Expenses. Selling, general and administrative expenses were $1,569,746 for the three months ended December 31, 2021, compared to $1,321,311 for the comparable three months in the prior year. As a percentage of net sales, these expenses increased to 29.5% for the three month period ended December 31, 2021, from 25.8% for the 2020 period. These expenses increased as a percentage of net sales due to increased expenditures for customer packaging, presentation, and promotional costs, and due to increased legal and consulting fees related to public company activities.
Research and development expenses were $97,370 for the three month period ended December 31, 2021 compared to $106,608 for the comparable quarter of the prior year, a decrease of $9,238 (8.7%).
Interest Expense. Our interest expense was $14,156 for the quarter ended December 31, 2021, compared to interest expense of $14,086 for the quarter ended December 31, 2020.
Net Income. We reported net income of $35,351 for the quarter ended December 31, 2021, compared to a net income of $78,318 for the corresponding quarter of the prior fiscal year, a $42,967 (54.9%) decrease in net income. The primary reasons for the decrease in the net income are customer packaging, presentation, and promotional costs, and legal and consulting expenditures in the current quarter as compared to the same period in the prior year.
Nine Months Ended December 31, 2021 and 2020
Sales. Net sales for the nine months ended December 31, 2021 were $15,259,235 compared to $14,522,813 for the comparable nine months in the prior period, an increase of $736,422 (5.1%). Sales increased principally due to orders from new customers. The Company attributes the increased sales to the fact that the Company has had sufficient inventory on hand prior to and since the beginning of the pandemic and, to date, has not been adversely affected by decreased production by its suppliers.
Gross Profit Margin. The gross profit margin is calculated as net sales less cost of goods sold expressed as a percentage of net sales. The Company’s gross profit margin was 29.8% for the period ended December 31, 2021 and 32.4% for the period ended December 31, 2020. The primary reason for the decrease in gross profit during the nine-month period ended December 31, 2021 was increased freight, tariffs, and customs charges. Gross margins were positively impacted in the comparable period of the prior year due to refunds of tariffs.
Expenses. Selling, general and administrative expenses were $4,059,988 for the nine months ended December 31, 2021 compared to $3,572,189 for the comparable nine months in the prior year. As a percentage of sales, these expenses were 26.6% for the nine month period ended December 31, 2021 and 24.6% for the comparable 2020 period. These expenses increased as a percentage of net sales since selling, general, and administrative expenses do not fluctuate in direct proportion to sales. In addition, these expenses increased as a percentage of net sales due to increased expenditures for customer packaging, presentation, and promotional costs, and due to increased legal and consulting fees related to public company activities.
Research and development expenses were $295,496 for the nine months ended December 31, 2021 compared to $332,276 for the comparable period of the prior year, a decrease of $36,780 (11.1%). The primary reason for the decrease is lower amounts paid to engineering consultants for services towards meeting revised smoke alarm testing standards.
Interest Expense. Our interest expense was $37,954 for the nine months ended December 31, 2021, compared to interest expense of $71,848 for the nine months ended December 31, 2020.
Net Income . We reported net income of $157,688 for the nine months ended December 31, 2021 compared to a net income of $725,181 for the corresponding period of the prior fiscal year, a decrease in the net income of $567,493 (78.3%). The primary reasons for the decrease in the net income is lower gross margins as a result of increased freight, tariffs and customs charges, and increased general and administrative costs.
Management Plans and Liquidity
As the Company previously reported, on August 31, 2020, the Company received a letter from NYSE American LLC (the “Exchange”) stating that the Exchange has determined that the Company is not in compliance with the Exchange’s continued listing requirements as the result of the Company’s failure to maintain stockholders’ equity of $6.0 million after reporting losses from continuing operations and/or net losses in its five most recent fiscal years. On October 1, 2021, the Company received a letter from the Exchange notifying