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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

General:

Park Aerospace Corp. (“Park” or the “Company”) is an aerospace company which develops and manufactures solution and hot-melt advanced composite materials used to produce composite structures for the global aerospace markets. Park’s advanced composite materials include film adhesives (undergoing qualification) and lightning strike materials. Park offers an array of composite materials specifically designed for hand lay-up or automated fiber placement (AFP) manufacturing applications. Park’s advanced composite materials are used to produce primary and secondary structures for jet engines, large and regional transport aircraft, military aircraft, Unmanned Aerial Vehicles (UAVs commonly referred to as “drones”), business jets, general aviation aircraft and rotary wing aircraft. Park also offers specialty ablative materials for rocket motors and nozzles and specially designed materials for radome applications. As a complement to Park’s advanced composite materials offering, Park designs and fabricates composite parts, structures and assemblies and low volume tooling for the aerospace industry. Target markets for Park’s composite parts and structures (which include Park’s proprietary composite SigmaStrutTM and AlphaStrutTM product lines) are, among others, prototype and development aircraft, special mission aircraft, spares for legacy military and civilian aircraft and exotic spacecraft.

The Company’s fiscal year is the 52- or 53-week period ending the Sunday nearest to the last day of February. The 2021, 2020 and 2019 fiscal years ended on February 28, 2021, March 1, 2020 and March 3, 2019, respectively. The 2019 fiscal year consisted of 53 weeks. The 2021 and 2020 fiscal years each consisted of 52 weeks. Unless otherwise indicated in this Discussion and Analysis, all references to years and quarters in this Discussion and Analysis are to the Company’s fiscal years and fiscal quarters and all annual and quarterly information in this Discussion and Analysis is for such fiscal years and quarters, respectively.

2021 Financial Overview

In 2019, the Company announced the major expansion of its aerospace manufacturing, development and design facilities located at the Newton City-County Airport in Newton, Kansas. This expansion includes the construction of a redundant manufacturing facility located adjacent to Park’s existing Newton, Kansas facilities. This facility, which is being constructed in part to support a major aerospace customer, will include approximately 90,000 square feet of manufacturing and office space, and will essentially double the size of Park’s existing Newton, Kansas manufacturing footprint. The total cost of the expansion is expected to be approximately $18.8 million, and the expansion is expected to be completed in the second half of the 2021 calendar year. The expansion includes new resin mixing and delivery systems, new hot-melt film and tape manufacturing lines, space to accommodate an additional hot-melt tape line or solution treating line, space to accommodate a confidential joint development project with a major aerospace customer, additional slitting capability, significant additional freezer and storage space, an expanded production lab, a new R&D lab and additional office space. Through February 28, 2021, the Company had incurred $14.9 million on the expansion.

In December 2019, a novel strain of coronavirus was reported in Wuhan, China and has since spread worldwide, including to the United States, posing public health risks that have reached pandemic proportions (the “COVID-19 Pandemic”).

The COVID-19 Pandemic and resultant global economic crisis had significant impacts on the Company’s results of operations and cash flow for the year ended February 28, 2021. The COVID-19 Pandemic and crisis had significant impacts on the markets the Company sells into, particularly the commercial and business aircraft markets. As a result, the Company has experienced a significant reduction in sales and backlog.

Even after the COVID-19 Pandemic has subsided, the Company may continue to experience adverse impacts to its business as a result of the potential continuing impact of the economic crisis on the markets the Company serves.

The Company's total net sales worldwide in 2021 were 23% lower than in 2020 due primarily to the lower sales to commercial aerospace and business aircraft customers due to the impacts of the pandemic on those markets partially offset by higher military sales during 2021.

The Company’s gross profit margin, measured as a percentage of sales, decreased to 28.5% in 2021 from 31.1% in 2020. Lower sales and production levels combined with the fixed nature of certain overhead costs led to lower gross margins.

The Company recorded restructuring charges of $1.6 million in 2021, related to the closure of the Company’s Park Aerospace Technologies Asia, Pte, Ltd. business unit located Singapore.

The Company’s earnings from continuing operations in 2021 were 49% lower than in 2020, primarily as a result of the aforementioned decreases in sales and gross profit partially offset by a 23% reduction in selling, general and administrative expenses. The Company’s net earnings from continuing operations in 2021 were 49% lower than in 2020, primarily due to lower sales and to lower interest income partially offset by lower selling, general and administrative expenses.

The Company has a number of long-term contracts pursuant to which certain of its customers, some of which represent a substantial portion of the Company’s revenue, place orders. Long-term contracts with the Company’s customers are primarily requirements based and do not guarantee quantities. An order forecast is generally agreed concurrently with pricing for any applicable long-term contract. This order forecast is then typically updated periodically during the term of the underlying contract. Purchase orders are generally received in excess of three months in advance of delivery.

Results of Operations:

2021 Compared to 2020

Year Ended

February 28, March 1,

(Amounts in thousands, except per share amounts) 2021 2020 Increase / (Decrease)

Selling, general and administrative expenses 6,113 7,932 (1,819 ) -23 %

Loss from discontinued operations, net of tax (328 ) (653 ) 325 -50 %

Earnings (loss) per share:

Basic:

Diluted:

Diluted earnings per share $ 0.24 $ 0.47 $ (0.23 ) -49 %

Net Sales

The Company's total net sales worldwide in 2021 were 23% lower than in 2020 due primarily to the lower sales to commercial aerospace and business aircraft customers as a result of the inverse impact of the COVID-19 Pandemic on those markets, partially offset by higher military sales during 2021.

Gross Profit

Selling, General and Administrative Expenses

Selling, general and administrative expenses decreased by $1.8 million, or 23%, during 2021 compared to 2020. Such expenses, measured as percentages of sales, were 13.2% during both the 2021 and 2020 fiscal years. The decrease in such expenses in 2021 was due primarily to decreased travel and entertainment, salaries and lower stock option expenses, excluding stock option modification charges in 2020.

Selling, general and administrative expenses in 2021 included $0.2 million of stock option expenses compared to $0.7 million of such expenses in 2020, including $0.2 million due to the modification of previously granted stock options.

Restructuring Charges

The Company recorded restructuring charges of $1.6 million in the 2021 related to the closure of the Company’s Park Aerospace Technologies Asia, Pte, Ltd. business unit located Singapore.

Earnings from Continuing Operations

For the reasons set forth above, the Company’s earnings from continuing operations were $5.5 million for 2021, including the pretax charges of $1.6 million for the closure of the facility located in Singapore. The Company’s earnings from continuing operations were $10.7 million in 2020, including a pre-tax stock option modification charge of $0.2 million resulting from the special dividend of $1.00 per share paid in February 2020.

Interest and Other Income

Interest and other income were $1.8 million and $3.3 million for 2021 and 2020, respectively. The decrease from 2020 was due primarily to lower average invested cash during the period and lower weighted average interest rates. During 2021 and 2020, the Company earned interest income principally from its investments, which were primarily in short-term instruments and money market funds.

Income Tax Provision

The Company’s effective income tax rate of 28.7% for 2021 was due primarily to the U.S. Federal rate and state income taxes. The Company’s effective income tax rate was lower in 2020, due to favorable adjustments to valuation allowances on state tax credits and a lower state effective tax rate in 2020.

Net Earnings from Continuing Operations

The Company’s net earnings from continuing operations for 2021 were $5.2 million, including the pretax charges of $1.6 million for the closure of the facility located in Singapore. The Company’s net earnings from continuing operations for 2020 were $10.2 million, including the stock option modification pre-tax charge of $0.2 million in connection with the special dividend of $1.00 per share paid in February 2020.

Discontinued Operations

On December 4, 2018, Park completed the previously announced sale of its Electronics Business, including manufacturing facilities in Singapore, France, California and Arizona and R&D facilities in Singapore and Arizona, to AGC Inc. for an aggregate purchase price of $145 million in cash, subject to post-closing adjustments for changes in working capital compared to the target net working capital, excluding cash in certain acquired subsidiaries and certain accrued and unpaid taxes of certain acquired subsidiaries. See Note 12, “Discontinued Operations”, of the Notes to Consolidated Financial Statements elsewhere in this Report for additional information on the sale.

The operating results of the Electronics Business are classified, together with certain costs related to the sale, as discontinued operations, net of tax, in the Consolidated Statements of Operations.

The Company’s loss from discontinued operations was lower in 2021 compared to 2020 primarily as a result of exiting the facility in Fullerton California, previously used in the electronics operations, at the beginning of the Company’s third fiscal quarter of 2021.

Basic and Diluted Earnings Per Share

Basic and diluted earnings per share from continuing operations for 2021 were $0.25, including the pretax charges for the closure of the facility located in Singapore, compared to basic and diluted earnings per share for 2020 of $0.50, including the stock option modification charge in connection with the special dividend paid in February 2020. The net impact of the items described above was to decrease basic and diluted earnings per share by $0.07 in 2021 and $0.01 in 2020.

2020 Compared to 2019

Year Ended

March 1, March 3,

(Amounts in thousands, except per share amounts) 2020 2019 Increase / (Decrease)

Selling, general and administrative expenses 7,932 8,968 (1,036 ) -12 %

Loss on sale of marketable securities - (1,498 ) 1,498 -100 %

Earnings from continuing operations before income taxes 14,071 8,097 5,974 74 %

Earnings per share:

Basic:

Diluted:

Diluted earnings per share $ 0.47 $ 5.57 $ (5.10 ) -92 %

Net Sales

The Company's total net sales worldwide in 2020 were 17% higher than in 2019 due primarily to the “end customer” of a major Company customer ramping up commercial jet production and to an increase in military sales during 2020.

Gross Profit

The Company’s gross profit margin, measured as a percentage of sales, decreased to 31.1% in 2020, from 31.7% in 2019. Higher sales and the partially fixed nature of overhead expenses were more than offset by the increased labor and supplies expenses.

Selling, General and Administrative Expenses

Selling, general and administrative expenses decreased by $1.0 million, or 12%, during 2020 compared to 2019. Such expenses, measured as percentages of sales, were 13.2% during 2020 compared to 17.5% during 2019. The decrease in such expenses in 2019 was due primarily to decreased legal and professional fees and lower stock option expenses, excluding the stock option modification charges in each period.

Selling, general and administrative expenses in 2020 included $0.7 million of stock option expenses, including $0.2 million due to the modification of previously granted stock options, compared to $1.2 million of such expenses in 2019, including $0.5 million due to the modification of previously granted stock options.

Earnings from Continuing Operations

For the reasons set forth above, the Company’s earnings from continuing operations were $10.7 million for 2020, including a pre-tax stock option modification charge of $0.2 million resulting from the special dividend of $1.00 per share paid in February 2020. The Company’s earnings from continuing operations were $7.2 million in 2019, including a pre-tax stock option modification charge of $0.5 million resulting from the special dividend of $4.25 per share paid in February 2019.

Loss on Sales of Marketable Securities

Loss on sales of marketable securities was $0 in 2020 and $1.5 million in 2019 in connection with the liquidation of securities to fund the special cash dividend of $4.25 per share paid in February 2019.

Interest and Other Income

Interest and other income were $3.3 million and $2.4 million for 2020 and 2019, respectively. The increase from 2019 was primarily the result of higher average invested cash during the period and higher weighted average interest rates. As mentioned above, the Company paid a special cash dividend of $4.25 per share in February 2019. During 2020 and 2019, the Company earned interest income principally from its investments, which were primarily in short-term instruments and money market funds.

Income Tax Provision

The Company’s effective income tax rate of 27.5% for 2020 was due primarily to the U.S. Federal rate and state income taxes and lost tax deductions from expiring unexercised non-qualified stock options. The Company’s effective income tax rate was lower in 2019, due to favorable adjustments to valuation allowances on state tax credits and a lower state effective tax rate in 2019.

Net Earnings from Continuing Operations

The Company’s net earnings from continuing operations for 2020 were $10.2 million, including the stock option modification pre-tax charge of $0.2 million in connection with the special dividend of $1.00 per share paid in February 2020. The Company’s net earnings from continuing operations for 2019 were $6.3 million, including the stock option modification pre-tax charge of $0.5 million in connection with the special dividend of $4.25 per share paid in February 2019.

Discontinued Operations

The Company’s net earnings from discontinued operations were lower in 2020 compared to 2019 primarily as a result of the gain recognized on the sale of the electronics business of $102,145 in 2019 and the gain of $2,945 recognized on the sale of its New England Laminates Co., Inc. facility located in Newburgh, New York in 2019.

Basic and Diluted Earnings Per Share

Basic and diluted earnings per share from continuing operations for 2020 were $0.50, including the stock option modification charge in connection with the special dividend paid in February 2020, compared to basic and diluted earnings per share for 2019 of $0.31, including the stock option modification charge in connection with the special dividend paid in February 2019 and the pre-tax loss on the sales of marketable securities described above. The net impact of the items described above was to decrease basic and diluted earnings per share by $0.01 in 2020 and decrease basic and diluted earnings per share by $0.08 in 2019.

Liquidity and Capital Resources:

(Amounts in thousands) February 28, March 1, Increase /

From continuing operations Fiscal Year Ended

(Amounts in thousands) February 28, March 1, March 3, Increase / (Decrease)

Cash and Marketable Securities

The Company believes it has sufficient liquidity to fund its operating activities for the 12 months from the date of the filing of this Form 10-K Annual Report and for the foreseeable future thereafter.

The change in cash and marketable securities at February 28, 2021 compared to March 1, 2020 was primarily the result of positive operating cash flow more than offset by capital expenditures and regular quarterly dividends paid by the Company to its shareholders during 2021 and a number of additional factors. The significant changes in cash provided by operating activities were as follows:

In addition, the Company paid $8.2 million and $28.7 million in cash dividends during 2021 and 2020, respectively, including special dividends of $20.5 million paid in 2020.

Working Capital

Working capital at February 28, 2021 was lower compared to March 1, 2020. Decreases in cash and cash equivalents and marketable securities, decreases in accounts receivable, inventories and prepaid and other assets and increases taxes payable were partially offset by decreases in accounts payable.

The Company's current ratio (the ratio of current assets to current liabilities) was 16.6 to 1 at February 28, 2021 compared to 16.7 to 1 at March 1, 2020.

Cash Flows

During 2021, the Company's net earnings from continuing operations, before depreciation and amortization, stock-based compensation, amortization of bond premium, gain on sale of fixed assets and non-cash restructuring, were $8.3 million. Such earnings were decreased by changes in operating assets and liabilities of $5.0 million, resulting in $13.0 million of cash provided by operating activities from continuing operations. During 2021, the Company expended $7.5 million for the purchase of property, plant and equipment compared to $6.8 million during 2020, the Company paid $1.6 million for the repurchase of the Company’s stock and the Company paid $8.2 million and $28.7 million in cash dividends in 2021 and 2020, respectively.

Other Liquidity Factors

In December 2018, the Company entered into a Development Agreement with the City of Newton, Kansas and the Board of County Commissioners of Harvey County, Kansas. Pursuant to this agreement, the Company agreed to construct and operate an additional manufacturing facility approximately 90,000 square feet in size for the design, development and manufacture of advanced composite materials and parts, structures and assemblies for aerospace. the Company further agreed to equip the facility through the purchase of machinery, equipment and furnishings and to create additional new full-time employment of specified levels during a five-year period. In exchange for these agreements, the City and the County agreed to lease to the Company three acres of land at the Newton City/County Airport, in addition to the eight acres previously leased to the Company by the City and County. The City and the County further agreed to provide financial and other assistance toward the construction of the additional facility as set forth in the Development Agreement. The Company estimates the total cost of the additional facility to be approximately $18.8 million, and the Company expects to complete the construction of the additional facility in the first half of the 2021 calendar year. As of February 28, 2021, the Company had $748 in equipment purchase obligations and $14,874 of construction-in-progress related to the additional facility. (See Note 1, Consolidated Financial Statements).

On December 22, 2017, the U.S. government enacted comprehensive tax reform commonly referred to as the Tax Cuts and Jobs Act (“TCJA” or “Tax Act”) and significantly revised U.S. corporate income tax by, among other things, lowering corporate income tax rates, imposing a one-time transition tax on deemed repatriated earnings of non-U.S. subsidiaries, and implementing a territorial tax system. As a result of the Tax Act, the Company recorded tax payable to be paid in installments over eight years. The remaining balance of these installment payments, as of February 28, 2021, was approximately $16 million to be paid over the next five years.

The Company believes that our existing cash, cash equivalents and marketable securities, and cash flow from operations will be sufficient to fund necessary capital expenditures and operating cash requirements for at least the next twelve months from the date of the filing of this Form 10-K Annual Report. The Company further believes that its balance sheet and financial position to be very strong, and the Company believes it is well positioned to weather the impact of the Pandemic on its business as a result.

Contractual Obligations:

The Company's contractual obligations and other commercial commitments to make future payments under contracts, such as lease agreements, consist only of operating lease commitments, commitments to purchase raw materials and commitments to purchase equipment, as described in Note 10 of the Notes to Consolidated Financial Statements included elsewhere in this Report. The Company has no other long-term debt, capital lease obligations, unconditional purchase obligations or other long-term obligations, standby letters of credit, guarantees, standby repurchase obligations or other commercial commitments or contingent commitments, other than two standby letters of credit in the total amount of $0.3 million to secure the Company's obligations under its workers’ compensation insurance program.

As of February 28, 2021, the Company’s significant contractual obligations, including payments due by fiscal year, were as follows:

Operating lease obligations $ 212 $ 151 $ 61 $ - $ -

Equipment purchase obligations 748 748 - - -

At February 28, 2021, the Company had unrecognized tax benefits and related interest of $4.5 million. A reasonable estimate of the timing of the payment of these liabilities is not possible.

Off-Balance Sheet Arrangements:

The Company's liquidity is not dependent on the use of, and the Company is not engaged in, any off-balance sheet financing arrangements, such as securitization of receivables or obtaining access to assets through special purpose entities.

Environmental Matters:

The Company is subject to various Federal, state and local govern‐ment and foreign government requirements relating to the protection of the environment. The Com‐pany believes that, as a general matter, its policies, practices and procedures are properly designed to prevent unreasonable risk of environmental damage and that its handling, manufacture, use and disposal of hazardous or toxic substances are in accord with environmental laws and regulations. However, mainly because of past opera‐tions of the Company’s former Electronics Business and operations of predecessor companies, which were generally in compliance with applicable laws at the time of the operations in question, the Company, like other companies engaged in similar businesses, is a party to claims by govern‐ment agencies and third parties and has incurred remedial response and voluntary cleanup costs associated with environmental matters. Additional claims and costs involving past environmental matters may continue to arise in the future. It is the Company's policy to record appropriate liabilities for such matters when remedial efforts are probable and the costs can be reasonably estimated.

In 2021, 2020 and 2019, the Company incurred approximately $9,000, $41,000 and $70,000, respectively, for remedial response and voluntary cleanup costs and related legal fees, and the Company received, or expects to receive, reimbursement pursuant to general liability insurance coverage for approximately $9,000, $38,000 and $68,000, respectively, of such amounts. While annual environmental remedial response and voluntary cleanup expenditures, including legal fees, have generally been constant from year to year, and may increase over time, the Company expects it will be able to fund such expenditures from cash flow from operations. The timing of expenditures depends on a number of factors, including regulatory approval of cleanup projects, remedial techniques to be utilized and agreements with other parties. At February 28, 2021 and March 1, 2020, there were no amounts recorded in accrued liabilities for environmental matters.

Management does not expect that environmental matters will have a material adverse effect on the liquidity, capital resources, busi‐ness, consolidated results of operations or consolidated financial position of the Company. See Note 11 of the Notes to Consolidated Financial Statements included in Item 8 of Part II of this Report for a discussion of the Company's contin‐gencies, includ‐ing those related to environmental matters.

Critical Accounting Policies and Estimates:

The following information is provided regarding critical accounting policies that are important to the Consolidated Financial Statements and that entail, to a significant extent, the use of estimates, assumptions and the application of management's judgment.

General

The Company's Discussion and Analysis of its Financial Condition and Results of Operations are based upon the Company's Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these Consolidated Financial Statements requires the Company to make estimates, assumptions and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and the related disclosure of contingent liabilities. On an ongoing basis, the Company evaluates its estimates, including those related to sales allowances, allowances for doubtful accounts, inventories, valuation of long-lived assets, income taxes, restructurings, contingencies and litigation, and employee benefit programs. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

The Company believes the following critical accounting policies affect its more significant judgments and estimates used in the preparation of its Consolidated Financial Statements.

Recently Adopted Accounting Pronouncement

See Note 15 of the Notes to Consolidated Financial Statements included in Item 8 of Part II of this Report for a discussion of the Company's recently adopted accounting pronouncements.

Revenue Recognition

The Company recognizes revenue when a customer obtains control of promised goods or services in an amount that reflects the consideration to which the providing entity expects to be entitled in exchange for those goods or services. We recognize revenue when all of the following criteria are met: (1) we have entered into a binding agreement, (2) the performance obligations have been identified, (3) the transaction price to the customer has been determined, (4) the transaction price has been allocated to the performance obligations in the contract, and (5) the performance obligations have been satisfied. The majority of the Company’s shipping terms define the performance obligation to be satisfied upon shipment.

Sales Allowances and Product Warranties

The Company records estimated reductions to revenue for customer returns, allowances, and warranty claims. Provisions for such reductions are recorded in the period the sale is recorded and are derived from historical trends and other relevant information. The Company’s products are made to customer specifications and tested for adherence to such specifications before shipment to customers. Composite structures and assemblies may be subject to “airworthiness” acceptance by customers after receipt at the customers’ locations. There are no future performance requirements other than the products’ meeting the agreed specifications. The Company’s basis for providing sales allowances for returns are known situations in which products may have failed due to manufacturing defects in the products supplied by the Company. The Company is focused on manufacturing the highest quality advanced composite materials, structures and assemblies and tooling possible and employs stringent manufacturing process controls and works with raw material suppliers who have dedicated themselves to complying with the Company’s specifications and technical requirements. The amounts of returns and allowances resulting from defective or damaged products have averaged approximately 1.0% of sales for the Company’s last three fiscal years.

Accounts Receivable

The Company’s accounts receivable are due from purchasers of the Company’s products. Credit is extended based on evaluation of a customer’s financial condition and, generally, collateral is not required. Accounts receivable are due within established payment terms and are stated at amounts due from customers net of an allowance for doubtful accounts. Accounts outstanding longer than established payment terms are considered past due. The Company determines its allowance by considering a number of factors, including the length of time accounts receivable are past due, the Company’s previous loss history, the customer’s current ability to pay its obligation to the Company, and the conditions of the general economy and the aerospace industry. If the financial condition of the Company’s customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required. The Company writes off accounts receivable when they become uncollectible.

Inventories

Inventories are stated at the lower of cost (first-in, first-out method) or net realizable value. The Company writes down its inventory for estimated obsolescence or unmarketability based upon the age of the inventory and assumptions about future demand for the Company's products and market conditions.

Valuation of Long-Lived Assets

The Company assesses the impairment of long-lived assets whenever events or changes in circumstances indicate that the carrying value of such assets may not be recoverable. In addition, the Company assesses the impairment of goodwill at least annually. Important factors that could trigger an impairment review include, but are not limited to, significant negative industry or economic trends and significant changes in the use of the Company’s assets or strategy of the overall business.

Income Taxes

As part of the processes of preparing its consolidated financial statements, the Company is required to estimate the income taxes in each of the jurisdictions in which it operates. This process involves estimating the actual current tax expense together with assessing temporary differences resulting from differing treatment of items for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are included in the Company’s Consolidated Balance Sheets. Deferred income taxes are provided for temporary differences in the reporting of certain items, such as depreciation and undistributed earnings of foreign subsidiaries, for income tax purposes compared to financial accounting purposes. In evaluating the Company’s ability to recover the deferred tax assets within the jurisdiction from which they arise, all positive and negative evidence is considered, including the scheduled reversal of deferred tax liabilities, projected future taxable income, tax planning strategies and results of recent acquisitions. If these estimates and assumptions change in the future, the Company may be required to record additional valuation allowances against its deferred tax assets, resulting in additional income tax expense in the Company's Consolidated Statements of Operations, or conversely to further reduce the existing valuation allowance, resulting in less income tax expense. The Company evaluates the realizability of the deferred tax assets and assesses the need for additional valuation allowances quarterly.

Tax benefits are recognized for an uncertain tax position when, in the Company’s judgment, it is more likely than not that the position will be sustained upon examination by a taxing authority. For a tax position that meets the more-likely-than-not recognition threshold, the tax benefit is measured as the largest amount that is judged to have a greater than 50% likelihood of being realized upon ultimate settlement with a taxing authority. The liability associated with unrecognized tax benefits is adjusted periodically due to changing circumstances and when new information becomes available. Such adjustments are recognized entirely in the period in which they are identified. The effective tax rate includes the net impact of changes in the liability for unrecognized tax benefits and subsequent adjustments as considered appropriate by the Company. While it is often difficult to predict the final outcome or the timing of resolution of any particular tax matter, the Company believes its liability for unrecognized tax benefits is adequate. Interest and penalties recognized on the liability for unrecognized tax benefits are recorded as income tax expense.

Contingencies and Litigation

The Company is subject to a number of proceedings, lawsuits and other claims related to environmental, employment, product and other matters. The Company is required to assess the likelihood of any adverse judgments or outcomes in these matters as well as potential ranges of probable losses. A determination of the amount of reserves required, if any, for these contingencies is made after careful analysis of each individual issue. The required reserves may change in the future due to new developments in each matter or changes in approach, such as a change in settlement strategy in dealing with these matters.

Employee Benefit Programs

The Company's obligations for workers' compensation claims prior to fiscal year 2019 are effectively self-insured, although the Company maintains individual and aggregate stop-loss insurance coverage for such claims. The Company accrues its workers’ compensation liability based on estimates of the total exposure of known claims using historical experience and projected loss development factors less amounts previously paid out.

The Company has a non-contributory profit sharing retirement plan covering their regular full-time employees. In addition, the Company has various bonus and incentive compensation programs, most of which are determined at management's discretion.

The Company's reserves associated with these self-insured liabilities and benefit programs are reviewed by management for adequacy at the end of each reporting period.

ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Interest Rate Risk – The exposure to market risks for changes in interest rates relates to the Company's short-term investment portfolio. The Company does not use derivative financial instruments in its investment portfolio. The Company’s short-term investment portfolio is managed in accordance with guidelines issued by the Company. These guidelines are designed to establish a high quality fixed income portfolio of government and highly rated corporate debt securities with a maximum weighted maturity of less than one year. Based on the average anticipated maturity of the investment portfolio at the end of the 2021 fiscal year, the Company does not believe that a hypothetical 10% fluctuation in short-term interest rates would have had a material impact on the consolidated results of operations or financial position of the Company.

Commodities Risk – The Company is subject to fluctuations in the cost of raw materials used to manufacture its materials and products. In particular, the Company is exposed to market fluctuations in commodity pricing as the Company utilizes certain materials that are key materials in certain of its products. The Company generally passes changes in the costs of its raw material costs through to its customers. The Company currently does not use hedging strategies to minimize the risk of price fluctuations on commodity-based raw materials; however, the Company regularly reviews such strategies on an ongoing basis. See “Materials and Sources of Supply” in Item 1 of this Report.

ITEM 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

The Company's Financial Statements begin on the next page.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Shareholders of

Park Aerospace Corp.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Park Aerospace Corp. and subsidiaries (the “Company”) as of February 28, 2021 and March 1, 2020 and the related consolidated statements of operations, comprehensive earnings, shareholders’ equity, and cash flows for each of the years in the three-year period ended February 28, 2021, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of February 28, 2021 and March 1, 2020, and the results of its operations and its cash flows for each of the three years in the period ended February 28, 2021, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Impairment on non-operating fixed assets

As described in Note 8 and Note 10 to the consolidated financial statements, the Company has approximately $1.3 million of fixed assets associated with discontinued operations in Asia and $14.9 million of construction in process, respectively, collectively “non-operating assets”. Management assesses impairment of long-lived assets whenever events or changes in circumstances indicate that the carrying value of such assets may not be recoverable. Due to the impacts of COVID-19, such circumstances have occurred and management performed such as assessment as of February 28, 2021. The determination of recoverability required management to make assumptions and estimates about the future undiscounted cash flows associated with such assets, market comparisons of value, future utilization and requirements and purchaser interest. The more sensitive assumptions included projected operating results and utilization, market comparisons of value as well as current negotiations with potential purchasers.

The principal considerations for our determination that performing procedures relating to the impairment assessment of the Company’s non-operating fixed assets is a critical audit matter are the significant judgment required of management when determining the recoverability of the non-operating fixed assets, which in turn led to a high degree of auditor judgment, subjectivity, and effort in performing procedures to evaluate management’s significant assumptions related to projected operating results and utilization, market comparisons and purchaser interest.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. The procedures include, among others, testing management’s process for determining the recoverability of its non-operating assets, which include (i) evaluating the reasonableness of the projected operating results and utilization, market comparisons and purchaser interest, (ii) testing the completeness and accuracy of underlying data used to determine the projected operating results and utilization, market comparisons and purchaser interest and (iii) evaluating the significant assumptions used by management related to the projected operating results and utilization, market comparisons and purchaser interest. Evaluating management’s assumptions related to projected operating results and utilization, market comparisons and purchaser interest involved evaluating whether the assumptions used by management were reasonable considering (i) the current and past performance of the Company, (ii) the consistency with external market and industry data and (iii) whether these assumptions were consistent with evidence obtained in other areas of the audit.

/s/ CohnReznick LLP

We have served as the Company’s auditor since 2014.

Parsippany, New Jersey

May 13, 2021

PARK AEROSPACE CORP. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Amounts in thousands, except share and per share amounts)

ASSETS

Current assets:

Prepaid expenses and other current assets 3,372 5,535

Property, plant and equipment, net (Note 3) 21,130 16,100

Operating right-of-use assets (Note 10) 103 420

Goodwill and other intangible assets, net (Note 3) 9,797 9,804

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

Operating lease liabilities (Note 10) 33 152

Long-term operating lease liabilities (Note 10) 86 268

Deferred income taxes (Note 4) 778 834

Commitments and contingencies (Notes 10 and 11)

Shareholders' equity (Note 6):

Accumulated other comprehensive (loss) earnings (336 ) 668

Total liabilities and shareholders' equity $ 163,512 $ 171,786

See Notes to Consolidated Financial Statements.

PARK AEROSPACE CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Amounts in thousands, except per share amounts)

Fiscal Year Ended

February 28, March 1, March 3,

Selling, general and administrative expenses 6,113 7,932 8,968

Restructuring charges (Note 8) 1,570 - -

Loss on sale of marketable securities - - (1,498 )

Earnings from continuing operations before income taxes 7,285 14,071 8,097

Earnings (loss) per share (Note 7)

Basic:

Diluted:

Diluted earnings per share $ 0.24 $ 0.47 $ 5.57

See Notes to Consolidated Financial Statements.

PARK AEROSPACE CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS

(Amounts in thousands)

Fiscal Year Ended

February 28, March 1, March 3,

Other comprehensive (loss) earnings, net of tax:

Foreign currency translation - - (1,310 )

Unrealized gains on marketable securities:

Unrealized holding gains arising during the period 421 990 41

Unrealized losses on marketable securities:

Unrealized holding losses arising during the period (1,176 ) (291 ) (87 )

Other comprehensive (loss) earnings (1,004 ) 690 (153 )

See Notes to Consolidated Financial Statements.

PARK AEROSPACE CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(Amounts in thousands, except share and per share amounts)

Accumulated

Additional Other

Common Stock Paid-in Accumulated Comprehensive Treasury Stock

Shares Amount Capital Deficit Earnings (Loss) Shares Amount

Net earnings - - - 113,545 - - -

Unrealized gain on marketable securities, net of tax - - - - 1,157 - -

Stock options exercised - - (1,157 ) - - - -

Cash dividends ($4.65 per share) - - - (95,051 ) - - -

Net earnings - - - 9,552 - - -

Unrealized gain on marketable securities, net of tax - - - - 690 - -

Stock-based compensation - - 726 - - - -

Cash dividends ($1.40 per share) - - - (28,721 ) - - -

Net earnings - - - 4,864 - - -

Unrealized loss on marketable securities, net of tax - - - - (1,004 ) - -

Stock options exercised - - (15 ) - - (1,450 ) 27

Stock-based compensation - - 191 - - - -

Repurchase of treasury shares - - - - - 137,397 (1,644 )

Cash dividends ($.40 per share) - - - (8,153 ) - - -

See Notes to Consolidated Financial Statements.

PARK AEROSPACE CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

Fiscal Year Ended

February 28, March 1, March 3,

Cash flows from operating activities:

Loss (earnings) from discontinued operations, net of tax 328 653 (107,239 )

Allowance for bad debt 16 41 -

Provision for deferred income taxes (56 ) 849 (1,147 )

Amortization of bond premium 543 27 (52 )

(Gain) loss on sale of marketable securities (10 ) (15 ) 1,498

Non-cash restructuring 1,318 - -

Changes in operating assets and liabilities:

Prepaid expenses and other current assets 157 490 (452 )

Cash flows from investing activities:

Purchase of property, plant and equipment (7,493 ) (6,846 ) (2,764 )

Net cash provided by investing activities - discontinued operations - - 144,951

Cash flows from financing activities:

Proceeds from exercise of stock options 12 417 (3,868 )

Intercompany capital contributions - - (6,600 )

Purchase of treasury stock (1,644 ) - -

Net cash used in financing activities - discontinued operations - - -

Effect of exchange rate changes on cash and cash equivalents - - (3,120 )

See Notes to Consolidated Financial Statements.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Three years ended February 28, 2021

(Amounts in thousands, except share (unless otherwise stated), per share and option amounts)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Park Aerospace Corp. and its subsidiaries (collectively, “Park” or the “Company”), is a global advanced materials company which develops and manufactures advanced composite materials, primary and secondary structures and assemblies and low-volume tooling for the aerospace markets.

Fair value measurements are broken down into three levels based on the reliability of inputs as follows:

Level 1 inputs are quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. An active market for the asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.

Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar assets or liabilities in active markets, inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates and yield curves observable at commonly quoted intervals or current market) and contractual prices for the underlying financial instrument, as well as other relevant economic measures.

Level 3 inputs are unobservable inputs for the asset or liability. Unobservable inputs are used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at the measurement date.

The fair value of the Company’s cash and cash equivalents, accounts receivable, accounts payable and current liabilities approximate their carrying value due to their short-term nature. Certain assets and liabilities of the Company are required to be recorded at fair value on either a recurring or non-recurring basis. On a recurring basis, the Company records its marketable securities at fair value using Level 1 or Level 2 inputs. (See Note 2).

The Company’s non-financial assets measured at fair value on a non-recurring basis, for purposes of calculating impairment, include goodwill and any long-lived assets written down to fair value. To measure fair value of such assets, the Company uses Level 3 inputs consisting of techniques including an income approach and a market approach. The income approach is based on a discounted cash flow analysis and calculates the fair value by estimating the after-tax cash flows attributable to a reporting unit and then discounting the after-tax cash flows to a present value using a risk-adjusted discount rate. Assumptions used in the discounted cash flow analysis require the exercise of significant judgment, including judgment about appropriate discount rates, terminal values, growth rates and the amount and timing of expected future cash flows. There were no transfers between levels within the fair value hierarchy during the 2021, 2020 or 2019 fiscal years.

Supplemental cash flow information:

Fiscal Year

Cash paid during the year for:

At February 28, 2021 and March 1, 2020, the Company held $12,446 and $21, respectively, of cash and cash equivalents in foreign financial institutions.

Tax benefits are recognized for an uncertain tax position when, in the Company’s judgment, it is more likely than not that the position will be sustained upon examination by a taxing authority. For a tax position that meets the more-likely-than-not recognition threshold, the tax benefit is measured as the largest amount that is judged to have a greater than 50% likelihood of being realized upon ultimate settlement with a taxing authority. The liability associated with unrecognized tax benefits is adjusted periodically due to changing circumstances and when new information becomes available. Such adjustments are recognized entirely in the period in which they are identified. The effective tax rate includes the net impact of changes in the liability for unrecognized tax benefits and subsequent adjustments as considered appropriate by the Company. While it is often difficult to predict the final outcome or the timing of resolution of any particular tax matter, the Company believes its liability for unrecognized tax benefits is adequate. Interest and penalties, if any, recognized on the liability for unrecognized tax benefits are recorded as income tax expense.

2. MARKETABLE SECURITIES

The following is a summary of available-for-sale securities:

Total Level 1 Level 2 Level 3

U.S. Treasury and other government securities $ 56,906 $ 56,906 $ - $ -

Total marketable securities $ 74,947 $ 74,947 $ - $ -

Total Level 1 Level 2 Level 3

U.S. Treasury and other government securities $ 101,390 $ 101,390 $ - $ -

The following tables show the amortized cost basis, gross unrealized gains and losses and gross realized gains and losses on the Company’s available-for-sale securities:

Amortized Cost Basis Gross Unrealized Gains Gross Unrealized Losses

U.S. Treasury and other government securities $ 57,400 $ 153 $ 647

U.S. Treasury and other government securities $ 100,626 $ 764 $ -

U.S. corporate debt securities 15,473 82 -

Total marketable securities $ 116,099 $ 846 $ -

Fiscal Year

Gross realized gains on sale $ 155 $ 90 $ -

Gross realized losses on sale $ 145 $ 75 $ 1,498

The estimated fair values of such securities at February 28, 2021, by contractual maturity, are shown below:

Due in one year or less $ 63,294

Due after one year through five years 11,653

In the 2019 fiscal year, the Company recorded losses on the sales of marketable securities of $1,498 in connection with the funding of a special cash dividend of $4.25 per share paid in February 2019.

3. OTHER CONSOLIDATED BALANCE SHEET DATA

Other consolidated balance sheet data consisted of the following:

February 28, March 1,

Inventories:

Property, plant and equipment:

Machinery, equipment, furniture and fixtures 37,446 35,182

Less: accumulated depreciation and amortization 30,552 32,724

Goodwill and other intangible assets:

Other intangibles 21 28

Accrued liabilities:

Payroll and payroll related $ 596 $ 578

Employee benefits 2 1

4. INCOME TAXES

The income tax provision (benefit) for continuing operations includes the following:

Fiscal Year

Current:

Deferred:

The income tax provision (benefit) for discontinued operations includes the following:

Fiscal Year

Current:

Deferred:

State and local - 564 (31 )

State income tax benefits from loss carryforwards to future years were recognized as deferred tax assets in the 2021, 2020 and 2019 fiscal years.

Notwithstanding the U.S. taxation of the deemed repatriated foreign earnings as a result of the transition tax, the Company intends to indefinitely invest approximately $25 million of undistributed earnings outside of the U.S. If these future earnings are repatriated to the U.S., or if the Company determines that such earnings will be remitted in the foreseeable future, the Company may be required to accrue U.S. deferred taxes. In connection with sale of the Electronics Business and the enactment of the Tax Act, the Company repatriated $0, $100,216, and $113,600 in cash from its Singapore and French subsidiaries in the 2021, 2020 and 2019 fiscal years, respectively.

The Company’s pre-tax earnings (loss) from continuing operations in the United States and foreign locations are as follows:

Fiscal Year

The Company’s pre-tax earnings (loss) from discontinued operations in the United States and foreign locations are as follows:

Fiscal Year

(Loss) earnings before income taxes $ (435 ) $ (887 ) $ 121,922

The Company’s effective income tax rate differs from the statutory U.S. Federal income tax rate as a result of the following:

Fiscal Year

Statutory U.S. Federal tax rate 21.0 % 21.0 % 21.0 %

State and local taxes, net of Federal benefit 5.9 % 0.1 % 1.6 %

Foreign tax rate differentials 0.7 % (0.6 %) (0.8 %)

Valuation allowance on deferred tax assets 0.0 % (0.1 %) (2.8 %)

Adjustment on tax accruals 0.0 % (17.6 %) 2.9 %

Foreign tax credits (0.1 %) (2.7 %) (3.2 %)

Permanent differences and other (0.8 %) (0.1 %) (1.0 %)

The Company had state net operating loss carryforwards of approximately $2,160 and $2,515 in the 2021 and 2020 fiscal years, respectively, and total net foreign operating loss carryforwards of approximately $7,798 and $7,862 in the 2021 and 2020 fiscal years, respectively. The Company utilized $64 of net operating loss in the 2020 fiscal year. The Company has a valuation allowance against the remaining carryforwards. The state net operating loss carryforwards will expire in 2021 through 2039.

The Company had available Kansas tax credits of $0 and $45 at the end of the 2021 and 2020 fiscal years, respectively. Kansas credits of $191 were utilized in 2020 and a corresponding tax benefit was recognized. The Company had Arizona tax credits of $991 and $576 in the 2021 and 2020 fiscal years, respectively, for which no benefit has been provided.

The deferred tax asset valuation allowance of $3,587 as of February 28, 2021 relates to foreign net operating losses and state tax credit carryforwards from continuing operations for which the Company does not expect to realize any tax benefit. During the 2021 fiscal year, the valuation allowance increased by $412, primarily related to the recognition of the Arizona tax credits. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts for income tax purposes.

Significant components of the Company's deferred tax assets and liabilities from continuing operations as of February 28, 2021 and March 1, 2020 were as follows:

February 28, March 1,

Deferred tax assets:

Net operating loss carryforwards $ 2,602 $ 2,608

Tax credits carryforward 991 621

Valuation allowance on deferred tax assets (3,587 ) (3,175 )

Total deferred tax assets, net of valuation allowance 2,015 1,652

Deferred tax liabilities:

Undistributed earnings (4 ) (2 )

Total deferred tax liabilities (2,751 ) (2,444 )

Net deferred tax asset (liability) $ (736 ) $ (792 )

At February 28, 2021 and March 1, 2020, the Company had gross unrecognized tax benefits and related interest of $4,452 and $4,356, respectively, included in other liabilities. If any portion of the unrecognized tax benefits at February 28, 2021 were recognized, the Company’s effective tax rate would decrease.

A reconciliation of the beginning and ending amounts of unrecognized tax benefits for continuing operations is as follows:

Unrecognized Tax Benefits

February 28, March 1, March 3,

Tax positions - Discontinued Ops in prior period (47 ) - 187

Gross decreases - tax positions in prior period - (32 ) (256 )

Gross increases - current period tax positions - 3,259 784

Audit settlements - - (92 )

A reconciliation of the beginning and ending amounts of unrecognized tax benefits for discontinued operations is as follows:

Unrecognized Tax Benefits

March 1, March 3, February 25,

Balance, beginning of year $ - $ - $ 187

Tax positions - Discontinued Ops in prior period - - (187 )

Gross decreases - tax positions in prior period - -

Gross increases - current period tax positions - -

Lapse of statute of limitations - -

Balance, end of year $ - $ - $ -

The amount of unrecognized tax benefits may increase or decrease in the future for various reasons, including adding or subtracting amounts for current year tax positions, expiration of statutes of limitations on open income tax years, changes in the Company’s judgment about the level of uncertainty, status of tax examinations, and legislative changes. Changes in prior period tax positions are the result of a re-evaluation of the probability of realizing the benefit of a particular tax position based on new information. It is reasonably possible that none of the unrecognized tax benefits will be recognized within the next 12 months.

A list of open tax years by major jurisdiction follows:

The Company had approximately $335 and $193 of accrued interest and penalties as of February 28, 2021 and March 1, 2020, respectively. The Company’s policy is to include applicable interest and penalties related to unrecognized tax benefits as a component of current income tax expense.

The Company has no ongoing examinations of its Federal returns. New York state tax returns for the 2018 and 2019 fiscal years are currently being audited.

5. STOCK-BASED COMPENSATION

As of February 28, 2021, the Company had a 2018 Stock Option Plan (the “2018 Plan”) and no other stock-based compensation plan. The 2018 Plan was adopted by the Board of Directors of the Company on May 8, 2018 and approved by the shareholders of the Company at the Annual Meeting of Shareholders of the Company on July 24, 2018. Prior to the 2018 Plan, the Company had the 2002 Stock Option Plan (the “2002 Plan”) which had been approved by the Company’s shareholders and provided for the grant of stock options to directors and key employees of the Company. All options granted under the 2018 Plan and 2002 Plan have exercise prices equal to the fair market value of the underlying common stock of the Company at the time of grant, which, pursuant to the terms of such Plans, is the reported closing price of the common stock on the New York Stock Exchange on the date preceding the date an option is granted. Options granted under the Plans become exercisable 25% one year after the date of grant, with an additional 25% exercisable each succeeding anniversary of the date of grant, and expire 10 years after the date of grant. Options to purchase a total of 800,000 shares of common stock were authorized for grant under the 2018 Plan. At February 28, 2021, 566,000 shares of common stock of the Company were reserved for issuance upon exercise of stock options under the 2018 Plan.

The compensation expense for stock options includes an estimate for forfeitures and is recognized on a straight-line basis over the requisite service period.

The future compensation expense to be recognized in earnings before income taxes for options outstanding at February 28, 2021 was $484, which is expected to be recognized ratably over a weighted average vesting period of 2.60 years.

The Company records its stock-based compensation at fair value. The weighted average fair value for options was estimated at the dates of grants, using the Black-Scholes option pricing model.

The following table represents the weighted average fair value and valuation assumptions used for options granted in the 2021, 2020 and 2019 fiscal years:

Fiscal Year

Weighted average fair value per share of option grants $2.12 $3.97 $3.66

Estimated option terms (in years) 4.3 - 7.6 4.3 - 5.8 5.2

The risk-free interest rates are based on U.S. Treasury rates at the date of grant with maturity dates approximately equal to the estimated term of the options at the date of grant. Volatility factors are based on historical volatility of the Company’s common stock. The expected dividend yields are based on the regular quarterly cash dividend per share most recently declared by the Company and on the exercise price of the options granted during the 2020 fiscal year. The estimated terms of the options are based on evaluations of the historical and expected future employee exercise behavior.

During the 2020 fiscal year, the Company recorded non-cash charges of $208 related to the modification of previously granted employee stock options resulting from the $1.00 per share special cash dividend paid by the Company in February 2020. During the 2019 fiscal year, the Company recorded non-cash charges of $528 related to the modification of previously granted employee stock options resulting from the $4.25 per share special cash dividend paid by the Company in February 2019. Selling, general and administrative expenses in the 2020 fiscal year included $726 of stock option expenses compared to $1,249 of such expenses in the 2019 fiscal year.

Information with respect to stock option activity follows:

The aggregate intrinsic values realized (the market value of the underlying shares on the date of exercise, less the exercise price, times the number of shares acquired) from the exercise of options during the 2021, 2020 and 2019 fiscal years were $8, $124 and $1,157, respectively.

A summary of the status of the Company’s non-vested options at February 28, 2021, and changes during the fiscal year then ended, is presented below:

Shares Subject to Options Weighted Average Grant Date Fair Value

6. SHAREHOLDERS’ EQUITY

Treasury Stock – On January 8, 2015, the Company announced that its Board of Directors had authorized the Company’s purchase, on the open market and in privately negotiated transactions, of up to 1,250,000 shares of its common stock, representing approximately 6% of the Company’s 20,945,634 total outstanding shares as of the close of business on January 7, 2015. This authorization superseded all prior Board of Directors’ authorizations to purchase shares of the Company’s common stock.

On March 10, 2016, the Company announced that its Board of Directors authorized the Company’s purchase, on the open market and in privately negotiated transactions, of up to 1,000,000 additional shares of its common stock, in addition to the unused prior authorization to purchase shares of the Company’s common stock announced on January 8, 2015. During the 2016 fiscal year, the Company purchased 599,832 shares pursuant to the above authorizations at an aggregate purchase price of $12,187. In 2021, the Company purchased 137,397 shares pursuant to the above authorization at an aggregate purchase price of $1,644. As a result, the Company is authorized to purchase up to a total of 1,394,015 shares of its common stock, representing approximately 6.8% of the Company’s 20,382,876 total outstanding shares as of the close of business on February 28, 2021.

Reserved Common Shares – At February 28, 2021, 566,000 shares of common stock were reserved for issuance upon exercise of stock options.

Accumulated Other Comprehensive Earnings (Loss) – Accumulated balances related to each component of other comprehensive earnings were as follows:

Accumulated balance $ (336 ) $ 668

7. EARNINGS PER SHARE

Basic earnings per share are computed by dividing net earnings by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share are computed by dividing net earnings by the sum of (a) the weighted average number of shares of common stock outstanding during the period and (b) the potential common stock equivalents outstanding during the period. Stock options are the only common stock equivalents, and the number of dilutive options is computed using the treasury stock method.

The following table sets forth the calculation of basic and diluted earnings per share:

Fiscal Year

(Amounts in thousands, except per share amounts) 2021 2020 2019

Net (loss) earnings - discontinued operations (328 ) (653 ) 107,239

Weighted average common shares outstanding for basic EPS 20,387 20,507 20,288

Net effect of dilutive options 91 88 97

Basic earnings per share - continuing operations $ 0.25 $ 0.50 $ 0.31

Basic (loss) earnings per share - discontinued operations (0.01 ) (0.03 ) 5.29

Diluted earnings per share - continuing operations $ 0.25 $ 0.50 $ 0.31

Diluted (loss) earnings per share - discontinued operations (0.01 ) (0.03 ) 5.26

Diluted earnings per share $ 0.24 $ 0.47 $ 5.57

Potentially dilutive stock options, which were not included in the computation of diluted earnings per share because either the effect would have been antidilutive or the options’ exercise prices were greater than the average market price of the common stock, were 387,975, 132,000 and 213,893 for the 2021, 2020 and 2019 fiscal years, respectively.

8. RESTRUCTURING CHARGES

The Company recorded restructuring charges of $1,570, $0 and $0 in the 2021, 2020 and 2019 fiscal years, respectively, related to the closure of the Company’s Park Aerospace Technologies Asia PTE, LTD facility located in Singapore.

The following table sets forth the charges and accruals related to the restructuring:

Facility Lease Costs $ - $ 252 $ - $ - $ 252 $ 252

Other - - - - - -

9. EMPLOYEE BENEFIT PLANS

Profit Sharing Plan – The Company has a non-contributory profit sharing retirement plan covering substantially all full-time employees in the United States. The plan may be modified or terminated at any time, but in no event may any portion of the contributions revert back to the Company. The Company's estimated contributions are accrued at the end of each fiscal year and paid to the plan in the subsequent fiscal year. The Company’s contributions to the plan were $168 and $160 for fiscal years 2020 and 2019, respectively. The contribution for fiscal year 2021 has not been determined or paid. Contributions are discretionary and may not exceed the amount allowable as a tax deduction under the Internal Revenue Code.

Savings Plan – The Company also sponsors a 401(k) retirement savings plan but has no financial obligations to plan participants in the form of matching contributions or otherwise.

10. LEASES AND COMMITMENTS

The Company has operating leases related to land, office space, warehouse space and equipment. All of the Company’s leases have been assessed to be operating leases. Renewal options are included in the lease terms to the extent the Company is reasonably certain to exercise the option. The exercise of lease renewal options is at the Company’s sole discretion. The amounts disclosed in our consolidated balance sheet as of February 28, 2021, pertaining to the right-of-use assets and lease liabilities, are measured on our current expectations of exercising our available renewal options. The incremental borrowing rate represents the Company’s ability to borrow on a collateralized basis over a term similar to the lease term. The leases typically contain renewal options for periods ranging from one year to 10 years and require the Company to pay real estate taxes and other operating costs. The latest land lease expiration is 2068 assuming exercise of all applicable renewal options by the Company. The Company’s existing leases are not subject to any restrictions or covenants which preclude its ability to pay dividends, obtain financing or exercise its available renewal options.

Future minimum lease payments under non-cancellable operating leases as of February 28, 2021 are as follows:

Fiscal Year:

Total undiscounted operating lease payments 195

Less imputed interest (76 )

Present value of operating lease payments $ 119

The above payment schedule includes renewal options that the Company is reasonably likely to exercise. Leases with an initial term of 12 months or less are not recorded on the Company’s balance sheet. The Company recognizes lease expense for leases on a straight-line basis over the terms of the leases. The above payment schedule does not include lease payments of $171 in for the Company’s idle facility in Singapore that have been accrued on the consolidated balance sheets in accrued liabilities.

During the 2021 fiscal year, the Company’s operating lease expense was $173. Cash payments of $161, pertaining to operating leases, are reflected in the consolidated cash flow statement under cash flows from operating activities.

The following table sets forth the right-of-use assets and operating lease liabilities as of February 28, 2021:

Operating right-of-use assets $ 103

Operating lease liabilities $ 33

Long-term operating lease liabilities 86

Total operating lease liabilities $ 119

The Company’s weighted average remaining lease term for its operating leases is 12.16 years.

These non-cancelable leases have the following payment schedule:

Fiscal Year Amount

Thereafter -

The above payment schedule does not include renewal options that have not been committed to. An additional $161 would be included in the period after 2024 if the Company included renewal periods that the Company deems likely to renew.

Rental expenses, inclusive of real estate taxes and other costs, were $328, $368 and $346 for the 2021, 2020 and 2019 fiscal years, respectively.

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The changes simplify the accounting for a number of topics, some of which are narrow. Some of the proposed amendments eliminate specific exceptions to the general principles of income tax accounting while other changes clarify a handful of narrow issues within the broad topic of income tax accounting. The amendments in ASU 2019-12 are effective for public business entities for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. For all other entities, the requirements are effective for fiscal years beginning after December 15, 2021 and interim periods within fiscal years beginning after December 15, 2022. Early adoption is permitted for: (1) public business entities for periods for which financial statements have not yet been issued, and (2) all other entities for periods for which financial statements have not yet been made available for issuance. The adoption of ASU 2019-12 will not have a material impact on the Company’s consolidated financial statements and disclosures.

11. CONTINGENCIES

Litigation

The Company is subject to a small number of immaterial proceedings, lawsuits and other claims related to environmental, employment, product and other matters. The Company is required to assess the likelihood of any adverse judgments or outcomes in these matters as well as potential ranges of probable losses. A determination of the amount of reserves required, if any, for these contingencies is made after careful analysis of each individual issue. The required reserves may change in the future due to new developments in each matter or changes in approach, such as a change in settlement strategy in dealing with these matters. The Company believes that the ultimate disposition of such proceedings, lawsuits and claims will not have a material adverse effect on the liquidity, capital resources, business or consolidated results of operations or financial position of the Company.

Environmental Contingencies

The Company and certain of its subsidiaries have been named by the Environmental Protection Agency (the “EPA”) or a comparable state agency under the Comprehensive Environmental Response, Compensation and Liability Act (the “Superfund Act”) or similar state law as potentially responsible parties in connection with alleged releases of hazardous substances at three sites.

Under the Superfund Act and similar state laws, all parties who may have contributed any waste to a hazardous waste disposal site or contaminated area identified by the EPA or comparable state agency may be jointly and severally liable for the cost of cleanup. Generally, these sites are locations at which numerous persons disposed of hazardous waste. In the case of the Com‐pany’s subsidiaries, generally the waste was removed from their manufacturing facilities and disposed at waste sites by various companies which contracted with the subsidiaries to provide waste disposal services. Neither the Company nor any of its sub‐sidiaries have been accused of or charged with any wrongdoing or illegal acts in connection with any such sites. The Company believes it maintains an effective and comprehensive environmental compliance program.

The insurance carriers which provided general liability insurance coverage to the Company and its subsidiaries for the years dur‐ing which the Company’s subsidiaries’ waste was disposed at these sites have in the past reimbursed the Company and its subsidiaries for 100% of their legal defense and remediation costs associated with two of these sites.

The Company does not record environmental liabilities and related legal expenses for which the Company believes that it and its subsidiaries have general liability insurance coverage for the years during which the Company’s subsidiaries’ waste was disposed at two sites for which certain subsidiaries of the Company have been named as potentially responsible parties. Pursuant to such general liability insurance coverage, three insurance carriers reimburse the Company and its subsidiaries for 100% of the legal defense and remediation costs associated with the two sites.

Included in selling, general and administrative expenses are charges for actual expenditures and accruals, based on estimates, for certain environmental mat‐ters described above. The Company accrues estimated costs asso‐ciated with known environmental matters, when such costs can be reasonably estimated and when the outcome appears probable. The Company believes that the ultimate disposition of known environmental matters will not have a material adverse effect on the Company’s results of operations, cash flows or financial position.

12. DISCONTINUED OPERATIONS

On July 25, 2018, the Company entered into a definitive agreement to sell its Electronics Business to AGC Inc. for $145,000 in cash, subject to post-closing adjustments for changes in working capital compared to target net working capital, excluding cash in certain acquired subsidiaries and certain accrued and unpaid taxes of certain acquired subsidiaries. The net cash proceeds from the sale were approximately $124,156, net of transaction costs of approximately $7,657 and taxes of approximately $13,187. The net gain on the Sale was estimated to be $102,145. The net gain on the sale was calculated as the sum of the gains on the sale of each of the Electronics Business subsidiaries as determined by the total consideration allocation between the subsidiaries, less the respective tax bases and deductible transaction costs for each of the subsidiaries. The total consideration allocation for Nelco Products Pte. Ltd (Singapore), Neltec, Inc. (US), and Neltec SA (France), was 82%, 16%, and 2%, respectively, as agreed upon by the Company and AGC Inc. The Company completed this transaction on December 4, 2018.

The Company has classified the operating results of its former Electronics Business, together with certain costs related to the transaction, as discontinued operations, net of tax, in the Consolidated Statements of Operations. The Company has income in the U.S., Singapore and France, the blended tax rates for discontinued operations for the 2021, 2020 and 2019 fiscal years were negative 24.7%, negative 26.4% and 12.0%, respectively.

The following table shows the summary operating results of the discontinued operations:

Fiscal Year Ended

February 28, March 1, March 3,

Net sales $ - $ - $ 57,492

Selling, general and administrative expenses 8 234 8,826

(Loss) earnings from discontinued operations (435 ) (1,175 ) 3,669

Net (loss) earnings from discontinued operations $ (328 ) $ (653 ) $ 107,239

The restructuring expenses for discontinued operations were $0, $108 and $262 in the 2021, 2020 and 2019 fiscal years, respectively.

The following table sets forth the charges and accruals related to the consolidation:

The Company recorded additional restructuring charges for discontinued operations of $427, $833 and $374 during the 2021, 2020 and 2019 fiscal years, respectively, related to the closure of its electronics manufacturing plant located in Fullerton California in the 2018 fiscal year. The accrual balance of $8 is included in the consolidated balance sheets as the Company has assumed these obligations.

13. GEOGRAPHIC REGIONS

The Company’s products are sold to customers in North America, Asia and Europe. The Company’s manufacturing facilities are located in Kansas. Sales are attributed to geographic regions based upon the region in which the materials were delivered to the customer. Sales between geographic regions were not significant.

Financial information regarding the Company’s continuing operations by geographic region is as follows:

Fiscal Year

Sales:

Long-lived assets:

Europe - - -

14. CUSTOMER AND SUPPLIER CONCENTRATIONS

As a result of the sale of the Electronics Business, the Company now operates in a single segment. As such, segment reporting is no longer provided.

Customers – Net sales to affiliate and non-affiliate subtier suppliers of General Electric Company were 27.9%, 48.2% and 42.8% of the Company’s total worldwide sales in the 2021, 2020 and 2019 fiscal years, respectively. Net sales to AAE Aerospace were 20.7% of the Company’s total worldwide sales in the 2021 fiscal year.

While no other customer accounted for 10% or more of the Company's total worldwide net sales in the 2021, 2020 or 2019 fiscal years, the loss of a major customer or of a group of customers could have a material adverse effect on the Company's business or consolidated results of operations or financial position.

Sources of Supply – The principal materials used in the manufacture of the Company's advanced composite materials, aerospace grade reinforcements, thermoset resins and base chemicals. Although there is a limited number of qualified suppliers of these materials, the Company has nevertheless identified alter‐nate sources of supply for many of such materials. While the Company has not experienced significant problems in the delivery of these materials and considers its relationships with its suppliers to be strong, a disruption of the supply of material from a principal supplier could adversely affect the Company's business. Furthermore, substitutes for these materials are not readily available, and an inability to obtain essential materials, if prolonged, could materially adversely affect the Company’s business.

15. ACCOUNTING PRONOUNCEMENTS

Recently Adopted

In June 2018, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This ASU improves financial reporting by requiring timelier recording of credit losses on loans and other financial instruments held by financial institutions and other organizations. The ASU requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates. This ASU is effective for SEC filers for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019 (i.e., January 1, 2020, for calendar year entities). For public companies that are not SEC filers, the ASU is effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. The Company adopted this ASU in the first quarter of the 2021 fiscal year. The adoption of ASU 2016-13 did not have an impact on the Company’s consolidated financial statements and disclosures.

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement. This ASU modifies the disclosure requirements for fair value measurements by removing the requirement to disclose the amount and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy and the policy for timing of such transfers. This ASU expands the disclosure requirements for Level 3 fair value measurements, primarily focused on changes in unrealized gains and losses included in other comprehensive income (loss). This ASU is effective for the Company’s fiscal year ending February 28, 2021 and for the interim periods within that year. The Company adopted this ASU in the first quarter of the 2021 fiscal year. The adoption of ASU 2018-13 did not have an impact on the Company’s consolidated financial statements and disclosures.

Recently Issued

PARK AEROSPACE CORP. AND SUBSIDIARIES

SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

(Amounts in thousands, except per share amounts)

Quarter

First Second Third Fourth

Net loss from discontinued operations (15 ) (197 ) (116 ) -

Basic earnings (loss) per share:

Basic net loss per share from discontinued operations - (0.01 ) - -

Diluted earnings (loss) per share:

Diluted net loss per share from discontinued operations - (0.01 ) - -

Weighted average common shares outstanding:

Net (loss) earnings from discontinued operations (127 ) 83 (360 ) (249 )

Basic earnings (loss) per share:

Diluted earnings (loss) per share:

Weighted average common shares outstanding:

Earnings per share are computed separately for each quarter. There‐fore, the sum of such quarterly per share amounts may differ from the total for each year.

ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

None.

ITEM 9A.CONTROLS AND PROCEDURES.

(a) Disclosure Controls and Procedures.

The Company's management, with the participation of the Company's Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company's disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of February 28, 2021, the end of the fiscal year covered by this annual report. Based on such evaluation, the Company's Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such fiscal year, the Company's disclosure controls and procedures were effective in recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act and are effective in ensuring that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

(b) Management’s Annual Report on Internal Control Over Financial Reporting.

Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. The Company’s internal control over financial reporting is designed 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 in the United States of America. The Company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company, (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company, and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management assessed the effectiveness of the Company’s internal control over financial reporting as of February 28, 2021. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control–Integrated Framework (2013). Based on management’s assessment and those criteria, management concluded that the Company maintained effective internal control over financial reporting as of February 28, 2021.

There has not been any change in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fourth fiscal quarter of the fiscal year to which this report relates that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

ITEM 9B.OTHER INFORMATION.

None.

PART III

ITEM 10.DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

The information called for by this Item (except for information as to the Company's executive officers, which information appears elsewhere in this Report) is incorporated by reference to the Com‐pany's definitive proxy statement for the 2021 Annual Meeting of Shareholders to be filed pursuant to Regulation 14A.

ITEM 11.EXECUTIVE COMPENSATION.

The information called for by this Item is incorporated by ref‐erence to the Company's definitive proxy statement for the 2021 Annual Meeting of Shareholders to be filed pursuant to Regulation 14A.

ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

The information called for by this Item is incorporated by ref‐erence to the Company's definitive proxy statement for the 2021 Annual Meeting of Shareholders to be filed pursuant to Regulation 14A.

ITEM 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

The information called for by this Item is incorporated by reference to the Company's definitive proxy statement for the 2021 Annual Meeting of Shareholders to be filed pursuant to Regulation 14A.

ITEM 14.PRINCIPAL ACCOUNTANT FEES AND SERVICES.

This information called for by this Item is incorporated by reference to the Company's definitive proxy statement for the 2021 Annual Meeting of Shareholders to be filed pursuant to Regulation 14A.

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

Page

(a) Documents filed as a part of this Report:

(1) Consolidated Financial Statements:

Report of Independent Registered Public Accounting Firm 38

Consolidated Balance Sheets 39

Consolidated Statements of Operations 40

Consolidated Statements of Comprehensive Earnings 41

Consolidated Statements of Shareholders' Equity 42

Consolidated Statements of Cash Flows 43

Notes to Consolidated Financial Statements (1-15) 44

(2) Financial Statement Schedule:

Schedule II – Valuation and Qualifying Accounts 69

(3) Exhibits:

ITEM 16. FORM 10-K SUMMARY

Not Applicable

PARK AEROSPACE CORP. AND SUBSIDIARIES

SCHEDULE II – VALUATION AND QUALIFYING ACCOUNTS

Column C

Column A Column B Additions Column D Column E

DEFERRED INCOME TAX ASSET VALUATION ALLOWANCE:

Column D

Column A Column B Column C Other Column E

ALLOWANCE FOR DOUBTFUL ACCOUNTS:

(A) Uncollectible amounts, net of recoveries

EXHIBIT INDEX

Exhibit Numbers Description

21.1 Subsidiaries of the Company

23.1 Consent of Independent Registered Public Accounting Firm

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

Date: May 13, 2021 PARK AEROSPACE CORP.

By: /s/ Brian E. Shore

Brian E. Shore, Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

Signature Title Date

/s/ Dale Blanchfield Dale Blanchfield Director May 13, 2021

/s/ Emily J. Groehl Emily J. Groehl Director May 13, 2021

s/ Carl W. Smith Carl W. Smith Director May 13, 2021

/s/ D. Bradley Thress D. Bradley Thress Director May 13, 2021

/s/ Steven T. Warshaw Steven T. Warshaw Director May 13, 2021

PKE US Equity

PKE · 10-K · period ended 2021-02-28

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

ITEM 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

ITEM 9A.CONTROLS AND PROCEDURES.

ITEM 9B.OTHER INFORMATION.

ITEM 10.DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

ITEM 11.EXECUTIVE COMPENSATION.

ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

ITEM 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

ITEM 14.PRINCIPAL ACCOUNTANT FEES AND SERVICES.

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

ITEM 16. FORM 10-K SUMMARY

PKE US Equity☆

PKE · 10-K · period ended 2021-02-28

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

ITEM 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

ITEM 9A.CONTROLS AND PROCEDURES.

ITEM 9B.OTHER INFORMATION.

ITEM 10.DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

ITEM 11.EXECUTIVE COMPENSATION.

ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

ITEM 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

ITEM 14.PRINCIPAL ACCOUNTANT FEES AND SERVICES.

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

ITEM 16. FORM 10-K SUMMARY

PKE US Equity