Solitron Devices Inc 10-Q for FY2023 Q1

Solitron Devices Inc (SODI)

10-Q 2022-08-05 For: 2022-05-31

Added on April 07, 2026

About this 10-Q

Solitron Devices Inc filed this 10-Q on August 5, 2022, covering the quarter ended May 31, 2022 (FY2023 Q1).

Headline figures

Quarter ended May 31, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $2.14M; down 40.8% from $3.61M a year earlier
Net income: $771K; down 24.9% from net income of $1.03M a year earlier

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Delaware		22-1684144
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

901 Sansburys Way, West Palm Beach, Florida		33411
(Address of Principal Executive Offices)		(Zip Code)

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated Filer	☒	Smaller reporting company	☒
		Emerging growth company	☐

		Page No.
Item 1.	Financial Statements	3

	Balance Sheets May 31, 2022 (unaudited) and February 28, 2022	3

	Statements of Operations (unaudited) Three Months Ended May 31, 2022 and 2021	4

	Statements of Changes in Stockholders’ Equity (unaudited) Three Months Ended May 31, 2022 and 2021	5

	Statements of Cash Flows (unaudited) Three Months Ended May 31, 2022 and 2021	6

	Notes to Financial Statements (unaudited)	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	17

Item 4.	Controls and Procedures	17

PART II – OTHER INFORMATION

Item 1.	Legal Proceedings		19

Item 1A	Risk Factors	19

Item 6.	Exhibits	20

Signatures			21

SOLITRON DEVICES, INC.
BALANCE SHEETS
AS OF MAY 31, 2022 AND FEBRUARY 28, 2022
(in thousands, except for share and per share amounts)
	May 31, 2022			February 28, 2022
	(unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	4,284		$	4,088
Marketable securities		821			684
Accounts receivable		1,128			1,591
Inventories, net		2,329			2,260
Prepaid expenses and other current assets		306			196
TOTAL CURRENT ASSETS		8,868			8,819

Property, plant and equipment, net		4,996			4,926
Construction in progress		1,689			609
Other assets		4			4
TOTAL ASSETS	$	15,557		$	14,358

LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable	$	580		$	135
Customer deposits		24			24
Finance lease liability		9			9
Mortgage loan, current portion		104			103
Accrued expenses and other current liabilities		899			888
TOTAL CURRENT LIABILITIES		1,616			1,159

Mortgage loan, net of current portion		2,728			2,755
Finance lease liability, net of current portion		1			3
TOTAL LIABILITIES		4,345			3,917

STOCKHOLDERS’ EQUITY
Preferred stock, $0.01 par value, authorized 500,000 shares, none issued		-			-
Common stock, $0.01 par value, authorized 10,000,000 shares,
2,083,436 shares outstanding, net of 487,827 treasury shares
at May 31, 2022 and 2,083,436 shares outstanding, net of
487,827 treasury shares at February 28, 2022, respectively		21			21
Additional paid-in capital		1,834			1,834
Retained Earnings		10,769			9,998
Less treasury stock		(1,412	)		(1,412	)
TOTAL STOCKHOLDERS’ EQUITY		11,212			10,441
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	15,557		$	14,358

SOLITRON DEVICES, INC.
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MAY 31, 2022 AND MAY 31, 2021
(Unaudited, in thousands except for share and per share amounts)

	For the three months ended			For the three months ended
	May 31, 2022			May 31, 2021

Net sales	$	2,136		$	3,610
Cost of sales		1,319			1,946

Gross profit		817			1,664

Selling, general and administrative expenses		576			714

Operating income		241			950

Other income (loss)
Interest expense		(28	)		(20	)
Dividend income		3			-
Realized gain (loss) on investments		8			27
Unrealized gain (loss) on investments		(51	)		(20	)
Scrap income		598			90
Total other income		530			77

Net income	$	771		$	1,027

Net income per common share - basic and diluted	$	0.37		$	0.49

Weighted average shares outstanding - basic and diluted		2,083,436			2,083,462

SOLITRON DEVICES, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
FOR THE THREE MONTHS ENDED MAY 31, 2022 AND MAY 31, 2021
(Unaudited, in thousands, except for number of shares)

	Common Stock							Additional		Treasury
	Number		Treasury					Paid-in		Stock			Retained
	of Shares		Shares			Amount		Capital		Amount			Earnings		Total

Balance, February 28, 2021		2,571,263		(487,801	)	$	21	$	1,834	$	(1,412	)	$	6,490	$	6,933
Net income		-		-			-		-		-			1,027		1,027
Balance, May 31, 2021		2,571,263		(487,801	)	$	21	$	1,834	$	(1,412	)	$	7,517	$	7,960

Balance, February 28, 2022		2,571,263		(487,827	)	$	21	$	1,834	$	(1,412	)	$	9,998	$	10,441
Net income		-		-			-		-		-			771		771
Balance, May 31, 2022		2,571,263		(487,827	)	$	21	$	1,834	$	(1,412	)	$	10,769	$	11,212

SOLITRON DEVICES, INC.
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MAY 31, 2022 AND MAY 31, 2021
(unaudited, in thousands)
	Three Months ended			Three Months ended
	May 31, 2022			May 31, 2021

Net income	$	771		$	1,027
Adjustments to reconcile net income
to net cash used in operating activities:
Depreciation and amortization		70			59
Operating lease expense		0			100
Net realized and unrealized (gains) on investments		43			(7	)
Changes in Operating Assets and Liabilities:
Accounts receivable		463			(1,026	)
Inventories		(69	)		94
Prepaid expenses and other current assets		(110	)		(21	)
Other assets		-			3
Payments on operating lease liabilities		-			(111	)
Payments on capital lease liabilities		(2	)		(3	)
Accounts payable		445			362
Customer deposits		-			216
Accrued expenses, other current and non-current liabilities		11			207
Net cash provided by operating activities		1,622			900

Investing activities
Proceeds from sale of marketable securities		131			88
Purchases of marketable securities		(311	)		(103	)
Expenditures on construction in progress		(1,080	)		-
Purchases of property and equipment		(140	)		(4,583	)
Net cash (used in) investing activities		(1,400	)		(4,598	)

Financing activities
Proceeds from mortgage loan		-			2,940
Principal payments on mortgage loan		(26	)		(8	)
Net cash provided by (used in) financing activities		(26	)		2,932

Net increase in cash and cash equivalents		196			(766	)
Cash and cash equivalents - beginning of the year		4,088			3,785
Cash and cash equivalents - end of period	$	4,284		$	3,019

Non-cash transactions
Non-cash increase in plant, property and equipment	$	-		$	-

Supplemental disclosures of cash flow data
Income taxes paid	$	-		$	-
Interest expense paid	$	28		$	-

The accompanying notes are an integral part of the unaudited financial statements.

May 31, 2022			Gross		Gross
Marketable Securities:	Cost		Unrealized Gains		Unrealized Losses			Fair Value
Common Stocks	$	854,000	$	32,000	$	(65,000	)	$	821,000

February 28, 2022			Gross		Gross
Marketable Securities:	Cost		Unrealized Gains		Unrealized Losses			Fair Value
Common Stocks	$	668,000	$	42,000	$	(26,000	)	$	684,000

Level 1:	Observable inputs that reflect unadjusted quoted prices for identical assets or liabilities traded in active markets.

Level 2:	Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

Level 3:	Inputs that are generally unobservable. These inputs may be used with internally developed methodologies that result in management’s best estimate of fair value.

May 31, 2022	Level 1		Level 2		Level 3		Total
Common Stocks	$	697,000	$	71,000	$	-	$	768,000
Limited Partnerships	$	53,000	$	-	$	-	$	53,000
Total	$	750,000	$	71,000	$	-	$	821,000

Raw material /Work in process:	All material acquired or processed in the last two fiscal years is valued at the lower of its acquisition cost or net realizable value, except for wafers which function under a three- year policy. All material not used after two fiscal years is fully reserved for except wafers which are reserved for after three years. Finished wafers produced in our wafer fab are stored in the wafer bank and are considered work-in-process. Raw material in excess of five years’ usage that cannot be restocked, and slow-moving work in process are reserved for.

Finished goods:	All finished goods with firm orders for later delivery are valued (material and overhead) at the lower of cost or net realizable value. All finished goods with no orders are fully reserved.

Direct labor costs:	Direct labor costs are allocated to finished goods and work in process inventory based on engineering estimates of the number of man-hours required from the different direct labor departments to bring each device to its particular level of completion. Manufacturing overhead costs are allocated to finished goods and work in process inventory as a ratio to direct labor costs.

Building		39 years
Leasehold Improvements		10 years
Machinery and Equipment		5 years

	May 31, 2022		May 31, 2021
Beginning Balance	$	471,000	$	354,000
Accrued Allowances		-		92,000
Credits Issued		-		-
Ending Balance	$	471,000	$	446,000

	Gross		Reserve			Net
Raw Materials	$	1,441,000	$	(685,000	)	$	756,000
Work-In-Process		5,305,000		(3,880,000	)		1,425,000
Finished Goods		714,000		(566,000	)		148,000
Totals	$	7,460,000	$	(5,131,000	)	$	2,329,000

	Gross		Reserve			Net
Raw Materials	$	1,504,000	$	(813,000	)	$	691,000
Work-In-Process		5,410,000		(3,906,000	)		1,504,000
Finished Goods		723,000		(658,000	)		65,000
Totals	$	7,637,000	$	(5,377,000	)	$	2,260,000

	May 31, 2022		February 28, 2022
Payroll and related employee benefits	$	357,000	$	375,000
Legal fees		14,000		8,000
Property, Sales, and Franchise taxes		57,000		18,000
Return Allowance		471,000		471,000
Other liabilities		-		16,000
Totals	$	899,000	$	888,000

Geographic Region	May 31, 2022		May 31, 2021
Europe and Australia	$	235,000	$	-
Canada and Latin America		17,000		15,000
Far East and Middle East		-		-
United States		1,884,000		3,595,000
Totals	$	2,136,000	$	3,610,000

Customer	May 31, 2022			Customer	May 31, 2021
1. Raytheon		48	%	1. Raytheon		53	%
2. Intracom Defense Electronics		11	%	2. Avnet / USI Electronics		14	%
				3. Honeywell		11	%
Totals		59	%	Totals		78	%

	·	Loss of, or reduction of business from, substantial clients could hurt our business by reducing our revenues, profitability and cash flow.
	·	Our complex manufacturing processes may lower yields and reduce our revenues.
	·	Our business could be materially and adversely affected if we are unable to obtain qualified supplies of raw materials, parts and finished components on a timely basis and at a cost-effective price.
	·	Our inventories may become obsolete and other assets may be subject to risks.
	·	Environmental regulations could require us to incur significant costs.
	·	Our business is highly competitive and increased competition could reduce gross profit margins and the value of an investment in our Company.
	·	Our operating results may decrease due to the decline of profitability in the semiconductor industry.
	·	We may not achieve the intended effects of our business strategy, which could adversely impact our business, financial condition and results of operations.
	·	Our inability to introduce new products could result in decreased revenues and loss of market share to competitors; new technologies could also reduce the demand for our products.
	·	The nature of our products exposes us to potentially significant product liability risk.
	·	We depend on the recruitment and retention of qualified personnel and our failure to attract and retain such personnel could seriously harm our business.
	·	Failure to protect our proprietary technologies or maintain the right to use certain technologies may negatively affect our ability to compete.
	·	We cannot guarantee that we will have sufficient capital resources to make necessary investments in manufacturing technology and equipment.
	·	We may make substantial investments in plant and equipment that may become impaired.
	·	While we attempt to monitor the credit worthiness of our customers, we may be at risk due to the adverse financial condition of one or more customers.
	·	Our international operations expose us to material risks, including risks under U.S. export laws.
	·	Compliance with regulations regarding the use of “conflict minerals” could limit the supply and increase the cost of certain metals used in manufacturing our products.
	·	We are dependent on government contracts, which are subject to termination, price renegotiations and regulatory compliance, which can increase the cost of doing business and negatively impact our revenues.
	·	Changes in government policy or economic conditions could negatively impact our results.
	·	Changes in Defense related programs and priorities could reduce the revenues and profitability of our business.
	·	The COVID-19 pandemic may have a material adverse effect on our business, cash flows and results of operations.
	·	Security breaches and other disruptions could compromise the integrity of our information and expose us to liability, which would cause our business and reputation to suffer.
	·	Our failure to remediate the material weakness in our internal control over financial reporting or our identification of any other material weaknesses in the future may adversely affect the accuracy and timing of our financial reporting.
	·	Provisions in our charter documents could make it more difficult to acquire our Company and may reduce the market price of our stock.
	·	The price of our common stock has fluctuated widely in the past and may fluctuate widely in the future.
	·	We cannot guarantee that we will declare future cash dividend payments, nor repurchase any shares of our common stock pursuant to our stock repurchase program.
	·	Uncertainty of current economic conditions, domestically and globally, could continue to affect demand for our products and negatively impact our business.
	·	Natural disasters, like hurricanes, or occurrences of other natural disasters whether in the United States or internationally may affect the markets in which our common stock trades, the markets in which we operate and our profitability.

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.

101.INS*	XBRL Instance Document

101.SCH*	XBRL Taxonomy Extension Schema

101.CAL*	XBRL Taxonomy Extension Calculation Linkbase

101.DEF*	XBRL Taxonomy Label Linkbase

101.LAB*	XBRL Taxonomy Presentation Linkbase

101.PRE*	+Management contracts or compensatory plans, contracts or arrangements.

104	Cover Page Ineractive Data File - the cover page XBRL tags are embedded within the inline XBRL document.

	* Filed herewith.

	** Furnished herewith

	SOLITRON DEVICES, INC.

Date: August 05, 2022		/s/ Tim Eriksen
		Tim Eriksen
		Chief Executive Officer,
		and Interim Chief Financial Officer

1.	I have reviewed this quarterly report on Form 10-Q of Solitron Devices, Inc.;

2.	Based on my knowledge, this 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 report;

3.	Based on my knowledge, the financial statements, and other financial information included in this 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 report;

4.	I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)), and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

	a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within this entity, particularly during the period in which this report is being prepared;

	b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

	c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

	d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.	I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

	a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

	b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

	1.	the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

	2.	the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.