UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended August 31,November 30, 2021
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. 001-04978
SOLITRON DEVICES, INC. |
(Exact Name of Registrant as Specified in Its Charter) |
Delaware |
| 22-1684144 |
(State or Other Jurisdiction of |
| (I.R.S. Employer |
Incorporation or Organization) |
| Identification No.) |
|
| |
3301 Electronics Way, West Palm Beach, Florida |
| 33407 |
(Address of Principal Executive Offices) |
| (Zip Code) |
(561) 848‑4311
(Registrant’s Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act: NoneNone.
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 every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,”company” and “emerging"emerging growth company”company" in Rule 12b-2 of the Exchange Act. (Check one)
Large accelerated filer | ☐ | Accelerated filer | ☐ |
Non-accelerated filer | ☐ | Smaller reporting company | ☒ |
|
| Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The number of shares of the registrant’s common stock, $0.01 par value, outstanding as of September 30,January 10, 2021, was 2,083,462.2,083,452.
SOLITRON DEVICES, INC.
TABLE OF CONTENTS
2 |
PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SOLITRON DEVICES, INC. | SOLITRON DEVICES, INC. | SOLITRON DEVICES, INC. | ||||||||||||||
BALANCE SHEETS | BALANCE SHEETS | BALANCE SHEETS | ||||||||||||||
AS OF AUGUST 31, 2021 AND FEBRUARY 28, 2021 | ||||||||||||||||
AS OF NOVEMBER 30, 2021 AND FEBRUARY 28, 2021 | AS OF NOVEMBER 30, 2021 AND FEBRUARY 28, 2021 | |||||||||||||||
(in thousands, except for share and per share amounts) | (in thousands, except for share and per share amounts) | (in thousands, except for share and per share amounts) | ||||||||||||||
|
|
|
|
|
| |||||||||||
|
| August 31, 2021 |
|
| February 28, 2021 |
|
| November 30, 2021 |
|
| February 28, 2021 |
| ||||
|
| (unaudited) |
|
|
| Unaudited |
|
|
| |||||||
ASSETS |
|
|
|
|
|
|
|
|
|
| ||||||
CURRENT ASSETS |
|
|
|
|
|
|
|
|
|
| ||||||
Cash and cash equivalents |
| 4,482 |
| 3,785 |
|
| 5,247 |
| 3,785 |
| ||||||
Marketable securities |
| 334 |
| 248 |
|
| 435 |
| 248 |
| ||||||
Accounts receivable |
| 2,085 |
| 1,306 |
|
| 1,445 |
| 1,306 |
| ||||||
Inventories, net |
| 2,505 |
| 2,721 |
|
| 2,517 |
| 2,721 |
| ||||||
Prepaid expenses and other current assets |
|
| 339 |
|
|
| 372 |
|
|
| 435 |
|
|
| 372 |
|
TOTAL CURRENT ASSETS |
| 9,745 |
| 8,432 |
|
| 10,079 |
| 8,432 |
| ||||||
|
|
|
|
|
|
|
|
|
|
| ||||||
Property, plant and equipment, net |
| 4,903 |
| 281 |
|
| 4,837 |
| 281 |
| ||||||
Operating lease - right-of-use asset |
| 138 |
| 340 |
|
| 35 |
| 340 |
| ||||||
Other assets |
|
| 88 |
|
|
| 40 |
|
|
| 224 |
|
|
| 40 |
|
TOTAL ASSETS |
|
| 14,874 |
|
|
| 9,093 |
|
|
| 15,175 |
|
|
| 9,093 |
|
|
|
|
|
|
|
|
|
|
|
| ||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
|
| ||||||
CURRENT LIABILITIES |
|
|
|
|
|
|
|
|
|
| ||||||
Accounts payable |
| 323 |
| 165 |
|
| 291 |
| 165 |
| ||||||
Customer deposits |
| 24 |
| 49 |
|
| 24 |
| 49 |
| ||||||
Operating lease liability |
| 153 |
| 377 |
|
| 39 |
| 377 |
| ||||||
Finance lease liability |
| 9 |
| 9 |
|
| 9 |
| 9 |
| ||||||
Notes payable (PPP loan) |
| 0 |
| 43 |
|
| 0 |
| 43 |
| ||||||
Mortgage loan |
| 100 |
| 0 |
|
| 100 |
| 0 |
| ||||||
Accrued expenses and other current liabilities |
|
| 1,040 |
|
|
| 740 |
|
|
| 1,023 |
|
|
| 740 |
|
TOTAL CURRENT LIABILITIES |
| 1,649 |
| 1,383 |
|
| 1,486 |
| 1,383 |
| ||||||
|
|
|
|
|
|
|
|
|
|
| ||||||
Notes payable (PPP loan), net of current |
| 0 |
| 764 |
|
| 0 |
| 764 |
| ||||||
Mortgage loan, net of current |
| 2,807 |
| 0 |
|
| 2,783 |
| 0 |
| ||||||
Finance lease liability, net of current |
|
| 8 |
|
|
| 13 |
|
|
| 6 |
|
|
| 13 |
|
TOTAL LIABILITIES |
| 4,464 |
| 2,160 |
|
| 4,275 |
| 2,160 |
| ||||||
|
|
|
|
|
|
|
|
|
|
| ||||||
STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
|
| ||||||
Preferred stock, $.01par value, authorized 500,000shares, none issued |
| 0 |
| 0 |
| |||||||||||
Common stock, $.01par value, authorized 10,000,000shares, 2,083,462shares outstanding, net of 487,801treasury shares at August 31, 2021 and February 28, 2021 |
| 21 |
| 21 |
| |||||||||||
Preferred stock, $.01 par value, authorized 500,000shares, none issued |
| 0 |
| 0 |
| |||||||||||
Common stock, $.01 par value, authorized 10,000,000 shares, 2,083,452 shares outstanding, net of 487,811 treasury shares at November 30, 2021 and 2,083,462 shares outstanding, net of 487,801 treasury shares at February 28, 2021, respectively |
| 21 |
| 21 |
| |||||||||||
Additional paid-in capital |
| 1,834 |
| 1,834 |
|
| 1,834 |
| 1,834 |
| ||||||
Retained Earnings |
| 9,967 |
| 6,490 |
|
| 10,457 |
| 6,490 |
| ||||||
Less treasury stock |
|
| (1,412 | ) |
|
| (1,412 | ) |
|
| (1,412 | ) |
|
| (1,412 | ) |
TOTAL STOCKHOLDERS’ EQUITY |
|
| 10,410 |
|
|
| 6,933 |
|
|
| 10,900 |
|
|
| 6,933 |
|
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
| 14,874 |
|
|
| 9,093 |
|
|
| 15,175 |
|
|
| 9,093 |
|
The accompanying notes are an integral part of the unaudited financial statements.
3 |
Table of Contents |
SOLITRON DEVICES, INC. | SOLITRON DEVICES, INC. | SOLITRON DEVICES, INC. | ||||||||||||||||||||||||||||||
STATEMENTS OF OPERATIONS | STATEMENTS OF OPERATIONS | STATEMENTS OF OPERATIONS | ||||||||||||||||||||||||||||||
FOR THE THREE AND SIX MONTHS ENDED AUGUST 31, 2021 AND AUGUST 31, 2020 | ||||||||||||||||||||||||||||||||
FOR THE THREE AND NINE MONTHS ENDED NOVEMBER 30, 2021 AND NOVEMBER 30, 2020 | FOR THE THREE AND NINE MONTHS ENDED NOVEMBER 30, 2021 AND NOVEMBER 30, 2020 | |||||||||||||||||||||||||||||||
(Unaudited, in thousands except for share and per share amounts) | (Unaudited, in thousands except for share and per share amounts) | (Unaudited, in thousands except for share and per share amounts) | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
|
| For the three months ended |
|
| For the three months ended |
|
| For the six months ended |
|
| For the six months ended |
|
| For the three months ended |
|
| For the three months ended |
|
| For the nine months ended |
|
| For the nine months ended |
| ||||||||
|
| August 31, 2021 |
|
| August 31, 2020 |
|
| August 31, 2021 |
|
| August 31, 2020 |
|
| November 30, 2021 |
|
| November 30, 2020 |
|
| November 30, 2021 |
|
| November 30, 2020 |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Net sales |
| 4,230 |
| 3,103 |
| 7,840 |
| 5,601 |
|
| 2,468 |
| 2,312 |
| 10,308 |
| 7,913 |
| ||||||||||||||
Cost of sales |
|
| 2,010 |
|
|
| 1,978 |
|
|
| 3,956 |
|
|
| 3,620 |
|
|
| 1,672 |
|
|
| 1,799 |
|
|
| 5,628 |
|
|
| 5,419 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Gross profit |
| 2,220 |
| 1,125 |
| 3,884 |
| 1,981 |
|
| 796 |
| 513 |
| 4,680 |
| 2,494 |
| ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Selling, general and administrative expenses |
|
| 659 |
|
|
| 526 |
|
|
| 1,373 |
|
|
| 1,012 |
|
|
| 497 |
|
|
| 575 |
|
|
| 1,870 |
|
|
| 1,587 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Operating income |
|
| 1,561 |
|
|
| 599 |
|
|
| 2,511 |
|
|
| 969 |
|
|
| 299 |
|
|
| (62 | ) |
|
| 2,810 |
|
|
| 907 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Other income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Interest expense |
| (26 | ) |
| 0 |
| (46 | ) |
| 0 |
|
| (28 | ) |
| 0 |
| (74 | ) |
| 0 |
| ||||||||||
Dividend income |
| 1 |
| 1 |
| 1 |
| 7 |
|
| 1 |
| 0 |
| 2 |
| 7 |
| ||||||||||||||
Realized gain (loss) on investments |
| (1 | ) |
| 11 |
| 26 |
| 26 |
|
| 41 |
| 9 |
| 67 |
| 35 |
| |||||||||||||
Unrealized gain (loss) on investments |
| 21 |
| 24 |
| 1 |
| 2 |
|
| (8 | ) |
| 26 |
| (7 | ) |
| 28 |
| ||||||||||||
Other, net |
|
| 894 |
|
|
| 0 |
|
|
| 984 |
|
|
| 0 |
| ||||||||||||||||
Gain on PPP loan forgiveness |
| 0 |
| 0 |
| 812 |
| 0 |
| |||||||||||||||||||||||
Scrap income |
|
| 185 |
|
|
| 0 |
|
|
| 357 |
|
|
| 0 |
| ||||||||||||||||
Total other income (loss) |
|
| 889 |
|
|
| 36 |
|
|
| 966 |
|
|
| 35 |
|
|
| 191 |
|
|
| 35 |
|
|
| 1,157 |
|
|
| 70 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Net income |
|
| 2,450 |
|
|
| 635 |
|
|
| 3,477 |
|
|
| 1,004 |
| ||||||||||||||||
Net income (loss) |
|
| 490 |
|
|
| (27 | ) |
|
| 3,967 |
|
|
| 977 |
| ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Net income per common share-basic and diluted |
| $ | 1.18 |
|
| $ | 0.31 |
|
| $ | 1.67 |
|
| $ | 0.49 |
| ||||||||||||||||
Net income (loss) per common share - basic and diluted |
| $ | 0.24 |
|
| $ | (0.01 | ) |
| $ | 1.90 |
|
| $ | 0.47 |
| ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Weighted average common shares outstanding |
|
| 2,083,462 |
|
|
| 2,060,457 |
|
|
| 2,083,462 |
|
|
| 2,061,703 |
|
|
| 2,083,452 |
|
|
| 2,064,754 |
|
|
| 2,083,459 |
|
|
| 2,062,713 |
|
The accompanying notes are an integral part of the unaudited financial statements.
4 |
Table of Contents |
SOLITRON DEVICES, INC. | SOLITRON DEVICES, INC. | SOLITRON DEVICES, INC. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY | STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY | STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
FOR THE THREE AND SIX MONTHS ENDED AUGUST 31, 2021 AND AUGUST 31, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
FOR THE THREE AND NINE MONTHS ENDED NOVEMBER 30, 2021 AND NOVEMBER 30, 2020 | FOR THE THREE AND NINE MONTHS ENDED NOVEMBER 30, 2021 AND NOVEMBER 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
(Unaudited, in thousands, except for number of shares) | (Unaudited, in thousands, except for number of shares) | (Unaudited, in thousands, except for number of shares) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
| |||||||||||||||||||||||||||||||||
|
| Common Stock |
| Treasury Stock |
| Additional |
|
|
|
|
|
| Common Stock |
| Additional |
| Treasury |
|
|
|
| |||||||||||||||||||||||||||||||||||
|
| Number |
|
|
| Treasury |
|
|
| Paid-in |
| Retained |
|
|
|
| Number |
| Treasury |
|
| Paid-in |
| Stock |
| Retained |
|
| ||||||||||||||||||||||||||||
|
| of Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Capital |
|
| Earnings |
|
| Total |
|
| of Shares |
|
| Shares |
|
| Amount |
|
| Capital |
|
| Amount |
|
| Earnings |
|
| Total |
| ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||
Balance, February 29, 2020 |
| 2,571,263 |
| $ | 21 |
| (508,314 | ) |
| $ | (1,481 | ) |
| $ | 1,834 |
| $ | 5,109 |
| $ | 5,483 |
|
| 2,571,263 |
| (508,314 | ) |
| $ | 21 |
| $ | 1,834 |
| $ | (1,481 | ) |
| $ | 5,109 |
| $ | 5,483 |
| ||||||||||||
Net income |
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| 0 |
|
|
| 369 |
|
|
| 369 |
|
|
| - |
|
|
| - |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 369 |
|
|
| 369 |
|
Balance, May 31, 2020 |
|
| 2,571,263 |
|
|
| 21 |
|
|
| (508,314 | ) |
|
| (1,481 | ) |
|
| 1,834 |
|
|
| 5,478 |
|
|
| 5,852 |
|
|
| 2,571,263 |
|
|
| (508,314 | ) |
| $ | 21 |
|
| $ | 1,834 |
|
| $ | (1,481 | ) |
| $ | 5,478 |
|
| $ | 5,852 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||
Purchase of Common Stock |
| - |
| 0 |
| (2,493 | ) |
| (6 | ) |
| 0 |
| 0 |
| (6 | ) |
| - |
| (2,493 | ) |
| 0 |
| 0 |
| (6 | ) |
| 0 |
| (6 | ) | ||||||||||||||||||||||
Net income |
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| 0 |
|
|
| 635 |
|
|
| 635 |
|
|
| - |
|
|
| - |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 635 |
|
|
| 635 |
|
Balance, August 31, 2020 |
|
| 2,571,263 |
|
| $ | 21 |
|
|
| (510,807 | ) |
| $ | (1,487 | ) |
| $ | 1,834 |
|
| $ | 6,113 |
|
| $ | 6,481 |
|
|
| 2,571,263 |
|
|
| (510,807 | ) |
| $ | 21 |
|
| $ | 1,834 |
|
| $ | (1,487 | ) |
| $ | 6,113 |
|
| $ | 6,481 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||
Stock based compensation |
| - |
| 23,006 |
| 0 |
| 0 |
| 75 |
| 0 |
| 75 |
| |||||||||||||||||||||||||||||||||||||||||
Net (loss) |
|
| - |
|
|
| - |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| (27 | ) |
|
| (27 | ) | ||||||||||||||||||||||||||||
Balance, November 30, 2020 |
|
| 2,571,263 |
|
|
| (487,801 | ) |
| $ | 21 |
|
| $ | 1,834 |
|
| $ | (1,412 | ) |
| $ | 6,086 |
|
| $ | 6,529 |
| ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||
Balance, February 28, 2021 |
| 2,571,263 |
| $ | 21 |
| (487,801 | ) |
| $ | (1,412 | ) |
| $ | 1,834 |
| $ | 6,490 |
| $ | 6,933 |
|
| 2,571,263 |
| (487,801 | ) |
| $ | 21 |
| $ | 1,834 |
| $ | (1,412 | ) |
| $ | 6,490 |
| $ | 6,933 |
| ||||||||||||
Net income |
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| 0 |
|
|
| 1,027 |
|
|
| 1,027 |
|
|
| - |
|
|
| - |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 1,027 |
|
|
| 1,027 |
|
Balance, May 31, 2021 |
|
| 2,571,263 |
|
|
| 21 |
|
|
| (487,801 | ) |
|
| (1,412 | ) |
|
| 1,834 |
|
|
| 7,517 |
|
|
| 7,960 |
|
|
| 2,571,263 |
|
|
| (487,801 | ) |
| $ | 21 |
|
| $ | 1,834 |
|
| $ | (1,412 | ) |
| $ | 7,517 |
|
| $ | 7,960 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||
Net income |
|
| - |
|
|
| 0 |
|
|
| - |
|
|
| 0 |
|
|
| 0 |
|
|
| 2,450 |
|
|
| 2,450 |
|
|
| - |
|
|
| - |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 2,450 |
|
|
| 2,450 |
|
Balance, August 31, 2021 |
|
| 2,571,263 |
|
| $ | 21 |
|
|
| (487,801 | ) |
| $ | (1,412 | ) |
| $ | 1,834 |
|
| $ | 9,967 |
|
| $ | 10,410 |
|
|
| 2,571,263 |
|
|
| (487,801 | ) |
| $ | 21 |
|
| $ | 1,834 |
|
| $ | (1,412 | ) |
| $ | 9,967 |
|
| $ | 10,410 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||
Transfer Agent Adjustment of Common Stock |
| - |
| (10 | ) |
| 0 |
| 0 |
| 0 |
| 0 |
| 0 |
| ||||||||||||||||||||||||||||||||||||||||
Net income |
|
| - |
|
|
| - |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 490 |
|
|
| 490 |
| ||||||||||||||||||||||||||||
Balance, November 30, 2021 |
|
| 2,571,263 |
|
|
| (487,811 | ) |
| $ | 21 |
|
| $ | 1,834 |
|
| $ | (1,412 | ) |
| $ | 10,457 |
|
| $ | 10,900 |
|
The accompanying notes are an integral part of the unaudited financial statements.statements
5 |
Table of Contents |
SOLITRON DEVICES, INC. | SOLITRON DEVICES, INC. | SOLITRON DEVICES, INC. | ||||||||||||||
STATEMENTS OF CASH FLOWS | STATEMENTS OF CASH FLOWS | STATEMENTS OF CASH FLOWS | ||||||||||||||
FOR THE SIX MONTHS ENDED AUGUST 31, 2021 AND AUGUST 31, 2020 | ||||||||||||||||
FOR THE NINE MONTHS ENDED NOVEMBER 30, 2021 AND NOVEMBER 30, 2020 | FOR THE NINE MONTHS ENDED NOVEMBER 30, 2021 AND NOVEMBER 30, 2020 | |||||||||||||||
(Unaudited, in thousands) | (Unaudited, in thousands) | (Unaudited, in thousands) | ||||||||||||||
|
| August 31, 2021 |
|
| August 31, 2020 |
|
| November 30, 2021 |
|
| November 30, 2020 |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||||
Net income |
| $ | 3,477 |
| 1,004 |
|
| $ | 3,967 |
| 977 |
| ||||
Adjustments to reconcile net income (loss) to net cash used in operating activities: |
|
|
|
|
|
|
|
|
|
| ||||||
Depreciation and amortization |
| 124 |
| 119 |
|
| 193 |
| 179 |
| ||||||
Operating lease expense |
| 202 |
| 188 |
|
| 305 |
| 285 |
| ||||||
Net realized and unrealized (gains) on investments |
| (27 | ) |
| (28 | ) |
| (60 | ) |
| (63 | ) | ||||
Stock based compensation |
| 0 |
| 75 |
| |||||||||||
PPP loan forgiveness |
| (812 | ) |
| 0 |
|
| (812 | ) |
| 0 |
| ||||
Changes in Operating Assets and Liabilities: |
|
|
|
|
|
|
|
|
|
| ||||||
Accounts receivable |
| (779 | ) |
| (403 | ) |
| (139 | ) |
| 213 |
| ||||
Inventories |
| 216 |
| (298 | ) |
| 204 |
| (183 | ) | ||||||
Prepaid expenses and other current assets |
| 33 |
| (131 | ) |
| (63 | ) |
| (72 | ) | |||||
Other assets |
| (48 | ) |
| 1 |
|
| (184 | ) |
| 0 |
| ||||
Payments on operating lease liabilities |
| (224 | ) |
| (204 | ) |
| (338 | ) |
| (308 | ) | ||||
Payments on capital lease liabilities |
| (5 | ) |
| 0 |
|
| (7 | ) |
| 0 |
| ||||
Accounts payable |
| 158 |
| 54 |
|
| 126 |
| 49 |
| ||||||
Customer deposits |
| (25 | ) |
| (24 | ) |
| (25 | ) |
| (22 | ) | ||||
Accrued expenses, other current and non-current liabilities |
|
| 300 |
|
|
| 448 |
|
|
| 283 |
|
|
| 297 |
|
Net cash provided by operating activities |
| 2,590 |
| 726 |
|
| 3,450 |
| 1,427 |
| ||||||
|
|
|
|
|
|
|
|
|
|
| ||||||
Investing activities |
|
|
|
|
|
|
|
|
|
| ||||||
Proceeds from sale of marketable securities |
| 117 |
| 272 |
|
| 270 |
| 340 |
| ||||||
Purchases of marketable securities |
| (171 | ) |
| (272 | ) |
| (392 | ) |
| (379 | ) | ||||
Purchases of property and equipment |
|
| (4,746 | ) |
|
| (40 | ) |
|
| (4,749 | ) |
|
| (68 | ) |
Net cash (used in) investing activities |
| (4,800 | ) |
| (40 | ) |
| (4,871 | ) |
| (107 | ) | ||||
|
|
|
|
|
|
|
|
|
|
| ||||||
Financing activities |
|
|
|
|
|
|
|
|
|
| ||||||
Proceeds from mortgage loan |
| 2,940 |
| 0 |
|
| 2,940 |
| 807 |
| ||||||
Proceeds from SBA Paycheck Protection Program loan |
| 0 |
| 807 |
| |||||||||||
Principal payments on mortgage loan |
| (33 | ) |
| 0 |
|
| (57 | ) |
| 0 |
| ||||
Purchase of treasury stock |
|
| 0 |
|
|
| (6 | ) |
|
| 0 |
|
|
| (6 | ) |
Net cash provided by financing activities |
| 2,907 |
| 801 |
|
| 2,883 |
| 801 |
| ||||||
|
|
|
|
|
|
|
|
|
|
| ||||||
Net increase in cash and cash equivalents |
| 697 |
| 1,487 |
|
| 1,462 |
| 2,121 |
| ||||||
Cash and cash equivalents - beginning of the year |
|
| 3,785 |
|
|
| 1,332 |
|
|
| 3,785 |
|
|
| 1,332 |
|
Cash and cash equivalents - end of period |
| $ | 4,482 |
|
|
| 2,819 |
|
| $ | 5,247 |
|
|
| 3,453 |
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Non-cash transactions |
|
|
|
|
|
|
|
|
|
| ||||||
Capitalization of ROU asset and liability |
| $ | 0 |
| $ | 26 |
|
| $ | 0 |
| $ | 26 |
| ||
|
|
|
|
|
|
|
|
|
|
| ||||||
Supplemental disclosures of cash flow data |
|
|
|
|
|
|
|
|
|
| ||||||
Income taxes paid |
| $ | 0 |
| $ | 0 |
|
| $ | 0 |
| $ | 0 |
| ||
Interest expense paid |
| $ | 38 |
| $ | 0 |
|
| $ | 74 |
| $ | 0 |
|
The accompanying notes are an integral part of the unaudited financial statements.
6 |
Table of Contents |
SOLITRON DEVICES, INC.
NOTES TO FINANCIAL STATEMENTS
UNAUDITED
1. THE COMPANY AND OPERATIONS
Solitron Devices, Inc., a Delaware corporation (“Solitron,” the “Company,” “we,” “us,” or “our”), designs, develops, manufactures, and markets solid-state semiconductor components and related devices primarily for the military and aerospace markets. The Company was incorporated under the laws of the State of New York in 1959 and reincorporated under the laws of the State of Delaware in August 1987.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The unaudited financial statements have been prepared in accordance with United States generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements.
The unaudited financial information furnished herein reflects all adjustments, consisting of normal recurring items that, in the opinion of management, are necessary for a fair presentation of the Company’s financial position, results of operations and cash flows for the interim periods. The results of operations for the three and sixnine months ended August 31,November 30, 2021 are not necessarily indicative of the results to be expected for the year ending February 28, 2022.
The information included in this Form 10-Q should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended February 28, 2021.
Cash and Cash Equivalents
Cash and cash equivalents include demand deposits and money market accounts.
Investment in Marketable Securities
Investment in Securitiesmarketable securities includes investments in common stocks and bonds. Investments in securities are reported at fair value with changes in unrecognized gains or losses included in other income on the income statement.
The following table summarizes available-for-sale investments (in $000’s)000’s):
August 31, 2021 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
|
| Gross |
|
| Gross |
|
|
| |||||||
Marketable Securities: |
| Cost |
|
| Unrealized Gains |
|
| Unrealized Losses |
|
| Fair Value |
| ||||
Common Stocks |
|
| 291 |
|
|
| 62 |
|
|
| (19 | ) |
|
| 334 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
February 28, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
|
|
|
|
| Gross |
|
| Gross |
|
|
|
|
| |||
Marketable Securities: |
| Cost |
|
| Unrealized Gains |
|
| Unrealized Losses |
|
| Fair Value |
| ||||
Common Stocks |
|
| 224 |
|
|
| 46 |
|
|
| (22 | ) |
|
| 248 |
|
|
|
| Gross |
|
| Gross |
|
|
| |||||||
November 30, 2021 Marketable Securities: |
| Cost |
|
| Unrealized Gains |
|
| Unrealized Losses |
|
| Fair Value |
| ||||
Common Stocks |
|
| 399 |
|
|
| 49 |
|
|
| (14 | ) |
|
| 435 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Gross |
|
| Gross |
|
|
|
|
| ||||
February 28, 2021 Marketable Securities: |
| Cost |
|
| Unrealized Gains |
|
| Unrealized Losses |
|
| Fair Value |
| ||||
Common Stocks |
|
| 224 |
|
|
| 46 |
|
|
| (22 | ) |
|
| 248 |
|
One marketable security was marked at cost at the end of the quarter ended August 31,November 30, 2021, which matched the most recent trade in the security. Total value of the security was $44,800.
At August 31,November 30, 2021 and February 28, 2021, the deferred tax liability related to unrecognized gains and losses on short-term investments was $0.
7 |
Table of Contents |
Fair Value of Financial Instruments
Accounting Standards Codification (“ASC”) Topic 820, “Fair Value Measurements and Disclosures”, defines “fair value” as the price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also sets forth a valuation hierarchy of the inputs (assumptions that market participants would use in pricing an asset or liability) used to measure fair value. This hierarchy prioritizes the inputs into the following three levels:
Level 1: | Observable inputs that reflect unadjusted quoted prices for identical assets or liabilities traded in active markets. |
Level 2: | Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. |
Level 3: | Inputs that are generally unobservable. These inputs may be used with internally developed methodologies that result in management’s best estimate of fair value. |
|
|
|
|
|
|
Level 1:
Observable inputs that reflect unadjusted quoted prices for identical assets or liabilities traded in active markets.
Level 2:
Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.
Level 3:
Inputs that are generally unobservable. These inputs may be used with internally developed methodologies that result in management’s best estimate of fair value.
The Company’s securities are subject to levelLevel 1 fair value measurement.
The carrying amounts of the Company’s short-term financial instruments, including accounts receivable, accounts payable, accrued expenses and other liabilities approximate their fair value due to the relatively short period to maturity for these instruments.
Accounts Receivable
Accounts receivable consists of unsecured credit extended to the Company’s customers in the ordinary course of business. The Company reserves for any amounts deemed to be uncollectible based on past collection experiences and an analysis of outstanding balances, using an allowance account. The allowance amount was $0as$0 as of August 31,November 30, 2021 and February 28, 2021.
Shipping and Handling
Shipping and handling costs billed to customers are recorded in net sales. Shipping costs incurred by the Company are recorded in cost of sales.
��
Inventories
Inventories are stated at the lower of cost and net realizable value. Cost is determined using the “first-in, first-out” (FIFO) method. The Company buys raw material only to fill customer orders. Excess raw material is created only when a vendor imposes a minimum quantity buy in excess of actual requirements. Such excess material will usually be utilized to meet the requirements of the customer’s subsequent orders. If excess material is not utilized after two fiscal years it is fully reserved. Any inventory item once designated as reserved is carried at zero value in all subsequent valuation activities. The Company maintains a three inch wafer fab which procures raw wafers and produces finished wafers based on management’s estimates of projected future demand. Finished wafers are considered work-in-process since they are usable for many years, and in some circumstances can be used on more than one finished product depending on customer parameters.
The Company does not classify a portion of inventories as non-current since we cannot reasonably estimate based on the length of our operating cycle which items will or will not be used within twelve months.
The Company’s inventory valuation policy is as follows:
Raw material /Work in process: | All material acquired or processed in the last two fiscal years is valued at the lower of its acquisition cost or net realizable value, except for wafers which function under a three-year policy. All material not used after two fiscal years is fully reserved for except wafers which are reserved for after three years. Finished wafers produced in our wafer fab are stored in the wafer bank and are considered work-in-process. Raw material in excess of five years’ usage that cannot be restocked, and slow-moving work in process are reserved for. |
Finished goods: | All finished goods with firm orders for later delivery are valued (material and overhead) at the lower of cost or net realizable value. All finished goods with no orders are fully reserved. |
Direct labor costs: | Direct labor costs are allocated to finished goods and work in process inventory based on engineering estimates of the number of man-hours required from the different direct labor departments to bring each device to its particular level of completion. Manufacturing overhead costs are allocated to finished goods and work in process inventory as a ratio to direct labor costs. |
Raw material /Work in process: | All material acquired or processed in the last two fiscal years is valued at the lower of its acquisition cost or net realizable value, except for wafers which function under a three- year policy. All material not used after two fiscal years is fully reserved for except wafers which are reserved for after three years. Finished wafers produced in our wafer fab are stored in the wafer bank and are considered work-in-process. Raw material in excess of five years’ usage that cannot be restocked, and slow-moving work in process are reserved for. | |
|
| |
Finished goods: | All finished goods with firm orders for later delivery are valued (material and overhead) at the lower of cost or net realizable value. All finished goods with no orders are fully reserved. | |
|
| |
Direct labor costs: | Direct labor costs are allocated to finished goods and work in process inventory based on engineering estimates of the number of man-hours required from the different direct labor departments to bring each device to its particular level of completion. Manufacturing overhead costs are allocated to finished goods and work in process inventory as a ratio to direct labor costs. |
Raw material /Work in process: All material acquired or processed in the last two fiscal years is valued at the lower of its acquisition cost or net realizable value, except for wafers which function under a three- year policy. All material not used after two fiscal years is fully reserved for except wafers which are reserved for after three years. Finished wafers produced in our wafer fab are stored in the wafer bank and are considered work-in-process. Raw material in excess of five years’ usage that cannot be restocked, and slow-moving work in process are reserved for. Finished goods: All finished goods with firm orders for later delivery are valued (material and overhead) at the lower of cost or net realizable value. All finished goods with no orders are fully reserved. |
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Direct labor costs: | Direct labor costs are allocated to finished goods and work in process inventory based on engineering estimates of the number of man-hours required from the different direct labor departments to bring each device to its particular level of completion. Manufacturing overhead costs are allocated to finished goods and work in process inventory as a ratio to direct labor costs.
Property, Plant, Equipment, and Leasehold Improvements Property, plant, and equipment is recorded at cost. Major renewals and improvements are capitalized, while maintenance and repairs that do not extend their expected life are expensed as incurred. Depreciation is provided on a straight-line basis over the estimated useful lives of the related assets. Leasehold improvements are amortized over the shorter of the lease term or the lives of the related assets:
Concentrations of Credit Risk Financial instruments, which potentially subject the Company to concentration of credit risk, consist principally of cash and account receivables. The Company places its cash with high credit quality institutions. At times, such amounts may be in excess of the Federal Deposit Insurance Corporation (“FDIC”) insurance limits. The Company has not experienced any losses in such accounts and believes that it is not exposed to any significant credit risk on the accounts. As of
Net Income (Loss) Per Common Share Net income (loss) per common share is presented in accordance with ASC 260-10 “Earnings per Share.” Basic earnings per common share are computed using the weighted average number of common shares outstanding during the period. Diluted earnings per common share incorporate the incremental shares issuable upon the assumed exercise of stock options to the extent they are not anti-dilutive using the treasury stock method. The Company had no stock options outstanding during fiscal
Revenue Recognition
On May 28, 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standard Update (ASU) No. 2014-09, Revenue from Contracts with Customers (Topic 606), which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods and services to customers. The ASU replaces most existing revenue recognition guidance in the United States. The standard permits the use of either the full retrospective or modified retrospective transition method.
Based on a review of its customer contracts, the Company has determined that revenue on the majority of its customer contracts will continue to be recognized at a point in time, generally upon shipment of products, consistent with the Company’s historical revenue recognition model.
The core principle of the guidance in Topic 606 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.
To achieve that core principle, the Company applied the following steps:
1. Identify the contract(s) with a customer.
The Company designs, develops, manufactures and markets solid-state semiconductor components and related devices. The Company’s products are used as components primarily in the military and aerospace markets.
The Company’s revenues are from purchase orders and/or contracts with customers associated with manufacture of products. We account for a contract when it has approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability of consideration is probable.
2. Identify the performance obligations in the contract.
The majority of the Company’s purchase orders or contracts with customers contain a single performance obligation, the shipment of products.
3. Determine the transaction price.
The transaction price reflects the Company’s expectations about the consideration it will be entitled to receive from the customer at a fixed price per unit shipped based on the terms of the contract or purchase order with the customer. To the extent our actual costs vary from the fixed price that was negotiated, we will generate more or less profit or could incur a loss.
4. Allocate the transaction price to the performance obligations in the contract.
5. Recognize revenue when (or as) the Company satisfies a performance obligation.
This performance obligation is satisfied when control of the product is transferred to the customer, which occurs upon shipment or delivery. The Company receives purchase orders for products to be delivered over multiple dates that may extend across reporting periods. The
In addition, the Company may have a contract or purchase order to provide a non-recurring engineering service to a customer. These contracts are reviewed, performance obligations are determined, and we recognize revenue at the point in time in which each performance obligation is fully satisfied.
We recognize revenue on sales to distributors when the distributor takes control of the products
We recognize the estimated variable consideration to be received as revenue and record a related accrued expense for the consideration not expected to be received, based upon an estimate of product returns, scrap allowances,
Related Party Transactions The Company currently purchases and has purchased in the past die and wafers, as specified by the
Stock based compensation The Company records stock-based compensation in accordance with the provisions of ASC Topic 718,
Financial Statement Estimates The preparation of condensed financial statements in conformity with
Recent Accounting Pronouncements No recent accounting pronouncements affecting the Company were issued by the Financial Accounting Standards Board or other standards-setting bodies.
3. REVENUE RECOGNITION
As of
As noted in Note 2 above, one of our distributor agreements has a termination clause that would allow for a full credit for all inventory upon 60
The Company warrants that its products, when delivered, will be free from defects in material workmanship under normal use and service. The obligations are limited to replacing, repairing, or reimbursing for, at the option of the Company, any products that are returned within one year after the date of shipment. The Company does not reserve for potential warranty costs based on historical experience and the nature of its cost tracking system.
4. INVENTORIES
As of
Wafer related inventory, which includes raw wafers, work-in-process wafers, and wafer bank (completed wafers that are available to be consumed in the Company’s products), net of reserves, totaled
5. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
As of
6. DISAGGREGATION OF REVENUE AND MAJOR CUSTOMERS
Revenues from domestic and export sales are attributed to a global geographic region according to the location of the customer’s primary manufacturing or operating facilities. Revenues from domestic and export sales to unaffiliated customers for the three months ended
Revenues from domestic and export sales are attributed to a global geographic region according to the location of the customer’s primary manufacturing or operating facilities. Revenues from domestic and export sales to unaffiliated customers for the
For the three months ended
For the
Revenues from customers who accounted for 10% or more of the Company’s net sales for the three months ended
Revenues from customers who accounted for 10% or more of the Company’s net sales for the
As of
7. MAJOR SUPPLIERS
For the three months ended
For the
8. COMMITMENTS AND CONTINGENCIES
Finance lease: During fiscal 2021, the Company entered into a 36-month finance lease for $27,000 of computer equipment. The Company does not consider the lease to be material to the Company’s financial statements. As of
Operating lease: On October 1, 2014, the Company extended its current lease with its landlord, CF EB REO II LLC, for the occupancy and use of its 47,000 square foot facility located at 3301 Electronics Way, West Palm Beach, Florida 33407 (the “Lease”). The property subsequently was sold to La Boheme Properties, Inc., a Florida corporation, which is the current landlord as the Lease was assigned to them. The term of the Lease
On November 5, 2021, the Company entered into the Second Amendment to the Lease, which extended the Lease portion over a portion of the leased premises until February 28, 2022 and extended the Lease term over a portion through March 31, 2022. On November 19, 2021, the Company entered into a replacement of the Second Amendment, which extended the Lease over the whole facility by one month and the aforementioned extensions by one month, respectively. The Company does not consider the Lease extension to be material to the Company’s financial statements and has not adjusted the balance sheet classification. The balance sheet classification of operating lease assets and liabilities as of
Future minimum operating lease payments, excluding Florida sales tax, as of
The balance sheet classification of lease assets and liabilities as of February 28, 2021 was as follows:
Future minimum operating lease payments, excluding Florida sales tax, as of February 28, 2021 under non-cancelable operating leases was as follows:
9. NOTES PAYABLE
On July 21, 2020, the Company received loan proceeds of $807,415 under the Paycheck Protection Program (the “PPP Loan”). The Paycheck Protection Program (“PPP”) was established under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) and is administered by the U.S. Small Business Administration (“SBA”). The PPP Loan to the Company was made through Bank of America, N.A., a national banking association. The PPP Loan was scheduled to mature on July 21, 2025 and bore interest at a rate of 1% per annum. Payments of principal and interest on the loan were initially deferred until January 1, 2021 and based on applying for forgiveness the deferral was extended through October 31, 2021. The
On April 16, 2021, the Company closed on the acquisition of a facility and real estate located in West Palm Beach, Florida for a purchase price of $4,200,000 pursuant to the Commercial Contract entered into on March 1, 2021. In connection with the acquisition, the Company obtained mortgage financing from Bank of America, N.A. in the amount of $2,940,000 to fund that portion of the total purchase price, and entered into the Master Credit Agreement, a Note, a Mortgage, Assignment of Rents, Security Agreement and Fixture Filing and Financial Covenant Agreement. The loan accrues interest at a fixed rate of 3.8% per year and matures on April 15, 2031. Beginning on May 15, 2021 the Company began making monthly installments of $17,593 consisting of principal and interest. The payment and performance of the loan is secured by a security interest in the property acquired. The Master Credit Agreement contains certain representations and warranties, undertakings and events of default customary for these types of agreements. Additionally, under the terms of the Financial Covenant Agreement, the Company has agreed to maintain a fixed charge coverage ratio of at least 1.15:1.0, calculated at the end of each fiscal year, using the results of the twelve-month period ending with that reporting period, and has agreed to maintain on a consolidated basis a minimum of unrestricted, unencumbered liquid assets of no less than $1,000,000.
The Company has begun making the necessary improvements to the property acquired in order to completely relocate its manufacturing operations and corporate headquarters
10. EQUITY
Repurchase Program
The Board of Directors has authorized a stock repurchase program of up to $1.0 million of its outstanding common stock. Purchases under the program may be made through the open market or privately negotiated transactions as determined by the Company’s management, and in accordance with the requirements of the Securities and Exchange Commission. The timing and actual number of shares repurchased will depend on a variety of factors including price, corporate and regulatory requirements and other conditions.
Stock Compensation
On November 13, 2020, the Company granted Mr. Eriksen and Mr. Matson the option to receive half of their bonuses in shares instead of cash, which both elected. Mr. Eriksen received 7,669 shares, with a fair market value of $25,000, or $3.26 per share, and Mr. Matson received 15,337 shares, with a fair market value of $50,000, or $3.26 per share. Shares were issued under the 2019 Stock Incentive Plan.
No shares were granted during the three and
Item 2.
Solitron Devices, Inc., a Delaware corporation (the “Company” or “Solitron”), designs, develops, manufactures and markets solid-state semiconductor components and related devices primarily for the military and aerospace markets. The Company manufactures a large variety of bipolar and metal oxide semiconductor (“MOS”) power transistors, power and control hybrids, junction and power MOS field effect transistors and other related products. Most of the Company’s products are custom made pursuant to contracts with customers whose end products are sold to the United States government. Other products, such as Joint Army/Navy transistors, diodes and Standard Military Drawings voltage regulators, are sold as standard or catalog items.
The following discussion and analysis of factors which have affected the
Significant Accounting Policies:
The discussion and analysis of our financial condition and results of operations are based upon the unaudited condensed financial statements included elsewhere in this Quarterly Report on Form 10-Q which are prepared in accordance with accounting principles generally accepted in the United States. Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. These estimates and assumptions are affected by management’s application of accounting policies. Our critical accounting policies include cash and cash equivalents, investment in marketable securities, revenue recognition, earnings per common share, shipping and handling, and inventories. A discussion of these critical accounting policies are included in Note 2 of the “Notes To Financial Statements” in Item 8 of our Annual Report on Form 10-K for the fiscal year ended February 28, 2021. Results of Operations-Three Months Ended November 30, 2021 Compared to Three Months Ended November 30, 2020: Net sales for the three months ended November 30, 2021 increased 7% to $2,468,000 as compared to $2,312,000 for the three months ended November 30, 2020. Net bookings for the three months ended November 30, 2021 increased 4% to $1,340,000 versus $1,285,000 during the three months ended November 30, 2020. Backlog as of November 30, 2021 decreased 27% to $3,197,000 as compared to a backlog of $4,401,000 as of November 30, 2020. Cost of sales for the three months ended November 30, 2021 decreased to $1,672,000 from $1,799,000 for the three months ended November 30, 2020, due to decreased material and direct labor costs. Expressed as a percentage of net sales, cost of sales decreased to 68% for the three months ended November 30, 2021 from 78% for the three months ended November 30, 2020. Gross profit for the three months ended November 30, 2021 increased to $796,000 from $513,000 for the three months ended November 30, 2020, due primarily to increased net sales and decreased materials and direct labor costs. Accordingly, gross margins increased to 32% for the three months ended November 30, 2021 as compared to 22% for the three months ended November 30, 2020.
For the three months ended November 30, 2021, we shipped 36,047 units as compared to 10,259 units shipped during the same period of the prior year. It should be noted that since we manufacture a wide variety of products with an average sales price ranging from a few dollars to several hundred dollars, such periodic variations in our volume of units shipped should not be regarded as a reliable indicator of our performance. Selling, general, and administrative expenses decreased to $497,000 for the three months ended November 30, 2021 from $575,000 for the same period in the prior year. The decrease was primarily due to decreased bonus expense and professional fees. During the three months ended November 30, 2021, selling, general and administrative expenses as a percentage of net sales decreased to 20% as compared to 25% for the three months ended November 30, 2020. Operating income for the three months ended November 30, 2021 increased to $299,000 as compared to an operating loss of ($62,000) for the three months ended November 30, 2020. This increase is due primarily to increased net sales and decreased cost of sales and selling, general and administrative expense. Interest expense was ($28,000) for the three months ended November 30, 2021 as compared to $0 for the three months ended November 30, 2020. Interest and dividend income for the three months ended November 30, 2021 was $1,000 as compared to $0 for the three months ended November 30, 2020. Realized gains on investments for the three months ended November 30, 2021 increased to $41,000 as compared to $9,000 for the three months ended November 30, 2020. Unrealized loss on investments for the three months ended November 30, 2021 was ($8,000) as compared to unrealized gain on investments of $26,000 for the three months ended November 30, 2020. Other income, consisting of primarily scrap income, for the three months ended November 30, 2021 was $185,000 as compared to $0 for the three months ended November 30, 2020. Net income for the three months ended November 30, 2021 increased to $490,000 as compared to a net loss of ($27,000) for the three months ended November 30, 2020. This increase is due primarily to increased net sales and other income, and decreased cost of sales and selling, general and administrative expenses as described above. Results of Operations-Nine Months Ended November 30, 2021 Compared to Nine Months Ended November 30, 2020: Net sales for the nine months ended November 30, 2021 increased 30% to $10,308,000 as compared to $7,913,000 for the nine months ended November 30, 2020. Net bookings for the nine months ended November 30, 2021 increased 6% to $4,713,000 versus $4,428,000 during the nine months ended November 30, 2020. Backlog as of November 30, 2021 decreased 27% to $3,197,000 as compared to a backlog of $4,401,000 as of November 30, 2020.
Cost of sales for the
Gross profit for the
For the
Selling, general, and administrative expenses increased to
Operating income for the
Interest expense was ($74,000) for the
Net income for the
Operating Activities: Net cash provided by operating activities was $3,450,000 for the nine months ended November 30, 2021 primarily reflecting net income of
Net Investing Activities: Net cash used in investing activities was ($4,871,000) for the
Net
Net cash provided by
Net cash provided by financing activities was $801,000 for the
We expect our sole source of liquidity over the next twelve months to be cash from operations and cash and cash equivalents, if necessary. We anticipate that our capital expenditures required to sustain operations and complete the renovations to our new facility will be approximately
At
At
At
Based on various factors, including the Company’s desire to fully utilize its current net operating loss carryforwards, the Company may
Off-Balance Sheet Arrangements: The Company has not engaged in any off-balance sheet arrangements.
FORWARD-LOOKING STATEMENTS Some of the statements in this Quarterly Report on Form 10-Q are “forward-looking statements”. These forward-looking statements include statements regarding our business, financial condition, results of operations, strategies or prospects. You can identify forward-looking statements by the fact that these statements do not relate strictly to historical or current matters. Rather, forward-looking statements relate to anticipated or expected events, activities, trends or results. Because forward-looking statements relate to matters that have not yet occurred, these statements are inherently subject to risks and uncertainties. Many factors could cause our actual activities or results to differ materially from the activities and results anticipated in forward-looking statements. These factors include those described under the caption
Some of the factors that may impact our business, financial condition, results of operations, strategies or prospects include:
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
This item is not applicable as we are currently considered a smaller reporting company.
ITEM 4. CONTROLS AND PROCEDURES
Our Evaluation of Disclosure Controls and Procedures
The Company carried out an evaluation, under the supervision and with the participation of its management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e), and 15d-15(e)) as of the end of the period covered by this Quarterly Report. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of
Changes in Internal Control over Financial Reporting.
Other than the changes referenced in the Company’s Annual Report on Form 10-K for the year ended February 28, 2021 under “Management’s Report on Internal Control over Financial Reporting”, there were no changes in the Company’s internal control over financial reporting during the quarter ended
PART II– OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We may from time to time become a party to various legal proceedings arising in the ordinary course of business. As of
ITEM 1A. RISK FACTORS
In addition to the information set forth in this Form 10-Q, you should carefully consider the risk factors discussed in Part 1, Item 1A of our Annual Report on Form 10-K for the year ended February 28, 2021, which could materially affect our business, financial condition or future results.
ITEM 6. EXHIBITS
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SIGNATURES
Pursuant to the requirements 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.
EXHIBIT INDEX
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