Company Quick10K Filing
Cyberoptics
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$0.00 7 $121
10-Q 2019-11-06 Quarter: 2019-09-30
10-Q 2019-08-07 Quarter: 2019-06-30
10-Q 2019-05-08 Quarter: 2019-03-31
10-K 2019-03-12 Annual: 2018-12-31
10-Q 2018-11-06 Quarter: 2018-09-30
10-Q 2018-08-07 Quarter: 2018-06-30
10-Q 2018-05-08 Quarter: 2018-03-31
10-K 2018-03-09 Annual: 2017-12-31
10-Q 2017-11-06 Quarter: 2017-09-30
10-Q 2017-08-07 Quarter: 2017-06-30
10-Q 2017-05-08 Quarter: 2017-03-31
10-K 2017-03-14 Annual: 2016-12-31
10-Q 2016-11-08 Quarter: 2016-09-30
10-Q 2016-08-08 Quarter: 2016-06-30
10-Q 2016-05-06 Quarter: 2016-03-31
10-K 2016-03-09 Annual: 2015-12-31
10-Q 2015-11-06 Quarter: 2015-09-30
10-Q 2015-08-07 Quarter: 2015-06-30
10-Q 2015-05-07 Quarter: 2015-03-31
10-K 2015-03-12 Annual: 2014-12-31
10-Q 2014-11-12 Quarter: 2014-09-30
10-Q 2014-08-13 Quarter: 2014-06-30
10-Q 2014-05-13 Quarter: 2014-03-31
10-K 2014-03-28 Annual: 2013-12-31
10-Q 2013-11-12 Quarter: 2013-09-30
10-Q 2013-08-09 Quarter: 2013-06-30
10-Q 2013-05-13 Quarter: 2013-03-31
10-K 2013-03-13 Annual: 2012-12-31
10-Q 2012-11-09 Quarter: 2012-09-30
10-Q 2012-08-10 Quarter: 2012-06-30
10-Q 2012-05-10 Quarter: 2012-03-31
10-K 2012-03-15 Annual: 2011-12-31
10-Q 2011-11-09 Quarter: 2011-09-30
10-Q 2011-08-10 Quarter: 2011-06-30
10-Q 2011-05-11 Quarter: 2011-03-31
10-K 2011-03-10 Annual: 2010-12-31
10-Q 2010-11-08 Quarter: 2010-09-30
10-Q 2010-08-09 Quarter: 2010-06-30
10-Q 2010-05-10 Quarter: 2010-03-31
10-K 2010-03-11 Annual: 2009-12-31
8-K 2019-10-23
8-K 2019-07-24 Earnings, Regulation FD, Exhibits
8-K 2019-07-02 Earnings, Exhibits
8-K 2019-06-18 Accountant, Exhibits
8-K 2019-05-16 Shareholder Vote
8-K 2019-04-24 Earnings, Exhibits
8-K 2019-02-19 Earnings, Exhibits
8-K 2018-10-24 Earnings, Exhibits
8-K 2018-07-25 Earnings, Exhibits
8-K 2018-05-10 Officers, Shareholder Vote, Exhibits
8-K 2018-04-24 Earnings, Exhibits
8-K 2018-02-15 Earnings, Officers, Exhibits
CYBE 2019-09-30
Part I. Financial Information
Item 1. Interim Condensed Consolidated Financial Statements
Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3 - Quantitative and Qualitative Disclosures About Market Risk
Item 4 - Controls and Procedures
Part II. Other Information
Item 1 - Legal Proceedings
Item 1A - Risk Factors
Item 2 - Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities
Item 3 - Defaults Upon Senior Securities
Item 4 - Mine Safety Disclosures
Item 5 - Other Information
Item 6 - Exhibits
EX-31.1 ex311_1.htm
EX-31.2 ex312_2.htm
EX-32 ex32_3.htm

Cyberoptics Earnings 2019-09-30

CYBE 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

Comparables ($MM TTM)
Ticker M Cap Assets Liab Rev G Profit Net Inc EBITDA EV G Margin EV/EBITDA ROA
TESS 161 230 125 587 116 2 6 162 20% 27.8 1%
CYBE 121 73 15 65 29 3 7 111 44% 16.4 4%
RADA 100 54 12 0 0 0 0 78 0%
VOXX 97 498 106 439 120 -46 -34 43 27% -1.3 -9%
PRCP 52 63 21 77 27 -7 -4 47 35% -11.7 -11%
CUI 25 79 40 98 30 -15 -12 22 31% -1.9 -18%
TAIT 18 14 1 8 4 1 2 14 46% 9.2 10%
AWSM 14 13 21 20 5 -31 -30 24 28% -0.8 -233%
QBAK 11 11 4 12 4 1 1 7 32% 10.7 5%
UUU 3 19 9 18 6 -2 -1 3 31% -2.7 -8%

cybe-20190930.htm
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

 


FORM 10-Q

 

 

 

 

(Check One)

 

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

 

 

 

For the quarterly period ended September 30, 2019

 

 

  

o TRANSITION PURSUANT TO SECTION 13 OR 15(D)

OF THE SECURITIES EXCHANGE ACT


 

 

For the transition period from ______ to ______

 

 

 


COMMISSION FILE NO. (0-16577)

 

 

 

CYBEROPTICS CORPORATION

(Exact name of registrant as specified in its charter)

 

 

 

 

Minnesota

 

41-1472057

(State or other jurisdiction of incorporation or organization)

 

(I.R.S. Employer Identification No.)

 

 

 

5900 Golden Hills Drive

 

 

MINNEAPOLIS, MINNESOTA

 

55416

(Address of principal executive offices)

 

(Zip Code)

 


(763) 542-5000

 

(Registrant’s telephone number, including area code)


Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:

Title of each class Trading Symbol(s) Name of each exchange on which registered
Common Stock, no par value CYBE  NASDAQ Stock Market LLC

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þ No o

 

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, "smaller reporting company", and "emerging growth company" in Rule 12b-2 of the Exchange Act.

 

 Large Accelerated Filer

 

Accelerated Filer

 Non-Accelerated Filer

☐ 

  Smaller Reporting Company

 

 

  Emerging Growth Company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ 

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No þ

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. At October 31, 2019, there were 7,128,199 shares of the registrant’s Common Stock, no par value, issued and outstanding.

1


PART I. FINANCIAL INFORMATION


ITEM 1. INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS

CYBEROPTICS CORPORATION 

(Unaudited)

   

 

 

 

 

 

 

 

 

(In thousands, except share information)

 

September 30,
2019

 

December 31,
2018

ASSETS

 

 

 

 

 

 

Cash and cash equivalents

 

$

8,104

 

 

$

9,248

 

Marketable securities

 

7,792

 

 

5,771

 

Accounts receivable, less allowances of $283 at September 30, 2019 and $314 at December 31, 2018

 

13,322

 

 

15,859

 

Inventories

 

16,360

 

 

16,163

 

Other current assets

 

1,819

 

 

2,096

 

Total current assets

 

47,397

 

 

49,137

 




Marketable securities, long-term 

 

9,392

 

 

10,322

 

Equipment and leasehold improvements, net

 

3,546

 

 

2,861

 

Intangible assets, net

 

295

 

 

333

 

Goodwill

 

1,366

 

 

1,366

 

Right-of-use assets (operating leases)
1,985


Other assets

 

249

 

 

259

 

Deferred tax assets

 

5,276

 

 

5,422

 

Total assets

 

$

69,506



$

69,700

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

Accounts payable

 

$

4,945

 

 

$

8,513

 

Advance customer payments

 

528

 

 

636

 

Accrued expenses

 

2,350

 

 

3,568

 

Current operating lease liabilities
686


Total current liabilities

 

8,509

 

 

12,717

 

 

Other liabilities

 

162

 

 

629

 

Long-term operating lease liabilities
3,178


Reserve for income taxes

 

143

 

 

143

 

Total liabilities

 

11,992

 

 

13,489

 

 

 

Commitments and contingencies

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

Preferred stock, no par value, 5,000,000 shares authorized, none outstanding

 

 

 

 

Common stock, no par value, 25,000,000 shares authorized, 7,121,671 shares issued and outstanding at September 30, 2019 and 7,100,825 shares issued and outstanding at December 31, 2018

 

36,397

 

 

35,637

 

Accumulated other comprehensive loss

 

(1,786

)

 

(1,690

)

Retained earnings

 

22,903

 

 

22,264

 

Total stockholders’ equity

 

57,514

 

 

56,211

 

Total liabilities and stockholders’ equity

 

$

69,506

 

 

$

69,700

 

 

SEE THE ACCOMPANYING NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.

 

2


 

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

CYBEROPTICS CORPORATION

(Unaudited)

 









 

 

 

 

 

 

 

 

 


Three Months Ended September 30,

 

Nine Months Ended September 30,

(In thousands, except per share amounts)


2019
2018

 

2019

 

2018

Revenues


$ 12,391

$ 16,683

 

$

42,411

 

 

$

46,657

 

Cost of revenues



6,885


9,247

 

 

23,290

 

 

 

25,738

 

 









 

 

 

 

 

 


 

Gross margin



5,506


7,436

 

 

19,121

 

 

 

20,919

 

 









 

 


 

 

 


 

Research and development expenses



2,408


2,162

 

 

6,950

 

 

 

6,585

 

Selling, general and administrative expenses



3,855



3,945

 

 

11,779

 

 

 

12,448

 

 









 

 


 

 

 


 

Income (loss) from operations



(757 )

1,329

 

 

392

 

 

1,886

 









 

 


 

 

 


 

Interest income and other



170


35

 

 

306

 

 

192

 









 

 


 

 

 


 

Income (loss) before income taxes



(587 )

1,364

 

 

698

 

 

2,078

 









 

 


 

 

 


 

Income tax expense (benefit)



(234 )

297

 

 

92

 

 

444

 









 

 


 

 

 


 

Net income (loss)


$ (353 )
$ 1,067

 

$

606

 

$

1,634

 









 

 


 

 

 


 

Net income (loss) per share – Basic


$ (0.05 )
$ 0.15

 

$

0.09

 

$

0.23

Net income (loss) per share – Diluted


$ (0.05
)
$ 0.15

 

$

0.08

 

$

0.23

 









 

 


 

 

 


 

Weighted average shares outstanding – Basic



7,117


7,041

 

 

7,108

 

 

 

7,012

 

Weighted average shares outstanding – Diluted



7,117



7,299

 

 

7,245

 

 

 

7,176

 

 

SEE THE ACCOMPANYING NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.

 

3


 

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

CYBEROPTICS CORPORATION  

(Unaudited)










 

 

 

 

 

 

 

 

 


Three Months Ended September 30,

 

Nine Months Ended September 30,

(In thousands)


2019
2018

 

2019

 

2018

Net income (loss)


$ (353 )
$ 1,067

 

$

606


 

$

1,634

 









 

 


 

 

 


 

Other comprehensive loss, before tax:









 

 


 

 

 


 

Foreign currency translation adjustments

(269 )

(50 )

 

 

(199

)

 

 

(252

)

 









 

 


 

 

 


 

Unrealized gains (losses) on available-for-sale securities:









 

 


 

 

 


 

Unrealized gains (losses)



1


3

 

 

129

 

 

(33

)

Reclassification adjustment for gains included in net income 






(3 )

 

 

 

 

(3

)

Total unrealized gains (losses) on available-for-sale securities



1



 

 

129

 

 

(36

)

 









 

 


 

 

 


 

Other comprehensive loss before income taxes



(268 )

(50 )

 

 

(70

)

 

 

(288

)

Income tax (provision) benefit





 

(26

)

 

 

8

Other comprehensive loss after income taxes



(268 )

(50 )

 

 

(96

)

 

 

(280

)

Total comprehensive income (loss)


$ (621 )
$ 1,017
$

510



$

1,354


 

SEE THE ACCOMPANYING NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.

 

4


 

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

CYBEROPTICS CORPORATION

(Unaudited)

 


 

 



 

 

 

 


Nine Months Ended September 30,

(In thousands)


2019



2018


CASH FLOWS FROM OPERATING ACTIVITIES:


 



 

 

Net income


$

606



$

1,634


Adjustments to reconcile net income to net cash provided by (used in) operating activities:


 



 


Depreciation and amortization


2,102



1,876

 

Recovery for doubtful accounts


(31

)

(159

)

Deferred taxes


107



261

Foreign currency transaction gains


(112

)

(140

)

Share-based compensation


737



701

 

Unrealized loss on available-for-sale equity security

 

10



24

 

Realized gain on available-for-sale marketable securities

(3 )

Changes in operating assets and liabilities:


 



 


Accounts receivable


2,568



(3,594

)

Inventories


(1,123

)

(387

)

Other assets


235



(692

)

Accounts payable


(3,538

)

1,124

Advance customer payments


(50

)

638

Accrued expenses


(1,077

)

382

Operating lease assets and liabilities
482


Net cash provided by operating activities


916



1,665


 


 



 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES:


 



 

 

Proceeds from maturities of available-for-sale marketable securities 


6,144



6,018

 

Proceeds from sales of available-for-sale marketable securities





480

 

Purchases of available-for-sale marketable securities


(7,080

)

(7,006

)

Additions to equipment and leasehold improvements


(1,065

)

(1,079

)

Additions to patents


(88

)

(76

)

Net cash used in investing activities


(2,089

)

(1,663

)

 


 



 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:


 



 

 

Proceeds from exercise of stock options


173



452

 

Repurchase of common stock
(353 )

Proceeds from issuance of common stock under employee stock purchase plan
203

219

Net cash provided by financing activities


23



671

 

 

 

 



 

 

 

Effects of exchange rate changes on cash and cash equivalents


6



16

 


 



 

 

 

Net increase (decrease) in cash and cash equivalents


(1,144

)

689


 


 



 

 

 

Cash and cash equivalents – beginning of period


9,248



6,944

 

Cash and cash equivalents – end of period


$

8,104



$

7,633

 

 

SEE THE ACCOMPANYING NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.

 

5


 

NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

CYBEROPTICS CORPORATION


1. INTERIM REPORTING:


The interim condensed consolidated financial statements of CyberOptics Corporation ("we", "us" or "our") presented herein as of September 30, 2019, and for the three and nine month periods ended September 30, 2019 and 2018, are unaudited but, in the opinion of management, include all adjustments, consisting of normal recurring adjustments necessary, for a fair presentation of financial position, results of operations and cash flows for the periods presented.


The results of operations for the three and nine month periods ended September 30, 2019 do not necessarily indicate the results to be expected for the full year. The December 31, 2018 consolidated balance sheet data was derived from audited consolidated financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America ("U.S. GAAP"). The unaudited interim condensed consolidated financial statements should be read in conjunction with our consolidated financial statements and notes thereto contained in our Annual Report on Form 10-K for the year ended December 31, 2018.


2. RECENT ACCOUNTING DEVELOPMENTS: 


In February 2016, the Financial Accounting Standards Board (the "FASB") issued new lease accounting guidance, ASU 2016-02, Leases (also referred to as Topic 842), which we adopted on January 1, 2019. Under Topic 842, at the commencement date, lessees are required (a) to recognize a lease liability, which is a lessee's obligation to make lease payments arising from a lease, measured on a discounted basis, and (b) to record a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. In July 2018, the FASB issued ASU 2018-11, Leases (Topic 842), Targeted Improvements, which gave companies the option of applying the new standard at the adoption date, rather than retrospectively to the earliest period presented in the financial statements, with recognition of a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. We chose the option to apply the new standard at the adoption date, and therefore we were not required to restate the financial statements for prior periods, nor are we required to provide the disclosures required by Topic 842 for prior periods. Upon adoption of Topic 842, we recognized an approximate $2.6 million right-of-use asset, and an approximate $3.2 million lease liability. Our previously recognized liability for lease incentives recorded under prior accounting standards was eliminated. The cumulative-effect adjustment to the opening balance of retained earnings related to our adoption of Topic 842 was inconsequential. Our adoption of Topic 842 did not impact our cash flows or have a material impact on our results of operations. We have expanded our consolidated financial statement disclosures to comply with the requirements of Topic 842.

In February 2018, the FASB issued ASU 2018-02, Reclassification of Tax Effects from Accumulated Other Comprehensive Income ("ASU 2018-02"), which allows an entity to elect an option to reclassify the stranded tax effects related to the application of the Tax Cuts and Jobs Act (the "TCJA") from accumulated other comprehensive income or loss to retained earnings. ASU 2018-02 was effective January 1, 2019 and could be applied either in the period of adoption or retrospectively to all applicable periods. We did not elect to reclassify the stranded tax effects related to the application of the TCJA from accumulated other comprehensive loss to retained earnings.

In January 2017, the FASB issued guidance on simplifying the test for goodwill impairment, ASU 2017-04Simplifying the Test for Goodwill Impairment ("ASU 2017-04"). Under ASU 2017-04, goodwill impairment would be measured as the amount by which a reporting unit’s carrying value exceeds its fair value, but not in an amount in excess of the carrying value of goodwill. The new standard eliminates the requirement to determine goodwill impairment by calculating the implied fair value of goodwill by hypothetically assigning the fair value of a reporting unit to all of its assets and liabilities as if that reporting unit had been acquired in a business combination. ASU 2017-04 is to be applied prospectively to impairment tests beginning January 1, 2020, with early adoption permitted. We are currently evaluating when we will adopt ASU 2017-04 and do not expect the adoption to have a material impact on our consolidated financial statements. 


6



3. REVENUE RECOGNITION:


Our revenue performance obligations are primarily satisfied at a point in time and limited revenue streams are satisfied over time as work progresses.


The following is a summary of our revenue performance obligations in the three and nine months ended September 30, 2019 and the three and nine months ended September 30, 2018:








Three Months Ended September 30, 2019
Three Months Ended September 30, 2018

(In thousands except percentages)


Revenues
Percent of Revenues

Revenues

Percent of Revenues

Revenue recognized over time


$ 403
3

%

$

1,241

7

%

Revenue recognized at a point in time



11,988
97 %

15,442

93

%


$ 12,391
100 %

$

16,683

100

%








Nine Months Ended September 30, 2019
Nine Months Ended September 30, 2018

(In thousands except percentages)


Revenues
Percent of Revenues

Revenues

Percent of Revenues

Revenue recognized over time


$ 1,041
2

%

$

3,262

7

%

Revenue recognized at a point in time



41,370
98 %

43,395

93

%


$ 42,411
100 %

$

46,657

100

%


See Note 10 for additional information regarding disaggregation of revenue. 


Contract Balances


Contract assets consist of unbilled amounts from sales where we recognize the revenue over time and the revenue recognized exceeds the amount billed to the customer at a point in time. Accounts receivable are recorded when the right to payment becomes unconditional. Contract liabilities consist of payments received in advance of performance under the contract. Contract liabilities are recognized as revenue when we perform under the contract.

The following summarizes our contract assets and contract liabilities:    






(In thousands)


September 30,

2019


December 31,

2018

Contract assets, included in other current assets


$

6

 


$

 

 

Contract liabilities - advance customer payments


$

427

 


$

366

 

Contract liabilities - deferred warranty revenue
$ 235

$

218



Changes in contract assets in the nine months ended September 30, 2019 and the nine months ended September 30, 2018 resulted from unbilled amounts under sensor product arrangements and longer duration 3D scanning service projects in which revenue is recognized over time. Changes in contract liabilities primarily resulted from reclassification of beginning contract liabilities to revenue as performance obligations were satisfied or from cash received in advance and not recognized as revenue. See Note 8 for changes in contractual obligations related to deferred warranty revenue. Unsatisfied performance obligations are generally expected to be recognized as revenue over the next one to three years. There were no impairment losses for contract assets in the nine months ended September 30, 2019 or the nine months ended September 30, 2018.


The following summarizes the amounts reclassified from beginning contract liabilities to revenue:







Three Months Ended September 30,
Nine Months Ended September 30,
(In thousands)
2019
2018

2019



2018

Amounts reclassified from beginning contract liabilities to revenue


$ 342

$ 39

 

$

401

 

 

$

262

 

Amounts reclassified from deferred warranty revenue

111


99

334


310

Total
$ 453

$ 138

$ 735

$ 572


7



4. MARKETABLE SECURITIES:


Our investments in marketable securities are classified as available-for-sale and consist of the following:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30, 2019

(In thousands)

 

Cost

 

Unrealized
Gains

 

Unrealized
Losses

 

Fair Value

Short-Term

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government and agency obligations

 

$

5,138

 

 

$

11

 

 

$

(2

)

 

$

5,147

 

Corporate debt securities and certificates of deposit

 

1,170

 

 

1

 

 

 

1,171

 

Asset backed securities

 

1,469

 

 

5

 

 

 

1,474

 

Marketable securities – short-term

 

$

7,777

 

 

$

17

 

 

$

(2

)

 

$

7,792

 

Long-Term

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government and agency obligations

 

$

5,646

 

 

$

32

 

 

$

(1

)

 

$

5,677

 

Corporate debt securities and certificates of deposit

 

1,602

 

 

12

 

 

 

1,614

 

Asset backed securities

 

2,035

 

 

17

 

 

 

2,052

 

Equity security

 

42

 

 

7

 

 

 

 

49

 

Marketable securities – long-term

 

$

9,325

 

 

$

68

 

 

$

(1

)

 

$

9,392

 





 

December 31, 2018

(In thousands)

 

Cost

 

Unrealized
Gains

 

Unrealized
Losses

 

Fair Value

Short-Term

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government and agency obligations

 

$

3,377

 

 

$

 

 

$

(20

)

 

$

3,357

 

Corporate debt securities and certificates of deposit

 

1,787

 

 

3

 

 

(5

)

 

1,785

 

Asset backed securities

 

633

 

 

 

 

(4

 

629

 

  Marketable securities – short-term

 

$

5,797

 

 

$

3

 

 

$

(29

)

 

$

5,771

 

Long-Term

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government and agency obligations

 

$

6,114

 

 

$

10

 

 

$

(23

)

 

$

6,101

 

Corporate debt securities and certificates of deposit

 

754

 

 

1

 

 

(3

)

 

752

 

Asset backed securities

 

3,422

 

 

2

 

 

(15

)

 

3,409

 

Equity security

 

42

 

 

18

 

 

 

 

60

 

Marketable securities – long-term

 

$

10,332

 

 

$

31

 

 

$

(41

)

 

$

10,322

 

 
 
 
 

 
In Unrealized Loss Position For
Less Than 12 Months 
 
 In Unrealized Loss Position For
Greater Than 12 Months
(In thousands) 
 
Fair Value
 
Gross Unrealized
Losses
 
Fair Value
 
Gross Unrealized
Losses
September 30, 2019
 
 

 
 

 
 

 
 

U.S. government and agency obligations
 
$
1,057

 
$
(2
)
 
$
2,282
 
$
(1
)
Corporate debt securities and certificates of deposit
 
20

 
 
80
 
Asset backed securities
 
50

 
 
733

 
Marketable securities
 
$
1,127

 
$
(2
)
 
$
3,095
 
$
(1
)
December 31, 2018
 
 

 
 

 
 

 
 

U.S. government and agency obligations
 
$
1,548

 
$
(4
)
 
$
4,608
 
$
(39
)
Corporate debt securities and certificates of deposit
 
250

 
 
1,178
 
(8
)
Asset backed securities
 
1,023

 
(3
)
 
2,137
 
(16
)
Marketable securities
 
$
2,821

 
$
(7
)
 
$
7,923
 
$
(63
)


8


The marketable debt securities in which we have invested all have maturities of less than five years. Net pre-tax unrealized gains for marketable debt securities of $75,000 at September 30, 2019 and net pre-tax losses for marketable debt securities of $54,000 at December 31, 2018 have been recorded as a component of accumulated other comprehensive loss in stockholders’ equity. We have determined that the net pre-tax unrealized losses for marketable debt securities at September 30, 2019 and December 31, 2018 were caused by fluctuations in interest rates and are temporary in nature. We review our marketable debt securities to identify and evaluate investments that have indications of possible impairment. Factors considered in determining whether a loss is other-than-temporary include the length of time and extent to which the fair value of the investment has been less than the cost basis, the credit quality of the investment and our ability and intent to hold the investment for a period of time sufficient to allow for any anticipated recovery in market value. No marketable securities were sold in the three or nine months ended September 30, 2019. In the three and nine months ended September 30, 2018, proceeds from sales of marketable securities totaled $410,000 and $480,000, respectively. In both the three and nine months ended September 30, 2018, gains of $3,000 were recognized on the sales. 


Investments in marketable securities classified as cash equivalents of $3.9 million at September 30, 2019 and $2.5 million at December 31, 2018 consist of corporate debt securities and certificates of deposit. There were no unrealized gains or losses with respect to any of these securities at September 30, 2019 or December 31, 2018.


Cash and marketable securities held by foreign subsidiaries totaled $405,000 at September 30, 2019 and $362,000 at December 31, 2018.


5. FAIR VALUE MEASUREMENTS:


We determine the fair value of our assets and liabilities based on the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value maximize the use of observable inputs and minimize the use of unobservable inputs. We use a fair value hierarchy with three levels of inputs, of which the first two are considered observable and the last is considered unobservable, to measure fair value. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1). The next highest priority is based on quoted prices for similar assets or liabilities in active markets or quoted prices for identical or similar assets or liabilities in non-active markets or other observable inputs (Level 2). The lowest priority is given to unobservable inputs (Level 3). The following provides information regarding fair value measurements for our marketable securities as of September 30, 2019 and December 31, 2018 according to the three-level fair value hierarchy:


 

 

Fair Value Measurements at
September 30, 2019 Using

(In thousands)

 

Balance

September 30, 
2019

 

Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)

 

Significant
Other
Observable
Inputs
(Level 2)

 

Significant
Unobservable
Inputs
(Level 3)

Marketable securities:

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government and agency obligations

 

$

10,824

 

 

$

 

 

$

10,824

 

 

$

 

Corporate debt securities and certificates of deposit

 

2,785

 

 

 

 

2,785

 

 

 

Asset backed securities

 

3,526

 

 

 

 

3,526

 

 

 

Equity security

 

49

 

 

49

 

 

 

 

 

Total marketable securities

 

$

17,184

 

 

$

49

 

 

$

17,135

 

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair Value Measurements at
December 31, 2018 Using

(In thousands)

 

Balance

December 31,

2018

 

Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)

 

Significant
Other
Observable
Inputs
(Level 2)

 

Significant
Unobservable
Inputs
(Level 3)

Marketable securities:

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government and agency obligations

 

$

9,458

 

 

$

 

 

$

9,458

 

 

$

 

Corporate debt securities and certificates of deposit

 

2,537

 

 

 

 

2,537

 

 

 

Asset backed securities

 

4,038

 

 

 

 

4,038

 

 

 

Equity security

 

60

 

 

60

 

 

 

 

 

Total marketable securities

 

$

16,093

 

 

$

60

 

 

$

16,033

 

 

$

 

9


During the nine months ended September 30, 2019 and the year ended December 31, 2018, we owned no Level 3 securities, and there were no transfers within the three level hierarchy. A significant transfer is recognized when the inputs used to value a security have been changed which merit a transfer between the disclosed levels of the valuation hierarchy.  


The fair value for our U.S. government and agency obligations, corporate debt securities and certificates of deposit and asset backed securities are determined based on valuations provided by external investment managers, which obtain the valuations from a variety of industry standard data providers. The fair value for our equity security is based on a quoted market price obtained from an active market. 


The carrying amounts of financial instruments such as cash equivalents, accounts receivable, other assets, accounts payable, advance customer payments, accrued expenses and other liabilities are approximately equal to their related fair values due to their short-term maturities. Non-financial assets such as equipment and leasehold improvements and goodwill and other intangible assets are subject to non-recurring fair value measurements if they are deemed impaired. We had no re-measurements of non-financial assets to fair value in the nine months ended September 30, 2019 or the nine months ended September 30, 2018.

6. SHARE-BASED COMPENSATION:


We have three share-based compensation plans that are administered by the Compensation Committee of the Board of Directors. We have (a) an Employee Stock Incentive Plan for officers, other employees, consultants and independent contractors under which we have granted options and restricted stock units to officers and other employees, (b) an Employee Stock Purchase Plan under which shares of our common stock may be acquired by employees at discounted prices, and (c) a Non-Employee Director Stock Plan that provides for automatic grants of restricted shares of our common stock to non-employee directors. New shares of our common stock are issued upon stock option exercises, vesting of restricted stock units, issuances of shares to board members and issuances of shares under the Employee Stock Purchase Plan. 

Employee Stock Incentive Plan

 

As of September 30, 2019, there were 273,764 shares of common stock reserved in the aggregate for issuance pursuant to future awards under our Employee Stock Incentive Plan and 524,428 shares of common stock reserved in the aggregate for issuance pursuant to outstanding awards under such plan. Although our Compensation Committee has authority to issue options, restricted stock, restricted stock units, share grants and other share-based benefits under our Employee Stock Incentive Plan, to date only restricted stock units and stock options have been granted under the plan. Options have been granted at an option price per share equal to the market value of our common stock on the date of grant, vest over a four year period and expire seven years after the date of grant. Restricted stock units vest over a four year period and entitle the holders to one share of our common stock for each restricted stock unit. Reserved shares underlying outstanding awards, including options and restricted stock units, that are forfeited are available under the Employee Stock Incentive Plan for future grant.


Non-Employee Director Stock Plan

 

As of September 30, 2019, there were 52,000 shares of common stock reserved in the aggregate for issuance pursuant to future restricted share grants under our Non-Employee Director Stock Plan and 16,000 shares of common stock reserved in the aggregate for issuance pursuant to outstanding stock option awards under our Non-Employee Director Stock Plan (which previously authorized the granting of stock options to non-employee directors). Under the terms of the plan, each non-employee director receives annual restricted share grants of 2,000 shares of our common stock on the date of each annual meeting at which such director is elected to serve on the board. The annual restricted share grants of common stock vest in four equal quarterly installments during the year after the grant date, provided the non-employee director is still serving as a director on the applicable vesting date.  


On the date of our 2019 annual meeting, we issued a total of 8,000 shares of our common stock to our non-employee directors, which were restricted as specified in the Non-Employee Director Stock Plan. The shares had an aggregate fair market value on the date of grant equal to $138,000 (grant date fair value of $17.26 per share). As of September 30, 2019, 2,000 of these shares were vested. The aggregate fair value of the 6,000 unvested shares based on the closing price of our common stock on September 30, 2019 was $86,000

 

10


Stock Option Activity


The following is a summary of stock option activity in the nine months ended September 30, 2019:

 

 

 

 

 

 

 

 

Options Outstanding

 

Weighted Average Exercise
Price Per Share

Outstanding, December 31, 2018

523,042

 

 

$

11.48

 

Granted

 

 

 

Exercised

(21,050

)

 

8.23

 

Expired

(5,750

)

 

10.83

 

Forfeited

(7,350

)

 

16.67

 

Outstanding, September 30, 2019

488,892

 

 

$

11.55

 


 

 

 

Exercisable, September 30, 2019

334,768

 

 

$

9.45

 

 

The intrinsic value of an option is the amount by which the market price of the underlying common stock exceeds the option's exercise price. For options outstanding at September 30, 2019, the weighted average remaining contractual term of all outstanding options was 3.3 years and their aggregate intrinsic value was $2.1 million. At September 30, 2019, the weighted average remaining contractual term of options that were exercisable was 2.6 years and their aggregate intrinsic value was $1.9 million. The aggregate intrinsic value of stock options exercised in the nine months ended September 30, 2019 was $121,000. We received proceeds from stock option exercises of $173,000 in the nine months ended September 30, 2019 and $452,000 in the nine months ended September 30, 2018. The aggregate fair value of options that vested in the nine months ended September 30, 2019 was $5,000.


Restricted Shares and Restricted Stock Units

Restricted shares are granted under our Non-Employee Director Stock Plan. There were 8,000 restricted shares granted in the nine months ended September 30, 2019. Restricted stock units are granted under our Employee Stock Incentive Plan. No restricted stock units were granted in the nine months ended September 30, 2019. The aggregate fair value of outstanding restricted shares and restricted stock units based on the closing share price of our common stock as of September 30, 2019 was $822,000. The aggregate fair value of restricted shares and restricted stock units that vested, based on the closing price of our common stock on the vesting date, was $105,000 in the nine months ended September 30, 2019.

 

The following is a summary of activity in non-vested restricted shares and restricted stock units in the nine months ended September 30, 2019:

Non-vested restricted stock units and restricted shares

 

Shares

 

Weighted Average  Grant Date Fair Value

Non-vested at December 31, 2018

 

56,411

 

 

$

17.59

 

Granted

 

8,000

 

 

17.26

 

Vested

 

(6,000

)

 

16.59

 

Forfeited

 

(875

)

 

16.19

 

Non-vested at September 30, 2019

 

57,536

 

 

$

17.67

 

 

Employee Stock Purchase Plan

We have an Employee Stock Purchase Plan available to eligible U.S. employees. Under the terms of the plan, eligible employees may designate from 1% to 10% of their compensation to be withheld through payroll deductions, up to a maximum of $6,500 in each plan year, for the purchase of common stock at 85% of the lower of the market price on the first or last day of the offering period (which begins on August 1st and ends on July 31st of each year). There were 17,781 shares issued under this plan in the nine months ended September 30, 2019. As of September 30, 2019156,688 shares remain available for future purchase under the Employee Stock Purchase Plan. 


11


Share-Based Compensation Information

All share-based compensation awarded to our employees and non-employee directors, including grants of stock options, restricted stock units and restricted shares, are required to be recognized as an expense in our consolidated statements of operations based on the grant date fair value of the award. We utilize the straight-line method of expense recognition over the award's service period for our graded vesting options. The fair value of stock options has been determined using the Black-Scholes model. We have classified employee share-based compensation within our statements of operations in the same manner as our cash-based employee compensation costs. 

Share-based compensation expense in the three months ended September 30, 2019 totaled $244,000, and included $110,000 for stock options, $21,000 for our Employee Stock Purchase Plan, $78,000 for restricted stock units and $35,000 for  restricted shares. Share-based compensation expense in the nine months ended September 30, 2019 totaled $737,000, and included $327,000 for stock options, $81,000 for our Employee Stock Purchase Plan, $231,000 for restricted stock units and $98,000 for restricted shares.

 

Share-based compensation expense in the three months ended September 30, 2018 totaled $217,000, and included $94,000 for stock options, $31,000 for our Employee Stock Purchase Plan, $59,000 for restricted stock units and $33,000 for  restricted shares. Share-based compensation expense in the nine months ended September 30, 2018 totaled $701,000, and included $328,000 for stock options, $86,000 for our Employee Stock Purchase Plan, $176,000 for restricted stock units and $111,000 for restricted shares.

 

At September 30, 2019, the total unrecognized compensation cost related to non-vested share-based compensation arrangements was $1.6 million and the related weighted average period over which such cost is expected to be recognized is 2.35 years.


7CHANGES IN STOCKHOLDERS’ EQUITY:

 

A reconciliation of the changes in our stockholders' equity is as follows:


Three months ended September 30, 2019:

 

Common Stock

Accumulated

Other Comprehensive

Loss

 

Retained

Earnings

Total Stockholders’

Equity

(In thousands)

Shares

 

 Amount 

 

Balance, June 30, 2019

 7,115

 

$

 36,189

 

$

(1,518

)

 

$

23,256

 

$

57,927

 

Exercise of stock options
15


114








114

Share-based compensation

 

 

244

 

 

 

 

 

 

 

 244

 

Issuance of common stock under Employee Stock Purchase Plan
18


203








203
Repurchase of common stock
(26 )

(353 )







(353 )

Other comprehensive loss, net of tax

 

 

 

 

 

 

(268

)

 

 

 

 

(268

)

Net loss

 

 

 

 

 

 

 

 

 

(353

)

 

(353

)

Balance, September 30, 2019

 7,122

 

$

36,397

 

$

(1,786

)

 

$

22,903

 

$

57,514

 


Nine months ended September 30, 2019:

  Common Stock

Accumulated

Other Comprehensive

Loss

 

Retained

Earnings

Total Stockholders’

Equity

(In thousands) Shares    Amount   
Balance, December 31, 2018  7,101   $  35,637   $  (1,690 )   $ 22,264   $ 56,211  
Increase related to adoption of ASU 2016-02               33      33  

Exercise of stock options

 21     173