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 November 30, 2004
[ ] 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.
(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 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 January 7, 2005: 2,080,524.
Transitional Small Business Disclosure Format (check one):
Yes No X
--- ---
1
SOLITRON DEVICES, INC.
INDEX
PART I - FINANCIAL INFORMATION Page No.
------------------------------ --------
Item 1. Financial Statements (unaudited) : 3-5
Consolidated Balance Sheets - November 30, 2004 and February 29, 2004 3
Consolidated Statements of Operations - Three and Nine Months Ended 4
November 30, 2004 and 2003
Consolidated Statements of Cash Flows - Nine Months Ended 5
November 30, 2004 and 2003
Notes to Consolidated Financial Statements 6-7
Item 2. Management's Discussion and Analysis of Financial Condition and 8-12
Results of Operations
Item 3. Controls and Procedures 13
PART II - OTHER INFORMATION
---------------------------
Item 1. Legal Proceedings 13
Item 6. Exhibits 13
Signatures 14
2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SOLITRON DEVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
November 30, 2004 February 29, 2004
----------------- -----------------
(Unaudited) (Audited)
(In thousands, except for share amounts)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 1,836 $ 1,883
Accounts receivable 1,225 988
Inventories 2,444 2,416
Prepaid expenses and other current assets 77 164
------- -------
TOTAL CURRENT ASSETS $ 5,582 $ 5,451
PROPERTY, PLANT AND EQUIPMENT, net 600 562
OTHER ASSETS 59 52
------- -------
TOTAL ASSETS $ 6,241 $ 6,065
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of accrued environmental expenses $ 985 $ 966
Accounts payable, Post-petition 402 409
Accounts payable, Pre-petition, current portion 819 851
Accrued expenses and other liabilities 1,186 1,189
------- -------
TOTAL CURRENT LIABILITIES 3,392 3,415
LONG-TERM LIABILITIES, net of current portion 13 33
------- -------
TOTAL LIABILITIES 3,405 3,448
------- -------
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 2,080,492
and 2,076,357 shares issued and outstanding at 21 21
November 30, 2004 and February 29, 2004 respectively
Additional paid-in capital 2,620 2,620
Accumulated earnings/(deficit) 195 (24)
------- -------
TOTAL STOCKHOLDERS' EQUITY 2,836 2,617
------- -------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 6,241 $ 6,065
======= =======
The accompanying notes are an integral part of the financial statements.
3
SOLITRON DEVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended Nine Months Ended
November 30, November 30,
-------------------------- --------------------------
2004 2003 2004 2003
----------- ----------- ----------- -----------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
(in thousands, except for share amounts and per share amounts)
NET SALES $ 1,909 $ 1,859 $ 5,796 $ 5,868
Cost of Sales 1,580 1,513 4,700 4,715
----------- ----------- ----------- -----------
Gross Profit 329 346 1,096 1,153
Selling, general and administrative expenses 266 278 878 836
----------- ----------- ----------- -----------
Operating Income
63 68 218 317
----------- ----------- ----------- -----------
OTHER INCOME (EXPENSE)
Other Income & (Expense), Net 5 5 5 139
Interest Expense (1) (5) (4) (16)
----------- ----------- ----------- -----------
Other Income (Expense), Net 4 0 1 123
----------- ----------- ----------- -----------
Net Income $ 67 $ 68 $ 219 $ 440
=========== =========== =========== ===========
NET INCOME PER SHARE:Basic $ 0.03 $ 0.03 $ 0.11 $ 0.21
----------- ----------- ----------- -----------
:Diluted $ 0.03 $ 0.03 $ 0.11 $ 0.21
----------- ----------- ----------- -----------
WEIGHTED AVERAGE
SHARES OUTSTANDING:Basic 2,070,783 2,070,362 2,070,783 2,070,362
=========== =========== =========== ===========
:Diluted 2,070,783 2,204,013 2,070,783 2,204,013
=========== =========== =========== ===========
The accompanying notes are an integral part of the financial statements
4
SOLITRON DEVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED NOVEMBER 30,
2004 2003
------- -------
(Unaudited) (Unaudited)
(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 219 $ 440
------- -------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 139 141
Cancellation of debt 0 (109)
(Increase) Decrease in:
Accounts receivable (236) 193
Inventories (29) 103
Prepaid expenses
and other current assets 86 (7)
Other assets (7) 0
Increase (Decrease) in:
Accounts payable (7) (174)
Accounts payable - Pre-petition (32) (41)
Accrued expenses and other liabilities (4) 48
Accrued environmental expenses 19 80
Other long term liabilities (19) (80)
------- -------
NET CASH PROVIDED BY OPERATING ACTIVITIES 129 594
------- -------
CASH FLOW FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment (177) (158)
------- -------
NET CASH USED IN INVESTING ACTIVITIES (177) (158)
------- -------
NET (DECREASE) INCREASE IN CASH (48) 436
------- -------
CASH AT BEGINNING OF PERIOD $ 1,884 $ 1,448
------- -------
CASH AT END OF PERIOD $ 1,836 $ 1,884
======= =======
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 29, 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 29, 2004.
3. INVENTORIES:
As of November 30, 2004 net inventories consist of the following:
Raw Materials $ 1,417,000
Work-In-Process 1,433,000
Finished Goods 177,000
-----------
Gross Inventory 3,027,000
Reserve (583,000)
-----------
Net Inventory $ 2,444,000
-----------
The raw materials inventory balance reflects purchases and material usage during
the period. Cycle counts are performed in the raw materials stockrooms weekly
and monthly cycle count adjustments are recorded. Work-in-process inventory is
counted and adjusted semiannually. The finished goods inventory balance reflects
shipments from and transfers to the finished goods stockrooms during the period.
The inventory reserve balance is adjusted semiannually for work-in-process,
monthly for finished goods and annually for raw materials in conjunction with
physical inventory counts.
6
SOLITRON DEVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
4. RECENT ACCOUNTING PRONOUNCEMENTS:
Management does not believe that any recently issued, but not yet effective,
accounting standards if currently adopted would have a material effect on the
accompanying consolidated financial statements. Also, management believes that
accounting standards adopted during fiscal year 2004 are not applicable to the
Company.
5. INCOME TAXES:
At February 29, 2004, the Company had net operating loss carryforwards of
approximately $15,487,000 that expire through 2022. Such net operating losses
are available to offset future taxable income, if any. As of November 30, 2004,
the Company has net income of approximately $219,000 which will be offset by the
net operating loss carryforwards resulting in no income tax liability for the
fiscal year.
6. MATERIAL EVENTS:
As a result of Hurricanes Frances and Jeanne, the company was forced to stop
operations for fifteen calendar days and operated at a reduced production output
capacity for five additional business days. Additionally, the Company suffered
damage to certain of its manufacturing equipment. Using overtime from its
existing workforce, the Company was able to recover approximately $407,000 of
$497,000 sales lost while the plant was not operational. The Company still has
approximately $90,000 of shipments to recover and expects to do so in the
upcoming two months. Equipment damaged as a result of the storms has been, or is
in the process of being, repaired or replaced at a cost of approximately
$70,000. It is uncertain what amount, if any, of insurance proceeds will be
available to offset these costs.
As previously disclosed in the Company's filings with the Securities and
Exchange Commission (the "SEC"), the Southeast Regional Office of the SEC
conducted a formal investigation concerning the Company. The SEC investigation
focused on the propriety of the Company's past accounting. The Company produced
documents to the SEC, and the SEC took sworn testimony from several individuals.
On October 4, 2004, the SEC advised the Company that it had terminated its
investigation and that no enforcement action has been recommended.
7
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 29, 2004 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 and accounting for
income taxes. A discussion of all of these critical accounting policies 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-KSB for the
fiscal year ended February 29, 2004.
Material Events:
As a result of Hurricanes Frances and Jeanne, the company was forced to stop
operations for fifteen calendar days and operated at a reduced production output
capacity for five additional business days. Additionally, the Company suffered
damage to certain of its manufacturing equipment. Using overtime from its
existing workforce, The Company was able to recover approximately $407,000 of
$497,000 sales lost while the plant was not operational. The Company still has
approximately $90,000 of shipments to recover and expects to do so in the
upcoming two months. Equipment damaged as a result of the storms has been, or is
in the process of being, repaired or replaced at a cost of approximately
$70,000. It is uncertain what amount, if any, of insurance proceeds will be
available to offset these costs.
Trends and Uncertainties:
During the twelve months ended November 30, 2004, the Company's book-to-bill
ratio was approximately as follows: three months 1.07; six months 0.82; nine
months 0.85; twelve months 0.97. The Company believes that the overall decline
in the book-to-bill ratio, current quarter notwithstanding, may indicate a
specific trend in the demand for the Company's products as a result of delays in
contracts awarded by the Department of Defense for programs that the Company
participates in and also as a result of changes in government military spending
priorities. Also, a major contributing factor is the fact that a leading
supplier of semiconductor die increased prices to a level 10 to 15 times above
normal since the beginning of calendar year 2004. This price increase requires
prime contractors to renegotiate their contracts with their customers,
contributing to additional delays and possible reduction in quantity of products
to be placed on order with the Company. Generally, the intake of orders over the
last two years 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 for the foreseeable future. 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 continue. 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.
8
Results of Operations-Three Months Ended November 30, 2004 Compared to Three
Months Ended November 30, 2003:
Net sales for the three months ended November 30, 2004 increased approximately
3% to $1,909,000 as compared to $1,859,000 for the three months ended November
30, 2003. This increase was primarily attributable to a higher level of
shippable orders, as per the delivery schedules requested by the Company's
customers, offset by the shutdown and reduced production output capacity caused
by Hurricanes Frances and Jeanne. Approximately $90,000 of shipments were lost
as a result of Hurricanes Frances and Jeanne (which the Company expects to
recover in the upcoming two months).
Cost of sales for the three months ended November 30, 2004 increased to
$1,580,000 from $1,513,000 for the comparable period in 2003. Expressed as a
percentage of sales, cost of sales increased to 83% from 81% for the same
periods. This increase as a percentage of sales was due mainly to increases in
labor costs that were necessary to maintain the Company's shipping schedules
which were negatively affected by Hurricanes Frances and Jeanne. Cost of sales
was also higher due to expenses associated with repair and replacement of
equipment damaged during the storms.
Gross profit for the three months ended November 30, 2004 decreased to $329,000
from $346,000 for the three months ended November 30, 2003. Accordingly, gross
margins on the Company's sales decreased to 17% for the three months ended
November 30, 2004 in comparison to 19% for the three months ended November 30,
2003. This change was due largely to increased labor and equipment repair costs.
For the three months ended November 30, 2004, the Company shipped 76,847 units
as compared with 57,268 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 increased 3% for the three months ended
November 30, 2004 as compared to an increase of 14% for the three months ended
November 30, 2003. Changes in the backlog reflect changes in the intake of
orders and in the delivery dates required by customers. The backlog of open
orders was affected by shipments lost due to Hurricanes Frances and Jeanne and
by a decrease in the level of bookings due to increases in material costs
mentioned in the Trends and Uncertainties Section.
The Company has experienced a decrease in the level of bookings of approximately
18% for the quarter ended November 30, 2004 as compared to the same period for
the previous year principally as a result of a lower demand for its products in
this period. The decrease is also attributed to increases in material costs
mentioned in the Trends and Uncertainties Section.
Selling, general, and administrative expenses decreased to $266,000 for the
three months ended November 30, 2004 from $278,000 for the comparable period in
2003. During the three months ending November 30, 2004, selling, general, and
administrative expenses as a percentage of sales decreased to 14% as compared to
15% during the three months ended November 30, 2003. This decrease was due
primarily to a reduction in legal fees offset by higher wages.
Operating Income for the three months ended November 30, 2004 decreased to a
profit of $63,000 from a profit of $68,000 for the three months ended November
30, 2003. This decrease is due largely to increased labor and equipment repair
costs as a result of Hurricanes Frances and Jeanne.
The Company recorded a net other income of $4,000 for the three months ended
November 30, 2004 versus a $0 net other income amount for the three months ended
November 30, 2003. The variance was due primarily to a reduction in accrued
interest on the Company's liability to its unsecured creditors.
Net income for the three months ended November 30, 2004 decreased to a profit of
$67,000 from a profit of $68,000 for the same period in 2003. The decrease was a
result of increased cost of sales offset by lower selling, general and
administrative expenses and lower accrued interest expense.
9
Results of Operations-Nine Months Ended November 30, 2004 Compared to Nine
Months Ended November 30, 2003:
Net sales for the nine months ended November 30, 2004 decreased approximately 1%
to $5,796,000 as compared to $5,868,000 for the nine months ended November 30,
2003. This decrease was primarily attributable to a lower level of orders that
were shipped in accordance with customer requirements. Net sales were also
negatively affected by the shutdown and reduced production output capacity
caused by Hurricanes Frances and Jeanne.
Cost of sales for the nine months ended November 30, 2004 decreased to
$4,700,000 from $4,715,000 for the comparable period in 2003. Expressed as a
percentage of sales, cost of sales increased to 81% from 80% for the same
periods in 2003. This change was due mainly to increased labor costs that that
were necessary to maintain the Company's shipping schedules which were
negatively affected by Hurricanes Frances and Jeanne. Cost of sales as a
percentage of sales was affected by expenses associated with repair and
replacement of equipment damaged during the storms.
Gross profit for the nine months ended November 30, 2004 decreased to $1,096,000
from $1,153,000 for the nine months ended November 30, 2003. Accordingly, gross
margins on the Company's sales decreased to 19% for the nine months ended
November 30, 2004 in comparison to 20% for the nine months ended November 30,
2003. This change was due primarily to increased labor and equipment repair
costs.
For the nine months ended November 30, 2004, the Company shipped 233,540 units
as compared with 289,121 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 4% for the nine months ended
November 30, 2004 as compared to a decrease of 5% for the nine months ended
November 30, 2003. Changes in the backlog reflect changes in the intake of
orders. The backlog was also affected by a decrease in the level of bookings
caused by increased material costs mentioned in the Trends and Uncertainties
Section.
The Company has experienced a decrease in the level of bookings of approximately
18% for the nine months ended November 30, 2004 as compared to the same period
for the previous year principally as a result of a lower demand for its products
in this period. The decrease is also attributed to increases in material costs
mentioned in the Trends and Uncertainties Section.
Selling, general, and administrative expenses increased to $878,000 for the nine
months ended November 30, 2004 from $836,000 for the comparable period in 2003.
During the nine months ended November 30, 2004, selling, general, and
administrative expenses as a percentage of sales increased to 15% as compared
with 14% for the nine months ended November 30, 2003. This increase as a
percentage of sales is due to higher wages and to higher legal fees.
Operating Income for the nine months ended November 30, 2004 decreased to a
profit of $218,000 from a profit of $317,000 for the nine months ended November
30, 2003. This decrease is primarily due to higher selling, general, and
administrative expenses and to higher labor and equipment repair costs as a
result of Hurricanes Frances and Jeanne.
The Company recorded a net other income of $1,000 for the nine months ended
November 30, 2004 versus a net other income of $123,000 for the nine months
ended November 30, 2003. The variance was due primarily to other income
resulting from the settlement of a debt obligation to an unsecured creditor
which was recorded in the quarter ended August 31, 2003.
Net income for the nine months ended November 30, 2004 decreased to a profit of
$219,000 from a profit of $440,000 for the same period in 2003. This decrease is
mainly due to increased selling general and administrative expenses, higher
labor and equipment repair costs and other income resulting from the settlement
of a debt obligation to an unsecured creditor which was recorded in the quarter
ended August 31, 2003.
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 foreseeable future. The
Company's liquidity is not expected to improve until the Company's revenues
increase to a level above its breakeven point.
Furthermore, the Company's liquidity continues to be adversely affected by
significant recurring payments 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
29, 2004.
The Company is required to make quarterly payments to holders of unsecured
claims until they receive 35 percent (35%) of their pre-petition claims. As of
November 30, 2004, the Company has paid approximately $483,000 to its unsecured
creditors. The Company's remaining obligation is approximately $1,842,000 to
holders of allowed unsecured claims in quarterly installments.
The Company reported a net income of $219,000 and an operating income of
$218,000 for the nine months ended November 30, 2004. 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 November 30, 2004, February 29, 2004 and November 30, 2003 respectively, the
Company had cash of $1,836,000, $1,883,000 and $1,884,000. The decrease during
the last nine months was primarily attributable to lower revenues. A decrease in
prepaid expenses contributed $89,000 to the last nine months' positive cash flow
generated by ongoing operations.
At November 30, 2004, the Company had working capital of $2,190,000 as compared
with a working capital at November 30, 2003 of $2,527,000. At February 29, 2004,
the Company had a working capital of $2,036,000. The approximately $154,000
increase for the nine months ended November 30, 2004 was due mainly to an
increase in accounts receivable. The approximately $337,000 decrease for the
twelve months ended November 30, 2004 was due to an increase in the current
portion of our liability to our unsecured creditors and a decrease in net
inventory value.
Off-Balance Sheet Arrangements:
The Company is not involved in any off-balance sheet arrangements.
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 Exchange 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 the Company's ability to recover sales lost as a result of Hurricanes
Frances and Jeanne;
o the Company's expectations regarding its liquidity;
o the Company's beliefs regarding the change in book-to-bill ratio
o the Company's expectations regarding fluctuations in the general economy
and variations in defense spending and the effects of such fluctuations
and variations on the intake of orders;
o the Company's ability to generate sufficient cash flow from operations to
sustain operations;
o the Company's ability to implement effective cost-cutting or downsizing
measures;
o the Company's compliance with environmental laws, orders and
investigations and the future cost of such compliance;
11
o implementation of the Plan of Reorganization and the Company's ability to
make payments required under the Plan of Reorganization;
o the Company's belief regarding the applicability of accounting standards
adopted during fiscal year 2004; 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:
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 a potential loss of customers as a result of delayed shipments due to the
impact of Hurricanes Frances and Jeanne;
o unexpected rapid technological change;
o a misinterpretation of the Company's capital needs and sources and
availability of liquidity;
o any increased financial impact to the Company as a result of Hurricanes
Frances and Jeanne;
o the Company's inability to receive an adequate amount, or any amount, of
insurance proceeds to cover the Company's losses and/or costs resulting
from Hurricanes Frances and Jeanne;
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 any impairment or delay in the development of any or all of its products;
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, of the Company's
competitive strengths or of 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 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; and
o unexpected growth or stagnation of the business.
12
Item 3. CONTROLS AND PROCEDURES
Based on the evaluation of the Company's disclosure controls and procedures as
of November 30, 2004, 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 changes in the Company's internal control over financial reporting
during the quarter ended November 30, 2004 that has materially affected or is
reasonably likely to materially affect the Company's internal control over
financial reporting.
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
As previously disclosed in the Company's filings with the SEC, the Southeast
Regional Office of the SEC conducted a formal investigation concerning the
Company. The SEC investigation focused on the propriety of the Company's past
accounting. The Company produced documents to the SEC, and the SEC took sworn
testimony from several individuals. On October 4, 2004, the SEC advised the
Company that it terminated its investigation and that no enforcement has been
recommended.
Item 6. EXHIBITS
(a) Exhibits
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, thereunto duly
authorized.
SOLITRON DEVICES, INC.
Date: January 11, 2005 /s/ Shevach Saraf
--------------------------
Title: Chairman, President,
Chief Executive Officer and
Chief Financial Officer
14
EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION
-------------- -----------
31 Certification of Chief Executive Officer
and Chief Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of
2002.
32 Certification of Chief Executive Officer
and Chief Financial Officer pursuant to
Section 906 of the Sarbanes-Oxley Act of
2002.
15