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UNITED STATES SECURITIES AND 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 May 31, 2003
[_] 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
------------------------------- ------------------------------------
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
3301 Electronics Way, West Palm Beach, Florida 33407
----------------------------------------------------
(Address of principal executive offices)
(561) 848-4311
--------------
(Issuer's telephone number, including area code)
N/A
----------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of June 30, 2003: 2,070,821.
Transitional Small Business Disclosure Format (check one):
Yes [X] No [ ]
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SOLITRON DEVICES, INC.
INDEX
PART 1 - FINANCIAL INFORMATION
Page No.
Item 1. Financial Statements (unaudited):
Consolidated Balance Sheets 3
May 31, 2003 and February 28, 2003
Consolidated Statement of Operations 4
Three Months Ended May 31, 2003 and 2002
Consolidated Statements of Cash flows 5
Three Months Ended May 31, 2003 and 2002
Notes to Consolidated Financial Statements 6-8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9-12
Item 3. Controls and Procedures 12
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
Signatures
2
SOLITRON DEVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
May 31, 2003 February 28, 2003
------------ -----------------
(Unaudited) (Audited)
(in thousands, except for share amounts)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 1,564 $ 1,448
Accounts receivable 938 1,052
Inventories 2,898 2,869
Prepaid expenses and other current assets 118 139
---------- ----------
TOTAL CURRENT ASSETS 5,518 5,508
PROPERTY, PLANT AND EQUIPMENT, net 612 568
OTHER ASSETS 52 52
---------- ----------
TOTAL ASSETS $ 6,182 $ 6,128
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of accrued environmental expenses $ 876 $ 846
Accounts payable - Post petition 387 549
Accounts payable-Pre-petition, current portion 788 800
Accrued expenses and other liabilities 1,135 1,119
---------- ----------
TOTAL CURRENT LIABILITIES 3,186 3,314
LONG TERM LIABILITIES, net of current portion 334 364
---------- ----------
TOTAL LIABILITIES 3,520 3,678
---------- ----------
COMMITMENTS AND CONTINGENCIES -- --
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value, authorized 500,000 shares, none issued -0- -0-
Common stock, $.01 par value, authorized 10,000,000 shares,
2,070,821 shares issued and outstanding 21 21
Additional paid-in capital 2,617 2,617
Retained earnings (accumulated deficit) 24 (188)
---------- ----------
TOTAL STOCKHOLDERS' EQUITY 2,662 2,450
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 6,182 $ 6,128
========== ==========
The accompanying notes are an integral part of the financial statements
3
SOLITRON DEVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MAY 31,
2003 2002
---- ----
(Unaudited) (Unaudited)
(in thousands, except for per share amounts)
Net sales $ 2,000 $ 1,818
Cost of sales 1,555 1,520
----------- -----------
Gross profit 445 298
Selling, general and administrative expenses 248 278
----------- -----------
Operating income 197 20
----------- -----------
Other income (expense)
Other income 21 16
Interest expense (5) (13)
Other -- (2)
----------- -----------
Net other income 16 1
----------- -----------
Net income $ 213 $ 21
=========== ===========
INCOME PER SHARE OF COMMON STOCK:
Basic $ 0.10 $ 0.01
----------- -----------
Diluted $ 0.10 $ 0.01
----------- -----------
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic 2,070,821 2,070,821
=========== ===========
Diluted 2,070,821 2,089,816
=========== ===========
The accompanying notes are an integral part of the financial statements
4
SOLITRON DEVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
THREE MONTHS ENDED MAY 31,
2003 2002
---- ----
(Unaudited) (Unaudited)
(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 213 $ 21
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 15 43
Changes in operating assets and liabilities:
(Increase) Decrease in:
Accounts receivable 114 275
Inventories (29) (38)
Prepaid expenses and other current assets 21 6
Increase (Decrease) in:
Accounts payable (174) (22)
Accrued expenses and other liabilities 15 (21)
Accrued environmental expenses 30 27
Other long term liabilities (30) 14
---------- ----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 175 305
---------- ----------
CASH FLOW FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment (59) (24)
---------- ----------
NET CASH USED IN INVESTING ACTIVITIES (59) (24)
---------- ----------
NET INCREASE IN CASH 116 281
CASH AT BEGINNING OF PERIOD 1,448 1,335
---------- ----------
CASH AT END OF PERIOD $ 1,564 $ 1,616
========== ==========
The accompanying notes are an integral part of the financial statements
5
SOLITRON DEVICES, INC. AND SUBSIDIARIES
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 pursuant to the rules and regulations of the Securities and Exchange
Commission for reporting on Form 10-QSB. Pursuant to 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, 2003.
The results of operations for the three-month period ended May 31, 2003 are not
necessarily indicative of the results to be expected for the year ending
February 28, 2004.
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. There can be no assurance that the Company and its
subsidiaries will not be required to incur costs to comply with, or that the
operations, business, or financial condition of the Company will not be
materially adversely affected by, 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, 2003.
3. INVENTORIES:
As of May 31, 2003 net inventories consist of the following:
Raw Materials $ 1,554,000
Work-In-Process and Finished Goods 1,344,000
-----------
$ 2,898,000
6
SOLITRON DEVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
RECENT ACCOUNTING PRONOUNCEMENTS
In October 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") 144, ("SFAS 144"),
"Accounting for Impairment or Disposal of Long-Lived Assets," which is effective
for fiscal years beginning after December 15, 2001 and interim periods within
those fiscal periods. SFAS 144 addresses financial accounting and reporting for
the impairment of certain Long-Lived Assets and for Long-Lived Assets to be
disposed of. SFAS 144 supersedes SFAS No. 121, "Accounting for the Impairment of
long-lived Assets and Long-Lived Assets to be Disposed of," and Accounting
Principles Board ("APB") Opinion No. 30; however, SFAS 144 retains the
requirement of APB Opinion No. 30 to report discontinued operations separately
from continuing operations and extends that reporting to a component of an
entity that has either been disposed of (by sale, abandonment or in a
distribution to owners) or is classified as held for sale. The Company has
adopted SFAS 144, and the adoption did not have a material impact on its
financial position and results of operations.
In June 2002, the FASB issued SFAS No. 146, "Accounting for Exit or Disposal
Activities" ("SFAS 146"). SFAS 146 addresses significant issues regarding the
recognition, measurement, and reporting of costs that are associated with exit
and disposal activities, including restructuring activities that are currently
accounted for under Emerging Issues Task Force ("EITF") release No. 94-3,
"Liability Recognition for Certain Employee Termination Benefits and Other Costs
to Exit an Activity (including Certain Costs Incurred in a Restructuring) ("EITF
No. 94-3"). The scope of SFAS 146 also includes costs related to terminating a
contract that is not a capital lease and termination benefits that employees who
are involuntarily terminated receive under the terms of a one-time benefit
arrangement that is not an ongoing benefit arrangement or an individual
deferred-compensation contract. SFAS 146 will be effective for exit or disposal
activities that are initiated after December 31, 2002, and early application is
encouraged. The Company adopted SFAS 146 during the second quarter of the last
fiscal year. The provisions of EITF No. 94-3 shall continue to apply for an exit
activity initiated under an exit plan that met the criteria of EITF No. 94-3
prior to the adoption of SFAS 146. SFAS 146 will change, on a prospective basis,
the time when restructuring charges are recorded from a commitment date approach
to when the liability is incurred. SFAS No. 146 has not had a material impact on
its financial position and results of operations.
In November 2002, the FASB issued FASB Interpretation No. 45 ("FIN 45"),
"Guarantor's Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others." FIN 45 requires that a liability
be recorded in the guarantor's balance sheet upon issuance of a guarantee. In
addition, FIN 45 requires disclosures about the guarantees that an entity has
issued, including a reconciliation of changes in the entity's product warranty
liabilities. The initial recognition and initial measurement provisions of FIN
45 are applicable on a prospective basis to guarantees issued or modified after
December 31, 2002, irrespective of the guarantor's fiscal year-end. The
disclosure requirements of FIN 45 are effective for financial statements of
interim or annual periods ending after December 15, 2002. FIN 45 is not
anticipated to have a material impact on the Company's financial position or
results of operations.
In November 2002, the EITF reached a consensus on Issue No. 00-21, "Revenue
Arrangements with Multiple Deliverables" ("EIFT Issue No. 00-21"). EITF Issue
No. 00-21 provides guidance on how to account for arrangements that involve the
delivery or performance of multiple products, services and/or rights to use
assets. The provisions of EITF Issue No. 00-21 will apply to revenue
arrangements entered into in fiscal periods beginning after June 15, 2003. The
Company believes that the adoption of this standard will not have a material
impact on its financial statements.
In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation, Transition and Disclosure" ("SFAS 148"). SFAS 148 provides
alternative methods of transition for a voluntary change to the fair value based
method of accounting for stock-based employee compensation. SFAS 148 also
requires that disclosures of the pro forma effect of using the fair value method
of accounting for stock-based employee compensation be displayed more
prominently and in a tabular format.
7
SOLITRON DEVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Additionally, SFAS 148 requires disclosure of the pro forma effect in interim
financial statements. The transition and annual disclosure requirements of SFAS
148 are effective for fiscal years ended after December 15, 2002. The interim
disclosure requirements are effective for interim periods beginning after
December 15, 2002. SFAS 148 is not anticipated to have a material impact on the
Company's financial position or results of operations.
In January 2003, the FASB issued FASB Interpretation No. 46 ("FIN 46"),
"Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51."
FIN 46 requires certain variable interest entities to be consolidated by the
primary beneficiary of the entity if the equity investors in the entity do not
have the characteristics of a controlling financial interest or do not have
sufficient equity at risk for the entity to finance its activities without
additional subordinated financial support from other parties. FIN 46 is
effective immediately for all new variable interest entities created or acquired
after January 31, 2003. For variable interest entities created or acquired prior
to February 1, 2003, the provisions of FIN 46 must be applied for the first
interim or annual period beginning after June 15, 2003. The Company believes
that the adoption of this standard will not have a material impact on its
financial statements.
8
SOLITRON DEVICES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
-----------------------------------------------------------------------
OF OPERATIONS
-------------
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 and other related products. Most of the Company's products are
custom made pursuant to 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, 2003 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.
Critical Accounting Policies
----------------------------
Our financial statements and accompanying notes are prepared in accordance with
generally accepted accounting principles in the United States. Preparing
financial statements requires management to make estimates and assumptions that
affect the reported amounts of assets, liabilities, revenue, and expenses. These
estimates and assumptions are affected by management's application of accounting
policies. Our critical accounting policies include inventories, valuation of
plant, equipment and intangible assets, revenue recognition, accounting for
legal contingencies, accounting for income taxes and accounting for
non-recurring engineering work. A discussion of all of these critical accounting
policies except for non-recurring engineering work can be found in the
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" section of our Annual Report on Form 10-K for the fiscal year ended
February 28, 2003 and a discussion of the critical accounting policy relating to
non-recurring engineering work can be found in the "Management's Discussion and
Analysis of Financial Condition and Results of Operations" section of our
Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2002.
Trends and Uncertainties:
-------------------------
During the three months ended May 31, 2003, the company's book-to-bill ratio was
approximately 1.13, reflecting an increase in the volume of orders booked. 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. Generally, the intake
of orders over the last eighteen months has varied greatly as a result of the
fluctuations in the general economy and of variations in defense spending on
programs the Company supports, which is expected to continue over the next
twelve months. The Company continues to identify means intended to reduce its
variable manufacturing costs to offset the potential impact of low volume of
orders to be shipped should a slow down in the intake of orders reoccur.
However, should order intake fall significantly below the level experienced in
the last twelve months, the Company might be required to implement further cost
cutting or other downsizing measures to continue its business operations.
9
RESULTS OF OPERATIONS-THREE MONTHS ENDED MAY 31, 2003 COMPARED TO THREE MONTHS
------------------------------------------------------------------------------
ENDED MAY 31, 2002:
-------------------
Net sales for the three months ended May 31, 2003 increased approximately 10% to
$2,000,000 as compared to $1,818,000 for the three months ended May 31, 2002.
This increase was primarily attributable to a higher level of orders that were
shipped in accordance with customer requirements.
Cost of sales for the three months ended May 31, 2003 increased to $1,555,000
from $1,520,000 for the comparable period in 2002. However, expressed as a
percentage of sales, Cost of sales decreased to approximately 78% from
approximately 84% for the same periods. This change was due partly to a higher
level of shipments and partly to reductions in material and labor costs
expressed as a percentage of sales.
Gross profit for the three months ended May 31, 2003 increased to $445,000 from
$298,000 for the three months ended May 31, 2002. Accordingly, gross margins on
the Company's sales increased to approximately 22% for the three months ended
May 31, 2003 in comparison to approximately 16% for the three months ended May
31, 2002. This change was due partly to a higher level of shipments and partly
to reductions in material and labor costs expressed as a percentage of sales.
For the three months ending May 31, 2003, the Company shipped 154,722 units as
compared with 193,321 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 might
not be a reliable indicator of the Company's performance.
The Company's backlog of open orders increased approximately 5% for the three
months ended May 31, 2003 as compared to an increase of approximately 7% for the
three months ended May 31, 2002. Changes in the backlog reflect the changes in
the intake of orders and in the delivery dates required by customers.
The Company has experienced an increase in the level of bookings of
approximately 50% for the quarter ended May 31, 2003 as compared to the same
period for the previous year principally as a result of a higher demand for its
product in this period.
Selling, general, and administrative expenses decreased to $248,000 for the
three months ended May 31, 2003 from $278,000 for the comparable period in 2002.
During the three months ending May 31, 2003, selling, general, and
administrative expenses as a percentage of sales decreased to approximately 12%
as compared with approximately 15% for the three months ending May 31, 2002.
This decrease is due to lower sales department salaries.
Operating Income for the three months ended May 31, 2003 increased to $197,000
from $20,000 for the three months ended May 31, 2002. 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 income of $16,000 for the three months ended
May 31, 2003 versus a net other income of $1,000 for the three months ended May
31, 2002. The variance was due primarily to a decrease in the Company's interest
expense.
Net income for the three months ended May 31, 2003 increased to $213,000 from
$21,000 for the same period in 2002. This increase is mainly due to a higher
sales volume and to decreases in material cost and in selling, general and
administrative expenses.
10
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 six to nine 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. 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, 2003.
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 May
30, 2003, the Company is currently scheduled to pay approximately $1,811,000 to
holders of allowed unsecured claims in quarterly installments of approximately
$62,000.
The Company reported a net income of $213,000 and an operating income of
$197,000 for the three months ended May 31, 2003. 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 May 31, 2003, February 28, 2003 and May 31, 2002 respectively, the Company
had cash of $1,564,000, $1,448,000 and $1,616,000. The increase during the last
three months against February 28, 2003 was primarily attributable to higher
revenues and to a lower level of cost of sales and expenses. Reduction in
accounts receivable contributed $114,000 to the last three months' positive cash
flow generated by ongoing operations.
At May 31, 2003, the Company had working capital of $2,332,000 as compared with
a working capital at May 31, 2002 of $2,111,000. At February 28, 2003, the
Company had a working capital of $2,194,000. The approximately $138,000 increase
for the three months ended May 31, 2003 was due mainly to a decrease in accounts
payable made possible by an improved cash inflow.
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 may differ significantly from the
results discussed in such forward-looking statements.
Statements regarding:
o sources and availability of liquidity;
o expectations regarding fluctuations in the general economy and variations
in defense spending;
o the Company's belief regarding changes in its book-to-bill ratio;
o expectations regarding the impact of certain accounting pronouncements; and
o other statements contained in this report that address activities, events
or developments that the Company expects, believes or anticipates will or
may 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 may cause actual future events to differ significantly from those predicted
or assumed include, but are not limited to:
11
o the loss of certification or qualification of the Company's products or the
inability of the Company to capitalize on such certifications and/or
qualifications;
o unexpected rapid technological change;
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 unforeseen factors which impair or delay the development of any or all of
its products if such decision is later determined to be in the best
interests of the Company;
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 Plan of Reorganization;
o inability to move into new market segments based on unforeseen factors;
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 the results of the informal inquiry being conducted by the Securities and
Exchange Commission;
o inability to sell certain properties or to obtain expected prices for such
properties;
o unexpected growth or stagnation of the business; and
o unforeseen changes that render the Company's headquarters and manufacturing
facilities unsuitable or inadequate to meet the Company's current needs;
o unforeseen effects of inflation; other unforeseen activities, events and
developments that may occur in the future.
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 of the Company, 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.
12
PART II - OTHER INFORMATION
---------------------------
ITEM 1. LEGAL PROCEEDINGS:
------------------
On June 23, 2003, the Southeast Regional Officer of the Securities and Exchange
Commission notified us that it is conducting an informal inquiry concerning the
Company. The Securities and Exchange Commission has requested that we provide
them with certain documents and other information. We are cooperating fully with
the Securities and Exchange Commission in connection with this informal inquiry.
Management has no knowledge or belief that the Company is in violation of any
SEC regulations. Currently, we are unable to determine whether this informal
inquiry may lead to a formal investigation or the commencement of proceedings
against the Company by the Securities and Exchange Commission.
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, 2003, 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) Exhibits
99.1 Certification of Chief Executive Officer and Chief Financial
Officer pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
13
SIGNATURES
----------
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, therein duly
authorized.
SOLITRON DEVICES, INC.
Date: July 8, 2003 /s/ Shevach Saraf
--------------------------------
By: Shevach Saraf
Title: Chairman, President,
Chief Executive Officer and
Chief Financial Officer
14
CERTIFICATION
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 my 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; and
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 my most recent
evaluation, including any corrective actions with regard to significant
deficiencies and material weaknesses.
Date: July 8, 2003 /s/ Shevach Saraf
------------------------------
Shevach Saraf
Chairman, President,
Chief Executive Officer,
Treasurer and
Chief Financial Officer
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EXHIBIT INDEX
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EXHIBIT NUMBER DESCRIPTION
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99.1* Certification of Chief Executive Officer and Chief
Financial Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
*Filed herewith.
16