10-K

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2016

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                     to                    

Commission File No. 000-24575

AMERICAN ELECTRIC TECHNOLOGIES, INC.

(Exact name of registrant as specified in its charter)

Florida	59-3410234
(State or other jurisdiction of incorporation)	(I.R.S. Employer Identification No.)

1250 Wood Branch Park Drive, Suite 600, Houston TX 77079

(Address of principal executive offices)

(713) 644-8182

(Registrant’s telephone number, including area code)

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

Title of each class	Name of each exchange on which registered
Common Stock, $.001 par value per share	The NASDAQ Stock Market

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  ☐    No  ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.    Yes  ☐    No  ☒

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 for 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  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (S. 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ☒    No  ☐

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.    Yes  ☒    No   ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☒

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

The aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was $16,203,230 based on the closing sale price on June 30, 2016 as reported by the NASDAQ Stock Market.

The number of shares of common stock outstanding on March 14, 2017 was 8,337,448.

DOCUMENTS INCORPORATED BY REFERENCE

Document	Parts Into Which Incorporated
Proxy Statement for the 2017 Annual Meeting of Stockholders to be held May 12, 2017 (Proxy Statement)	Part III

FORWARD-LOOKING STATEMENTS

The Description of Business section and other parts of this Annual Report on Form 10-K (“Form 10-K”) contain forward-looking statements that involve risks and uncertainties. Many of the forward-looking statements are located in “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Forward-looking statements provide current expectations of future events based on certain assumptions and include any statement that does not directly relate to any current or historical fact. Forward-looking statements can also be identified by words such as “anticipates,” “believes,” “estimates,” “expects,” “intends,” “plans,” “predicts,” and similar terms. Forward-looking statements are not guarantees of future performance and the Company’s actual results may differ significantly from the results discussed in the forward-looking statements. Factors that might cause such differences include, but are not limited to, those discussed in the subsection entitled “Risk Factors” under Part I, Item 1A of this Form 10-K. The Company assumes no obligation to revise or update any forward-looking statements for any reason, except as required by law. Examples of other forward-looking statements contained or incorporated by reference in this report include statements regarding:

• future oil and gas commodity prices;

• future government regulations, pertaining to the oil and gas industry;

• the effects of current and future worldwide economic conditions (particularly in developing countries) and demand for oil and natural gas and power system equipment and services;

• the effects of ongoing and future industry consolidation, including, in particular, the effects of consolidation and vertical integration in the power systems market;

• future energy industry fundamentals, including future demand for power system equipment and services;

• future benefits to our customers to be derived from new services and products;

• future benefits to be derived from our investments in technologies, joint ventures and acquired companies;

• future growth rates for our services and products;

• the degree and rate of future market acceptance of our new services and products;

• expectations regarding end-users purchasing our more technologically-advanced services and products;

• anticipated timing and success of commercialization and capabilities of services and products under development and related start-up costs associated with their development;

• future opportunities for new products and projected research and development expenses;

• future levels of our capital expenditures;

• expected continued compliance with our debt financial covenants;

• expectations regarding realization of deferred tax assets;

• anticipated results with respect to certain estimates we make for financial accounting purposes.

• future cash needs and future availability to fund our operations and pay our obligations;

• expected net revenues, income from operations and net income; and

• expected gross margins for our services and products;

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PART I

ITEM 1. DESCRIPTION OF BUSINESS

Company Background and Corporate Structure

American Electric Technologies, Inc. (the “Company”, “AETI”, “our”, “us” or “we”) was incorporated on October 21, 1996 as a Florida corporation. On May 15, 2007, we completed a business combination (the “M&I Merger”) with M&I Electric Industries, Inc. (“M&I” or “M&I Electric”), a Texas corporation, and changed our name to American Electric Technologies, Inc. Our principal executive offices are located at 1250 Wood Branch Park Drive, Suite 600, Houston Texas 77079 and our telephone number is 713-644-8182.

Our corporate structure currently consists of American Electric Technologies, Inc., which owns 100% of M&I Electric Industries, Inc.,including its wholly-owned subsidiary, South Coast Electric Systems, LLC (“SCES”) and M&I Electric Brazil Sistemas e Servicios em Energia LTDA (“M&I Brazil”).

The Company is a leading provider of power delivery solutions to the global energy industry. The Company is positioned to be the “turn-key” supplier for power delivery projects for our customers by offering custom-designed power distribution and power conversion systems, automation and control software, Power Distribution Centers (PDCs), power services, and electrical and instrumentation construction.

Our business strategy is to grow organically in our current key energy markets, expand our solution set to our current markets, continue our international expansion, and accelerate those efforts with acquisitions, while at the same time increasing earnings and cash flow per share to enhance overall stockholder value.

The principal markets that we serve include:

• Power generation and distribution – the Company provides “turn-key” power delivery solutions for the power generation and distribution market sectors.

• The Company works with turbine manufacturers, engine-generator manufacturers and dealers, Engineering, Procurement and Construction (“EPC”) firms, and high voltage service companies to provide electric power delivery products and solutions. The Company also provides products and services for renewable power generation including biomass, geothermal and other renewable energy projects.

• The Company designs, manufactures, commissions and maintains our equipment for implementation in base-load, peaking power, cogeneration, and substation transmission facilities worldwide. 

• Oil & gas – the Company provides “turn-key” power delivery solutions for the upstream, midstream and downstream oil and natural gas sectors.

• Upstream oil and gas refers to the exploration and production of oil and natural gas. The Company serves customers in the land drilling, offshore drilling, land-based production, and offshore production segments of the market.

• Midstream oil and gas is primarily related to oil & gas transportation, including oil & gas pipelines and compression and pumping stations. The Company also has a strong customer base in natural gas fractionation (separation), cryo, natural gas to liquids, and other natural gas related-plants.

• Downstream oil and gas includes oil refining and petrochemical plants, as well as Liquefied Natural Gas (LNG) plants, export facilities, and storage facilities.

• Marine and industrial

• Marine applications includes blue water vessels such as platform supply vessels (PSV), offshore supply vessels (OSV), tankers and other various work boats, typically up to 300 ft. in length. The Company also provides solutions to brown water vessels such as barges, dredges and other river and inland water vessels.

• Industrial, including non-oil & gas industrial markets such as steel, paper, heavy commercial, and other non-oil & gas applications.

A key component of our Company’s strategy is our international focus.

We have three primary models for conducting our international business.

First, in certain international markets, we sell through foreign sales agents that we have appointed in energy regions around the world. Many of these international partners also provide local service and support for our products in those overseas markets.

Second, where local market conditions dictate, we have expanded internationally by forming joint venture operations with local partners in key markets such as China and Singapore, where we can partner with the primary end-customer in that market, or there are local content requirements or a competitive advantage to using local manufacturing.

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Finally, we have expanded our international footprint by forming a wholly-owned foreign subsidiary to serve the Brazil electrical service market.

Products and Services

We have provided sophisticated custom-designed power distribution, power conversion, and automation and control systems for our customers since 1946. Our products are used to safely distribute and control the flow of electricity from a power generation source (e.g. a diesel generator, turbine or the utility grid) to whatever mechanical device utilizes the power (drilling machinery, motors, other process equipment, the utility grid, etc.) at low and medium voltages.

Our power distribution products include low and medium voltage switchgear that provides power distribution and protection for electrical systems from electrical faults. Our products include traditional low voltage and medium voltage switchgear, and our award winning IntelliSafe™ medium voltage arc-resistant switchgear designed to increase end-user safety in case of an arc-flash explosion. IntelliSafe™ is designed for the downstream sector, process industries and the power generation market, and was designed to be the safest arc-resistant product on the market, and meets key industry specifications and certifications. Our products are suitable for both American National Standards Institute (“ANSI”) and International Electrotechnical Commission (“IEC”) markets. Other power distribution products in our solution set include low voltage and medium voltage motor control centers, bus ducts, fuse and switch products, and other related power distribution equipment. We also bundle third party products per our customer specifications including items such as battery backup power systems and transformers.

Our power conversion solutions include sophisticated alternating current variable frequency drive (“AC VFD”) systems,  analog systems and digital silicon controlled rectifier (“SCR”) products , that are used to adjust the speed and torque of an electric motor to match various user applications, primarily in the land and offshore drilling and marine vessel markets.

Our power distribution and control products are generally custom-designed to our customers’ specific requirements, and we do not maintain an inventory of such products.

We have the technical expertise to provide our solutions in compliance with a number of applicable industry standards such as National Electrical Manufacturers Association (“NEMA”) and ANSI or IEC equipment to meet American Bureau of Shipping (“ABS”), United States Coast Guard (“USCG”), Lloyd’s Register, a provider of marine certification services, and Det Norske Veritas (a leading certification body/registrar for management systems certification services) standards.

Our automation and control solutions are designed for the management and control of power in a customers’ application. The DrillAssist™ is a control system that enables the management of an entire land and offshore drilling rig’s operations. DrillAssist™ includes auto-drill capabilities and a driller’s chair and cabin where the drilling rig operator manages the rig. The Company’s Vessel Management system is a packaged control platform for management of vessel operations.

Our Power Distribution Centers (“PDC”) are a critical element of our turnkey solution set and are used to house our power distribution and power conversion products. Our PDCs can be manufactured over 100 ft. long and 40 ft. wide. The Company also manufactures VFD and SCR houses for land drilling and driller’s cabins for land and offshore deployment.

We provide a variety of electrical services including the commissioning and maintenance of our customer’s full electrical power infrastructure. We provide low and medium voltage start-up/commissioning, preventative maintenance, emergency call out services, and breaker and switchgear refurbishment services.

We offer a full range of electrical and instrumentation construction and installation services to our markets. These services include new construction as well as electrical and instrumentation turnarounds, maintenance and renovation projects. Applications include installation of switchgear, AC and DC motors, drives, motor controls, lighting systems and high voltage cable. Much of this work is generated from the installation (“rig-up”) of our power delivery solutions into our packaged power control systems.

Foreign Joint Ventures

We use foreign joint ventures to accommodate business in China and South East Asia. We believe our foreign joint ventures provide a prudent way to diversify and reduce the risk of international expansion, capitalize on the strengths and the relationships of our foreign joint venture partners with potential customers, and achieve competitive advantages. Our interests in foreign joint ventures are accounted for under the equity method of accounting. Sales made to the foreign joint ventures are made with terms and conditions similar to those of our other customers.

China. In March 2006, M&I Electric entered into a joint venture agreement with Baoji Oilfield Machinery Co., Ltd., (“BOMCO”), a wholly-owned subsidiary of the China National Petroleum Corporation, and AA Energies, Inc. of Houston, Texas, which markets oilfield equipment, to form BOMAY Electric Industries Co., Ltd. (“BOMAY”), as an equity joint venture limited liability company organized in China. M&I is a 40% interest owner in BOMAY with 51% being owned by BOMCO and the remaining 9% owned by AA Energies, Inc. BOMAY manufactures power and control systems for land drilling rigs. M&I has invested 16 million Yuan (approximately $2 million) in this joint venture in which M&I provides technology and services to BOMAY. Each of the BOMAY investors may be required to guarantee the bank loans of BOMAY in proportion to their investment. No guarantees have been provided by AETI at this time. The joint venture has an initial 12 year term, and will expire in 2018. The term of the joint venture may be extended upon agreement of all parties. In such case, the joint venture shall apply for the extension to the relevant

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Chinese authority six months before expiry of the venture. The company is working with our Joint Venture partners on extending the joint venture. At this time, AETI has no indication that the joint venture will not be extended beyond the 2018 expiration date.

Singapore. In 1994, the Company formed a joint venture in Singapore to provide sales, engineering, manufacturing and technical support for our products in Southeast Asia called M & I Electric Far East PTE Ltd. (“MIEFE”). The Company currently owns 41% of the joint venture with our joint venture partner, Sonepar, owning 51% and MIEFE’s general manager owning the remaining 8%. In 2016, due to market conditions, the business suspended current operations and the investment in MIEFE was written down to zero excluding foreign currency translation.

The following is selected financial information of the Company’s investment in foreign joint ventures as of and for the years ended December 31, 2016 and 2015:

	Year Ended December 31, 2016						Year Ended December 31, 2015
	BOMAY			MIEFE			BOMAY			MIEFE
Investment as of end of year	$	10,450		$	213		$	10,896		$	208
Equity income (loss)*		804			(3	)		973			(232	)
Distributions received from joint ventures*		589			-			1,032		137
Foreign currency translation*		(661	)		8			(593	)		71
AETI sales to joint ventures	105				2		186			52
Accounts receivable due from joint ventures	36				-		-			52

* Numbers are reflected in the investment balance as of end of year.

During 2016 and 2015, the Company recognized approximately $0.25 million and $0.39 million respectively, for employee joint venture related expenses which are included in Foreign Joint Ventures Operation’s Related Expenses in the accompanying consolidated statements of operations.

International Sales

During 2016, approximately 13% of the Company’s consolidated revenue was derived from systems sold or shipped into international markets. Sales from the United States are generally made in United States Dollars and settled prior to shipment or are collateralized by irrevocable letters of credit. M&I Brazil’s sales are generally made in Brazilian Reals.

Marketing  

We market our products and services in the United States through direct contact with potential customers by our internal sales organization, consisting of full-time sales and sales support employees. We have several sales agreements with agents and distributors in the United States and several foreign countries. We also exhibit at a variety of industry trade shows each year. M&I Brazil markets in Brazil and certain other South American countries.

Our business is generally obtained through a competitive bid process where the lowest bid from pre-qualified suppliers is awarded the project. Depending on the market segment, we either sell directly to the end user or owner, a shipyard or rig builder, or, sell to an EPC firm representing the end project owner.

Manufacturing

Manufacturing processes at our facilities include machining, fabrication, wiring, subassembly, system assembly and final testing. We have invested in automated and semi-automated equipment for the fabrication and machining of parts and assemblies that we incorporate into our products. Our quality assurance program includes quality control measures from inspection of raw material, purchased parts and assemblies through on-line inspection. We perform system design, assembly and testing in-house. The Company’s primary manufacturing facility is located in Beaumont, Texas and is ISO 9001:2008 certified.

Raw Materials and Suppliers

The principal raw materials for our products are copper, steel, aluminum and manufactured electrical components. We obtain these products from a number of domestic and foreign suppliers. The market for most of the raw materials and parts we use is comprised of numerous suppliers and we believe that we can obtain each of the raw materials we require from more than one supplier. We do not have any long-term contractual arrangements with the suppliers of our raw materials.

Competition

Our products and services are sold in highly competitive markets. We compete in all of our markets and regions with a number of companies, some of which have financial and other resources comparable to or greater than us. Due to the demanding operating conditions in the energy sector and the high costs associated with project delays and equipment failure, we believe customers in this industry prefer suppliers with a track record of proven, reliable performance in their specific energy related project type. We seek to build strong long-term relationships with our customers by providing high-quality, efficient and reliable products and services, developing new products and services and responding promptly to our customers’ needs.

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The principal competitive factors in our markets are product and service quality and reliability, lead time, price, technical expertise and reputation.

We believe our principal competitive strengths include the following:

Our power delivery, control and drive systems are custom-designed and are built to meet our customers’ specific requirements. We specialize in projects that are complex, require industry certification, have short lead times or other non-standard elements, such as systems that must be deployed in harsh environments or need to meet tight space or weight requirements. Our ability to provide custom-designed technical products, PDCs, electrical and instrumentation construction services, and electrical startup and preventative maintenance services enables us to provide customers total system responsibility for their electrical power control and distribution needs and is unusual in this industry.

Our commitment to providing quality products and services, fair pricing, innovation and customer service is the foundation to the long-standing customer relationships that we enjoy with an attractive customer base. Since 1946, we have provided over 10,000 power delivery systems to many of the leading companies involved in oil and gas exploration, drilling, production, pipelines, shipbuilding, oil refineries, petrochemicals, power generation, and steel industries in the United States.

We are led by an experienced management team with a proven track record. We believe the experience of our management team provides us with an in-depth understanding of our customers’ needs and enhances our ability to deliver customer-driven solutions. We believe our management has fostered a culture of loyalty, resulting in high employee retention rates for our professional and technical employees.

The Company has multiple competitive advantages for our products:

- Custom design;

- Market leading technologies such as our patent-pending IntelliSafe™ medium voltage arc-resistant switchgear and our DrillAssist™ drilling automation and control solutions;

- Turn-key solutions, including in-house manufacturing of PDC’s;

- Quick delivery time;

- Able to use best of breed components and mix and match subsystems from a variety of vendors versus a single supplier solution; and

- Ability to provide integrated solution by self-performing our technical products and electrical & instrumentation construction work.

We have identified our largest competitors, by product line as follows:

- Power distribution/switchgear systems—Powell Industries, Siemens, Eaton, GE, ABB and Volta.

- Power conversion/drive systems—Omron/ Schlumberger, National Oilwell Varco (NOV), ABB, and Siemens.

Backlog

Backlog represents the dollar amount of net sales that we expect to realize in the future as a result of performing work under multi-month contracts. Backlog is not a measure defined by generally accepted accounting principles, and our methodology for determining backlog may not be comparable to the methodology used by other companies in determining their backlog. Backlog may not be indicative of future operating results. Not all of our potential net sales are recorded in backlog for a variety of reasons, including the fact that some contracts begin and end within a short-term period. Many contracts are subject to modification or termination by the customer. The termination or modification of any one or more sizeable contracts or the addition of other contracts may have a substantial and immediate effect on backlog. Our backlog does not include any backlog in place at our foreign joint ventures’ operations.

We generally include total expected net sales in backlog when a contract for a definitive amount of work is entered into. We generally expect our backlog to become net sales within a year from the signing of a contract. Backlog as of December 31, 2016 and 2015 totaled $13.5 million and $19.0 million, respectively.

Intellectual Property

We have a number of trademarks and trade names utilized with our products and services. While proprietary intellectual property is important to the Company, management believes the loss or expiration of any intellectual property right would not materially impact the Company. The Company has recently filed for several patents relating to its new IntelliSafe™ medium voltage arc-resistant switchgear product line.

Environmental Laws

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We are subject to various federal, state and local laws enacted for the protection of the environment. We believe we are in compliance with such laws. Our compliance has, to date, had no material effect on our capital expenditures, earnings, or competitive position.

Research and Development Costs

Total expenditures for research and development were $0.96 million and $0.77 million for the fiscal years ended December 31, 2016 and 2015, respectively. Research and development cost were incurred to develop new products for our energy-related markets including new power distribution, power conversion and automation and control products.

Employees

As of December 31, 2016, we had 232 employees. No employees are covered by a collective bargaining agreement, and we consider our relations with our employees to be satisfactory.

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ITEM 1A. RISK FACTORS

You should carefully consider each of the following risks associated with an investment in our common stock and all of the other information in this 2016 Annual Report on Form 10-K. Our business may also be adversely affected by risks and uncertainties not presently known to us or that we currently believe to be immaterial. If any of the events contemplated by the following discussion of risks should occur, our business, prospects, financial condition and results of operations may suffer.

Our indebtedness contains various covenants that impose restrictions that may affect our ability to operate our business and increase our interest expense.

In March 2017, we repaid and terminated our revolving credit facilities through the sale of a Senior Secured Term Note (the “Note”) in the amount of $7.00 million as described in Note 8 and Note 19 of the Consolidated Financial Statements included herein. The note sale provided us with approximately $1.00 million of additional funds for working capital. The Note’s governing documents contain various affirmative, negative and financial covenants customary for such financing, including various financial covenants which we must meet on a monthly basis. Our ability to comply with these provisions may be affected by events beyond our control. Failure to comply with these covenants could result in an event of default, which, if not cured or waived, could accelerate our repayment obligations.

Our indebtedness could have negative consequences to us, including:

• we may have difficulty satisfying our obligations with respect to our outstanding debt;

• we may have difficulty obtaining financing in the future for working capital, capital expenditures, acquisitions or other purposes;

• we may need to use all, or a substantial portion, of our available cash flow to pay interest and principal on our debt, which will reduce the amount of money available to finance our operations and other business activities;

• our vulnerability to general economic downturns and adverse industry conditions could increase;

• our flexibility in planning for, or reacting to, changes in our business and in our industry in general could be limited;

• our amount of debt and the amount we must pay to service our debt obligations could place us at a competitive disadvantage compared to our competitors that have less debt;

• our customers may react adversely to our significant debt level and seek or develop alternative licensors or suppliers; and

• our failure to comply with the restrictive covenants in our debt instruments which, among other things, may limit our ability to incur debt and sell assets, could result in an event of default that, if not cured or waived, could have a material adverse effect on our business or prospects.

Customers in the oil and gas industry account for a significant portion of our sales. Reduced expenditures by customers in this industry are likely to reduce demand for our products and services.

Customers related to the upstream, midstream and downstream oil and gas industry accounted for approximately 47% and 81% of our net sales in 2016 and 2015, respectively. The oil and gas industry is a cyclical commodity business, with product demand and prices based on numerous factors such as general economic conditions and local, regional and global events and conditions that affect supply, demand and profits. Demand for our products and services benefits from strong oil and gas markets. The recent decline in the price for oil and its prolonged lower prices has caused a decrease in demand for our products and services resulting in a decline in our net sales, profit margins and cash flows.

Our products include complex systems for energy and industrial markets which are subject to operational and liability risks.

We are engaged in the manufacture and installation of complex power distribution and control systems for the energy and industrial markets. These systems are frequently complex and susceptible to unique engineering elements that are not tested in the actual operating environment until commissioned. As a result, we may incur unanticipated additional operating and warranty expenses that were not anticipated when the fixed-price contracts were estimated and executed resulting in reduced profit margins on such projects.

The industries in which we operate are highly competitive, which may result in a loss of market share or decrease in net sales or profit margin.

Our products and services are provided in a highly competitive environment and we are subject to competition from a number of similarly sized or larger businesses which may have greater financial and other resources than are available to us. Factors that affect competition include timely delivery of products and services, reputation, manufacturing capabilities, price, performance and dependability. Any failure to adapt to a changing competitive environment may result in a loss of market share and a decrease in net sales and profit margins.

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We often utilize fixed-price contracts which could adversely affect our financial results.

We currently generate, and expect to continue to generate, a significant portion of our net sales under fixed-price contracts. We must estimate the costs of completing a particular project to bid for such fixed-price contracts. The cost of labor and materials, however, may vary from the costs we originally estimated. These variations, along with other risks inherent in performing fixed-price contracts, may result in actual costs and gross profits for a project differing from those we originally estimated and could result in reduced profitability and losses on projects. Depending upon the size of fixed-price contracts, variations from estimated contract costs can have a significant impact on our operating results for any fiscal quarter or year.

Our use of percentage-of-completion accounting could result in a reduction or elimination of previously reported profit.

A portion of our net sales is recognized on the percentage-of-completion method of accounting. The percentage-of-completion method of accounting practice we use results in recognizing contract net sales and earnings ratably over the contract term in proportion to our incurrence of contract costs. The earnings or losses recognized on individual contracts are based on estimates of contract net sales, costs and profitability. Contract losses are recognized in full when determined, and contract profit estimates are adjusted based on ongoing reviews of contract profitability. Actual collection of contract amounts or change orders could differ from estimated amounts and could result in a reduction or elimination of previously recognized earnings in future periods. In certain circumstances, it is possible that such adjustments could be significant.

Inability to obtain performance bonding could prevent us from bidding on certain projects

A portion of the Company’s growth is focused on power generation projects and the EPC firms building them. Those bids typically require a form of surety which could be a letter of credit or a performance bond. Failure to obtain adequate bonding capacity could hinder our growth in this market.

We may not be able to fully realize the net sales value reported in our backlog.

Orders included in our backlog are represented by customer purchase orders and contracts. Backlog develops as a result of new business which represents the net sales value of new project commitments received by us during a given period. Backlog consists of projects which have either (1) not yet been started or (2) are in progress and are not yet complete. In the latter case, the net sales value reported in backlog is the remaining value associated with work that has not yet been completed. From time to time, projects that were recorded as new business are cancelled. In the event of a project cancellation, we may be reimbursed for certain costs but typically have no contractual right to the total net sales included in our backlog. In addition to being unable to recover certain direct costs, we may also incur additional costs resulting from underutilized assets if projects are cancelled.

We rely on a few key employees whose absence or loss could disrupt our operations or be adverse to our business.

Our continued success is dependent on the continuity of several key management, operating and technical personnel. The loss of these key employees would have a negative impact on our future growth and profitability. We have entered into written employment agreements with our Chief Executive Officer; Chief Financial Officer; Chief Operating Officer; and International Director, who is responsible for managing our BOMAY joint venture operations relationships and Brazil subsidiary.

Our results of operations and financial condition may be adversely impacted by economic uncertainty and global recession.

The consequences of a prolonged recession could include a lower level of economic activity and uncertainty regarding commodity and capital markets. The lack of a sustained economic recovery could have an adverse effect on our results of operations, cash flows or financial position.

Our failure to attract and retain qualified personnel could lead to a loss of net sales or profitability.

Our ability to provide high-quality products and services on a timely basis requires that we employ an adequate number of skilled personnel. Accordingly, our ability to increase our productivity and profitability will be limited by our ability to employ, train and retain skilled personnel necessary to meet our requirements. We cannot be certain that we will be able to maintain an adequate skilled labor force necessary to operate efficiently and to support our growth strategy or that our labor expenses will not increase as a result of a shortage in the supply of skilled personnel.

Natural disasters, terrorism, acts of war, international conflicts or other disruptions could harm our business and operations.

Natural disasters, acts or threats of war or terrorism, international conflicts, and the actions taken by the United States and other governments in response to such events could cause damage to or disrupt our business operations or those of our customers, any of which could have an adverse effect on our business.

We manufacture products and operate plants in Texas and Brazil. Operations in the United States have been disrupted in the past due to hurricanes. Although we have not suffered any material losses as a result of these disruptions due to our insurance coverage and advance preparations, it is not possible to predict future similar events or their consequences, any of which could decrease demand for our products, make it difficult or impossible for us to deliver products, or disrupt our supply chain.

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We generate a significant portion of our net sales from international operations and are subject to the risks of doing business outside of the United States.

Approximately 13% of our net sales in 2016 were generated from projects and business operations outside of the United States, primarily provided to the oil and gas drilling and marine industries in the following countries: Mexico, Canada, United Arab Emirates, Singapore, Indonesia and Brazil. This percentage was approximately 15% in 2015. The oil and gas industry operates in both remote and potentially politically unstable locations, and numerous risks and uncertainties affect our non-United States operations. These risks and uncertainties include changes in political, economic and social environments, local labor conditions, changes in laws, regulations and policies of foreign governments, as well as United States laws affecting activities of United States companies abroad, including tax laws and enforcement of contract and intellectual property rights. In addition, the costs of providing our services can be adversely and/or unexpectedly impacted by the remoteness of the locations and other logistical factors.

The marketplace may not accept and utilize our newly developed products and services, the effect of which would prevent us from successfully commercializing our proposed products or services and may adversely affect our financial condition and results of operations.

Our ability to market and commercialize our new products and services depends on the acceptance of such products and services by the industry.

Joint Venture limited life risk

The joint venture, BOMAY was formed in 2006 in China. It was formed with a term of 12 years. The joint venture may be terminated earlier for valid business reasons including Force Majeure. In the event the joint venture is to be terminated, either party may acquire the other parties’ interests and continue the operations of the joint venture. Additionally, the term of the joint venture may be extended upon agreement of all parties. In such case, the joint venture shall apply for the extension to the relevant Chinese authority six months before expiry of the venture. At this time, AETI has no indication that the joint venture will not be extended beyond 12 years.

Risk related to our Chinese Joint Venture

We maintain a significant investment in a joint venture with a Chinese energy company. We may encounter risks pertaining to a weakening Chinese economic environment. We may encounter unforeseen or unexpected operating, financial, political or cultural factors that could impact its business plans and the expected profitability from such investment. We will face risks if China loses normal trade relations with the United States and it may be adversely affected by the diplomatic and political relationships between the United States and China. As a result of the relatively weak Chinese legal system, in general, and the intellectual property regime, in particular, we may face additional risk with respect to the protection of our intellectual property in China. Changes in China’s political and economic policies could adversely affect our investment and business opportunities in China.

Risk from Restricted U.S. Government Access to Audit Documents in China

The audit of BOMAY for the fiscal years ended December 31, 2016 and 2015 was conducted in China by a Chinese audit firm not registered with the Public Company Accounting Oversight Board (“PCAOB”) under the direction of the Company’s independent auditor.  The Company’s independent auditor has directed additional procedures to comply with auditing standards prescribed by the PCAOB.  

Under the laws of the United States, auditors of public companies are to undergo regular inspections by the PCAOB and to make all requested work papers available for the SEC and the PCAOB inspection. However, due to laws of the People’s Republic of China applicable to auditors, the SEC and the PCAOB are currently unable to conduct such inspections on work papers prepared in China without the approval of the Chinese government authorities.

As a result, the SEC or PCAOB may be unable to conduct inspections of the BOMAY audit work papers.  The Company’s stockholders may be deprived of the benefits of PCAOB inspections, and may lose confidence in our reported financial information and procedures and the quality of portions of our financial statements.

Joint Venture Centralized Government Risks

Since the centralized government of China controls most of the petroleum industry and related manufacturing through annual planning and budgets, the financial results realized by the Company’s joint venture, BOMAY, will reflect the government’s decisions on production levels for oil and gas equipment. The Company further understands that the value of BOMAY’s assets, including inventory, may not be fully realized if demand for these products is reduced significantly because of economic policy decisions or other organizational changes in the Chinese petroleum industry.

Market Risk

The markets in which we participate are capital intensive and cyclical in nature. The volatility in customer demand is greatly driven by the change in the price of oil and gas. These factors influence the release of new capital projects by our customers, which are traditionally awarded in competitive bid situations. Coordination of project start dates is matched to the customer requirements and projects may take a number of months to complete; schedules also may change during the course of any particular project.

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Foreign Currency Transaction Risk

The Company operates a subsidiary in Brazil and maintains equity method investments in its Chinese and Singapore joint ventures, BOMAY and MIEFE. The functional currencies of the Brazilian subsidiary and the joint ventures are the Brazilian Real, Chinese Yuan and Singapore Dollar, respectively. Investments are translated into United States Dollars at the exchange rate in effect at the end of each quarterly reporting period. The resulting translation adjustment is recorded as accumulated other comprehensive income in our consolidated balance sheets. The translation adjustment decreased from $0.31 million at December 31, 2015 to $0.00 million at December 31, 2016 due principally to the weakening of the Brazilian Real and strengthening of the Chinese Yuan versus the United States Dollar.

Other than the aforementioned items, we do not believe we are exposed to significant foreign currency exchange risk because most of our net sales and purchases are denominated in United States Dollars.

Commodity Price Risk

We are subject to commodity price risk from fluctuating market prices of certain raw materials. While such materials are typically available from numerous suppliers, commodity raw materials are subject to price fluctuations. We endeavor to recoup these price increases from our customers on an individual contract basis to avoid operating margin erosion. Although historically we have not entered into any contracts to hedge commodity risk, we may do so in the future. Commodity price changes can have a material impact on our prospective earnings and cash flows. Copper, steel and aluminum represent a significant element of our material cost. Significant increases in the prices of these materials could reduce our estimated operating margins if we are unable to recover such increases from our customers.

Interest Rate Risk

Our interest rate sensitive items do not subject us to material risk exposures. Our revolving credit facility remains available through December 29, 2017. The revolving promissory note has a similar interest rate exposure, with semi-annual payments of $0.15 million. The outstanding balance is due December 2020. At December 31, 2016, the Company had $5.70 million of variable-rate term debt outstanding. At this borrowing level, a hypothetical relative increase of 10% in interest rates would have an unfavorable but insignificant impact on the Company’s pre-tax earnings and cash flows. The primary interest rate exposure on variable-rate debt is based on the three month LIBOR rate (0.98% at December 31, 2016) plus 4.00% per year. The loan agreements are collateralized by real estate, trade accounts receivable, equipment, inventory and work-in-process, and guaranteed by our operating subsidiaries. In March 2017, the Company refinanced our outstanding debt at a fixed rate. Refer to Note 8 and Note 19 in the accompany Notes to Consolidated Financial Statements.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

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ITEM 2. PROPERTIES

The following table describes the material facilities of AETI and its subsidiaries, including foreign joint ventures, as of December 31, 2016:

Location	General Description	Approximate Acres	Approximate Square Feet of Building	Owned/Leased
Houston, Texas	Company and M&I headquarters, engineering, administration, E&I services	0.1	13,000	Leased
Beaumont, Texas	Manufacturing, engineering, E&I services, administration and storage	9.0	118,000	Owned
Houma, Louisiana	M&I Electric services location	0.1	4,125	Leased
Brazil - Macaé	M&I Brazil offices and shop services	1.0	10,764	Leased
Rio	M&I Brazil offices and shop services	0.1	6,458	Leased
Belo Horizonte	M&I Brazil offices	0.1	4,306	Leased
Foreign joint ventures’ operations:
Xian, Shaanxi, China	BOMAY Electric Industries offices and manufacturing	4.1	100,000 80,000	Owned Leased
Singapore	M&I Electric Far East offices and manufacturing	0.3	15,000	Leased

ITEM 3. LEGAL PROCEEDINGS.

The Company becomes involved in various legal proceedings and claims in the normal course of business. In management’s opinion, the ultimate resolution of these matters is not expected to have a material effect on our consolidated financial position or results of operations.

ITEM 4. MINE SAFETY DISCLOSURES.

Not applicable.

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PART II

ITEM 5. MARKET FOR THE REGISTRANT’S COMMON STOCK, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

The Company’s common stock trades on The NASDAQ Stock Market under the symbol “AETI”.

The following table sets forth quotations for the high and low sales prices for the Company’s common stock, as reported by NASDAQ, for the periods indicated below:

	Year Ended December 31, 2016				Year Ended December 31, 2015
	High		Low		High		Low
First Quarter	$	4.41	$	1.81	$	6.12	$	3.05
Second Quarter	2.82		1.76		6.24		3.97
Third Quarter	5.15		2.21		5.14		2.31
Fourth Quarter	2.70			1.50	3.51		1.85

As of March 16, 2017, there were 44 shareholders of record of our common stock.  

The Company did not declare or pay cash dividends on common shares in either fiscal year 2016 or 2015. Dividends were paid on our Series A Convertible Preferred Stock. The Company anticipates that, for the foreseeable future, it will retain any earnings for use in the operations of its business. Our amended bank loan agreement prohibits the payment of cash dividends on our common stock.

EQUITY COMPENSATION PLAN INFORMATION

The following table summarizes information about outstanding equity plans as of December 31, 2016. The 2007 Employee Stock Incentive Plan, as amended, has been approved to issue up to 1,700,000 shares of the Company’s common stock.

Plan Category	Number of securities to be issued upon exercise of outstanding   rights (1)		Weighted-average exercise price of outstanding options (2)		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (1)) (3) (a)
Equity compensation plans approved by security holders		218,412	$	—		433,777
Equity compensation plans not approved by security holders		—		—		—
Total (c)		218,412	$	—		433,777

(1) Includes shares of common stock issuable upon vesting of outstanding restricted stock units (RSUs).

(2) The weighted average exercise price does not take into account the shares issuable upon vesting of outstanding RSUs, which convert to common stock on a one-to-one basis. No options were outstanding.  

(3) Consists of the shares available for future issuance under 2007 Employee Stock Incentive Plan for services by eligible employees, board members, independent contractors and consultants.

(a) See Note 10 to the consolidated financial statements included in this 10-K for the year ended December 31, 2016 for further information.

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ITEM 6. SELECTED FINANCIAL DATA

The following table summarizes our consolidated financial data for continuing operations for the periods presented. This data excludes the results of American Access Technologies, Inc., a former subsidiary of the Company which was sold in 2014. You should read the following selected consolidated financial data in conjunction with our consolidated financial statements and the related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of this annual report. The information set forth below is not necessarily indicative of results of future operations. Amounts are in thousands of dollars except share and per share data.

CONTINUING OPERATIONS

	2016			2015			2014			2013		2012
Net sales	$	37,812		$	49,083		$	57,254		$	59,239	$	48,169
Net income (loss) before dividends on redeemable preferred stock	$	(7,060	)	$	(2,593	)	$	(4,727	)	$	5,263	$	2,793
Earnings (loss) per common share:
Basic	$	(0.89	)	$	(0.36	)	$	(0.29	)	$	0.62	$	0.33
Diluted	$	(0.89	)	$	(0.36	)	$	(0.29	)	$	0.56	$	0.31
Cash dividends declared per common share	$	-		$	-		$	-		$	-	$	-
Shares used in computing earnings (loss) per common share:
Basic		8,305,764			8,241,585			8,182,034			7,990,690		7,901,225
Diluted		8,305,764			8,241,585			8,182,034			9,472,506		8,258,742
Cash and cash equivalents	$	1,618		$	7,989		$	3,550		$	4,148	$	4,477
Total assets		35,384			38,586			43,254			45,836		38,974
Long-term debt (including current maturities)		4,200			4,500			4,000		500		500
Total liabilities		19,883			15,924			17,701			15,565		13,789
Redeemable preferred stock (net of discount)		4,383			4,329			4,281			4,236		4,194
Total stockholders’ equity		11,118			18,333			21,272			26,035		20,991

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with the consolidated financial statements and accompanying notes appearing elsewhere in this Form 10-K. This discussion contains forward-looking statements, based on current expectations related to future events and AETI’s future financial performance that involves risks and uncertainties. AETI’s actual results may differ materially from those anticipated in these forward-looking statements as a result of many important factors, including those set forth in the section entitled “Risk Factors” in this Form 10-K.

Overview  

Our corporate structure currently consists of American Electric Technologies, Inc., which owns 100% of  M&I Electric Industries, Inc., its wholly-owned subsidiary, South Coast Electric Systems, LLC and M&I Electric Brazil Sistemas e Servicios em Energia LTDA (“M&I Brazil”).

The Company is a leading provider of power delivery solutions to the global energy industry.

The principal markets that we serve include:

• Power generation and distribution– the Company provides “turn-key” power delivery solutions for the power generation and distribution market sectors.

• The Company works with turbine manufacturers, engine-generator manufacturers and dealers, EPC firms, and high voltage service companies to provide electric power delivery products and solutions. The Company also provides products and services for renewable power generation including biomass, geothermal and other renewable energy projects.

• The Company designs, manufactures, commissions and maintains our equipment for implementation in base-load, peaking power, cogeneration, and substation transmission facilities worldwide. 

• Oil and gas – the Company provides “turn-key” power delivery solutions for the upstream, midstream and downstream oil and natural gas sectors.

• Upstream oil and gas refers to the exploration and production of oil and natural gas. The Company serves customers in the land drilling, offshore drilling, land-based production, and offshore production segments of the market.

• Midstream oil and gas is primarily related to oil and gas transportation, including oil and gas pipelines and compression and pumping stations. The Company also has a strong customer base in natural gas fractionation (separation), cryo, natural gas to liquids, and other natural gas related-plants.

• Downstream oil and gas includes oil refining and petrochemical plants, as well as Liquefied Natural Gas (LNG) plants, export facilities, and storage facilities.

• Marine and industrial

• Marine applications includes blue water vessels such as platform supply vessels (PSV), offshore supply vessels (OSV), tankers and other various work boats, typically up to 300 ft. in length. The Company also provides solutions to brown water vessels such as barges, dredges and other river and inland water vessels.

• Industrial, including non-oil and gas industrial markets such as steel, paper, heavy commercial, and other non-oil and gas applications.

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Business Sectors Disclosures

Our financial results are captured in three major market sectors. These sectors are: Oil and Gas; Power Generation and Distribution; and Marine and Other Industrial. The products we manufacture are consistent in application within all the sectors. This information is supplemental and provided to allow investors to follow our future trends in marketing to various customer groups.

	For the Twelve Months Ended December 31, 2016 and 2015
	(in thousands)
				Power Generation			Marine & Other
2016	Oil & Gas			& Distribution			Industrial			Total
Net Sales	$	17,783		$	12,225		$	7,804		$	37,812
Gross Profit (Loss)		1,324			(804	)		496			1,016
Gross Profit (Loss) as % of Revenue		7	%		-7	%		6	%		3	%
				Power Generation			Marine & Other
2015	Oil & Gas			& Distribution			Industrial			Total
Net Sales	$	39,876		$	3,704		$	5,503		$	49,083
Gross Profit		5,018			788			784			6,590
Gross Profit as % of Revenue		13	%		21	%		14	%		13	%

Non-U.S. GAAP Financial Measures

A non-U.S. GAAP financial measure is generally defined as one that purports to measure historical or future financial performance, financial position or cash flows, but excludes or includes amounts that would not be so adjusted in the most comparable U.S. GAAP measure. In this report, we define and use the non-U.S. GAAP financial measure EBITDA as set forth below.

EBITDA

Definition of EBITDA

We define EBITDA as follows:

Net income (loss) before:

• provision (benefit) for income taxes;

• depreciation and amortization;

• dividends on redeemable preferred stock; and

• discontinued operations

Management’s Use of EBITDA

We use EBITDA to assess our overall financial and operating performance.  We believe this non-U.S. GAAP measure, as we have defined it, is helpful in identifying trends in our day-to-day performance because the items excluded have little or no significance on our day-to-day operations.  This measure provides an assessment of controllable expenses and affords management the ability to make decisions which are expected to facilitate meeting current financial goals as well as achieving optimal financial performance.  It provides an indicator for management to determine if adjustments to current spending decisions are needed.

EBITDA provides us with a measure of financial performance, independent of items that are beyond the control of management in the short-term, such as dividends required on preferred stock, depreciation and amortization, taxation and interest expense associated with our capital structure.  This metric measures our financial performance based on operational factors that management can impact in the short-term, namely the cost structure or expenses of the organization. EBITDA is one of the metrics used by senior management and the board of directors to review the financial performance of the business on a regular basis. EBITDA is also used by research analysts and investors to evaluate the performance and value of companies in our industry.

Limitations of EBITDA

EBITDA has limitations as an analytical tool.  It should not be viewed in isolation or as a substitute for U.S. GAAP measures of earnings.  Material limitations in making the adjustments to our earnings to calculate EBITDA, and using this non-U.S. GAAP financial measure as compared to U.S. GAAP net income (loss), include:

• the cash portion of dividends, interest expense and income tax (benefit) provision generally represent charges (gains), which may significantly affect our financial results; and

16

• depreciation and amortization, though not directly affecting our current cash position, represent the wear and tear and/or reduction in value of our fixed assets and may be indicative of future needs for capital expenditures.

An investor or potential investor may find this item important in evaluating our performance, results of operations and financial position.  We use non-U.S. GAAP financial measures to supplement our U.S. GAAP results in order to provide a more complete understanding of the factors and trends affecting our business.

EBITDA is not an alternative to net income, income from operations or cash flows provided by or used in operations as calculated and presented in accordance with U.S. GAAP.  You should not rely on EBITDA as a substitute for any such U.S. GAAP financial measure.  We strongly urge you to review the reconciliation of EBITDA to U.S. GAAP net income (loss) attributable to common stockholders, along with our consolidated financial statements included herein.

We also strongly urge you to not rely on any single financial measure to evaluate our business.  In addition, because EBITDA is not a measure of financial performance under U.S. GAAP and is susceptible to varying calculations, the EBITDA measure, as presented in this report, may differ from and may not be comparable to similarly titled measures used by other companies.

The table below shows the reconciliation of net loss attributable to common stockholders to EBITDA for the years ended December 31, 2016 and 2015 (dollars in thousands):

	Years Ending December 31,
	2016			2015
Net loss attributable to common stockholders	$	(7,413	)	$	(2,942	)
Add: Depreciation and amortization		877			894
Interest expense		251			172
Provision (benefit) for income taxes		44			428
Dividend on redeemable preferred stock		353			349
EBITDA	$	(5,888	)	$	(1,099	)

Backlog

Backlog is another non-U.S.GAAP indicator management uses to measure the level of outstanding orders.

The order backlog at December 31, 2016 and December 31, 2015 was $13.50 million and $19.03 million, respectively.

Foreign Joint Ventures:

Summary financial information of BOMAY and MIEFE in U.S. dollars was as follows at December 31, 2016 and 2015 (in thousands):

	BOMAY				MIEFE
	2016		2015		2016			2015
Assets:
Total current assets	$	47,700	$	68,151	$	425		$	2,365
Total non-current assets		3,589		4,131		17			70
Total assets	$	51,289	$	72,282	$	442		$	2,435
Liabilities and equity:
Total liabilities	$	24,196	$	44,415	$	551		$	1,930
Total joint ventures’ equity		27,093		27,867		(109	)		505
Total liabilities and equity	$	51,289	$	72,282	$	442		$	2,435
	Twelve Months Ended December 31,
	BOMAY				MIEFE
	2016		2015		2016			2015
Revenue	$	33,468	$	47,347	$	1,167		$	5,741
Gross Profit	$	6,687	$	8,353	$	481		$	1,112
Earnings	$	2,010	$	2,433	$	(631	)	$	(567	)

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The Company’s investments in and advances to its foreign joint ventures’ operations were as follows as of December 31, 2016 and 2015:

	2016									2015
	BOMAY*			MIEFE			TOTAL			BOMAY*			MIEFE			TOTAL
	(in thousands)									(in thousands)
Investments in foreign joint ventures:
Balance, beginning of year	$	2,033		$	14		$	2,047		$	2,033		$	14		$	2,047
Additional amounts invested and advanced		-			-			-			-			-			-
Balance, end of year		2,033			14			2,047			2,033			14			2,047
Undistributed earnings:
Balance, beginning of year		8,098			(11	)		8,087			8,157			358			8,515
Equity in earnings (loss)		804			(3	)		801			973			(232	)		741
Dividend distributions		(589	)		-			(589	)		(1,032	)		(137	)		(1,169	)
Balance, end of year		8,313			(14	)		8,299			8,098			(11	)		8,087
Foreign currency translation:
Balance, beginning of year		765			205			970			1,358			134			1,492
Change, during the year		(661	)		8			(653	)		(593	)		71			(522	)
Balance, end of year		104			213			317			765			205			970
Investments, end of year	$	10,450		$	213		$	10,663		$	10,896		$	208		$	11,104

* Accumulated statutory reserves in equity method investments of $2.89 million and $2.72 million at December 31, 2016 and 2015, respectively, are included in AETI’s consolidated retained earnings. In accordance with the People’s Republic of China, (“PRC”), regulations on enterprises with foreign ownership, an enterprise established in the PRC with foreign ownership is required to provide for certain statutory reserves, namely (i) General Reserve Fund, (ii) Enterprise Expansion Fund and (iii) Staff Welfare and Bonus Fund, which are appropriated from net profit as reported in the enterprise’s PRC statutory accounts. A non-wholly-owned foreign invested enterprise is permitted to provide for the above allocation at the discretion of its board of directors. The aforementioned reserves can only be used for specific purposes and are not distributable as cash dividends.

The Company accounts for its investments in foreign joint ventures’ operations using the equity method of accounting. Under the equity method, the Company’s share of the joint ventures’ operations’ earnings or loss is recognized in the consolidated statements of operations as equity income (loss) from foreign joint ventures’ operations. Joint venture income increases the carrying value of the joint ventures and joint venture losses reduce the carrying value. Dividends received from the joint ventures reduce the carrying value.

The equity income for the Company’s interest in the two joint ventures for 2016 and 2015 was: BOMAY $0.80 million vs. $0.97 million and MIEFE ($0.27) million vs. ($0.23) million. During 2016, the Company’s share of accumulated losses from its investment in MIEFE exceeded the Company’s initial investment balance. The Company applied the losses to the investment balance  to the extent of the Company’s initial investment, with the remaining $0.27 million accrued in other current liabilities to reflect the Company’s intention to fund their share of losses. Due to market conditions, the business suspended current operations and the investment in MIEFE was written down to zero excluding foreign currency translation in the first quarter of 2016. These results reflect the lower market demand in China and in Southeast Asia attribute to global energy prices.

Historically, the operating results of BOMAY have appeared almost seasonal as budgets were established for new years in March and the company worked to complete production to meet targets. Most of BOMAY’s production is for BOMCO for the Chinese National Petroleum Corporation, (“CNPC”), for land drilling in China and in other international markets where BOMCO or CNPC have relationships.

At December 31, 2016, there were inventories and work in progress at BOMAY of approximately $22.22 million compared to approximately $29.66 million at December 31, 2015. We expect much of this will be invoiced in 2017 after new budgets are established and products accepted. Additionally, new international orders will be completed and recognized. BOMAY has addressed the recent downturn in the Chinese market, including the decrease in the oil price, with reduced staff and other cost cutting measures.

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Results of Operations

The table below summarizes our consolidated net sales and profitability for the years ended December 31, 2016 and 2015 (dollars in thousands):

OPERATIONS

	2016			2015
Net sales	$	37,812		$	49,083
Gross profit		1,016			6,590
Gross profit %		3	%		13	%
Research and development expenses		(962	)		(769	)
Selling and marketing expenses		(2,181	)		(2,380	)
General and administrative expenses		(5,242	)		(5,782	)
Loss from operations		(7,369	)		(2,341	)
Equity income from foreign joint ventures’ operations		529			741
Foreign joint ventures’ operations related expenses		(245	)		(393	)
Net equity income from foreign joint ventures’ operations		284			348
Loss from operations and net equity income from foreign joint ventures’ operations		(7,085	)		(1,993	)
Other income (expense), net		69			(172	)
Loss before income taxes		(7,016	)		(2,165	)
(Provision for) benefit from income taxes		(44	)		(428	)
Net loss before dividends on redeemable convertible preferred stock		(7,060	)		(2,593	)
Dividends on redeemable preferred stock		(353	)		(349	)
Net loss attributable to common stockholders	$	(7,413	)	$	(2,942	)

Year ended December 31, 2016 compared to year ended December 31, 2015

Revenue and Gross Profit

Revenue decreased 23%, or $11.27 million, to $37.81 million for the year ended December 31, 2016, compared to the year ended December 31, 2015, primarily due to the general decline in market demand including  significant project cancellations and postponements in the United States.

Gross profit decreased 85%, or $5.55 million, to $1.02 million for the year ended December 31, 2016, compared to the year ended December 31, 2015. Gross profit as a percentage of revenues decreased to 3% for the year ended December 31, 2016, compared to 13% for the year ended December 31, 2015. The decrease in profitability was primarily attributable to competitive pricing pressure and overall lower revenue levels, along with $1.20 million of cost overruns associated with a large power generation project.

Research and Development costs

Research and development costs increased 25%, or $0.19 million, to $0.96 million for the year ended December 31, 2016, compared to the year ended December 31, 2015 as the Company completed its work on the IntelliSafe medium voltage arc resistant switchgear program.

Selling and Marketing expenses

Selling and marketing expenses decreased 8%, or $0.20 million, to $2.18 million for the year ended December 31, 2016, compared to the year ended December 31, 2015, due to expense management for advertising and marketing programs. Selling and marketing expenses, as a percentage of revenues, increased approximately 1% to 6% for the year ended December 31, 2016, compared to the year ended December 31, 2015.

General and Administrative Expenses

General and administrative expenses decreased by 9%, or $0.54 million, to $5.24 million for the year ended December 31, 2016, compared to the year ended December 31, 2015, primarily due to lower operating cost including reduction in force. General and administrative expenses, as a percentage of revenues, increased approximately 2% to 14% for the year ended December 31, 2016, compared to the year ended December 31, 2015.

Foreign Joint Venture Equity

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Net equity income from foreign joint ventures decreased 18%, or $0.06 million, to $0.28 million for the year ended December 31, 2016, compared to the year ended December 31, 2015, primarily due to lower market demand in China and in Southeast Asia attribute to global energy prices.

Other Income (Expense), Net

Interest expense and other income increased 140% or $0.24 million to $0.07 million for the year ended December 31, 2016, compared to the year ended December 31, 2015, primarily due to the gain on sale of South Coast Electric Systems manufacturing operations and the BP settlement from the 2010 gulf oil spill. Interest expense and other income, as a percentage of revenues, increased to 0.18% for the year ended December 31, 2016, compared to (0.35%) for the year ended December 31, 2015.

Income Tax Provisions

The provision for income taxes for 2016 was $0.04 million compared to $0.43 million in 2015. These amounts reflect the valuation allowance related to the Company’s net deferred tax assets related to its U.S. operation.  See Note 7 Income Taxes to the Consolidated Financial Statements included in this report for further details.  The 2016 and 2015 tax accruals represent U.S. taxes on the foreign joint ventures equity income less dividends and proceeds received.

LIQUIDITY AND CAPITAL RESOURCES

	December 31, 2016			December 31, 2015
	(in thousands except percentages and ratios)
Working capital	$	3,302		$	10,945
Current ratio	1.3 to 1			2.3 to 1
Total Debt	$	5,700		$	5,543
Debt as a percent of total capitalization		34	%		23	%
Consolidated net worth	$	15,502		$	22,662

* “Consolidated Net Worth” represents the Company’s consolidated total assets less consolidated total liabilities.

AETI’s long-term debt as of December 31, 2016 was $3.90 million on which payments were current.  

See Note 8 Notes Payable to the Consolidated Financial Statements included in this report for discussion of recent financial activity.

Notes Payable

On December 29, 2015, the Company entered into a Loan Agreement (the “Loan Agreement”) with Frost Bank (“Frost”). The Loan Agreement provided two separate revolving credit facilities to the Company. These facilities were repaid and terminated on March 23, 2017 at which time we sold a $7.00 million Senior-Secured Term Note (the “Note”) to a third-party lender. The proceeds of the note sale were used to pay off all remaining balances on the credit facilities with Frost in addition to providing approximately $1.00 million of working capital. Note is payable in monthly interest only payments, in arrears, with $0.50 million of principal payable by June 30, 2017 and the balance due March 23, 2021. The Note is secured by all assets of the Company, with few exceptions, and bears interest at a fixed rate of 11.50%.

Sources and Use of Cash

We derive the majority of our operating cash inflow from receipts from the sale of goods and services and cash outflow is used for the procurement of materials and labor. Accordingly, cash flow is subject to market fluctuations and conditions. A substantial portion of our business allows for progress billings that provide us with cash receipts as costs are incurred throughout the project, rather than upon contract completion, thereby reducing working capital requirements.

Operating Activities

During the twelve months ended December 31, 2016, the Company’s operating activities used cash of $6.60 million as compared to providing $2.37 million during 2015. This was primarily the result of the net loss from operations and a net increase in cost in excess of billings along with an increase in accounts payable of $4.3 million.

Investing Activities

During the twelve months ended December 31, 2016, the Company’s investing activities provided $0.17 million in cash as compared to providing $0.80 million for the comparable period in 2015. The decrease in 2016 is mainly attributed to a lower dividend received from our joint venture, partially offset by proceeds from the sale of SCES assets.

Financing Activities

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During the twelve months ended December 31, 2016, the Company’s financing activities provided $0.03 million in cash as compared to providing $1.43 million in the comparable period in 2015 which included $1.50 million in net proceeds from the issuance of debt.

Liquidity

We periodically evaluate our liquidity requirements, capital needs and availability of resources in view of debt requirements and operating cash needs. To meet our short and long-term liquidity requirements, we rely primarily on cash from operations. Beyond cash generated from operations, the Company has a shelf registration filed with the SEC which permits us to issue an unspecified amount of debt or equity securities. Refer to Note 8 - Notes Payable and Note 19 - Subsequent Event to the Consolidated Financial Statements in this Annual Report.

Operating Lease Commitments

The following is a schedule of future minimum rental payments required under operating leases that have initial or remaining non-cancelable lease terms in excess of one year as of December 31, 2016:

Year Ending December 31,	Amount
	(In thousands)
2017	$	698
2018		631
2019		438
2020		241
2021		215
	$	2,223

Contractual Obligations

Payments due under contractual obligations other than leases at December 31, 2016 are as follows:

	Within 1 Year		2 - 3 years		4 - 5 years		More Than 5 Years		Total
	(in thousands)
Long-term debt obligations	$	300	$	600	$	3,300	$	0	$	4,200
Interest on long-term debt		200		357		156		0		713
Total	$	500	$	957	$	3,456	$	0	$	4,913

Interest is estimated based on the current rate of approximately 4.98% and do not reflect financing in 2017. Please refer to Note 19 Subsequent event.  

Other Commercial Commitments

We are contingently liable for secured letters of credit of $1.25 million as of December 31, 2016 in relation to performance guarantees on certain customer contracts. These guarantees assure that we will perform under the terms of our contract.

The following table reflects potential cash outflows that may result in the event that we are unable to perform under our contracts as of December 31, 2016:

For the Year Ending December 31,	Amount
	(in thousands)
Payments Due by Period:	$	-
Less than 1 year		1,248
1 to 3 years		-
More than 3 years		-
	$	1,248

Outlook for Fiscal 2017

Although the market experienced significant losses in 2015 and 2016 due to reduced oil and gas price-based demand, the Company believes it has several promising areas of opportunity in 2017.

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The Company believes there is an increased level of opportunities in the power generation and distribution markets with the availability of low cost natural gas. This fact, coupled with political pressures on coal-fired power generation plants, creates an increased market opportunity for the Company.

The Company is also strongly pursuing opportunities it sees in the midstream and downstream niches in the oil & gas market including storage terminals, LNG projects, refineries and petrochemical facilities.  

The Company also sees continued growth opportunities for its IntelliSafe™ medium voltage arc-resistant switchgear primarily in the downstream and power generation and distribution sectors in 2017 and beyond.

The Company believes that an increase in the price of oil above 2016 levels will create growth opportunities for its services business as drilling companies need to get their assets up and running again.

Internationally, the Company believes our global energy markets in China will remain flat at 2016 levels throughout 2017. We anticipate an increase in market opportunities in Brazil in 2017 as the political and economic challenges facing Brazil stabilize.

The Company enters the 2017 fiscal year with backlog of $13.50 million, which is up approximately $2.5 million from the end of the third quarter based on orders received in the fourth quarter for the Company’s products. We closely monitor our backlog and order activity and continue to adjust our cost structure and expenditures as conditions require.

The Company continues to review growth opportunities and depending on cash needs may raise cash in the form of debt, equity, or a combination of both.

Effects of Inflation

We experienced minimal increases in our material prices in 2016. The Company has been generally successful in recovering these increases from its customers in the form of increased prices. Future inflationary pressures will likely be largely dependent on the worldwide demand for these basic materials which cannot be predicted at this time.

Commitments and Contingencies

The Company maintains a group medical and hospitalization minimum premium insurance program. For the policy year ended August 2016 and the subsequent policy year, the Company is liable for all claims each year up to $70,000 per insured, or $1.7 million in the aggregate. An outside insurance company insures any claims in excess of these amounts. The Company’s annual expense for this minimum premium insurance program totaled $1.07 million and $1.16 million during the years ended December 31, 2016 and 2015, respectively. Insurance reserves included in accrued payroll and benefits in the accompanying consolidated balance sheets were approximately $0.02 million and $0.00 million at December 31, 2016 and 2015, respectively. The Company is a party to a number of legal proceedings in the normal course of business for which appropriate provisions have been made if it is believed an ultimate loss is probable.

Critical Accounting Policies and Estimates

We have adopted various critical accounting policies that govern the application of accounting principles generally accepted in the United States of America (“U.S. GAAP”) in the preparation of our consolidated financial statements. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Although these estimates are based on management’s knowledge of current events and actions it may undertake in the future, they may ultimately differ from actual results.

Certain accounting policies involve significant estimates and assumptions by us that have a material impact on our consolidated financial condition or operating performance. Management believes the following critical accounting policies reflect its most significant estimates and assumptions used in the preparation of our consolidated financial statements. We do not have off-balance sheet arrangements, financings, or other relationships with unconsolidated entities or other persons, also known as “special purpose entities”, nor do we have any “variable interest entities”.

Inventories – Inventories are stated at the lower of cost or market, with material value determined using an average cost method. Inventory costs for finished goods and work-in-process include direct material, direct labor, production overhead and outside services. Indirect overhead is apportioned to work-in-process based on direct labor incurred.

Allowance for Obsolete and Slow-Moving Inventory – The Company regularly reviews the value of inventory on hand using specific aging categories, and records a provision for obsolete and slow-moving inventory based on historical usage and estimated future usage. As actual future demand or market conditions may vary from those projected, adjustments to our inventory reserve may be required. Based on this assessment, management believes the inventory reserve is adequate.

Allowance for Doubtful Accounts – The Company maintains an allowance for doubtful accounts for estimated losses resulting from the inability of customers to make required payments. The estimate is based on management’s assessment of the collectability of specific customer accounts and includes consideration for credit worthiness and financial condition of those specific customers. The Company also reviews historical experience with the customer, the general economic environment and the aging of receivables. The

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Company records an allowance to reduce receivables to the amount that is reasonably believed to be collectible. Based on this assessment, management believes the allowance for doubtful accounts is adequate.

Revenue Recognition – The Company reports earnings from fixed-price and modified fixed-price long-term contracts on the percentage-of-completion method.  Earnings are accrued based on the ratio of costs incurred to total estimated costs. Costs include direct material, direct labor, and job related overhead.  However, for our manufacturing activities, we have determined that labor incurred, rather than total costs incurred, provides an improved measure of percentage-of-completion. For contracts with anticipated losses, estimated losses are charged to operations in the period such losses are determined. A contract is considered complete when all costs, except insignificant items, have been incurred and the project has been accepted by the customer. Revenue from non-time and material jobs of a short-term nature (typically less than one month) is recognized on the completed-contract method after considering the attributes of such contracts. This method is used because these contracts are typically completed in a short period of time and the financial position and results of operations do not vary materially from those which would result from use of the percentage-of-completion method. The asset, “Work-in-process,” which is included in inventories, represents the cost of labor, material, and overhead on jobs accounted for under the completed-contract method. For contracts accounted for under the percentage-of-completion method, the asset, “Costs and estimated earnings in excess of billings on uncompleted contracts,” represents revenue recognized in excess of amounts billed and the liability, “Billings in excess of costs and estimated earnings on uncompleted contracts,” represents billings in excess of revenue recognized.

Foreign Currency Gains and Losses – Foreign currency translations are included as a separate component of comprehensive income. The Company has determined the local currency of its foreign subsidiary and its foreign joint ventures to be the functional currency. In accordance with ASC 830, the assets and liabilities of the foreign equity investees and M&I Brazil, denominated in foreign currency, are translated into United States dollars at exchange rates in effect at the consolidated balance sheet date and net sales and expenses are translated at the average exchange rate for the period. Related translation adjustments are reported as comprehensive income, net of deferred income taxes, which is a separate component of stockholders’ equity, whereas gains and losses resulting from foreign currency transactions are included in results of operations.

Federal Income Taxes – The liability method is used in accounting for federal income taxes. Under this method, deferred tax assets and liabilities are determined based on differences between the financial reporting and tax basis of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The realizability of deferred tax assets are evaluated annually and a valuation allowance is provided if it is more likely than not that the deferred tax assets will not give rise to future benefits in the Company’s tax returns.

Contingencies – The Company records an estimated loss from a loss contingency when information indicates that it is probable that an asset has been impaired or a liability has been incurred and the amount of loss can be reasonably estimated. Contingencies are often resolved over long time periods, are based on unique facts and circumstances, and are inherently uncertain. The Company regularly evaluates the current information that is available to determine whether such accruals should be adjusted or other disclosures related to contingencies are required. The Company is a party to a number of legal proceedings in the normal course of business for which appropriate provisions have been made if it is believed an ultimate loss is probable. The ultimate resolution of these matters, individually or in the aggregate, is not likely to have a material impact on the Company’s consolidated financial position or results of operations.

Equity Income from Foreign Joint Ventures’ Operations – The Company accounts for its investments in foreign joint ventures’ using the equity method. Under the equity method, the Company records its pro-rata share of foreign joint ventures’ income or losses and adjusts the basis of its investment accordingly. Dividends received from the joint ventures, if any, are recorded as reductions to the investment balance.

Carrying Value of Joint Venture Investments – The Company evaluates the carrying value of equity method investments as to whether an impairment adjustment may be necessary. In making this evaluation, a variety of quantitative and qualitative factors are considered including international, national and local economic, political and market conditions, industry trends and prospects, liquidity and capital resources and other pertinent factors. Based on the most recent review at December 31, 2016 and December 31, 2015, management believes the carrying value of investments in foreign joint ventures is recoverable.

Recently Issued Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers, which supersedes nearly all existing revenue recognition guidance under U.S. GAAP. The core principle of ASU No. 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. ASU No. 2014-09 defines a five step process to achieve this core principle and, in doing so, more judgment and estimates may be required under existing U.S. GAAP. The standard is effective for annual periods beginning after December 15, 2016, and interim periods therein, using either of the following transition methods: (i) a full retrospective approach reflecting the application of the standard in each prior reporting period with the option to elect certain practical expedients, or (ii) a retrospective approach with the cumulative effect of initially adopting ASU No. 2014-09 recognized at the date of adoption (which includes additional footnote disclosures). In July 2015, the FASB issued ASU No. 2015-14 which delayed the effective date of ASU No. 2014-09 by one year (effective for annual periods

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beginning after December 15, 2017). We are currently evaluating the future impact of our pending adoption of ASU No. 2014-09 on our consolidated financial statements and have not yet determined the method with which we will adopt the standard in 2018.  

In June 2014, the FASB issued ASU No. 2014-12, Compensation – Stock Compensation (Topic 718): Accounting for Share Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period. The amendments in this ASU require that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. A reporting entity should apply existing guidance in Topic 718, Compensation – Stock Compensation, as it relates to awards with performance conditions that affect vesting to account for such awards. The performance target should not be reflected in estimating the grant-date fair value of the award. Compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the period(s) for which the requisite service has already been rendered. If the performance target becomes probable of being achieved before the end of the 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. The requisite service period ends when the employee can cease rendering service and still be eligible to vest in the award if the performance target is achieved. The amendments in ASU No. 2014-12 are effective for annual periods and interim periods within those annual periods beginning after December 15, 2015, with early adoption permitted. The adoption of ASU No. 2014-12 did not have a significant impact on the Company’s consolidated financial position, results of operations and disclosures.

In January 2015, the FASB issued ASU No. 2015-01, Income Statement – Extraordinary and Unusual Items (Subtopic 225-20): Simplified Income Statement Presentation by Eliminating the Concept of Extraordinary Items. This ASU eliminates from U.S. GAAP the concept of extraordinary items. Subtopic 225-20, Income Statement – Extraordinary and Unusual Items, requires that an entity separately classify, present and disclose extraordinary events and transactions. Presently, an event or transaction is presumed to be ordinary and usual activity of the reporting entity unless evidence clearly supports its classification as an extraordinary item. If an event or transaction meets the criteria for extraordinary classification, an entity is required to segregate the extraordinary item from the results of ordinary operations and show the item separately in the income statement, net of tax, after income from continuing operations. The entity also is required to disclose applicable income taxes and either present or disclose earnings-per-share data applicable to the extraordinary item. ASU No. 2015-01 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. The amendments of ASU No. 2015-01 can be applied prospectively or retrospectively to all prior periods presented in the financial statements. Early adoption is permitted. The adoption of ASU No. 2015-01 did not have a significant impact on the Company’s consolidated financial position, results of operations or disclosures.

In February 2015, the FASB issued ASU No. 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis, which is intended to improve targeted areas of consolidation guidance for legal entities such as limited partnerships, limited liability corporations, and securitization structures. ASU No. 2015-02 focuses on the consolidation evaluation for reporting organizations that are required to evaluate whether they should consolidate certain legal entities. In addition to reducing the number of consolidation models from four to two, the new standard simplifies the FASB Accounting Standards Codification ^TM and improves current U.S. GAAP by: (1) Placing more emphasis on risk of loss when determining a controlling financial interest. A reporting organization may no longer have to consolidate a legal entity in certain circumstances based solely on its fee arrangement, when certain criteria are met; (2) Reducing the frequency of the application of related-party guidance when determining a controlling financial interest in a variable interest entity; and (3) Changing consolidation conclusions for public and private companies in several industries that typically make use of limited partnerships or variable interest entities. ASU No. 2015-02 is effective for periods beginning after December 15, 2015. The adoption of ASU No. 2015-02 did not have a significant impact on the Company’s consolidated financial position, results of operations and disclosures.

In July 2015, the FASB issued ASU No. 2015-11 Inventory (Topic 330): Simplifying the Measurement of Inventory, which is intended to converge U.S. GAAP on this topic with IFRS. ASU No. 2015-11 focuses on the premeasurement of inventory measured using any method other than LIFO, for example, average cost. Inventory within the scope of ASU No. 2015-11 is required to be measured at the lower of cost and net realizable value. When evidence exists that the net realizable value of inventory is lower than its cost, the difference shall be recognized as a loss in earnings in the period in which it occurs. That loss may be required, for example, due to damage, physical deterioration, obsolescence, changes in price levels, or other causes. For public business entities, the amendments in ASU No. 2015-11 are effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. Management is currently evaluating the future impact of ASU No. 2015-11 on the Company’s consolidated financial position, results of operations and disclosures.

In September 2015, the FASB issued ASU No. 2015-16 Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments, ASU No. 2015-16 requires that an acquirer recognize adjustments to estimated amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. ASU No. 2015-16 requires that the acquirer record, in the same period’s financial statements, the effect on earnings of changes in depreciation, amortization, or other income effects, if any, as a result of the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date. ASU No. 2015-16 also requires an entity to present separately on the face of the income

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statement or disclose in the notes the portion of the amount recorded in current-period earnings by line item that would have been recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized as of the acquisition date. ASU No. 2015-16 is effective for fiscal years beginning after December 15, 2015. ASU No. 2015-16 should be applied retrospectively and early adoption is permitted. The adoption of ASU No. 2015-16 did not have a significant impact on the Company’s consolidated financial position, results of operations and disclosures.

In November, 2015, the FASB issued ASU No. 2015-17, Balance Sheet Classification of Deferred Taxes. The new guidance requires that all deferred tax assets and liabilities, along with any related valuation allowance, be classified as noncurrent on the balance sheet. As a result, each jurisdiction will now only have one net noncurrent deferred tax asset or liability. The new guidance will be effective for fiscal years beginning after December 15, 2017 and early adoption is permitted.  The Company has elected to early adopt this pronouncement and has reflected the change on the consolidated balance sheets for all periods presented.

In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. ASU No. 2016-01 requires (1) an entity to measure equity instruments (except those accounted for under the equity method of accounting, or those that result in consolidation of the investee) at fair value with changes in fair value recognized in net income; (2) entities to use the exit price notation when measuring the fair value of financial instruments for disclosure purposes; (3) separate presentation of financial assets and financial liabilities by measurement category and form of financial asset; and (4) elimination of the requirement to disclose the methods and significant assumptions used to estimate fair value that is required to be disclosed for financial instruments measured at amortized cost. ASU No. 2016-01 is effective for fiscal years beginning after December 15, 2017 with early adoption permitted. Management is currently evaluating the future impact of ASU No. 2016-01 on the Company’s consolidated financial position, results of operations and disclosures.

In February 2016, the FASB issued ASU No. 2016-02, Leases, which requires lessees to  recognize the following for all leases (with the exception of short-term leases) at the commencement date: (1) a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and (2) 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. Under ASU No. 2016-02, lessor accounting is largely unchanged. ASU No. 2016-02 is effective for fiscal years beginning after December 15, 2018 with early application permitted. Lessees and lessors must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The modified retrospective approach would not require any transition accounted for leases expired before the earliest comparative period presented. Lessees and lessors may not apply a full retrospective transition approach. Management is currently evaluating the future impact of ASU No. 2016-02 on the Company’s consolidated financial position, results of operations and disclosures.

In April 2016, the FASB issued ASU No.2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing, to clarify two aspects of Topic 606: (i) identifying performance obligations; and (ii) the licensing implementation guidance. The amendments do not change the core principle of the guidance in Topic 606. The effective date and transition requirements for ASU No. 2016-10 are the same as the effective date and transition requirements for ASU No. 2014-09. Management is currently evaluating the future impact of ASU No. 2016-10 on the Company’s consolidated financial position, results of operations and disclosures.

In May 2016, the FASB issued ASU No. 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients. ASU No. 2016-12 provides narrow-scope improvements to the guidance on collectability, noncash consideration, and completed contracts at transition. The amendment also provides a practical expedient for contract modifications at transition and an accounting policy election related to the presentation of sales taxes and other similar taxes collected from customers and are expected to reduce the judgment necessary to comply with Topic 606. The effective date and transition requirements for ASU No. 2016-12 are the same as the effective date and transition requirements for ASU No. 2014-09. Management is currently evaluating the future impact of ASU No. 2016-12 on the Company’s consolidated financial position, results of operations and disclosures.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU No. 2016-13 eliminates the probable initial recognition threshold in current generally accepted accounting principles (“GAAP”) and, instead, requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. In addition, ASU No. 2016-13 amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. ASU No. 2016-13 is effective for annual periods beginning after December 15, 2020, with early application permitted in annual periods beginning after December 15, 2018. The amendments of ASU No. 2016-13 should be applied through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. Management is currently evaluating the future impact of ASU No. 2016-13 on the Company’s consolidated financial position, results of operations and disclosures.

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. ASU No. 2016-15 addresses eight specific cash flow issues and is intended to reduce diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. ASU No. 2016-15

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is effective for reporting periods beginning after December 15, 2017. Early adoption is permitted. Management is currently evaluating the future impact of ASU No. 2016-15 on the Company’s consolidated financial position, results of operations and disclosures.

In December 2016, the FASB issued ASU No. 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers. ASU No. 2016-20 allows entities not to make quantitative disclosures about remaining performance obligations in certain cases and require entities that use any of the new or previously existing optional exemptions to expand their qualitative disclosures. The amendment also clarifies narrow aspects of ASC 606, including contract modifications, contract costs, and the balance sheet classification of items as contract assets versus receivables, or corrects unintended application of the guidance. The effective date and transition requirements for ASU No. 2016-20 are the same as the effective date and transition requirements for ASU No. 2014-09. Management is currently evaluating the future impact of ASU No. 2016-20 on the Company’s consolidated financial position, results of operations and disclosures.

In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business. ASU No. 2017-01 clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of a business or as acquisitions (or disposals) of assets. ASU No. 2017-01 is effective for annual periods beginning after December 15, 2018, with early adoption permitted under certain circumstances. The amendments of ASU No. 2017-01 should be applied prospectively as of the beginning of the period of adoption. Management is currently evaluating the future impact of ASU No. 2017-01 on the Company’s consolidated financial position, results of operations and disclosures.

In January 2017, the FASB issued ASU No. 2017-03, Accounting Changes and Error Corrections (Topic 250) and Investments – Equity Method and Joint Ventures (Topic 323): Amendments to SEC Paragraphs Pursuant to Staff Announcements at the September 22, 2016 and November 17, 2016 EITF Meetings. The amendments in this update relate to disclosures of the impact of recently issued accounting standards. The SEC staff’s view that a registrant should evaluate ASC updates that have not yet been adopted to determine the appropriate financial disclosures about the potential material effects of the updates on the financial statements when adopted. If a registrant does not know or cannot reasonably estimate the impact of an update, then in addition to making a statement to that effect, the registrant should consider additional qualitative financial statement disclosures to assist the reader in assessing the significance of the impact. The staff expects the additional qualitative disclosures to include a description of the effect of the accounting policies expected to be applied compared to current accounting policies. Also, the registrant should describe the status of its process to implement the new standards and the significant implementation matters yet to be addressed. The amendments specifically addressed recent ASC amendments to ASU No. 2016-13, Financial Instruments – Credit Losses, ASU No. 2016-02, Leases, and ASU No. 2014-09, Revenue from Contracts with Customers, although, the amendments apply to any subsequent amendments to guidance in the ASC. ASU No. 2017-03 is effective upon issuance and did not have a significant impact on the Company’s consolidated financial position, results of operations and disclosures.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market Risk

The markets in which we participate are capital intensive and cyclical in nature. The volatility in customer demand is greatly driven by the change in the price of oil and gas. These factors influence the release of new capital projects by our customers, which are traditionally awarded in competitive bid situations. Coordination of project start dates is matched to the customer requirements and projects may take a number of months to complete; schedules also may change during the course of any particular project. For more information please see Outlook for Fiscal 2017, contained within Item 7, Management Discussion and Analysis of Financial Condition and Results of Operations.

Liquidity Risk

Our inability to borrow additional funds under our existing credit facility could negatively impact future working capital, capital expenditures, and acquisitions in addition to fulfilling our obligations and our ability to continue operations of business. While we would seek alternative funding sources through both debt and equity raises, there is no assurance that additional capital can be obtained or that it can be obtained at terms that are favorable to us and our existing stockholders.

As of December 31, 2016, we had cash and cash equivalents of $1.62 million and total outstanding debt of $5.70 million and no availability for additional borrowings under our revolving credit facilities. Under the original terms of the credit facilities, the lender is committed to $7.90 million, however, failure to comply with certain financial covenants has resulted in a cap on Facility A until such time that we are compliant with the financial covenant.

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Interest Rates

Our interest rate sensitive items do not subject us to material risk exposures. Our Loan closed on March 23, 2017 has a fixed interest rate of 11.5%, with monthly interest only payments of $0.07 million.

Foreign Currency Transaction Risk

AETI operates a subsidiary in Brazil and maintains equity method investments in its Singapore and Chinese joint ventures, MIEFE and BOMAY respectively. The functional currencies of the Brazilian subsidiary and the joint ventures are the Brazilian Real, Singapore Dollar and Chinese Yuan, respectively. Investments are translated into United States Dollars at the exchange rate in effect at the end of each quarterly reporting period. The resulting translation adjustment is recorded as accumulated other comprehensive income, net of taxes, in our consolidated balance sheets. This item decreased from $0.31 million at December 31, 2015 to $0.00 million at December 31, 2016 due principally to the strengthening of the United States Dollar against the Chinese Yuan and weakening versus the Brazilian Real.

Other than the aforementioned items, we do not believe we are exposed to foreign currency exchange risk because most of our net sales and purchases are denominated in United States Dollars.

Commodity Price Risk

We are subject to market risk from fluctuating market prices of certain raw materials. While such materials are typically available from numerous suppliers, commodity raw materials are subject to price fluctuations. We endeavor to recoup these price increases from our customers on an individual contract basis to avoid operating margin erosion. Although historically we have not entered into any contracts to hedge commodity risk, we may do so in the future. Commodity price changes can have a material impact on our prospective earnings and cash flows. Copper, steel and aluminum represent a significant element of our material cost. Significant increases in the prices of these materials could reduce our estimated operating margins if we are unable to recover such increases from our customers.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Reference is made to the Table of Contents on page F-2 of our Consolidated Financial Statements and Notes thereto contained herein.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

Disclosure controls and procedures

Under the direction of our Principal Executive Officer and Principal Financial Officer, we evaluated our disclosure controls and procedures as of December 31, 2016. Our Principal Executive Officer and Principal Financial Officer concluded that our disclosure controls and procedures were effective as of December 31, 2016.

Management’s annual report on internal control over financial reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rule 13a-15(f) under the Exchange Act. Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2016. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission on Internal Control-Integrated Framework. Our management has concluded that our internal control over financial reporting was effective as of December 31, 2016 based on these criteria. This annual report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our independent registered public accounting firm pursuant to section 404(c) of the Sarbanes-Oxley Act of 2002, as amended, that permits the Company, as a smaller reporting company, to provide only management’s report in this annual report.

Changes in internal control over financial reporting

There were no changes in our internal controls over financial reporting that occurred during the quarter ended December 31, 2016 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B. OTHER INFORMATION

None.

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PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Directors

Information required by this Item is incorporated by reference to the information contained in the Proxy Statement for the 2017 Annual Meeting of Stockholders to be filed within 120 days after our December 31, 2016 fiscal year end.

ITEM 11. EXECUTIVE COMPENSATION

The information required by this Item is incorporated by reference to our Proxy Statement for the 2017 Annual Meeting of Stockholders.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The additional information required by this Item is incorporated by reference to our Proxy Statement for the 2017 Annual Meeting of Stockholders.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information required by this item is incorporated by reference to the “Director Independence” and “Certain Relationships and Related Transactions” sections of our Proxy Statement for the 2017 Annual Meeting of Stockholders.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

The information required by this Item is incorporated by reference to our Proxy Statement for the 2017 Annual Meeting of Stockholders.

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

(a) The following documents are filed as part of this report:

1. Consolidated Financial Statements and Report of Independent Registered Public Accounting Firm

See Index on page F-2.

2. Financial Statement Schedules

All financial statement schedules have been omitted, since the required information is not applicable or is not present in amounts sufficient to require submission of the schedule, or because the information required is included in the Consolidated Financial Statements and Notes thereto.

3. Exhibits

A list of exhibits filed or furnished with this report on Form 10-K (or incorporated by reference to exhibits previously filed or furnished by us) is provided in the Exhibit Index immediately following the signature pages of this report. We will furnish copies of exhibits for a reasonable fee (covering the expense of furnishing copies) upon request. Stockholders may request exhibit copies by contacting: Rachel Acree, Assistant Corporate Secretary, American Electric Technologies, Inc., 1250 Wood Branch Park Drive, Suite 600, Houston, Texas 77079.

ITEM 16.  FORM 10-K SUMMARY

None

28

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Dated: March 28, 2017
AMERICAN ELECTRIC TECHNOLOGIES, INC.
By:	/s/ Charles M. Dauber
	Charles M. Dauber
	President and Chief Executive Officer
	(Principal Executive Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature	Title(s)	Date
/s/ Charles M. Dauber	President, Chief Executive Officer, Director	March 28, 2017
Charles M. Dauber	(Principal Executive Officer)
/s/ William B. Brod	Chief Financial Officer	March 28, 2017
William B. Brod	(Principal Financial Officer)
/s/ Neal M. Dikeman
Neal M. Dikeman	Director	March 28, 2017
/s/ Peter Menikoff
Peter Menikoff	Director	March 28, 2017
/s/ J. Hoke Peacock II
J. Hoke Peacock II	Director	March 28, 2017
/s/ Casey Crenshaw
Casey Crenshaw	Director	March 28, 2017
/s/ Edward Kuntz
Edward Kuntz	Director	March 28, 2017

29

EXHIBIT INDEX

3.1	Restated Articles of Incorporation of the Registrant. (Incorporated by Reference to Exhibit 3.1 to Registrant’s Current Report on Form 8-K filed May 12, 2008)
3.2	Articles of Amendment to Registrant’s Articles of Incorporation filed April 30, 2012. (Incorporated by Reference to Exhibit 3.1 to Registrant’s Current Report on Form 8-K filed May 4, 2012)
3.3	Amended and Restated Bylaws of the Registrant. (Incorporated by Reference to Exhibit 3.2 to Registrant’s Current Report on Form 8-K filed February 9, 2009)
4.1	Warrant to purchase 125,000 shares of Registrant’s common stock dated May 2, 2012. (Incorporated by reference to Exhibit 4.1 to Registrant’s Quarterly Report of Form 10-Q filed on August 14, 2012)
4.2	Warrant to purchase 200,000 shares of Registrant’s common stock dated May 2, 2012. (Incorporated by reference to Exhibit 4.2 to Registrant’s Quarterly Report of Form 10-Q filed on August 14, 2012)
4.3	Investors Rights Agreement between Registrant and JCH Crenshaw Holdings, LLC dated May 2, 2012. (Incorporated by reference to Exhibit 4.3 to Registrant’s Quarterly Report of Form 10-Q filed on August 14, 2012)
4.4	Registration Rights Agreement between Registrant and JCH Crenshaw Holdings, LLC dated May 2, 2012. (Incorporated by reference to Exhibit 4.4 to Registrant’s Quarterly Report of Form 10-Q filed on August 14, 2012)
10.3	Amended 2007 Employee Stock Incentive Plan. (Incorporated by reference to Exhibit 10.3 to the Registrant’s Annual Report on Form 10-K filed March 31, 2015)*
10.4	Non-Employee Directors’ Deferred Compensation Plan (Incorporated by reference to Exhibit 10.4 to the Registrant’s report on Form 10-QSB filed November 14, 2007)*
10.5	2007 Employee Stock Purchase Plan (Incorporated by reference to Exhibit 10.5 to the Registrant’s report on Form 10-QSB filed November 14, 2007)*
10.15	Summary of Non-Employee Director compensation effective January 1, 2016. (Incorporated by reference to Exhibit 10.15 to the Registrant’s Annual Report on Form 10-K filed March 30, 2015)*
10.16	Loan Agreement with Frost Bank. (Incorporated by reference to Exhibit 10.1 to Registrant’s Current Report on Form 8-K filed January 8, 2016)
10.21	Form of Employee Stock Option Award Agreement under 2007 Employee Stock Incentive Plan. (Incorporated by reference to Exhibit 10.25 to the Registrant’s Annual Report on Form 10-K filed March 31, 2008) *
10.22	Form of Restricted Stock Unit Award Agreement under 2007 Employee Stock Incentive Plan. (Incorporated by reference to Exhibit 10.26 to the Registrant’s Annual Report on Form 10-K filed March 31, 2008) *
10.23	Securities Purchase Agreement between Registrant and JCH Crenshaw Holdings, LLC dated April 13, 2012. (Incorporated by reference to Exhibit 10.1 to Registrant’s Current Report on Form 8-K filed April 19, 2012)
10.25	Deferred Compensation Plan for executives. (Incorporated by reference to Exhibit 10.25 to the Registrant’s Annual Report on Form 10-K filed March 27, 2009)*
10.27	Notification of annual salary and target for performance bonus compensation. (Incorporated by reference to Exhibit 10.27 to the Registrant’s Annual Report on Form 10-K filed March 27, 2009)*
10.29	Employment Agreement with Arthur G. Dauber dated August 25, 2009. (Incorporated by reference to Exhibit 99.1 to the Registrant’s Current Report on Form 8-K filed August 27, 2009)*
10.33	Amendment No. 1 to Employment Agreement with Arthur G. Dauber. (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed November 30, 2010)*
10.34	Amendment to Employment Agreement with Arthur G. Dauber. (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed November 13, 2012)*
10.35	Employment Agreement with Charles M. Dauber dated March 27, 2017*
10.36	Employment Agreement with William Brod. (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed November 20, 2015)*
10.37	Summary of Compensation for Named Executive Officers 2017.
10.38	Employment Agreement with William C. Miller dated August 4, 2014 (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed September 8, 2014)*

30

10.39	Employment Agreement Amendments with William Brod dated June 1, 2016 and February 3, 2017*
10.40	Employment Agreement Amendments with William C. Miller dated June 21, 2016 and February 3, 2017*
14	Code of Ethics. (Incorporated by reference to Exhibit 14 to the Registrant’s Annual Report on Form 10-KSB filed March 21, 2004)
21	Subsidiaries of the Registrant.
23.1	Consent of Ham, Langston & Brezina, LLP
31.1	Rule 13a-14(a) / 15d-14(a) Certifications of the Principal Executive Officer.
31.2	Rule 13a-14(a) / 15d-14(a) Certifications of the Principal Accounting Officer.
32.1	Section 1350 Certifications of the Principal Executive Officer and Principal Accounting Officer.
101.INS	XBRL Instance Document.
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB	XBRL Taxonomy Extension Labels Linkbase Document.
101.PRE	XBRL Extension Presentation Linkbase Document.

* Indicates a management contract or compensatory plan or arrangement.

31

AMERICAN ELECTRIC TECHNOLOGIES, INC.

AND SUBSIDIARIES

Consolidated Financial Statements

With Report of Independent Registered Public Accounting Firm

December 31, 2016 and 2015

F-1

American Electric Technologies, Inc. and Subsidiaries

Consolidated Financial Statements

December 31, 2016 and 2015

Table of Contents

Report of Independent Registered Public Accounting Firm	F-3
Consolidated Financial Statements:
Consolidated Balance Sheets	F-4
Consolidated Statements of Operations	F-5
Consolidated Statements of Comprehensive Income (Loss)	F-6
Consolidated Statements of Stockholders’ Equity	F-7
Consolidated Statements of Cash Flows	F-8
Notes to Consolidated Financial Statements	F-9

F-2

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders

American Electric Technologies, Inc. and Subsidiaries:

We have audited the accompanying consolidated balance sheets of American Electric Technologies, Inc. and Subsidiaries (the “Company”) as of December 31, 2016 and 2015, and the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity, and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2016 and 2015, and the results of their operations and their cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

We were not engaged to examine management’s assertion about the effectiveness of the Company’s internal control over financial reporting as of December 31, 2016 and, accordingly, we do not express an opinion thereon.

/s/ Ham, Langston & Brezina, L.L.P.

Houston, Texas

March 28, 2017

F-3

American Electric Technologies, Inc. and Subsidiaries

Consolidated Balance Sheets

(in thousands, except share and per share data)

	December 31,			December 31,
	2016			2015
Assets
Current assets:
Cash and cash equivalents	$	1,618		$	7,989
Short-term investments		507			507
Accounts receivable-trade, net of allowance of $204 and $225 at December 31, 2016 and December 31, 2015		6,717			6,853
Inventories, net of allowance of $60 at both December 31, 2016 and December 31, 2015		1,181			1,325
Cost and estimated earnings in excess of billings on uncompleted contracts		5,829			2,302
Prepaid expenses and other current assets		349			324
Total current assets		16,201			19,300
Property, plant and equipment, net		7,298			7,915
Advances to and investments in foreign joint ventures		10,663			11,104
Retainage receivable		649			-
Intangibles		527			218
Other assets		46			49
Total assets	$	35,384		$	38,586
Liabilities, Convertible Preferred Stock and Stockholders’ Equity
Current liabilities:
Revolving line of credit	$	1,500		$	1,043
Current portion of long-term note payable		300			300
Accounts payable and other accrued expenses		9,798			4,907
Accrued payroll and benefits		1,093			476
Billings in excess of costs and estimated earnings on uncompleted contracts		208			1,629
Total current liabilities		12,899			8,355
Long-term note payable		3,900			4,200
Deferred compensation		260			305
Deferred income taxes		2,824			3,064
Total liabilities		19,883			15,924
Convertible preferred stock:
Redeemable convertible preferred stock, Series A, net of discount of $617 at December 31, 2016 and $671 at December 31, 2015; $0.001 par value, 1,000,000 shares authorized, issued and outstanding at December 31, 2016 and December 31, 2015		4,383			4,329
Stockholders’ equity:
Common stock; $0.001 par value, 50,000,000 shares authorized, 8,499,508 and 8,385,929 shares issued and 8,335,968 and 8,254,001 shares outstanding at December 31, 2016 and December 31, 2015		8			8
Treasury stock, at cost 163,540 shares at December 31, 2016 and 131,928 shares at December 31, 2015		(863	)		(792	)
Additional paid-in capital		12,613			12,032
Accumulated other comprehensive income		(2	)		310
Retained (deficit) earnings; including accumulated statutory reserves in equity method investments of $2,887 and $2,722 at December 31, 2016 and December 31, 2015		(638	)		6,775
Total stockholders’ equity		11,118			18,333
Total liabilities, convertible preferred stock and stockholders’ equity	$	35,384		$	38,586

The accompanying notes are an integral part of the consolidated financial statements.

F-4

American Electric Technologies, Inc. and Subsidiaries

Consolidated Statements of Operations

(in thousands, except share and per share data)

	Year Ended December 31,
	2016			2015
Net sales	$	37,812		$	49,083
Cost of sales		36,796			42,493
Gross profit		1,016			6,590
Operating expenses:
Research and development		962			769
Selling and marketing		2,181			2,380
General and administrative		5,242			5,782
Total operating expenses		8,385			8,931
Loss from operations		(7,369	)		(2,341	)
Net equity income from foreign joint ventures’ operations:
Equity income from foreign joint ventures’ operations		529			741
Foreign joint ventures’ operations related expenses		(245	)		(393	)
Net equity income from foreign joint ventures’ operations		284			348
Loss from operations and net equity income from foreign joint ventures’ operations		(7,085	)		(1,993	)
Other income (expense):
Interest expense and other, net		69			(172	)
Loss before income taxes		(7,016	)		(2,165	)
Provision for (benefit from) income taxes		44			428
Net loss before dividends on redeemable convertible preferred stock		(7,060	)		(2,593	)
Dividends on redeemable convertible preferred stock		(353	)		(349	)
Net loss attributable to common stockholders	$	(7,413	)	$	(2,942	)
Earnings (loss) per common share:
Basic	$	(0.89	)	$	(0.36	)
Diluted	$	(0.89	)	$	(0.36	)
Weighted - average number of common shares outstanding:
Basic		8,305,764			8,241,585
Diluted		8,305,764			8,241,585

The accompanying notes are an integral part of the consolidated financial statements.

F-5

American Electric Technologies, Inc. and Subsidiaries

Consolidated Statements of Comprehensive Income (Loss)

(in thousands)

	Year Ended December 31,
	2016			2015
Net loss before dividends on redeemable convertible   preferred stock	$	(7,060	)	$	(2,593	)
Other comprehensive income:
Foreign currency translation loss, net of deferred income taxes of    $158 and $279 for the twelve months ended December 31, 2016 and 2015		(312	)		(541	)
Total comprehensive loss	$	(7,372	)	$	(3,134	)

The accompanying notes are an integral part of the consolidated financial statements.

F-6

American Electric Technologies, Inc. and Subsidiaries

Consolidated Statements of Stockholders’ Equity

(in thousands, except share data)

	Common Stock
	Shares			Amount		Additional Paid-in Capital			Accumulated Other Comprehensive Income			Retained Earnings			Total Stockholders’ Equity
Balance at December 31, 2014		8,185,323		$	8	$	10,696		$	851		$	9,717		$	21,272
Common stock issued to ESPP		5,666			-		29			-			-			29
Issued for Acquisition		11,000			-		-			-			-			-
Treasury stock purchase		(20,288	)		-		(70	)		-			-			(70	)
Restricted stock units (1)		72,300			-		585			-			-			585
Net income (loss) to common stockholders*		-			-		-			-			(2,942	)		(2,942	)
Foreign currency translation		-			-		-			(541	)		-			(541	)
Balance at December 31, 2015		8,254,001			8		11,240			310			6,775			18,333
Common stock issued to ESPP		8,142			-		18			-			-			18
Treasury stock purchase		(31,612	)		-		(71	)		-			-			(71	)
Restricted stock units (1)		105,437			-		563			-			-			563
Net income (loss) to common stockholders*		-			-		-			-			(7,413	)		(7,413	)
Foreign currency translation		-			-		-			(312	)		-			(312	)
Balance at December 31, 2016		8,335,968		$	8	$	11,750		$	(2	)	$	(638	)	$	11,118

* Net of preferred dividends of $353 and $349 in 2016 and 2015, respectively.

** Includes treasury stock of ($863) and ($792) as of December 31, 2016 and 2015, respectively.

(1) Converted to common stock.

F-7

American Electric Technologies, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(in thousands)

	Year Ended December 31,
	2016			2015
Cash flows from operating activities:
Net income (loss) before dividends on redeemable convertible preferred stock	$	(7,060	)	$	(2,593	)
Adjustments to reconcile net income (loss) to net cash (used in) provided by    operating activities:
Deferred income tax provision (benefit)		(75	)		195
Equity income from foreign joint ventures’ operations		(529	)		(741	)
Depreciation and amortization		877			894
Stock based compensation		563			585
Bad debt expense		214			172
Obsolete inventory expense		40			460
(Gain)/loss on sale of property and equipment		(75	)		96
Deferred compensation costs		(45	)		15
Change in operating assets and liabilities:
Accounts receivable		(1,111	)		4,712
Inventories		104			983
Costs and estimated earnings in excess of billings on    uncompleted contracts		(3,008	)		686
Prepaid expenses and other current assets		33			268
Accounts payable		4,327			(2,299	)
Billings in excess of costs and estimated earnings on uncompleted contracts		(1,421	)		(354	)
Accrued liabilities and other current liabilities		566			(712	)
Net cash  (used in) provided by operating activities		(6,600	)		2,367
Cash flows from investing activities:
Proceeds from sales of property and equipment		309			-
Purchases of property, plant and equipment and other assets		(725	)		(588	)
Proceeds from foreign joint ventures’ operations dividends		589			1,170
Proceeds from sale of Assets Held for Sale		-			723
Purchase of certificate of deposits		-			(509	)
Net cash provided by from investing activities		173			796
Cash flows from financing activities:
Proceeds from sale of common stock, preferred stock, and warrants		18			29
Treasury stocks purchase		(71	)		(70	)
Preferred stock cash dividend		(75	)		(75	)
Proceeds from long-term notes payable		-			4,500
Advances from revolving credit facility (repayments)		457			1,043
Payments on long-term notes payable		(300	)		(4,000	)
Net cash provided by financing activities		29			1,427
Effect of exchange rates on cash		27			(151	)
Net (decrease) increase in cash and cash equivalents		(6,371	)		4,439
Cash and cash equivalents, beginning of period		7,989			3,550
Cash and cash equivalents, end of period	$	1,618		$	7,989
Supplemental disclosures of cash flow information:
Interest paid	$	235		$	159
Income taxes paid	$	60		$	178

The accompanying notes are an integral part of the consolidated financial statement.

F-8

American Electric Technologies, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(1) Organization and Nature of Business

American Electric Technologies, Inc. (“AETI” or the “Company”) is the surviving financial reporting entity from a reverse acquisition of American Access Technologies, Inc. by the shareholders of M&I Electric Industries, Inc.(“M&I”) on May 17, 2007. Immediately upon the completion of the reverse acquisition, American Access Technologies, Inc. changed its name to American Electric Technologies, Inc. AETI is a Florida corporation and M&I, AETI’s wholly-owned subsidiary is a Texas corporation. M&I has a wholly-owned subsidiary, South Coast Electric Systems, LLC (“SCES”), and joint venture interests in China and Singapore.

In 2014, the Company formed a wholly-owned subsidiary in Brazil (“M&I Brazil”), which is owned 20% by AETI and 80% by M&I. The Company has U.S. facilities and sales offices in Texas and Louisiana; Brazil facilities and sales offices in Macaé, Rio and Belo Horizonte; and foreign joint ventures’ operations that have facilities in Singapore and Xian, China. The Company owns the Beaumont, Texas facilities, comprised of 9 acres and 118,000 square feet. The Company leases facilities in Houston, Texas and Houma, Louisiana and internationally in Rio, Macaé and Belo Horizonte, Brazil.

M&I’s wholly-owned subsidiary, SCES, is a Delaware Limited Liability Company organized on February 20, 2003. With the exception of electrical contracting, it is engaged in the same lines of business as M&I, but it participates in different market sectors.

M&I has foreign joint ventures’ interests in M&I Electric Far East PTE Ltd. (“MIEFE”) and BOMAY Electrical Industries Company, Ltd. (“BOMAY”). MIEFE is a Singapore company that provides sales, manufacturing and technical support internationally. BOMAY provides electrical systems primarily for land and marine based drilling rigs in China. These ventures are accounted for using the equity method of accounting.

(2) Summary of Significant Accounting Policies

Principles of Consolidation  

The accompanying consolidated financial statements include the accounts of AETI and its wholly-owned subsidiaries, M&I and M&I Brazil, and the accounts of SCES through the disposition date in June 2016. Significant intercompany accounts and transactions are eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of net sales and expenses during the reporting period. Actual results could differ from those estimates. The most significant estimates made by management include:

(1) Percentage-of-completion estimates on long-term contracts

(2) Estimates of the provision for doubtful accounts

(3) Estimated useful lives of property and equipment

(4) Valuation allowances related to deferred tax assets

Financial Instruments

The Company includes fair value information in the notes to the consolidated financial statements when the fair value of its financial instruments is different from the book value. When the book value approximates fair value, no additional disclosure is made, which is the case for financial instruments outstanding as of December 31, 2016 and 2015. The Company assumes the book value of those financial instruments that are classified as current approximates fair value because of the short maturity of these instruments. For non-current financial instruments, the Company uses quoted market prices or, to the extent that there are no available quoted market prices, market prices for similar instruments.

Cash and Cash Equivalents

Cash equivalents consist of liquid investments with original maturities of three months or less. Cash balances routinely exceed FDIC limits however all cash is maintained in JP Morgan Chase and Frost Bank and believed to be secure.  

F-9

Short-term investments

Short-term investments consist of any fund held in certificate of deposit with maturity greater than three months and investments in debt and equity securities with maturity of one year or less.

Accounts Receivable and Allowance for Bad Debts

The Company maintains an allowance for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. The estimate is based on management’s assessment of the collectability of specific customer accounts and includes consideration for credit worthiness and financial condition of those specific customers. The Company also reviews historical experience with the customer, the general economic environment and the aging of its receivables. The Company records an allowance to reduce receivables to the amount it reasonably believes to be collectible. Based on this assessment, management believes the allowance for doubtful accounts is adequate. The bad debt expense was $0.21 million and $0.17 million for the fiscal years ended December 31, 2016 and 2015.

Inventories

Inventories are stated at the lower of cost or market, with material value determined using an average cost method. Inventory costs for work-in-process include direct material, direct labor, production overhead and outside services. Indirect overhead is apportioned to work-in-process based on direct labor incurred.

Property, Plant and Equipment

Property, plant and equipment are stated at cost. Expenditures for repairs and maintenance are expensed as incurred while renewals and betterments are capitalized. Depreciation is calculated on the straight-line basis over the estimated useful lives of the assets after giving effect to salvage values.

Long-lived assets

If events or circumstances indicate the carrying amount of an asset may not be recoverable, including intangible assets, management tests long-lived assets for impairment. If the estimated future cash flows are projected to be less than the carrying amount, an impairment write-down (representing the carrying amount of the long-lived asset which exceeds the present value of estimated expected future cash flows) would be recorded as a period expense. Events that would trigger an impairment test include the following:

• A significant decrease in the market price of a long-lived asset.

• A significant change in the use of long-lived assets or in its physical condition.

• A significant change in the business climate that could affect an assets value.

• An accumulation of cost significantly greater than the amount originally expected to acquire or construct a long-lived asset.

• A current period operating or cash flow loss combined with a history of such losses or a forecast demonstrating continued losses associated with the use of a long-lived asset.

• An expectation to sell or otherwise dispose of a long-lived asset significantly before the end of its estimated useful life.

Based on management’s reviews during each of the years ended December 31, 2016 and 2015, there were no events or circumstances that caused management to believe that impairments were necessary.

Intangible Assets

Intangible Assets at December 31, 2016	Useful Lives (Years)		Cost		Accumulated Amortization		Net Value
	(in thousands)
Intellectual property		3	$	322	$	322	$	-
License		5		358		49		309
License		-		218		-		218
			$	898	$	371	$	527

On March 8, 2012, the Company acquired certain technology from Amnor Technologies, Inc. for cash of $0.10 million plus 44,000 shares of the Company’s common stock valued at $4.95 per share (the closing price on that date). One fourth of the shares were issued initially with the balance to be issued one third annually on the anniversaries over the subsequent 3 years. The purchase price was valued at $0.32 million (including $4,000 of transaction costs) at March 8, 2012 and is recorded as an intangible asset in the consolidated balance sheets. The cost was being amortized over its estimated useful life of 3 years which

F-10

expired in 2015. Amortization expense of $0.02 million was recognized during the year ended December 31, 2015 and is included in general and administrative expenses in the consolidated statements of operations.  

The technology provides automation and control system technologies for land and offshore drilling monitoring and control (auto-driller); marine automation including ballast control and tank monitoring and machinery plant control and monitoring systems; IP-based CCTV systems; and military vessel security and safety systems, all proven in multiple installations.

During 2014 we acquired arc-resistant technology and capitalized the cost of $0.22 million. During 2016, the Company capitalized cost of $0.36 million for the testing associated with certifications for IntelliSafe™ products. The cost is being amortized over its useful life of 5 years. Amortization expense of $0.05 million was recognized during the year ended December 31, 2016 and is included in the cost of sales in the consolidated statements of operations.  If events or circumstances indicate the carrying amount of an asset may not be recoverable, including intangible assets, management tests long-lived assets for impairment.  

Income Taxes

The Company uses the asset and liability method to account for income taxes. Under this method of accounting for income taxes, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using the enacted tax rates and laws that will be in effect when the differences are expected to be reported to the taxing authority. The Company also records any financial statement recognition and disclosure requirements for uncertain tax positions taken or expected to be taken in its tax return. Financial statement recognition of the tax position is dependent on an assessment of a 50% or greater likelihood that the tax position will be sustained upon examination, based on the technical merits of the position. Any interest and penalties related to uncertain tax positions are recorded as interest expense in the accompanying consolidated statements of operations.

Foreign Currency Gains and Losses

Foreign currency translations are included as a separate component of comprehensive income. The Company has determined the local currency of its foreign subsidiary and foreign joint ventures to be the functional currency. In accordance with ASC 830, the assets and liabilities of the foreign equity investees and foreign subsidiary, denominated in foreign currency, are translated into United States dollars at exchange rates in effect at the consolidated balance sheet date and net sales and expenses are translated at the average exchange rate for the period. Related translation adjustments are reported as comprehensive income, net of deferred income taxes, which is a separate component of stockholders’ equity, whereas gains and losses resulting from foreign currency transactions are included in results of operations.

Net Sales Recognition

The Company reports earnings from fixed-price and modified fixed-price long-term contracts on the percentage-of-completion method. Earnings are accrued based on the ratio of costs incurred to total estimated costs. However, for our manufacturing activities, we have determined that labor incurred provides an improved measure of percentage-of-completion. Costs include direct material, direct labor, and job related overhead. Losses expected to be incurred on contracts are charged to operations in the period such losses are determined. A contract is considered complete when all costs except insignificant items have been incurred and the facility has been accepted by the customer. Net sales from non-time and material jobs of a short-term nature (typically less than one month) are recognized on the completed-contract method after considering the attributes of such contracts. This method is used because these contracts are typically completed in a short period of time and the financial position and results of operations do not vary materially from those which would result from use of the percentage-of-completion method.

The Company records net sales from its field and technical service and repair operations on a completed service basis after customer acknowledgement that the service has been completed and accepted. In addition, the Company sells certain purchased parts and products. These net sales are recorded when the product is shipped and title passes to the customer.  

The asset, “Work-in-process,” which is included in inventories, represents the cost of labor, material, and overhead in excess of amounts billed on jobs accounted for under the completed-contract method. For contracts accounted for under the percentage-of-completion method, the asset, “Costs and estimated earnings in excess of billing on uncompleted contracts,” represents net sales recognized in excess of amounts billed and the liability, “Billings in excess of costs and estimated earnings on uncompleted contracts,” represents billings in excess of net sales recognized. Any billed net sale that has not been collected is reported as accounts receivable. The timing of when we bill our customers is generally dependent upon advance billing terms or completion of certain phases of the work.  

On occasion, the Company enters into long-term contracts that include both a service component and a manufacturing component. The Company segments net sales, costs and gross profit related to these contracts if they meet the contract segmenting criteria in ASC 605-35, including that the terms and scope of the project clearly call for separate elements, the separate elements are often bid or negotiated by the Company separately and the total economic returns and risks of the separate

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elements are similar to the economic returns and risks of the overall contract. For segmented contracts, the Company recognizes net sales as if they were separate contracts over the performance periods of the individual elements.

Contract net sales recognition inherently involves estimation, including the contemplated level of effort to accomplish the tasks under the contract, the cost of the effort, and an ongoing assessment of progress toward completing the contract. From time to time, as part of the normal management processes, facts develop that requires revisions to estimated total cost or net sales expected. The cumulative impact of any revisions to estimates and the full impact of anticipated losses on contracts are recognized in the period in which they become known.

Shipping and Handling Fees and Costs

Shipping and handling fees, if billed to customers, are included in net sales. Shipping and handling costs associated with inbound freight are expensed as incurred. Shipping and handling costs associated with outbound freight are classified as cost of sales.

Concentration of Market Risk and Geographic Operations

Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of trade accounts receivable. The Company’s market risk is dependent primarily on the strength of the oil and gas and energy related industries. The Company grants credit to customers and generally does not require security except in the case of certain international contracts. Procedures are in effect to monitor the credit worthiness of its customers. During 2016, one customer accounted for approximately 19% of net sales and 17% of net accounts receivable trade. During 2015, one customer accounted for approximately 14% of net sales and 3% of net accounts receivable trade.

The Company sells its products and services in domestic and international markets; however, significant portions of the Company’s sales are concentrated with customers located in the Gulf Coast region of the United States. The Gulf Coast region accounts for approximately 47% and 68% of the Company’s net sales during the years ended December 31, 2016 and 2015, respectively.

Reclassification

Certain items are reclassified in the 2015 consolidated financial statements to conform to the 2016 presentation. Such reclassifications had no effect on the Company’s financial position, results of operations or cashflows.

Recently Issued Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers, which supersedes nearly all existing revenue recognition guidance under U.S. GAAP. The core principle of ASU No. 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. ASU No. 2014-09 defines a five step process to achieve this core principle and, in doing so, more judgment and estimates may be required under existing U.S. GAAP. The standard is effective for annual periods beginning after December 15, 2016, and interim periods therein, using either of the following transition methods: (i) a full retrospective approach reflecting the application of the standard in each prior reporting period with the option to elect certain practical expedients, or (ii) a retrospective approach with the cumulative effect of initially adopting ASU No. 2014-09 recognized at the date of adoption (which includes additional footnote disclosures). In July 2015, the FASB issued ASU No. 2015-14 which delayed the effective date of ASU No. 2014-09 by one year (effective for annual periods beginning after December 15, 2017). We are currently evaluating the future impact of our pending adoption of ASU No. 2014-09 on our consolidated financial statements and have not yet determined the method with which we will adopt the standard in 2018.  

In June 2014, the FASB issued ASU No. 2014-12, Compensation – Stock Compensation (Topic 718): Accounting for Share Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period. The amendments in this ASU require that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. A reporting entity should apply existing guidance in Topic 718, Compensation – Stock Compensation, as it relates to awards with performance conditions that affect vesting to account for such awards. The performance target should not be reflected in estimating the grant-date fair value of the award. Compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the period(s) for which the requisite service has already been rendered. If the performance target becomes probable of being achieved before the end of the 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. The requisite service period ends when the employee can cease rendering service and still be eligible to vest in the award if the performance target is achieved. The amendments in ASU No. 2014-12 are effective for annual periods and interim periods within those annual periods

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beginning after December 15, 2015, with early adoption permitted. The adoption of ASU No. 2014-12 did not have a significant impact on the Company’s consolidated financial position, results of operations and disclosures.

In January 2015, the FASB issued ASU No. 2015-01, Income Statement – Extraordinary and Unusual Items (Subtopic 225-20): Simplified Income Statement Presentation by Eliminating the Concept of Extraordinary Items. This ASU eliminates from U.S. GAAP the concept of extraordinary items. Subtopic 225-20, Income Statement – Extraordinary and Unusual Items, requires that an entity separately classify, present and disclose extraordinary events and transactions. Presently, an event or transaction is presumed to be ordinary and usual activity of the reporting entity unless evidence clearly supports its classification as an extraordinary item. If an event or transaction meets the criteria for extraordinary classification, an entity is required to segregate the extraordinary item from the results of ordinary operations and show the item separately in the income statement, net of tax, after income from continuing operations. The entity also is required to disclose applicable income taxes and either present or disclose earnings-per-share data applicable to the extraordinary item. ASU No. 2015-01 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. The amendments of ASU No. 2015-01 can be applied prospectively or retrospectively to all prior periods presented in the financial statements. Early adoption is permitted. The adoption of ASU No. 2015-01 did not have a significant impact on the Company’s consolidated financial position, results of operations or disclosures.

In February 2015, the FASB issued ASU No. 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis, which is intended to improve targeted areas of consolidation guidance for legal entities such as limited partnerships, limited liability corporations, and securitization structures. ASU No. 2015-02 focuses on the consolidation evaluation for reporting organizations that are required to evaluate whether they should consolidate certain legal entities. In addition to reducing the number of consolidation models from four to two, the new standard simplifies the FASB Accounting Standards Codification ^TM and improves current U.S. GAAP by: (1) Placing more emphasis on risk of loss when determining a controlling financial interest. A reporting organization may no longer have to consolidate a legal entity in certain circumstances based solely on its fee arrangement, when certain criteria are met; (2) Reducing the frequency of the application of related-party guidance when determining a controlling financial interest in a variable interest entity; and (3) Changing consolidation conclusions for public and private companies in several industries that typically make use of limited partnerships or variable interest entities. ASU No. 2015-02 is effective for periods beginning after December 15, 2015. The adoption of ASU No. 2015-02 did not have a significant impact on the Company’s consolidated financial position, results of operations and disclosures.

In July 2015, the FASB issued ASU No. 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory, which is intended to converge U.S. GAAP on this topic with IFRS. ASU No. 2015-11 focuses on the premeasurement of inventory measured using any method other than LIFO, for example, average cost. Inventory within the scope of ASU No. 2015-11 is required to be measured at the lower of cost and net realizable value. When evidence exists that the net realizable value of inventory is lower than its cost, the difference shall be recognized as a loss in earnings in the period in which it occurs. That loss may be required, for example, due to damage, physical deterioration, obsolescence, changes in price levels, or other causes. For public business entities, the amendments in ASU No. 2015-11 are effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. Management is currently evaluating the future impact of ASU No. 2015-11 on the Company’s consolidated financial position, results of operations and disclosures.

In September 2015, the FASB issued ASU No. 2015-16, Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments. ASU No. 2015-16 requires that an acquirer recognize adjustments to estimated amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. ASU No. 2015-16 requires that the acquirer record, in the same period’s financial statements, the effect on earnings of changes in depreciation, amortization, or other income effects, if any, as a result of the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date. ASU No. 2015-16 also requires an entity to present separately on the face of the income statement or disclose in the notes the portion of the amount recorded in current-period earnings by line item that would have been recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized as of the acquisition date. ASU No. 2015-16 is effective for fiscal years beginning after December 15, 2015. ASU No. 2015-16 should be applied retrospectively and early adoption is permitted. The adoption of ASU No. 2015-16 did not have a significant impact on the Company’s consolidated financial position, results of operations and disclosures.

In November 2015, the FASB issued ASU No. 2015-17, Balance Sheet Classification of Deferred Taxes. The new guidance requires that all deferred tax assets and liabilities, along with any related valuation allowance, be classified as noncurrent on the balance sheet. As a result, each jurisdiction will now only have one net noncurrent deferred tax asset or liability. The new guidance will be effective for fiscal years beginning after December 15, 2017 and early adoption is permitted.  The Company has elected to early adopt this pronouncement and has reflected the change on the consolidated balance sheet for all periods presented.

In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. ASU No. 2016-01 requires (1) an entity to measure equity instruments (except those accounted for under the equity method of accounting, or those that result in consolidation of the investee) at fair value with changes in fair value recognized in net income; (2) entities to use the exit price notation when

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measuring the fair value of financial instruments for disclosure purposes; (3) separate presentation of financial assets and financial liabilities by measurement category and form of financial asset; and (4) elimination of the requirement to disclose the methods and significant assumptions used to estimate fair value that is required to be disclosed for financial instruments measured at amortized cost. ASU No. 2016-01 is effective for fiscal years beginning after December 15, 2017 with early adoption permitted. Management is currently evaluating the future impact of ASU No. 2016-01 on the Company’s consolidated financial position, results of operations and disclosures.

In February 2016, the FASB issued ASU No. 2016-02, Leases, which requires lessees to  recognize the following for all leases (with the exception of short-term leases) at the commencement date: (1) a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and (2) 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. Under ASU No. 2016-02, lessor accounting is largely unchanged. ASU No. 2016-02 is effective for fiscal years beginning after December 15, 2018 with early application permitted. Lessees and lessors must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The modified retrospective approach would not require any transition accounted for leases expired before the earliest comparative period presented. Lessees and lessors may not apply a full retrospective transition approach. Management is currently evaluating the future impact of ASU No. 2016-02 on the Company’s consolidated financial position, results of operations and disclosures.

In April 2016, the FASB issued ASU No.2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing, to clarify two aspects of Topic 606: (i) identifying performance obligations; and (ii) the licensing implementation guidance. The amendments do not change the core principle of the guidance in Topic 606. The effective date and transition requirements for ASU No. 2016-10 are the same as the effective date and transition requirements for ASU No. 2014-09. Management is currently evaluating the future impact of ASU No. 2016-10 on the Company’s consolidated financial position, results of operations and disclosures.

In May 2016, the FASB issued ASU No. 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients. ASU No. 2016-12 provides narrow-scope improvements to the guidance on collectability, noncash consideration, and completed contracts at transition. The amendment also provides a practical expedient for contract modifications at transition and an accounting policy election related to the presentation of sales taxes and other similar taxes collected from customers and are expected to reduce the judgment necessary to comply with Topic 606. The effective date and transition requirements for ASU No. 2016-12 are the same as the effective date and transition requirements for ASU No. 2014-09. Management is currently evaluating the future impact of ASU No. 2016-12 on the Company’s consolidated financial position, results of operations and disclosures.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU No. 2016-13 eliminates the probable initial recognition threshold in current generally accepted accounting principles (“GAAP”) and, instead, requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. In addition, ASU No. 2016-13 amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. ASU No. 2016-13 is effective for annual periods beginning after December 15, 2020, with early application permitted in annual periods beginning after December 15, 2018. The amendments of ASU No. 2016-13 should be applied through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. Management is currently evaluating the future impact of ASU No. 2016-13 on the Company’s consolidated financial position, results of operations and disclosures.

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. ASU No. 2016-15 addresses eight specific cash flow issues and is intended to reduce diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. ASU No. 2016-15 is effective for reporting periods beginning after December 15, 2017. Early adoption is permitted. Management is currently evaluating the future impact of ASU No. 2016-15 on the Company’s consolidated financial position, results of operations and disclosures.

In December 2016, the FASB issued ASU No. 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers. ASU No. 2016-20 allows entities not to make quantitative disclosures about remaining performance obligations in certain cases and require entities that use any of the new or previously existing optional exemptions to expand their qualitative disclosures. The amendment also clarifies narrow aspects of ASC 606, including contract modifications, contract costs, and the balance sheet classification of items as contract assets versus receivables, or corrects unintended application of the guidance. The effective date and transition requirements for ASU No. 2016-20 are the same as the effective date and transition requirements for ASU No. 2014-09. Management is currently evaluating the future impact of ASU No. 2016-20 on the Company’s consolidated financial position, results of operations and disclosures.

In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business. ASU No. 2017-01 clarifies the definition of a business with the objective of adding guidance to assist entities with

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evaluating whether transactions should be accounted for as acquisitions (or disposals) of a business or as acquisitions (or disposals) of assets. ASU No. 2017-01 is effective for annual periods beginning after December 15, 2018, with early adoption permitted under certain circumstances. The amendments of ASU No. 2017-01 should be applied prospectively as of the beginning of the period of adoption. Management is currently evaluating the future impact of ASU No. 2017-01 on the Company’s consolidated financial position, results of operations and disclosures.

In January 2017FASB issued ASU No. 2017-03, Accounting Changes and Error Corrections (Topic 250) and Investments – Equity Method and Joint Ventures (Topic 323): Amendments to SEC Paragraphs Pursuant to Staff Announcements at the September 22, 2016 and November 17, 2016 EITF Meetings. The amendments in this update relate to disclosures of the impact of recently issued accounting standards. The SEC staff’s view that a registrant should evaluate ASC updates that have not yet been adopted to determine the appropriate financial disclosures about the potential material effects of the updates on the financial statements when adopted. If a registrant does not know or cannot reasonably estimate the impact of an update, then in addition to making a statement to that effect, the registrant should consider additional qualitative financial statement disclosures to assist the reader in assessing the significance of the impact. The staff expects the additional qualitative disclosures to include a description of the effect of the accounting policies expected to be applied compared to current accounting policies. Also, the registrant should describe the status of its process to implement the new standards and the significant implementation matters yet to be addressed. The amendments specifically addressed recent ASC amendments to ASU No. 2016-13, Financial Instruments – Credit Losses, ASU No. 2016-02, Leases, and ASU No. 2014-09, Revenue from Contracts with Customers, although, the amendments apply to any subsequent amendments to guidance in the ASC. ASU No. 2017-03 is effective upon issuance and did not have a significant impact on the Company’s consolidated financial position, results of operations and disclosures.

(3) Inventories

Inventories consisted of the following at December 31, 2016 and 2015.

	December 31, 2016			December 31, 2015
	(in thousands)
Raw materials	$	513		$	594
Work-in-process		728			791
		1,241			1,385
Less: allowance		(60	)		(60	)
Total inventories	$	1,181		$	1,325

Obsolete or slow moving inventory totaling $0.04 million and $0.46 million was expensed during the years ended December 31, 2016 and 2015, respectively, and included in cost of sales in the accompanying consolidated statements of operations.

(4) Costs, Estimated Earnings, and Related Billings on Uncompleted Contracts

Contracts in progress at December 31, 2016 and 2015 consisted of the following:

	2016			2015
	(in thousands)
Costs incurred on uncompleted contracts	$	26,340		$	31,197
Estimated earnings		1,193			10,506
		27,533			41,703
Billings on uncompleted contracts		(21,912	)		(41,030	)
	$	5,621		$	673

Costs, estimated earnings, and related billing on uncompleted contracts consisted of the following at December 31, 2016 and 2015:

	2016			2015
	(in thousands)
Cost and estimated earnings in excess of billings on uncompleted contracts	$	5,829		$	2,302
Billings in excess of costs and estimated earnings on uncompleted contracts		(208	)		(1,629	)
	$	5,621		$	673

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(5) Property, Plant and Equipment

Property, plant and equipment consisted of the following at December 31, 2016 and 2015:

Category	Estimated Useful Lives (years)		2016		2015
		(in thousands)
Buildings and improvements	15 – 25	$	7,972	$	8,083
Office equipment and furniture	2 – 7		2,135		2,126
Automobiles and trucks	2 – 5		157		118
Machinery and shop equipment	2 – 10		2,951		2,963
Construction in progress			23		94
			13,238		13,384
Less: accumulated depreciation and amortization			6,074		5,603
			7,164		7,781
Land			134		134
		$	7,298	$	7,915

During the years ended December 31, 2016 and 2015, depreciation charged to operations amounted to $0.88 million and $0.89 million, respectively. Of these amounts, $0.74 million and $0.73 million was charged to cost of sales while $0.14 million and $0.16 million was charged to selling, general and administrative expenses for the years ended December 31, 2016 and 2015, respectively.

(6) Advances to and Investments in Foreign Joint Ventures’ Operations

The Company has a foreign joint venture agreement and holds a 40% interest in a Chinese company, BOMAY, which builds electrical systems for sale in China. The majority partner in this foreign joint venture is a subsidiary of a major Chinese oil company. M&I made an initial investment of $1.00 million in 2006 and made an additional $1.00 million investment in 2007. The Company’s equity income from the foreign joint venture was $0.80 million and $0.97 million for the years ended December 31, 2016 and 2015, respectively. During the years ended December 31, 2016 and 2015, the Company received $0.59 million and $1.03 million, respectively, in dividends from BOMAY. Sales made to the foreign joint venture were $0.11 million and $0.19 million for the years ended December 31, 2016 and 2015, respectively. Accounts receivable from BOMAY were $0.04 million and $0.00 million at December 31, 2016 and 2015.

The Company owns a 41% interest in MIEFE which provides additional sales and technical support in Asia. The Company’s equity income from the foreign joint venture was ($0.27) million and ($0.23) million for the years ended December 31, 2016 and 2015, respectively. During 2016, the Company’s share of cumulative losses from MIEFE exceeded the Company’s initial investment balance. The Company applied the losses to the investment balance to the extent of the initial investment amount, with the remaining losses in the amount of $0.27 million accrued  for in accounts payable and other liabilities to reflect management’s intention to fund the losses. During the years ended December 31, 2016 and 2015, the Company received $0.00 million and $0.14 million, respectively, in dividends from MIEFE. Sales made to the foreign joint venture were $0.00 million and $0.05 million for the years ended December 31, 2016 and 2015, respectively. Accounts receivable from MIEFE was $0.00 million and $0.05 million at December 31, 2016 and 2015, respectively.

The Company’s equity income from the foreign joint ventures, before foreign operations expenses, totaled $0.53 million and $0.74 million for the years ended December 31, 2016 and 2015, respectively.

During 2016 and 2015, the Company also recognized approximately $0.25 million and $0.39 million, respectively, for employee related expenses directly attributable to the foreign joint ventures.

Sales to foreign joint ventures’ operations are made on an arm’s length basis and intercompany profits, if any, are eliminated in consolidation.

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Summary financial information of BOMAY and MIEFE in U.S. dollars was as follows at December 31, 2016 and 2015:

	BOMAY				MIEFE
	2016		2015		2016			2015
Assets:
Total current assets	$	47,700	$	68,151	$	425		$	2,365
Total non-current assets		3,589		4,131		17			70
Total assets	$	51,289	$	72,282	$	442		$	2,435
Liabilities and equity:
Total liabilities	$	24,196	$	44,415	$	551		$	1,930
Total joint ventures’ equity		27,093		27,867		(109	)		505
Total liabilities and equity	$	51,289	$	72,282	$	442		$	2,435
	Twelve Months Ended December 31,
	BOMAY				MIEFE
	2016		2015		2016			2015
Revenue	$	33,468	$	47,347	$	1,167		$	5,741
Gross Profit	$	6,687	$	8,353	$	481		$	1,112
Earnings	$	2,010	$	2,433	$	(631	)	$	(567	)

The Company’s investments in and advances to its foreign joint ventures’ operations were as follows as of December 31, 2016 and 2015:

	2016									2015
	BOMAY*			MIEFE			TOTAL			BOMAY*			MIEFE			TOTAL
	(in thousands)									(in thousands)
Investments in foreign joint ventures:
Balance, beginning of year	$	2,033		$	14		$	2,047		$	2,033		$	14		$	2,047
Additional amounts invested and advanced		-			-			-			-			-			-
Balance, end of year		2,033			14			2,047			2,033			14			2,047
Undistributed earnings:
Balance, beginning of year		8,098			(11	)		8,087			8,157			358			8,515
Equity in earnings (loss)		804			(3	)		801			973			(232	)		741
Dividend distributions		(589	)		-			(589	)		(1,032	)		(137	)		(1,169	)
Balance, end of year		8,313			(14	)		8,299			8,098			(11	)		8,087
Foreign currency translation:
Balance, beginning of year		765			205			970			1,358			134			1,492
Change, during the year		(661	)		8			(653	)		(593	)		71			(522	)
Balance, end of year		104			213			317			765			205			970
Investments, end of year	$	10,450		$	213		$	10,663		$	10,896		$	208		$	11,104

* Accumulated statutory reserves in equity method investments of $2.89 million and $2.72 million at December 31, 2016 and 2015, are included in AETI’s consolidated retained earnings. In accordance with the People’s Republic of China, (“PRC”), regulations on enterprises with foreign ownership, an enterprise established in the PRC with wholly-owned foreign ownership is required to provide for certain statutory reserves, namely (i) General Reserve Fund, (ii) Enterprise Expansion Fund and (iii) Staff Welfare and Bonus Fund, which are appropriated from net profit as reported in the enterprise’s PRC statutory accounts. A non-wholly-owned foreign invested enterprise is permitted to provide for the above allocation at the discretion of its board of directors. The aforementioned reserves can only be used for specific purposes and are not distributable as cash dividends.

The Company accounts for its investments in foreign joint ventures’ operations using the equity method of accounting. Under the equity method, the Company’s share of the joint ventures’ operations’ earnings or losses is recognized in the consolidated statements of operations as equity income (loss) from foreign joint ventures’ operations. Joint venture income increases the carrying value of the joint ventures and joint venture losses reduce the carrying value. Dividends received from the joint ventures reduce the carrying value. In accordance with our long-lived asset policy, when events or circumstances indicate the

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carrying amount of an asset may not be recoverable, management tests long-lived assets for impairment. If the estimated future cash flows are projected to be less than the carrying amount, an impairment write-down (representing the carrying amount of the long-lived asset which exceeds the present value of estimated expected future cash flows) would be recorded as a period expense. In making this evaluation, a variety of quantitative and qualitative factors are considered including national and local economic, political and market conditions, industry trends and prospects, liquidity and capital resources and other pertinent factors. Based on this evaluation for this reporting period, the Company does not believe an impairment adjustment is necessary.

(7) Income Taxes

The components of income (loss) before income taxes and dividends on preferred stock for the years ended December 31, 2016 and 2015 were as follows:

	2016		2015
	(in thousands)
United States	$	(7,545)	$	(2,906)
Foreign		529		741
	$	(7,016)	$	(2,165)

The components of the provision (benefit) for income taxes by taxing authority for the years ended December 31, 2016 and 2015 were as follows:

	2016		2015
	(in thousands)
Current provision:
Federal	$	-	$	443
Foreign		119		131
States		-		-
Total current provision		119		574
Deferred provision (benefit):
Federal		(24)		(114)
Foreign		-		-
States		(51)		(32)
Total deferred provision (benefit):		(75)		(146)
	$	44	$	428

Significant components of the Company’s deferred federal income taxes were as follows:

	December 31,			December 31,
	2016			2015
	Non-Current
Deferred tax assets:
Accrued liabilities	$	15		$	22
Deferred compensation		1,113			936
Allowance for doubtful accounts		101			73
Inventory		83			73
Net operating loss		6,528			4,137
Property and equipment		143			123
Foreign tax credit carry forward		3,297			3,226
Deferred tax assets		11,280			8,590
Deferred tax liabilities:
Valuation allowance		(11,280	)		(8,590	)
Equity in foreign investments		(2,824	)		(2,755	)
Translation gain		-			(309	)
Deferred tax liabilities		(14,104	)		(11,654	)
Net deferred tax assets (liabilities)		(2,824	)		(3,064	)

F-18

The Company’s deferred tax assets are primarily related to net operating loss carry forwards. A valuation allowance was established at December 31, 2016 and 2015 due to uncertainty regarding future realization of deferred tax assets. Our total valuation allowance as of December 31, 2016 and 2015 is $11.28 million and $8.59 million, respectively.  

The Company has federal net operating loss carry forwards of approximately $17.3 million which include $7.4 million acquired from AAT that are subject to the utilization limitation under Section 382 of the Internal Revenue Code. The Company has state net operating losses of $14 million.  These tax loss carry forwards are available to offset future taxable income and expire if unused during the federal tax year ending December 31, 2019 through 2032.

The Company’s 2008 U.S. federal income tax return was examined by the Internal Revenue Service (“IRS”). In the fourth quarter 2011, the IRS concluded its audit which adjusted the annual net operating loss carry forward limitation under Sec. 382 related to AAT’s pre-acquisition net operating loss carry forwards to $299,000 per year through 2027.  The Company has adopted the provisions of ASC Topic 740-10 “Income Taxes” to assess tax benefits claimed on a tax return should be recorded in the financial statements.  The Company has assessed all open tax years and has recorded no uncertain tax positions related to the open tax years. The Company is no longer subject to tax examination before 2013.  

The difference between the effective income tax rate reflected in the provision for income taxes and the amounts, which would be determined by applying the statutory income tax rate of 34%, is summarized as follows:

	2016		2015
	(in thousands)
(Provision for) benefit from U.S federal statutory rate	$	2,385	$	736
Effect of state income taxes		51		32
Non-deductible business meals and entertainment expenses		(11)		(16)
Foreign income taxes included in equity in earnings		140		269
Accrual to return adjustments and other		81		(653)
Change in valuation allowance		(2,690)		(796)
Total expense	$	(44)	$	(428)

The Company files income tax returns in the United States Federal jurisdiction and various state jurisdictions.

(8) Notes Payable

The components of notes payable at December 31, 2016 and 2015 are as follows:

	2016		2015
	(In thousands)
Revolving credit agreement	$	1,500	$	1,043
Current portion of long-term notes payable......................................		300		300
Long-term notes payable		3,900		4,200
Total revolving credit agreement	$	5,700	$	5,543

Principal payments of debt for years subsequent to 2017 are as follows (in thousands):

	Amount
	(In thousands)
2017	$	1,800
2018		300
2019		300
2020		3,300
2021		-
	$	5,700

Revolving Credit Agreement

On December 29, 2015, the Company entered into a Loan Agreement (the “Loan Agreement”) with Frost Bank (“Frost”). The Loan Agreement provides two separate revolving credit facilities to the Company. The first facility (“Facility A”) provides the Company with a $4.00 million revolving line of credit with a two-year term maturing December 29, 2017, subject to a maximum loan amount (the “Borrowing Base”) based on a formula related to the value of certain of the Company’s accounts, inventories and equipment.Under Facility A, the Company may borrow, repay and reborrow, up to the Borrowing Base.  Facility A also allows the issuance of standby letters of credit. As of December 31, 2016, we had $1.25 million in letters of credit outstanding.

F-19

Facility A requires a period of not less than 30 consecutive days during each calendar year that the entire outstanding principal amount of the revolving credit facility is paid. Upon Facility A’s maturity date, all outstanding principal and unpaid accrued interest is due and payable.  The Company borrowed $1.04 million under Facility A upon initiation of the Loan Agreement and had $1.50 million drawn and outstanding as of December 31, 2016. There was no additional borrowing capacity as of December 31, 2016 due to non-compliance with its financial covenants.  

The second facility (“Facility B”) provides the Company with a $4.50 million declining revolving line of credit. The Company may be borrow, repay and reborrow from the line. The amount available to borrow under Facility B declines from the initial $4.50 million by $0.15 million each six months. Facility B’s maturity date is December 29, 2020 when all outstanding principal and unpaid accrued interest is due and payable. The Company was advanced $4.50 million under Facility B upon the initiation of the Loan Agreement which was to pay off the remaining balance on the facility from JP Morgan Chase Bank N.A. (“Chase”) and as of December 31, 2016, the outstanding balance is $4.20 million.

Under the Loan Agreement, the interest rate on both facilities is the three month LIBOR (0.98% at December 31, 2016) plus 4.00% per year. The Loan agreement also provides for usual and customary covenants and restrictions  including that the borrower must maintain a fixed charge coverage ratio of no less than 1.25 to 1.00, and will not permit the ratio of consolidated total liabilities to consolidated net worth to exceed 1.25.   Additionally, the Company’s obligations under Facility A are secured by:  

1.     All our accounts receivable, whether now owned or hereafter acquired.

2.     All our inventory, whether now owned or hereafter acquired.

3.     All our machinery and equipment, whether now owned or hereafter acquired.

4.     A collateral assignment on all future distributions from joint ventures.

The Company’s obligations under Facility B are secured by:

1.     Our fee simple interest in certain real estate and improvements in Beaumont, Texas.

2.     Any parking, utility and ingress/egress easements on the foregoing property.

3.     A collateral assignment on all future distributions from joint ventures.

The Company’s subsidiaries, M&I Electric Industries, Inc. and South Coast Electric Systems, LLC are additional obligors on the Loan Agreement.

The Company had $5.70 million of borrowings outstanding under the Frost credit agreement at December 31, 2016 and $5.54 million at December 31, 2015.  

On March 23, 2017, the Company sold a $7.00 million Senior Secured Term Note (the “Note”) to a third-party lender to repay all outstanding borrowings under the existing revolving credit facilities and provide approximately $1.00 million of additional working capital. The Note is payable in monthly interest only payments, in arrears, with $0.50 million of principal repayable no later than June 30, 2017 and the balance due March 23, 2021. The Note is secured by all assets of the Company, with few exceptions, and bears interest at a fixed rate of 11.50%.                                         

(9) Leases

New Corporate Office Lease

In December 2013, the Company executed a lease for office space at 1250 Wood Branch Park Drive, Houston, Texas. The lease covers approximately 13,000 square feet.

The term of the lease is 64 months and commenced upon completion of tenant improvements, which were completed in March 2014.

The Company also leases equipment (principally trucks and forklifts) under operating lease agreements that expire at various dates to 2021. Rental expense relating to operating leases and other short-term leases for the years ended December 31, 2016 and 2015, amounted to approximately $0.70 million and $0.68 million, respectively.

F-20

The following is a schedule of future minimum lease payments:

Year Ending December 31,	Amount
	(In thousands)
2017	$	698
2018		631
2019		438
2020		241
2021		215
	$	2,223

(10) Stock and Stock-based Compensation

Employee Stock Purchase Plan

The Company issued 8,142 and 5,668  shares of Company stock during 2016 and 2015, respectively, in connection with an Employee Stock Purchase Plan (“ESPP”) that commenced in April 2008.

Restricted Stock Units

As amended in May 2014, the stockholder approved shares available under the plan is 1,700,000. The number of RSUs awarded is generally subject to the substantial achievement of budgeted performance and other metrics in the year granted. The RSUs do not have voting rights of the common stock, and the shares of common stock underlying the RSUs are not considered issued and outstanding until actually vested and issued. In general, the awards convert to common stock on a one to one basis in 25% increments over four years from the grant date subject to a continuing employment obligation.

The following table summarizes the activity for unvested restricted stock units for the years ended December 31, 2016 and 2015:

	Units		Weighted Average Fair Value Per RSU
Unvested restricted stock units at December 31, 2014		168,642	$	4.88
Awarded		231,356	$	3.47
Vested		(72,298)	$	4.44
Forfeited		(11,853)	$	4.55
Unvested restricted stock units at December 31, 2015		315,847	$	3.99
Awarded		31,327	$	2.81
Vested		(105,443)	$	4.66
Forfeited		(23,319)	$	5.12
Unvested restricted stock units at December 31, 2016		218,412	$	4.28

Compensation expense of approximately $0.49 million and $0.46 million was recorded in the years ended December 31, 2016 and 2015, respectively, to reflect the fair value of the original RSU’s granted or anticipated to be granted less forfeitures, amortized over the portion of the vesting period occurring during the period. The fair value of the RSUs was based on the closing price of our common stock as reported on the NASDAQ Stock Market (“NASDAQ”) on the grant date. Based upon the fair value on the grant date of the number of shares awarded or expected to be awarded, it is anticipated that approximately $0.93 million of additional compensation cost will be recognized in future periods through 2017. The weighted average period over which this additional compensation cost will be expensed is 2 years.

In December 2016, the Board of Directors approved modification to the requisite service period to accelerate vesting for 75% of the RSU granted to employees for 2016 plan.

During February 2017, the Board of Directors approved the grants of approximately 395,000 RSUs in conjunction with the Plan, of which, approximately 332,000 units are subject to 2017 fiscal performance measures.

Board of Directors Compensation

Directors who are not employees of the Company and who do not have a compensatory agreement providing for service as a director of the Company receive a retainer fee payable quarterly. Eligible directors may elect to defer 50% to 100% of their retainer fee, which may be used to acquire common stock of the Company at the fair market value on the date the retainer fee would otherwise be paid, acquire stock units equivalent to the fair market value of the Company’s common stock on the date the retainer fee would otherwise be paid, or be paid in cash. During the years ended December 31, 2016 and 2015, directors of the Company elected to defer retainer fees to acquire approximately 31,000 and 29,400, respectively, stock units. Compensation

F-21

expense of approximately $0.15 million and $0.18 million was recorded in the years ended December 31, 2016 and 2015 respectively, which is included in general and administrative expenses in the consolidated statements of operations.

(11) Redeemable Convertible Preferred Stock

On April 13, 2012, the Company signed a securities purchase agreement (the “Securities Purchase Agreement”) with a private investor for the sale (the “Preferred Stock Financing”) of 1,000,000 shares of the Company’s Series A Convertible Preferred Stock (the “Series A Convertible Preferred Stock”) at $5.00 per share and 325,000 warrants to purchase shares of the Company’s common stock expiring in May 2020. The Series A Convertible Preferred Stock shares are initially convertible into 1,000,000 shares of the Company’s common stock at a conversion price of $5.00 per share. The warrants were issued in two tranches with 125,000 of such warrants at an initial exercise price of $6.00 per share and 200,000 of such warrants at an initial exercise price of $7.00 per share. On May 2, 2012, the Company completed the issuance of the Series A Convertible Preferred Stock and warrants.

On April 30, 2012, the Company filed an Articles of Amendment to its Articles of Incorporation designating 1,000,000 shares of the Company’s authorized preferred stock as Series A Convertible Preferred Stock. The Company also entered into a Registration Rights Agreement and Investor Rights Agreement with the private investor.

The Series A Convertible Preferred Stock ranks senior to all other equity instruments of the Company, including the Company’s common stock. The Series A Convertible Preferred Stock accrues cumulative dividends at a rate of 6% per annum, whether or not dividends have been declared by the Board of Directors and whether or not there are profits, surplus or other funds available for the payment of such dividends. The Company may pay such dividends in shares of the Company’s common stock based on the then current market price of the common stock. At any time following a material default by the Company, as defined in the Securities Purchase Agreement, or April 30, 2017, the holders of a majority of the outstanding shares of the Series A Convertible Preferred Stock may require the Company to redeem the Series A Convertible Preferred Stock at a redemption price equal to the lessor of (i) the liquidation preference per share (initially $5.00 per share, subject to adjustments for certain future equity transactions defined in the Securities Purchase Agreement) and (ii) the fair market value of the Series A Convertible Preferred Stock per share, as determined in good faith by the Company’s Board of Directors. As of December 31, 2016 and 2015, the redemption price per share was $5.00 in both years. The redemption price, plus any accrued and unpaid dividends, shall be payable in 36 equal monthly installments plus interest at an annual rate of 6%.

The preferred stock and warrants were issued for a total of $5.0 million. This amount was allocated to the preferred stock and warrants based on their relative fair values. The fair value of the warrants was calculated using the Black Scholes-Merton pricing model using the following weighted average assumptions, at the grant date:

Number of warrants		325,000
Exercise price	$	6.62
Expected volatility of underlying stock		74	%
Risk-free interest rate		1.62	%
Dividend yield		0	%
Expected life of warrants		8 years
Weighted-average fair value of warrants	$	3.11
Expiration date		May 2, 2020

Based on these calculations and the actual consideration, the warrants were valued at $840,000 and the Series A Convertible Preferred Stock was valued at $4,160,000.

The initial values allocated to the warrants were recognized as a discount on the Series A Convertible Preferred Stock, with a corresponding charge to additional paid-in capital. The discount related to the warrants is accreted to retained earnings through the scheduled redemption date of the mandatorily redeemable Series A Convertible Preferred Stock. Discount accretion for the years ended December 31, 2016 and 2015 totaled $0.05 million in both years.

At December 31, 2016 and December 31, 2015, the company had accrued but unpaid dividends totaling $0.23 million, in both years, which is included in the accounts payable and other accrued expenses in the consolidated balance sheets.

(12) Employee Benefit and Bonus Plans

The employees of the Company are eligible to participate in a 401(k) plan sponsored by the Company. The plan is a defined contribution 401(k) Savings and Profit Sharing Plan (the “Plan”) that covers all full-time employees who meet certain age and service requirements. The Company may provide discretionary contributions to the Plan as determined by the Board of Directors. For the years ended December 31, 2016 and 2015, the Company made no contributions to the Plan.

F-22

The Company maintains an “Executive Performance” bonus plan, which covers approximately 43 key employees. Under the plan, the participants receive a percentage of a bonus pool based primarily on pre-tax income in relation to budget. The Board of Directors approves the Executive Performance plan at the beginning of each year. During the years ended December 31, 2016 and 2015, the Company recorded approximately $0.49 million and $0.46 million under the plan, respectively.

(13) Related Party Transactions

During 2016 and 2015, the Company received legal advice on various Company matters from a law firm related to a director of the Company. The Company incurred expenses totaling approximately $0.07 million and $0.05 million related to these services during 2016 and 2015, respectively, which is included in general and administrative expenses in the accompanying consolidated statements of operations. As of December 31, 2016 and 2015, the outstanding payable balance for services rendered by this law firm was $0.04 million and $0.00, respectively.  

The Company, upon approval from the Board, has an employment agreement with the former Executive Chairman of the Board of Directors (“Executive Chairman”), whereby the Company compensated the Executive Chairman $0.00 million and $0.13 million during 2016 and 2015, respectively. Under the terms of the agreement, the Executive Chairman will assist in international joint venture relations and operations, technical developments, manufacturing and transformative business development projects and other special projects assigned by the Company. In November 2013, the Company amended the agreement to extend the term through 2015 with annual compensation of $0.13 million for 2015. In addition, the amendment included a bonus equal to 1% of the amount reported by the Company as equity income from foreign joint ventures’ operations in the consolidated statements of operations. During 2015, the Company paid compensation of $0.13 million, under the terms of the agreement, which is included in general and administrative expenses in the accompanying consolidated statements of operations.

(14) Segment Reporting

The Company follows guidance prescribed by the ASC Topic 280, Segment Reporting, which governs the way the Company reports information about its operating segments.

The Company manages its continuing operations as a single segment which reflects how the Company’s Chief Operating Officer analyzes the business.

(15) Quarterly Results for Continuing Operations

The following table reflects the quarterly information for continuing operations for the applicable time periods.

	2016
	Q1			Q2		Q3			Q4			Total
Net Sales	$	8,298		$	11,444	$	8,673		$	9,397		$	37,812
Gross Profit (Loss)		91			1,226		(451	)		150		$	1,016
Net income (loss)		(2,883	)		151		(2,624	)		(1,704	)		(7,060	)
Earnings (loss) per share:
Basic	$	(0.36	)	$	0.01	$	(0.33	)	$	(0.21	)	$	(0.89	)
	2015
	Q1			Q2		Q3			Q4			Total
Net Sales	$	15,311		$	12,302	$	13,780		$	7,690		$	49,083
Gross Profit (Loss)		2,283			2,044	2561				(298	)	$	6,590
Net income (loss)	274				547		204			(3,618	)		(2,593	)
Earnings (loss) per share:
Basic	$	0.02		$	0.06	$	0.01		$	(0.45	)	$	(0.36	)

(16) Commitments and Contingencies

On September 1, 1999, the Company created a group medical and hospitalization minimum premium insurance program. For the policy year ended August 2016, the Company is liable for all claims each year up to $70,000 per insured, or $1.7 million in the aggregate. An outside insurance company insures any claims in excess of these amounts. The Company’s expense for this minimum premium insurance totaled $1.07 million and $1.16 million during the years ended December 31, 2016 and 2015. Insurance reserves included in accrued payroll and benefits in the accompanying consolidated balance sheets were approximately $0.02 million and $0.00 million at December 31, 2016 and 2015. The Company is contingently liable for secured letters of credit of $1.25 million as of December 31, 2016 in relation to performance guarantees on certain customer contracts.

F-23

(17) Earnings (Loss) from Continuing Operations Per Common Share

Basic earnings (loss) per common share is based on the weighted average number of common shares outstanding for the year ended December 31, 2016 and 2015. Diluted earnings (loss) per common share is based on the weighted average number of common shares outstanding, plus the incremental shares that would have been outstanding upon the assumed exercise of all potentially dilutive stock options and other units subject to anti-dilution limitations.

The following table sets forth the computation of basic and diluted earnings (loss) per common share (in thousands, except share and per share data):

	Year Ended December 31,
		2016		2015
Net loss**	$	(7,413)	$	(2,942)
Weighted average basic shares		8,305,764		8,241,585
Dilutive effect of stock options, restricted stock units, preferred stock and warrants*		-		-
Total weighted average diluted shares with assumed conversions		8,305,764		8,241,585
Loss from operations per common share:
Basic	$	(0.89)	$	(0.36)
Dilutive	$	(0.89)	$	(0.36)

*No units or shares are considered when losses cause the effect to be anti-dilutive.

**Net income (loss) represents net income (loss) from continuing operations less the dividends on redeemable convertible preferred stock.

(18) Sale of South Coast Electric Assets

On June 24, 2016, the Company sold its Bay St. Louis, MS manufacturing facility and related assets including fixed assets, work in process, and inventory to an unrelated party. The sale resulted in a gain of $0.18 million, of which $0.07 million is in relation to the gain on sale of fixed assets and reported in other income, and $0.11 million is related to inventory and is reflected in income from operations.

(19) Subsequent Event

As reported in the Company’s Current Report on Form 8-K filed March 27, 2017, on March 23, 2017 the Company entered into a $7.00 million Senior Secured Term Note with a third-party lender. The Note is payable in monthly interest only payments in arrears at the fixed rate of 11.5%. Principal of $0.50 million is payable no later than June 30, 2017 with the balance due March 23, 2021.   The proceeds of the note sale were used to pay off all remaining balances on the credit facilities with Frost in addition to providing approximately $1.00 million of working capital.    

F-24

EX-10.35

Exhibit 10.35

AMENDED EMPLOYMENT AGREEMENT

I, Charles M. Dauber, agree to the terms and conditions of employment with American Electric Technologies, Inc., a Florida corporation (the “Company”), set forth in this Amended Employment Agreement (“Agreement”), which clarifies certain of the terms provided in the Employment Agreement between the Company and me dated November 6, 2013.

1. Term of Employment. My employment under this Agreement shall commence on January 1, 2014 (“Effective Date”) and end on December 31, 2015 (“Expiration Date”), or such earlier date on which my employment is terminated under Section 5 of this Agreement. If the Company continues to employ me beyond the Expiration Date without entering into a written agreement extending the term of this Agreement, all obligations and rights under this Agreement shall prospectively lapse as of the Expiration Date, except the Company’s obligation to pay me two years salary and expected bonus under 5.a. Change of Control, the Company’s ongoing indemnification obligation under Section 4(g), my confidentiality and other obligations under Section 6, and our mutual waiver under Section 8.

2. Nature of Duties.

a. If the Board of Directors so elects me, I will serve as President and Chief Executive Officer of the Company and be its principal executive officer for Securities and Exchange Commission purposes. I shall work exclusively for the Company, and I will be responsible for all of the Company’s operations and assets and shall have all the customary powers and duties associated with the Chief Executive Officer position.

b. If I have been elected to the Board of Directors of the Company by the Company’s shareholders, I will serve as such director without any additional compensation beyond that provided herein.

c. I recognize and agree that the Company may alter my duties from time to time. I shall devote my full business time and effort to the performance of my duties for the Company, which I shall perform faithfully and to the best of my ability. I will be subject to the Company’s policies, procedures and approval practices, as generally in effect from time to time. Notwithstanding the foregoing or any other provisions of this Agreement, it shall not be a breach or violation of this Agreement for me to (i) serve on non-profit, civic or charitable boards or

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committees, (ii) deliver lectures, fulfill speaking engagements or teach at educational institutions, (iii) serve on the board of directors of a non-competing company with the prior written approval of the Company’s Board of Directors, or (iv) manage personal investments, so long as such activities do not significantly interfere or significantly detract from the performance of my responsibilities to the Company in accordance with this agreement.

3. Place of Performance. I shall be based at the Company’s headquarters in Houston, Texas, except for required travel on the Company’s business.

4. Compensation and Related Matters.

	2014		2015
Base Salary	$	325,000	$	350,000
Executive Performance Bonus	$	150,000	$	175,000
Total ON TARGET Expected CASH Compensation	$	475,000	$	525,000

CEO Performance Equity Award 80,000 RSU pool Variable Award
80,000 RSU 80,000 RSU pool Variable Award
80,000 RSU

a. The Executive Performance Bonus is based on achievement of negotiated operating and personal goals and objectives (including IDO) for the fiscal year. The on target bonus pool for 2014 is set at $150,000 and the target bonus pool for 2015 is $175,000. This bonus is uncapped. The bonus award is structured in this manner:

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Level of Performance Achievement:

<70% achievement of management plan = 0%

>70% achievement of management plan= actual% x 100% of bonus pool.

b. The 2014 and 2015 CEO Performance Equity Award is based on performance and achievement of negotiated goals and objectives (including IDO) in place for the fiscal year.

Award and Vesting: The entire allocated RSU bonus pool is awarded upon the commencement of the employment agreement. Full vesting occurs 48 months after the award with a 25% portion of the award vesting as of the end of each year. At the conclusion of the 2014 or 2015 fiscal year if the CEO’s performance achievement is determined to be less than 100% of plan an adjustment is made in the form of forfeiture of any unearned RSUs. No further adjustment in the number ofRSU to vest in future years will be made after the conclusion of the 2014 or 2015 fiscal years, respectively. The RSU bonus pool is capped at 80,000 RSU.

Level of Performance Achievement:

<70% achievement of management plan = 0%

>70% =actual % x 80,000 RSU

(iii) With the above exceptions, both the 2014 and the 2015 awards are bound by the all other general terms and conditions of the 2007 Employee Stock Incentive Plan.

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c. The term “IDO” means “Income (loss) from domestic operations” (IDO) as it appears in the company’s published financials.

c. Automobile Allowance. The Company shall provide an automobile allowance equal to $1,000.00 per month.

d. Standard Benefits. During my employment, I shall be entitled to continue to participate in all executive benefit plans and programs, including paid vacations, and other benefits generally available to other similarly situated Company executives in accordance with the terms of those plans and programs and applicable law. During 2014 and 2015 I will be entitled to take 4 weeks of paid vacation.

e. Indemnification. The Company shall extend to me the same indemnification arrangements as are generally provided to other similarly situated Company officers.

f. Expenses. I shall be entitled to receive prompt reimbursement for all reasonable and customary travel and business expenses I incur in connection with my employment, but I must incur and account for those expenses in accordance with the policies and procedures established by the Company. Company will reimburse for YPO dues (local and global), attendance at annual chapter retreat and a 1 week per year educational event.

g. Sarbanes-Oxley Act Loan Prohibition. To the extent that any Company benefit, program, practice, arrangement, or this Agreement would or might otherwise result in my receipt of an illegal loan (“Loan”), the Company shall use reasonable efforts to provide me with a substitute for the Loan that is lawful and of at least equal value to me. If this cannot be done, or if doing so would be significantly more expensive to the Company than making the Loan, the Company need not make the Loan to me or provide me substitute for it.

5. Termination.

a. Rights and Duties. If my employment is involuntarily terminated, I shall be entitled to the amounts or benefits shown on the applicable row of the following table, subject to the balance of this Section 5. The Company and I shall have no further obligations to each other, except the Company’s obligations, as applicable, as set forth in the following table, the Company’s ongoing indemnification obligation under Section 4(g), my confidentiality and other obligations under Section 6, and our mutual waiver under Section 8, or as set forth in any written agreement I subsequently enter into with the Company.  

-4

For purposes of the following, “Termination Date” means the last day of my employment with the Company.

DISCHARGE FOR CAUSE	Payment or provision when due of (I) any earned but unpaid base salary expense reimbursements, and vacation days accrued prior to termination of employment, and (2) other unpaid vested amounts or benefits under Company compensation incentive and benefit plans.
DISABILITY	Same as for Discharge for Cause EXCEPT that I also shall be potentially eligible for disability benefits under any Company provided disability plan in which I then participate.
DISCHARGE OTHER THAN FOR CAUSE OR DISABILITY OR CHANGE OF CONTROL	Any benefits I am due as result of involuntary discharge other than for cause or disability or change of control are subject to Section 5(d).   Subject thereto, I shall be entitled to the same benefits  as for “Change of Control” EXCEPT that I will only be entitled to one year’s salary and expected cash and equity bonus and Company will pay COBRA health insurance premiums for me and my family for a like period while I seek other employment, with such salary, bonus and insurance to be  in 12 monthly installments beginning the first day of the first full month after involuntary termination  and ceasing upon my commencement of other employment.
RESIGNATION	Same as for “Discharge for cause”
DEATH	Same as for Discharge for Cause EXCEPT that payments shall be made to the person or entity prescribed by Company policies.
EXPIRATION OF AGREEMENT	Same as for Discharge other than for cause or disability.’
CHANGE OF CONTROL	Payment of two year’s salary and expected bonus as specified in 4.a. and b. in the event of a change of control after which my employment was involuntary terminated as a result of such change of control  to be paid in a single lump sum cash payment on or before the 60th day following my Termination Date plus automatic accelerated forward vesting of any equity option or RSU grant held by me, as provided herein,  and Company will pay COBRA health insurance premiums for me and my family for eighteen (18) months after my employment ends beginning the first day of the first full month after involuntary termination. With respect to any outstanding Company equity options and RSU grants I own as of my Termination Date that are not vested and exercisable as of such date, the Company shall accelerate the vesting of the same, if any, and settle the same not later than sixty (60) days following the Termination Date

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b. Discharge for Cause. The Company may terminate my employment at any time if it believes in good faith that it has Cause to terminate me. “Cause” shall include, but not be limited to:

i. my refusal to follow the Company’s lawful directions or my material failure to perform my agreed upon duties (other than by reason of physical or mental illness, injury, or condition), in either case, after I have been given notice of my default and a reasonable opportunity to cure my default;

ii. my material failure to comply with Company policies;

iii. my engaging in conduct that is or may be unlawful or disreputable, to the possible detriment of the Company and its subsidiaries and affiliates, and their predecessors and successors (“Group”), or my own reputation;

iv. my seeking, exploring, or accepting a full time position with another business enterprise or venture without the Company’s written consent at any time more than 90 days before the Expiration Date; or

v. my engaging in activities on behalf of an enterprise which competes or plans to compete with the Company or any of its subsidiaries or affiliates.

C. Termination for Disability. Except as prohibited by applicable law, the Company may terminate my employment on account of Disability, or may transfer me to inactive employment status, which shall have the same effect under this Agreement as a termination for Disability. “Disability” means a physical or mental illness, injury, or condition that prevents me from performing my duties, as determined under Company policies relating to disability applicable to me and other similarly situated employees.

d. Discharge Other Than for Cause or Disability. The Company may terminate my employment at any time for any reason, and without advance notice. If I am terminated by the Company other than for Cause under Section 5(b) or for Disability under Section 5(c), I will only receive the special benefits provided for a Discharge other than for Cause under Section 5(a) if I sign a general release form furnished to me by the Company (which may include any provision customary in formal

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settlement agreements and general releases, including such things as my release of the Company and all conceivably related persons or entities (“affiliates”) from all known and unknown claims, my covenant never in the future to pursue any released claim, my promise never to seek employment with the Company or any affiliate in the future, my promise not to solicit current or former customers, employees, suppliers or, to the fullest extent lawful, engage in business activities that compete with the Company or any affiliate, or disclose or use any of their proprietary or trade secret information for one year after the effective date of termination) within 60 days after my employment ends and I do not thereafter properly revoke the release.

e. Resignation. I promise not to resign my employment before the Expiration Date without giving the Company at least 30 days advance written notice. If I resign, the Company may accept my resignation effective on the date set forth in my notice or any earlier date.

f. Death. If I die while employed under this Agreement, the payments required by Section 5(a) in the event of my death shall be made.

g. Change of Control. “Change of Control” as used herein occurs (i) if one or more persons or entities acting in concert acquire stock in the Company that constitutes, in the aggregate, more than 50 percent of the total fair market value or voting power of the stock of the Company, and such persons or entities did not own more than 50 percent before such acquisition, (ii) if there is a reorganization, merger or consolidation of the Company with one or more entities and thereafter, shares of the surviving entity are less than fifty percent (50%) owned by the Company

or Company’s shareholders as of the date of the execution of this Agreement, or (iii) if there is a transfer of substantially all of the property of the Company to another entity neither directly nor indirectly controlled by the Company’s present shareholders. (For purposes of this provision, “controlled” means ownership of more than fifty percent (50%) of the voting stock.)

h. Amounts Owed to the Company. Any amounts payable to me under this section shall first be applied to repay any amounts I owe the Company.

1.  Section 409A of the Code.

(a)  Notwithstanding the other provisions hereof, this Agreement is intended to comply with the requirements of section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) to the extent applicable, and this Agreement shall be interpreted to avoid any penalty sanctions under section 409A of the Code. Accordingly, all provisions herein, or incorporated by reference, shall be construed and interpreted to comply with section 409A of the Code and, if necessary, any such provision shall be deemed amended to comply with section 409A of the Code and regulations thereunder. For purposes of section 409A of the Code, each payment made under this Agreement shall be treated as a separate payment. In no event will I, directly or indirectly, be permitted to designate the calendar year of payment.

(b)  All reimbursements provided under this Agreement shall be made or provided in accordance with the requirements of section 409A of the Code, including, where applicable, the requirement that (i) any reimbursement is for expenses incurred during my lifetime (or during a shorter period of time specified in this Agreement), (ii) the amount of expenses eligible for reimbursement during a calendar year may not affect the expenses eligible for reimbursement in any other calendar year, (iii) the reimbursement of an eligible expense will be made on or before the last day of the taxable year following the year in which the expense is incurred, and (iv) the right to reimbursement is not subject to liquidation or exchange for another benefit.

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6. Confidentiality. I acknowledge that as an integral part of the Company’s business, the Company has developed, and will develop, at a considerable investment of time and expense, marketing and business plans and strategies, procedures, methods of operation and marketing, financial data, lists of actual and potential customers and suppliers, and independent sales representatives and related data, technical procedures, engineering and product specifications, plans for development and expansion, and other confidential and sensitive information, and I acknowledge that the Company has a legitimate business interest in protecting the confidentiality of such information. I acknowledge that I will be entrusted with such information as well as confidential information belonging to customers, suppliers, and other third parties.

a. “Trade Secrets” are defined as information, regardless of form, belonging to the Company, licensed by it, or disclosed to it on a confidential basis by its customers, suppliers, or other third parties, including, but not limited to, technical or nontechnical data, formulae, patterns, compilations, programs, devices, methods, techniques, drawings, processes, financial data, product plans, or lists of actual or potential customers or suppliers which are not commonly known by or available to the public and which information: (i) derives economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use; and (ii) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.

b. “Confidential Information” is defined as information, regardless of form, belonging to the Company, licensed by it, or disclosed to it on a confidential basis by its customers, suppliers, or other third parties, other than Trade Secrets, which is material and valuable to the Company and not generally known by the public.

C. Promise Not to Disclose. I promise never to use or disclose any Trade Secret before it has become generally known within the relevant industry through no fault of my own. I agree that this promise shall never expire. I further promise that, while this Agreement is in effect and for 2

years after its termination, I will not, without the prior written approval of the Company, disclose any Confidential Information before it has become generally known within the relevant industry through no fault of my own.

d. Promise Not to Solicit. To prevent me from inevitably breaking this promise, I further agree that, while this Agreement is in effect and for 24 months after its termination: (l) as to any customer or supplier of the Group with whom I had dealings or about whom I acquired proprietary

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information during my employment, I will not solicit or attempt to solicit (or assist others to solicit) the customer or supplier to do business with any person or entity other than the Group; and (2) I will not solicit or attempt to solicit (or assist others to solicit) for employment any person who is, or within the preceding 12 months was, an officer, manager, employee, or consultant of the Group.

e. Promise Not to Engage in Certain Employment. I agree that, while this Agreement is in effect and for 12 months after its termination, I will not accept any employment or engage in any activity, without the written consent of the Board if the loyal and complete fulfillment of my duties would inevitably require me to reveal or utilize Trade Secrets or Confidential Information, as reasonably determined by the Board.

f. Return of Information. When my employment with the Company ends, I will promptly deliver to the Company, or, at its written instruction, destroy, all documents, data, drawings, manuals, letters, notes, reports, electronic mail, recordings, and copies thereof, of or pertaining to it or any other Group member in my possession or control. In addition, during my employment with the Company or the Group and thereafter, I agree to meet with Company personnel and, based on knowledge or insights I gained during my employment with the Company and the Group, answer any question they may have related to the Company or the Group.

g. Promise to Discuss Proposed Actions in Advance. To prevent the inevitable use or disclosure of Trade Secrets or Confidential Information, I promise that, before I disclose or use Trade Secrets or Confidential Information and before I commence employment, solicitations, or any other activity that could possibly violate the promises I have just made, I will discuss my proposed actions with an attorney for the Company, who will advise me in writing whether my proposed actions would violate these promises.

h. Intellectual Property. Intellectual property (including such things as all ideas, concepts, inventions, plans, developments, software, data, configurations, materials (whether written or machine-readable), designs, drawings, illustrations, and photographs, that may be protectable, in whole or in part, under any patent, copyright, trademark, trade secret, or other intellectual property law), developed, created, conceived, made, or

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reduced to practice during my Company employment (except intellectual property that has no relation to the Group or any Group customer that I developed, purely on my own time and at my own expense), shall be the sole and exclusive property of the Company, and I hereby assign all my rights, title, and interest in any such intellectual property to the Company.

i.Execution of Inventions Agreement. I agree to the terms of the Company’s Assignment of lnventions agreement, which is attached to this Agreement as Schedule 1, and I promise to execute it contemporaneously with this Agreement.

j. Enforcement of This Section. This section shall survive the termination of this Agreement for any reason. I acknowledge that (a) my services are of a special, unique, and extraordinary character and it would be very difficult or impossible to replace them, (b) this section’s terms are

reasonable and necessary to protect the Company’s legitimate interests, (c) this section’s restrictions will not prevent me from earning or seeking a livelihood, (d) this section’s restrictions shall apply wherever permitted by law, and (e) my violation of any ofthis section’s terms would irreparably harm the Company. Accordingly, I agree that, if I violate any of the provisions of this section, the Company shall be entitled to, in addition to other remedies available to it, an injunction to be issued by any court of competent jurisdiction restraining me from committing or continuing any such violation, without the need to prove the inadequacy of money damages or post any bond or for any other undertaking.

7. Notice.

a. To the Company. I will send all communications to the Company in writing, addressed as follows (or in any other manner the Company notifies me to use):

If Mailed: American Electric Technologies, Inc.

6410 Long Road

Houston, TX 77087

Attention: Chairman of the Board

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With a copy to:

J. Hoke Peacock II 470 Orleans

Beaumont, TX 77701

b. To Me. All communications from the Company to me relating to this Agreement must be sent to me in writing as follows (or in any other manner that I notify the Company) at my Company office or in any other manner I notify the Company to use.

If mailed: Charles M.Dauber   5102 Valerie St.   Bellaire, TX 77401

C. Time Notice Deemed Given. Notice shall be deemed to have been given when delivered or, if earlier (1) when mailed by United States certified or registered mail, return receipt requested, postage prepaid, or (2) faxed with confirmation of delivery, in either case, addressed as required in this section.

8. Waiver of Jury Trial. The Company and I both hereby irrevocably waive any and all right to trial by jury in any litigation directly or indirectly arising out of or relating to this Agreement and agree that any such action or proceeding shall be tried before a court and not before a jury.

9. Golden Parachute Limitation. I agree that my payments and benefits under this Agreement and all other contracts, arrangements, or programs shall not, in the aggregate, exceed the maximum amount that may be paid to me without triggering golden parachute penalties under Section 280G and related provisions of the Internal Revenue Code, as determined in good faith by the Company’s independent auditors. If any benefits must be cut back to avoid triggering such penalties, my benefits shall be cut back in the priority order designated by the Company. If an amount in excess of the limit set forth in this section is paid to me, I will repay the excess amount to the Company upon demand, with interest at the rate provided for in Internal Revenue Code Section 1274(b)(2)(B). The Company and I agree to cooperate with each other in connection with any administrative or judicial proceedings concerning the existence or amount of golden parachute penalties with respect to payments or benefits I receive.

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10. Amendment. No provisions of this Agreement may be modified, waived, or discharged except by a written document signed by a duly authorized Company officer and me. Thus, for example, promotions, commendations, and/or bonuses shall not, by themselves, modify, amend, or extend this Agreement. A waiver of

any conditions or provisions of this Agreement in a given instance shall not be deemed a waiver of such conditions or provisions at any other time.

11. Interpretation; Exclusive Forum. The validity, interpretation, construction, and performance of this Agreement shall be governed by the laws of the State of Texas (excluding any that mandate the use of another jurisdiction’s laws). Any litigation, with respect to such matters may only be brought in the courts of Harris County, Texas.

12. Successors. This Agreement shall be binding upon, and shall inure to the benefit of, me and my estate, but I may not assign or pledge this Agreement or any rights arising under it, except to the extent permitted under the terms of the benefit plans in which I participate. Without my consent, the Company may assign this Agreement to any affiliate or successor that agrees in writing to be bound by this Agreement, after which any reference to the “Company” in this Agreement shall be deemed to be a reference to the affiliate or successor, and the Company thereafter shall have no further primary, secondary or other responsibilities or liabilities under this Agreement of any kind.

13. Taxes. The Company shall withhold taxes from payments it makes pursuant to this Agreement as it determines to be required by applicable law.

14. Validity. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. In the event that a court of competent jurisdiction determines that any provision of this Agreement is invalid or more restrictive than permitted under the governing law of such jurisdiction, then only as to enforcement of this Agreement within the jurisdiction of such court, such provision shall be interpreted and enforced as if it provided for the maximum restriction permitted under such governing law.

15. Counterparts. This Agreement may be executed in multiple counterparts, each of which shall for all purposes be deemed to be an original and all of which, when taken together, shall constitute one and the same instrument.

16. Entire Agreement. All oral or written agreements or representations, express or implied, with respect to the subject matter of this Agreement are set forth in this Agreement, and this Agreement supersedes the terms of any previous employment agreement between theCompany and myself. However, this Agreement does not override other written agreements I have executed simultaneously with this Agreement relating to specific aspects of my employment, such as conflicts of interest.

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17. Former Employers. I am not subject to any employment, confidentiality, or other agreement or restriction that would prevent me from fully satisfying my duties under this Agreement or that would be violated if I did so. Without the Company’s prior written approval, I promise I will not:

a. disclose proprietary information belonging to a former employer or other entity without its written permission;

b. contact any former employer’s customers or employees to solicit their business or employment on behalf of the Group; or

C. distribute announcements about or otherwise publicize my employment with the Group.

I will indemnify and hold the Company harmless from any liabilities, including defense costs, it may incur because I am alleged to have broken any of these promises or improperly revealed or used such proprietary information or to have threatened to do so, or if a former employer challenges my entering into this Agreement or rendering services pursuant to it.

18. Department of Homeland Security Verification Requirement. If I have not already done so, I agree to timely file all documents required by the Department of Homeland Security to verify my identity and my lawful employment in the United States. Notwithstanding any other provision of this Agreement, if I fail to meet any such requirements promptly after receiving a written request from the Company to do so, I agree that my employment shall terminate immediately and that I shall not be entitled to any compensation from the Company of any type.

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I ACKNOWLEDGE THAT ALL UNDERSTANDINGS AND AGREEMENTS BETWEEN THE COMPANY AND ME RELATING TO THE SUBJECTS COVERED IN THIS AGREEMENT ARE CONTAINED IN IT AND THAT I HAVE ENTERED INTO THIS AGREEMENT VOLUNTARILY AND NOT IN RELIANCE ON ANY PROMISES OR REPRESENTATIONS BY THE COMPANY OTHER THAN THOSE CONTAINED IN THIS AGREEMENT ITSELF.

I UNDERSTAND THAT ORGAIN, BELL & TUCKER, L.L.P. (OB&T) REPRESENTED THE COMPANY, NOT ME, IN NEGOTIATING THIS CONTRACT. TO THE EXTENT OB&T HAS REPRESENTED ME, IS REPRESENTING ME, OR REPRESENTS ME IN THE FUTURE, I IRREVOCABLY WAIVE ANY CONFLICT OF INTEREST OBJECTIONS I MAY HAVE TO ITS REPRESENTATION OF THE COMPANY AS TO ANY MATTERS RELATING TO MY EMPLOYMENT BY THE COMPANY, INCLUDING THE NEGOTIATION OF THIS CONTRACT.

I FURTHER ACKNOWLEDGE THAT I HAVE CAREFULLY READ THIS AGREEMENT, THAT I UNDERSTAND ALL OF IT, AND THAT I HAVE BEEN GIVEN THE OPPORTUNITY TO DISCUSS THIS AGREEMENT, TOGETHER WITH ALL ATTACHED SCHEDULES AND EXHIBITS, WITH MY PRIVATE LEGAL COUNSEL AND HAVE AVAILED MYSELF OF THAT OPPORTUNITY TO THE EXTENT I WISHED TO DO SO. I UNDERSTAND THAT BY SIGNING THIS AGREEMENT I AM GIVING UP MY RIGHT TO A JURY TRIAL.

Date: March 27, 2017, effective January 1, 2014	American Electric Technologies, Inc.
	By:	/s/ Neal Dikeman
	Name:	Neal Dikeman
	Title:	Chairman of the Compensation Committee
Date: March 27, 2017, effective January 1, 2014
	/s/ Charles M. Dauber
	Charles M. Dauber

Signature Page to Employment Agreement

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Schedule 1

ASSIGNMENT OF INVENTIONS

1. I will promptly disclose in writing to the Company all Inventions. For purposes of this Agreement, “Invention” shall mean any discovery, whether or not patentable, as well as improvements thereto, which is conceived or first practiced by me, alone or in a joint effort with others, whether prior to or following execution of this Agreement, which: (i) may be reasonably expected to be used in a product of the Company; (ii) results from work that I have been assigned as part of my duties as an employee of the Company; (iii) is in an area of technology which is the same as or substantially related to the areas of technology with which I am involved; (iv) is useful, or which the Company reasonably expects may be useful, in any manufacturing or product design process of the Company; or (v) utilizes any Confidential Information.

2. All Inventions developed while employed by the Company in the scope of such my employment and duties belong to and are the sole property of the Company and will be subject to this Agreement. I assign to the Company all right, title, and interest I may have or may acquire in and to all Inventions. I shall sign and deliver to the Company (during and after employment) any other documents that the Company considers reasonably necessary to

provide evidence of (i) the assignment of all of my rights, if any, in any Inventions and (ii) the Company’s ownership of such Inventions.

3. I will assist the Company in applying for, prosecuting, obtaining, or enforcing any patent, copyright, or other right or protection relating to any Invention, all at the Company’s expense but without consideration to me in excess of my salary or wages. If the Company requires any assistance after termination of my employment, I will be compensated for time actually spent in providing that assistance at an hourly rate equivalent to my salary or wages during the last period of employment with the Company.

4. If the Company is unable to secure my signature on any document necessary to apply for, prosecute, obtain, or enforce any patent, copyright, or other right or protection relating to any Invention, whether due to my mental or physical incapacity or any other cause, I hereby irrevocably designate and appoint the Company and each of its duly authorized officers and agents as my agent and attorney-in-fact, to act for and in my behalf to execute and file any such document and to do all other lawfully permitted acts to further the prosecution, issuance, and enforcement of patents, copyrights, or other rights or protections, with the same force and effect as if executed and delivered by me.

Employee:	American Electric Technologies, Inc.
/s/ Charles M. Dauber	/s/ Neal Dikeman
Signature of Employee	Signature of Authorized Company Representative
Charles M. Dauber Print Name of Employee	/s/ Neal Dikeman Neal Dikeman, Chmn. of the Compensation Committee
.
March 27, 2017, but effective January 1, 2014	March 27, 2017, but effective January 1, 2014

Signature Page to Assignment of Inventions Agreement

Amendment to Employment Agreement

Between Charles M. Dauber and American Electric Technologies, Inc. dated November 6, 2013

Prior to the Expiration Date, the parties have previously agreed to extend the term of the Employment Agreement on a month to month basis.

Charles M. Dauber and American Electric Technologies, Inc. hereby agree that Section 1 of the Employment Agreement is amended to read as follows effective December 31, 2015:

1. “Term of Employment. My employment under this Agreement shall commence on January 1, 2014 (“Effective Date”) and end on December 31, 2017 (“Expiration Date”), or such earlier date on which my employment is terminated under Section 5 of this Agreement.”

Date: February 2, 2017, effective December 31, 2015	American Electric Technologies, Inc.
	By:	/s/ Neal Dikeman
	Name:	Neal Dikeman
	Title:	Chairman of the Compensation Committee
Date: February 2, 2017, effective December 31, 2015
	/s/ Charles M. Dauber
	Charles M. Dauber

EX-10.37

Exhibit 10.37

Summary of Compensation For Named Executive Officers 2017*

In February 2017, the Compensation Committee of the Board of Directors established 2017 salary and target bonus applicable to our named executive officers as follows:

Named Executive	2017 Base Salary($)		2017 Target Bonus($)
Charles M. Dauber		350,000		175,000
William C. Miller		210,000		100,000
Neal T. Hare		160,000		100,000
James J. Steffek		160,000		100,000

William Brod 200, 000 60,000

In connection with the 2017 salary and target bonus established for our named executive officers, the following were awarded performance-based restricted stock units under the 2007 Employee Stock Incentive Plan:

Named Executive	Restricted Stock Units
Charles M. Dauber		80,000
William C. Miller		15,000
William Brod		24,911

EX-10.39

Exhibit 10.39

June 1, 2016

William Brod

2018 Laura Lane

La Porte, Texas 77571

Dear William:

It has been a pleasure working with you over the past several months and the Board of Directors and I both recognize and appreciate you and your efforts to date.   In this regard and based on our discussions, we agree to modify the terms of your employment as a Senior Vice President and Chief Financial Officer.

The following are revisions to the terms of your offer letter dated November 18, 2015 (attached) and are effective as of the date of your acceptance of this letter:

Paragraph 7 h. of your offer letter of November 18, 2015 is deleted and the following is substituted therefor:

h.Special Severance and Retention Bonus:

i. In the event you are terminated for other than cause or disability, or in the event there is a change of control/acquisition resulting in your termination or a substantial reduction of or material change in your responsibilities, M&I agrees to provide you a severance package equal to up to twelve (12) months of your then current base salary plus $80,000.00 of Annual Variable Cash Bonus and will reimburse your COBRA medical insurance costs, if elected, for you and your dependents for up to twelve (12) months.  Such severance and reimbursement will be paid on a monthly basis and ceases upon your commencement of other employment.

ii. Retention Bonus:  As an incentive to retain your services, if we do not do a merger deal with ENG before February 1, 2017, you will receive a cash bonus of $100,000.00 payable in March, 2017 based on your continued employment thru February 15, 2017.  This bonus will not be paid if you are provided a severance package as noted in i. above.

William, I appreciate having you as a key member of the team and I look forward to our continuing to work together.  

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If you accept these amended terms, please sign and date two copies of this letter and return one signed copy to me.

Sincerely,

	AMERICAN ELECTRIC TECHNOLOGIES, INC.
Date: June 1, 2016		By:	/s/ Charles M. Dauber
			Charles M. Dauber
			President and CEO

I agree to employment by AETI based on the foregoing amended terms.

	AMERICAN ELECTRIC TECHNOLOGIES, INC.
Date: June 1, 2016		By:	/s/ William B. Brod
			William B. Brod
			Chief Financial Officer

2

January 16, 2017

William Brod

2018 Laura Lane

La Porte, Texas 77571

Dear William,

This letter is in follow up to our letter agreement dated June 1, 2016 wherein certain changes were made to your employment as provided in our letter agreement dated November 18, 2015.  The purpose of this letter is to clarify certain items in the prior letter agreements as set forth herein.  

Specifically, this letter clarifies that the special severance provided under Paragraph 7 h of our letter agreement dated November 18, 2015as modified by our June 1, 2016 letter agreement, only applies in the event of involuntary termination of employment by M&I Electric/American Electric Technologies, Inc.  This letter further clarifies that in the event of such involuntary termination,  the severance and reimbursement pay provided thereunder shall be paid in no more than twelve (12) monthly installments beginning the first day of the first full month after involuntary termination.  In no event will you be able to, directly or indirectly, designate the calendar year of any payment you are entitled pursuant to Paragraph 7 h. Finally, this letter clarifies that all letter agreements M&I Electric/American Electric Technologies, Inc. has entered into with you are intended to comply with the requirements of section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), to the extent applicable, and shall be interpreted to avoid any penalty sanctions under section 409A of the Code.  Accordingly, all provisions therein, or incorporated by reference, shall be construed and interpreted to comply with section 409A of the Code and, if necessary, any such provision shall be deemed amended to comply with section 409A of the Code and regulations thereunder.

Please sign and date two sets of this letter in the place indicated below and return one to the undersigned.

Sincerely,

	AMERICAN ELECTRIC TECHNOLOGIES, INC.
Date: February 3, 2017		By:	/s/ Charles M. Dauber
			Charles M. Dauber
			President and CEO

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I agree to the clarifications to the terms of my employment with M&I Electric/American Electric Technologies, Inc. as provided in the forgoing letter.

	AMERICAN ELECTRIC TECHNOLOGIES, INC.
Date: February 3, 2017		By:	/s/ William B. Brod
			William B. Brod
			Chief Financial Officer

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EX-10.40

Exhibit 10.40

June 21, 2016

Mr. William Miller

7770 Village Dr

Beaumont, Texas  77713

Dear William:

It has been a pleasure working with you over the past two years and the Board of Directors and I both recognize and appreciate your efforts to date.   In this regard and based on our discussions, we agree to modify the terms of your employment as Chief Operating Officer.

The company would like to grant you a special one-time RSU grant of 22,500 RSU. These RSU are subject to the company’s standard vesting schedule.  

In addition to the special one-time RSU grant, the following are revisions to the terms of your offer letter dated August 4, 2014 (attached) and are effective as of the date of your acceptance of this letter:

Paragraph 7 c. of your offer letter of August 4, 2014 is deleted and the following is substituted therefor:

c. Annual Variable Equity Bonus: In addition to the cash bonus, beginning January 1^st, 2016, you are also eligible for an annual equity bonus of $105,000 of Restricted Stock Units (RSU).  The equity bonus is 100% variable based on the same mutually agreed upon objectives as the annual variable cash bonus described above.  This variable cash bonus is uncapped.  The RSU bonus is subject to a four year vesting schedule. The RSU bonus is subject to approval by the Compensation Committee of the AETI Board of Directors.  The RSU bonus price is set at grant time according to the Company’s equity plan.

Paragraph 7 f. of your offer letter of August 4, 2014 is deleted and the following is substituted therefor:
f.Special Severance and Retention Bonus:

i. In the event you are terminated for other than cause or disability, or in the event there is a change of control/acquisition resulting in your termination or a substantial reduction of or material change in your responsibilities, M&I agrees to provide you a severance package equal to up to twelve (12) months of your then current base salary plus $80,000.00 of Annual Variable Cash Bonus and will reimburse your COBRA medical insurance costs, if elected, for you and your dependents for up to twelve (12) months.  Such severance and reimbursement will be paid on a monthly basis and ceases upon your

1

commencement of other employment.

ii. Retention Bonus:  As an incentive to retain your services, you will receive a cash bonus of $100,000.00 payable in March, 2017 based on your continued employment thru February 15, 2017.  This bonus will not be paid if you are provided a severance package as noted above.

Bill, I appreciate having you as a key member of the team and I look forward to our continuing to work together.  

If you accept these amended terms, please sign and date two copies of this letter and return one signed copy to me.

Sincerely,

	AMERICAN ELECTRIC TECHNOLOGIES, INC.
Date: June 21, 2016		By:	/s/ Charles M. Dauber
			Charles M. Dauber
			President and CEO

I agree to employment by AETI based on the foregoing amended terms.

	AMERICAN ELECTRIC TECHNOLOGIES, INC.
Date: June 21, 2016		By:	/s/ William C. Miller
			William C. Miller
			Chief Operating Officer

2

January 16, 2017

William Miller

7770 Village Dr.

Beaumont, Texas 77713

Dear William,

This letter is in follow up to our letter agreement dated June 21, 2016 wherein certain changes were made to your employment as provided in our letter agreement dated August 4, 2014.  The purpose of this letter is to clarify certain items in the prior letter agreements as set forth herein.  

Specifically, this letter clarifies that the special severance provided under Paragraph 7 c of our letter agreement dated August 4, 2014 as modified by our June 21, 2016 letter agreement, only applies in the event of involuntary termination of employment by M&I Electric/American Electric Technologies, Inc.  This letter further clarifies that in the event of such involuntary termination,  the severance and reimbursement pay provided thereunder shall be paid in no more than twelve (12) monthly installments beginning the first day of the first full month after involuntary termination.  In no event will you be able to, directly or indirectly, designate the calendar year of any payment you are entitled pursuant to Paragraph 7 c. Finally, this letter clarifies that all letter agreements M&I Electric/American Electric Technologies, Inc. has entered into with you are intended to comply with the requirements of section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), to the extent applicable, and shall be interpreted to avoid any penalty sanctions under section 409A of the Code.  Accordingly, all provisions therein, or incorporated by reference, shall be construed and interpreted to comply with section 409A of the Code and, if necessary, any such provision shall be deemed amended to comply with section 409A of the Code and regulations thereunder.

Please sign and date two sets of this letter in the place indicated below and return one to the undersigned.

Sincerely,

	AMERICAN ELECTRIC TECHNOLOGIES, INC.
Date: February 3, 2017		By:	/s/ Charles M. Dauber
			Charles M. Dauber
			President and CEO

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I agree to the clarifications to the terms of my employment with M&I Electric/American Electric Technologies, Inc. as provided in the forgoing letter.

	AMERICAN ELECTRIC TECHNOLOGIES, INC.
Date: February 3, 2017		By:	/s/ William C. Miller
			William C. Miller
			Chief Operating Officer

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EX-21

Exhibit 21

Subsidiaries of Registrant

M&I Electric Industries, Inc., a Texas corporation

South Coast Electric Systems, LLC, a Mississippi limited liability company

M&I Electric Brazil Sistemas e Servicios em Energia LTDA, a Brazilian corporation

EX-23.1

Exhibit 23.1

CONSENT OF HAM, LANGSTON & BREZINA, LLP

We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (File Nos. 333-183609, 333-167305, 333-149724 and 333-175303) and S-3 (File No. 333-204329) of American Electric Technologies, Inc. of our report dated March 28, 2017 with respect to our audit of the consolidated financial statements of American Electric Technologies, Inc. and Subsidiaries as of and for the years ended December 31, 2016 and 2015, which appears in this Annual Report on Form 10-K.

/s/ Ham, Langston & Brezina, LLP

Houston, Texas

March 28, 2017

EX-31.1

Exhibit 31.1

CERTIFICATIONS

I, Charles M. Dauber, certify that:

1. I have reviewed this annual report on Form 10-K of American Electric Technologies, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and l5d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 28, 2017

By:	/s/ Charles M. Dauber
	Charles M. Dauber
	Principal Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATIONS

I, William B. Brod, certify that:

1. I have reviewed this annual report on Form 10-K of American Electric Technologies, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and l5d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 28, 2017

By:	/s/ William B. Brod
	William B. Brod
	Principal Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Charles M. Dauber ,certify, pursuant to 18U.S.C.Section1350,as adopted pursuant to Section906 of the Sarbanes-Oxley Act of 2002, that the Annual Report of American Electric Technologies, Inc. on Form 10-K for the fiscal year ended December 31, 2016 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that the information contained in such Form l0-K fairly presents in all material respects the financial condition and results of operations of American Electric Technologies, Inc.

Date: March 28, 2017
By:	/s/ Charles M. Dauber
	Charles M. Dauber
	Principal Executive Officer

I, William B. Brod, certify, pursuant to 18U.S.C.Section1350,as adopted pursuant to Section906 of the Sarbanes-Oxley Act of 2002, that the Annual Report of American Electric Technologies, Inc. on Form 10-K for the fiscal year ended December 31, 2016 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that the information contained in such Form l0-K fairly presents in all material respects the financial condition and results of operations of American Electric Technologies, Inc.

Date: March 28, 2017
By:	/s/ William B. Brod
	William B. Brod
	Principal Financial Officer

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Document and Entity Information - USD ($)	12 Months Ended
	Dec. 31, 2016	Mar. 14, 2017	Jun. 30, 2016
Document And Entity Information [Abstract]
Document Type	10-K
Amendment Flag	false
Document Period End Date	Dec. 31, 2016
Document Fiscal Year Focus	2016
Document Fiscal Period Focus	FY
Trading Symbol	AETI
Entity Registrant Name	American Electric Technologies Inc
Entity Central Index Key	0001043186
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Smaller Reporting Company
Entity Public Float			$ 16,203,230
Entity Common Stock, Shares Outstanding		8,337,448

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Consolidated Balance Sheets - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Current assets:
Cash and cash equivalents	$ 1,618	$ 7,989
Short-term investments	507	507
Accounts receivable-trade, net of allowance of $204 and $225 at December 31, 2016 and December 31, 2015	6,717	6,853
Inventories, net of allowance of $60 at both December 31, 2016 and December 31, 2015	1,181	1,325
Cost and estimated earnings in excess of billings on uncompleted contracts	5,829	2,302
Prepaid expenses and other current assets	349	324
Total current assets	16,201	19,300
Property, plant and equipment, net	7,298	7,915
Advances to and investments in foreign joint ventures	10,663	11,104
Retainage receivable	649
Intangibles	527	218
Other assets	46	49
Total assets	35,384	38,586
Current liabilities:
Revolving line of credit	1,500	1,043
Current portion of long-term note payable	300	300
Accounts payable and other accrued expenses	9,798	4,907
Accrued payroll and benefits	1,093	476
Billings in excess of costs and estimated earnings on uncompleted contracts	208	1,629
Total current liabilities	12,899	8,355
Long-term note payable	3,900	4,200
Deferred compensation	260	305
Deferred income taxes	2,824	3,064
Total liabilities	19,883	15,924
Convertible preferred stock:
Redeemable convertible preferred stock, Series A, net of discount of $617 at December 31, 2016 and $671 at December 31, 2015; $0.001 par value, 1,000,000 shares authorized, issued and outstanding at December 31, 2016 and December 31, 2015	4,383	4,329
Stockholders’ equity:
Common stock; $0.001 par value, 50,000,000 shares authorized, 8,499,508 and 8,385,929 shares issued and 8,335,968 and 8,254,001 shares outstanding at December 31, 2016 and December 31, 2015	8	8
Treasury stock, at cost 163,540 shares at December 31, 2016 and 131,928 shares at December 31, 2015	(863)	(792)
Additional paid-in capital	12,613	12,032
Accumulated other comprehensive income	(2)	310
Retained (deficit) earnings; including accumulated statutory reserves in equity method investments of $2,887 and $2,722 at December 31, 2016 and December 31, 2015	(638)	6,775
Total stockholders’ equity	11,118	18,333
Total liabilities, convertible preferred stock and stockholders’ equity	$ 35,384	$ 38,586

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Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Accounts receivable-trade, allowance	$ 204	$ 225
Inventories, allowance	60	60
Redeemable convertible preferred stock, Series A, discount	$ 617	$ 671
Redeemable convertible preferred stock, par value	$ 0.001	$ 0.001
Redeemable convertible preferred stock, shares authorized	1,000,000	1,000,000
Redeemable convertible preferred stock, shares issued	1,000,000	1,000,000
Redeemable convertible preferred stock, shares outstanding	1,000,000	1,000,000
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	50,000,000	50,000,000
Common stock, shares issued	8,499,508	8,385,929
Common stock, shares outstanding	8,335,968	8,254,001
Treasury stock, shares	163,540	131,928
Equity Method Investments
Retained (deficit) earnings; accumulated statutory reserves in equity method investments	$ 2,887	$ 2,722

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Consolidated Statements of Operations - USD ($) $ in Thousands		12 Months Ended
		Dec. 31, 2016	Dec. 31, 2015
Income Statement [Abstract]
Net sales		$ 37,812	$ 49,083
Cost of sales		36,796	42,493
Gross profit		1,016	6,590
Operating expenses:
Research and development		962	769
Selling and marketing		2,181	2,380
General and administrative		5,242	5,782
Total operating expenses		8,385	8,931
Loss from operations		(7,369)	(2,341)
Net equity income from foreign joint ventures’ operations:
Equity income from foreign joint ventures’ operations		529	741
Foreign joint ventures’ operations related expenses		(245)	(393)
Net equity income from foreign joint ventures’ operations		284	348
Loss from operations and net equity income from foreign joint ventures’ operations		(7,085)	(1,993)
Other income (expense):
Interest expense and other, net		69	(172)
Loss before income taxes		(7,016)	(2,165)
Provision for (benefit from) income taxes		44	428
Net loss before dividends on redeemable convertible preferred stock		(7,060)	(2,593)
Dividends on redeemable convertible preferred stock		(353)	(349)
Net loss attributable to common stockholders	[1],[2]	$ (7,413)	$ (2,942)
Earnings (loss) per common share:
Basic		$ (0.89)	$ (0.36)
Diluted		$ (0.89)	$ (0.36)
Weighted - average number of common shares outstanding:
Basic		8,305,764	8,241,585
Diluted		8,305,764	8,241,585

[1] Net income (loss) represents net income (loss) from continuing operations less the dividends on redeemable convertible preferred stock.

[2] Net of preferred dividends of $353 and $349 in 2016 and 2015, respectively.

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Consolidated Statements of Comprehensive Income (Loss) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Statement Of Income And Comprehensive Income [Abstract]
Net loss before dividends on redeemable convertible preferred stock	$ (7,060)	$ (2,593)
Other comprehensive income:
Foreign currency translation loss, net of deferred income taxes	(312)	(541)
Total comprehensive loss	$ (7,372)	$ (3,134)

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Consolidated Statements of Comprehensive Income (Loss) (Parenthetical) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Statement Of Income And Comprehensive Income [Abstract]
Foreign currency translation loss, deferred income taxes	$ 158	$ 279

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Consolidated Statements of Stockholders' Equity - USD ($) $ in Thousands		Total		Common Stock	Additional Paid in Capital	Accumulated Other Comprehensive Income (Loss)	Retained Earnings
Balance at Dec. 31, 2014		$ 21,272		$ 8	$ 10,696	$ 851	$ 9,717
Balance, shares at Dec. 31, 2014				8,185,323
Common stock issued to ESPP		$ 29			29
Common stock issued to ESPP, shares		5,668		5,666
Issued for Acquisition, Shares				11,000
Treasury stock purchase, Value		$ (70)			(70)
Treasury stock purchase, Shares				(20,288)
Restricted stock units	[1]	585			585
Restricted stock units, shares	[1]			72,300
Net income (loss) to common stockholders	[3]	(2,942)	[2]				(2,942)
Foreign currency translation		(541)				(541)
Balance at Dec. 31, 2015		$ 18,333		$ 8	11,240	310	6,775
Balance, shares at Dec. 31, 2015		8,385,929		8,254,001
Common stock issued to ESPP		$ 18			18
Common stock issued to ESPP, shares		8,142		8,142
Treasury stock purchase, Value		$ (71)			(71)
Treasury stock purchase, Shares				(31,612)
Restricted stock units	[1]	563			563
Restricted stock units, shares	[1]			105,437
Net income (loss) to common stockholders	[3]	(7,413)	[2]				(7,413)
Foreign currency translation		(312)				(312)
Balance at Dec. 31, 2016		$ 11,118		$ 8	$ 11,750	$ (2)	$ (638)
Balance, shares at Dec. 31, 2016		8,499,508		8,335,968

[1] Converted to common stock.

[2] Net income (loss) represents net income (loss) from continuing operations less the dividends on redeemable convertible preferred stock.

[3] Net of preferred dividends of $353 and $349 in 2016 and 2015, respectively.

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Consolidated Statements of Stockholders' Equity (Parenthetical) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Net of preferred dividends	$ 353	$ 349
Treasury stock value	(863)	(792)
Retained Earnings
Net of preferred dividends	$ 353	$ 349

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Consolidated Statements of Cash Flows - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Cash flows from operating activities:
Net income (loss) before dividends on redeemable convertible preferred stock	$ (7,060)	$ (2,593)
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:
Deferred income tax provision (benefit)	(75)	195
Equity income from foreign joint ventures’ operations	(529)	(741)
Depreciation and amortization	877	894
Stock based compensation	563	585
Bad debt expense	214	172
Obsolete inventory expense	40	460
(Gain)/loss on sale of property and equipment	(75)	96
Deferred compensation costs	(45)	15
Change in operating assets and liabilities:
Accounts receivable	(1,111)	4,712
Inventories	104	983
Costs and estimated earnings in excess of billings on uncompleted contracts	(3,008)	686
Prepaid expenses and other current assets	33	268
Accounts payable	4,327	(2,299)
Billings in excess of costs and estimated earnings on uncompleted contracts	(1,421)	(354)
Accrued liabilities and other current liabilities	566	(712)
Net cash (used in) provided by operating activities	(6,600)	2,367
Cash flows from investing activities:
Proceeds from sales of property and equipment	309
Purchases of property, plant and equipment and other assets	(725)	(588)
Proceeds from foreign joint ventures’ operations dividends	589	1,170
Proceeds from sale of Assets Held for Sale		723
Purchase of certificate of deposits		(509)
Net cash provided by from investing activities	173	796
Cash flows from financing activities:
Proceeds from sale of common stock, preferred stock, and warrants	18	29
Treasury stocks purchase	(71)	(70)
Preferred stock cash dividend	(75)	(75)
Proceeds from long-term notes payable		4,500
Advances from revolving credit facility (repayments)	457	1,043
Payments on long-term notes payable	(300)	(4,000)
Net cash provided by financing activities	29	1,427
Effect of exchange rates on cash	27	(151)
Net (decrease) increase in cash and cash equivalents	(6,371)	4,439
Cash and cash equivalents, beginning of period	7,989	3,550
Cash and cash equivalents, end of period	1,618	7,989
Supplemental disclosures of cash flow information:
Interest paid	235	159
Income taxes paid	$ 60	$ 178

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Organization and Nature of Business

12 Months Ended

Dec. 31, 2016

Organization Consolidation And Presentation Of Financial Statements [Abstract]

Organization and Nature of Business

(1) Organization and Nature of Business

American Electric Technologies, Inc. (“AETI” or the “Company”) is the surviving financial reporting entity from a reverse acquisition of American Access Technologies, Inc. by the shareholders of M&I Electric Industries, Inc.(“M&I”) on May 17, 2007. Immediately upon the completion of the reverse acquisition, American Access Technologies, Inc. changed its name to American Electric Technologies, Inc. AETI is a Florida corporation and M&I, AETI’s wholly-owned subsidiary is a Texas corporation. M&I has a wholly-owned subsidiary, South Coast Electric Systems, LLC (“SCES”), and joint venture interests in China and Singapore.

In 2014, the Company formed a wholly-owned subsidiary in Brazil (“M&I Brazil”), which is owned 20% by AETI and 80% by M&I. The Company has U.S. facilities and sales offices in Texas and Louisiana; Brazil facilities and sales offices in Macaé, Rio and Belo Horizonte; and foreign joint ventures’ operations that have facilities in Singapore and Xian, China. The Company owns the Beaumont, Texas facilities, comprised of 9 acres and 118,000 square feet. The Company leases facilities in Houston, Texas and Houma, Louisiana and internationally in Rio, Macaé and Belo Horizonte, Brazil.

M&I’s wholly-owned subsidiary, SCES, is a Delaware Limited Liability Company organized on February 20, 2003. With the exception of electrical contracting, it is engaged in the same lines of business as M&I, but it participates in different market sectors.

M&I has foreign joint ventures’ interests in M&I Electric Far East PTE Ltd. (“MIEFE”) and BOMAY Electrical Industries Company, Ltd. (“BOMAY”). MIEFE is a Singapore company that provides sales, manufacturing and technical support internationally. BOMAY provides electrical systems primarily for land and marine based drilling rigs in China. These ventures are accounted for using the equity method of accounting.

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Summary of Significant Accounting Policies

12 Months Ended

Dec. 31, 2016

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

(2) Summary of Significant Accounting Policies

Principles of Consolidation  

The accompanying consolidated financial statements include the accounts of AETI and its wholly-owned subsidiaries, M&I and M&I Brazil, and the accounts of SCES through the disposition date in June 2016. Significant intercompany accounts and transactions are eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of net sales and expenses during the reporting period. Actual results could differ from those estimates. The most significant estimates made by management include:

(1) Percentage-of-completion estimates on long-term contracts

(2) Estimates of the provision for doubtful accounts

(3) Estimated useful lives of property and equipment

(4) Valuation allowances related to deferred tax assets

Financial Instruments

The Company includes fair value information in the notes to the consolidated financial statements when the fair value of its financial instruments is different from the book value. When the book value approximates fair value, no additional disclosure is made, which is the case for financial instruments outstanding as of December 31, 2016 and 2015. The Company assumes the book value of those financial instruments that are classified as current approximates fair value because of the short maturity of these instruments. For non-current financial instruments, the Company uses quoted market prices or, to the extent that there are no available quoted market prices, market prices for similar instruments.

Cash and Cash Equivalents

Cash equivalents consist of liquid investments with original maturities of three months or less. Cash balances routinely exceed FDIC limits however all cash is maintained in JP Morgan Chase and Frost Bank and believed to be secure.  

Short-term investments

Short-term investments consist of any fund held in certificate of deposit with maturity greater than three months and investments in debt and equity securities with maturity of one year or less.

Accounts Receivable and Allowance for Bad Debts

The Company maintains an allowance for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. The estimate is based on management’s assessment of the collectability of specific customer accounts and includes consideration for credit worthiness and financial condition of those specific customers. The Company also reviews historical experience with the customer, the general economic environment and the aging of its receivables. The Company records an allowance to reduce receivables to the amount it reasonably believes to be collectible. Based on this assessment, management believes the allowance for doubtful accounts is adequate. The bad debt expense was $0.21 million and $0.17 million for the fiscal years ended December 31, 2016 and 2015.

Inventories

Inventories are stated at the lower of cost or market, with material value determined using an average cost method. Inventory costs for work-in-process include direct material, direct labor, production overhead and outside services. Indirect overhead is apportioned to work-in-process based on direct labor incurred.

Property, Plant and Equipment

Property, plant and equipment are stated at cost. Expenditures for repairs and maintenance are expensed as incurred while renewals and betterments are capitalized. Depreciation is calculated on the straight-line basis over the estimated useful lives of the assets after giving effect to salvage values.

Long-lived assets

If events or circumstances indicate the carrying amount of an asset may not be recoverable, including intangible assets, management tests long-lived assets for impairment. If the estimated future cash flows are projected to be less than the carrying amount, an impairment write-down (representing the carrying amount of the long-lived asset which exceeds the present value of estimated expected future cash flows) would be recorded as a period expense. Events that would trigger an impairment test include the following:

• A significant decrease in the market price of a long-lived asset.

• A significant change in the use of long-lived assets or in its physical condition.

• A significant change in the business climate that could affect an assets value.

• An accumulation of cost significantly greater than the amount originally expected to acquire or construct a long-lived asset.

• A current period operating or cash flow loss combined with a history of such losses or a forecast demonstrating continued losses associated with the use of a long-lived asset.

• An expectation to sell or otherwise dispose of a long-lived asset significantly before the end of its estimated useful life.

Based on management’s reviews during each of the years ended December 31, 2016 and 2015, there were no events or circumstances that caused management to believe that impairments were necessary.

Intangible Assets

Intangible Assets at December 31, 2016	Useful Lives (Years)		Cost		Accumulated Amortization		Net Value
	(in thousands)
Intellectual property		3	$	322	$	322	$	-
License		5		358		49		309
License		-		218		-		218
			$	898	$	371	$	527

  On March 8, 2012, the Company acquired certain technology from Amnor Technologies, Inc. for cash of $0.10 million plus 44,000 shares of the Company’s common stock valued at $4.95 per share (the closing price on that date). One fourth of the shares were issued initially with the balance to be issued one third annually on the anniversaries over the subsequent 3 years. The purchase price was valued at $0.32 million (including $4,000 of transaction costs) at March 8, 2012 and is recorded as an intangible asset in the consolidated balance sheets. The cost was being amortized over its estimated useful life of 3 years which expired in 2015. Amortization expense of $0.02 million was recognized during the year ended December 31, 2015 and is included in general and administrative expenses in the consolidated statements of operations.

The technology provides automation and control system technologies for land and offshore drilling monitoring and control (auto-driller); marine automation including ballast control and tank monitoring and machinery plant control and monitoring systems; IP-based CCTV systems; and military vessel security and safety systems, all proven in multiple installations.

During 2014 we acquired arc-resistant technology and capitalized the cost of $0.22 million. During 2016, the Company capitalized cost of $0.36 million for the testing associated with certifications for IntelliSafe™ products. The cost is being amortized over its useful life of 5 years. Amortization expense of $0.05 million was recognized during the year ended December 31, 2016 and is included in the cost of sales in the consolidated statements of operations. If events or circumstances indicate the carrying amount of an asset may not be recoverable, including intangible assets, management tests long-lived assets for impairment.  

Income Taxes

The Company uses the asset and liability method to account for income taxes. Under this method of accounting for income taxes, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using the enacted tax rates and laws that will be in effect when the differences are expected to be reported to the taxing authority. The Company also records any financial statement recognition and disclosure requirements for uncertain tax positions taken or expected to be taken in its tax return. Financial statement recognition of the tax position is dependent on an assessment of a 50% or greater likelihood that the tax position will be sustained upon examination, based on the technical merits of the position. Any interest and penalties related to uncertain tax positions are recorded as interest expense in the accompanying consolidated statements of operations.

Foreign Currency Gains and Losses

Foreign currency translations are included as a separate component of comprehensive income. The Company has determined the local currency of its foreign subsidiary and foreign joint ventures to be the functional currency. In accordance with ASC 830, the assets and liabilities of the foreign equity investees and foreign subsidiary, denominated in foreign currency, are translated into United States dollars at exchange rates in effect at the consolidated balance sheet date and net sales and expenses are translated at the average exchange rate for the period. Related translation adjustments are reported as comprehensive income, net of deferred income taxes, which is a separate component of stockholders’ equity, whereas gains and losses resulting from foreign currency transactions are included in results of operations.

Net Sales Recognition

The Company reports earnings from fixed-price and modified fixed-price long-term contracts on the percentage-of-completion method. Earnings are accrued based on the ratio of costs incurred to total estimated costs. However, for our manufacturing activities, we have determined that labor incurred provides an improved measure of percentage-of-completion. Costs include direct material, direct labor, and job related overhead. Losses expected to be incurred on contracts are charged to operations in the period such losses are determined. A contract is considered complete when all costs except insignificant items have been incurred and the facility has been accepted by the customer. Net sales from non-time and material jobs of a short-term nature (typically less than one month) are recognized on the completed-contract method after considering the attributes of such contracts. This method is used because these contracts are typically completed in a short period of time and the financial position and results of operations do not vary materially from those which would result from use of the percentage-of-completion method.

The Company records net sales from its field and technical service and repair operations on a completed service basis after customer acknowledgement that the service has been completed and accepted. In addition, the Company sells certain purchased parts and products. These net sales are recorded when the product is shipped and title passes to the customer.  

The asset, “Work-in-process,” which is included in inventories, represents the cost of labor, material, and overhead in excess of amounts billed on jobs accounted for under the completed-contract method. For contracts accounted for under the percentage-of-completion method, the asset, “Costs and estimated earnings in excess of billing on uncompleted contracts,” represents net sales recognized in excess of amounts billed and the liability, “Billings in excess of costs and estimated earnings on uncompleted contracts,” represents billings in excess of net sales recognized. Any billed net sale that has not been collected is reported as accounts receivable. The timing of when we bill our customers is generally dependent upon advance billing terms or completion of certain phases of the work.  

On occasion, the Company enters into long-term contracts that include both a service component and a manufacturing component. The Company segments net sales, costs and gross profit related to these contracts if they meet the contract segmenting criteria in ASC 605-35, including that the terms and scope of the project clearly call for separate elements, the separate elements are often bid or negotiated by the Company separately and the total economic returns and risks of the separate elements are similar to the economic returns and risks of the overall contract. For segmented contracts, the Company recognizes net sales as if they were separate contracts over the performance periods of the individual elements.

Contract net sales recognition inherently involves estimation, including the contemplated level of effort to accomplish the tasks under the contract, the cost of the effort, and an ongoing assessment of progress toward completing the contract. From time to time, as part of the normal management processes, facts develop that requires revisions to estimated total cost or net sales expected. The cumulative impact of any revisions to estimates and the full impact of anticipated losses on contracts are recognized in the period in which they become known.

Shipping and Handling Fees and Costs

Shipping and handling fees, if billed to customers, are included in net sales. Shipping and handling costs associated with inbound freight are expensed as incurred. Shipping and handling costs associated with outbound freight are classified as cost of sales.

Concentration of Market Risk and Geographic Operations

Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of trade accounts receivable. The Company’s market risk is dependent primarily on the strength of the oil and gas and energy related industries. The Company grants credit to customers and generally does not require security except in the case of certain international contracts. Procedures are in effect to monitor the credit worthiness of its customers. During 2016, one customer accounted for approximately 19% of net sales and 17% of net accounts receivable trade. During 2015, one customer accounted for approximately 14% of net sales and 3% of net accounts receivable trade.

The Company sells its products and services in domestic and international markets; however, significant portions of the Company’s sales are concentrated with customers located in the Gulf Coast region of the United States. The Gulf Coast region accounts for approximately 47% and 68% of the Company’s net sales during the years ended December 31, 2016 and 2015, respectively.

Reclassification

Certain items are reclassified in the 2015 consolidated financial statements to conform to the 2016 presentation. Such reclassifications had no effect on the Company’s financial position, results of operations or cashflows.

Recently Issued Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers, which supersedes nearly all existing revenue recognition guidance under U.S. GAAP. The core principle of ASU No. 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. ASU No. 2014-09 defines a five step process to achieve this core principle and, in doing so, more judgment and estimates may be required under existing U.S. GAAP. The standard is effective for annual periods beginning after December 15, 2016, and interim periods therein, using either of the following transition methods: (i) a full retrospective approach reflecting the application of the standard in each prior reporting period with the option to elect certain practical expedients, or (ii) a retrospective approach with the cumulative effect of initially adopting ASU No. 2014-09 recognized at the date of adoption (which includes additional footnote disclosures). In July 2015, the FASB issued ASU No. 2015-14 which delayed the effective date of ASU No. 2014-09 by one year (effective for annual periods beginning after December 15, 2017). We are currently evaluating the future impact of our pending adoption of ASU No. 2014-09 on our consolidated financial statements and have not yet determined the method with which we will adopt the standard in 2018.  

In June 2014, the FASB issued ASU No. 2014-12, Compensation – Stock Compensation (Topic 718): Accounting for Share Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period. The amendments in this ASU require that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. A reporting entity should apply existing guidance in Topic 718, Compensation – Stock Compensation, as it relates to awards with performance conditions that affect vesting to account for such awards. The performance target should not be reflected in estimating the grant-date fair value of the award. Compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the period(s) for which the requisite service has already been rendered. If the performance target becomes probable of being achieved before the end of the 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. The requisite service period ends when the employee can cease rendering service and still be eligible to vest in the award if the performance target is achieved. The amendments in ASU No. 2014-12 are effective for annual periods and interim periods within those annual periods beginning after December 15, 2015, with early adoption permitted. The adoption of ASU No. 2014-12 did not have a significant impact on the Company’s consolidated financial position, results of operations and disclosures.

In January 2015, the FASB issued ASU No. 2015-01, Income Statement – Extraordinary and Unusual Items (Subtopic 225-20): Simplified Income Statement Presentation by Eliminating the Concept of Extraordinary Items. This ASU eliminates from U.S. GAAP the concept of extraordinary items. Subtopic 225-20, Income Statement – Extraordinary and Unusual Items, requires that an entity separately classify, present and disclose extraordinary events and transactions. Presently, an event or transaction is presumed to be ordinary and usual activity of the reporting entity unless evidence clearly supports its classification as an extraordinary item. If an event or transaction meets the criteria for extraordinary classification, an entity is required to segregate the extraordinary item from the results of ordinary operations and show the item separately in the income statement, net of tax, after income from continuing operations. The entity also is required to disclose applicable income taxes and either present or disclose earnings-per-share data applicable to the extraordinary item. ASU No. 2015-01 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. The amendments of ASU No. 2015-01 can be applied prospectively or retrospectively to all prior periods presented in the financial statements. Early adoption is permitted. The adoption of ASU No. 2015-01 did not have a significant impact on the Company’s consolidated financial position, results of operations or disclosures.

In February 2015, the FASB issued ASU No. 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis, which is intended to improve targeted areas of consolidation guidance for legal entities such as limited partnerships, limited liability corporations, and securitization structures. ASU No. 2015-02 focuses on the consolidation evaluation for reporting organizations that are required to evaluate whether they should consolidate certain legal entities. In addition to reducing the number of consolidation models from four to two, the new standard simplifies the FASB Accounting Standards Codification ^TM and improves current U.S. GAAP by: (1) Placing more emphasis on risk of loss when determining a controlling financial interest. A reporting organization may no longer have to consolidate a legal entity in certain circumstances based solely on its fee arrangement, when certain criteria are met; (2) Reducing the frequency of the application of related-party guidance when determining a controlling financial interest in a variable interest entity; and (3) Changing consolidation conclusions for public and private companies in several industries that typically make use of limited partnerships or variable interest entities. ASU No. 2015-02 is effective for periods beginning after December 15, 2015. The adoption of ASU No. 2015-02 did not have a significant impact on the Company’s consolidated financial position, results of operations and disclosures.

In July 2015, the FASB issued ASU No. 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory, which is intended to converge U.S. GAAP on this topic with IFRS. ASU No. 2015-11 focuses on the premeasurement of inventory measured using any method other than LIFO, for example, average cost. Inventory within the scope of ASU No. 2015-11 is required to be measured at the lower of cost and net realizable value. When evidence exists that the net realizable value of inventory is lower than its cost, the difference shall be recognized as a loss in earnings in the period in which it occurs. That loss may be required, for example, due to damage, physical deterioration, obsolescence, changes in price levels, or other causes. For public business entities, the amendments in ASU No. 2015-11 are effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. Management is currently evaluating the future impact of ASU No. 2015-11 on the Company’s consolidated financial position, results of operations and disclosures.

In September 2015, the FASB issued ASU No. 2015-16, Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments. ASU No. 2015-16 requires that an acquirer recognize adjustments to estimated amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. ASU No. 2015-16 requires that the acquirer record, in the same period’s financial statements, the effect on earnings of changes in depreciation, amortization, or other income effects, if any, as a result of the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date. ASU No. 2015-16 also requires an entity to present separately on the face of the income statement or disclose in the notes the portion of the amount recorded in current-period earnings by line item that would have been recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized as of the acquisition date. ASU No. 2015-16 is effective for fiscal years beginning after December 15, 2015. ASU No. 2015-16 should be applied retrospectively and early adoption is permitted. The adoption of ASU No. 2015-16 did not have a significant impact on the Company’s consolidated financial position, results of operations and disclosures.

In November 2015, the FASB issued ASU No. 2015-17, Balance Sheet Classification of Deferred Taxes. The new guidance requires that all deferred tax assets and liabilities, along with any related valuation allowance, be classified as noncurrent on the balance sheet. As a result, each jurisdiction will now only have one net noncurrent deferred tax asset or liability. The new guidance will be effective for fiscal years beginning after December 15, 2017 and early adoption is permitted.  The Company has elected to early adopt this pronouncement and has reflected the change on the consolidated balance sheet for all periods presented.

In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. ASU No. 2016-01 requires (1) an entity to measure equity instruments (except those accounted for under the equity method of accounting, or those that result in consolidation of the investee) at fair value with changes in fair value recognized in net income; (2) entities to use the exit price notation when measuring the fair value of financial instruments for disclosure purposes; (3) separate presentation of financial assets and financial liabilities by measurement category and form of financial asset; and (4) elimination of the requirement to disclose the methods and significant assumptions used to estimate fair value that is required to be disclosed for financial instruments measured at amortized cost. ASU No. 2016-01 is effective for fiscal years beginning after December 15, 2017 with early adoption permitted. Management is currently evaluating the future impact of ASU No. 2016-01 on the Company’s consolidated financial position, results of operations and disclosures.

In February 2016, the FASB issued ASU No. 2016-02, Leases, which requires lessees to  recognize the following for all leases (with the exception of short-term leases) at the commencement date: (1) a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and (2) 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. Under ASU No. 2016-02, lessor accounting is largely unchanged. ASU No. 2016-02 is effective for fiscal years beginning after December 15, 2018 with early application permitted. Lessees and lessors must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The modified retrospective approach would not require any transition accounted for leases expired before the earliest comparative period presented. Lessees and lessors may not apply a full retrospective transition approach. Management is currently evaluating the future impact of ASU No. 2016-02 on the Company’s consolidated financial position, results of operations and disclosures.

In April 2016, the FASB issued ASU No.2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing, to clarify two aspects of Topic 606: (i) identifying performance obligations; and (ii) the licensing implementation guidance. The amendments do not change the core principle of the guidance in Topic 606. The effective date and transition requirements for ASU No. 2016-10 are the same as the effective date and transition requirements for ASU No. 2014-09. Management is currently evaluating the future impact of ASU No. 2016-10 on the Company’s consolidated financial position, results of operations and disclosures.

In May 2016, the FASB issued ASU No. 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients. ASU No. 2016-12 provides narrow-scope improvements to the guidance on collectability, noncash consideration, and completed contracts at transition. The amendment also provides a practical expedient for contract modifications at transition and an accounting policy election related to the presentation of sales taxes and other similar taxes collected from customers and are expected to reduce the judgment necessary to comply with Topic 606. The effective date and transition requirements for ASU No. 2016-12 are the same as the effective date and transition requirements for ASU No. 2014-09. Management is currently evaluating the future impact of ASU No. 2016-12 on the Company’s consolidated financial position, results of operations and disclosures.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU No. 2016-13 eliminates the probable initial recognition threshold in current generally accepted accounting principles (“GAAP”) and, instead, requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. In addition, ASU No. 2016-13 amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. ASU No. 2016-13 is effective for annual periods beginning after December 15, 2020, with early application permitted in annual periods beginning after December 15, 2018. The amendments of ASU No. 2016-13 should be applied through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. Management is currently evaluating the future impact of ASU No. 2016-13 on the Company’s consolidated financial position, results of operations and disclosures.

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. ASU No. 2016-15 addresses eight specific cash flow issues and is intended to reduce diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. ASU No. 2016-15 is effective for reporting periods beginning after December 15, 2017. Early adoption is permitted. Management is currently evaluating the future impact of ASU No. 2016-15 on the Company’s consolidated financial position, results of operations and disclosures.

In December 2016, the FASB issued ASU No. 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers. ASU No. 2016-20 allows entities not to make quantitative disclosures about remaining performance obligations in certain cases and require entities that use any of the new or previously existing optional exemptions to expand their qualitative disclosures. The amendment also clarifies narrow aspects of ASC 606, including contract modifications, contract costs, and the balance sheet classification of items as contract assets versus receivables, or corrects unintended application of the guidance. The effective date and transition requirements for ASU No. 2016-20 are the same as the effective date and transition requirements for ASU No. 2014-09. Management is currently evaluating the future impact of ASU No. 2016-20 on the Company’s consolidated financial position, results of operations and disclosures.

In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business. ASU No. 2017-01 clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of a business or as acquisitions (or disposals) of assets. ASU No. 2017-01 is effective for annual periods beginning after December 15, 2018, with early adoption permitted under certain circumstances. The amendments of ASU No. 2017-01 should be applied prospectively as of the beginning of the period of adoption. Management is currently evaluating the future impact of ASU No. 2017-01 on the Company’s consolidated financial position, results of operations and disclosures.

In January 2017FASB issued ASU No. 2017-03, Accounting Changes and Error Corrections (Topic 250) and Investments – Equity Method and Joint Ventures (Topic 323): Amendments to SEC Paragraphs Pursuant to Staff Announcements at the September 22, 2016 and November 17, 2016 EITF Meetings. The amendments in this update relate to disclosures of the impact of recently issued accounting standards. The SEC staff’s view that a registrant should evaluate ASC updates that have not yet been adopted to determine the appropriate financial disclosures about the potential material effects of the updates on the financial statements when adopted. If a registrant does not know or cannot reasonably estimate the impact of an update, then in addition to making a statement to that effect, the registrant should consider additional qualitative financial statement disclosures to assist the reader in assessing the significance of the impact. The staff expects the additional qualitative disclosures to include a description of the effect of the accounting policies expected to be applied compared to current accounting policies. Also, the registrant should describe the status of its process to implement the new standards and the significant implementation matters yet to be addressed. The amendments specifically addressed recent ASC amendments to ASU No. 2016-13, Financial Instruments – Credit Losses, ASU No. 2016-02, Leases, and ASU No. 2014-09, Revenue from Contracts with Customers, although, the amendments apply to any subsequent amendments to guidance in the ASC. ASU No. 2017-03 is effective upon issuance and did not have a significant impact on the Company’s consolidated financial position, results of operations and disclosures.

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Inventories

12 Months Ended

Dec. 31, 2016

Inventory Disclosure [Abstract]

Inventories

(3) Inventories

Inventories consisted of the following at December 31, 2016 and 2015.

	December 31, 2016			December 31, 2015
	(in thousands)
Raw materials	$	513		$	594
Work-in-process		728			791
		1,241			1,385
Less: allowance		(60	)		(60	)
Total inventories	$	1,181		$	1,325

Obsolete or slow moving inventory totaling $0.04 million and $0.46 million was expensed during the years ended December 31, 2016 and 2015, respectively, and included in cost of sales in the accompanying consolidated statements of operations.

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Costs, Estimated Earnings, and Related Billings on Uncompleted Contracts

12 Months Ended

Dec. 31, 2016

Contractors [Abstract]

Costs, Estimated Earnings, and Related Billings on Uncompleted Contracts

(4) Costs, Estimated Earnings, and Related Billings on Uncompleted Contracts

Contracts in progress at December 31, 2016 and 2015 consisted of the following:

	2016			2015
	(in thousands)
Costs incurred on uncompleted contracts	$	26,340		$	31,197
Estimated earnings		1,193			10,506
		27,533			41,703
Billings on uncompleted contracts		(21,912	)		(41,030	)
	$	5,621		$	673

Costs, estimated earnings, and related billing on uncompleted contracts consisted of the following at December 31, 2016 and 2015:

	2016			2015
	(in thousands)
Cost and estimated earnings in excess of billings on uncompleted contracts	$	5,829		$	2,302
Billings in excess of costs and estimated earnings on uncompleted contracts		(208	)		(1,629	)
	$	5,621		$	673

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Property, Plant and Equipment

12 Months Ended

Dec. 31, 2016

Property Plant And Equipment [Abstract]

Property, Plant and Equipment

(5) Property, Plant and Equipment

Property, plant and equipment consisted of the following at December 31, 2016 and 2015:

Category	Estimated Useful Lives (years)		2016		2015
		(in thousands)
Buildings and improvements	15 – 25	$	7,972	$	8,083
Office equipment and furniture	2 – 7		2,135		2,126
Automobiles and trucks	2 – 5		157		118
Machinery and shop equipment	2 – 10		2,951		2,963
Construction in progress			23		94
			13,238		13,384
Less: accumulated depreciation and amortization			6,074		5,603
			7,164		7,781
Land			134		134
		$	7,298	$	7,915

During the years ended December 31, 2016 and 2015, depreciation charged to operations amounted to $0.88 million and $0.89 million, respectively. Of these amounts, $0.74 million and $0.73 million was charged to cost of sales while $0.14 million and $0.16 million was charged to selling, general and administrative expenses for the years ended December 31, 2016 and 2015, respectively.

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Advances to and Investments in Foreign Joint Ventures' Operations

12 Months Ended

Dec. 31, 2016

Equity Method Investments And Joint Ventures [Abstract]

Advances to and Investments in Foreign Joint Ventures' Operations

(6) Advances to and Investments in Foreign Joint Ventures’ Operations

The Company has a foreign joint venture agreement and holds a 40% interest in a Chinese company, BOMAY, which builds electrical systems for sale in China. The majority partner in this foreign joint venture is a subsidiary of a major Chinese oil company. M&I made an initial investment of $1.00 million in 2006 and made an additional $1.00 million investment in 2007. The Company’s equity income from the foreign joint venture was $0.80 million and $0.97 million for the years ended December 31, 2016 and 2015, respectively. During the years ended December 31, 2016 and 2015, the Company received $0.59 million and $1.03 million, respectively, in dividends from BOMAY. Sales made to the foreign joint venture were $0.11 million and $0.19 million for the years ended December 31, 2016 and 2015, respectively. Accounts receivable from BOMAY were $0.04 million and $0.00 million at December 31, 2016 and 2015.

The Company owns a 41% interest in MIEFE which provides additional sales and technical support in Asia. The Company’s equity income from the foreign joint venture was ($0.27) million and ($0.23) million for the years ended December 31, 2016 and 2015, respectively. During 2016, the Company’s share of cumulative losses from MIEFE exceeded the Company’s initial investment balance. The Company applied the losses to the investment balance to the extent of the initial investment amount, with the remaining losses in the amount of $0.27 million accrued  for in accounts payable and other liabilities to reflect management’s intention to fund the losses. During the years ended December 31, 2016 and 2015, the Company received $0.00 million and $0.14 million, respectively, in dividends from MIEFE. Sales made to the foreign joint venture were $0.00 million and $0.05 million for the years ended December 31, 2016 and 2015, respectively. Accounts receivable from MIEFE was $0.00 million and $0.05 million at December 31, 2016 and 2015, respectively.

The Company’s equity income from the foreign joint ventures, before foreign operations expenses, totaled $0.53 million and $0.74 million for the years ended December 31, 2016 and 2015, respectively.

During 2016 and 2015, the Company also recognized approximately $0.25 million and $0.39 million, respectively, for employee related expenses directly attributable to the foreign joint ventures.

Sales to foreign joint ventures’ operations are made on an arm’s length basis and intercompany profits, if any, are eliminated in consolidation.

Summary financial information of BOMAY and MIEFE in U.S. dollars was as follows at December 31, 2016 and 2015:

	BOMAY				MIEFE
	2016		2015		2016			2015
Assets:
Total current assets	$	47,700	$	68,151	$	425		$	2,365
Total non-current assets		3,589		4,131		17			70
Total assets	$	51,289	$	72,282	$	442		$	2,435
Liabilities and equity:
Total liabilities	$	24,196	$	44,415	$	551		$	1,930
Total joint ventures’ equity		27,093		27,867		(109	)		505
Total liabilities and equity	$	51,289	$	72,282	$	442		$	2,435
	Twelve Months Ended December 31,
	BOMAY				MIEFE
	2016		2015		2016			2015
Revenue	$	33,468	$	47,347	$	1,167		$	5,741
Gross Profit	$	6,687	$	8,353	$	481		$	1,112
Earnings	$	2,010	$	2,433	$	(631	)	$	(567	)

The Company’s investments in and advances to its foreign joint ventures’ operations were as follows as of December 31, 2016 and 2015:

	2016									2015
	BOMAY*			MIEFE			TOTAL			BOMAY*			MIEFE			TOTAL
	(in thousands)									(in thousands)
Investments in foreign joint ventures:
Balance, beginning of year	$	2,033		$	14		$	2,047		$	2,033		$	14		$	2,047
Additional amounts invested and advanced		-			-			-			-			-			-
Balance, end of year		2,033			14			2,047			2,033			14			2,047
Undistributed earnings:
Balance, beginning of year		8,098			(11	)		8,087			8,157			358			8,515
Equity in earnings (loss)		804			(3	)		801			973			(232	)		741
Dividend distributions		(589	)		-			(589	)		(1,032	)		(137	)		(1,169	)
Balance, end of year		8,313			(14	)		8,299			8,098			(11	)		8,087
Foreign currency translation:
Balance, beginning of year		765			205			970			1,358			134			1,492
Change, during the year		(661	)		8			(653	)		(593	)		71			(522	)
Balance, end of year		104			213			317			765			205			970
Investments, end of year	$	10,450		$	213		$	10,663		$	10,896		$	208		$	11,104

* Accumulated statutory reserves in equity method investments of $2.89 million and $2.72 million at December 31, 2016 and 2015, are included in AETI’s consolidated retained earnings. In accordance with the People’s Republic of China, (“PRC”), regulations on enterprises with foreign ownership, an enterprise established in the PRC with wholly-owned foreign ownership is required to provide for certain statutory reserves, namely (i) General Reserve Fund, (ii) Enterprise Expansion Fund and (iii) Staff Welfare and Bonus Fund, which are appropriated from net profit as reported in the enterprise’s PRC statutory accounts. A non-wholly-owned foreign invested enterprise is permitted to provide for the above allocation at the discretion of its board of directors. The aforementioned reserves can only be used for specific purposes and are not distributable as cash dividends.

The Company accounts for its investments in foreign joint ventures’ operations using the equity method of accounting. Under the equity method, the Company’s share of the joint ventures’ operations’ earnings or losses is recognized in the consolidated statements of operations as equity income (loss) from foreign joint ventures’ operations. Joint venture income increases the carrying value of the joint ventures and joint venture losses reduce the carrying value. Dividends received from the joint ventures reduce the carrying value. In accordance with our long-lived asset policy, when events or circumstances indicate the carrying amount of an asset may not be recoverable, management tests long-lived assets for impairment. If the estimated future cash flows are projected to be less than the carrying amount, an impairment write-down (representing the carrying amount of the long-lived asset which exceeds the present value of estimated expected future cash flows) would be recorded as a period expense. In making this evaluation, a variety of quantitative and qualitative factors are considered including national and local economic, political and market conditions, industry trends and prospects, liquidity and capital resources and other pertinent factors. Based on this evaluation for this reporting period, the Company does not believe an impairment adjustment is necessary.

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Income Taxes

12 Months Ended

Dec. 31, 2016

Income Tax Disclosure [Abstract]

Income Taxes

(7) Income Taxes

The components of income (loss) before income taxes and dividends on preferred stock for the years ended December 31, 2016 and 2015 were as follows:

	2016		2015
	(in thousands)
United States	$	(7,545)	$	(2,906)
Foreign		529		741
	$	(7,016)	$	(2,165)

The components of the provision (benefit) for income taxes by taxing authority for the years ended December 31, 2016 and 2015 were as follows:

	2016		2015
	(in thousands)
Current provision:
Federal	$	-	$	443
Foreign		119		131
States		-		-
Total current provision		119		574
Deferred provision (benefit):
Federal		(24)		(114)
Foreign		-		-
States		(51)		(32)
Total deferred provision (benefit):		(75)		(146)
	$	44	$	428

Significant components of the Company’s deferred federal income taxes were as follows:

	December 31,			December 31,
	2016			2015
	Non-Current
Deferred tax assets:
Accrued liabilities	$	15		$	22
Deferred compensation		1,113			936
Allowance for doubtful accounts		101			73
Inventory		83			73
Net operating loss		6,528			4,137
Property and equipment		143			123
Foreign tax credit carry forward		3,297			3,226
Deferred tax assets		11,280			8,590
Deferred tax liabilities:
Valuation allowance		(11,280	)		(8,590	)
Equity in foreign investments		(2,824	)		(2,755	)
Translation gain		-			(309	)
Deferred tax liabilities		(14,104	)		(11,654	)
Net deferred tax assets (liabilities)		(2,824	)		(3,064	)

The Company’s deferred tax assets are primarily related to net operating loss carry forwards. A valuation allowance was established at December 31, 2016 and 2015 due to uncertainty regarding future realization of deferred tax assets. Our total valuation allowance as of December 31, 2016 and 2015 is $11.28 million and $8.59 million, respectively.  

The Company has federal net operating loss carry forwards of approximately $17.3 million which include $7.4 million acquired from AAT that are subject to the utilization limitation under Section 382 of the Internal Revenue Code. The Company has state net operating losses of $14 million.  These tax loss carry forwards are available to offset future taxable income and expire if unused during the federal tax year ending December 31, 2019 through 2032.

The Company’s 2008 U.S. federal income tax return was examined by the Internal Revenue Service (“IRS”). In the fourth quarter 2011, the IRS concluded its audit which adjusted the annual net operating loss carry forward limitation under Sec. 382 related to AAT’s pre-acquisition net operating loss carry forwards to $299,000 per year through 2027.  The Company has adopted the provisions of ASC Topic 740-10 “Income Taxes” to assess tax benefits claimed on a tax return should be recorded in the financial statements.  The Company has assessed all open tax years and has recorded no uncertain tax positions related to the open tax years. The Company is no longer subject to tax examination before 2013.  

The difference between the effective income tax rate reflected in the provision for income taxes and the amounts, which would be determined by applying the statutory income tax rate of 34%, is summarized as follows:

	2016		2015
	(in thousands)
(Provision for) benefit from U.S federal statutory rate	$	2,385	$	736
Effect of state income taxes		51		32
Non-deductible business meals and entertainment expenses		(11)		(16)
Foreign income taxes included in equity in earnings		140		269
Accrual to return adjustments and other		81		(653)
Change in valuation allowance		(2,690)		(796)
Total expense	$	(44)	$	(428)

The Company files income tax returns in the United States Federal jurisdiction and various state jurisdictions.

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Notes Payable

12 Months Ended

Dec. 31, 2016

Debt Disclosure [Abstract]

Notes Payable

(8) Notes Payable

The components of notes payable at December 31, 2016 and 2015 are as follows:

	2016		2015
	(In thousands)
Revolving credit agreement	$	1,500	$	1,043
Current portion of long-term notes payable......................................		300		300
Long-term notes payable		3,900		4,200
Total revolving credit agreement	$	5,700	$	5,543

Principal payments of debt for years subsequent to 2017 are as follows (in thousands):

	Amount
	(In thousands)
2017	$	1,800
2018		300
2019		300
2020		3,300
2021		-
	$	5,700

Revolving Credit Agreement

On December 29, 2015, the Company entered into a Loan Agreement (the “Loan Agreement”) with Frost Bank (“Frost”). The Loan Agreement provides two separate revolving credit facilities to the Company. The first facility (“Facility A”) provides the Company with a $4.00 million revolving line of credit with a two-year term maturing December 29, 2017, subject to a maximum loan amount (the “Borrowing Base”) based on a formula related to the value of certain of the Company’s accounts, inventories and equipment.Under Facility A, the Company may borrow, repay and reborrow, up to the Borrowing Base.  Facility A also allows the issuance of standby letters of credit. As of December 31, 2016, we had $1.25 million in letters of credit outstanding. Facility A requires a period of not less than 30 consecutive days during each calendar year that the entire outstanding principal amount of the revolving credit facility is paid. Upon Facility A’s maturity date, all outstanding principal and unpaid accrued interest is due and payable.  The Company borrowed $1.04 million under Facility A upon initiation of the Loan Agreement and had $1.50 million drawn and outstanding as of December 31, 2016. There was no additional borrowing capacity as of December 31, 2016 due to non-compliance with its financial covenants.

The second facility (“Facility B”) provides the Company with a $4.50 million declining revolving line of credit. The Company may be borrow, repay and reborrow from the line. The amount available to borrow under Facility B declines from the initial $4.50 million by $0.15 million each six months. Facility B’s maturity date is December 29, 2020 when all outstanding principal and unpaid accrued interest is due and payable. The Company was advanced $4.50 million under Facility B upon the initiation of the Loan Agreement which was to pay off the remaining balance on the facility from JP Morgan Chase Bank N.A. (“Chase”) and as of December 31, 2016, the outstanding balance is $4.20 million.

Under the Loan Agreement, the interest rate on both facilities is the three month LIBOR (0.98% at December 31, 2016) plus 4.00% per year. The Loan agreement also provides for usual and customary covenants and restrictions  including that the borrower must maintain a fixed charge coverage ratio of no less than 1.25 to 1.00, and will not permit the ratio of consolidated total liabilities to consolidated net worth to exceed 1.25.   Additionally, the Company’s obligations under Facility A are secured by:  

1.     All our accounts receivable, whether now owned or hereafter acquired.

2.     All our inventory, whether now owned or hereafter acquired.

3.     All our machinery and equipment, whether now owned or hereafter acquired.

4.     A collateral assignment on all future distributions from joint ventures.

The Company’s obligations under Facility B are secured by:

1.     Our fee simple interest in certain real estate and improvements in Beaumont, Texas.

2.     Any parking, utility and ingress/egress easements on the foregoing property.

3.     A collateral assignment on all future distributions from joint ventures.

The Company’s subsidiaries, M&I Electric Industries, Inc. and South Coast Electric Systems, LLC are additional obligors on the Loan Agreement.

The Company had $5.70 million of borrowings outstanding under the Frost credit agreement at December 31, 2016 and $5.54 million at December 31, 2015.  

On March 23, 2017, the Company sold a $7.00 million Senior Secured Term Note (the “Note”) to a third-party lender to repay all outstanding borrowings under the existing revolving credit facilities and provide approximately $1.00 million of additional working capital. The Note is payable in monthly interest only payments, in arrears, with $0.50 million of principal repayable no later than June 30, 2017 and the balance due March 23, 2021. The Note is secured by all assets of the Company, with few exceptions, and bears interest at a fixed rate of 11.50%.                                       

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Leases

12 Months Ended

Dec. 31, 2016

Leases [Abstract]

Leases

(9) Leases

New Corporate Office Lease

In December 2013, the Company executed a lease for office space at 1250 Wood Branch Park Drive, Houston, Texas. The lease covers approximately 13,000 square feet.

The term of the lease is 64 months and commenced upon completion of tenant improvements, which were completed in March 2014.

The Company also leases equipment (principally trucks and forklifts) under operating lease agreements that expire at various dates to 2021. Rental expense relating to operating leases and other short-term leases for the years ended December 31, 2016 and 2015, amounted to approximately $0.70 million and $0.68 million, respectively.

The following is a schedule of future minimum lease payments:

Year Ending December 31,	Amount
	(In thousands)
2017	$	698
2018		631
2019		438
2020		241
2021		215
	$	2,223

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Stock and Stock-based Compensation

12 Months Ended

Dec. 31, 2016

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Stock and Stock-based Compensation

(10) Stock and Stock-based Compensation

Employee Stock Purchase Plan

The Company issued 8,142 and 5,668 shares of Company stock during 2016 and 2015, respectively, in connection with an Employee Stock Purchase Plan (“ESPP”) that commenced in April 2008.

Restricted Stock Units

As amended in May 2014, the stockholder approved shares available under the plan is 1,700,000. The number of RSUs awarded is generally subject to the substantial achievement of budgeted performance and other metrics in the year granted. The RSUs do not have voting rights of the common stock, and the shares of common stock underlying the RSUs are not considered issued and outstanding until actually vested and issued. In general, the awards convert to common stock on a one to one basis in 25% increments over four years from the grant date subject to a continuing employment obligation.

The following table summarizes the activity for unvested restricted stock units for the years ended December 31, 2016 and 2015:

	Units		Weighted Average Fair Value Per RSU
Unvested restricted stock units at December 31, 2014		168,642	$	4.88
Awarded		231,356	$	3.47
Vested		(72,298)	$	4.44
Forfeited		(11,853)	$	4.55
Unvested restricted stock units at December 31, 2015		315,847	$	3.99
Awarded		31,327	$	2.81
Vested		(105,443)	$	4.66
Forfeited		(23,319)	$	5.12
Unvested restricted stock units at December 31, 2016		218,412	$	4.28

Compensation expense of approximately $0.49 million and $0.46 million was recorded in the years ended December 31, 2016 and 2015, respectively, to reflect the fair value of the original RSU’s granted or anticipated to be granted less forfeitures, amortized over the portion of the vesting period occurring during the period. The fair value of the RSUs was based on the closing price of our common stock as reported on the NASDAQ Stock Market (“NASDAQ”) on the grant date. Based upon the fair value on the grant date of the number of shares awarded or expected to be awarded, it is anticipated that approximately $0.93 million of additional compensation cost will be recognized in future periods through 2017. The weighted average period over which this additional compensation cost will be expensed is 2 years.

In December 2016, the Board of Directors approved modification to the requisite service period to accelerate vesting for 75% of the RSU granted to employees for 2016 plan.

During February 2017, the Board of Directors approved the grants of approximately 395,000 RSUs in conjunction with the Plan, of which, approximately 332,000 units are subject to 2017 fiscal performance measures.

Board of Directors Compensation

Directors who are not employees of the Company and who do not have a compensatory agreement providing for service as a director of the Company receive a retainer fee payable quarterly. Eligible directors may elect to defer 50% to 100% of their retainer fee, which may be used to acquire common stock of the Company at the fair market value on the date the retainer fee would otherwise be paid, acquire stock units equivalent to the fair market value of the Company’s common stock on the date the retainer fee would otherwise be paid, or be paid in cash. During the years ended December 31, 2016 and 2015, directors of the Company elected to defer retainer fees to acquire approximately 31,000 and 29,400, respectively, stock units. Compensation expense of approximately $0.15 million and $0.18 million was recorded in the years ended December 31, 2016 and 2015 respectively, which is included in general and administrative expenses in the consolidated statements of operations.

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Redeemable Convertible Preferred Stock

12 Months Ended

Dec. 31, 2016

Temporary Equity Disclosure [Abstract]

Redeemable Convertible Preferred Stock

(11) Redeemable Convertible Preferred Stock

On April 13, 2012, the Company signed a securities purchase agreement (the “Securities Purchase Agreement”) with a private investor for the sale (the “Preferred Stock Financing”) of 1,000,000 shares of the Company’s Series A Convertible Preferred Stock (the “Series A Convertible Preferred Stock”) at $5.00 per share and 325,000 warrants to purchase shares of the Company’s common stock expiring in May 2020. The Series A Convertible Preferred Stock shares are initially convertible into 1,000,000 shares of the Company’s common stock at a conversion price of $5.00 per share. The warrants were issued in two tranches with 125,000 of such warrants at an initial exercise price of $6.00 per share and 200,000 of such warrants at an initial exercise price of $7.00 per share. On May 2, 2012, the Company completed the issuance of the Series A Convertible Preferred Stock and warrants.

On April 30, 2012, the Company filed an Articles of Amendment to its Articles of Incorporation designating 1,000,000 shares of the Company’s authorized preferred stock as Series A Convertible Preferred Stock. The Company also entered into a Registration Rights Agreement and Investor Rights Agreement with the private investor.

The Series A Convertible Preferred Stock ranks senior to all other equity instruments of the Company, including the Company’s common stock. The Series A Convertible Preferred Stock accrues cumulative dividends at a rate of 6% per annum, whether or not dividends have been declared by the Board of Directors and whether or not there are profits, surplus or other funds available for the payment of such dividends. The Company may pay such dividends in shares of the Company’s common stock based on the then current market price of the common stock. At any time following a material default by the Company, as defined in the Securities Purchase Agreement, or April 30, 2017, the holders of a majority of the outstanding shares of the Series A Convertible Preferred Stock may require the Company to redeem the Series A Convertible Preferred Stock at a redemption price equal to the lessor of (i) the liquidation preference per share (initially $5.00 per share, subject to adjustments for certain future equity transactions defined in the Securities Purchase Agreement) and (ii) the fair market value of the Series A Convertible Preferred Stock per share, as determined in good faith by the Company’s Board of Directors. As of December 31, 2016 and 2015, the redemption price per share was $5.00 in both years. The redemption price, plus any accrued and unpaid dividends, shall be payable in 36 equal monthly installments plus interest at an annual rate of 6%.

The preferred stock and warrants were issued for a total of $5.0 million. This amount was allocated to the preferred stock and warrants based on their relative fair values. The fair value of the warrants was calculated using the Black Scholes-Merton pricing model using the following weighted average assumptions, at the grant date:

Number of warrants		325,000
Exercise price	$	6.62
Expected volatility of underlying stock		74	%
Risk-free interest rate		1.62	%
Dividend yield		0	%
Expected life of warrants		8 years
Weighted-average fair value of warrants	$	3.11
Expiration date		May 2, 2020

Based on these calculations and the actual consideration, the warrants were valued at $840,000 and the Series A Convertible Preferred Stock was valued at $4,160,000.

The initial values allocated to the warrants were recognized as a discount on the Series A Convertible Preferred Stock, with a corresponding charge to additional paid-in capital. The discount related to the warrants is accreted to retained earnings through the scheduled redemption date of the mandatorily redeemable Series A Convertible Preferred Stock. Discount accretion for the years ended December 31, 2016 and 2015 totaled $0.05 million in both years.

At December 31, 2016 and December 31, 2015, the company had accrued but unpaid dividends totaling $0.23 million, in both years, which is included in the accounts payable and other accrued expenses in the consolidated balance sheets.

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Employee Benefit and Bonus Plans

12 Months Ended

Dec. 31, 2016

Compensation And Retirement Disclosure [Abstract]

Employee Benefit and Bonus Plans

(12) Employee Benefit and Bonus Plans

The employees of the Company are eligible to participate in a 401(k) plan sponsored by the Company. The plan is a defined contribution 401(k) Savings and Profit Sharing Plan (the “Plan”) that covers all full-time employees who meet certain age and service requirements. The Company may provide discretionary contributions to the Plan as determined by the Board of Directors. For the years ended December 31, 2016 and 2015, the Company made no contributions to the Plan.

The Company maintains an “Executive Performance” bonus plan, which covers approximately 43 key employees. Under the plan, the participants receive a percentage of a bonus pool based primarily on pre-tax income in relation to budget. The Board of Directors approves the Executive Performance plan at the beginning of each year. During the years ended December 31, 2016 and 2015, the Company recorded approximately $0.49 million and $0.46 million under the plan, respectively.

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Related Party Transactions

12 Months Ended

Dec. 31, 2016

Related Party Transactions [Abstract]

Related Party Transactions

(13) Related Party Transactions

During 2016 and 2015, the Company received legal advice on various Company matters from a law firm related to a director of the Company. The Company incurred expenses totaling approximately $0.07 million and $0.05 million related to these services during 2016 and 2015, respectively, which is included in general and administrative expenses in the accompanying consolidated statements of operations. As of December 31, 2016 and 2015, the outstanding payable balance for services rendered by this law firm was $0.04 million and $0.00, respectively.

The Company, upon approval from the Board, has an employment agreement with the former Executive Chairman of the Board of Directors (“Executive Chairman”), whereby the Company compensated the Executive Chairman $0.00 million and $0.13 million during 2016 and 2015, respectively. Under the terms of the agreement, the Executive Chairman will assist in international joint venture relations and operations, technical developments, manufacturing and transformative business development projects and other special projects assigned by the Company. In November 2013, the Company amended the agreement to extend the term through 2015 with annual compensation of $0.13 million for 2015. In addition, the amendment included a bonus equal to 1% of the amount reported by the Company as equity income from foreign joint ventures’ operations in the consolidated statements of operations. During 2015, the Company paid compensation of $0.13 million, under the terms of the agreement, which is included in general and administrative expenses in the accompanying consolidated statements of operations.

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Segment Reporting

12 Months Ended

Dec. 31, 2016

Segment Reporting [Abstract]

Segment Reporting

(14) Segment Reporting

The Company follows guidance prescribed by the ASC Topic 280, Segment Reporting, which governs the way the Company reports information about its operating segments.

The Company manages its continuing operations as a single segment which reflects how the Company’s Chief Operating Officer analyzes the business.

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Quarterly Results for Continuing Operations

12 Months Ended

Dec. 31, 2016

Quarterly Financial Information Disclosure [Abstract]

Quarterly Results for Continuing Operations

(15) Quarterly Results for Continuing Operations

The following table reflects the quarterly information for continuing operations for the applicable time periods.

	2016
	Q1			Q2		Q3			Q4			Total
Net Sales	$	8,298		$	11,444	$	8,673		$	9,397		$	37,812
Gross Profit (Loss)		91			1,226		(451	)		150		$	1,016
Net income (loss)		(2,883	)		151		(2,624	)		(1,704	)		(7,060	)
Earnings (loss) per share:
Basic	$	(0.36	)	$	0.01	$	(0.33	)	$	(0.21	)	$	(0.89	)
	2015
	Q1			Q2		Q3			Q4			Total
Net Sales	$	15,311		$	12,302	$	13,780		$	7,690		$	49,083
Gross Profit (Loss)		2,283			2,044	2561				(298	)	$	6,590
Net income (loss)	274				547		204			(3,618	)		(2,593	)
Earnings (loss) per share:
Basic	$	0.02		$	0.06	$	0.01		$	(0.45	)	$	(0.36	)

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Commitments and Contingencies

12 Months Ended

Dec. 31, 2016

Commitments And Contingencies Disclosure [Abstract]

Commitments and Contingencies

(16) Commitments and Contingencies

On September 1, 1999, the Company created a group medical and hospitalization minimum premium insurance program. For the policy year ended August 2016, the Company is liable for all claims each year up to $70,000 per insured, or $1.7 million in the aggregate. An outside insurance company insures any claims in excess of these amounts. The Company’s expense for this minimum premium insurance totaled $1.07 million and $1.16 million during the years ended December 31, 2016 and 2015. Insurance reserves included in accrued payroll and benefits in the accompanying consolidated balance sheets were approximately $0.02 million and $0.00 million at December 31, 2016 and 2015. The Company is contingently liable for secured letters of credit of $1.25 million as of December 31, 2016 in relation to performance guarantees on certain customer contracts.

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Earnings (Loss) from Continuing Operations Per Common Share

12 Months Ended

Dec. 31, 2016

Earnings Per Share [Abstract]

Earnings (Loss) from Continuing Operations Per Common Share

(17) Earnings (Loss) from Continuing Operations Per Common Share

Basic earnings (loss) per common share is based on the weighted average number of common shares outstanding for the year ended December 31, 2016 and 2015. Diluted earnings (loss) per common share is based on the weighted average number of common shares outstanding, plus the incremental shares that would have been outstanding upon the assumed exercise of all potentially dilutive stock options and other units subject to anti-dilution limitations.

The following table sets forth the computation of basic and diluted earnings (loss) per common share (in thousands, except share and per share data):

	Year Ended December 31,
		2016		2015
Net loss**	$	(7,413)	$	(2,942)
Weighted average basic shares		8,305,764		8,241,585
Dilutive effect of stock options, restricted stock units, preferred stock and warrants*		-		-
Total weighted average diluted shares with assumed conversions		8,305,764		8,241,585
Loss from operations per common share:
Basic	$	(0.89)	$	(0.36)
Dilutive	$	(0.89)	$	(0.36)

*No units or shares are considered when losses cause the effect to be anti-dilutive.

**Net income (loss) represents net income (loss) from continuing operations less the dividends on redeemable convertible preferred stock.

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Sale of South Coast Electric Assets

12 Months Ended

Dec. 31, 2016

Gain Loss On Disposition Of Assets [Abstract]

Sale of South Coast Electric Assets

(18) Sale of South Coast Electric Assets

On June 24, 2016, the Company sold its Bay St. Louis, MS manufacturing facility and related assets including fixed assets, work in process, and inventory to an unrelated party. The sale resulted in a gain of $0.18 million, of which $0.07 million is in relation to the gain on sale of fixed assets and reported in other income, and $0.11 million is related to inventory and is reflected in income from operations.

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Subsequent Event

12 Months Ended

Dec. 31, 2016

Subsequent Events [Abstract]

Subsequent Event

(19) Subsequent Event

As reported in the Company’s Current Report on Form 8-K filed March 27, 2017, on March 23, 2017 the Company entered into a $7.00 million Senior Secured Term Note with a third-party lender. The Note is payable in monthly interest only payments in arrears at the fixed rate of 11.5%. Principal of $0.50 million is payable no later than June 30, 2017 with the balance due March 23, 2021.   The proceeds of the note sale were used to pay off all remaining balances on the credit facilities with Frost in addition to providing approximately $1.00 million of working capital.    

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Summary of Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2016

Accounting Policies [Abstract]

Principles of Consolidation

Principles of Consolidation  

The accompanying consolidated financial statements include the accounts of AETI and its wholly-owned subsidiaries, M&I and M&I Brazil, and the accounts of SCES through the disposition date in June 2016. Significant intercompany accounts and transactions are eliminated in consolidation.

Use of Estimates

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of net sales and expenses during the reporting period. Actual results could differ from those estimates. The most significant estimates made by management include:

(1) Percentage-of-completion estimates on long-term contracts

(2) Estimates of the provision for doubtful accounts

(3) Estimated useful lives of property and equipment

(4) Valuation allowances related to deferred tax assets

Financial Instruments

Financial Instruments

The Company includes fair value information in the notes to the consolidated financial statements when the fair value of its financial instruments is different from the book value. When the book value approximates fair value, no additional disclosure is made, which is the case for financial instruments outstanding as of December 31, 2016 and 2015. The Company assumes the book value of those financial instruments that are classified as current approximates fair value because of the short maturity of these instruments. For non-current financial instruments, the Company uses quoted market prices or, to the extent that there are no available quoted market prices, market prices for similar instruments.

Cash and Cash Equivalents

Cash and Cash Equivalents

Cash equivalents consist of liquid investments with original maturities of three months or less. Cash balances routinely exceed FDIC limits however all cash is maintained in JP Morgan Chase and Frost Bank and believed to be secure.  

Short-term Investments

Short-term investments

Short-term investments consist of any fund held in certificate of deposit with maturity greater than three months and investments in debt and equity securities with maturity of one year or less.

Accounts Receivable and Allowance for Bad Debts

Accounts Receivable and Allowance for Bad Debts

The Company maintains an allowance for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. The estimate is based on management’s assessment of the collectability of specific customer accounts and includes consideration for credit worthiness and financial condition of those specific customers. The Company also reviews historical experience with the customer, the general economic environment and the aging of its receivables. The Company records an allowance to reduce receivables to the amount it reasonably believes to be collectible. Based on this assessment, management believes the allowance for doubtful accounts is adequate. The bad debt expense was $0.21 million and $0.17 million for the fiscal years ended December 31, 2016 and 2015.

Inventories

Inventories

Inventories are stated at the lower of cost or market, with material value determined using an average cost method. Inventory costs for work-in-process include direct material, direct labor, production overhead and outside services. Indirect overhead is apportioned to work-in-process based on direct labor incurred.

Property, Plant and Equipment

Property, Plant and Equipment

Property, plant and equipment are stated at cost. Expenditures for repairs and maintenance are expensed as incurred while renewals and betterments are capitalized. Depreciation is calculated on the straight-line basis over the estimated useful lives of the assets after giving effect to salvage values.

Long-lived assets

Long-lived assets

If events or circumstances indicate the carrying amount of an asset may not be recoverable, including intangible assets, management tests long-lived assets for impairment. If the estimated future cash flows are projected to be less than the carrying amount, an impairment write-down (representing the carrying amount of the long-lived asset which exceeds the present value of estimated expected future cash flows) would be recorded as a period expense. Events that would trigger an impairment test include the following:

• A significant decrease in the market price of a long-lived asset.

• A significant change in the use of long-lived assets or in its physical condition.

• A significant change in the business climate that could affect an assets value.

• An accumulation of cost significantly greater than the amount originally expected to acquire or construct a long-lived asset.

• A current period operating or cash flow loss combined with a history of such losses or a forecast demonstrating continued losses associated with the use of a long-lived asset.

• An expectation to sell or otherwise dispose of a long-lived asset significantly before the end of its estimated useful life.

Based on management’s reviews during each of the years ended December 31, 2016 and 2015, there were no events or circumstances that caused management to believe that impairments were necessary.

Intangible Assets

Intangible Assets

Intangible Assets at December 31, 2016	Useful Lives (Years)		Cost		Accumulated Amortization		Net Value
	(in thousands)
Intellectual property		3	$	322	$	322	$	-
License		5		358		49		309
License		-		218		-		218
			$	898	$	371	$	527

  On March 8, 2012, the Company acquired certain technology from Amnor Technologies, Inc. for cash of $0.10 million plus 44,000 shares of the Company’s common stock valued at $4.95 per share (the closing price on that date). One fourth of the shares were issued initially with the balance to be issued one third annually on the anniversaries over the subsequent 3 years. The purchase price was valued at $0.32 million (including $4,000 of transaction costs) at March 8, 2012 and is recorded as an intangible asset in the consolidated balance sheets. The cost was being amortized over its estimated useful life of 3 years which expired in 2015. Amortization expense of $0.02 million was recognized during the year ended December 31, 2015 and is included in general and administrative expenses in the consolidated statements of operations.

The technology provides automation and control system technologies for land and offshore drilling monitoring and control (auto-driller); marine automation including ballast control and tank monitoring and machinery plant control and monitoring systems; IP-based CCTV systems; and military vessel security and safety systems, all proven in multiple installations.

During 2014 we acquired arc-resistant technology and capitalized the cost of $0.22 million. During 2016, the Company capitalized cost of $0.36 million for the testing associated with certifications for IntelliSafe™ products. The cost is being amortized over its useful life of 5 years. Amortization expense of $0.05 million was recognized during the year ended December 31, 2016 and is included in the cost of sales in the consolidated statements of operations. If events or circumstances indicate the carrying amount of an asset may not be recoverable, including intangible assets, management tests long-lived assets for impairment.  

Income Taxes

Income Taxes

The Company uses the asset and liability method to account for income taxes. Under this method of accounting for income taxes, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using the enacted tax rates and laws that will be in effect when the differences are expected to be reported to the taxing authority. The Company also records any financial statement recognition and disclosure requirements for uncertain tax positions taken or expected to be taken in its tax return. Financial statement recognition of the tax position is dependent on an assessment of a 50% or greater likelihood that the tax position will be sustained upon examination, based on the technical merits of the position. Any interest and penalties related to uncertain tax positions are recorded as interest expense in the accompanying consolidated statements of operations.

Foreign Currency Gains and Losses

Foreign Currency Gains and Losses

Foreign currency translations are included as a separate component of comprehensive income. The Company has determined the local currency of its foreign subsidiary and foreign joint ventures to be the functional currency. In accordance with ASC 830, the assets and liabilities of the foreign equity investees and foreign subsidiary, denominated in foreign currency, are translated into United States dollars at exchange rates in effect at the consolidated balance sheet date and net sales and expenses are translated at the average exchange rate for the period. Related translation adjustments are reported as comprehensive income, net of deferred income taxes, which is a separate component of stockholders’ equity, whereas gains and losses resulting from foreign currency transactions are included in results of operations.

Net Sales Recognition

Net Sales Recognition

The Company reports earnings from fixed-price and modified fixed-price long-term contracts on the percentage-of-completion method. Earnings are accrued based on the ratio of costs incurred to total estimated costs. However, for our manufacturing activities, we have determined that labor incurred provides an improved measure of percentage-of-completion. Costs include direct material, direct labor, and job related overhead. Losses expected to be incurred on contracts are charged to operations in the period such losses are determined. A contract is considered complete when all costs except insignificant items have been incurred and the facility has been accepted by the customer. Net sales from non-time and material jobs of a short-term nature (typically less than one month) are recognized on the completed-contract method after considering the attributes of such contracts. This method is used because these contracts are typically completed in a short period of time and the financial position and results of operations do not vary materially from those which would result from use of the percentage-of-completion method.

The Company records net sales from its field and technical service and repair operations on a completed service basis after customer acknowledgement that the service has been completed and accepted. In addition, the Company sells certain purchased parts and products. These net sales are recorded when the product is shipped and title passes to the customer.  

The asset, “Work-in-process,” which is included in inventories, represents the cost of labor, material, and overhead in excess of amounts billed on jobs accounted for under the completed-contract method. For contracts accounted for under the percentage-of-completion method, the asset, “Costs and estimated earnings in excess of billing on uncompleted contracts,” represents net sales recognized in excess of amounts billed and the liability, “Billings in excess of costs and estimated earnings on uncompleted contracts,” represents billings in excess of net sales recognized. Any billed net sale that has not been collected is reported as accounts receivable. The timing of when we bill our customers is generally dependent upon advance billing terms or completion of certain phases of the work.  

On occasion, the Company enters into long-term contracts that include both a service component and a manufacturing component. The Company segments net sales, costs and gross profit related to these contracts if they meet the contract segmenting criteria in ASC 605-35, including that the terms and scope of the project clearly call for separate elements, the separate elements are often bid or negotiated by the Company separately and the total economic returns and risks of the separate elements are similar to the economic returns and risks of the overall contract. For segmented contracts, the Company recognizes net sales as if they were separate contracts over the performance periods of the individual elements.

Contract net sales recognition inherently involves estimation, including the contemplated level of effort to accomplish the tasks under the contract, the cost of the effort, and an ongoing assessment of progress toward completing the contract. From time to time, as part of the normal management processes, facts develop that requires revisions to estimated total cost or net sales expected. The cumulative impact of any revisions to estimates and the full impact of anticipated losses on contracts are recognized in the period in which they become known.

Shipping and Handling Fees and Costs

Shipping and Handling Fees and Costs

Shipping and handling fees, if billed to customers, are included in net sales. Shipping and handling costs associated with inbound freight are expensed as incurred. Shipping and handling costs associated with outbound freight are classified as cost of sales.

Concentration of Market Risk and Geographic Operations

Concentration of Market Risk and Geographic Operations

Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of trade accounts receivable. The Company’s market risk is dependent primarily on the strength of the oil and gas and energy related industries. The Company grants credit to customers and generally does not require security except in the case of certain international contracts. Procedures are in effect to monitor the credit worthiness of its customers. During 2016, one customer accounted for approximately 19% of net sales and 17% of net accounts receivable trade. During 2015, one customer accounted for approximately 14% of net sales and 3% of net accounts receivable trade.

The Company sells its products and services in domestic and international markets; however, significant portions of the Company’s sales are concentrated with customers located in the Gulf Coast region of the United States. The Gulf Coast region accounts for approximately 47% and 68% of the Company’s net sales during the years ended December 31, 2016 and 2015, respectively.

Reclassification

Reclassification

Certain items are reclassified in the 2015 consolidated financial statements to conform to the 2016 presentation. Such reclassifications had no effect on the Company’s financial position, results of operations or cashflows.

Recently Issued Accounting Pronouncements

Recently Issued Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers, which supersedes nearly all existing revenue recognition guidance under U.S. GAAP. The core principle of ASU No. 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. ASU No. 2014-09 defines a five step process to achieve this core principle and, in doing so, more judgment and estimates may be required under existing U.S. GAAP. The standard is effective for annual periods beginning after December 15, 2016, and interim periods therein, using either of the following transition methods: (i) a full retrospective approach reflecting the application of the standard in each prior reporting period with the option to elect certain practical expedients, or (ii) a retrospective approach with the cumulative effect of initially adopting ASU No. 2014-09 recognized at the date of adoption (which includes additional footnote disclosures). In July 2015, the FASB issued ASU No. 2015-14 which delayed the effective date of ASU No. 2014-09 by one year (effective for annual periods beginning after December 15, 2017). We are currently evaluating the future impact of our pending adoption of ASU No. 2014-09 on our consolidated financial statements and have not yet determined the method with which we will adopt the standard in 2018.  

In June 2014, the FASB issued ASU No. 2014-12, Compensation – Stock Compensation (Topic 718): Accounting for Share Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period. The amendments in this ASU require that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. A reporting entity should apply existing guidance in Topic 718, Compensation – Stock Compensation, as it relates to awards with performance conditions that affect vesting to account for such awards. The performance target should not be reflected in estimating the grant-date fair value of the award. Compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the period(s) for which the requisite service has already been rendered. If the performance target becomes probable of being achieved before the end of the 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. The requisite service period ends when the employee can cease rendering service and still be eligible to vest in the award if the performance target is achieved. The amendments in ASU No. 2014-12 are effective for annual periods and interim periods within those annual periods beginning after December 15, 2015, with early adoption permitted. The adoption of ASU No. 2014-12 did not have a significant impact on the Company’s consolidated financial position, results of operations and disclosures.

In January 2015, the FASB issued ASU No. 2015-01, Income Statement – Extraordinary and Unusual Items (Subtopic 225-20): Simplified Income Statement Presentation by Eliminating the Concept of Extraordinary Items. This ASU eliminates from U.S. GAAP the concept of extraordinary items. Subtopic 225-20, Income Statement – Extraordinary and Unusual Items, requires that an entity separately classify, present and disclose extraordinary events and transactions. Presently, an event or transaction is presumed to be ordinary and usual activity of the reporting entity unless evidence clearly supports its classification as an extraordinary item. If an event or transaction meets the criteria for extraordinary classification, an entity is required to segregate the extraordinary item from the results of ordinary operations and show the item separately in the income statement, net of tax, after income from continuing operations. The entity also is required to disclose applicable income taxes and either present or disclose earnings-per-share data applicable to the extraordinary item. ASU No. 2015-01 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. The amendments of ASU No. 2015-01 can be applied prospectively or retrospectively to all prior periods presented in the financial statements. Early adoption is permitted. The adoption of ASU No. 2015-01 did not have a significant impact on the Company’s consolidated financial position, results of operations or disclosures.

In February 2015, the FASB issued ASU No. 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis, which is intended to improve targeted areas of consolidation guidance for legal entities such as limited partnerships, limited liability corporations, and securitization structures. ASU No. 2015-02 focuses on the consolidation evaluation for reporting organizations that are required to evaluate whether they should consolidate certain legal entities. In addition to reducing the number of consolidation models from four to two, the new standard simplifies the FASB Accounting Standards Codification ^TM and improves current U.S. GAAP by: (1) Placing more emphasis on risk of loss when determining a controlling financial interest. A reporting organization may no longer have to consolidate a legal entity in certain circumstances based solely on its fee arrangement, when certain criteria are met; (2) Reducing the frequency of the application of related-party guidance when determining a controlling financial interest in a variable interest entity; and (3) Changing consolidation conclusions for public and private companies in several industries that typically make use of limited partnerships or variable interest entities. ASU No. 2015-02 is effective for periods beginning after December 15, 2015. The adoption of ASU No. 2015-02 did not have a significant impact on the Company’s consolidated financial position, results of operations and disclosures.

In July 2015, the FASB issued ASU No. 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory, which is intended to converge U.S. GAAP on this topic with IFRS. ASU No. 2015-11 focuses on the premeasurement of inventory measured using any method other than LIFO, for example, average cost. Inventory within the scope of ASU No. 2015-11 is required to be measured at the lower of cost and net realizable value. When evidence exists that the net realizable value of inventory is lower than its cost, the difference shall be recognized as a loss in earnings in the period in which it occurs. That loss may be required, for example, due to damage, physical deterioration, obsolescence, changes in price levels, or other causes. For public business entities, the amendments in ASU No. 2015-11 are effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. Management is currently evaluating the future impact of ASU No. 2015-11 on the Company’s consolidated financial position, results of operations and disclosures.

In September 2015, the FASB issued ASU No. 2015-16, Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments. ASU No. 2015-16 requires that an acquirer recognize adjustments to estimated amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. ASU No. 2015-16 requires that the acquirer record, in the same period’s financial statements, the effect on earnings of changes in depreciation, amortization, or other income effects, if any, as a result of the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date. ASU No. 2015-16 also requires an entity to present separately on the face of the income statement or disclose in the notes the portion of the amount recorded in current-period earnings by line item that would have been recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized as of the acquisition date. ASU No. 2015-16 is effective for fiscal years beginning after December 15, 2015. ASU No. 2015-16 should be applied retrospectively and early adoption is permitted. The adoption of ASU No. 2015-16 did not have a significant impact on the Company’s consolidated financial position, results of operations and disclosures.

In November 2015, the FASB issued ASU No. 2015-17, Balance Sheet Classification of Deferred Taxes. The new guidance requires that all deferred tax assets and liabilities, along with any related valuation allowance, be classified as noncurrent on the balance sheet. As a result, each jurisdiction will now only have one net noncurrent deferred tax asset or liability. The new guidance will be effective for fiscal years beginning after December 15, 2017 and early adoption is permitted.  The Company has elected to early adopt this pronouncement and has reflected the change on the consolidated balance sheet for all periods presented.

In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. ASU No. 2016-01 requires (1) an entity to measure equity instruments (except those accounted for under the equity method of accounting, or those that result in consolidation of the investee) at fair value with changes in fair value recognized in net income; (2) entities to use the exit price notation when measuring the fair value of financial instruments for disclosure purposes; (3) separate presentation of financial assets and financial liabilities by measurement category and form of financial asset; and (4) elimination of the requirement to disclose the methods and significant assumptions used to estimate fair value that is required to be disclosed for financial instruments measured at amortized cost. ASU No. 2016-01 is effective for fiscal years beginning after December 15, 2017 with early adoption permitted. Management is currently evaluating the future impact of ASU No. 2016-01 on the Company’s consolidated financial position, results of operations and disclosures.

In February 2016, the FASB issued ASU No. 2016-02, Leases, which requires lessees to  recognize the following for all leases (with the exception of short-term leases) at the commencement date: (1) a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and (2) 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. Under ASU No. 2016-02, lessor accounting is largely unchanged. ASU No. 2016-02 is effective for fiscal years beginning after December 15, 2018 with early application permitted. Lessees and lessors must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The modified retrospective approach would not require any transition accounted for leases expired before the earliest comparative period presented. Lessees and lessors may not apply a full retrospective transition approach. Management is currently evaluating the future impact of ASU No. 2016-02 on the Company’s consolidated financial position, results of operations and disclosures.

In April 2016, the FASB issued ASU No.2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing, to clarify two aspects of Topic 606: (i) identifying performance obligations; and (ii) the licensing implementation guidance. The amendments do not change the core principle of the guidance in Topic 606. The effective date and transition requirements for ASU No. 2016-10 are the same as the effective date and transition requirements for ASU No. 2014-09. Management is currently evaluating the future impact of ASU No. 2016-10 on the Company’s consolidated financial position, results of operations and disclosures.

In May 2016, the FASB issued ASU No. 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients. ASU No. 2016-12 provides narrow-scope improvements to the guidance on collectability, noncash consideration, and completed contracts at transition. The amendment also provides a practical expedient for contract modifications at transition and an accounting policy election related to the presentation of sales taxes and other similar taxes collected from customers and are expected to reduce the judgment necessary to comply with Topic 606. The effective date and transition requirements for ASU No. 2016-12 are the same as the effective date and transition requirements for ASU No. 2014-09. Management is currently evaluating the future impact of ASU No. 2016-12 on the Company’s consolidated financial position, results of operations and disclosures.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU No. 2016-13 eliminates the probable initial recognition threshold in current generally accepted accounting principles (“GAAP”) and, instead, requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. In addition, ASU No. 2016-13 amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. ASU No. 2016-13 is effective for annual periods beginning after December 15, 2020, with early application permitted in annual periods beginning after December 15, 2018. The amendments of ASU No. 2016-13 should be applied through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. Management is currently evaluating the future impact of ASU No. 2016-13 on the Company’s consolidated financial position, results of operations and disclosures.

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. ASU No. 2016-15 addresses eight specific cash flow issues and is intended to reduce diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. ASU No. 2016-15 is effective for reporting periods beginning after December 15, 2017. Early adoption is permitted. Management is currently evaluating the future impact of ASU No. 2016-15 on the Company’s consolidated financial position, results of operations and disclosures.

In December 2016, the FASB issued ASU No. 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers. ASU No. 2016-20 allows entities not to make quantitative disclosures about remaining performance obligations in certain cases and require entities that use any of the new or previously existing optional exemptions to expand their qualitative disclosures. The amendment also clarifies narrow aspects of ASC 606, including contract modifications, contract costs, and the balance sheet classification of items as contract assets versus receivables, or corrects unintended application of the guidance. The effective date and transition requirements for ASU No. 2016-20 are the same as the effective date and transition requirements for ASU No. 2014-09. Management is currently evaluating the future impact of ASU No. 2016-20 on the Company’s consolidated financial position, results of operations and disclosures.

In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business. ASU No. 2017-01 clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of a business or as acquisitions (or disposals) of assets. ASU No. 2017-01 is effective for annual periods beginning after December 15, 2018, with early adoption permitted under certain circumstances. The amendments of ASU No. 2017-01 should be applied prospectively as of the beginning of the period of adoption. Management is currently evaluating the future impact of ASU No. 2017-01 on the Company’s consolidated financial position, results of operations and disclosures.

In January 2017FASB issued ASU No. 2017-03, Accounting Changes and Error Corrections (Topic 250) and Investments – Equity Method and Joint Ventures (Topic 323): Amendments to SEC Paragraphs Pursuant to Staff Announcements at the September 22, 2016 and November 17, 2016 EITF Meetings. The amendments in this update relate to disclosures of the impact of recently issued accounting standards. The SEC staff’s view that a registrant should evaluate ASC updates that have not yet been adopted to determine the appropriate financial disclosures about the potential material effects of the updates on the financial statements when adopted. If a registrant does not know or cannot reasonably estimate the impact of an update, then in addition to making a statement to that effect, the registrant should consider additional qualitative financial statement disclosures to assist the reader in assessing the significance of the impact. The staff expects the additional qualitative disclosures to include a description of the effect of the accounting policies expected to be applied compared to current accounting policies. Also, the registrant should describe the status of its process to implement the new standards and the significant implementation matters yet to be addressed. The amendments specifically addressed recent ASC amendments to ASU No. 2016-13, Financial Instruments – Credit Losses, ASU No. 2016-02, Leases, and ASU No. 2014-09, Revenue from Contracts with Customers, although, the amendments apply to any subsequent amendments to guidance in the ASC. ASU No. 2017-03 is effective upon issuance and did not have a significant impact on the Company’s consolidated financial position, results of operations and disclosures.

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Summary of Significant Accounting Policies (Tables)

12 Months Ended

Dec. 31, 2016

Accounting Policies [Abstract]

Summary of Intangible Assets

Intangible Assets

Intangible Assets at December 31, 2016	Useful Lives (Years)		Cost		Accumulated Amortization		Net Value
	(in thousands)
Intellectual property		3	$	322	$	322	$	-
License		5		358		49		309
License		-		218		-		218
			$	898	$	371	$	527

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Inventories (Tables)

12 Months Ended

Dec. 31, 2016

Inventory Disclosure [Abstract]

Inventories

Inventories consisted of the following at December 31, 2016 and 2015.

	December 31, 2016			December 31, 2015
	(in thousands)
Raw materials	$	513		$	594
Work-in-process		728			791
		1,241			1,385
Less: allowance		(60	)		(60	)
Total inventories	$	1,181		$	1,325

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Costs, Estimated Earnings, and Related Billings on Uncompleted Contracts (Tables)

12 Months Ended

Dec. 31, 2016

Contractors [Abstract]

Costs, Estimated Earnings, and Related Billings on Uncompleted Contracts

Contracts in progress at December 31, 2016 and 2015 consisted of the following:

	2016			2015
	(in thousands)
Costs incurred on uncompleted contracts	$	26,340		$	31,197
Estimated earnings		1,193			10,506
		27,533			41,703
Billings on uncompleted contracts		(21,912	)		(41,030	)
	$	5,621		$	673

Costs, estimated earnings, and related billing on uncompleted contracts consisted of the following at December 31, 2016 and 2015:

	2016			2015
	(in thousands)
Cost and estimated earnings in excess of billings on uncompleted contracts	$	5,829		$	2,302
Billings in excess of costs and estimated earnings on uncompleted contracts		(208	)		(1,629	)
	$	5,621		$	673

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Property, Plant and Equipment (Tables)

12 Months Ended

Dec. 31, 2016

Property Plant And Equipment [Abstract]

Schedule of Property, Plant and Equipment

Property, plant and equipment consisted of the following at December 31, 2016 and 2015:

Category	Estimated Useful Lives (years)		2016		2015
		(in thousands)
Buildings and improvements	15 – 25	$	7,972	$	8,083
Office equipment and furniture	2 – 7		2,135		2,126
Automobiles and trucks	2 – 5		157		118
Machinery and shop equipment	2 – 10		2,951		2,963
Construction in progress			23		94
			13,238		13,384
Less: accumulated depreciation and amortization			6,074		5,603
			7,164		7,781
Land			134		134
		$	7,298	$	7,915

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Advances to and Investments in Foreign Joint Ventures' Operations (Tables)

12 Months Ended

Dec. 31, 2016

Equity Method Investments And Joint Ventures [Abstract]

Schedule of Financial Information of Foreign Joint Ventures

Sales to foreign joint ventures’ operations are made on an arm’s length basis and intercompany profits, if any, are eliminated in consolidation.

Summary financial information of BOMAY and MIEFE in U.S. dollars was as follows at December 31, 2016 and 2015:

	BOMAY				MIEFE
	2016		2015		2016			2015
Assets:
Total current assets	$	47,700	$	68,151	$	425		$	2,365
Total non-current assets		3,589		4,131		17			70
Total assets	$	51,289	$	72,282	$	442		$	2,435
Liabilities and equity:
Total liabilities	$	24,196	$	44,415	$	551		$	1,930
Total joint ventures’ equity		27,093		27,867		(109	)		505
Total liabilities and equity	$	51,289	$	72,282	$	442		$	2,435
	Twelve Months Ended December 31,
	BOMAY				MIEFE
	2016		2015		2016			2015
Revenue	$	33,468	$	47,347	$	1,167		$	5,741
Gross Profit	$	6,687	$	8,353	$	481		$	1,112
Earnings	$	2,010	$	2,433	$	(631	)	$	(567	)

Schedule of Activity in Investment in Foreign Joint Ventures

The Company’s investments in and advances to its foreign joint ventures’ operations were as follows as of December 31, 2016 and 2015:

	2016									2015
	BOMAY*			MIEFE			TOTAL			BOMAY*			MIEFE			TOTAL
	(in thousands)									(in thousands)
Investments in foreign joint ventures:
Balance, beginning of year	$	2,033		$	14		$	2,047		$	2,033		$	14		$	2,047
Additional amounts invested and advanced		-			-			-			-			-			-
Balance, end of year		2,033			14			2,047			2,033			14			2,047
Undistributed earnings:
Balance, beginning of year		8,098			(11	)		8,087			8,157			358			8,515
Equity in earnings (loss)		804			(3	)		801			973			(232	)		741
Dividend distributions		(589	)		-			(589	)		(1,032	)		(137	)		(1,169	)
Balance, end of year		8,313			(14	)		8,299			8,098			(11	)		8,087
Foreign currency translation:
Balance, beginning of year		765			205			970			1,358			134			1,492
Change, during the year		(661	)		8			(653	)		(593	)		71			(522	)
Balance, end of year		104			213			317			765			205			970
Investments, end of year	$	10,450		$	213		$	10,663		$	10,896		$	208		$	11,104

* Accumulated statutory reserves in equity method investments of $2.89 million and $2.72 million at December 31, 2016 and 2015, are included in AETI’s consolidated retained earnings. In accordance with the People’s Republic of China, (“PRC”), regulations on enterprises with foreign ownership, an enterprise established in the PRC with wholly-owned foreign ownership is required to provide for certain statutory reserves, namely (i) General Reserve Fund, (ii) Enterprise Expansion Fund and (iii) Staff Welfare and Bonus Fund, which are appropriated from net profit as reported in the enterprise’s PRC statutory accounts. A non-wholly-owned foreign invested enterprise is permitted to provide for the above allocation at the discretion of its board of directors. The aforementioned reserves can only be used for specific purposes and are not distributable as cash dividends.

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Income Taxes (Tables)

12 Months Ended

Dec. 31, 2016

Income Tax Disclosure [Abstract]

Components of income (loss) before income taxes and dividends on preferred stock

The components of income (loss) before income taxes and dividends on preferred stock for the years ended December 31, 2016 and 2015 were as follows:

	2016		2015
	(in thousands)
United States	$	(7,545)	$	(2,906)
Foreign		529		741
	$	(7,016)	$	(2,165)

Components of provision (benefit) for income taxes by taxing authority

The components of the provision (benefit) for income taxes by taxing authority for the years ended December 31, 2016 and 2015 were as follows:

	2016		2015
	(in thousands)
Current provision:
Federal	$	-	$	443
Foreign		119		131
States		-		-
Total current provision		119		574
Deferred provision (benefit):
Federal		(24)		(114)
Foreign		-		-
States		(51)		(32)
Total deferred provision (benefit):		(75)		(146)
	$	44	$	428

Components of deferred federal income taxes

Significant components of the Company’s deferred federal income taxes were as follows:

	December 31,			December 31,
	2016			2015
	Non-Current
Deferred tax assets:
Accrued liabilities	$	15		$	22
Deferred compensation		1,113			936
Allowance for doubtful accounts		101			73
Inventory		83			73
Net operating loss		6,528			4,137
Property and equipment		143			123
Foreign tax credit carry forward		3,297			3,226
Deferred tax assets		11,280			8,590
Deferred tax liabilities:
Valuation allowance		(11,280	)		(8,590	)
Equity in foreign investments		(2,824	)		(2,755	)
Translation gain		-			(309	)
Deferred tax liabilities		(14,104	)		(11,654	)
Net deferred tax assets (liabilities)		(2,824	)		(3,064	)

Summary of difference between effective income tax rate determined by applying statutory income tax rate

The difference between the effective income tax rate reflected in the provision for income taxes and the amounts, which would be determined by applying the statutory income tax rate of 34%, is summarized as follows:

	2016		2015
	(in thousands)
(Provision for) benefit from U.S federal statutory rate	$	2,385	$	736
Effect of state income taxes		51		32
Non-deductible business meals and entertainment expenses		(11)		(16)
Foreign income taxes included in equity in earnings		140		269
Accrual to return adjustments and other		81		(653)
Change in valuation allowance		(2,690)		(796)
Total expense	$	(44)	$	(428)

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Notes payable (Tables)

12 Months Ended

Dec. 31, 2016

Debt Disclosure [Abstract]

Components of Notes Payable

The components of notes payable at December 31, 2016 and 2015 are as follows:

	2016		2015
	(In thousands)
Revolving credit agreement	$	1,500	$	1,043
Current portion of long-term notes payable......................................		300		300
Long-term notes payable		3,900		4,200
Total revolving credit agreement	$	5,700	$	5,543

Schedule of Principal Payments of Debt

Principal payments of debt for years subsequent to 2017 are as follows (in thousands):

	Amount
	(In thousands)
2017	$	1,800
2018		300
2019		300
2020		3,300
2021		-
	$	5,700

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Lease (Tables)

12 Months Ended

Dec. 31, 2016

Leases [Abstract]

Schedule of Future Minimum Lease Payments

The following is a schedule of future minimum lease payments:

Year Ending December 31,	Amount
	(In thousands)
2017	$	698
2018		631
2019		438
2020		241
2021		215
	$	2,223

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Stock and Stock- based Compensation (Tables)

12 Months Ended

Dec. 31, 2016

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Summary of Unvested Restricted Stock Units

The following table summarizes the activity for unvested restricted stock units for the years ended December 31, 2016 and 2015:

	Units		Weighted Average Fair Value Per RSU
Unvested restricted stock units at December 31, 2014		168,642	$	4.88
Awarded		231,356	$	3.47
Vested		(72,298)	$	4.44
Forfeited		(11,853)	$	4.55
Unvested restricted stock units at December 31, 2015		315,847	$	3.99
Awarded		31,327	$	2.81
Vested		(105,443)	$	4.66
Forfeited		(23,319)	$	5.12
Unvested restricted stock units at December 31, 2016		218,412	$	4.28

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Redeemable Convertible Preferred Stock (Tables)

12 Months Ended

Dec. 31, 2016

Temporary Equity Disclosure [Abstract]

Preferred Stock and Warrants Calculated Using the Black Scholes Merton Pricing Model

The preferred stock and warrants were issued for a total of $5.0 million. This amount was allocated to the preferred stock and warrants based on their relative fair values. The fair value of the warrants was calculated using the Black Scholes-Merton pricing model using the following weighted average assumptions, at the grant date:

Number of warrants		325,000
Exercise price	$	6.62
Expected volatility of underlying stock		74	%
Risk-free interest rate		1.62	%
Dividend yield		0	%
Expected life of warrants		8 years
Weighted-average fair value of warrants	$	3.11
Expiration date		May 2, 2020

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Quarterly Results for Continuing Operations (Tables)

12 Months Ended

Dec. 31, 2016

Quarterly Financial Information Disclosure [Abstract]

Quarterly Information for the Applicable Time Periods

The following table reflects the quarterly information for continuing operations for the applicable time periods.

	2016
	Q1			Q2		Q3			Q4			Total
Net Sales	$	8,298		$	11,444	$	8,673		$	9,397		$	37,812
Gross Profit (Loss)		91			1,226		(451	)		150		$	1,016
Net income (loss)		(2,883	)		151		(2,624	)		(1,704	)		(7,060	)
Earnings (loss) per share:
Basic	$	(0.36	)	$	0.01	$	(0.33	)	$	(0.21	)	$	(0.89	)
	2015
	Q1			Q2		Q3			Q4			Total
Net Sales	$	15,311		$	12,302	$	13,780		$	7,690		$	49,083
Gross Profit (Loss)		2,283			2,044	2561				(298	)	$	6,590
Net income (loss)	274				547		204			(3,618	)		(2,593	)
Earnings (loss) per share:
Basic	$	0.02		$	0.06	$	0.01		$	(0.45	)	$	(0.36	)

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Earnings (Loss) from Continuing Operations Per Common Share (Tables)

12 Months Ended

Dec. 31, 2016

Earnings Per Share [Abstract]

Computation of Basic and Diluted Earnings (Loss) Per Common Share

The following table sets forth the computation of basic and diluted earnings (loss) per common share (in thousands, except share and per share data):

	Year Ended December 31,
		2016		2015
Net loss**	$	(7,413)	$	(2,942)
Weighted average basic shares		8,305,764		8,241,585
Dilutive effect of stock options, restricted stock units, preferred stock and warrants*		-		-
Total weighted average diluted shares with assumed conversions		8,305,764		8,241,585
Loss from operations per common share:
Basic	$	(0.89)	$	(0.36)
Dilutive	$	(0.89)	$	(0.36)

*No units or shares are considered when losses cause the effect to be anti-dilutive.

**Net income (loss) represents net income (loss) from continuing operations less the dividends on redeemable convertible preferred stock.

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Organization and Nature of Business - Additional Information (Detail)	Dec. 31, 2016 a ft²	Dec. 31, 2014
Beaumont, Texas facilities
Organization And Nature Of Business [Line Items]
Area of Land | a	9
Company owns facility | ft²	118,000
M&I Brazil
Organization And Nature Of Business [Line Items]
Ownership interest in wholly-owned subsidiary		20.00%
M&I Brazil | M&I
Organization And Nature Of Business [Line Items]
Ownership interest in wholly-owned subsidiary		80.00%

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Summary of Significant Accounting Policies - Additional Information (Detail) $ / shares in Units, $ in Thousands		12 Months Ended
	Mar. 08, 2012 USD ($) $ / shares shares	Dec. 31, 2016 USD ($) Customer	Dec. 31, 2015 USD ($) Customer	Dec. 31, 2014 USD ($)
Schedule Of Accounting Policies [Line Items]
Bad debt expense		$ 214	$ 172
Non-time and material jobs of short term nature duration description		less than one month
Number of Customers | Customer		1	1
Geographic Concentration Risk | Sales | Gulf Coast region
Schedule Of Accounting Policies [Line Items]
Customer accountability percentage		47.00%	68.00%
Customer one | Credit Concentration Risk | Sales
Schedule Of Accounting Policies [Line Items]
Customer accountability percentage		19.00%	14.00%
Customer one | Credit Concentration Risk | Accounts Receivable
Schedule Of Accounting Policies [Line Items]
Customer accountability percentage		17.00%	3.00%
Acquired Technology | Amnor Technologies
Schedule Of Accounting Policies [Line Items]
Cash payment for acquisition	$ 100
Shares payment for acquisition | shares	44,000
Common stock, per share | $ / shares	$ 4.95
Equity Interests Issuable Period	3 years
Intangible assets acquired	$ 320
Transaction cost	$ 4
Business acquisition equity interests issued during period, percentage of shares	25.00%
Estimated useful life	3 years
Estimated useful life expiration year	2015
Acquired Technology | Amnor Technologies | General and Administrative Expense
Schedule Of Accounting Policies [Line Items]
Amortization expense related to intangible assets			$ 20
Acquired Technology | First Anniversary | Amnor Technologies
Schedule Of Accounting Policies [Line Items]
Business acquisition equity interests issued during period, percentage of shares	25.00%
Acquired Technology | Second Anniversary | Amnor Technologies
Schedule Of Accounting Policies [Line Items]
Business acquisition equity interests issued during period, percentage of shares	25.00%
Acquired Technology | Third Anniversary | Amnor Technologies
Schedule Of Accounting Policies [Line Items]
Business acquisition equity interests issued during period, percentage of shares	25.00%
Arc-resistant Technology
Schedule Of Accounting Policies [Line Items]
Intangible assets acquired				$ 220
Arc-resistant Technology | IntelliSafe Products
Schedule Of Accounting Policies [Line Items]
Estimated useful life		5 years
Intangible assets capitalized cost		$ 360
Arc-resistant Technology | Cost of Sales | IntelliSafe Products
Schedule Of Accounting Policies [Line Items]
Amortization expense related to intangible assets		$ 50

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Summary of Significant Accounting Policies - Summary of Intangible Assets (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Summary of Intangible Assets
Intangible assets, Cost	$ 898
Finite lived intangible assets, Accumulated Amortization	371
Intangible assets, Net Value	527	$ 218
License
Summary of Intangible Assets
Indefinite lived intangible assets, Net Value	$ 218
Intellectual property
Summary of Intangible Assets
Finite lived intangible assets, Useful Lives	3 years
Finite lived intangible assets, Cost	$ 322
Finite lived intangible assets, Accumulated Amortization	$ 322
License
Summary of Intangible Assets
Finite lived intangible assets, Useful Lives	5 years
Finite lived intangible assets, Cost	$ 358
Finite lived intangible assets, Accumulated Amortization	49
Finite lived intangible assets, Net Value	$ 309

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Inventories - Inventories (Detail) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Inventory Disclosure [Abstract]
Raw materials	$ 513	$ 594
Work-in-process	728	791
Inventory, Gross	1,241	1,385
Less: allowance	(60)	(60)
Total inventories	$ 1,181	$ 1,325

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Inventories - Additional Information (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Inventory Disclosure [Abstract]
Obsolete inventory expense	$ 40	$ 460

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Costs, Estimated Earnings, and Related Billings on Uncompleted Contracts - Contracts in Progress (Detail) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Contractors [Abstract]
Costs incurred on uncompleted contracts	$ 26,340	$ 31,197
Estimated earnings	1,193	10,506
Total cost and earnings of unbilled contracts	27,533	41,703
Billings on uncompleted contracts	(21,912)	(41,030)
Total Costs, estimated earnings, and related billing on uncompleted contracts	$ 5,621	$ 673

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Costs, Estimated Earnings, and Related Billings on Uncompleted Contracts - Schedule of Costs, Estimated Earnings, and Related Billing on Uncompleted Contracts (Detail) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Contractors [Abstract]
Cost and estimated earnings in excess of billings on uncompleted contracts	$ 5,829	$ 2,302
Billings in excess of costs and estimated earnings on uncompleted contracts	(208)	(1,629)
Total Costs, estimated earnings, and related billing on uncompleted contracts	$ 5,621	$ 673

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Property, Plant and Equipment - Schedule of Property, Plant and Equipment (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Property, plant and equipment
Property, plant and equipment, gross	$ 13,238	$ 13,384
Less: accumulated depreciation and amortization	6,074	5,603
Property, plant and equipment net, excluding land	7,164	7,781
Land	134	134
Property, plant and equipment, net	7,298	7,915
Buildings and improvements
Property, plant and equipment
Property, plant and equipment, gross	$ 7,972	8,083
Buildings and improvements | Minimum
Property, plant and equipment
Property, plant and equipment, Estimated Useful Lives (years)	15 years
Buildings and improvements | Maximum
Property, plant and equipment
Property, plant and equipment, Estimated Useful Lives (years)	25 years
Office equipment and furniture
Property, plant and equipment
Property, plant and equipment, gross	$ 2,135	2,126
Office equipment and furniture | Minimum
Property, plant and equipment
Property, plant and equipment, Estimated Useful Lives (years)	2 years
Office equipment and furniture | Maximum
Property, plant and equipment
Property, plant and equipment, Estimated Useful Lives (years)	7 years
Automobiles and trucks
Property, plant and equipment
Property, plant and equipment, gross	$ 157	118
Automobiles and trucks | Minimum
Property, plant and equipment
Property, plant and equipment, Estimated Useful Lives (years)	2 years
Automobiles and trucks | Maximum
Property, plant and equipment
Property, plant and equipment, Estimated Useful Lives (years)	5 years
Machinery and shop equipment
Property, plant and equipment
Property, plant and equipment, gross	$ 2,951	2,963
Machinery and shop equipment | Minimum
Property, plant and equipment
Property, plant and equipment, Estimated Useful Lives (years)	2 years
Machinery and shop equipment | Maximum
Property, plant and equipment
Property, plant and equipment, Estimated Useful Lives (years)	10 years
Construction in Progress
Property, plant and equipment
Property, plant and equipment, gross	$ 23	$ 94

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Property, Plant and Equipment - Additional Information (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Property Plant And Equipment [Line Items]
Depreciation charges	$ 880	$ 890
Cost of Sales
Property Plant And Equipment [Line Items]
Depreciation charges	740	730
Selling, General and Administrative Expenses
Property Plant And Equipment [Line Items]
Depreciation charges	$ 140	$ 160

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Advances to and Investments in Foreign Joint Ventures' Operations - Additional Information (Detail) - USD ($) $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2016	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2015	Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2016	Dec. 31, 2015	Apr. 30, 2007	Dec. 31, 2006
Schedule Of Equity Method Investments [Line Items]
Equity income from foreign joint ventures' operations									$ 530	$ 740
Dividends received									589	1,170
Net sales	$ 9,397	$ 8,673	$ 11,444	$ 8,298	$ 7,690	$ 13,780	$ 12,302	$ 15,311	37,812	49,083
Foreign joint ventures' operations related expenses									$ 245	393
BOMAY
Schedule Of Equity Method Investments [Line Items]
Equity method investment, ownership percentage	40.00%								40.00%
Investment in joint ventures											$ 1,000	$ 1,000
Equity income from foreign joint ventures' operations									$ 800	970
Dividends received									590	1,030
BOMAY | Affiliated Entity
Schedule Of Equity Method Investments [Line Items]
Net sales									110	190
Accounts receivable from foreign joint venture	$ 40				0				$ 40	0
MIEFE
Schedule Of Equity Method Investments [Line Items]
Equity method investment, ownership percentage	41.00%								41.00%
Equity income from foreign joint ventures' operations									$ (270)	(230)
Dividends received									0	140
MIEFE | Accrued in Accounts Payable and Other Liabilities
Schedule Of Equity Method Investments [Line Items]
Remaining investment from joint venture	$ 270								270
MIEFE | Affiliated Entity
Schedule Of Equity Method Investments [Line Items]
Net sales									0	50
Accounts receivable from foreign joint venture	$ 0				$ 50				$ 0	$ 50

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Advances to and Investments in Foreign Joint Ventures' Operations - Schedule of Financial Information of Foreign Joint Ventures (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
BOMAY
Assets:
Total current assets	$ 47,700	$ 68,151
Total non-current assets	3,589	4,131
Total assets	51,289	72,282
Liabilities and equity:
Total liabilities	24,196	44,415
Total joint ventures’ equity	27,093	27,867
Total liabilities and equity	51,289	72,282
Revenue	33,468	47,347
Gross Profit	6,687	8,353
Earnings	2,010	2,433
MIEFE
Assets:
Total current assets	425	2,365
Total non-current assets	17	70
Total assets	442	2,435
Liabilities and equity:
Total liabilities	551	1,930
Total joint ventures’ equity	(109)	505
Total liabilities and equity	442	2,435
Revenue	1,167	5,741
Gross Profit	481	1,112
Earnings	$ (631)	$ (567)

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Advances to and Investments in Foreign Joint Ventures' Operations - Schedule of Activity in Investment in Foreign Joint Ventures (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Investments in foreign joint ventures:
Balance, beginning of year	$ 2,047	$ 2,047
Balance, end of year	2,047	2,047
Undistributed earnings:
Balance, beginning of year	8,087	8,515
Equity in earnings (loss)	801	741
Dividend distributions	(589)	(1,169)
Balance, end of year	8,299	8,087
Foreign currency translation:
Balance, beginning of year	970	1,492
Change, during the year	(653)	(522)
Balance, end of year	317	970
Investments, end of year	10,663	11,104
BOMAY
Investments in foreign joint ventures:
Balance, beginning of year	2,033	2,033
Balance, end of year	2,033	2,033
Undistributed earnings:
Balance, beginning of year	8,098	8,157
Equity in earnings (loss)	804	973
Dividend distributions	(589)	(1,032)
Balance, end of year	8,313	8,098
Foreign currency translation:
Balance, beginning of year	765	1,358
Change, during the year	(661)	(593)
Balance, end of year	104	765
Investments, end of year	10,450	10,896
MIEFE
Investments in foreign joint ventures:
Balance, beginning of year	14	14
Balance, end of year	14	14
Undistributed earnings:
Balance, beginning of year	(11)	358
Equity in earnings (loss)	(3)	(232)
Dividend distributions		(137)
Balance, end of year	(14)	(11)
Foreign currency translation:
Balance, beginning of year	205	134
Change, during the year	8	71
Balance, end of year	213	205
Investments, end of year	$ 213	$ 208

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Advances to and Investments in Foreign Joint Ventures' Operations - Schedule of Activity in Investment in Foreign Joint Ventures (Parenthetical) (Detail) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Equity Method Investments
Schedule Of Equity Method Investments [Line Items]
Accumulated statutory reserves in equity method investments	$ 2,887	$ 2,722

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Income Taxes - Components of Income (Loss) before Income Taxes and Dividends on Preferred Stock (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Components of income (loss) before income taxes
United States	$ (7,545)	$ (2,906)
Foreign	529	741
Income (loss) before income taxes	$ (7,016)	$ (2,165)

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Income Taxes - Components of Provision (Benefit) for Income Taxes by Taxing Authority (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Current provision:
Federal		$ 443
Foreign	$ 119	131
Total current provision	119	574
Deferred provision (benefit):
Federal	(24)	(114)
States	(51)	(32)
Total deferred provision (benefit):	(75)	(146)
Total provision (benefit) for income taxes	$ 44	$ 428

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Income Taxes - Components of Deferred Federal Income Taxes (Detail) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Deferred tax assets:
Accrued liabilities	$ 15	$ 22
Deferred compensation	1,113	936
Allowance for doubtful accounts	101	73
Inventory	83	73
Net operating loss	6,528	4,137
Property and equipment	143	123
Foreign tax credit carry forward	3,297	3,226
Deferred tax assets	11,280	8,590
Deferred tax liabilities:
Valuation allowance	(11,280)	(8,590)
Equity in foreign investments	(2,824)	(2,755)
Translation gain		(309)
Deferred tax liabilities	(14,104)	(11,654)
Net deferred tax assets (liabilities)	$ (2,824)	$ (3,064)

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Income Taxes - Additional Information (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2011
Income Taxes [Line Items]
Recognition of a valuation allowance against deferred tax assets in the U.S	$ 11,280	$ 8,590
Net operating loss carry forwards, federal	17,300
Net operating loss carry forwards, state	$ 14,000
Income tax examination, year under examination	2008
Annual net operating loss carry forward limitation expiration year	2027
Effective tax rate	34.00%	34.00%
Annual Net Operating Loss Carry Forward Limitation
Income Taxes [Line Items]
Net operating loss carry forwards related to business combination	$ 7,400
Annual Net Operating Loss Carry Forward Limitation | U.S. federal | Internal Revenue Service (IRS)
Income Taxes [Line Items]
Net operating loss carry forwards subject to expiration			$ 299
Earliest Tax Year
Income Taxes [Line Items]
Operating loss carry forwards expiration date	Dec. 31, 2019
Latest Tax Year
Income Taxes [Line Items]
Operating loss carry forwards expiration date	Dec. 31, 2032

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Income Taxes - Summary of Difference Between Effective Income Tax Rate Determined by Applying Statutory Income Tax Rate (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Summary of difference between effective income tax rate determined by applying statutory income tax rate
(Provision for) benefit from U.S federal statutory rate	$ 2,385	$ 736
Effect of state income taxes	51	32
Non-deductible business meals and entertainment expenses	(11)	(16)
Foreign income taxes included in equity in earnings	140	269
Accrual to return adjustments and other	81	(653)
Change in valuation allowance	(2,690)	(796)
Total expense	$ (44)	$ (428)

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Notes Payable - Components of Notes Payable (Detail) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Components of notes payable
Current portion of long-term notes payable	$ 1,500	$ 1,043
Long-term notes payable	3,900	4,200
Total revolving credit agreement	5,700	5,543
Revolving Credit Facility
Components of notes payable
Total notes payable	1,500	1,043
Total revolving credit agreement	5,700	5,540
Facility B
Components of notes payable
Current portion of long-term notes payable	300	300
Long-term notes payable	$ 3,900	$ 4,200

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Notes Payable - Schedule of Principal Payments of Debt (Detail) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Debt Disclosure [Abstract]
2017	$ 1,800
2018	300
2019	300
2020	3,300
Total revolving credit agreement	$ 5,700	$ 5,543

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Notes Payable - Additional Information (Detail)			12 Months Ended
	Mar. 23, 2017 USD ($)	Dec. 29, 2015 USD ($) CreditFacility	Dec. 31, 2016 USD ($)	Dec. 31, 2015 USD ($)
Debt Instrument [Line Items]
Borrowings outstanding			$ 5,700,000	$ 5,543,000
Revolving Credit Facility
Debt Instrument [Line Items]
Line of credit facility, agreement date			Dec. 29, 2015
Number of revolving credit facilities | CreditFacility		2
Additional borrowing capacity			$ 0
Credit facility's interest rate, Description			Interest rate on both facilities is the three month LIBOR (0.98% at December 31, 2016) plus 4.00% per year.
Leverage test of total liabilities to total net worth		1.25
Borrowings outstanding			$ 5,700,000	$ 5,540,000
Revolving Credit Facility | Minimum
Debt Instrument [Line Items]
Fixed charge coverage ratio		125.00%
Revolving Credit Facility | London Interbank Offered Rate (LIBOR)
Debt Instrument [Line Items]
Debt instrument variable interest rate			0.98%
Credit facility's interest rate		4.00%
Facility A
Debt Instrument [Line Items]
Line of credit facility, maximum borrowing capacity		$ 4,000,000
Line of credit term		2 years
Revolving credit agreement maturity date		Dec. 29, 2017
Amount borrowed under revolving credit facility		$ 1,040,000	$ 1,500,000
Letter of credit outstanding amount			1,250,000
Facility B
Debt Instrument [Line Items]
Line of credit facility, maximum borrowing capacity		$ 4,500,000
Revolving credit agreement maturity date		Dec. 29, 2020
Amount borrowed under revolving credit facility		$ 4,500,000	$ 4,200,000
Line of credit facility, borrowing capacity, description			The amount available to borrow under Facility B declines from the initial $4.50 million by $0.15 million each six months.
Revolving line of credit decline term			6 months
Decline in revolving line of credit		$ 150,000
Senior Secured Term Note | Subsequent Event
Debt Instrument [Line Items]
Debt principal amount	$ 7,000,000
Proceeds from debt used as working capital	1,000,000
Debt principal periodic payment amount	$ 500,000
Debt instrument, interest payment frequency	Monthly interest only payments
Debt instrument, payment terms	The Note is payable in monthly interest only payments, in arrears, with $0.50 million of principal repayable no later than June 30, 2017 and the balance due March 23, 2021.
Fixed interest rate	11.50%

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Leases - Additional Information (Detail) $ in Thousands	3 Months Ended	12 Months Ended
	Mar. 31, 2014	Dec. 31, 2016 USD ($)	Dec. 31, 2015 USD ($)	Dec. 31, 2013 ft²
Leases [Abstract]
Lease covered area | ft²				13,000
Term of lease	64 months
Lease expiration year		2021
Rental expense | $		$ 700	$ 680

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Leases (Detail) $ in Thousands	Dec. 31, 2016 USD ($)
Schedule of future minimum rental payments under operating leases
2017	$ 698
2018	631
2019	438
2020	241
2021	215
Total	$ 2,223

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Stock and Stock-based Compensation - Additional Information (Detail) - USD ($) $ in Thousands	1 Months Ended		12 Months Ended
	Feb. 28, 2017	Dec. 31, 2016	Dec. 31, 2016	Dec. 31, 2015	May 31, 2014
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Common stock issued to ESPP, shares			8,142	5,668
Additional compensation cost that will be recognized in future periods		$ 930	$ 930
Director
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Stock units reserved for issuance in lieu of retainer fee			31,000	29,400
Minimum | Director
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Percentage of retainer fee to acquire common stock			50.00%
Maximum | Director
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Percentage of retainer fee to acquire common stock			100.00%
Restricted Stock Units (RSUs)
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Conversion of stock RSU to Common, ratio		100.00%	100.00%
Convert to common stock		25.00%	25.00%
Increment period for awards converted into common stock			4 years
Stock compensation expense			$ 490	$ 460
Weighted average period additional compensation cost will be expensed			2 years
Granted restricted stock unit			31,327	231,356
Restricted Stock Units (RSUs) | Subsequent Event
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Granted restricted stock unit	395,000
Restricted Stock Units (RSUs) | Award Subject to 2017 Performance Measures | Subsequent Event
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Granted restricted stock unit	332,000
Restricted Stock Units (RSUs) | Two Thousand Seven Employee Stock Incentive Plan
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Shares available for issuance under the plan					1,700,000
Restricted Stock Units (RSUs) | Two Thousand Sixteen Employee Stock Incentive Plan
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Vesting percentage		75.00%
Board of Directors Compensation | Director | General and Administrative Expense
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Stock compensation expense			$ 150	$ 180

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Stock and Stock-based Compensation - Summary of Unvested Restricted Stock Units (Detail) - Restricted Stock Units (RSUs) - $ / shares	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Summary of unvested restricted stock units
Unvested restricted stock units, Beginning Balance	315,847	168,642
Granted restricted stock unit	31,327	231,356
Vested	(105,443)	(72,298)
Forfeited	(23,319)	(11,853)
Unvested restricted stock units, Ending Balance	218,412	315,847
Weighted Average Fair Value Per RSU, Beginning Balance	$ 3.99	$ 4.88
Awarded	2.81	3.47
Vested	4.66	4.44
Forfeited	5.12	4.55
Weighted Average Fair Value Per RSU, Ending Balance	$ 4.28	$ 3.99

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Redeemable Convertible Preferred Stock - Additional Information (Detail)		12 Months Ended
	May 02, 2012 USD ($)	Dec. 31, 2016 USD ($) Installment $ / shares shares	Dec. 31, 2015 USD ($) $ / shares shares	Apr. 30, 2012 shares	Apr. 13, 2012 $ / shares shares
Temporary Equity [Line Items]
Redeemable convertible preferred stock, shares issued		1,000,000	1,000,000
Common stock, shares issued		8,499,508	8,385,929		1,000,000
Number of warrants		325,000
Redeemable convertible preferred stock, shares authorized		1,000,000	1,000,000
Preferred stock and warrants value issued | $	$ 5,000,000
Warrants value | $		$ 840,000
Accretion amount | $		$ 50,000	$ 50,000
Warrants Exercise Price Tranche One
Temporary Equity [Line Items]
Warrant exercise price per share | $ / shares					$ 6.00
Number of warrants					125,000
Warrants Exercise Price Tranche Two
Temporary Equity [Line Items]
Warrant exercise price per share | $ / shares					$ 7.00
Number of warrants					200,000
Securities Purchase Agreement
Temporary Equity [Line Items]
Number of warrants					325,000
Series A Convertible Preferred Stock
Temporary Equity [Line Items]
Redeemable convertible preferred stock, stock price per share | $ / shares					$ 5.00
Redeemable convertible preferred stock, shares authorized				1,000,000
Cumulative dividends at a rate		6.00%
Preferred stock value | $	$ 4,160,000
Series A Convertible Preferred Stock | Accounts Payable and Other Accrued Expenses
Temporary Equity [Line Items]
Total accrued but unpaid dividends | $		$ 230,000	$ 230,000
Series A Convertible Preferred Stock | Scenario, Plan
Temporary Equity [Line Items]
Redeemable convertible preferred stock, liquidation preference per share | $ / shares		$ 5.00
Number of redemption price, accrued and unpaid dividends installment payments | Installment		36
Annual interest rate on redemption value payable		6.00%
Redemption price per share | $ / shares		$ 5.00	$ 5.00
Series A Convertible Preferred Stock | Scenario, Plan | Maximum
Temporary Equity [Line Items]
Majority outstanding shares redeemable date		Apr. 30, 2017
Series A Convertible Preferred Stock | Securities Purchase Agreement
Temporary Equity [Line Items]
Redeemable convertible preferred stock, shares issued					1,000,000
Warrant exercise price per share | $ / shares					$ 5.00

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Redeemable Convertible Preferred Stock - Preferred Stock and Warrants Calculated Using the Black Scholes Merton Pricing Model (Detail)	12 Months Ended
	Dec. 31, 2016 $ / shares shares
Preferred stock and warrants calculated using the Black Scholes Merton pricing model
Number of warrants | shares	325,000
Expiration date	May 02, 2020
Warrant
Preferred stock and warrants calculated using the Black Scholes Merton pricing model
Exercise price	$ 6.62
Expected volatility of underlying stock	74.00%
Risk-free interest rate	1.62%
Dividend yield	0.00%
Expected life of warrants	8 years
Weighted-average fair value of warrants	$ 3.11

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Employee Benefit and Bonus Plans - Additional Information (Detail)	12 Months Ended
	Dec. 31, 2016 USD ($) Employees	Dec. 31, 2015 USD ($)
Defined Contribution Pension and Other Postretirement Plans Disclosure [Abstract]
Contributions to the plan	$ 0	$ 0
Executive Performance
Defined Contribution Pension and Other Postretirement Plans Disclosure [Abstract]
Number of employees who are covering executive performance of bonus plan | Employees	43
Accrued expenses	$ 490,000	$ 460,000

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Related Party Transactions - Additional Information (Detail) - USD ($)	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Director
Related Party Transactions (Textual) [Abstract]
Outstanding payable balance for services rendered by law firm	$ 40,000	$ 0
Former Executive Chairman of Board of Directors | Labor And Related Compensation
Related Party Transactions (Textual) [Abstract]
Compensation amount	$ 0	130,000
Percentage of amendment bonus	1.00%
Employment agreement expiration year	2015
General and Administrative Expense | Director
Related Party Transactions (Textual) [Abstract]
Expenses related to legal advice	$ 70,000	50,000
General and Administrative Expense | Former Executive Chairman of Board of Directors
Related Party Transactions (Textual) [Abstract]
Compensation amount included in general and administrative expenses		$ 130,000

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Segment Reporting - Additional Information (Detail)	12 Months Ended
	Dec. 31, 2016 Segment
Segment Reporting [Abstract]
Number of segments	1

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Quarterly Results for Continuing Operations - Quarterly Information for the Applicable Time Periods (Detail) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2016	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2015	Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2016	Dec. 31, 2015
Quarterly information for the applicable time periods
Net sales	$ 9,397	$ 8,673	$ 11,444	$ 8,298	$ 7,690	$ 13,780	$ 12,302	$ 15,311	$ 37,812	$ 49,083
Gross Profit (Loss)	150	(451)	1,226	91	(298)	2,561	2,044	2,283	1,016	6,590
Net income (loss)	$ (1,704)	$ (2,624)	$ 151	$ (2,883)	$ (3,618)	$ 204	$ 547	$ 274	$ (7,060)	$ (2,593)
Earnings (loss) per share:
Basic	$ (0.21)	$ (0.33)	$ 0.01	$ (0.36)	$ (0.45)	$ 0.01	$ 0.06	$ 0.02	$ (0.89)	$ (0.36)

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Commitments and Contingencies - Additional Information (Detail) - Medical And Hospitalization Insurance Program - USD ($)	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Loss Contingencies [Line Items]
Minimum insurance premium	$ 1,070,000	$ 1,160,000
Insurance reserves	20,000	$ 0
Liable for secured line of credit facility	1,250,000
Maximum
Loss Contingencies [Line Items]
Liable for all claims per insured annual amount	70,000
Liable for all claims per insured aggregate amount	$ 1,700,000

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Earnings (Loss) from Continuing Operations Per Common Share - Computation of Basic and Diluted Earnings (Loss) Per Common Share (Detail) - USD ($) $ / shares in Units, $ in Thousands		12 Months Ended
		Dec. 31, 2016	Dec. 31, 2015
Earnings Per Share [Abstract]
Net loss	[1],[2]	$ (7,413)	$ (2,942)
Weighted average basic shares		8,305,764	8,241,585
Total weighted average diluted shares with assumed conversions		8,305,764	8,241,585
Loss from operations per common share:
Basic		$ (0.89)	$ (0.36)
Dilutive		$ (0.89)	$ (0.36)

[1] Net income (loss) represents net income (loss) from continuing operations less the dividends on redeemable convertible preferred stock.

[2] Net of preferred dividends of $353 and $349 in 2016 and 2015, respectively.

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Sale of South Coast Electric Assets - Additional Information (Detail) - Bay St. Louis, MS Manufacturing Facility $ in Thousands	Jun. 24, 2016 USD ($)
Long Lived Assets Held For Sale [Line Items]
Gain on sale of facility	$ 180
Gain on sale of fixed assets	70
Gain on sale of inventory	$ 110

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Subsequent Event - Additional Information (Detail) - Subsequent Event - Senior Secured Term Note $ in Thousands	Mar. 23, 2017 USD ($)
Subsequent Event [Line Items]
Debt principal amount	$ 7,000
Debt instrument, interest payment frequency	Monthly interest only payments
Fixed interest rate	11.50%
Debt principal periodic payment amount	$ 500
Proceeds from debt used as working capital	$ 1,000