EXHIBIT 99.3
ITEM 9.01 (b) - PRO FORMA FINANCIAL INFORMATION
Introduction to the Unaudited Pro Forma Combined Balance Sheet and Combined Statements of Operations
On August 31, 2023, Solitron Devices, Inc. (the “Company” or “Solitron”) acquired all of the outstanding common stock of Micro Engineering, Inc. (“MEI”), pursuant to a Stock Purchase Agreement (the “Purchase Agreement”), effective September 1, 2023, by and between the Company and the selling stockholders.
MEI specializes in solving design layout and manufacturing challenges while maximizing efficiency and keeping flexibility to meet unique customer needs. Since 1980, the MEI team has been dedicated to overcoming obstacles to provide cost efficient and rapid results. MEI specializes in low to mid volume projects that require engineering dedication, quality systems and efficient manufacturing.
The purchase price consisted of $3.0 million cash paid at closing. Additional earnout payments of up to 7.5% of annual revenue, or approximately $450,000 annually, would be payable over each of the next three years.
The Purchase Agreement contains a provision for an adjustment to the purchase price for acquired working capital in excess of, or below, $3.25 million within 180 days after the closing date.
The Unaudited Pro Forma Combined Balance Sheet represents the historical balance sheet of Solitron giving effect to the stock purchase agreement as if it had been consummated on August 31, 2023. The Unaudited Pro Forma Combined Statements of Operations for the fiscal period then ended represents the historical statement of operations as if the acquisition had been consummated the beginning of Solitron's fiscal 2023 year and six-month fiscal period ended August 31, 2023.
You should read this information in conjunction with the:
· | Accompanying notes to the Unaudited Pro Forma Combined Balance Sheet and Unaudited Pro Forma Combined Statements of Operations. |
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|
· | Separate historical financial statements and footnotes of Solitron, included in Solitron’s annual report on Form 10-K for the fiscal year ended February 28, 2023, as filed on June 23, 2023. |
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· | Separate historical financial statements and footnotes of Solitron, included in Solitron’s quarterly report on Form 10-Q for the fiscal quarter ended August 31, 2023, as filed on October 12, 2023. |
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· | Separate historical financial statements and footnotes of MEI, included in this Current Report on Form 8- K/A as of and for the years ended December 31, 2021 and December 31, 2022, and unaudited financial statements as of and for the six-months ended June 30, 2023. |
We present the unaudited pro forma combined financial information for informational purposes only. The pro forma information is not necessarily indicative of what our financial position would have been had we completed the acquisition on the dates indicated nor is it necessarily indicative of what our operating results actually would have been had we completed the acquisition on any future date or for any future period. In addition, the unaudited pro forma combined and combining financial information does not purport to project the future financial position or operating results of Solitron.
SOLITRON DEVICES, INC. UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEETS | ||||||||||||||||||
AS OF AUGUST 31, 2023 | ||||||||||||||||||
(in thousands, except for share and per share amounts) | ||||||||||||||||||
| ||||||||||||||||||
|
| Solitron Devices |
|
| Micro Engineering |
|
|
| Pro forma |
|
| Pro forma |
| |||||
|
| August 31, 2023 |
|
| June 30, 2023 |
|
| Note |
| Adjustments |
|
| Consolidated |
| ||||
|
| (unaudited) |
|
| (unaudited) |
|
|
|
|
| (unaudited) |
| ||||||
ASSETS |
|
|
|
|
|
|
|
|
| |||||||||
CURRENT ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Cash and cash equivalents |
| $ | 4,098 |
|
| $ | 338 |
|
| (a)(f) |
| $ | (2,803 | ) |
| $ | 1,633 |
|
Marketable securities |
|
| 751 |
|
|
| - |
|
|
|
|
| - |
|
|
| 751 |
|
Accounts receivable |
|
| 952 |
|
|
| 987 |
|
| (f) |
|
| (214 | ) |
|
| 1,725 |
|
Inventories, net |
|
| 2,076 |
|
|
| 2,164 |
|
| (b)(f) |
|
| 498 |
|
|
| 4,738 |
|
Prepaid expenses and other current assets |
|
| 285 |
|
|
| 448 |
|
| (f) |
|
| (149 | ) |
|
| 584 |
|
TOTAL CURRENT ASSETS |
|
| 8,162 |
|
|
| 3,937 |
|
|
|
|
| (2,668 | ) |
|
| 9,431 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net |
|
| 7,218 |
|
|
| 110 |
|
| (f) |
|
| 37 |
|
|
| 7,365 |
|
Intangibles |
|
| - |
|
|
| - |
|
| (c) |
|
| 298 |
|
|
| 298 |
|
Other assets |
|
| 14 |
|
|
| - |
|
|
|
|
| - |
|
|
| 14 |
|
TOTAL ASSETS |
| $ | 15,394 |
|
| $ | 4,047 |
|
|
|
| $ | (2,333 | ) |
| $ | 17,108 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable |
| $ | 373 |
|
| $ | 125 |
|
| (d)(f) |
| $ | 106 |
|
| $ | 604 |
|
Customer deposits |
|
| 77 |
|
|
| - |
|
|
|
|
| - |
|
|
| 77 |
|
Mortgage loan, current portion |
|
| 109 |
|
|
| - |
|
|
|
|
| - |
|
|
| 109 |
|
Accrued contingent consideration, current |
|
| - |
|
|
| - |
|
| (e) |
|
| 413 |
|
|
| 413 |
|
Accrued expenses and other current liabilities |
|
| 946 |
|
|
| 115 |
|
| (f) |
|
| (45 | ) |
|
| 1,016 |
|
TOTAL CURRENT LIABILITIES |
|
| 1,505 |
|
|
| 240 |
|
|
|
|
| 474 |
|
|
| 2,219 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued contingent consideration |
|
| - |
|
|
| - |
|
| (e) |
|
| 750 |
|
|
| 750 |
|
Deferred tax liability |
|
| - |
|
|
| 103 |
|
| (f) |
|
| 147 |
|
|
| 250 |
|
Mortgage loan, net of current portion |
|
| 2,593 |
|
|
| - |
|
|
|
|
| - |
|
|
| 2,593 |
|
TOTAL LIABILITIES |
|
| 4,098 |
|
|
| 343 |
|
|
|
|
| 1,371 |
|
|
| 5,812 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock |
|
| - |
|
|
| - |
|
|
|
|
| - |
|
|
| - |
|
Common stock |
|
| 21 |
|
|
| - |
|
|
|
|
| - |
|
|
| 21 |
|
Additional paid-in capital |
|
| 1,834 |
|
|
| 1 |
|
|
|
|
| (1 | ) |
|
| 1,834 |
|
Retained Earnings |
|
| 10,853 |
|
|
| 3,703 |
|
|
|
|
| (3,703 | ) |
|
| 10,853 |
|
Less treasury stock |
|
| (1,412 | ) |
|
| - |
|
|
|
|
| - |
|
|
| (1,412 | ) |
TOTAL STOCKHOLDERS’ EQUITY |
|
| 11,296 |
|
|
| 3,704 |
|
|
|
|
| (3,704 | ) |
|
| 11,296 |
|
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY |
| $ | 15,394 |
|
| $ | 4,047 |
|
|
|
| $ | (2,333 | ) |
| $ | 17,108 |
|
The accompanying notes are an integral part of these unaudited proforma financial statements.
2 |
SOLITRON DEVICES, INC. | ||||||||||||||||||
PRO FORMA CONSOLIDATED STATEMENTS OF INCOME | ||||||||||||||||||
FOR FISCAL YEAR ENDED FEBRUARY 28, 2023 | ||||||||||||||||||
(Unaudited, in thousands except for share and per share amounts) | ||||||||||||||||||
| ||||||||||||||||||
|
| Solitron Devices |
|
| Micro Engineering |
|
|
|
|
|
|
|
|
| ||||
|
| For The Fiscal Year ended |
|
| For The Calendar Year ended |
|
| note |
| Pro forma Adjustments |
|
| Pro forma Consolidated |
| ||||
|
| February 28, 2023 |
|
| December 31, 2022 |
|
|
|
|
|
|
| (unaudited) |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Net sales |
| $ | 6,406 |
|
| $ | 5,930 |
|
|
|
|
|
|
| $ | 12,336 |
| |
Cost of sales |
|
| 5,005 |
|
|
| 2,704 |
|
|
|
|
|
|
|
| 7,709 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Gross profit |
|
| 1,401 |
|
|
| 3,226 |
|
|
|
|
|
|
|
| 4,627 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Selling, general and administrative expenses |
|
| 2,052 |
|
|
| 1,828 |
|
| (a) |
|
| 99 |
|
|
| 3,979 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
| (651 | ) |
|
| 1,398 |
|
| (a) |
|
| (99 | ) |
|
| 648 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
| 36 |
|
|
| 3 |
|
|
|
|
|
|
|
|
| 39 |
|
Interest expense |
|
| (108 | ) |
|
| - |
|
| (b) |
|
| (105 | ) |
|
| (213 | ) |
Dividend income |
|
| 31 |
|
|
| - |
|
|
|
|
|
|
|
|
| 31 |
|
Realized (loss) on investments |
|
| (18 | ) |
|
| - |
|
|
|
|
|
|
|
|
| (18 | ) |
Unrealized gain on investments |
|
| 886 |
|
|
| - |
|
|
|
|
|
|
|
|
| 886 |
|
Scrap income |
|
| 650 |
|
|
| - |
|
|
|
|
|
|
|
|
| 650 |
|
PPP loan forgiveness |
|
| - |
|
|
| 365 |
|
|
|
|
|
|
|
|
| 365 |
|
Total other income |
|
| 1,477 |
|
|
| 368 |
|
| (b) |
|
| (105 | ) |
|
| 1,740 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income before taxes |
|
| 826 |
|
|
| 1,766 |
|
| (a)(b) |
|
| (204 | ) |
|
| 2,388 |
|
Income taxes |
|
| - |
|
|
| 361 |
|
| (c) |
|
| (361 | ) |
|
| - |
|
Net income |
| $ | 826 |
|
| $ | 1,405 |
|
|
|
|
|
|
|
| $ | 2,388 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per common share - basic and diluted |
| $ | 0.40 |
|
| $ | 16.53 |
|
|
|
|
|
|
|
| $ | 1.15 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding - basic and diluted |
|
| 2,083,436 |
|
|
| 85,000 |
|
|
|
|
|
|
|
|
| 2,083,436 |
|
The accompanying notes are an integral part of these unaudited proforma financial statements.
3 |
SOLITRON DEVICES, INC. | ||||||||||||||||||
PRO FORMA CONSOLIDATED STATEMENTS OF INCOME | ||||||||||||||||||
FOR SIX MONTHS ENDED AUGUST 31, 2023 | ||||||||||||||||||
(Unaudited, in thousands except for share and per share amounts) | ||||||||||||||||||
| ||||||||||||||||||
|
| Solitron Devices |
|
| Micro Engineering |
|
|
|
|
|
|
|
|
| ||||
|
| For The Six Months ended |
|
| For The Six Months ended |
|
| note |
| Pro forma Adjustments |
|
| Pro forma Consolidated |
| ||||
|
| August 31, 2023 |
|
| June 30, 2023 |
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net sales |
| $ | 4,617 |
|
| $ | 2,795 |
|
|
|
|
|
|
| $ | 7,412 |
| |
Cost of sales |
|
| 3,113 |
|
|
| 1,463 |
|
|
|
|
|
|
|
| 4,576 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Gross profit |
|
| 1,504 |
|
|
| 1,332 |
|
|
|
|
|
|
|
| 2,836 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Selling, general and administrative expenses |
|
| 1,156 |
|
|
| 825 |
|
| (a) |
|
| 50 |
|
|
| 2,031 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
| 348 |
|
|
| 507 |
|
| (a) |
|
| (50 | ) |
|
| 805 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
| 20 |
|
|
| 2 |
|
|
|
|
|
|
|
|
| 22 |
|
Interest expense |
|
| (53 | ) |
|
| - |
|
| (b) |
|
| (52 | ) |
|
| (105 | ) |
Dividend income |
|
| 19 |
|
|
| - |
|
|
|
|
|
|
|
|
| 19 |
|
Realized gain on investments |
|
| 332 |
|
|
| - |
|
|
|
|
|
|
|
|
| 332 |
|
Unrealized (loss) on investments |
|
| (637 | ) |
|
| - |
|
|
|
|
|
|
|
|
| (637 | ) |
Total other income |
|
| (319 | ) |
|
| 2 |
|
| (b) |
|
| (52 | ) |
|
| (369 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income before taxes |
|
| 29 |
|
|
| 509 |
|
| (a)(b) |
|
| (102 | ) |
|
| 436 |
|
Income taxes |
|
| - |
|
|
| 127 |
|
| (c) |
|
| (127 | ) |
|
| - |
|
Net income |
| $ | 29 |
|
| $ | 382 |
|
|
|
|
|
|
|
| $ | 436 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per common share - basic and diluted |
| $ | 0.01 |
|
| $ | 4.49 |
|
|
|
|
|
|
|
| $ | 0.21 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding - basic and diluted |
|
| 2,083,436 |
|
|
| 85,000 |
|
|
|
|
|
|
|
|
| 2,083,436 |
|
The accompanying notes are an integral part of these unaudited proforma financial statements.
4 |
NOTE 1 - DESCRIPTION OF TRANSACTION AND BASIS OF PRESENTATION
The Unaudited Pro Forma Combined Balance Sheet and Unaudited Pro Forma Combined Statements of Operations include the accounts of both companies. For the fiscal 2023 statement of income of Solitron, the historical amounts represent the fiscal year ended February 28, 2023. For the 2022 statement of income of Micro Engineering, the historical amounts represent the calendar year ended December 31, 2022. For the fiscal 2023 six-month statement of income of Solitron, the historical amounts represent the fiscal six-month period ended August 31, 2023. For the 2023 six-month statement of operations of Micro Engineering, the historical amounts represent the six-month period ended June 30, 2023.
NOTE 2 – PRO FORMA ADJUSTMENTS TO THE COMBINED BALANCE SHEET AT AUGUST 31, 2023
(a) to record purchase price of $3 million |
(b) to record fair value adjustment of inventory acquired |
(c) to record associated intangibles |
(d) to record amount payable due to working capital adjustment |
(e) to record accrued contingent consideration |
(f) to record adjustments due to changes between June 30, 2023 and August 31, 2023. |
NOTE 3 – PRO FORMA ADJUSTMENTS TO THE COMBINED STATEMENT OF OPERATIONS FOR THE FISCAL YEAR ENDED FEBRUARY 28, 2023 AND THE SIX MONTHS ENDED AUGUST 31, 2023
(a) to record amortization of intangibles |
(b) to record interest expense on contingent purchase consideration |
(c) to record the tax effect of Solitron's net operating loss carryforwards |
NOTE 4 – PRELIMINARY PURCHASE PRICE ALLOCATION and INTANGIBLE ASSETS
A preliminary estimate of the fair value of the assets to be acquired and the liabilities to be assumed by Solitron in connection with the acquisition is as follows:
|
| Micro Engineering |
|
|
|
| Fair value |
|
| Pro forma |
| |||
|
| August 31, 2023 |
|
| Note |
| Adjustments |
|
| Consolidated |
| |||
|
| (unaudited) |
|
|
|
| (unaudited) |
|
| (unaudited) |
| |||
Assets Acquired |
|
|
|
|
|
|
|
|
|
|
| |||
Cash and cash equivalents |
| $ | 535 |
|
|
|
| $ | - |
|
| $ | 535 |
|
Accounts receivable |
|
| 773 |
|
|
|
|
| - |
|
|
| 773 |
|
Inventories, net |
|
| 1,944 |
|
| (a) |
|
| 718 |
|
|
| 2,662 |
|
Prepaid expenses and other current assets |
|
| 299 |
|
|
|
|
| - |
|
|
| 299 |
|
Property, plant and equipment, net |
|
| 147 |
|
|
|
|
| - |
|
|
| 147 |
|
Total assets acquired |
| $ | 3,698 |
|
|
|
| $ | 718 |
|
| $ | 4,416 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities Assumed |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable |
| $ | 79 |
|
|
|
| $ | - |
|
| $ | 79 |
|
Accrued expenses and other current liabilities |
|
| 70 |
|
|
|
|
| - |
|
|
| 70 |
|
Deferred tax liability |
|
| 250 |
|
|
|
|
| - |
|
|
| 250 |
|
Total liabilities assumed |
|
| 399 |
|
|
|
|
| - |
|
|
| 399 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangibles |
|
| - |
|
|
|
|
| - |
|
|
| 298 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total purchase price |
|
|
|
|
|
|
|
|
|
|
|
| 4,315 |
|
5 |
The above estimate of the fair value of assets to be acquired and the liabilities to be assumed by Solitron could materially change.
The carrying values of all current assets and non-current assets acquired are assumed to be representative of their estimated fair values other than in the case of inventory.
The carrying values of current liabilities and non-current liabilities are assumed to be representative of their estimated fair values.
(a) to record adjustment of inventory to fair value net of selling costs.
6 |