goodwill at September 30, 2014 and December 31, 2013.

 

Recently Issued Accounting Pronouncements

 

Effective January 1, 2014, the Company adopted Accounting Standards Update No. 2013-11, “Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists” (“ASU 2013-11”).  ASU 2013-11 is expected to reduce diversity in practice by providing guidance on the presentation of unrecognized tax benefits and will better reflect the manner in which an entity would settle at the reporting date any additional income taxes that would result from the disallowance of a tax position when net operating loss carryforwards, similar tax losses, or tax credit carryforwards exist. This guidance is effective prospectively for the Company for annual and interim periods beginning January 1, 2014.  The adoption of ASU 2013-11 did not have a material effect on the Company's financial position, results of operations or cash flows.

  

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers” (“ASU 2014-09”).  The amendments in ASU 2014-09 affect any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets unless those contracts are within the scope of other standards (e.g., insurance contracts or lease contracts). This ASU will supersede the revenue recognition requirements in ASC 605, “Revenue Recognition” and most industry-specific guidance and creates ASC 606, “Revenue from Contracts with Customers.”

 

The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve that core principle, an entity should apply the following steps:

 

Step 1: Identify the contract(s) with a customer.

Step 2: Identify the performance obligations in the contract.

Step 3: Determine the transaction price.

Step 4: Allocate the transaction price to the performance obligations in the contract.

Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation.

 

ASU 2014-09 is effective for public entities for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period.  The Company is currently evaluating the effects of the adoption of ASU 2014-09 on its consolidated financial statements.

 

In June 2014, the FASB issued ASU 2014-12, “Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period” (“ASU No. 2014-12”).  ASU No. 2014-12 requires that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. An entity should recognize compensation cost in the period in which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the periods for which the requisite service has already been rendered. If the performance target becomes probable of being achieved before the end of requisite service period, the remaining unrecognized compensation cost should be recognized prospectively over the remaining requisite service period. The total amount of compensation cost recognized during and after the requisite service period should reflect the number of awards that are expected to vest and should be adjusted to reflect those awards that ultimately vest. ASU 2014-12 becomes effective for interim and annual periods beginning on or after December 15, 2015. Early adoption is permitted.  The adoption of ASU 2014-12 is not expected to have a significant impact on the Company’s consolidated financial statements.

 

The Company does not believe that any other recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying financial statements.

 

Subsequent Events

 

Management has evaluated subsequent events through the date of this filing.