UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report
(Date of earliest event reported): January 11, 2019
Solitron
Devices, Inc.
(Exact Name of
Registrant as Specified in Its Charter)
|
Delaware
|
|
001-04978
|
|
22-1684144
|
|
(State or Other
Jurisdiction of Incorporation)
|
|
(Commission File
Number)
|
|
(IRS Employer
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)
(Former Name or
Former Address, if Changed Since Last Report)
Check
the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant
under any of the following provisions (see General Instruction A.2.
below):
☐
Written
communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
☐
Soliciting material
pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
☐
Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17
CFR 240.14d-2(b))
☐
Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17
CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth
company as defined in Rule 405 of the Securities Act of 1933
(§ 230.405 of this chapter) or Rule 12b-2 of the Securities
Exchange Act of 1934 (§ 240.12b-2 of this
chapter).
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.
□
Section 4 – Matters Related to Accountants and Financial
Statements
Item
4.01.
Changes
in Registrant's Certifying Accountant.
On
January 11, 2019, Solitron Devices, Inc. (“Solitron” or
the “Company”) notified BDO USA, LLP
(“BDO”), that it was terminating BDO as the
Company’s independent registered public accounting firm. The
decision to terminate BDO was approved by Solitron’s Audit
Committee and approved by Solitron’s Board of Directors
unanimously.
As
previously disclosed on a Form 8-K filed on February 27, 2018 and a
Form 8-K/A filed on March 8, 2018, BDO provided Solitron with a
letter on February 21, 2018 regarding BDO’s determination
that it would not stand for reappointment as the Company’s
independent registered public accounting firm for any period
subsequent to the period ended February 28, 2017.
The
report of the independent registered public accounting firm of BDO
regarding the Company’s financial statements for the fiscal
year ended February 28, 2017 has not been filed and the Company is
therefore unable to provide the information requested under Item
304(a)(1)(ii) of Regulation S-K.
During
the fiscal year ended February 28, 2017, and during the period from
the end of February 28, 2017 through January 11, 2019, the date
Solitron sent its termination letter to BDO, there were (i) two
prior disagreements with BDO that were later resolved (the
"Resolved Disagreements") and (ii) one disagreement with BDO on a
matter of accounting principles or practices, financial statement
disclosure or auditing scope or procedure, which disagreement, was
not resolved to the satisfaction of BDO, and as a result would have
caused BDO to make reference to such disagreement in its reports
(the "Unresolved Disagreement").
With
respect to the first Resolved Disagreement, Solitron informed BDO
that it expected to have an inventory adjustment for the period
ended February 28, 2017. This Resolved Disagreement involved a
determination of what the proper accounting treatment should be for
the fiscal 2017 inventory adjustment. Solitron communicated that it
believed the proper treatment under generally accepted accounting
principles ("GAAP") was a change in estimate. BDO communicated that
it believed the proper treatment was a change in accounting
principle and that a restatement was necessary. Solitron's
management and Solitron's Audit Committee discussed the subject
matter with BDO. Solitron provided BDO with authoritative analysis
on December 8, 2017 that the proper treatment was change in
estimate to resolve the matter. Solitron has authorized BDO to
respond fully to the inquiries of any successor accountant
concerning the subject matter of this first Resolved
Disagreement.
With
respect to the second Resolved Disagreement, BDO demanded that
Solitron conduct a 10A investigation concerning four issues, one of
which, was an assertion by BDO regarding “Factors that led to
Solitron not properly maintaining historical inventory reserves,
including excess and obsolescence...” This Resolved
Disagreement involved a determination of whether Solitron had
properly maintained historical inventory reserves, including excess
and obsolescence. Solitron asserted that it had properly maintained
historical inventory reserves and that the related 2017 fiscal
year-end adjustment was a change in estimate. BDO communicated that
it did not agree with Solitron’s assertion. As part of the
10A investigation Solitron retained Marcum LLP to review
Solitron’s historical inventory accounting. Solitron’s
management and Solitron’s Audit Committee discussed the
matter with BDO. Marcum’s conclusion was that
Solitron’s inventory policies were consistent with GAAP. BDO
accepted the conclusions of the 10A investigation. Solitron has
authorized BDO to respond fully to the inquiries of any successor
accountant concerning the subject matter of the second Resolved
Disagreement.
With
respect to the Unresolved Disagreement, Solitron has historically
classified inventory as a current asset, consistent with industry
practice. Subsequent to the conclusion of the 10A investigation
regarding Solitron’s historical inventory practices, BDO
communicated to Solitron that it believes GAAP requires a company
to classify inventory as short-term and/or long-term, whereby
“all” inventory (irrespective of nature or type) not
expected to be consumed within one year must be classified as
long-term (non-current). Solitron’s review of selected
guidance provided by BDO and the Company’s research reveals
that Financial Accounting Standards Board ("FASB") authoritative
guidance has not been provided specifically on inventory
classification as current or non-current. BDO has communicated that
it believes Solitron has a balance sheet classification error in
past financial statements because it classified all inventory as
short-term (current), but now BDO asserts a portion of inventory
should have been classified as long-term (non-current). Solitron's
management does not agree with BDO’s assertion nor believe
reclassification of previously reported inventory is necessary.
However, in good faith with efforts to assist in having the audit
concluded, Solitron's management agreed to reclassify inventory as
a change from one accepted accounting principle to another accepted
accounting principle, and to reclassify the prior year’s
financials for comparative purposes. Solitron’s treatment was
similar to a BDO example provided to Solitron, and which example
was for an entity’s financial reporting where BDO was the
auditor. Solitron's management completed a materiality analysis and
concluded that while the change is quantitatively material (i.e.,
greater than five percent) to certain balance sheet line items, it
would not affect the income statement or stockholders' equity and
therefore would not be material to investors valuing the company on
a book value or income basis. BDO disagreed with Solitron’s
treatment. BDO used subsequent information (more than thirty
months) regarding inventory usage to calculate the amount of
inventory to reclassify from Solitron’s fiscal 2016 audited
financials. BDO did not provide Solitron the audit analysis of the
calculation nor any authoritative basis for changing a prior
year’s audited financials based on such subsequent
information. BDO believes the long-term inventory adjustments are
material and any material adjustment to previously reported
financial statements is a correction of an error requiring the
restatement of the previously reported financial statements. BDO
did not provide Solitron with a corresponding materiality analysis.
Solitron's management and Solitron's Audit Committee discussed the
subject matter with BDO. Solitron has authorized BDO to respond
fully to the inquiries of any successor accountant concerning the
subject matter of the Unresolved Disagreement.
During
the process to audit Solitron's financial statements, Solitron
retained Marcum LLP as an outside consultant. Marcum has reviewed
Solitron's policies and confirmed that Solitron's policies are
consistent with ("GAAP").
There
were no reportable events as described in paragraph (a)(1)(v) of
Item 304 of Regulation S-K.
The
Company provided BDO with a copy of this Current Report on Form 8-K
(the "Report") prior to its filing with the Securities and Exchange
Commission ("SEC") and requested that BDO furnish the Company with
a letter addressed to the SEC stating whether it agrees with the
above statements and, if it does not agree, the respects in which
it does not agree. A copy of such letter will be filed by amendment
as Exhibit 16.1 to this Report.
SIGNATURE
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 hereunto duly authorized.
|
|
SOLITRON
DEVICES, INC.
|
|
|
|
|
|
|
|
|
Date: January 17,
2019
|
By:
|
/s/ Tim
Eriksen
|
|
|
|
|
Tim
Eriksen
|
|
|
|
|
Chief Executive
Officer and
Interim Chief
Financial Officer
|
|