Comparison of Results of Operations for the Years Ended March 31, 2024 and 2023
Sales. In fiscal year 2024, our net sales were $19,902,673 compared to sales in the prior year of $22,178,873, a decrease of $2,276,200 (10.3%). The decrease in sales was primarily due to decreased sales to existing retail customers as a result of delays in obtaining certain electronic components used in manufacturing our products and due to delays in ocean freight shipments.
Gross Profit. Gross profit percentage is calculated as net sales less cost of goods sold expressed as a percentage of net sales. Our gross profit percentage for the fiscal year ended March 31, 2024, was 29.2% compared to 28.6% in fiscal 2023. The increase in 2024 gross margin is attributed to variations in the mix of products sold as certain products are subject to tariff charges that directly impact gross margin.
Selling, General and Administrative Expense. Selling, general and administrative expenses increased to $5,645,584 in fiscal 2024 from $4,974,453 in fiscal 2023. As a percentage of net sales, these expenses were 28.4% for the fiscal year ended March 31, 2024, and 22.4% for the fiscal year ended March 31, 2023. These expenses increased as a percentage of net sales as they do not change in direct proportion to a change in sales. These expenses increased as a dollar amount due primarily to increases in the provision for credit losses, salaries as the prior fiscal year reflected an employee retention credit, and due to increased freight costs, insurance, and professional fees.
Engineering and Product Development. Engineering and product development expense for the fiscal year ended March 31, 2024, was $427,234. Engineering and product development expense for the fiscal year ended March 31, 2023, was $402,692. The increase in overall engineering and product development expense for the 2024 period compared to the 2023 period was due to independent testing of products.
Net Interest Expense and Interest Income. For the fiscal years ended March 31, 2024, and 2023, the Company incurred net interest expense of $155,731 and $237,686, respectively, related to borrowing costs associated with interest paid on amounts borrowed from our factor. The decrease in interest expense resulted primarily from decreased borrowing from our factor during the fiscal year ended March 31, 2024.
For the fiscal year ended March 31, 2024 the Company received interest income of $24,746 related to refunds of customs payments made in the prior fiscal year.
Income Taxes. For the fiscal years ended March 31, 2024, and 2023 our statutory Federal tax rate was 21.0%. The Company has accumulated net operating losses and other income tax credits for which a full valuation allowance has been established. Accordingly, income taxes or deferred income tax benefits indicated by the provision for income taxes as shown on the Consolidated Statements of Operations for the fiscal years ended March 31, 2024, and 2023 varies from the expected statutory rate. Footnote E to the financial statements provides a reconciliation of the amount of tax that would be expected at statutory rates and the amount of tax expense or benefit provided at the effective rate of tax for each fiscal period.
Net (Loss) Income. We reported a net loss of $395,790 for the fiscal year 2024, compared to net income of $720,411 for fiscal 2023, a decrease of $1,116,201 (154.9%) in net income. The net loss for the fiscal year ended March 31, 2024, is attributed to decreased sales resulting from manufacturing delays caused by shortages of critical components and to delays experienced in ocean freight shipments, to increases in salaries as the prior fiscal year reflected an employee retention credit, an increase in the provision for credit losses, and due to increased freight costs, insurance, and professional fees.
Financial Condition, Liquidity and Capital Resources
The Company reported a net loss of $395,790, and net income of $720,411 for the years ended March 31, 2024, and 2023, respectively. As of March 31, 2024, working capital (computed as the excess of current assets over current liabilities) decreased by $391,075 from $5,176,475 on March 31, 2023, to $4,785,400 on March 31, 2024.
Our operating activities provided cash of $604,076 for the year ended March 31, 2024. Operating activities provided cash principally by decreasing trade accounts receivable and amounts due from factor of $354,794, and by increasing accounts payable and accrued expenses by $1,382,394 and offset by increases in inventories of $688,194, increased prepaid expenses of $61,354, and a net loss of $395,790.