Form 10-Q - Quarterly report [Sections 13 or 15(d)]

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

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FORM 10-Q

 

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

For the quarterly period ended June 30, 2023

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 Number: 0-25844

 

TAITRON COMPONENTS INCORPORATED

(Exact name of registrant as specified in its charter)

 

California	95-4249240
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

 

28040 West Harrison Parkway, Valencia, California	91355-4162
(Address of principal executive offices)	(Zip Code)

 

[phone]

(Registrant’s telephone number, including area code)

 

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

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A common stock	TAIT	NASDAQ Capital Market

 

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”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ☑	Smaller reporting company ☑
	Emerging growth company ☐

 

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

 

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

 

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date:

 

Classes of common stock	Outstanding on July 31, 2023
Class A	5,233,568
Class B	762,612

 

 

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TAITRON COMPONENTS INCORPORATED

 

INDEX

		Page
PART I - FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)
	Condensed Consolidated Balance Sheets	1
	Condensed Consolidated Statements of Operations and Comprehensive Income	2
	Condensed Consolidated Statements of Shareholders' Equity	3
	Condensed Consolidated Statements of Cash Flows	4
	Notes to Condensed Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	8
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	11
Item 4.	Controls and Procedures	11
PART II - OTHER INFORMATION
Item 1.	Legal proceedings	12
Item 1A.	Risk Factors	12
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	12
Item 3.	Defaults Upon Senior Securities	12
Item 4.	Mine Safety Disclosures	12
Item 5.	Other Information	12
Item 6.	Exhibits	12
	Signatures	13

 

 

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PART I - FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

 

TAITRON COMPONENTS INCORPORATED

 

Condensed Consolidated Balance Sheets

 

		June 30,				December 31,
		2023				2022
Assets		(Unaudited)
Current assets:
Cash and cash equivalents		$	4,737,000			$	5,217,000
Accounts receivable, less allowances of $7,000			958,000				683,000
Short-term investments (Note 2)			3,572,000				2,034,000
Inventories, less reserves for obsolescence of $5,130,000, and $5,069,000, respectively (Note 3)			3,304,000				3,900,000
Prepaid expenses and other current assets			349,000				148,000
Total current assets			12,920,000				11,982,000
Property and equipment, net			2,844,000				2,922,000
Deferred taxes			2,052,000				2,047,000
Other assets (Note 4)			186,000				186,000
Total assets		$	18,002,000			$	17,137,000
Liabilities and Equity
Current liabilities:
Accounts payable		$	496,000			$	211,000
Accrued liabilities			673,000				790,000
Total current liabilities			1,169,000				1,001,000
Commitments and contingencies (Note 6)
Equity:
Shareholders' equity:
Preferred stock, $0.001 par value. Authorized 5,000,000 shares; None issued or outstanding			-				-
Class A common stock, $0.001 par value. Authorized 20,000,000 shares; 5,233,568 shares issued and outstanding			5,000				5,000
Class B common stock, $0.001 par value. Authorized, issued and outstanding 762,612 shares			1,000				1,000
Additional paid-in capital			11,413,000				11,407,000
Accumulated other comprehensive income			(60,000	)			(58,000	)
Retained earnings			5,474,000				4,781,000
Total equity			16,833,000				16,136,000
Total liabilities and equity		$	18,002,000			$	17,137,000

 

See accompanying notes to condensed consolidated financial statements (unaudited).

 

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Index

 

TAITRON COMPONENTS INCORPORATED

 

Condensed Consolidated Statements of Operations and Comprehensive Income

 

		Three Months Ended June 30,								Six Months Ended June 30,
		2023				2022				2023				2022
		(Unaudited)				(Unaudited)				(Unaudited)				(Unaudited)
Net product revenue		$	1,490,000			$	2,790,000			$	3,576,000			$	4,342,000
Cost of products sold			644,000				1,300,000				1,577,000				2,049,000
Gross profit			846,000				1,490,000				1,999,000				2,293,000
Selling, general and administrative expenses			583,000				531,000				1,173,000				1,088,000
Operating income			263,000				959,000				826,000				1,205,000
Interest income, net			48,000				4,000				67,000				8,000
Other income(expense), net			260,000				(310,000	)			481,000				(393,000	)
Income before income taxes			571,000				653,000				1,374,000				820,000
Income tax (provision)benefit			(40,000	)			(40,000	)			(81,000	)			1,835,000
Net income		$	531,000			$	613,000			$	1,293,000			$	2,655,000
Net income per share: Basic		$	0.09			$	0.10			$	0.22			$	0.45
Diluted		$	0.09			$	0.10			$	0.21			$	0.45
Weighted average shares outstanding: Basic			5,996,180				5,936,180				5,996,180				5,906,180
Diluted			6,033,180				5,994,180				6,033,180				5,950,180
Cash dividends declared per common share		$	0.050			$	0.145			$	0.100			$	0.190
Net income		$	531,000			$	613,000			$	1,293,000			$	2,655,000
Other comprehensive income:
Foreign currency translation adjustment			(1,000	)			12,000				(2,000	)			(5,000	)
Comprehensive income			530,000				625,000				1,291,000				2,650,000

 

See accompanying notes to condensed consolidated financial statements (unaudited).

 

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TAITRON COMPONENTS INCORPORATED

 

Condensed Consolidated Statements of Shareholders’ Equity

 

																						Accumulated
		Common Stock																				Other
		Class A								Class B								Additional				Comprehensive				Retained				Total
		Shares				Amount				Shares				Amount				Paid-in capital				Income (Loss)				Earnings				Equity
Three months ending March 31, 2023 and June 30, 2023 (unaudited)
Balance at December 31, 2022			5,233,568			$	5,000				762,612			$	1,000			$	11,407,000			$	(58,000	)		$	4,781,000			$	16,136,000
Consolidated net income			-				-				-				-				-				-				762,000			$	762,000
Other comprehensive loss			-				-				-				-				-				(1,000	)			-			$	(1,000	)
Amortization of stock based compensation			-				-				-				-				2,000				-				-			$	2,000
Cash dividends			-				-				-				-				-				-				(300,000	)		$	(300,000	)
Balance at March 31, 2023			5,233,568			$	5,000				762,612			$	1,000			$	11,409,000			$	(59,000	)		$	5,243,000			$	16,599,000
Consolidated net income			-				-				-				-				-				-				531,000			$	531,000
Other comprehensive loss			-				-				-				-				-				(1,000	)			-			$	(1,000	)
Amortization of stock based compensation			-				-				-				-				4,000				-				-			$	4,000
Cash dividends			-				-				-				-				-				-				(300,000	)		$	(300,000	)
Balance at June 30, 2023			5,233,568			$	5,000				762,612			$	1,000			$	11,413,000			$	(60,000	)		$	5,474,000			$	16,833,000
Three months ending March 31, 2022 and June 30, 2022 (unaudited):
Balance at December 31, 2021			5,113,568			$	5,000				762,612			$	1,000			$	11,176,000			$	(73,000	)		$	3,276,000			$	14,385,000
Consolidated net income			-				-				-				-				-				-				2,042,000			$	2,042,000
Other comprehensive loss			-				-				-				-				-				(17,000	)			-			$	(17,000	)
Amortization of stock based compensation			-				-				-				-				5,000				-				-			$	5,000
Cash dividends			-				-				-				-				-				-				(264,000	)		$	(264,000	)
Balance at March 31, 2022			5,113,568			$	5,000				762,612			$	1,000			$	11,181,000			$	(90,000	)		$	5,054,000			$	16,151,000
Consolidated net income			-				-				-				-				-				-				613,000			$	613,000
Other comprehensive loss			-				-				-				-				-				12,000				-			$	12,000
Exercise stock options			120,000				-				-				-				208,000				-				-			$	208,000
Amortization of stock based compensation			-				-				-				-				6,000				-				-			$	6,000
Cash dividends			-				-				-				-				-				-				(870,000	)		$	(870,000	)
Balance at June 30, 2022			5,233,568			$	5,000				762,612			$	1,000			$	11,395,000			$	(78,000	)		$	4,797,000			$	16,120,000

 

See accompanying notes to condensed consolidated financial statements (unaudited).

 

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Index

 

TAITRON COMPONENTS INCORPORATED

 

Condensed Consolidated Statements of Cash Flows

 

		Six Months Ended June 30,
		2023				2022
Operating activities:
Net income		$	1,293,000			$	2,655,000
Adjustments to reconcile net income to net cash provided by(used for) operating activities:
Depreciation and amortization			76,000				61,000
Stock based compensation			6,000				11,000
Deferred income taxes			(5,000	)			(1,922,000	)
Changes in values of marketable securities			(538,000	)			444,000
Changes in assets and liabilities:
Accounts receivable			(275,000	)			(183,000	)
Inventories			596,000				220,000
Prepaid expenses and other current assets			(201,000	)			(55,000	)
Accounts payable			285,000				(1,009,000	)
Accrued liabilities			(117,000	)			(466,000	)
Other assets and liabilities			2,000				7,000
Total adjustments			(171,000	)			(2,892,000	)
Net cash provided by(used for) operating activities			1,122,000				(237,000	)
Investing activities:
Acquisition of property and equipment			-				(3,000	)
Purchase of marketable securities			(1,000,000	)			(1,029,000	)
Net cash used for investing activities			(1,000,000	)			(1,032,000	)
Financing activities:
Dividend payments			(600,000	)			(1,134,000	)
Proceeds of short-term investments			-				208,000
Net cash used for financing activities			(600,000	)			(926,000	)
Impact of exchange rates on cash			(2,000	)			(5,000	)
Net decrease in cash and cash equivalents			(480,000	)			(2,200,000	)
Cash and cash equivalents, beginning of period			5,217,000				5,974,000
Cash and cash equivalents, end of period		$	4,737,000			$	3,774,000
Supplemental disclosures of cash flow information:
Cash paid for interest		$	-			$	-
Cash paid for income taxes, net		$	439,000			$	386,000

 

See accompanying notes to condensed consolidated financial statements (unaudited).

 

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TAITRON COMPONENTS INCORPORATED

 

Notes to Condensed Consolidated Financial Statements (Unaudited)

 

1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Overview of Business

 

We are primarily a supplier of original designed and manufactured (“ODM”) electronic components (“ODM Components”) with our product offerings ranging from discrete semiconductors through small electronic devices. Our products include value-added engineering and turn-key solutions, focusing on providing contract electronic manufacturers (“CEMs”) and original equipment manufacturers (“OEMs”) with ODM products for their multi-year turn-key projects (“ODM Projects”). We also distribute brand name electronic components with a vast inventory available on hand. We are incorporated in California and were originally formed in 1989. We maintain divisions in Taiwan and China which were established in 1996 and 2005, respectively.

 

Basis of Presentation

 

The unaudited condensed consolidated interim financial statements include the accounts of the Company and all wholly owned divisions. All significant intercompany accounts and transactions have been eliminated in consolidation.

 

These unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and 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. In the opinion of management, all adjustments of a normal recurring nature and considered necessary for a fair presentation of its financial condition and results of operations for the interim periods presented in this Quarterly Report on Form 10-Q have been included. Operating results for the interim periods are not necessarily indicative of financial results for the full year. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022. In preparing these financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the condensed consolidated financial statements and the reported amount of revenues and expenses during the reporting periods. Actual results could differ from those estimates. Significant estimates and assumptions included in the Company’s condensed consolidated financial statements relate to the allowance for sales returns, doubtful accounts, inventory reserves, accrued liabilities and deferred income taxes.

 

Revenue recognition

 

Revenue is recognized at the point at which control of the underlying products are transferred to the customer. Satisfaction of our performance obligations occur upon the transfer of control of products, either from our facilities or directly from suppliers to customers. We consider customer purchase orders to be the contracts with a customer. All revenue is generated from contracts with customers.

 

In determining the transaction price, we evaluate whether the price is subject to refund or adjustment to determine the net consideration to which we expect to receive.

 

Taxes assessed by a governmental authority on revenue-producing transactions are excluded from revenue.

 

Shipping and handling costs associated with outbound freight after control over a product has transferred to a customer are accounted for as fulfillment costs and are included in cost of products sold.

 

Based upon the nature of our contracts with customers and our performance obligations within those contracts, we have no contract assets or liabilities as of June 30, 2023 and December 31, 2022.

 

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Nature of products

 

We are primarily a supplier of original designed and manufactured (“ODM”) products that include value-added engineering and turn-key solutions. The following is a description of major products lines from which we generate our revenue:

 

ODM Projects - Our custom made small devices for original equipment manufacturers (“OEMs”) and contract electronic manufacturers (CEMs) in their multi-year turn-key projects and marketed in specific industries such as: wild animal feeders, timers for DC motors, public street light controllers, and battery chargers.

 

ODM Components - Our private labeled electronic components.

 

Distribution Components - Our name brand electronic components.

 

Disaggregation of revenue

 

In the following table, revenue is disaggregated by primary geographical market, major product line, and timing of revenue recognition.

 

		Three Months Ended June 30,								Six Months Ended June 30,
		2023				2022				2023				2022
Primary geographical markets:
United States		$	1,341,000			$	2,593,000			$	3,376,000			$	4,054,000
Asia			146,000				187,000				183,000				272,000
Other			3,000				10,000				17,000				16,000
			1,490,000				2,790,000				3,576,000				4,342,000
Major product lines:
ODM projects		$	749,000			$	2,118,000			$	2,213,000			$	2,989,000
ODM components			727,000				654,000				1,310,000				1,286,000
Distribution components			14,000				18,000				53,000				67,000
			1,490,000				2,790,000				3,576,000				4,342,000
Timing of revenue recognition:
Products transferred at a point in time		$	1,490,000			$	2,790,000			$	3,576,000			$	4,342,000

 

2 – SHORT-TERM INVESTMENTS

 

Short-term investments, consisting principally of marketable U.S. equity securities, are classified as short-term based on the nature of the securities and their availability for use in current operations. Measurement is based on fair value with gains and losses recognized in other income/(expense), net.

 

3 – INVENTORY

 

Inventory – Inventory, consisting principally of products held for resale, is recorded at the lower of cost (determined using the first in-first out method) and net realizable value. We had inventory balances in the amount of $3,304,000 and $3,900,000 at June 30, 2023 and December 31, 2022, respectively, which is presented net of valuation allowances of $5,130,000 and $5,069,000, respectively. We evaluate inventories to identify excess, high-cost, slow-moving or other factors rendering inventories as unmarketable at normal profit margins. Due to the complexity of managing and maintaining a large inventory of product offerings, estimates are made regarding adjustments to the carrying values of inventories. Based on our assumptions about future demand and market conditions, inventories are carried at the lower of cost and net realizable value. If our assumptions about future demand change, or market conditions are less favorable than those projected, additional write-downs of inventories or valuation allowances may be required. In any case, actual amounts could be different from those estimated.

 

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4 – OTHER ASSETS

 

		Investment in securities - Zowie Technology				Other				Other Assets Total
Balance at December 31, 2022		$	186,000			$	-			$	186,000
Other changes			-				-				-
Balance at June 30, 2023		$	186,000			$	-			$	186,000

 

Our $186,000 investment in securities as of June 30, 2023 relates to 317,428 shares of preferred convertible debt of Zowie Technology Corporation (Taipei Hsien, Taiwan), a supplier of electronic component products, with our option after three (3) years to convert into common stock or refundable bearing 7% annual interest rate. Our investment represents approximately 6% of their total outstanding shares, although we do not have significant influence or control. This investment is accounted for under the cost (plus impairment) basis of accounting, however when facts and circumstances indicate that the carrying value of this asset may not be recoverable, we recognize an impairment loss. The impairment loss recognized is the amount by which the carrying amount exceeds the estimated fair value.

 

5 – SHARE BASED COMPENSATION

 

Accounting for stock options issued to employees measures the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. That cost is recognized over the period during which an employee is required to provide service in exchange for the award. Outstanding options to purchase Class A common stock (“the Options”) vest in three equal annual installments beginning one (1) year from the date of grant and are subject to termination provisions as defined in our 2005 Stock Incentive Plan and 2018 Omnibus Incentive Plan (collectively referred to as “the Plans”). The Options activity during the six months ended June 30, 2023 is as follows:

 

		Number of Shares				Weighted Average Exercise Price				Weighted Average Years Remaining Contractual Term				Aggregate Intrinsic Value
Outstanding at December 31, 2022			224,567			$	3.10				5.8			$	148,000
Forfeited			(1,000	)
Outstanding at June 30, 2023			223,567			$	3.11				5.4			$	251,000
Exercisable at June 30, 2023			140,569			$	2.71				4.6			$	207,000

 

At June 30, 2023, the range of individual outstanding weighted average exercise prices was $0.98 to $3.95 and the unamortized compensation expense was approximately $18,000. Stock based compensation recorded in the three and six months ended June 30, 2023 was $2,000 and $4,000, respectively, and is included in selling, general and administrative expenses on the accompanying Condensed Consolidated Statements of Operations and Comprehensive Income.

 

6 – COMMITMENTS AND CONTINGENCIES

 

Inventory Purchasing

Outstanding commitments to purchase inventory from suppliers aggregated approximately $700,000 as of June 30, 2023.

 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

The following discussion should be read in conjunction with the condensed consolidated financial statements, including the related notes, appearing in Item 1 of Part 1 of this quarterly report on Form 10-Q, as well as our most recent annual report on Form 10-K for the year ended December 31, 2022.

 

This document contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (“Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) with respect to the financial condition, results of operations and business of the Company. Forward-looking statements usually are denoted by words or phrases such as “believes,” “expects,” “projects,” “estimates,” “anticipates,” “will likely result” or similar expressions. We wish to caution readers that all forward-looking statements are necessarily speculative and not to place undue reliance on forward-looking statements, which speak only as of the date made, and to advise readers that actual results could vary due to a variety of risks and uncertainties, including the risks described in our Annual Report on Form 10-K for the year ended December 31, 2022 and other reports we file with the Securities and Exchange Commission. Except as required by law, we undertake no obligation to update forward-looking statements.

 

References to “Taitron,” the “Company,” “we,” “our” and “us” refer to Taitron Components Incorporated and its wholly owned and majority-owned subsidiaries or divisions, unless the context otherwise requires.

 

Critical Accounting Policies and Estimates

 

Use of Estimates - Management has made a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities to prepare our condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States. These estimates have a significant impact on our valuation and reserve accounts relating to the allowance for sales returns, doubtful accounts, inventory reserves and deferred income taxes. Actual results could differ from these estimates.

 

Revenue Recognition – Revenue is recognized upon shipment of the products, which is when legal transfer of title occurs and control of the product is transferred to the customer. Reserves for sales allowances and customer returns are established based upon historical experience and our estimates of future returns. Sales returns for each of the three and six months ended June 30, 2023 and 2022 were $0 and $0, respectively. The allowance for sales returns and doubtful accounts at June 30, 2023 and December 31, 2022 aggregated $7,000.

 

Inventory – Inventory, consisting principally of products held for resale, is recorded at the lower of cost (determined using the first in-first out method) and net realizable value. We had inventory balances in the amount of $3,304,000 and $3,900,000 at June 30, 2023 and December 31, 2022, respectively, which is presented net of valuation allowances of $5,130,000 and $5,069,000, respectively. We evaluate inventories to identify excess, high-cost, slow-moving or other factors rendering inventories as unmarketable at normal profit margins. Due to the large number of transactions and the complexity of managing and maintaining a large inventory of product offerings, estimates are made regarding adjustments to the cost of inventories. If our assumptions about future demand change, or market conditions are less favorable than those projected, additional write-downs of inventories may be required. In any case, actual amounts could be different from those estimated.

 

Deferred Taxes – If determined that it is more likely than not that we will not realize all or part of our net deferred tax assets in the future, we record a valuation allowance against the deferred tax assets, which allowance will be charged to income tax expense in the period of such determination. We also consider the scheduled reversal of deferred tax liabilities, tax planning strategies and future taxable income in assessing if deferred tax assets could be realized. We also consider the weight of both positive and negative evidence in determining whether a valuation allowance is needed. However, we have fully reduced by $1,915,000 the entire valuation allowance against our net deferred tax assets during the year ended December 31, 2022 primarily as a result of our recent history of net income.

 

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Overview

 

We are primarily focused on supplying ODM products for our OEM customer’s multi-year turn-key projects. We also distribute discrete semiconductors, commodity Integrated Circuits (ICs), optoelectronic devices and passive components to other electronic distributors, CEMs and OEMs, who incorporate them in their products.

 

Our core strategy has shifted to primarily focus on higher margin ODM Projects that require custom products designed for specific applications to OEM customers, and away from actively marketing our superstore strategy of maintaining a vast quantity of electronic components to fill customer orders immediately from available stock held in inventory. As a result, we expect our components inventory will be more passively marketed and distributed online for clearance through our internet sales portal, however at potentially lower rates due to the pricing pressures normally attributed with online shopping.

 

In accordance with generally accepted accounting principles, we have classified inventory as a current asset in our June 30, 2023, condensed consolidated financial statements representing approximately 26% of current assets and 18% of total assets. However, if all or a substantial portion of the inventory was required to be immediately liquidated, the inventory would not be as readily marketable or liquid as other items included or classified as a current asset, such as cash. We cannot assure you that demand in the discrete semiconductor market will increase and that market conditions will improve. Therefore, it is possible that further declines in our carrying values of inventory may result.

 

Our gross profit margins are subject to a number of factors, including product demand, the relative strength of the U.S. dollar, provisions for inventory reserves, our ability to purchase inventory at favorable prices and our sales product mix.

 

Results of Operations

 

Significant Risks and Uncertainties

 

See the Risk Factors included in our Annual report on Form 10-K for the year ended December 31, 2022 as filed with the Securities and Exchange Commission as well as the additional Risk Factor included in Part II—Item 1A of this quarterly report.

 

Second quarter of 2023 versus 2022.

 

Net sales in the second quarter of 2023 totaled $1,490,000 versus $2,790,000 in the comparable period for 2022, a decrease of $1,300,000 or 46.6% over the same period last year. The decrease was primarily driven by a decrease of ODM project sales volume.

 

Gross profit for the second quarter of 2023 was $846,000 versus $1,490,000 in the comparable period for 2022, and gross margin percentage of net sales was 56.8% in the second quarter of 2023 versus 53.4% in the comparable period for 2022. The approximately 3.4% gross margin percentage increase was driven by selling higher margin products.

 

Selling, general and administrative expenses in the second quarter of 2023 totaled $583,000 versus $531,000 in the comparable period for 2022. The $52,000 increase was primarily driven by higher salaries and personnel related costs.

 

Other income(expense), net, in the second quarter of 2023 was $260,000 versus ($310,000) in the comparable period for 2022. Other income(expense) was primarily from short-term investments.

 

Income tax provision was $40,000 for the second quarter of 2023 versus $40,000 in the comparable period for 2022.

 

Net income was $531,000 for the second quarter of 2023 versus $613,000 in the comparable period for 2022, a decrease of $82,000 resulting from the reasons discussed above.

 

9

---

Index

 

Six Months Ended June 30, 2023 versus Six Months Ended June 30, 2022.

 

Net sales in the six months ended June 30, 2023 was $3,576,000 versus $4,342,000 in the comparable period for 2022, a decrease of $766,000 or 17.6% over the same period last year. The decrease was driven by a decrease of ODM project sales volume.

 

Gross profit for the six months ended June 30, 2023 was $1,999,000 versus $2,293,000 in the comparable period for 2022, and gross margin percentage of net sales was approximately 55.9% for the six months ended June 30, 2023 and 52.8% for 2022, respectively.

 

Selling, general and administrative expenses in the six months ended June 30, 2023 totaled $1,173,000 versus $1,088,000 in the comparable period for 2022, an increase of $85,000 over the same period last year. The $85,000 increase was primarily driven by higher salaries and personnel related costs.

 

Other income(expense), net, in the six months ended June 30, 2023 was $481,000 versus ($393,000) in the comparable period for 2022. Other income(expense) was primarily from short-term investments.

 

Income tax provision(benefit) was $81,000 for the six months ended June 30, 2023 versus ($1,835,000) in the comparable period for 2022. The decrease was due to reducing by ($1,915,000) our entire valuation allowance against our deferred tax assets in 2022.

 

Net income was $1,293,000 for the six months ended June 30, 2023 versus $2,655,000 in the comparable period for 2022, a decrease of $1,362,000 resulting from the reasons discussed above.

 

Liquidity and Capital Resources

 

We historically have satisfied our liquidity requirements through cash generated from operations, short-term commercial loans, subordinated related party promissory notes and issuance of equity securities.

 

Cash flows provided by operating activities were $1,122,000 as opposed to used for ($237,000) in the six months ended June 30, 2023 and 2022, respectively. The increase of $1,359,000 in cash flows provided by operations compared with the prior period resulted from changes in operating assets and liabilities, primarily from accounts payable and inventory and a decrease in net income.

 

Cash flows used for investing activities were $1,000,000 and $1,032,000 for the six months ended June 30, 2023 and 2022, respectively.

 

Cash flows used for financing activities were $600,000 and $926,000 for the six months ended June 30, 2023 and 2022, respectively. The decrease of $326,000 compared with the prior period was based upon our 2022 special cash dividend of $0.10 per share announced on April 29, 2022.

 

We believe that funds generated from operations, existing cash balances and, if necessary, related party short-term loans, are likely to be sufficient to finance our working capital and capital expenditure requirements for the foreseeable future. If these funds are not sufficient, we may secure new sources of asset-based lending on accounts receivables or issue debt or equity securities. Otherwise, we may need to liquidate assets to generate the necessary working capital.

 

Inventory is included and classified as a current asset. As of June 30, 2023, inventory represented approximately 26% of current assets and 18% of total assets. However, it is likely to take over one (1) year for the inventory to turn and therefore is likely not saleable within this time frame. Hence, inventory would not be as readily marketable or liquid as other items included in current assets, such as cash.

 

Off-Balance Sheet Arrangements

 

As of June 30, 2023, we had no off-balance sheet arrangements.

 

10

---

Index

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk. - Not applicable.

 

Item 4. Controls and Procedures.

 

Evaluation of Disclosure Controls and Procedures

Our management has evaluated, under the supervision and with the participation of our principal executive and principal financial officers, the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934 (the “Exchange Act”). Based on that evaluation, our principal executive and principal financial officers concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective in ensuring that information required to be disclosed in our Exchange Act reports is (1) recorded, processed, summarized and reported in a timely manner, and (2) accumulated and communicated to our management, including our principal executive and financial officers, as appropriate to allow timely decisions regarding required disclosure.

 

Changes in Internal Control over Financial Reporting

 

There have been no changes in our internal control over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

11

---

Index

 

PART II - OTHER INFORMATION

 

Item 1. Legal Proceedings.

 

In the ordinary course of business, we may become involved in legal proceedings from time to time. As of the date of this report, we are not aware of any material pending legal proceedings.

 

Item 1A. Risk Factors.

 

The discussion of our business and operations should be read together with the risk factor set forth below and the risk factors contained in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2022, which describe various risks and uncertainties to which we are or may become subject. These risks and uncertainties have the potential to affect our business, financial condition, results of operations, cash flows, strategies or prospects in a material and adverse manner. As of August 14, 2023, there have been no material changes to the risk factors set forth in our Annual Report on Form 10-K for the year ended December 31, 2022.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. None.

 

Item 3. Defaults Upon Senior Securities. None.

 

Item 4. Mine Safety Disclosures. Not Applicable.

 

Item 5. Other Information. None.

 

Item 6. Exhibits.

 

Exhibit Number		Description of Document
31.1 *		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2 *		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32 **		Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 USC. Section 1350).
101.INS*		Inline XBRL Instance Document
101.SCH*		Inline XBRL Taxonomy Extension Schema
101.CAL*		Inline XBRL Taxonomy Extension Calculation Linkbase
101.DEF*		Inline XBRL Taxonomy Extension Definition Linkbase
101.LAB*		Inline XBRL Taxonomy Extension Label Linkbase
101.PRE*		Inline XBRL Taxonomy Extension Presentation Linkbase
104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

 

---

*		Filed herewith.
**		Furnished herewith.

 

12

---

Index

 

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.

 

		TAITRON COMPONENTS INCORPORATED
Date: August 14, 2023		/s/ Stewart Wang Stewart Wang Chief Executive Officer and President (Principal Executive Officer)
		/s/ David Vanderhorst David Vanderhorst Chief Financial Officer and Secretary (Principal Financial Officer)

 

13

 

EXHIBIT 31.1

 

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO RULES 13A-14 AND 15D-14

OF THE SECURITIES EXCHANGE ACT OF 1934

 

I, Stewart Wang, certify that:

 

1. I have reviewed this quarterly report on Form 10-Q of Taitron Components Incorporated;

 

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 15d-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 issuer'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: August 14, 2023		/s/ Stewart Wang                                     Stewart Wang Chief Executive Officer and President (Principal Executive Officer)

 

 

 

 

EXHIBIT 31.2

 

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO RULES 13A-14 AND 15D-14

OF THE SECURITIES EXCHANGE ACT OF 1934

 

I, David Vanderhorst, certify that:

 

1. I have reviewed this quarterly report on Form 10-Q of Taitron Components Incorporated;

 

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 15d-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 issuer'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: August 14, 2023
		/s/ David Vanderhorst                               David Vanderhorst Chief Financial Officer and Secretary (Principal Financial Officer)

 

 

 

 

EXHIBIT 32

 

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the quarterly report on Form 10-Q of Taitron Components Incorporated (the “Company”) for the period ended June 30, 2023 (the “Report”), the undersigned hereby certify in their capacities as Chief Executive Officer and Chief Financial Officer of the Company, respectively, pursuant to 18 U.S.C. section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

 

1 ) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

 

2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

Date: August 14, 2023		/s/ Stewart Wang                                          Stewart Wang Chief Executive Officer and President (Principal Executive Officer)
		/s/ David Vanderhorst                                   David Vanderhorst Chief Financial Officer and Secretary (Principal Financial Officer)

 

 

 

 

Document And Entity Information - shares	6 Months Ended
	Jun. 30, 2023	Jul. 31, 2023
Document Information Line Items
Entity Registrant Name	TAITRON COMPONENTS INCORPORATED
Trading Symbol	TAIT
Document Type	10-Q
Current Fiscal Year End Date	--12-31
Amendment Flag	false
Entity Central Index Key	0000942126
Entity Current Reporting Status	Yes
Entity Filer Category	Non-accelerated Filer
Document Period End Date	Jun. 30, 2023
Document Fiscal Year Focus	2023
Document Fiscal Period Focus	Q2
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Shell Company	false
Document Quarterly Report	true
Document Transition Report	false
Entity File Number	0-25844
Entity Incorporation, State or Country Code	CA
Entity Tax Identification Number	95-4249240
Entity Address, Address Line One	28040 West Harrison Parkway
Entity Address, City or Town	Valencia
Entity Address, State or Province	CA
Entity Address, Postal Zip Code	91355-4162
City Area Code	661
Local Phone Number	257-6060
Title of 12(b) Security	Class A common stock
Security Exchange Name	NASDAQ
Entity Interactive Data Current	Yes
Common Class A [Member]
Document Information Line Items
Entity Common Stock, Shares Outstanding		5,233,568
Common Class B [Member]
Document Information Line Items
Entity Common Stock, Shares Outstanding		762,612

Consolidated Balance Sheets - USD ($)	Jun. 30, 2023	Dec. 31, 2022
Current assets:
Cash and cash equivalents	$ 4,737,000	$ 5,217,000
Accounts receivable, less allowances of $7,000	958,000	683,000
Short-term investments (Note 2)	3,572,000	2,034,000
Inventories, less reserves for obsolescence of $5,130,000, and $5,069,000, respectively (Note 3)	3,304,000	3,900,000
Prepaid expenses and other current assets	349,000	148,000
Total current assets	12,920,000	11,982,000
Property and equipment, net	2,844,000	2,922,000
Deferred taxes	2,052,000	2,047,000
Other assets (Note 5)	186,000	186,000
Total assets	18,002,000	17,137,000
Current liabilities:
Accounts payable	496,000	211,000
Accrued liabilities	673,000	790,000
Total current and total liabilities	1,169,000	1,001,000
Commitments and contingencies (Note 6)
Shareholders' equity:
Preferred stock, $0.001 par value. Authorized 5,000,000 shares; None issued or outstanding	0	0
Additional paid-in capital	11,413,000	11,407,000
Accumulated other comprehensive income	(60,000)	(58,000)
Retained earnings	5,474,000	4,781,000
Total equity	16,833,000	16,136,000
Total liabilities and equity	18,002,000	17,137,000
Common Class A [Member]
Shareholders' equity:
Common stock, value	5,000	5,000
Common Class B [Member]
Shareholders' equity:
Common stock, value	$ 1,000	$ 1,000

Consolidated Balance Sheets (Parentheticals) - USD ($)	Jun. 30, 2023	Dec. 31, 2022
Accounts receivable, allowances (in Dollars)	$ 7,000	$ 7,000
Inventories, reserves for obsolescence (in Dollars)	$ 5,130,000	$ 5,069,000
Preferred stock, par value (in Dollars per share)	$ 0.001	$ 0.001
Preferred stock, shares authorized	5,000,000	5,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common Class A [Member]
Common stock par value (in Dollars per share)	$ 0.001	$ 0.001
Common stock, shares authorized	20,000,000	20,000,000
Common Stock, shares issued	5,233,568	5,233,568
Common stock, shares outstanding	5,233,568	5,233,568
Common Class B [Member]
Common stock par value (in Dollars per share)	$ 0.001	$ 0.001
Common stock, shares authorized	762,612	762,612
Common Stock, shares issued	762,612	762,612
Common stock, shares outstanding	762,612	762,612

Consolidated Statements of Operations and Comprehensive Income - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Income Statement [Abstract]
Net product revenue	$ 1,490,000	$ 2,790,000	$ 3,576,000	$ 4,342,000
Cost of products sold	644,000	1,300,000	1,577,000	2,049,000
Gross profit	846,000	1,490,000	1,999,000	2,293,000
Selling, general and administrative expenses	583,000	531,000	1,173,000	1,088,000
Operating income	263,000	959,000	826,000	1,205,000
Interest income, net	48,000	4,000	67,000	8,000
Other income, net	260,000	(310,000)	481,000	(393,000)
Income before income taxes	571,000	653,000	1,374,000	820,000
Income tax provision	(40,000)	(40,000)	(81,000)	1,835,000
Net income	531,000	613,000	1,293,000	2,655,000
Other comprehensive income:
Foreign currency translation adjustment	(1,000)	12,000	(2,000)	(5,000)
Comprehensive income	$ 530,000	$ 625,000	$ 1,291,000	$ 2,650,000
Net income per share: Basic (in Dollars per share)	$ 0.09	$ 0.1	$ 0.22	$ 0.45
Diluted (in Dollars per share)	$ 0.09	$ 0.1	$ 0.21	$ 0.45
Weighted average shares outstanding: Basic (in Shares)	5,996,180	5,936,180	5,996,180	5,906,180
Diluted (in Shares)	6,033,180	5,994,180	6,033,180	5,950,180
Cash dividends declared per common share (in Dollars per share)	$ 0.05	$ 0.145	$ 0.1	$ 0.19

Consolidated Statements of Shareholders' Equity - USD ($)	Common Class A [Member] Common Stock [Member]	Common Class A [Member]	Common Class B [Member] Common Stock [Member]	Common Class B [Member]	Additional Paid-in Capital [Member]	AOCI Attributable to Parent [Member]	Retained Earnings [Member]	Total
Balance at Dec. 31, 2021	$ 5,000		$ 1,000		$ 11,176,000	$ (73,000)	$ 3,276,000	$ 14,385,000
Balance (in Shares) at Dec. 31, 2021	5,113,568		762,612
Three months ending March 31, 2022 and June 30, 2022 (unaudited):
Consolidated net income							2,042,000	2,042,000
Other comprehensive loss						(17,000)		(17,000)
Amortization of stock based compensation					5,000			5,000
Cash dividends							(264,000)	(264,000)
Balance at Mar. 31, 2022	$ 5,000		$ 1,000		11,181,000	(90,000)	5,054,000	16,151,000
Balance (in Shares) at Mar. 31, 2022	5,113,568		762,612
Balance at Dec. 31, 2021	$ 5,000		$ 1,000		11,176,000	(73,000)	3,276,000	14,385,000
Balance (in Shares) at Dec. 31, 2021	5,113,568		762,612
Three months ending March 31, 2022 and June 30, 2022 (unaudited):
Other comprehensive loss								(5,000)
Balance at Jun. 30, 2022	$ 5,000		$ 1,000		11,395,000	(78,000)	4,797,000	16,120,000
Balance (in Shares) at Jun. 30, 2022	5,233,568		762,612
Balance at Mar. 31, 2022	$ 5,000		$ 1,000		11,181,000	(90,000)	5,054,000	16,151,000
Balance (in Shares) at Mar. 31, 2022	5,113,568		762,612
Three months ending March 31, 2022 and June 30, 2022 (unaudited):
Exercise stock options					208,000			208,000
Exercise stock options (in Shares)	120,000
Consolidated net income							613,000	613,000
Other comprehensive loss						12,000		12,000
Amortization of stock based compensation					6,000			6,000
Cash dividends							(870,000)	(870,000)
Balance at Jun. 30, 2022	$ 5,000		$ 1,000		11,395,000	(78,000)	4,797,000	16,120,000
Balance (in Shares) at Jun. 30, 2022	5,233,568		762,612
Balance at Dec. 31, 2022	$ 5,000		$ 1,000		11,407,000	(58,000)	4,781,000	16,136,000
Balance (in Shares) at Dec. 31, 2022	5,233,568	5,233,568	762,612	762,612
Three months ending March 31, 2022 and June 30, 2022 (unaudited):
Consolidated net income							762,000	762,000
Other comprehensive loss						(1,000)		(1,000)
Amortization of stock based compensation					2,000			2,000
Cash dividends							(300,000)	(300,000)
Balance at Mar. 31, 2023	$ 5,000		$ 1,000		11,409,000	(59,000)	5,243,000	16,599,000
Balance (in Shares) at Mar. 31, 2023	5,233,568		762,612
Balance at Dec. 31, 2022	$ 5,000		$ 1,000		11,407,000	(58,000)	4,781,000	16,136,000
Balance (in Shares) at Dec. 31, 2022	5,233,568	5,233,568	762,612	762,612
Three months ending March 31, 2022 and June 30, 2022 (unaudited):
Other comprehensive loss								(2,000)
Balance at Jun. 30, 2023	$ 5,000		$ 1,000		11,413,000	(60,000)	5,474,000	16,833,000
Balance (in Shares) at Jun. 30, 2023	5,233,568	5,233,568	762,612	762,612
Balance at Mar. 31, 2023	$ 5,000		$ 1,000		11,409,000	(59,000)	5,243,000	16,599,000
Balance (in Shares) at Mar. 31, 2023	5,233,568		762,612
Three months ending March 31, 2022 and June 30, 2022 (unaudited):
Consolidated net income							531,000	531,000
Other comprehensive loss						(1,000)		(1,000)
Amortization of stock based compensation					4,000			4,000
Cash dividends							(300,000)	(300,000)
Balance at Jun. 30, 2023	$ 5,000		$ 1,000		$ 11,413,000	$ (60,000)	$ 5,474,000	$ 16,833,000
Balance (in Shares) at Jun. 30, 2023	5,233,568	5,233,568	762,612	762,612

Consolidated Statements of Cash Flows - USD ($)	6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022
Operating activities:
Net income	$ 1,293,000	$ 2,655,000
Adjustments to reconcile net income to net cash provided by(used for) operating activities:
Depreciation and amortization	76,000	61,000
Stock based compensation	6,000	11,000
Deferred income taxes	(5,000)	(1,922,000)
Changes in values of marketable securities	(538,000)	444,000
Accounts receivable	(275,000)	(183,000)
Inventories	596,000	220,000
Prepaid expenses and other current assets	(201,000)	(55,000)
Accounts payable	285,000	(1,009,000)
Accrued liabilities	(117,000)	(466,000)
Other assets and liabilities	2,000	7,000
Total adjustments	(171,000)	(2,892,000)
Net cash provided by(used for) operating activities	1,122,000	(237,000)
Investing activities:
Acquisition of property and equipment	0	(3,000)
Purchase of marketable securities	(1,000,000)	(1,029,000)
Net cash used for investing activities	(1,000,000)	(1,032,000)
Financing activities:
Dividend payments	(600,000)	(1,134,000)
Proceeds of short-term investments	0	208,000
Net cash used for financing activities	(600,000)	(926,000)
Impact of exchange rates on cash	(2,000)	(5,000)
Net decrease in cash and cash equivalents	(480,000)	(2,200,000)
Cash and cash equivalents, beginning of period	5,217,000	5,974,000
Cash and cash equivalents, end of period	4,737,000	3,774,000
Supplemental disclosures of cash flow information:
Cash paid for interest	0	0
Cash paid for income taxes, net	$ 439,000	$ 386,000

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES	6 Months Ended
	Jun. 30, 2023
Accounting Policies [Abstract]
Significant Accounting Policies [Text Block]	1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES   Overview of Business   We are primarily a supplier of original designed and manufactured (“ODM”) electronic components (“ODM Components”) with our product offerings ranging from discrete semiconductors through small electronic devices. Our products include value-added engineering and turn-key solutions, focusing on providing contract electronic manufacturers (“CEMs”) and original equipment manufacturers (“OEMs”) with ODM products for their multi-year turn-key projects (“ODM Projects”). We also distribute brand name electronic components with a vast inventory available on hand. We are incorporated in California and were originally formed in 1989. We maintain divisions in Taiwan and China which were established in 1996 and 2005, respectively.   Basis of Presentation   The unaudited condensed consolidated interim financial statements include the accounts of the Company and all wholly owned divisions. All significant intercompany accounts and transactions have been eliminated in consolidation.   These unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and 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. In the opinion of management, all adjustments of a normal recurring nature and considered necessary for a fair presentation of its financial condition and results of operations for the interim periods presented in this Quarterly Report on Form 10-Q have been included. Operating results for the interim periods are not necessarily indicative of financial results for the full year. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022. In preparing these financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the condensed consolidated financial statements and the reported amount of revenues and expenses during the reporting periods. Actual results could differ from those estimates. Significant estimates and assumptions included in the Company’s condensed consolidated financial statements relate to the allowance for sales returns, doubtful accounts, inventory reserves, accrued liabilities and deferred income taxes.   Revenue recognition   Revenue is recognized at the point at which control of the underlying products are transferred to the customer. Satisfaction of our performance obligations occur upon the transfer of control of products, either from our facilities or directly from suppliers to customers. We consider customer purchase orders to be the contracts with a customer. All revenue is generated from contracts with customers.   In determining the transaction price, we evaluate whether the price is subject to refund or adjustment to determine the net consideration to which we expect to receive.   Taxes assessed by a governmental authority on revenue-producing transactions are excluded from revenue.   Shipping and handling costs associated with outbound freight after control over a product has transferred to a customer are accounted for as fulfillment costs and are included in cost of products sold.   Based upon the nature of our contracts with customers and our performance obligations within those contracts, we have no contract assets or liabilities as of June 30, 2023 and December 31, 2022.   Nature of products   We are primarily a supplier of original designed and manufactured (“ODM”) products that include value-added engineering and turn-key solutions. The following is a description of major products lines from which we generate our revenue:   ODM Projects - Our custom made small devices for original equipment manufacturers (“OEMs”) and contract electronic manufacturers (CEMs) in their multi-year turn-key projects and marketed in specific industries such as: wild animal feeders, timers for DC motors, public street light controllers, and battery chargers.   ODM Components - Our private labeled electronic components.   Distribution Components - Our name brand electronic components.   Disaggregation of revenue   In the following table, revenue is disaggregated by primary geographical market, major product line, and timing of revenue recognition.       Three Months Ended June 30,     Six Months Ended June 30,       2023     2022     2023     2022   Primary geographical markets:                                 United States   $ 1,341,000     $ 2,593,000     $ 3,376,000     $ 4,054,000   Asia     146,000       187,000       183,000       272,000   Other     3,000       10,000       17,000       16,000         1,490,000       2,790,000       3,576,000       4,342,000   Major product lines:                                 ODM projects   $ 749,000     $ 2,118,000     $ 2,213,000     $ 2,989,000   ODM components     727,000       654,000       1,310,000       1,286,000   Distribution components     14,000       18,000       53,000       67,000         1,490,000       2,790,000       3,576,000       4,342,000   Timing of revenue recognition:                                 Products transferred at a point in time   $ 1,490,000     $ 2,790,000     $ 3,576,000     $ 4,342,000

SHORT-TERM INVESTMENTS	6 Months Ended
	Jun. 30, 2023
Disclosure Text Block Supplement [Abstract]
Investment [Text Block]	2 – SHORT-TERM INVESTMENTS   Short-term investments, consisting principally of marketable U.S. equity securities, are classified as short-term based on the nature of the securities and their availability for use in current operations. Measurement is based on fair value with gains and losses recognized in other income/(expense), net.

INVENTORY	6 Months Ended
	Jun. 30, 2023
Inventory Disclosure [Abstract]
Inventory Disclosure [Text Block]	3 – INVENTORY   Inventory – Inventory, consisting principally of products held for resale, is recorded at the lower of cost (determined using the first in-first out method) and net realizable value. We had inventory balances in the amount of $3,304,000 and $3,900,000 at June 30, 2023 and December 31, 2022, respectively, which is presented net of valuation allowances of $5,130,000 and $5,069,000, respectively. We evaluate inventories to identify excess, high-cost, slow-moving or other factors rendering inventories as unmarketable at normal profit margins. Due to the complexity of managing and maintaining a large inventory of product offerings, estimates are made regarding adjustments to the carrying values of inventories. Based on our assumptions about future demand and market conditions, inventories are carried at the lower of cost and net realizable value. If our assumptions about future demand change, or market conditions are less favorable than those projected, additional write-downs of inventories or valuation allowances may be required. In any case, actual amounts could be different from those estimated. Index

OTHER ASSETS	6 Months Ended
	Jun. 30, 2023
Disclosure Text Block Supplement [Abstract]
Other Assets Disclosure [Text Block]	4 – OTHER ASSETS       Investment in securities - Zowie Technology     Other     Other Assets Total                             Balance at December 31, 2022   $ 186,000     $ -     $ 186,000   Other changes     -       -       -   Balance at June 30, 2023   $ 186,000     $ -     $ 186,000     Our $186,000 investment in securities as of June 30, 2023 relates to 317,428 shares of preferred convertible debt of Zowie Technology Corporation (Taipei Hsien, Taiwan), a supplier of electronic component products, with our option after three (3) years to convert into common stock or refundable bearing 7% annual interest rate. Our investment represents approximately 6% of their total outstanding shares, although we do not have significant influence or control. This investment is accounted for under the cost (plus impairment) basis of accounting, however when facts and circumstances indicate that the carrying value of this asset may not be recoverable, we recognize an impairment loss. The impairment loss recognized is the amount by which the carrying amount exceeds the estimated fair value.

SHARE BASED COMPENSATION	6 Months Ended
	Jun. 30, 2023
Share-Based Payment Arrangement [Abstract]
Share-Based Payment Arrangement [Text Block]	5 – SHARE BASED COMPENSATION   Accounting for stock options issued to employees measures the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. That cost is recognized over the period during which an employee is required to provide service in exchange for the award. Outstanding options to purchase Class A common stock (“the Options”) vest in three equal annual installments beginning one (1) year from the date of grant and are subject to termination provisions as defined in our 2005 Stock Incentive Plan and 2018 Omnibus Incentive Plan (collectively referred to as “the Plans”). The Options activity during the six months ended June 30, 2023 is as follows:       Number of Shares     Weighted Average Exercise Price     Weighted Average Years Remaining Contractual Term     Aggregate Intrinsic Value                                     Outstanding at December 31, 2022     224,567     $ 3.10       5.8     $ 148,000   Forfeited     (1,000 )                         Outstanding at June 30, 2023     223,567     $ 3.11       5.4     $ 251,000   Exercisable at June 30, 2023     140,569     $ 2.71       4.6     $ 207,000     At June 30, 2023, the range of individual outstanding weighted average exercise prices was $0.98 to $3.95 and the unamortized compensation expense was approximately $18,000. Stock based compensation recorded in the three and six months ended June 30, 2023 was $2,000 and $4,000, respectively, and is included in selling, general and administrative expenses on the accompanying Condensed Consolidated Statements of Operations and Comprehensive Income.

COMMITMENTS AND CONTINGENCIES	6 Months Ended
	Jun. 30, 2023
Commitments and Contingencies Disclosure [Abstract]
Commitments and Contingencies Disclosure [Text Block]	6 – COMMITMENTS AND CONTINGENCIES   Inventory Purchasing Outstanding commitments to purchase inventory from suppliers aggregated approximately $700,000 as of June 30, 2023.

Accounting Policies, by Policy (Policies)	6 Months Ended
	Jun. 30, 2023
Accounting Policies [Abstract]
Basis of Accounting, Policy [Policy Text Block]	Basis of Presentation The unaudited condensed consolidated interim financial statements include the accounts of the Company and all wholly owned divisions. All significant intercompany accounts and transactions have been eliminated in consolidation. These unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and 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. In the opinion of management, all adjustments of a normal recurring nature and considered necessary for a fair presentation of its financial condition and results of operations for the interim periods presented in this Quarterly Report on Form 10-Q have been included. Operating results for the interim periods are not necessarily indicative of financial results for the full year. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022. In preparing these financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the condensed consolidated financial statements and the reported amount of revenues and expenses during the reporting periods. Actual results could differ from those estimates. Significant estimates and assumptions included in the Company’s condensed consolidated financial statements relate to the allowance for sales returns, doubtful accounts, inventory reserves, accrued liabilities and deferred income taxes.
Revenue from Contract with Customer [Policy Text Block]	Revenue recognition Revenue is recognized at the point at which control of the underlying products are transferred to the customer. Satisfaction of our performance obligations occur upon the transfer of control of products, either from our facilities or directly from suppliers to customers. We consider customer purchase orders to be the contracts with a customer. All revenue is generated from contracts with customers. In determining the transaction price, we evaluate whether the price is subject to refund or adjustment to determine the net consideration to which we expect to receive. Taxes assessed by a governmental authority on revenue-producing transactions are excluded from revenue. Shipping and handling costs associated with outbound freight after control over a product has transferred to a customer are accounted for as fulfillment costs and are included in cost of products sold. Based upon the nature of our contracts with customers and our performance obligations within those contracts, we have no contract assets or liabilities as of June 30, 2023 and December 31, 2022.
Revenue [Policy Text Block]	Nature of products We are primarily a supplier of original designed and manufactured (“ODM”) products that include value-added engineering and turn-key solutions. The following is a description of major products lines from which we generate our revenue: ODM Projects - Our custom made small devices for original equipment manufacturers (“OEMs”) and contract electronic manufacturers (CEMs) in their multi-year turn-key projects and marketed in specific industries such as: wild animal feeders, timers for DC motors, public street light controllers, and battery chargers. ODM Components - Our private labeled electronic components. Distribution Components - Our name brand electronic components. Disaggregation of revenue In the following table, revenue is disaggregated by primary geographical market, major product line, and timing of revenue recognition.     Three Months Ended June 30,     Six Months Ended June 30,       2023     2022     2023     2022   Primary geographical markets:                                 United States   $ 1,341,000     $ 2,593,000     $ 3,376,000     $ 4,054,000   Asia     146,000       187,000       183,000       272,000   Other     3,000       10,000       17,000       16,000         1,490,000       2,790,000       3,576,000       4,342,000   Major product lines:                                 ODM projects   $ 749,000     $ 2,118,000     $ 2,213,000     $ 2,989,000   ODM components     727,000       654,000       1,310,000       1,286,000   Distribution components     14,000       18,000       53,000       67,000         1,490,000       2,790,000       3,576,000       4,342,000   Timing of revenue recognition:                                 Products transferred at a point in time   $ 1,490,000     $ 2,790,000     $ 3,576,000     $ 4,342,000

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)	6 Months Ended
	Jun. 30, 2023
Accounting Policies [Abstract]
Disaggregation of Revenue [Table Text Block]	In the following table, revenue is disaggregated by primary geographical market, major product line, and timing of revenue recognition.     Three Months Ended June 30,     Six Months Ended June 30,       2023     2022     2023     2022   Primary geographical markets:                                 United States   $ 1,341,000     $ 2,593,000     $ 3,376,000     $ 4,054,000   Asia     146,000       187,000       183,000       272,000   Other     3,000       10,000       17,000       16,000         1,490,000       2,790,000       3,576,000       4,342,000   Major product lines:                                 ODM projects   $ 749,000     $ 2,118,000     $ 2,213,000     $ 2,989,000   ODM components     727,000       654,000       1,310,000       1,286,000   Distribution components     14,000       18,000       53,000       67,000         1,490,000       2,790,000       3,576,000       4,342,000   Timing of revenue recognition:                                 Products transferred at a point in time   $ 1,490,000     $ 2,790,000     $ 3,576,000     $ 4,342,000

OTHER ASSETS (Tables)	6 Months Ended
	Jun. 30, 2023
Disclosure Text Block Supplement [Abstract]
Schedule of Other Assets [Table Text Block]	Investment in securities - Zowie Technology     Other     Other Assets Total                             Balance at December 31, 2022   $ 186,000     $ -     $ 186,000   Other changes     -       -       -   Balance at June 30, 2023   $ 186,000     $ -     $ 186,000

SHARE BASED COMPENSATION (Tables)	6 Months Ended
	Jun. 30, 2023
Share-Based Payment Arrangement [Abstract]
Share-Based Payment Arrangement, Option, Activity [Table Text Block]	Accounting for stock options issued to employees measures the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. That cost is recognized over the period during which an employee is required to provide service in exchange for the award. Outstanding options to purchase Class A common stock (“the Options”) vest in three equal annual installments beginning one (1) year from the date of grant and are subject to termination provisions as defined in our 2005 Stock Incentive Plan and 2018 Omnibus Incentive Plan (collectively referred to as “the Plans”). The Options activity during the six months ended June 30, 2023 is as follows:     Number of Shares     Weighted Average Exercise Price     Weighted Average Years Remaining Contractual Term     Aggregate Intrinsic Value                                     Outstanding at December 31, 2022     224,567     $ 3.10       5.8     $ 148,000   Forfeited     (1,000 )                         Outstanding at June 30, 2023     223,567     $ 3.11       5.4     $ 251,000   Exercisable at June 30, 2023     140,569     $ 2.71       4.6     $ 207,000

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - Disaggregation of Revenue - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Disaggregation of Revenue [Line Items]
Revenue	$ 1,490,000	$ 2,790,000	$ 3,576,000	$ 4,342,000
Products Transferred at a Point in Time [Member]
Disaggregation of Revenue [Line Items]
Revenue	1,490,000	2,790,000	3,576,000	4,342,000
ODM Projects [Member]
Disaggregation of Revenue [Line Items]
Revenue	749,000	2,118,000	2,213,000	2,989,000
ODM Components [Member]
Disaggregation of Revenue [Line Items]
Revenue	727,000	654,000	1,310,000	1,286,000
Distribution Components [Member]
Disaggregation of Revenue [Line Items]
Revenue	14,000	18,000	53,000	67,000
UNITED STATES
Disaggregation of Revenue [Line Items]
Revenue	1,341,000	2,593,000	3,376,000	4,054,000
Asia [Member]
Disaggregation of Revenue [Line Items]
Revenue	146,000	187,000	183,000	272,000
Other [Member]
Disaggregation of Revenue [Line Items]
Revenue	$ 3,000	$ 10,000	$ 17,000	$ 16,000

INVENTORY (Details) - USD ($)	Jun. 30, 2023	Dec. 31, 2022
Inventory Disclosure [Abstract]
Inventory, Net	$ 3,304,000	$ 3,900,000
Inventory Valuation Reserves	$ 5,130,000	$ 5,069,000

OTHER ASSETS (Details) - Zowie Technology [Member]	Jun. 30, 2023 USD ($) shares
OTHER ASSETS (Details) [Line Items]
Equity Method Investments | $	$ 186,000
Investment Owned, Balance, Shares | shares	317,428
Equity Method Investment, Ownership Percentage	6.00%

OTHER ASSETS (Details) - Schedule of Other Assets	6 Months Ended
	Jun. 30, 2023 USD ($)
OTHER ASSETS (Details) - Schedule of Other Assets [Line Items]
Investments Balance	$ 186,000
Other changes	0
Investments Balance	186,000
Zowie Technology [Member]
OTHER ASSETS (Details) - Schedule of Other Assets [Line Items]
Investments Balance	186,000
Other changes	0
Investments Balance	186,000
Other Investments [Member]
OTHER ASSETS (Details) - Schedule of Other Assets [Line Items]
Investments Balance	0
Other changes	0
Investments Balance	$ 0

SHARE BASED COMPENSATION (Details)	3 Months Ended	6 Months Ended
	Jun. 30, 2023 USD ($) $ / shares	Jun. 30, 2023 USD ($) $ / shares
SHARE BASED COMPENSATION (Details) [Line Items]
Share-Based Payment Arrangement, Nonvested Award, Option, Cost Not yet Recognized, Amount | $	$ 18,000	$ 18,000
Share-Based Payment Arrangement, Expense | $	$ 2,000	$ 4,000
2018 Stock Incentive Plan [Member]
SHARE BASED COMPENSATION (Details) [Line Items]
Share-Based Compensation Arrangement by Share-Based Payment Award, Terms of Award		vest in three equal annual installments beginning one (1) year from the date of grant and are subject to termination provisions as defined in our 2005 Stock Incentive Plan and 2018 Omnibus Incentive Plan (collectively referred to as “the Plans”)
Minimum [Member]
SHARE BASED COMPENSATION (Details) [Line Items]
Share-Based Compensation Arrangement by Share-Based Payment Award, Options, Vested and Expected to Vest, Outstanding, Weighted Average Exercise Price (in Dollars per share) | $ / shares	$ 0.98	$ 0.98
Maximum [Member]
SHARE BASED COMPENSATION (Details) [Line Items]
Share-Based Compensation Arrangement by Share-Based Payment Award, Options, Vested and Expected to Vest, Outstanding, Weighted Average Exercise Price (in Dollars per share) | $ / shares	$ 3.95	$ 3.95

SHARE BASED COMPENSATION (Details) - Schedule of Share-based Compensation, Stock Options, Activity - USD ($)		6 Months Ended
	Dec. 31, 2022	Jun. 30, 2023
Schedule Of Share Based Compensation Stock Options Activity Abstract
Options Outstanding, Number of Shares	224,567
Options Outstanding, Weighted Average Exercise Price (in Dollars per share)	$ 3.1
Options Outstanding, Weighted Average Remaining Contractual Term (Years)	5 years 9 months 18 days	5 years 4 months 24 days
Options Outstanding, Aggregate Intrinsic Value (in Dollars)	$ 148,000
Options Exercisable, Number of Shares		140,569
Options Exercisable, Weighted Average Exercise Price (in Dollars per share)		$ 2.71
Options Exercisable, Weighted Average Years Remaining Contractual Term		4 years 7 months 6 days
Options Exercisable, Aggregate Intrinsic Value (in Dollars)		$ 207,000
Options Forfeited, Number of Shares		(1,000)
Options Outstanding, Number of Shares		223,567
Options Outstanding, Weighted Average Exercise Price (in Dollars per share)		$ 3.11
Options Outstanding, Aggregate Intrinsic Value (in Dollars)		$ 251,000

COMMITMENTS AND CONTINGENCIES (Details)	Jun. 30, 2023 USD ($)
Commitments and Contingencies Disclosure [Abstract]
Purchase Commitment, Remaining Minimum Amount Committed	$ 700,000

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