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U.S. SECURITIES & EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended August 31, 2002
[_] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from _________ to _________
Commission file number: 001-04978
SOLITRON DEVICES, INC.
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(Exact name of small business issuer as specified in its charter)
Delaware 22-1684144
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(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
3301 Electronics Way, West Palm Beach, Florida 33407
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(Address of principal executive offices)
(561) 848-4311
--------------
(Issuer's telephone number)
N/A
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(Former name, former address and former fiscal year,
if changed since last report)
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of September 30, 2002: 2,070,821.
Transitional Small Business Disclosure Format (check one):
Yes No X
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SOLITRON DEVICES, INC.
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INDEX
Page No.
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PART I - FINANCIAL INFORMATION
------------------------------
Item 1. Financial Statements (unaudited):
Consolidated Balance Sheets - August 31, 2002 and
February 28, 2002 3-4
Consolidated Statements of Operations - Three and Six
Months Ended August 31, 2002 and 2001 5
Consolidated Statements of Cash Flows - Six Months Ended 6
August 31, 2002 and 2001
Notes to Consolidated Financial Statements 7-8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9-12
Item 3. Controls and Procedures 12-13
PART II - OTHER INFORMATION
---------------------------
Item 1. Legal Proceedings 14
Item 2. Changes in Securities and Use of Proceeds 14
Item 3. Defaults Upon Senior Securities 14
Item 4. Submission of Matters to a Vote of Security Holders 14
Item 5. Other Information 14
Item 6. Exhibits and Reports on Form 8-K 14
Signatures 15
2
SOLITRON DEVICES, INC. AND SUBSIDIARIES
---------------------------------------
CONSOLIDATED BALANCE SHEET
ASSETS
August 31, 2002 February 28, 2002
--------------- -----------------
(Unaudited) (Audited)
CURRENT ASSETS:
Cash $ 1,642,000 $ 1,335,000
Accounts receivable, less allowance
for doubtful accounts of $2,000 760,000 965,000
Inventories 2,673,000 2,692,000
Prepaid expenses and other current assets 127,000 135,000
Due from S/V Microwave -0- 1,000
----------- -----------
Total current assets $ 5,202,000 $ 5,128,000
PROPERTY, PLANT AND EQUIPMENT, net 526,000 477,000
NON-OPERATING PLANT FACILITIES, net of cost
to dispose -0- -0-
OTHER ASSETS 53,000 52,000
----------- -----------
TOTAL ASSETS $ 5,781,000 $ 5,657,000
=========== ===========
The accompanying notes are an integral part
of these financial statements
3
SOLITRON DEVICES, INC. AND SUBSIDIARIES
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CONSOLIDATED BALANCE SHEET
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
August 31, February 28,
2002 2002
----------- -----------
(Unaudited) (Audited)
CURRENT LIABILITIES:
Current portion of accrued environmental expenses $ 792,000 $ 738,000
Accounts payable - Post petition 380,000 410,000
Accounts payable - Pre-petition, current portion 627,000 651,000
Accrued expenses and other liabilities 1,328,000 1,271,000
Accrued Chapter 11 administrative expense -0- 1,000
----------- -----------
Total current liabilities $ 3,127,000 $ 3,071,000
Other long-term liabilities net of
current portion, net of cost to dispose
of non-operating plant facilities 373,000 430,000
----------- -----------
TOTAL LIABILITIES $ 3,500,000 $ 3,501,000
=========== ===========
Stockholders' Equity:
Preferred stock, $.01 par value,
authorized 500,000 shares,
0 shares issued and outstanding -0- -0-
Common stock $.01 par value,
authorized 10,000,000 shares,
issued and outstanding 2,070,821 21,000 21,000
Additional paid-in capital 2,617,000 2,617,000
Accumulated deficit (357,000) (482,000)
----------- -----------
Total stockholders' equity 2,281,000 2,156,000
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TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 5,781,000 $ 5,657,000
=========== ===========
The accompanying notes are an integral part
of these financial statements
4
SOLITRON DEVICES, INC. AND SUBSIDIARIES
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CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended August 31, Six Months Ended August 31,
---------------------------- ----------------------------
2002 2001 2002 2001
------------ ------------ ------------ ------------
NET SALES $ 1,810,000 $ 1,714,000 $ 3,628,000 $ 3,372,000
Cost of Sales 1,434,000 1,542,000 2,954,000 3,040,000
------------ ------------ ------------ ------------
Gross Profit 376,000 172,000 674,000 332,000
Selling, general and administrative
Expenses 271,000 327,000 549,000 668,000
------------ ------------ ------------ ------------
Operating Income/(Loss) 105,000 (155,000) 125,000 (336,000)
------------ ------------ ------------ ------------
OTHER INCOME (EXPENSE):
Other Income 15,000 18,000 31,000 54,000
Interest Expense (13,000) (16,000) (26,000) (31,000)
Other, net (3,000) (2,000) (5,000) (4,000)
------------ ------------ ------------ ------------
Other Income/(Expense) , Net (1,000) -- -- 19,000
Net Income/(Loss) $ 104,000 $ (155,000) $ 125,000 $ (317,000)
============ ============ ============ ============
INCOME/(LOSS) PER SHARE: Basic $ 0.05 $ (0.07) $ 0.06 $ (0.15)
: Diluted $ 0.05 $ (0.07) $ 0.06 $ (0.15)
WEIGHTED AVERAGE
SHARES OUTSTANDING: Basic 2,070,821 2,068,731 2,070,821 2,068,731
: Diluted 2,129,388 2,068,731 2,129,388 2,068,731
The accompanying notes are an integral part
of these consolidated financial statements
5
SOLITRON DEVICES, INC. AND SUBSIDIARIES
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CONSOLIDATED STATEMENT OF CASH FLOWS
Six Months Ended August 31,
----------------------------
2002 2001
----------- -----------
(Unaudited) (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net profit (loss) $ 125,000 $ (317,000)
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Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 85,000 107,000
(Increase)/Decrease in:
Accounts Receivable 205,000 152,000
Inventories 19,000 85,000
Prepaid Expenses
and other current assets 7,000 48,000
Due from SV Microwave 1,000 -
Increase/(Decrease) in:
Accounts Payable (30,000) 28,000
Accounts Payable - Pre-petition (24,000) (30,000)
Accrued Expenses and other liabilities 56,000 (35,000)
Accrued Environmental Expenses 54,000 54,000
Other Long Term Liabilities (57,000) (59,000)
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Total adjustments 316,000 350,000
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Net cash provided by operating activities 441,000 33,000
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CASH FLOW FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment (134,000) (193,000)
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Net Cash used in investing activities (134,000) (193,000)
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NET INCREASE (DECREASE) IN CASH 307,000 (160,000)
CASH AT BEGINNING OF PERIOD $ 1,335,000 $ 2,190,000
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CASH AT END OF PERIOD $ 1,642,000 $ 2,030,000
=========== ===========
Supplemental cash flow disclosure: Interest paid during the six months ended
August 31, 2002 and 2001 was approximately $26,000 and $31,000 respectively.
The accompanying notes are an integral part
of these consolidated financial statements
6
SOLITRON DEVICES, INC. AND SUBSIDIARIES
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. GENERAL:
--------
The financial information included herein is unaudited; however, such
information reflects all adjustments (consisting solely of normal recurring
adjustments), which are, in the opinion of management, necessary for a fair
statement of the results for the interim period.
The accompanying unaudited interim consolidated financial statements have been
prepared in accordance with the rules and regulations of the Securities and
Exchange Commission for reporting on Form 10-QSB. In accordance with such rules
and regulations, certain information and footnote disclosures normally included
in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted.
The information contained in this Form 10-QSB should be read in conjunction with
the Notes to Consolidated Financial Statements appearing in the Company's Annual
Report on Form 10-KSB for the year ended February 28, 2002.
The results of operations for the three month and six month periods ended August
31, 2002 are not necessarily indicative of the results to be expected for the
year ended February 28, 2003.
2. ENVIRONMENTAL REGULATION
------------------------
While the Company believes that it has the environmental permits necessary to
conduct its business and that its operations conform to present environmental
regulations, increased public attention has been focused on the environmental
impact of semiconductor operations. The Company, in the conduct of its
manufacturing operations, has handled and does handle materials that are
considered hazardous, toxic or volatile under federal, state, and local laws
and, therefore, is subject to regulations related to their use, storage,
discharge, and disposal. No assurance can be made that the risk of accidental
release of such materials can be completely eliminated. In the event of a
violation of environmental laws, the Company could be held liable for damages
and the costs of remediation and, along with the rest of the semiconductor
industry, is subject to variable interpretations and governmental priorities
concerning environmental laws and regulations. Environmental statutes have been
interpreted to provide for joint and several liability and strict liability
regardless of actual fault. The Company and its subsidiaries might be required
to incur costs to comply with current or future environmental laws or
regulations.
The information contained in this Form 10-QSB should be read in conjunction with
the "Business - Environmental Liabilities" section appearing in the Company's
Annual Report on Form 10-KSB for the year ended February 28, 2002.
3. INVENTORIES:
------------
As of August 31, 2002 net inventories consist of the following:
Raw Materials $ 1,316,000
Work-In-Process and Finished Goods 1,357,000
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Total Net Inventories $ 2,673,000
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7
SOLITRON DEVICES, INC. AND SUBSIDIARIES
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
4. GOING CONCERN:
--------------
The Company's consolidated financial statements are presented on a going concern
basis, which contemplates the realization of assets and satisfaction of
liabilities as they become due. Although the Company has projected that it will
be able to generate sufficient funds to support its ongoing operations, it has
significant obligations arising from settlements in connection with its
bankruptcy necessitating it to make substantial cash payments which cannot be
supported by the current level of operations. The Company must be able to obtain
forbearance or be able to renegotiate its bankruptcy related required payments
to unsecured creditors, the Environmental Protection Agency ("USEPA"), the
Florida Department of Environmental Protection ("FDEP"), and certain taxing
authorities or raise sufficient cash in order to pay these obligations as
currently due, in order to remain a going concern.
The Company continues to negotiate with its unsecured creditors, the USEPA, the
FDEP, and taxing authorities in an attempt to arrive at reduced payment
schedules. In addition, the Company has a contingency plan to reduce its size
and thereby reduce its cost of operations within certain limitations. However,
no assurance can be made that the Company can reach a suitable agreement with
the unsecured creditors or taxing authorities or obtain additional sources of
capital and/or cash or that the Company can generate sufficient cash to meet its
obligations over the next year.
The financial statements do not include any adjustments to reflect the possible
future effect on the recoverability and classification of assets or the amounts
and classification of liabilities that could result from the possible inability
of the Company to continue as a going concern.
5. SUBSEQUENT AND OTHER EVENTS:
----------------------------
On June 26, 2002, the Company executed an agreement with Port Salerno Industrial
Park, LLC,, the "Buyer", for the sale of the Solitron Microwave Superfund Site
in Port Salerno, Florida, which consists of a 42,000 square foot building and 23
acres of undeveloped land. The purchase price for the property is $800,000, and
the closing of the sale is required to take place within 330 days of the
execution of the agreement, provided certain contingencies are met. After
deducting amounts required to satisfy certain non-environmental liens on the
property, such as those for taxes, and certain of the Company's expenses in
connection with the sale of the property, the net proceeds of the sale will be
paid over to the U.S. Environmental Protection Agency ("USEPA") to release
certain liens on the property for costs incurred by USEPA in connection with the
investigation and remediation of the site. The Consent Final Judgment between
the Company and the Florida Department of Environmental Protection, dated as of
October 21, 1993, may need to be modified by the parties to allow for the net
proceeds to go to USEPA. The release of USEPA's lien does not discharge the
Company's alleged liability for clean-up costs of the site, which are currently
still under negotiation with USEPA.
On September 20, 2002 the Company and the Buyer agreed to amend the contract for
the sale of the Port Salerno facility while the Buyer is performing its due
diligence. The amendment allows the Buyer an additional thirty (30) days to
perform its due diligence. The closing date is not affected by this amendment.
8
SOLITRON DEVICES, INC. AND SUBSIDIARIES
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
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OF OPERATIONS
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OVERVIEW:
---------
Solitron Devices, Inc., a Delaware corporation (the "Company" or "Solitron"),
designs, develops, manufactures and markets solid-state semiconductor components
and related devices primarily for the military and aerospace markets. The
Company manufactures a large variety of bipolar and metal oxide semiconductor
power transistors, power and control hybrids, junction and MOS field effect
transistors, thin film resistors and other related products. Most of the
Company's products are custom made in accordance with contracts with customers
whose end products are sold to the United States government. Other products,
such as Joint Army Navy transistors, diodes and Standard Military Drawings
voltage regulators, are sold as standard or catalog items.
The following discussion and analysis of factors which have affected the
Company's financial position and operating results during the periods included
in the accompanying condensed consolidated financial statements should be read
in conjunction with the Consolidated Financial Statements and the related Notes
to Consolidated Financial Statements and Management's Discussion and Analysis of
Financial Condition and Results of Operations included in the Company's Annual
Report on Form 10-KSB for the year ended February 28, 2002 and the Condensed
Consolidated Financial Statements and the related Notes to Condensed
Consolidated Financial Statements included in Item 1 of this Quarterly Report on
Form 10-QSB.
TRENDS AND UNCERTAINTIES:
-------------------------
During the six months ended August 31, 2002, the Company's book-to-bill ratio
decreased to approximately 0.93, reflecting both an increase in the volume of
shipments and a lower amount of orders booked when compared to the six months
ending August 31, 2001. The Company does not believe that the change in the
book-to-bill ratio indicates a specific trend in the demand for the Company's
products.
During the month of September 2002 the Company booked orders, which were
received later this year than in prior years. Historically these annual orders
were received during the second fiscal quarter of each year. Thus, as of
September 30, 2002 the Company's backlog increased 83.3% as compared to August
31, 2002. The Company does not believe that this increase in the net orders
booked indicates a trend that will continue.
Generally, the intake of orders over the last eighteen months has been low as a
result of the general slow-down of the economy and of continued cuts in defense
spending on programs the Company supports, which is expected to continue, with
the exception of September 2002, over the next six to nine months. The Company
continues to implement steps intended to reduce its variable manufacturing costs
to offset the impact of the low volume of orders to be shipped. However, should
order intake continue at the level experienced in the last eighteen months, the
Company might be required to implement further cost cutting or other downsizing
measures or sell assets to continue its business operations.
RESULTS OF OPERATIONS-THREE MONTHS ENDED AUGUST 31, 2002 COMPARED TO THREE
--------------------------------------------------------------------------
MONTHS ENDED AUGUST 31, 2001:
-----------------------------
Net sales for the three months ended August 31, 2002 increased approximately
5.6% to $1,810,000 as compared to $1,714,000 for the three months ended August
31, 2001. This increase was primarily attributable to a higher level of orders.
Cost of sales for the three months ended August 31, 2002 decreased to $1,434,000
from $1,542,000 for the comparable period in 2001. Expressed as a percentage of
sales, Cost of sales decreased to 79.2% from 90.0% for the same periods. This
change was due mainly to reductions in material and labor costs.
9
Gross profit for the three months ended August 31, 2002 increased to $376,000
from $172,000 for the three months ended August 31, 2001. Accordingly, gross
margins on the Company's sales increased to 20.8% for the three months ended
August 31, 2002 in comparison to 10.0% for the three months ended August 31,
2001. This change was due partly to a higher level of shipments and partly to
reductions in material and labor costs.
For the three months ending August 31, 2002, the Company shipped 130,055 units
as compared with 84,082 units shipped during the same period of the prior year.
It should be noted that since the Company manufactures a wide variety of
products with an average sale price ranging from less than one dollar to several
hundred dollars, such periodic variations in the Company's volume of units
shipped should not be regarded as a reliable indicator of the Company's
performance.
The Company's backlog of open orders decreased 17.4% for the three months ended
August 31, 2002 as compared to an increase of 20.5% for the three months ended
August 31, 2001. Changes in the backlog reflect the changes in the intake of
orders and in the delivery dates required by customers.
The Company has experienced a decrease in the level of booking of approximately
55% for the quarter ended August 31, 2002 as compared to the same period for the
previous year. Changes in the level of orders booked depend, in large extent, on
the timing of issuance of orders from key customers.
Selling, general, and administrative expenses decreased to $271,000 for the
three months ended August 31, 2002 from $327,000 for the comparable period in
2001. During the three months ending August 31, 2002, selling, general, and
administrative expenses as a percentage of sales decreased to 15.0% as compared
with 19.1% for the three months ending August 31, 2001. This decrease is due to
lower salaries and to lower legal fees offset slightly by an increase in
commissions paid on sales.
Operating Income for the three months ended August 31, 2002 increased to a
profit of $105,000 from a loss of $155,000 for the three months ended August 31,
2001. This increase is due to a higher gross profit and to a decrease in
selling, general and administrative expenses.
The Company recorded a net other expense of $1,000 for the three months ended
August 31, 2002 versus a zero net amount for the three months ended August 31,
2001. The variance was due primarily to a decrease in the Company's interest
income, which resulted from both a smaller average invested cash balance and
lower interest rates received from the Company's bank.
Net income for the three months ended August 31, 2002 increased to a profit of
$104,000 from a loss of $155,000 for the same period in 2001. This increase is
due to a higher sales volume and to a decrease in selling, general and
administrative expenses.
RESULTS OF OPERATIONS-SIX MONTHS ENDED AUGUST 31, 2002 COMPARED TO SIX MONTHS
-----------------------------------------------------------------------------
ENDED AUGUST 31, 2001:
----------------------
Net sales for the six months ended August 31, 2002 increased approximately 7.6%
to $3,628,000 as compared to $3,372,000 for the six months ended August 31,
2001. This increase was primarily attributable to a higher level of orders.
Cost of sales for the six months ended August 31, 2002 decreased to $2,954,000
from $3,040,000 for the comparable period in 2001. Expressed as a percentage of
sales, Cost of sales decreased to 81.4% from 90.2% for the same periods. This
change was due mainly to reductions in material and labor costs.
Gross profit for the six months ended August 31, 2002 increased to $674,000 from
$332,000 for the six months ended August 31, 2001. Accordingly, gross margins on
the Company's sales increased to 18.6% for the six months ended August 31, 2002
in comparison to 9.8% for the six months ended August 31, 2001. This change was
due partly to a higher level of shipments and partly to reductions in material
and labor costs.
For the six months ending August 31, 2002, the Company shipped 323,376 units as
compared with 183,661 units shipped during the same period of the prior year. It
should be noted that since the Company manufactures a wide
10
variety of products with an average sale price ranging from less than one dollar
to several hundred dollars, such periodic variations in the Company's volume of
units shipped should not be regarded as a reliable indicator of the Company's
performance.
The Company's backlog of open orders decreased 23.5% for the six months ended
August 31, 2002 as compared to an increase of 14.7% for the six months ended
August 31, 2001. Changes in the backlog reflect the changes in the intake of
orders and in the delivery dates required by customers.
The Company has experienced a decrease in the level of booking of approximately
33% for the six months ended August 31, 2002 as compared to the same period for
the previous year. Changes in the level of orders booked depend, in large
extent, on the timing of issuance of orders from key customers.
Selling, general, and administrative expenses decreased to $549,000 for the six
months ended August 31, 2002 from $668,000 for the comparable period in 2001.
During the six months ending August 31, 2002, selling, general, and
administrative expenses as a percentage of sales decreased to 15.1% as compared
with 19.8% for the six months ending August 31, 2001. This decrease is due to
lower salaries and to lower legal fees offset slightly by an increase in
commissions paid on sales.
Operating Income for the six months ended August 31, 2002 increased to a profit
of $125,000 from a loss of $336,000 for the six months ended August 31, 2001.
This increase is due to a higher gross profit and to a decrease in selling,
general and administrative expenses.
The Company recorded a zero net other income for the six months ended August 31,
2002 versus a net other income of $19,000 for the six months ended August 31,
2001. The variance was due primarily to a decrease in the Company's interest
income, which resulted from both a smaller average invested cash balance and
lower interest rates received from the Company's bank.
Net income for the six months ended August 31, 2002 increased to a profit of
$125,000 from a loss of $317,000 for the same period in 2001. This increase is
due to a higher sales volume and to a decrease in selling, general and
administrative expenses.
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
The Company's sole source of liquidity is cash generated by ongoing operations.
The Company's liquidity is expected to be adversely affected in the short term
due to the anticipated lower level of revenue in the next twelve months. The
Company's liquidity is not expected to improve until the Company's revenue
increases above its breakeven point.
Furthermore, the Company's liquidity continues to be adversely affected by
significant non-recurring expenses associated with the Company's 1993 bankruptcy
petition obligations and the Company's inability to obtain additional working
capital through the sale of debt or equity securities or the sale of
non-operating assets. For a more complete discussion of the Company's bankruptcy
obligations, see "Business - Bankruptcy Proceedings" in the Company's Form
10-KSB filed for the period ended February 28, 2002.
The Company is required to make quarterly payments to holders of unsecured
claims until they receive 35 percent (35%) of their pre-petition claims. At
August 31, 2002, the Company is currently scheduled to pay approximately
$1,969,000 to holders of allowed unsecured claims in quarterly installments of
approximately $62,000. After making the August 31, 2002 payment, the Company has
paid approximately $378,000 to its unsecured creditors. The Company expects to
continue making these quarterly payments at the same rate as it has done
recently.
On June 26, 2002, the Company executed an agreement with Port Salerno Industrial
Park, LLC, for the sale of the Solitron Microwave Superfund Site in Port
Salerno, Florida, which consists of a 42,000 square foot building and 23 acres
of undeveloped land. The purchase price for the property is $800,000, and the
closing of the sale is required to take place within 330 days of the execution
of the agreement, provided certain contingencies are met. After deducting
amounts required to satisfy certain non-environmental liens on the property,
such as those for
11
taxes, and certain of the Company's expenses in connection with the sale of the
property, the net proceeds of the sale will be paid over to the U.S.
Environmental Protection Agency ("USEPA") to release certain liens on the
property for costs incurred by USEPA in connection with the investigation and
remediation of the site. The Consent Final Judgment between the Company and the
Florida Department of Environmental Protection, dated as of October 21, 1993,
may need to be modified by the parties to allow for the net proceeds to go to
USEPA. The release of USEPA's lien does not discharge the Company's alleged
liability for clean-up costs of the site, which are currently still under
negotiation with USEPA. For a more definitive description of environmental
matters pertaining to the Port Salerno property, please refer to
"Business--Environmental Liabilities" in the Company's Annual Report on Form
10-KSB for the year ended February 28, 2002.
On September 20, 2002 the Company and the Buyer agreed to amend the contract for
the sale of the Port Salerno facility while the Buyer is performing its due
diligence. The amendment allows the Buyer an additional thirty (30) days to
perform its due diligence. The closing date is not affected by this amendment.
The Company reported a net income of $125,000 and an operating income of
$125,000 for the six months ended August 31, 2002. The Company has significant
obligations arising from settlements related to its bankruptcy proceeding which
require it to make substantial cash payments, which cannot be supported by the
Company's current level of operations.
At August 31, 2002, February 28, 2002 and August 31, 2001 respectively, the
Company had cash of $1,642,000, $1,335,000 and $2,030,000. The increase during
the last three months was primarily attributable to higher revenues and to lower
expenses. Reduction in accounts receivable contributed $205,000 to the last six
months' positive cash flow generated by ongoing operations.
At August 31, 2002, the Company had working capital of $2,075,000 as compared
with a working capital at August 31, 2001 of $2,365,000. At February 28, 2002,
the Company had a working capital of $2,057,000. The approximately $18,000
increase for the six months ended August 31, 2002 was due mainly to an increase
in cash.
ITEM 3. CONTROLS AND PROCEDURES
-----------------------
Based on the evaluation of the Company's disclosure controls and procedures as
of a date within 90 days of the filing date of this quarterly report, Shevach
Saraf, Chairman, President, Chief Executive Officer, Treasurer and Chief
Financial Officer, has concluded that the Company's disclosure controls and
procedures are effective in ensuring that information required to be disclosed
by the Company in the reports that it files or submits under the Securities and
Exchange Act of 1934, as amended, is recorded, processed, summarized and
reported within the time period specified by the Securities and Exchange
Commission's rules and forms.
There were no significant changes in the Company's internal controls or in other
factors that could significantly affect these controls subsequent to the date of
their evaluation, including any corrective actions with regard to significant
deficiencies and material weaknesses.
Forward-Looking Statements
--------------------------
Information in this Form 10-QSB, including any information incorporated by
reference herein, includes "forward looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Act of 1934, as amended, and is subject to the safe-harbor created by
such sections. The Company's actual results could differ significantly from the
results discussed in such forward-looking statements.
Statements regarding:
o sources and availability of liquidity;
o anticipated recovery of volume and price of product sales;
o strategic plans to improve the Company's performance;
o the Company's ability to fill its backlog;
o the Company's ability to sustain or grow bookings and sales;
12
o the Company's ability to implement effectively cost-cutting or downsizing
measures;
o the Company's compliance with environmental laws, orders and
investigations and the future cost of such compliance;
o expectations regarding military and defense spending;
o the Company's ability to make payments required under the Plan of
Reorganization;
o the Company's ability to generate sufficient cash from operations or
otherwise;
o expectations of being released from certain environmental liabilities and
the Company's ability to satisfy such liabilities;
o amounts that the Company could receive (or not receive) upon the sale of
the Solitron Microwave Superfund Site in Port Salerno, Florida and the
expected application of such funds; and
o other statements contained in this report that address activities, events
of developments that the Company expects, believes or anticipates will or
could occur in the future, and similar statements are forward-looking
statements.
These statements are based upon assumptions and analyses made by the Company in
light of current conditions, future developments and other factors the Company
believes are appropriate in the circumstances, or information obtained from
third parties and are subject to a number of assumptions, risks and
uncertainties. Readers are cautioned that forward-looking statements are not
guarantees of future performance and that actual results might differ materially
from those suggested or projected in the forward-looking statements. Factors
that could cause actual future events to differ significantly from those
predicted or assumed include, but are not limited to:
o a misinterpretation of the Company's capital needs and sources and
availability of liquidity;
o a change in government regulations which hinders the Company's ability to
perform government contracts;
o a shift in or misinterpretation of industry trends;
o inability to sustain or grow bookings and sales;
o inability to capitalize on competitive strengths or a misinterpretation of
those strengths;
o the emergence of improved, patented technology by competitors;
o a misinterpretation of the nature of the competition, the Company's
competitive strengths or its reputation in the industry;
o inability to respond quickly to customers' needs and to deliver products
in a timely manner resulting from unforeseen circumstances;
o inability to generate sufficient cash to sustain operations;
o failure of price or volume recovery;
o failure to successfully implement cost-cutting or downsizing measures,
strategic plans or the insufficiency of such measures and plans;
o changes in military or defense appropriations;
o inability to make or renegotiate payments under the Company's Plan of
Reorganization;
o unexpected impediments affecting ability to fill backlog;
o inability to be released from environmental liabilities;
o an increase in the expected cost of environmental compliance based on
factors unknown at this time;
o changes in law or industry regulation;
o inability to close the sale of the Solitron Microwave Superfund Site in
Port Salerno, Florida;
o unexpected growth or stagnation of the business; and
o other unforeseen activities, events and developments that could occur in
the future.
13
PART II - OTHER INFORMATION
---------------------------
ITEM 1. LEGAL PROCEEDINGS:
------------------
On August 7, 2002, the Company received from the New York State
Department of Environmental Conservation a Request for Information
concerning waste that may have been delivered by the Company to the
municipal landfill in Clarkstown, New York. The Request for Information
was directed to the operation of a facility the Company operated in
Tappen, New York that closed in the mid-1980's. The New York Department
of Environmental Conservation also requested that the Company sign a
tolling agreement for any claims that may be asserted against the
Company in connection with the Clarkstown municipal landfill site.
The Company provided the requested information on August 29, 2002 and
signed the tolling agreement. The Company believes that any hazardous
waste that may have been sent by the Company to the Clarkstown
municipal landfill was subsequently removed and properly disposed.
The Company was not advised by the New York State Department of
Environmental Conservation of any specific claims the Department is
contemplating bringing against the Company and the magnitude of any
such claims.
The Company further believes that any claims asserted by the New York
Department of Environmental Conservation in connection with hazardous
waste are barred as a result of the Company's prior bankruptcy
proceedings.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS:
------------------------------------------
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES:
--------------------------------
See "Management's Discussion and Analysis - Liquidity and Capital
Resources" in this Form 10-QSB and "Business - Bankruptcy Proceedings"
in the Company's Form 10-KSB for the period ended February 28, 2002,
for a discussion of the status of payments pursuant to the Company's
1993 bankruptcy reorganization.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS:
----------------------------------------------------
None.
ITEM 5. OTHER INFORMATION:
------------------
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K:
---------------------------------
(a) 99.1 Certification Pursuant to 18 U.S.C. Section 1350 as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, executed by
the Chairman, President, Chief Executive Officer, Treasurer and Chief
Financial Officer.
(b) Forms 8-K:
None.
14
SIGNATURES
----------
In accordance with the requirements of the Securities Exchange Act of 1934, the
registrant caused this report to be signed on its behalf by the undersigned,
therein duly authorized.
SOLITRON DEVICES, INC.
Date: October 11, 2002 /s/ Shevach Saraf
--------------------------------------
By: Shevach Saraf
Title: Chairman, President, Chief
Executive Officer, Treasurer and
Chief Financial Officer
15
CERTIFICATIONS
--------------
I, Shevach Saraf, Chairman, President, Chief Executive Officer, Treasurer and
Chief Financial Officer of Solitron Devices, Inc., certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Solitron Devices,
Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. I am responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the
registrant and have;
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to me by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on my
evaluation as of the Evaluation Date;
5. I have disclosed, based on my most recent evaluation to the registrant's
auditors and the audit committee of registrant's board of directors (or persons
performing the equivalent function):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data and
have identified for the registrant's auditors any material weaknesses
in internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls;
6. I have indicated in this quarterly report whether or not there were
significant changes in internal controls or in other factors that could
significantly affect internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to significant
deficiencies and material weaknesses.
Date: October 11, 2002
/s/ Shevach Saraf
----------------------------------
Shevach Saraf
Chairman, President, Chief Executive
Officer, Treasurer and Chief Financial
Officer
16
EXHIBIT INDEX
-------------
EXHIBIT
NUMBER DESCRIPTION
------ -----------
99.1* Certification Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002, Executed by the
Chairman, President, Chief Executive Officer, Treasurer and Chief
Financial Officer
* Filed herewith.
17