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8-K - CURRENT REPORT - SOLITRON DEVICES INC | sodi_8k.htm |
Exhibit 99.1
SOLITRON
DEVICES, INC. ANNOUNCES TERMINATION OF ITS AUDITOR AND AN UPDATE ON
RECENT FINANCIAL RESULTS
WEST
PALM BEACH, FL – Solitron Devices, Inc. (OTCBB: SODI)
(“Solitron” or the “Company”) today
announced the termination of its auditor and an update on recent
financial results.
On
January 11, 2019 the Company delivered a termination letter to its
auditor. The Company will investigate potential recourse that may
be available against its former auditor, therefore, the Company
will not be commenting further beyond what was noted in the
Company’s Form 8-K filed on January 17, 2019 (the “Form
8-K”).
The Company has incurred an unaudited cumulative loss of
approximately $1.6 million over the twenty-two months since the
audit began (the end of fiscal 2017 through December 2018), nearly
all of the loss occurring in fiscal 2019. Approximately $1.4
million of the loss is directly attributable to the costs of the
audit and the 10A investigation demanded by the auditors which we
believe was unnecessary.
Subsequent to the end of the November 30, 2018 fiscal third
quarter, the Company received the large follow-on order noted in
our last two press releases. Net bookings for December
were $3.0 million. Bookings for the first ten months of
fiscal 2019 were approximately $7.2 million. As a reminder,
bookings for fiscal 2018 were $8.3 million. While it is
very early to make any estimates for fiscal 2020 bookings, our
quote levels are encouraging, as we continue to work hard to get
back into some programs that the Company had previously been a
supplier.
Fiscal 2017 Unaudited Results
As
disclosed in the Form 8-K, there is one unresolved disagreement
with the auditor regarding inventory classification as current or
non-current. There were no disagreements regarding the dollar value
of inventory, other balance sheet accounts, or historical income
statements. Below are the unaudited results for fiscal
2017. As a reminder, SG&A expenses in fiscal 2017 were $1.4
million higher due to an increase in compensation and benefits
related to the retirement of the Company’s former CEO, and
$170,000 higher due to reimbursement of expenses relating to the
2015 proxy contest and potential 2016 proxy contest.
|
(Dollars in Thousands)
|
|
|
Years Ended February
|
|
|
28, 2017
|
29, 2016
|
|
|
|
Net
Sales
|
$7,426
|
$8,395
|
Cost
of sales
|
6,269
|
6,621
|
Gross
profit
|
1,157
|
1,774
|
Selling,
general and administrative expenses
|
3,244
|
1,969
|
Operating
loss
|
-2,087
|
-195
|
Interest
income
|
42
|
30
|
Gain
on sale of asset
|
18
|
-
|
Net
Loss
|
$(2,027)
|
$(165)
|
|
|
|
Net
loss per share
|
$(1.00)
|
$(0.07)
|
Shares
Outstanding - basic and diluted
|
2,033
|
2,246
|
BALANCE
SHEETS
As
of February 28, 2017, and February 29, 2016
(Dollars
in Thousands)
|
28, 2017
|
29, 2016
|
|
Unaudited
|
|
|
|
|
Cash
|
2,341
|
634
|
Certificates
of Deposit
|
747
|
6,740
|
Accounts
Receivable
|
668
|
528
|
Inventories,
net
|
3,698
|
3,671
|
Prepaid
Expenses and Other
|
189
|
184
|
Total
Current Assets
|
7,643
|
11,757
|
|
|
|
Property,
Plant, & Equipment, net
|
553
|
436
|
Other
Assets
|
40
|
8
|
Total
Assets
|
8,236
|
12,201
|
|
|
|
Accounts
Payable
|
515
|
164
|
Customer
Deposits
|
44
|
28
|
Accrued
Expenses & Other
|
305
|
497
|
Total
Current Liabilities
|
864
|
689
|
|
|
|
Other
liabilities - non-current
|
24
|
|
Total
Liabilities
|
888
|
689
|
|
|
|
Commitments
& Contingencies
|
|
|
|
|
|
Common
Stock
|
19
|
24
|
Additional
Paid in Capital
|
1,834
|
2,759
|
Accumulated
Other Comprehensive Income
|
-
|
17
|
Retained
Earnings
|
7,256
|
9,266
|
Less
Treasury Stock
|
(1,761)
|
(554)
|
Total
Stockholders' Equity
|
7,348
|
11,512
|
|
|
|
Total
Liabilities & Stockholders' Equity
|
8,236
|
12,201
|
2
Preliminary Unaudited Fiscal 2018 Results
Preliminary
fiscal 2018 unaudited net loss is $11,000,
or $ (0.01) per share, on revenues of $9,271,000. Included in the
costs is approximately $225,000 of costs related to the fiscal 2017
audit.
|
(Dollars in Thousands)
|
|
|
Years Ended February
|
|
|
28, 2018
|
28, 2017
|
|
unaudited
|
unaudited
|
Net
Sales
|
$9,271
|
$7,426
|
Cost
of sales
|
6,931
|
6,269
|
Gross
profit
|
2,340
|
1,157
|
Selling,
general and administrative expenses
|
2,387
|
3,244
|
Operating
loss
|
-47
|
-2,087
|
Interest
& Other income
|
36
|
42
|
Gain
on sale of asset
|
0
|
18
|
Net
Loss
|
$(11)
|
$(2,027)
|
|
|
|
EPS
|
$(0.01)
|
$(1.00)
|
Shares
Outstanding - diluted
|
1,902
|
2,033
|
BALANCE
SHEETS
As
of February 28, 2018, and February 28, 2017
(Dollars
in Thousands)
|
28, 2018
|
28, 2017
|
|
Unaudited
|
Unaudited
|
|
|
|
Cash
|
2,215
|
2,341
|
Certificates
of Deposit
|
-
|
747
|
Securities
|
378
|
-
|
Accounts
Receivable
|
1,359
|
668
|
Inventories,
net
|
3,923
|
3,698
|
Prepaid
Expenses and Other
|
176
|
189
|
Total
Current Assets
|
8,051
|
7,643
|
|
|
|
Property,
Plant, & Equipment, net
|
591
|
553
|
Other
Assets
|
142
|
40
|
Total
Assets
|
8,784
|
8,236
|
|
|
|
Accounts
Payable
|
895
|
515
|
Customer
Deposits
|
36
|
44
|
Accrued
Expenses & Other
|
515
|
305
|
Total
Current Liabilities
|
1,446
|
864
|
|
|
|
Other
liabilities - non-current
|
-
|
24
|
Total
Liabilities
|
1,446
|
888
|
|
|
|
Commitments
& Contingencies
|
|
|
|
|
|
Common
Stock
|
19
|
19
|
Additional
Paid in Capital
|
1,834
|
1,834
|
Accumulated
Other Comprehensive Income
|
-
|
-
|
Retained
Earnings
|
7,246
|
7,256
|
Less
Treasury Stock
|
(1,761)
|
(1,761)
|
Total
Stockholders' Equity
|
7,338
|
7,348
|
|
|
|
Total
Liabilities & Stockholders' Equity
|
8,784
|
8,236
|
3
Preliminary Unaudited Three Month and Nine Month Fiscal 2019
Results
Preliminary
unaudited results
for the fiscal third quarter ended November 30, 2018 are a net loss
of $357,000, or $ (0.19) per share, on revenues of $2,255,000.
Included in SG&A expenses is approximately $100,000 of costs
related to the fiscal 2017 audit. Cost of sales was higher
primarily due to increased cost of rework and scrap associated with
introducing new product lines. Bookings in the fiscal third quarter
of 2019 remained consistent with the third quarter of fiscal 2018
at approximately $1.4 million. Backlog at the end of the third
quarter of fiscal 2019 was approximately $5.1 million versus
approximately $5.2 million at the end of the third quarter of
fiscal 2018.
Preliminary
unaudited results
for the nine months ended November 30, 2018 are a net loss of
$1,738,000, or $ (0.91) per share, on revenues of $6,497,000.
Included in SG&A expenses is approximately $1,150,000 of costs
related to the fiscal 2017 audit. Cost of sales was higher due to
increased cost of rework and scrap associated with introducing new
product lines. Bookings in the first nine months of fiscal 2019
remained consistent with the first nine months of fiscal 2018 at
approximately $4.2 million.
As we
noted in our last update, the Company implemented some cost savings
measures, including a reduction in personnel. The reduction was the
result of our ongoing cost review and was unrelated to bookings or
sales. The reduction included rationalizing our machine shop area
along with some other functions. We expect to be able to reduce
related inventory levels as well.
The
reduction included supervisory personnel related to development
initiatives which had reached their conclusion. One initiative
unfortunately was tabled, while two others have made strong
progress as demonstrated by customer purchases. On one we have
received a purchase order for NRE (non-recurring engineering) for a
new device and on the other we completed and sold test samples to
two different customers. In addition to the new initiatives we
continue to qualify additional JAN (Joint Army Navy)
products.
|
(Dollars in Thousands)
|
(Dollars in Thousands)
|
||
|
Three Months Ended November
|
Nine Months Ended November
|
||
|
2018
|
2017
|
2018
|
2017
|
|
unaudited
|
unaudited
|
unaudited
|
unaudited
|
Net
Sales
|
2,255
|
1,936
|
6,497
|
7,349
|
Cost
of Sales
|
1,968
|
1,487
|
5,747
|
5,019
|
Gross
Profit
|
287
|
449
|
750
|
2,330
|
SG&A
Expenses
|
602
|
465
|
2,403
|
1,651
|
Operating
Income (Loss)
|
(315)
|
(16)
|
(1,653)
|
679
|
Other
Income (Loss)
|
(42)
|
21
|
(85)
|
12
|
Net
Income (Loss)
|
(357)
|
5
|
(1,738)
|
691
|
|
|
|
|
|
EPS
|
$(0.19)
|
$0.00
|
$(0.91)
|
$0.36
|
Shares
Outstanding - diluted
|
1,902
|
1,902
|
1,902
|
1,902
|
4
BALANCE
SHEETS
As
of November 30, 2018, and February 28, 2018
(Dollars
in Thousands)
|
Nov. 30, 2018
|
Feb. 28, 2018
|
|
Unaudited
|
Unaudited
|
|
|
|
Cash
|
313
|
2,215
|
Securities
|
258
|
378
|
Accounts
Receivable
|
1,307
|
1,359
|
Inventories,
net
|
4,255
|
3,923
|
Prepaid
Expenses and Other
|
121
|
176
|
Total
Current Assets
|
6,254
|
8,051
|
|
|
|
Property,
Plant, & Equipment, net
|
564
|
591
|
Other
Assets
|
45
|
142
|
Total
Assets
|
6,863
|
8,784
|
|
|
|
Accounts
Payable
|
882
|
895
|
Customer
Deposits
|
5
|
36
|
Accrued
Expenses & Other
|
377
|
515
|
Total
Current Liabilities
|
1,264
|
1,446
|
|
|
|
Other
liabilities - non-current
|
-
|
-
|
Total
Liabilities
|
1,264
|
1,446
|
|
|
|
Commitments
& Contingencies
|
|
|
|
|
|
Common
Stock
|
19
|
19
|
Additional
Paid in Capital
|
1,834
|
1,834
|
Accumulated
Other Comprehensive Income
|
-
|
-
|
Retained
Earnings
|
5,507
|
7,246
|
Less
Treasury Stock
|
(1,761)
|
(1,761)
|
Total
Stockholders' Equity
|
5,599
|
7,338
|
|
|
|
Total
Liabilities & Stockholders' Equity
|
6,863
|
8,784
|
These
preliminary, unaudited results for the third fiscal quarter ended
2019 and 2018 are based on management's review of operations for
those periods and the information available to the Company as of
the date of this press release. An independent registered public
accounting firm has not reviewed or performed any procedures with
respect to the preliminary financial information presented for the
fiscal periods ended November 30, 2018, November 30, 2017, and
fiscal year ended February 28, 2018, nor completed the audit for
the fiscal year ended February 28, 2017.
5
About Solitron Devices, Inc.
Solitron Devices, Inc., a Delaware corporation, 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
(“Power MOSFETS”), 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
(“JAN”) transistors, diodes and Standard Military
Drawings voltage regulators, are sold as standard or catalog items.
The Company was incorporated under the laws of the State of New
York in March 1959 and reincorporated under the laws of the State
of Delaware in August 1987.
Forward-Looking Statements
This press release contains forward-looking statements regarding
future events and the future performance of Solitron Devices, Inc.
that involve risks and uncertainties that could materially affect
actual results, including statements regarding the Company’s
preliminary third quarter results, the Company’s expectations
regarding revenues for the fiscal fourth quarter of 2019, and any
potential recourse against its former auditor. Factors that could
cause actual results to vary from current expectations and
forward-looking statements contained in this press release include,
but are not limited to: (1) expected bookings for fiscal year 2019;
(2) our ability to properly account for inventory in the future;
(3) our ability to protect the Company’s net operating losses
and tax benefits; (4) changes in our stock price, corporate or
other market conditions; (5) the loss of, or reduction of business
from, substantial clients; (6) our dependence on government
contracts, which are subject to termination, price renegotiations
and regulatory compliance; (7) changes in government policy or
economic conditions; (8) increased competition; (9) the uncertainty
of current economic conditions, domestically and globally; (10) the
costs and uncertainty of pursuing any legal action against the
Company’s prior auditor and (11) other factors contained in
the Company’s Securities and Exchange Commission filings,
including its Form 10-K, 10-Q and 8-K reports.
Tim
Eriksen
Chief
Executive Officer
(561)
848-4311
Corporate@solitrondevices.com
6