UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
For the quarterly period ended
or
For the transition period from _____ to _____
Commission File No.
SOLITRON DEVICES, INC.
(Exact Name of Registrant as Specified in Its Charter)
| (State or Other Jurisdiction of | (I.R.S. Employer |
| Incorporation or Organization) | Identification No.) |
(Address of Principal Executive Offices) (Zip Code)
(
(Registrant’s Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act: None
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one)
| Large accelerated filer ☐ | Accelerated filer ☐ |
| Smaller reporting company | |
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
The number of shares of the registrant’s common stock, $0.01 par value, outstanding as of July 11, 2025, was
SOLITRON DEVICES, INC.
PART 1 - FINANCIAL INFORMATION
PART I – FINANCIAL INFORMATION
| CONSOLIDATED CONDENSED BALANCE SHEETS |
||||
| AS OF May 31, 2025 AND February 28, 2025 |
||||
| (in thousands, except for share and per share amounts) |
| May 31, 2025 | February 28, 2025 | |||||||
| unaudited | ||||||||
| ASSETS | ||||||||
| CURRENT ASSETS | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Marketable securities | ||||||||
| Accounts receivable | ||||||||
| Inventories, net | ||||||||
| Prepaid expenses and other current assets | ||||||||
| TOTAL CURRENT ASSETS | ||||||||
| Property, plant and equipment, net | ||||||||
| Intangible assets | ||||||||
| Deferred tax asset | ||||||||
| Long-term investment | ||||||||
| Other assets | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| CURRENT LIABILITIES | ||||||||
| Accounts payable | $ | $ | ||||||
| Customer deposits | ||||||||
| Accrued contingent consideration, current | ||||||||
| Mortgage loans, current portion | ||||||||
| Accrued expenses and other current liabilities | ||||||||
| TOTAL CURRENT LIABILITIES | ||||||||
| Accrued contingent consideration, non-current | ||||||||
| Mortgage loans, net of current portion | ||||||||
| TOTAL LIABILITIES | ||||||||
| STOCKHOLDERS’ EQUITY | ||||||||
| Preferred stock, $ par value, authorized shares, issued | ||||||||
| Common stock, $ par value, authorized shares, shares outstanding, net of treasury shares at May 31, 2025 and shares outstanding, net of treasury shares at February 28, 2025, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Retained Earnings | ||||||||
| Less treasury stock | ( | ) | ( | ) | ||||
| TOTAL STOCKHOLDERS’ EQUITY | ||||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | $ | ||||||
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
| CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS |
|||||||
| FOR THE three months ended May 31, 2025 AND May 31, 2024 |
|||||||
| (in thousands except for share and per share amounts) |
| For The Three Months ended | For The Three Months ended | |||||||
| May 31, 2025 | May 31, 2024 | |||||||
| unaudited | unaudited | |||||||
| Net sales | $ | $ | ||||||
| Cost of sales | ||||||||
| Gross profit | ||||||||
| Selling, general and administrative expenses | ||||||||
| Operating income | ( | ) | ||||||
| Other income (loss) | ||||||||
| Interest income | ||||||||
| Interest expense | ( | ) | ( | ) | ||||
| Dividend income | ||||||||
| Realized gain on investments | ||||||||
| Unrealized gain (loss) on investments | ( | ) | ||||||
| Total other income (loss) | ( | ) | ||||||
| Net income (loss) before income taxes | $ | ( | ) | $ | ||||
| Income taxes (benefit) | ( | ) | ||||||
| Net income (loss) | $ | ( | ) | $ | ||||
| Net income (loss) per common share - basic and diluted | $ | ( | ) | $ | ||||
| Weighted average shares outstanding - basic and diluted | ||||||||
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
| STATEMENTS OF CHANGES IN CONDENSED CONSOLIDATED STOCKHOLDERS’ EQUITY |
| FOR THE three months ended May 31, 2025 AND May 31, 2024 |
| (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, March 1, 2024 | ( | ) | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||||
| Net income | - | - | ||||||||||||||||||||||||||
| Balance, May 31, 2024 | ( | ) | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||||
| Balance, March 1, 2025 | ( | ) | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||||
| Net (loss) | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance, May 31, 2025 | ( | ) | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||||
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
| CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS |
|||
| FOR THE three months ended May 31, 2025 AND May 31, 2024 |
|||
| (unaudited, in thousands) |
| Three Months | Three Months | |||||||
| ended | ended | |||||||
| May 31, 2025 | May 31, 2024 | |||||||
| Net income (loss) | $ | ( | ) | $ | ||||
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||||||||
| Depreciation | ||||||||
| Amortization of intangibles | ||||||||
| Net realized and unrealized (gains) losses on investments | ( | ) | ||||||
| Accrued interest expense on contingent consideration | ||||||||
| Change in net deferred taxes | ( | ) | ||||||
| Changes in Operating Assets and Liabilities: | ||||||||
| Accounts receivable | ||||||||
| Inventories | ( | ) | ( | ) | ||||
| Prepaid expenses and other current assets | ( | ) | ( | ) | ||||
| Other assets, non-current | ( | ) | ||||||
| Accounts payable | ||||||||
| Customer deposits | ( | ) | ||||||
| Accrued expenses, other current and non-current liabilities | ( | ) | ||||||
| Net cash provided by operating activities | ||||||||
| Investing activities | ||||||||
| Proceeds from sale of marketable securities | ||||||||
| Purchases of marketable securities | ( | ) | ( | ) | ||||
| Purchases of long-term investments | ( | ) | ||||||
| Cash paid for acquisition, contingent consideration | ( | ) | ( | ) | ||||
| Purchases of property and equipment | ( | ) | ( | ) | ||||
| Net cash (used in) investing activities | ( | ) | ( | ) | ||||
| Financing activities | ||||||||
| Payments on finance lease liabilities | ( | ) | ||||||
| Proceeds from mortgage loan | ||||||||
| Principal payments on mortgage loan | ( | ) | ( | ) | ||||
| Net cash provided by (used in) financing activities | ( | ) | ||||||
| Net increase (decrease) in cash and cash equivalents | ( | ) | ||||||
| Cash and cash equivalents - beginning of the year | ||||||||
| Cash and cash equivalents - end of period | $ | $ | ||||||
| Non-cash transactions | ||||||||
| Financing right of use asset and liability extinguished | $ | $ | ||||||
| Supplemental disclosures of cash flow data | ||||||||
| Income taxes paid | $ | $ | ||||||
| Interest expense paid | $ | $ | ||||||
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
| 1. | THE COMPANY AND OPERATIONS |
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 was incorporated under the laws of the State of New York in 1959 and reincorporated under the laws of the State of Delaware in August 1987. In September 2023, Solitron acquired Micro Engineering Inc. (“MEI”). Since 1980, MEI has specialized in solving design layout and manufacturing challenges for electronic components. MEI specializes in low to mid volume projects that require engineering, quality systems and efficient manufacturing.
| 2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
Basis of Presentation
The unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles (“GAAP”) in the United States for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements.
The unaudited financial information furnished herein reflects all adjustments, consisting of normal recurring items that, in the opinion of management, are necessary for a fair presentation of the Company’s financial position, results of operations and cash flows for the interim periods. The results of operations for the three months ended May 31, 2025 are not necessarily indicative of the results to be expected for the year ending February 28, 2026.
The information included in this Form 10-Q should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended February 28, 2025.
Use of Estimates
The consolidated condensed financial statements are prepared in accordance with U.S. GAAP. Preparation of these consolidated condensed financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses and related disclosures. The Company bases its estimates on historical experience and on various other assumptions that it believes to be reasonable. The Company could have reasonably used different accounting estimates. This applies in particular to inventory and valuation allowance for deferred tax assets. Actual results could differ significantly from our estimates. To the extent that there are material differences between these estimates and actual results, the Company’s future financial statement presentation, financial condition, results of operations and cash flows will be affected.
Cash and Cash Equivalents
Cash and cash equivalents include demand deposits and money market accounts. The Company considers any short-term, highly liquid investments with maturities of three months or less as cash and cash equivalents.
Investment in Marketable Securities
Investment in Securities includes investments in equity securities. Investments in securities are reported at fair value with changes in unrecognized gains or losses included in other income on the condensed consolidated statements of operations.
The following table summarizes the Company’s marketable securities:
| May 31, 2025 | Gross | Gross | ||||||||||||||
| Unrealized | Unrealized | |||||||||||||||
| Marketable Securities: | Cost | Gains | Losses | Fair Value | ||||||||||||
| Common Stocks | $ | $ | $ | $ | ||||||||||||
| February 28, 2025 | Gross | Gross | ||||||||||||||
| Unrealized | Unrealized | |||||||||||||||
| Marketable Securities: | Cost | Gains | Losses | Fair Value | ||||||||||||
| Common Stocks | $ | $ | $ | ( | ) | $ | ||||||||||
At May 31, 2025 and February 28, 2025, the deferred tax liability related to unrecognized gains and losses on short-term investments was approximately $
Investment in Non-Current Securities (Long-Term Investment)
Investment in Non-Current Securities consist of investments in equity securities, which are without a readily determinable fair value, and are expected to be held for longer than one year. As there is no readily determinable fair value, the Company has elected to use the measurement alternative methodology. Using this approach, investments in non-current equity securities are initially valued at cost. Fair value adjustments are made based on observable price changes for identical or similar investments of the same issuer as of the date the observable transaction took place (measurement date). Qualitative assessments are completed each reporting period to determine if the fair value of the investment is less than the carrying value, and an adjustment to the carrying value will be recorded if the investment is impaired. Changes in fair value or impairments (unrecognized gains or losses) are included in other income on the condensed consolidated statements of operations.
The following table summarizes the Company’s non-current securities, which consists of membership interest in an investment fund:
| May 31, 2025 | Gross | Gross | ||||||||||||||||||
| Unrealized | Unrealized | |||||||||||||||||||
| Non-current Securities: | Cost | Gains | Losses | Impairment | Fair Value | |||||||||||||||
| Long-term Investments | $ | $ | $ | $ | $ | |||||||||||||||
Fair Value of Financial Instruments
Accounting Standards Codification (“ASC”) Topic 820, “Fair Value Measurements and Disclosures”, defines “fair value” as the price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also sets forth a valuation hierarchy of the inputs (assumptions that market participants would use in pricing an asset or liability) used to measure fair value. This hierarchy prioritizes the inputs into the following three levels:
| 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. |
The table below shows the Company’s marketable securities, long-term investment and contingent consideration as of May 31, 2025 and February 28, 2025:
| May 31, 2025 | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
| Common Stocks | $ | $ | $ | $ | ||||||||||||
| Long-term Investment | ||||||||||||||||
| Contingent Consideration | ||||||||||||||||
| $ | $ | $ | $ | |||||||||||||
| February 28, 2025 | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
| Common Stocks | $ | $ | $ | $ | ||||||||||||
| Long-term Investment | ||||||||||||||||
| Contingent Consideration | ||||||||||||||||
| $ | $ | $ | $ | |||||||||||||
The table below shows the Company's fair value rollforward of the contingent consideration recorded as a liability for the MEI acquisition completed during the fiscal year ended February 29, 2024. Under the Purchase Agreement the Company agreed to the following potential earn-out payments as additional consideration for the Acquisition: for each of (1) the period beginning on the Closing Date of August 31, 2023, and ending on December 31, 2023, (2) the calendar year ending on December 31, 2024, (3) the calendar year ending December 31, 2025, and (3) the period beginning on January 1, 2026 and ending on the third anniversary of the Closing Date, the Company agreed to pay the MEI Shareholders
| May 31, 2025 | February 28, 2025 | |||||||
| Contingent consideration | $ | $ | ||||||
| Accrued interest expense | ||||||||
| Earn out payment | ) | ) | ||||||
| Ending Balance | $ | $ | ||||||
The carrying amounts of the Company’s short-term financial instruments, including accounts receivable, accounts payable, accrued expenses and other liabilities approximate their fair value due to the relatively short period to maturity for these instruments. The carrying value of long-term debt approximates fair value since the related rates of interest approximate current market rates.
Accounts Receivable
Accounts receivable are stated at amounts management expects to collect from outstanding balances and do not bear interest. The Company regularly monitors and assesses its risk of not collecting amounts owed by customers. At each balance sheet date, the Company recognizes an expected allowance for credit losses. In addition, at each reporting date, this estimate is updated to reflect any changes in credit risk since the receivable was initially recorded. This estimate is calculated on a pooled basis where similar risk characteristics exist. If applicable, accounts receivable are evaluated individually when they do not share similar risk characteristics which could exist in circumstances where amounts are considered at risk or uncollectible. The accounts receivable balance as of May 31, 2025, and February 28, 2025, was $
The allowance estimate is derived from a review of the Company’s historical losses based on the aging of receivables. This estimate is adjusted for management’s assessment of current conditions, reasonable and supportable forecasts regarding future events, and any other factors deemed relevant by the Company. The Company believes historical loss information is a reasonable starting point in which to calculate the expected allowance for credit losses as the Company’s portfolio segment has remained consistent since the Company’s inception. The allowance for credit losses was $
The Company writes off receivables when there is information that indicates the debtor is facing significant financial difficulty and there is no possibility of recovery. If any recoveries are made from any accounts previously written off, they will be recognized in income (or an offset to credit loss expense) in the year of recovery, in accordance with the Company’s accounting policy election. The total amount of write-offs for the three months ended May 31, 2025, and May 31, 2024 was $
Shipping and Handling
Shipping and handling costs billed to customers are recorded in net sales. Shipping costs incurred by the Company are recorded in cost of sales.
Inventories
Inventories are stated at the lower of cost and net realizable value. Cost is determined using the “first-in, first-out” (FIFO) method. The Company buys raw material only to fill customer orders. Excess raw material is created only when a vendor imposes a minimum quantity buy in excess of actual requirements. Such excess material will usually be utilized to meet the requirements of the customer’s subsequent orders. If excess material is not utilized after two fiscal years it is fully reserved. Any inventory item once designated as reserved is carried at zero value in all subsequent valuation activities.
The Company does not classify a portion of inventories as non-current since we cannot reasonably estimate based on the length of our operating cycle which items will or will not be used within twelve months.
The Company’s inventory valuation policy is as follows:
| 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 were reserved for after three years. All raw wafers were fully reserved for when the wafer fab was decommissioned. Finished wafers produced in our former 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 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. |
Property, Plant, Equipment, and Leasehold Improvements
Property, plant, and equipment is recorded at cost. Major renewals and improvements are capitalized, while maintenance and repairs that do not extend their expected life are expensed as incurred. Depreciation is provided on a straight-line basis over the estimated useful lives of the related assets. Leasehold improvements are amortized over the shorter of the lease term or the lives of the related assets:
| Building (years) | ||||
| Building Improvements (years) | ||||
| Leasehold Improvements |
| |||
| Machinery and Equipment (years) | ||||
| Computer equipment (years) | ||||
| Motor vehicles (years) | ||||
Concentrations of Credit Risk
Financial instruments, which potentially subject the Company to concentration of credit risk, consist principally of cash and account receivables. The Company places its cash with high credit quality institutions. At times, such amounts may be in excess of the Federal Deposit Insurance Corporation (“FDIC”) insurance limits. The Company has not experienced any losses in such accounts and believes that it is not exposed to any significant credit risk on the accounts. As of May 31, 2025, all non-interest bearing checking accounts were FDIC insured to a limit of $250,000. Deposits in excess of FDIC insured limits were approximately $
Net Income (Loss) Per Common Share
Net income (loss) per common share is presented in accordance with ASC 260-10 “Earnings per Share.” Basic earnings per common share are computed using the weighted average number of common shares outstanding during the period. Diluted earnings per common share incorporate the incremental shares issuable upon the assumed exercise of stock options to the extent they are not anti-dilutive using the treasury stock method. The Company had
Revenue Recognition
The Company records revenue in accordance with ASC Topic 606, “Revenue from Contracts with Customers,” which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods and services to customers. Revenue is recognized at a point in time, generally upon shipment of products to customers.
The core principle of the guidance in Topic 606 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.
To achieve that core principle, the Company applied the following steps:
1. Identify the contract(s) with a customer.
The Company designs, develops, manufactures and markets solid-state semiconductor components and related devices. The Company’s products are used as components primarily in the military and aerospace markets.
The Company’s revenues are from purchase orders and/or contracts with customers associated with manufacture of products. We account for a contract when it has approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability of consideration is probable.
2. Identify the performance obligations in the contract.
The majority of the Company’s purchase orders or contracts with customers contain a single performance obligation, the shipment of products.
3. Determine the transaction price.
The transaction price reflects the Company’s expectations about the consideration it will be entitled to receive from the customer at a fixed price per unit shipped based on the terms of the contract or purchase order with the customer. To the extent our actual costs vary from the fixed price that was negotiated, we will generate more or less profit or could incur a loss.
4. Allocate the transaction price to the performance obligations in the contract.
5. Recognize revenue when (or as) the Company satisfies a performance obligation.
This performance obligation is satisfied when control of the product is transferred to the customer, which generally occurs upon shipment. The Company receives purchase orders for products to be delivered over multiple dates that may extend across reporting periods. The Company’s accounting policy treats shipping and handling activities as a fulfillment cost. The Company invoices for each delivery upon shipment and recognizes revenues at the fixed price for each distinct product delivered when transfer of control has occurred, which is generally upon shipment.
In addition, the Company may have a contract or purchase order to provide a non-recurring engineering service to a customer. These contracts are reviewed, performance obligations are determined, and we recognize revenue at the point in time in which each performance obligation is fully satisfied.
We recognize revenue on sales to distributors when the distributor takes control of the products ("sold-to" model). We have agreements with distributors that allow distributors a limited credit for unsaleable products, which we refer to as a "scrap allowance." Consistent with industry practice, we also have a "stock, ship and debit" program whereby we consider requests by distributors for credits on previously purchased products that remain in distributors' inventory, to enable the distributors to offer more competitive pricing. We have contractual arrangements whereby we provide distributors with protection against price reductions initiated by us after product is sold by us to the distributor and prior to resale by the distributor. In addition, we have a termination clause in one of our distributor agreements that would allow for a full credit for all inventory upon 60 days’ notice of terminating the agreement.
We recognize the estimated variable consideration to be received as revenue and record a related accrued expense for the consideration not expected to be received, based upon an estimate of product returns, scrap allowances, "stock, ship and debit" credits, and price protection credits that will be attributable to sales recorded through the end of the period. We make these estimates based upon sales levels to our customers during the period, inventory levels at the distributors, current and projected market conditions, and historical experience under the programs. Our estimates require the exercise of significant judgments. We believe that we have a reasonable basis to estimate future credits under the programs.
Related Party Transactions
The Company currently purchases and has purchased in the past die and wafers, as specified by the Company's customers, from ES Components. Mr. Aubrey, a director of the Company is a minority owner, and an immediate family member of the majority owner of ES Components. For the three months ended May 31, 2025, the Company purchased $
Stock based Compensation
The Company records stock-based compensation in accordance with the provisions of ASC Topic 718, "Compensation-Stock Compensation," which establishes accounting standards for transactions in which an entity exchanges its equity instruments for goods or services. Under ASC Topic 718, the Company recognizes an expense for the fair value of outstanding stock options and grants as they vest, whether held by employees or others. vesting of stock options or grants occurred during the three months ended May 31, 2025 or May 31, 2024.
| 3. | REVENUE RECOGNITION |
Sales returns and allowances accrual activity is shown below for the three months ended May 31, 2025, and May 31, 2024, respectively:
| Fiscal quarters ended | ||||||||
| May 31, 2025 | February 28, 2025 | |||||||
| Beginning Balance | $ | $ | ||||||
| Accrued Allowances and Adjustments | ( | ) | ( | ) | ||||
| Credits Issued | ||||||||
| Ending Balance | $ | $ | ||||||
As mentioned in Note 2 above, one of our distributor agreements has a termination clause that would allow for a full credit for all inventory upon 60 days’ notice of terminating the agreement. As of May 31, 2025, and February 28, 2025, the inventory balance at that distributor was believed to be $
The Company warrants that its products, when delivered, will be free from defects in material workmanship under normal use and service. The obligations are limited to replacing, repairing, or reimbursing for, at the option of the Company, any products that are returned within one year after the date of shipment. The Company does not reserve for potential warranty costs based on historical experience and the nature of its cost tracking system.
| 4. | INVENTORIES |
As of May 31, 2025, inventories consist of the following:
| Gross | Reserve | Net | ||||||||||
| Raw Materials | $ | $ | ( | ) | $ | |||||||
| Work-In-Process | ( | ) | ||||||||||
| Finished Goods | ( | ) | ||||||||||
| Totals | $ | $ | ( | ) | $ | |||||||
As of February 28, 2025, inventories consist of the following:
| Gross | Reserve | Net | ||||||||||
| Raw Materials | $ | $ | ( | ) | $ | |||||||
| Work-In-Process | ( | ) | ||||||||||
| Finished Goods | ( | ) | ||||||||||
| Totals | $ | $ | ( | ) | $ | |||||||
Wafer bank inventory (completed wafers that are available to be consumed in the Company’s products), net of reserves, totaled $
| 5. | ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES |
As of May 31, 2025, and February 28, 2025, accrued expenses and other current liabilities consist of the following:
| May 31, 2025 | February 28, 2025 | |||||||
| Payroll and related employee benefits | $ | $ | ||||||
| Legal fees | ||||||||
| Property, sales, and franchise taxes | ||||||||
| Return allowance | ||||||||
| Other liabilities | ||||||||
| Totals | $ | $ | ||||||
| 6. | DISAGGREGATION OF REVENUE AND MAJOR CUSTOMERS |
Revenues from domestic and export sales are attributed to a global geographic region according to the location of the customer’s primary manufacturing or operating facilities. Revenues from domestic and export sales to unaffiliated customers for the three months ended May 31, 2025, and May 31, 2024, respectively are as follows:
| Geographic Region | May 31, 2025 | May 31, 2024 | ||||||
| Europe and Australia | $ | $ | ||||||
| Canada and Latin America | ||||||||
| Far East and Middle East | ||||||||
| United States | ||||||||
| Totals | $ | $ | ||||||
For the three months ended May 31, 2025 and May 31, 2024, approximately
Customers who contributed ten percent or more of revenues for the three months ended May 31, 2025, and May 31, 2024, respectively are as follows:
| Customer | May 31, 2025 | Customer | May 31, 2024 | ||||||||
| 1. RTX (Raytheon) | % | 1. ConMed Linvatec | % | ||||||||
| 2. ConMed Linvatec | % | 2. RTX (Raytheon) | % | ||||||||
| 3. MOOG | % | 3. L3Harris | % | ||||||||
| Totals | % | Totals | % | ||||||||
| 7. | MAJOR SUPPLIERS |
For the three months ended May 31, 2025, the Company utilized
For the three months ended May 31, 2024, the Company utilized
| 8. | COMMITMENTS AND CONTINGENCIES |
Finance lease:
In connection with the Acquisition of MEI, the Company also entered into a Lease Agreement pursuant to which it agreed to lease the facility occupied by MEI, consisting of approximately
Contingencies:
We may from time to time become a party to various legal proceedings arising in the ordinary course of business. As of May 31, 2025, we had no known material current, pending, or threatened litigation.
| 9. | NOTES PAYABLE |
On April 16, 2021, the Company closed on the acquisition of a facility and real estate located in West Palm Beach, Florida for a purchase price of $
On June 29, 2022, the Company received notification from the Bank that it had elected to suspend certain financial and reporting requirements set forth in the FCA. Specifically, the Bank elected on a going forward basis to suspend measurement of any of the following financial covenants to the extent they are included in Section 2.1, ‘Financial Covenants’ of the FCA: Tangible Net Worth; Debt Service Coverage Ratio; Fixed Charge Coverage Ratio; Asset Coverage Ratio; Funded Debt to EBITDA; and/or Liquidity. In addition, the Bank elected to suspend the requirements in the FCA, if any, for the submission of financial statements and information by the Borrower on a periodic basis as specified in Section 2.4, ‘Financial Information’ of the FCA. The Bank reserves the right in its sole discretion to require the Company to resume delivery of financial statements and other information and to evidence compliance with the financial covenant requirements as currently provided in the FCA.
On May 21, 2024, Micro Engineering, Inc., a wholly owned subsidiary of Solitron purchased the property and facilities occupied by the Company, located at 401 Roger Williams Road, Apopka, Florida (the “Micro Property”), for a purchase price of $
Pursuant to the loan documentation, the Bank has advanced $
As of May 31, 2025 and February 28, 2025 principal payments on the notes payable are as follows:
| Total Principal Payments | ||||||||
| May 31, 2025 | February 28, 2025 | |||||||
| 2026 | $ | $ | ||||||
| 2027 | $ | |||||||
| 2028 | $ | |||||||
| 2029 | $ | |||||||
| 2030 | $ | |||||||
| Thereafter | $ | |||||||
| Total principal payments | $ | $ | ||||||
| 10. | STOCKHOLDERS’ EQUITY |
Repurchase Program
On October 14, 2024, the Board of Directors authorized an increase in the Company's stock repurchase program of up to $
The Company did repurchase any shares under the stock repurchase program during the three or three months ended May 31, 2025 or May 31, 2024.
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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 (“MOS”) power transistors, power and control hybrids, junction and power 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 unaudited condensed consolidated financial statements should be read in conjunction with the Audited Consolidated Financial Statements and the related Notes to 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-K for the year ended February 28, 2025 and the Unaudited Condensed Consolidated Financial Statements and the related Notes to Unaudited Financial Statements included in Item 1 of this Quarterly Report on Form 10-Q.
Critical Accounting Estimates:
The discussion and analysis of our financial condition and results of operations are based upon the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q which are prepared in accordance with GAAP. 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. See Note 2 in the financial statements for the Company’s significant accounting policies. Of the Company’s accounting policies, the following are considered to be critical – Revenue Recognition and Inventories. A discussion of these critical accounting policies are included in Note 2 of the “Notes To Financial Statements” in Item 8 of our Annual Report on Form 10-K for the fiscal year ended February 28, 2025.
See Note 2, “Summary of Significant Accounting Policies”, to the accompanying notes to the financial statements included in this Quarterly Report on 10-Q.
Results of Operations-Three Months Ended May 31, 2025, Compared to Three Months Ended May 31, 2024:
Net Sales. Net sales for the three months ended May 31, 2025, decreased 32% to $2,700,000 as compared to $3,967,000 for the three months ended May 31, 2024. The decrease in net sales was largely due a lower backlog during fiscal year 2025 until the fourth quarter of the year and the associated delivery dates of those orders, along with a delay of a large expected order.
Net bookings for the three months ended May 31, 2025, increased 37% to $2,797,000 versus $2,041,000 during the three months ended May 31, 2024 due to the variable timing on the receipt of orders. Backlog as of May 31, 2025, increased 94% to $18,256,000 as compared to a backlog of $9,413,000 as of May 31, 2024.
Cost of Sales. Cost of sales for the three months ended May 31, 2025, increased to $2,310,000 from $2,292,000 for the three months ended May 31, 2024. Expressed as a percentage of net sales, cost of sales increased to 86% for the three months ended May 31, 2025, from 58% for the three months ended May 31, 2024.
Gross Profit. Gross profit for the three months ended May 31, 2025, decreased to $390,000 from $1,675,000 for the three months ended May 31, 2024. Expressed as a percentage of net sales, gross profit decreased to 14% for the three months ended May 31, 2025, as compared to 42% for the three months ended May 31, 2024. This was due to delay in orders during fiscal year 2025, as mentioned above.
For the three months ended May 31, 2025, we shipped 15,035 units as compared to 22,777 units shipped during the same period of the prior year. It should be noted that since we manufacture a wide variety of products with an average sales price ranging from a few dollars to several hundred dollars, such periodic variations in our volume of units shipped should not be regarded as a reliable indicator of our performance.
Selling, General & Administrative Expenses. Selling, general, and administrative expenses decreased slightly to $768,000 for the three months ended May 31, 2025 from $883,000 for the same period in the prior year. However, expressed as a percentage of net sales, selling, general and administrative expenses during the three months ended May 31, 2025, was 28% as compared to 22% for the three months ended May 31, 2024. The Company experienced higher administration expenses during the first quarter of fiscal year 2025 due to the acquisition of MEI along with increased sales expenses related to greater net sales during the period.
Operating Income. The operating loss for the three months ended May 31, 2025, was ($378,000) as compared to operating income of $792,000 for the three months ended May 31, 2024. This loss is due to the reduction in net sales as noted above.
Other Income (Loss). Interest income decreased to $0 for the three months ended May 31, 2025, as compared to $5,000 for the three months ended May 31, 2024. Interest expense increased to ($74,000) for the three months ended May 31, 2025, as compared to ($50,000) for the three months ended May 31, 2024, due to the acquisition of the MEI property during fiscal year 2025. Dividend income increased to $41,000 for the three months ended May 31, 2025, as compared to $16,000 for the three months ended May 31, 2024. Realized gains on investments for the three months ended May 31, 2025, increased to $81,000 as compared to $11,000 for the three months ended May 31, 2024. Unrealized gains (losses) on investments for the three months ended May 31, 2025, were ($127,000) due to market price changes in the company’s common stock investments as compared to a gain of $27,000 for the three months ended May 31, 2024.
Income Taxes. Income taxes for the three months ended May 31, 2025, was a benefit of $121,000 as compared to an expense of ($212,000) for the three months ended May 31, 2024. This change in income tax is due to the company's loss during the current quarter ended May 31, 2025 compared to the net income recorded for the three months ended May 31, 2024.
Net Income (Loss). Net income (loss) for the three months ended May 31, 2025, was ($336,000) as compared to net income of $589,000 for the three months ended May 31, 2024.
Liquidity and Capital Resources:
Operating Activities:
Net cash provided by operating activities was $391,000 for the three months ended May 31, 2025, primarily reflecting a net loss of ($336,000), a decrease in accounts receivable of $379,000, an increase in accounts payable of $293,000, depreciation of $141,000, an increase in other non-current assets of $127,000 and an increase in net deferred taxes of $121,000, partially offset by an increase in inventories of $151,000.
Net cash provided by operating activities was $714,000 for the three months ended May 31, 2024, primarily reflecting net income of $589,000, an increase in accounts payable of $397,000, a decrease in accounts receivable of $335,000, a decrease in net deferred taxes of $146,000, depreciation of $135,000, partially offset by a decrease in customer deposits of $475,000 and an increase in inventories of $360,000.
Investing Activities:
Net cash used in investing activities was ($1,883,000) for the three months ended May 31, 2025, principally reflecting ($1,650,000) in purchases of a long-term investment, and ($409,000) of cash paid for acquisition, contingent consideration, partially offset by proceeds from the sale of marketable securities of $296,000.
Net cash used in investing activities was ($1,864,000) for the three months ended May 31, 2024, principally reflecting ($1,750,000) in purchases of property and equipment related to the MEI facility.
Financing Activities:
Net cash used in financing activities was ($37,000) for the three months ended May 31, 2025, reflecting ($37,000) in principal payments on the mortgage loans.
Net cash provided by financing activities was $1,337,000 for the three months ended May 31, 2024, principally reflecting $1,400,000 in proceeds from mortgage loan offset.
We expect our sole sources of liquidity over the next twelve months to be cash from operations and cash and cash equivalents, if necessary. We anticipate that our capital expenditures required to sustain operations will be approximately $250,000 during the next twelve months and that our cash from operations and cash and cash equivalents, if necessary, will be sufficient to fund these needs for the next twelve months. Available cash and cash equivalents as of June 30, 2025 was approximately $2.4 million.
At May 31, 2025 and February 28, 2025, we had cash and cash equivalents of approximately $2,570,000 and $4,099,000, respectively. The decrease for the three months ended May 31, 2025, was primarily due to the cash used in investing activities to purchase a long-term investment.
At May 31, 2025 and February 28, 2025, we had investments in securities of approximately $659,000 and $919,000, respectively.
At May 31, 2025 and February 28, 2025, we had working capital of $6,321,000 and $8,594,000, respectively. The decrease for the three months ended May 31, 2025 was due primarily to the cash used in investing activities to purchase the long-term investment and cash paid for acquisition, contingent consideration.
Based on various factors, including the Company’s desire to fully utilize its current net operating loss carryforwards, the Company may seek out acquisitions, additional product lines, and/or invest a portion of its cash into common stocks or higher yielding debt instruments.
The Company will also continue to consider additional share repurchases under the Company's stock repurchase program subject to market conditions, corporate liquidity requirements and priorities and other factors as may be considered in the Company’s sole discretion.
Off-Balance Sheet Arrangements:
The Company has not engaged in any off-balance sheet arrangements.
FORWARD-LOOKING STATEMENTS
Some of the statements in this Quarterly Report on Form 10-Q are “forward-looking statements”. These forward-looking statements include statements regarding our business, financial condition, results of operations, strategies or prospects and potential strategic transactions. You can identify forward-looking statements by the fact that these statements do not relate strictly to historical or current matters. Rather, forward-looking statements relate to anticipated or expected events, activities, trends or results. Because forward-looking statements relate to matters that have not yet occurred, these statements are inherently subject to risks and uncertainties. Many factors could cause our actual activities or results to differ materially from the activities and results anticipated in forward-looking statements. These factors include those described under the caption "Risk Factors" in our Annual Report on Form 10-K for the year ended February 28, 2025, including those identified below. We do not undertake any obligation to update forward-looking statements, except as required by law.
Some of the factors that may impact our business, financial condition, results of operations, strategies or prospects include:
| ● |
We are subject to substantial customer concentration, and any loss of, or reduction of business from, one or more of our significant customers 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. |
|
| ● | Increased international tariffs and threats of international tariffs may materially and adversely affect our business. |
| ● |
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. |
|
| ● | We may be unable to successfully execute our acquisition strategy, which may have adverse impacts on our growth and your investment. | |
| ● | If the inflationary pressures in the United States and elsewhere where we operate continue, we could experience reduced margins and lose future business. |
| ● |
Changes in government policy or economic conditions or technology or reduction in government spending to which our business relates could negatively impact our results. |
| ● |
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. |
| ● |
Changes in Defense related programs and priorities could reduce the revenues and profitability of our business. |
| ● |
Our operating results may decrease due to the decline of profitability in the semiconductor industry. |
| ● |
Uncertainty of current economic conditions, domestically and globally, could continue to affect demand for our products and negatively impact our business. |
| ● |
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. |
| ● |
Provisions in our charter documents could make it more difficult to acquire our Company and may reduce the market price of our stock. |
| ● |
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. |
| ● |
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 property, 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. |
| ● |
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. |
| ● |
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. |
| ● |
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. |
| ● |
Our failure to fully remediate and test the controls put in place related to 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. |
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
This item is not applicable as we are currently considered a smaller reporting company.
ITEM 4. CONTROLS AND PROCEDURES
Our Evaluation of Disclosure Controls and Procedures
The Company carried out an evaluation, under the supervision and with the participation of its management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e), and 15d-15(e) as of the end of the period covered by this Quarterly Report.
Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our new disclosure controls and procedures were appropriately designed. However, based on the timing of when the controls were implemented, there was not sufficient evidence to test whether these controls were operating effectively as of May 31, 2025 to remediate the material weakness described in the Company’s Annual Report on Form 10-K for the year ended February 28, 2025 under “Management’s Report on Internal Control over Financial Reporting”. Because of its inherent limitations, internal control over financial reporting may not prevent or detect all misstatements or fraud. Any control system, no matter how well designed and operated, is based upon certain assumptions and can provide only reasonable, not absolute, assurance that its objectives will be met. However, giving full consideration to the material weakness and the remediation plan, the Company’s management has concluded that the Company’s financial statements included in this Quarterly Report fairly present, in all material respects, the Company’s financial condition and results of operations as of and for the three months ended May 31, 2025.
Changes in Internal Control over Financial Reporting.
There were no changes in the Company’s internal control over financial reporting during the quarter ended May 31, 2025, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
We may from time to time become a party to various legal proceedings arising in the ordinary course of business. As of May 31, 2025, we had no known material current, pending, or threatened litigation.
In addition to the information set forth in this Form 10-Q, you should carefully consider the risk factors discussed in Part 1, Item 1A of our Annual Report on Form 10-K for the year ended February 28, 2025, which could materially affect our business, financial condition or future results.
|
|
Filed or |
|||||||||
| Incorporated by |
Furnished |
|||||||||
| Reference | Herewith |
|||||||||
| Exhibit # |
Exhibit Description |
Form |
Date |
Number |
||||||
| 3.1 |
Certificate of Incorporation |
10-K |
2/28/1993 |
- |
||||||
| 8-K |
7/27/2016 |
3.1 |
||||||||
| Certification of Chief Executive Officer and Chief Financial Officer (302) |
Filed |
|||||||||
| Certification of Chief Executive Officer and Chief Financial Officer (906) |
Furnished |
|||||||||
| 101.INS |
Inline XBRL Instance Document. |
Filed |
||||||||
| 101.SCH |
Inline XBRL Taxonomy Extension Schema Document. |
Filed |
||||||||
| 101.CAL |
Inline XBRL Taxonomy Extension Calculation Linkbase Document. |
Filed |
||||||||
| 101.DEF |
Inline XBRL Taxonomy Extension Definition Linkbase Document. |
Filed |
||||||||
| 101.LAB |
Inline XBRL Taxonomy Extension Label Linkbase Document. |
Filed |
||||||||
| 101.PRE |
Inline XBRL Taxonomy Extension Presentation Linkbase Document. |
Filed |
||||||||
| 104 |
Cover Page Interactive Data File (Embedded as Inline XBRL document and contained in Exhibit 101). |
|||||||||
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
|
SOLITRON DEVICES, INC. |
|
|
|
|
|
| Date: July 11, 2025 | ||
|
|
/s/ Tim Eriksen |
|
|
|
Tim Eriksen |
|
|
|
Chief Executive Officer |
|
| Date: July 11, 2025 | ||
| /s/ Carolyn Campbell | ||
| Carolyn Campbell | ||
| Chief Financial Officer |