10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended June 30, 2019

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)

(661) 257-6060

(Registrant’s telephone number, including area code)

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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post 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 ☑

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 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, 2019
Class A	4,990,235
Class B	762,612

	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	10
Item 4.	Controls and Procedures	10
PART II - OTHER INFORMATION
Item 1.	Legal proceedings	11
Item 1A.	Risk Factors	11
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	11
Item 3.	Defaults Upon Senior Securities	11
Item 4.	Mine Safety Disclosures	11
Item 5.	Other Information	11
Item 6.	Exhibits	11
	Signatures	11

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

TAITRON COMPONENTS INCORPORATED

Condensed Consolidated Balance Sheets

	June 30,		December 31,
	2019		2018
Assets	(Unaudited)
Current assets:
Cash and cash equivalents	$	4,098,000	$	4,494,000
Accounts receivable, less allowances of $40,000 and $38,000, respectively		1,073,000		901,000
Inventories, less reserves for obsolescence of $7,274,000, and $7,189,000, respectively (Note 2)		4,356,000		4,597,000
Prepaid expenses and other current assets		110,000		67,000
Total current assets		9,637,000		10,059,000
Property and equipment, net		3,633,000		3,710,000
Other assets (Note 3)		398,000		212,000
Total assets	$	13,668,000	$	13,981,000
Liabilities and Equity
Current liabilities:
Accounts payable	$	453,000	$	972,000
Accrued liabilities		271,000		311,000
Total current & total liabilities		724,000		1,283,000
Commitments and contingencies (Note 6 )
Equity:
Shareholders's 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;    4,990,235 and 4,867,235 shares issued and outstanding, respectively		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		10,947,000		10,812,000
Accumulated other comprehensive income		143,000		128,000
Retained earnings		1,757,000		1,656,000
Total shareholders’ equity - Taitron Components Inc		12,853,000		12,602,000
Noncontrolling interest in subsidiary		91,000		96,000
Total equity		12,944,000		12,698,000
Total liabilities and equity	$	13,668,000	$	13,981,000

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

1

TAITRON COMPONENTS INCORPORATED

Condensed Consolidated Statements of Operations and Comprehensive Income

	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
Net product revenue	$	1,772,000		$	2,150,000		$	3,156,000		$	3,805,000
Cost of products sold		937,000			1,171,000			1,638,000			2,172,000
Gross profit		835,000			979,000			1,518,000			1,633,000
Selling, general and administrative expenses		616,000			550,000			1,146,000			1,110,000
Operating income		219,000			429,000			372,000			523,000
Interest income(expense), net		7,000			2,000			14,000			(4,000	)
Loss on investments		-			(60,000	)		-			(135,000	)
Other income, net		31,000			29,000			56,000			77,000
Income before income taxes		257,000			400,000			442,000			461,000
Income tax provision		(1,000	)		(1,000	)		(2,000	)		(3,000	)
Net income		256,000			399,000			440,000			458,000
Net loss attributable to noncontrolling interest in subsidiary		(2,000	)		(2,000	)		(4,000	)		(4,000	)
Net income attributable to Taitron Components Inc.	$	258,000		$	401,000		$	444,000		$	462,000
Net income per share: Basic	$	0.05		$	0.07		$	0.08		$	0.08
Net income per share: Diluted	$	0.04		$	0.07		$	0.08		$	0.08
Cash dividends declared per common share	$	0.030		$	0.025		$	0.060		$	0.050
Weighted average common shares outstanding: Basic		5,726,347			5,574,180			5,695,597			5,572,514
Weighted average common shares outstanding: Diluted		5,827,347			5,665,847			5,807,597			5,669,181
Net income	$	256,000		$	399,000		$	440,000		$	458,000
Other comprehensive income:
Foreign currency translation adjustment		2,000			9,000			15,000			2,000
Comprehensive income		258,000			408,000			455,000			460,000
Comprehensive loss attributable to noncontrolling interests		(2,000	)		(2,000	)		(5,000	)		(3,000	)
Comprehensive income attributable to Taitron Components Inc.	$	260,000		$	410,000		$	460,000		$	463,000

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

2

TAITRON COMPONENTS INCORPORATED

Condensed Consolidated Statements of Shareholders’ Equity

									Additional Paid-in capital		Accumulated Other Comprehensive Income (Loss)			Retained Earnings			Noncontrolling Interest in Sub			Total Shareholders’ Equity
	Common Stock
	Class A				Class B
	Shares		Amount		Shares		Amount
Three months ending March 31, 2019 and June 30, 2019 (unaudited):
Balance at December 31, 2018		4,867,235	$	5,000		762,612	$	1,000	$	10,812,000	$	128,000		$	1,656,000		$	96,000		$	12,698,000
Consolidated net income (loss)		-		-		-		-		-		-			186,000			(2,000	)		184,000
Other comprehensive income(loss)		-		-		-		-		-		13,000			-			(1,000	)		12,000
Exercise stock options		70,000		-		-		-		76,000		-			-			-			76,000
Amortization of stock based compensation		-		-		-		-		4,000		-			-			-			4,000
Cash dividends		-		-		-		-		-		-			(171,000	)		-			(171,000	)
Balance at March 31, 2019		4,937,235	$	5,000		762,612	$	1,000	$	10,892,000	$	141,000		$	1,671,000		$	93,000		$	12,803,000
Consolidated net income (loss)		-		-		-		-		-		-			258,000			(2,000	)		256,000
Other comprehensive income		-		-		-		-		-		2,000			-			-			2,000
Exercise stock options		53,000		-		-		-		50,000		-			-			-			50,000
Amortization of stock based compensation		-		-		-		-		5,000		-			-			-			5,000
Cash dividends		-		-		-		-		-		-			(172,000	)		-			(172,000	)
Balance at June 30, 2019		4,990,235	$	5,000		762,612	$	1,000	$	10,947,000	$	143,000		$	1,757,000		$	91,000		$	12,944,000
Three months ending March 31, 2018 and June 30, 2018 (unaudited):
Balance at December 31, 2017		4,808,235	$	5,000		762,612	$	1,000	$	10,744,000	$	144,000		$	867,000		$	100,000		$	11,861,000
Consolidated net income (loss)		-		-		-		-		-		-			61,000			(2,000	)		59,000
Other comprehensive income (loss)		-		-		-		-		-		(7,000	)		-			1,000			(6,000	)
Amortization of stock based compensation		-		-		-		-		1,000		-			-			-			1,000
Cash dividends		-		-		-		-		-		-			(139,000	)		-			(139,000	)
Balance at March 31, 2018		4,808,235	$	5,000		762,612	$	1,000	$	10,745,000	$	137,000		$	789,000		$	99,000		$	11,776,000
Consolidated net income (loss)		-		-		-		-		-		-			401,000			(2,000	)		399,000
Other comprehensive income		-		-		-		-		-		9,000			-			-			9,000
Exercise stock options		20,000		-		-		-		18,000		-			-			-			18,000
Amortization of stock based compensation		-		-		-		-		1,000		-			-			-			1,000
Cash dividends		-		-		-		-		-		-			(139,000	)		-			(139,000	)
Balance at June 30, 2018		4,828,235	$	5,000		762,612	$	1,000	$	10,764,000	$	146,000		$	1,051,000		$	97,000		$	12,064,000

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

3

 TAITRON COMPONENTS INCORPORATED

Condensed Consolidated Statements of Cash Flows

	Six Months Ended June 30,
	2019			2018
	(Unaudited)			(Unaudited)
Operating activities:
Net income	$	440,000		$	458,000
Adjustments to reconcile net income to net cash (used for) provided by operating activities:
Depreciation and amortization		82,000			76,000
Provision for sales returns and doubtful accounts		4,000			3,000
Stock based compensation		9,000			2,000
Loss on investments		-			135,000
Changes in assets and liabilities:
Accounts receivable		(176,000	)		(384,000	)
Inventories		241,000			444,000
Prepaid expenses and other current assets		(43,000	)		(30,000	)
Accounts payable		(519,000	)		138,000
Accrued liabilities		(40,000	)		(68,000	)
Other assets and liabilities		(1,000	)		11,000
Total adjustments		(443,000	)		327,000
Net cash (used for) provided by operating activities		(3,000	)		785,000
Investing activities:
Acquisition of property and equipment		(5,000	)		-
Payment for investment in convertible securities		(186,000	)		-
Net cash used for investing activities		(191,000	)		-
Financing activities:
Payments on notes payable		-			(500,000	)
Dividend payments		(343,000	)		(278,000	)
Proceeds from stock options exercised		126,000			18,000
Net cash used for financing activities		(217,000	)		(760,000	)
Impact of exchange rates on cash		15,000			2,000
Net (decrease) increase in cash and cash equivalents		(396,000	)		27,000
Cash and cash equivalents, beginning of period		4,494,000			3,250,000
Cash and cash equivalents, end of period	$	4,098,000		$	3,277,000
Supplemental disclosures of cash flow information:
Cash paid for interest	$	-		$	9,000
Cash paid for income taxes, net	$	3,000		$	3,000

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

4

TAITRON COMPONENTS INCORPORATED

Notes to Condensed Consolidated Financial Statements (Unaudited)

1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Overview of Business

In 1989, we were formed and incorporated in California. We maintain a majority-owned subsidiary in Mexico (since 1998) and two divisions in each of Taiwan (since 1997) and China (since 2005). Our Mexico location closed all operations in May 2013 (final closure is pending sale of our local 15,000 sq. ft. office and warehouse facility) and our Taiwan and China locations are for supporting overseas customers, inventory sourcing, purchases and coordinating the manufacture of our products. Our China location also serves as the engineering design support center responsible for arranging pre-production scheduling and mass production runs with joint venture partners for our projects, making component datasheets and test specifications, preparing samples, monitoring quality of shipments and performing failure analysis reports.

Basis of Presentation

The unaudited condensed consolidated interim financial statements include the accounts of the Company and all wholly owned divisions, including its 60% majority-owned subsidiary, Taitron Components Mexico, S.A. de C.V. 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, 2018. 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.

New Accounting Pronouncements

In February 2016, the FASB issued a new accounting standard on leasing. The new standard will require companies to record most leased assets and liabilities on the balance sheet, and also proposes a dual model for recognizing expense. This guidance was effective in our first quarter of 2019. We have evaluated the impact of adopting this guidance and the adoption of these accounting changes have not impacted our assets and liabilities nor our net income or equity, as we currently do not lease any assets.

In May 2017, the FASB issued a new accounting standard which provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in ASC Topic 718. Under the new guidance, modification accounting is required only if the fair value, the vesting conditions, or the classification of the award (as equity or liability) changes as a result of the change in terms or conditions. This guidance was effective in our first quarter of 2019. The adoption of this guidance has not had a material effect on our consolidated financial statements.

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.

5

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, 2019 and December 31, 2018.

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,
	2019		2018		2019		2018
Primary geographical markets:
United States	$	1,544,000	$	1,940,000	$	2,663,000	$	3,386,000
Asia		220,000		179,000		479,000		365,000
Other		8,000		31,000		14,000		54,000
		1,772,000		2,150,000		3,156,000		3,805,000
Major product lines:
ODM projects	$	991,000	$	1,231,000	$	1,588,000	$	2,075,000
ODM components		749,000		713,000		1,492,000		1,424,000
Distribution components		32,000		206,000		76,000		306,000
		1,772,000		2,150,000		3,156,000		3,805,000
Timing of revenue recognition:
Products transferred at a point in time	$	1,772,000	$	2,150,000	$	3,156,000	$	3,805,000

2 – INVENTORY

Inventory, consisting principally of products held for resale, is recorded at the lower of cost (determined using the first in-first out method) or net realizable value. We had inventory balances in the amount of $4,356,000 and $4,597,000 at June 30, 2019 and December 31, 2018, respectively, which is presented net of valuation allowances of $7,274,000 and $7,189,000, 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 or 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.

6

3 – OTHER ASSETS

	Investment in securities - Zowie Technology		Other		Other Assets Total
Balance at December 31, 2018	$	193,000	$	19,000	$	212,000
Investment		186,000		-		186,000
Balance at June 30, 2019	$	379,000	$	19,000	$	398,000

Our $379,000 investment in securities as of June 30, 2019 relates to the following investments in Zowie Technology (“ZT”), a supplier of electronic component products located in Taipei City, Taiwan R.O.C.:

(a) $193,000 relates to 1,322,552 common shares of ZT and represents approximately 9% of their total outstanding shares although we do not have significant influence or control.

(b) $186,000 relates to 317,428 shares of preferred convertible shares of ZT with our option after 3 (three) years to convert the investment into common stock or refundable bearing 7% annual interest rate.

Both investments in ZT are accounted for under the cost (plus impairment) basis of accounting.

4 – RELATED PARTY TRANSACTIONS

We made payments to K.S. Best International Co. Ltd., a company controlled by the brother of our Chief Executive Officer of approximately $0 and $6,000 for three months ended June 30, 2019 and 2018, respectively and $0 and $12,000 for the six months ended June 30, 2019 and 2018. These payments were for professional fees related to the operational management of our Taiwan office. In addition, we also made interest expense payments on our credit facility of approximately $0 and $3,000 for the three months ended June 30, 2019 and 2018, respectively and $0 and $9,000 for the six months ended June 30, 2018, respectively.

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 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, 2019 is as follows:

	Number of Shares			Weighted Average Exercise Price		Weighted Average Years Remaining Contractual Term		Aggregate Intrinsic Value
Outstanding at December 31, 2018		453,000		$	1.35		5.0	$	182,400
Exercised		(123,000	)		1.03		-		-
Forfeited		(1,000	)		0.84		-		-
Outstanding at June 30, 2019		329,000		$	1.47		5.7	$	535,500
Exercisable at June 30, 2019		114,000		$	1.05		3.5	$	234,000

At June 30, 2019, the range of individual outstanding weighted average exercise prices was $1.02 to $1.78.

6 – COMMITMENTS AND CONTINGENCIES

Inventory Purchasing

Outstanding commitments to purchase inventory from suppliers aggregated $1,240,000 as of June 30, 2019.

7

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, 2018.

This document contains forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995 which are subject to risks and uncertainties. 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. We do not undertake any duty to update forward-looking statements after the date they are made or to conform them to actual results or to changes in circumstances or expectations.

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

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 both the three months ended June 30, 2019 and 2018 were $1,000 and for the six months ended June 30, 2019 and 2018 were $4,000 and $3,000, respectively. The allowance for sales returns and doubtful accounts at June 30, 2019 and December 31, 2018 aggregated $40,000 and $38,000, respectively.

Inventory – Inventory, consisting principally of products held for resale, is recorded at the lower of cost (determined using the first in-first out method) or net realizable value. We had inventory balances in the amount of $4,356,000 and $4,597,000 at June 30, 2019 and December 31, 2018, respectively, which is presented net of valuation allowances of $7,274,000 and $7,189,000, 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.

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, 2019, condensed consolidated financial statements representing approximately 45% of current assets and 32% 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.

8

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

Second quarter of 2019 versus 2018.

Net sales in the second quarter of 2019 totaled $1,772,000 versus $2,150,000 in the comparable period for 2018, a decrease of $378,000 or 17.6% 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 2019 was $835,000 versus $979,000 in the comparable period for 2018, and gross margin percentage of net sales was 47.1% in the second quarter of 2019 versus 45.5% in the comparable period for 2018. The approximately 1.6% gross profit margin increase were driven by shipments of higher gross margin ODM projects despite the lower sales volume.

Selling, general and administrative expenses in the second quarter of 2019 totaled $616,000 versus $550,000 in the comparable period for 2018. The $66,000 increase was primarily driven by an increase in salaries for severance pay incurred during the second quarter of 2019.

Other income, net of other expense, in the second quarter of 2019 was $31,000 versus $29,000 in the comparable period for 2018. Other income was primarily derived from the rental income of excess office space at our headquarters in Valencia, CA.

Income tax provision was $1,000 for both the second quarter of 2019 and 2018, as we do not expect significant taxable income for the year ending December 31, 2019.

Net income was $256,000 for the second quarter of 2019 versus $399,000 in the comparable period for 2018, a decrease of $143,000 resulting from the reasons discussed above.

Six Months Ended June 30, 2019 versus Six Months Ended June 30, 2018.

Net sales in the six months ended June 30, 2019 was $3,156,000 versus $3,805,000 in the comparable period for 2018, a decrease of $649,000 or 17% 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, 2019 was $1,518,000 versus $1,633,000 in the comparable period for 2018, and gross margin percentage of net sales was approximately 48.1% for the six months ended June 30, 2018 and 42.9% for 2018, respectively. The approximately 5% gross profit increase was driven by shipments of new higher gross margin ODM projects.

Selling, general and administrative expenses in the six months ended June 30, 2019 totaled $1,146,000 versus $1,110,000 in the comparable period for 2018, an increase of $36,000 or 3.2% over the same period last year.   The $36,000 increase was primarily driven by an increase of $66,000 in salaries primarily for severance pay incurred during the second quarter of 2019, offset by a decrease of $23,000 in professional fees paid for engineering design services.

Other income, net of other expenses, in the six months ended June 30, 2019 was $56,000 versus $77,000 in the comparable period for 2018. Other income was primarily derived from the rental income of excess office space at our headquarters in Valencia, CA.

Income tax provision was $2,000 for the six months ended June 30, 2019 versus $3,000 in 2018, as we do not expect significant taxable income for the year ending December 31, 2019.

Net income was $440,000 for the six months ended June 30, 2019 versus $458,000 in the comparable period for 2018, a decrease of $18,000 resulting from the reasons discussed above.

9

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 used for operating activities were $3,000 as opposed to cash flows provided by operating activities of $785,000 in the six months ended June 30, 2019 and 2018, respectively. The decrease of $788,000 in cash flows provided by operations compared with the prior period resulted from changes in operating assets and liabilities, primarily from inventory and accounts payable compared to the prior period.

Cash flows used for investing activities were $191,000 and $0 for the six months ended June 30, 2019 and 2018, respectively. The increase was primarily due to our $186,000 investment in convertible securities (see Note 3).

Cash flows used for financing activities were $217,000 and $760,000 for the six months ended June 30, 2019 and 2018, respectively. The decrease of $543,000 compared with the prior period was primarily due to $500,000 from payments on notes payable in the prior year and a $65,000 increase in dividend payments in the current year. The increase to our cash dividends was based upon our November 2, 2018 announcement that our quarterly cash dividends increased by 20% from $0.025 per share to $0.03 per share.

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, 2019, inventory represented approximately 45% of current assets and 32% of total assets. However, it is likely to take over one year for the inventory to turn and therefore is likely not saleable within a one-year 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, 2019, we had no off-balance sheet arrangements.

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.

10

PART II - OTHER INFORMATION

Item 1. Legal Proceedings. – None

Item 1A. Risk Factors. - Not Applicable

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*	XBRL Instance Document
101.SCH*	XBRL Taxonomy Extension Schema
101.CAL*	XBRL Taxonomy Extension Calculation Linkbase
101.DEF*	XBRL Taxonomy Extension Definition Linkbase
101.LAB*	XBRL Taxonomy Extension Label Linkbase
101.PRE*	XBRL Taxonomy Extension Presentation Linkbase
*	Filed herewith.

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, 2019	/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)

11

EX-31.1

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, 2019

/s/ Stewart Wang

Stewart Wang

Chief Executive Officer and President

(Principal Executive Officer)

EX-31.2

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, 2019

/s/ David Vanderhorst

David Vanderhorst

Chief Financial Officer and Secretary

(Principal Financial Officer)

EX-32

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, 2019 (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, 2019

/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)

XML

Document And Entity Information - shares	6 Months Ended
	Jun. 30, 2019	Jul. 31, 2019
Document Information Line Items
Entity Registrant Name	TAITRON COMPONENTS INC
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, 2019
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q2
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Ex Transition Period	false
Entity Interactive Data Current	Yes
Common Class A [Member]
Document Information Line Items
Entity Common Stock, Shares Outstanding		4,990,235
Common Class B [Member]
Document Information Line Items
Entity Common Stock, Shares Outstanding		762,612

XML

Condensed Consolidated Balance Sheets - USD ($)	Jun. 30, 2019	Dec. 31, 2018
Current assets:
Cash and cash equivalents	$ 4,098,000	$ 4,494,000
Accounts receivable, less allowances of $40,000 and $38,000, respectively	1,073,000	901,000
Inventories, less reserves for obsolescence of $7,274,000, and $7,189,000, respectively (Note 2)	4,356,000	4,597,000
Prepaid expenses and other current assets	110,000	67,000
Total current assets	9,637,000	10,059,000
Property and equipment, net	3,633,000	3,710,000
Other assets (Note 3)	398,000	212,000
Total assets	13,668,000	13,981,000
Current liabilities:
Accounts payable	453,000	972,000
Accrued liabilities	271,000	311,000
Total current & total liabilities	724,000	1,283,000
Commitments and contingencies (Note 6 )
Shareholders's equity:
Preferred stock, $0.001 par value. Authorized 5,000,000 shares; None issued or outstanding	0	0
Additional paid-in capital	10,947,000	10,812,000
Accumulated other comprehensive income	143,000	128,000
Retained earnings	1,757,000	1,656,000
Total shareholders’ equity - Taitron Components Inc	12,853,000	12,602,000
Noncontrolling interest in subsidiary	91,000	96,000
Total equity	12,944,000	12,698,000
Total liabilities and equity	13,668,000	13,981,000
Common Class A [Member]
Shareholders's equity:
Common Stock, value, issued	5,000	5,000
Common Class B [Member]
Shareholders's equity:
Common Stock, value, issued	$ 1,000	$ 1,000

XML

Condensed Consolidated Balance Sheets (Parentheticals) - USD ($)	Jun. 30, 2019	Dec. 31, 2018
Accounts receivable, allowances (in Dollars)	$ 40,000	$ 38,000
Inventories, reserves for obsolescence (in Dollars)	$ 7,274,000	$ 7,189,000
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	4,990,235	4,867,235
Common stock, shares outstanding	4,990,235	4,867,235
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

XML

Condensed Consolidated Statements of Operations and Comprehensive Income - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Net product revenue	$ 1,772,000	$ 2,150,000	$ 3,156,000	$ 3,805,000
Cost of products sold	937,000	1,171,000	1,638,000	2,172,000
Gross profit	835,000	979,000	1,518,000	1,633,000
Selling, general and administrative expenses	616,000	550,000	1,146,000	1,110,000
Operating income	219,000	429,000	372,000	523,000
Interest income(expense), net	7,000	2,000	14,000	(4,000)
Loss on investments	0	(60,000)	0	(135,000)
Other income, net	31,000	29,000	56,000	77,000
Income before income taxes	257,000	400,000	442,000	461,000
Income tax provision	(1,000)	(1,000)	(2,000)	(3,000)
Net income	256,000	399,000	440,000	458,000
Net loss attributable to noncontrolling interest in subsidiary	(2,000)	(2,000)	(4,000)	(4,000)
Net income attributable to Taitron Components Inc.	$ 258,000	$ 401,000	$ 444,000	$ 462,000
Net income per share: Basic (in Dollars per share)	$ 0.05	$ 0.07	$ 0.08	$ 0.08
Net income per share: Diluted (in Dollars per share)	0.04	0.07	0.08	0.08
Cash dividends declared per common share (in Dollars per share)	$ 0.030	$ 0.025	$ 0.060	$ 0.050
Weighted average common shares outstanding: Basic (in Shares)	5,726,347	5,574,180	5,695,597	5,572,514
Weighted average common shares outstanding: Diluted (in Shares)	5,827,347	5,665,847	5,807,597	5,669,181
Net income	$ 256,000	$ 399,000	$ 440,000	$ 458,000
Other comprehensive income:
Foreign currency translation adjustment	2,000	9,000	15,000	2,000
Comprehensive income	258,000	408,000	455,000	460,000
Comprehensive loss attributable to noncontrolling interests	(2,000)	(2,000)	(5,000)	(3,000)
Comprehensive income attributable to Taitron Components Inc.	$ 260,000	$ 410,000	$ 460,000	$ 463,000

XML

Condensed Consolidated Statements of Shareholders' Equity - USD ($)	Common Stock [Member] Common Class A [Member]	Common Stock [Member] Common Class B [Member]	Additional Paid-in Capital [Member]	AOCI Attributable to Parent [Member]	Retained Earnings [Member]	Noncontrolling Interest [Member]	Common Class A [Member]	Common Class B [Member]	Total
Balance at Dec. 31, 2017	$ 5,000	$ 1,000	$ 10,744,000	$ 144,000	$ 867,000	$ 100,000			$ 11,861,000
Balance (in Shares) at Dec. 31, 2017	4,808,235	762,612
Consolidated net income (loss)					61,000	(2,000)			59,000
Other comprehensive income (loss)				(7,000)		1,000			(6,000)
Amortization of stock based compensation			1,000						1,000
Cash dividends					(139,000)				(139,000)
Balance at Mar. 31, 2018	$ 5,000	$ 1,000	10,745,000	137,000	789,000	99,000			11,776,000
Balance (in Shares) at Mar. 31, 2018	4,808,235	762,612
Balance at Dec. 31, 2017	$ 5,000	$ 1,000	10,744,000	144,000	867,000	100,000			11,861,000
Balance (in Shares) at Dec. 31, 2017	4,808,235	762,612
Consolidated net income (loss)									458,000
Other comprehensive income (loss)									2,000
Balance at Jun. 30, 2018	$ 5,000	$ 1,000	10,764,000	146,000	1,051,000	97,000			12,064,000
Balance (in Shares) at Jun. 30, 2018	4,828,235	762,612
Balance at Mar. 31, 2018	$ 5,000	$ 1,000	10,745,000	137,000	789,000	99,000			11,776,000
Balance (in Shares) at Mar. 31, 2018	4,808,235	762,612
Consolidated net income (loss)					401,000	(2,000)			399,000
Other comprehensive income (loss)				9,000					9,000
Exercise stock options			18,000						18,000
Exercise stock options (in Shares)	20,000
Amortization of stock based compensation			1,000						1,000
Cash dividends					(139,000)				(139,000)
Balance at Jun. 30, 2018	$ 5,000	$ 1,000	10,764,000	146,000	1,051,000	97,000			12,064,000
Balance (in Shares) at Jun. 30, 2018	4,828,235	762,612
Balance at Dec. 31, 2018	$ 5,000	$ 1,000	10,812,000	128,000	1,656,000	96,000			12,698,000
Balance (in Shares) at Dec. 31, 2018	4,867,235	762,612					4,867,235	762,612
Consolidated net income (loss)					186,000	(2,000)			184,000
Other comprehensive income (loss)				13,000		(1,000)			12,000
Exercise stock options			76,000						76,000
Exercise stock options (in Shares)	70,000
Amortization of stock based compensation			4,000						4,000
Cash dividends					(171,000)				(171,000)
Balance at Mar. 31, 2019	$ 5,000	$ 1,000	10,892,000	141,000	1,671,000	93,000			12,803,000
Balance (in Shares) at Mar. 31, 2019	4,937,235	762,612
Balance at Dec. 31, 2018	$ 5,000	$ 1,000	10,812,000	128,000	1,656,000	96,000			12,698,000
Balance (in Shares) at Dec. 31, 2018	4,867,235	762,612					4,867,235	762,612
Consolidated net income (loss)									440,000
Other comprehensive income (loss)									$ 15,000
Exercise stock options (in Shares)									123,000
Balance at Jun. 30, 2019	$ 5,000	$ 1,000	10,947,000	143,000	1,757,000	91,000			$ 12,944,000
Balance (in Shares) at Jun. 30, 2019	4,990,235	762,612					4,990,235	762,612
Balance at Mar. 31, 2019	$ 5,000	$ 1,000	10,892,000	141,000	1,671,000	93,000			12,803,000
Balance (in Shares) at Mar. 31, 2019	4,937,235	762,612
Consolidated net income (loss)					258,000	(2,000)			256,000
Other comprehensive income (loss)				2,000					2,000
Exercise stock options			50,000						50,000
Exercise stock options (in Shares)	53,000
Amortization of stock based compensation			5,000						5,000
Cash dividends					(172,000)				(172,000)
Balance at Jun. 30, 2019	$ 5,000	$ 1,000	$ 10,947,000	$ 143,000	$ 1,757,000	$ 91,000			$ 12,944,000
Balance (in Shares) at Jun. 30, 2019	4,990,235	762,612					4,990,235	762,612

XML

Condensed Consolidated Statements of Cash Flows - USD ($)	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
Operating activities:
Net income	$ 440,000	$ 458,000
Adjustments to reconcile net income to net cash (used for) provided by operating activities:
Depreciation and amortization	82,000	76,000
Provision for sales returns and doubtful accounts	4,000	3,000
Stock based compensation	9,000	2,000
Loss on investments	0	135,000
Changes in assets and liabilities:
Accounts receivable	(176,000)	(384,000)
Inventories	241,000	444,000
Prepaid expenses and other current assets	(43,000)	(30,000)
Accounts payable	(519,000)	138,000
Accrued liabilities	(40,000)	(68,000)
Other assets and liabilities	(1,000)	11,000
Total adjustments	(443,000)	327,000
Net cash (used for) provided by operating activities	(3,000)	785,000
Investing activities:
Acquisition of property and equipment	(5,000)	0
Payment for investment in convertible securities	(186,000)	0
Net cash used for investing activities	(191,000)	0
Financing activities:
Payments on notes payable	0	(500,000)
Dividend payments	(343,000)	(278,000)
Proceeds from stock options exercised	126,000	18,000
Net cash used for financing activities	(217,000)	(760,000)
Impact of exchange rates on cash	15,000	2,000
Net (decrease) increase in cash and cash equivalents	(396,000)	27,000
Cash and cash equivalents, beginning of period	4,494,000	3,250,000
Cash and cash equivalents, end of period	4,098,000	3,277,000
Supplemental disclosures of cash flow information:
Cash paid for interest	0	9,000
Cash paid for income taxes, net	$ 3,000	$ 3,000

XML

1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

6 Months Ended

Jun. 30, 2019

Accounting Policies [Abstract]

Significant Accounting Policies [Text Block]

1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Overview of Business

In 1989, we were formed and incorporated in California. We maintain a majority-owned subsidiary in Mexico (since 1998) and two divisions in each of Taiwan (since 1997) and China (since 2005). Our Mexico location closed all operations in May 2013 (final closure is pending sale of our local 15,000 sq. ft. office and warehouse facility) and our Taiwan and China locations are for supporting overseas customers, inventory sourcing, purchases and coordinating the manufacture of our products. Our China location also serves as the engineering design support center responsible for arranging pre-production scheduling and mass production runs with joint venture partners for our projects, making component datasheets and test specifications, preparing samples, monitoring quality of shipments and performing failure analysis reports.

Basis of Presentation

The unaudited condensed consolidated interim financial statements include the accounts of the Company and all wholly owned divisions, including its 60% majority-owned subsidiary, Taitron Components Mexico, S.A. de C.V. 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, 2018. 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.

New Accounting Pronouncements

In February 2016, the FASB issued a new accounting standard on leasing. The new standard will require companies to record most leased assets and liabilities on the balance sheet, and also proposes a dual model for recognizing expense. This guidance was effective in our first quarter of 2019. We have evaluated the impact of adopting this guidance and the adoption of these accounting changes have not impacted our assets and liabilities nor our net income or equity, as we currently do not lease any assets.

In May 2017, the FASB issued a new accounting standard which provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in ASC Topic 718. Under the new guidance, modification accounting is required only if the fair value, the vesting conditions, or the classification of the award (as equity or liability) changes as a result of the change in terms or conditions. This guidance was effective in our first quarter of 2019. The adoption of this guidance has not had a material effect on our consolidated financial statements.

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, 2019 and December 31, 2018.

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,
	2019		2018		2019		2018
Primary geographical markets:
United States	$	1,544,000	$	1,940,000	$	2,663,000	$	3,386,000
Asia		220,000		179,000		479,000		365,000
Other		8,000		31,000		14,000		54,000
		1,772,000		2,150,000		3,156,000		3,805,000
Major product lines:
ODM projects	$	991,000	$	1,231,000	$	1,588,000	$	2,075,000
ODM components		749,000		713,000		1,492,000		1,424,000
Distribution components		32,000		206,000		76,000		306,000
		1,772,000		2,150,000		3,156,000		3,805,000
Timing of revenue recognition:
Products transferred at a point in time	$	1,772,000	$	2,150,000	$	3,156,000	$	3,805,000

XML

2 - INVENTORY

6 Months Ended

Jun. 30, 2019

Inventory Disclosure [Abstract]

Inventory Disclosure [Text Block]

2 – INVENTORY

Inventory, consisting principally of products held for resale, is recorded at the lower of cost (determined using the first in-first out method) or net realizable value. We had inventory balances in the amount of $4,356,000 and $4,597,000 at June 30, 2019 and December 31, 2018, respectively, which is presented net of valuation allowances of $7,274,000 and $7,189,000, 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 or 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.

XML

3 - OTHER ASSETS

6 Months Ended

Jun. 30, 2019

Disclosure Text Block Supplement [Abstract]

Other Assets Disclosure [Text Block]

3 – OTHER ASSETS

	Investment in securities - Zowie Technology		Other		Other Assets Total
Balance at December 31, 2018	$	193,000	$	19,000	$	212,000
Investment		186,000		-		186,000
Balance at June 30, 2019	$	379,000	$	19,000	$	398,000

Our $379,000 investment in securities as of June 30, 2019 relates to the following investments in Zowie Technology (“ZT”), a supplier of electronic component products located in Taipei City, Taiwan R.O.C.:

(a) $193,000 relates to 1,322,552 common shares of ZT and represents approximately 9% of their total outstanding shares although we do not have significant influence or control.

(b) $186,000 relates to 317,428 shares of preferred convertible shares of ZT with our option after 3 (three) years to convert the investment into common stock or refundable bearing 7% annual interest rate.

Both investments in ZT are accounted for under the cost (plus impairment) basis of accounting.

XML

4 - RELATED PARTY TRANSACTIONS

6 Months Ended

Jun. 30, 2019

Related Party Transactions [Abstract]

Related Party Transactions Disclosure [Text Block]

4 – RELATED PARTY TRANSACTIONS

We made payments to K.S. Best International Co. Ltd., a company controlled by the brother of our Chief Executive Officer of approximately $0 and $6,000 for three months ended June 30, 2019 and 2018, respectively and $0 and $12,000 for the six months ended June 30, 2019 and 2018. These payments were for professional fees related to the operational management of our Taiwan office. In addition, we also made interest expense payments on our credit facility of approximately $0 and $3,000 for the three months ended June 30, 2019 and 2018, respectively and $0 and $9,000 for the six months ended June 30, 2018, respectively.

XML

5 - SHARE BASED COMPENSATION

6 Months Ended

Jun. 30, 2019

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 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, 2019 is as follows:

	Number of Shares			Weighted Average Exercise Price		Weighted Average Years Remaining Contractual Term		Aggregate Intrinsic Value
Outstanding at December 31, 2018		453,000		$	1.35		5.0	$	182,400
Exercised		(123,000	)		1.03		-		-
Forfeited		(1,000	)		0.84		-		-
Outstanding at June 30, 2019		329,000		$	1.47		5.7	$	535,500
Exercisable at June 30, 2019		114,000		$	1.05		3.5	$	234,000

At June 30, 2019, the range of individual outstanding weighted average exercise prices was $1.02 to $1.78.

XML

6 - COMMITMENTS AND CONTINGENCIES

6 Months Ended

Jun. 30, 2019

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 $1,240,000 as of June 30, 2019.

XML

Accounting Policies, by Policy (Policies)

6 Months Ended

Jun. 30, 2019

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, including its 60% majority-owned subsidiary, Taitron Components Mexico, S.A. de C.V. 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, 2018. 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.

New Accounting Pronouncements, Policy [Policy Text Block]

New Accounting Pronouncements

In February 2016, the FASB issued a new accounting standard on leasing. The new standard will require companies to record most leased assets and liabilities on the balance sheet, and also proposes a dual model for recognizing expense. This guidance was effective in our first quarter of 2019. We have evaluated the impact of adopting this guidance and the adoption of these accounting changes have not impacted our assets and liabilities nor our net income or equity, as we currently do not lease any assets.

In May 2017, the FASB issued a new accounting standard which provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in ASC Topic 718. Under the new guidance, modification accounting is required only if the fair value, the vesting conditions, or the classification of the award (as equity or liability) changes as a result of the change in terms or conditions. This guidance was effective in our first quarter of 2019. The adoption of this guidance has not had a material effect on our consolidated financial statements.

Revenue [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, 2019 and December 31, 2018.

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,
	2019		2018		2019		2018
Primary geographical markets:
United States	$	1,544,000	$	1,940,000	$	2,663,000	$	3,386,000
Asia		220,000		179,000		479,000		365,000
Other		8,000		31,000		14,000		54,000
		1,772,000		2,150,000		3,156,000		3,805,000
Major product lines:
ODM projects	$	991,000	$	1,231,000	$	1,588,000	$	2,075,000
ODM components		749,000		713,000		1,492,000		1,424,000
Distribution components		32,000		206,000		76,000		306,000
		1,772,000		2,150,000		3,156,000		3,805,000
Timing of revenue recognition:
Products transferred at a point in time	$	1,772,000	$	2,150,000	$	3,156,000	$	3,805,000

XML

1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)

6 Months Ended

Jun. 30, 2019

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,
	2019		2018		2019		2018
Primary geographical markets:
United States	$	1,544,000	$	1,940,000	$	2,663,000	$	3,386,000
Asia		220,000		179,000		479,000		365,000
Other		8,000		31,000		14,000		54,000
		1,772,000		2,150,000		3,156,000		3,805,000
Major product lines:
ODM projects	$	991,000	$	1,231,000	$	1,588,000	$	2,075,000
ODM components		749,000		713,000		1,492,000		1,424,000
Distribution components		32,000		206,000		76,000		306,000
		1,772,000		2,150,000		3,156,000		3,805,000
Timing of revenue recognition:
Products transferred at a point in time	$	1,772,000	$	2,150,000	$	3,156,000	$	3,805,000

XML

3 - OTHER ASSETS (Tables)

6 Months Ended

Jun. 30, 2019

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, 2018	$	193,000	$	19,000	$	212,000
Investment		186,000		-		186,000
Balance at June 30, 2019	$	379,000	$	19,000	$	398,000

XML

5 - SHARE BASED COMPENSATION (Tables)

6 Months Ended

Jun. 30, 2019

Share-based Payment Arrangement [Abstract]

Share-based Payment Arrangement, Option, Activity [Table Text Block]

The Options activity during the six months ended June 30, 2019 is as follows:

	Number of Shares			Weighted Average Exercise Price		Weighted Average Years Remaining Contractual Term		Aggregate Intrinsic Value
Outstanding at December 31, 2018		453,000		$	1.35		5.0	$	182,400
Exercised		(123,000	)		1.03		-		-
Forfeited		(1,000	)		0.84		-		-
Outstanding at June 30, 2019		329,000		$	1.47		5.7	$	535,500
Exercisable at June 30, 2019		114,000		$	1.05		3.5	$	234,000

XML

1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details)	6 Months Ended
	Jun. 30, 2019 ft²
Accounting Policies [Abstract]
Number of Operating Segments	2
Area of Real Estate Property	15,000

XML

1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - Disaggregation of Revenue - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Disaggregation of Revenue [Line Items]
Revenue	$ 1,772,000	$ 2,150,000	$ 3,156,000	$ 3,805,000
ODM Projects [Member]
Disaggregation of Revenue [Line Items]
Revenue	991,000	1,231,000	1,588,000	2,075,000
ODM Components [Member]
Disaggregation of Revenue [Line Items]
Revenue	749,000	713,000	1,492,000	1,424,000
Distribution Components [Member]
Disaggregation of Revenue [Line Items]
Revenue	32,000	206,000	76,000	306,000
UNITED STATES
Disaggregation of Revenue [Line Items]
Revenue	1,544,000	1,940,000	2,663,000	3,386,000
Asia [Member]
Disaggregation of Revenue [Line Items]
Revenue	220,000	179,000	479,000	365,000
Other [Member]
Disaggregation of Revenue [Line Items]
Revenue	8,000	31,000	14,000	54,000
Products Transferred at a Point in Time [Member]
Disaggregation of Revenue [Line Items]
Revenue	$ 1,772,000	$ 2,150,000	$ 3,156,000	$ 3,805,000

XML

2 - INVENTORY (Details) - USD ($)	Jun. 30, 2019	Dec. 31, 2018
Inventory Disclosure [Abstract]
Inventory, Net	$ 4,356,000	$ 4,597,000
Inventory Valuation Reserves	$ 7,274,000	$ 7,189,000

XML

3 - OTHER ASSETS (Details) - Zowie Technology [Member]	6 Months Ended
	Jun. 30, 2019 USD ($) shares
3 - OTHER ASSETS (Details) [Line Items]
Equity Method Investments	$ 379,000
Common Stock [Member]
3 - OTHER ASSETS (Details) [Line Items]
Equity Method Investments	$ 193,000
Investment Owned, Balance, Shares (in Shares) | shares	1,322,552
Equity Method Investment, Ownership Percentage	9.00%
Preferred Stock [Member]
3 - OTHER ASSETS (Details) [Line Items]
Equity Method Investments	$ 186,000
Investment Owned, Balance, Shares (in Shares) | shares	317,428
Equity Method Investment, Description of Principal Activities	preferred convertible shares of ZT with our option after 3 (three) years to convert the investment into common stock or refundable bearing 7% annual interest rate

XML

3 - OTHER ASSETS (Details) - Schedule of Other Assets - USD ($)	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
3 - OTHER ASSETS (Details) - Schedule of Other Assets [Line Items]
Investments Balance	$ 212,000
Investment	186,000	$ 0
Investments Balance	398,000
Zowie Technology [Member]
3 - OTHER ASSETS (Details) - Schedule of Other Assets [Line Items]
Investments Balance	193,000
Investment	186,000
Investments Balance	379,000
Other Investments [Member]
3 - OTHER ASSETS (Details) - Schedule of Other Assets [Line Items]
Investments Balance	19,000
Investment	0
Investments Balance	$ 19,000

XML

4 - RELATED PARTY TRANSACTIONS (Details) - Immediate Family Member of Management or Principal Owner [Member] - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
4 - RELATED PARTY TRANSACTIONS (Details) [Line Items]
Related Party Transaction, Amounts of Transaction	$ 0	$ 6,000	$ 0	$ 12,000
Interest Paid, Including Capitalized Interest, Operating and Investing Activities	$ 0	$ 3,000	$ 0	$ 9,000

XML

5 - SHARE BASED COMPENSATION (Details) - 2018 Stock Incentive Plan [Member]	6 Months Ended
	Jun. 30, 2019 $ / shares
5 - 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 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”).
Share-based Payment Arrangement, Option, Exercise Price Range, Lower Range Limit	$ 1.02
Share-based Payment Arrangement, Option, Exercise Price Range, Upper Range Limit	$ 1.78

XML

5 - SHARE BASED COMPENSATION (Details) - Schedule of Share-based Compensation, Stock Options, Activity - USD ($)	6 Months Ended	12 Months Ended
	Jun. 30, 2019	Dec. 31, 2018
Schedule of Share-based Compensation, Stock Options, Activity [Abstract]
Options Outstanding, Number of Shares		453,000
Options Outstanding, Weighted Average Exercise Price		$ 1.35
Options Outstanding, Weighted Average Years Remaining Contractual Term	5 years 255 days	5 years
Options Outstanding, Aggregate Intrinsic Value		$ 182,400
Options Exercisable, Number of Shares	114,000
Options Exercisable, Weighted Average Exercise Price	$ 1.05
Options Exercisable, Weighted Average Years Remaining Contractual Term	3 years 6 months
Options Exercisable, Aggregate Intrinsic Value	$ 234,000
Options Exercised, Number of Shares	(123,000)
Options Exercised, Weighted Average Exercise Price	$ 1.03
Forfeited, Number of Shares	(1,000)
Forfeited, Weighted Average Exercise Price	$ 0.84
Options Outstanding, Number of Shares	329,000
Options Outstanding, Weighted Average Exercise Price	$ 1.47
Options Outstanding, Aggregate Intrinsic Value	$ 535,500

XML

6 - COMMITMENTS AND CONTINGENCIES (Details)	Jun. 30, 2019 USD ($)
Commitments and Contingencies Disclosure [Abstract]
Purchase Commitment, Remaining Minimum Amount Committed	$ 1,240,000