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SECURITIES & EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended August 31, 2001
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from _________ to _________
Commission file number 001-04978
SOLITRON DEVICES, INC.
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(Exact name of small business issuer as specified in its charter)
Delaware 22-1684144
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
3301 Electronics Way, West Palm Beach, Florida 33407
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(Address of principal executive offices)
(561) 848-4311
--------------
(Issuer's telephone number)
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(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to 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 the latest practicable date: 2,068,731.
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SOLITRON DEVICES, INC.
----------------------
INDEX
PART I - FINANCIAL INFORMATION
------------------------------
Item 1. Financial Statements (unaudited):
Consolidated Balance Sheets - August 31, 2001 and February 28, 2001
Consolidated Statements of Operations - Six and Three Months Ended
August 31, 2001 and 2000
Consolidated Statements of Cash Flows - Six Months Ended August 31,
2001 and 2000
Notes to Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
PART II - OTHER INFORMATION
---------------------------
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
Signatures
2
PART I - FINANCIAL INFORMATION
------------------------------
ITEM 1. Financial Statements: Pages 4 - 9
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations: Pages 10 -14
3
SOLITRON DEVICES, INC. AND SUBSIDIARIES
---------------------------------------
CONSOLIDATED BALANCE SHEET
--------------------------
ASSETS
August 31, February 28,
2001 2001
------------ ------------
(Unaudited) (Audited)
CURRENT ASSETS:
Cash $ 2,030,000 $ 2,190,000
Accounts receivable, less allowance
for doubtful accounts of $1,000 750,000 902,000
Inventories (net of reserve of $31,000) 2,362,000 2,447,000
Prepaid expenses and other current assets 72,000 120,000
Due from S/V Microwave 5,000 5,000
------------ ------------
Total current assets $ 5,219,000 $ 5,664,000
PROPERTY, PLANT AND EQUIPMENT, net 490,000 404,000
NON-OPERATING PLANT FACILITIES, net of cost
to dispose 0 0
OTHER ASSETS 52,000 52,000
------------ ------------
$ 5,761,000 $ 6,120,000
============ ============
The accompanying notes are an integral part
of these financial statements.
4
SOLITRON DEVICES, INC. AND SUBSIDIARIES
---------------------------------------
CONSOLIDATED BALANCE SHEET
--------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
August 31, February 28,
2001 2001
------------ ------------
(Unaudited) (Audited)
CURRENT LIABILITIES:
Current portion of accrued environmental expenses $ 684,000 $ 630,000
Accounts payable - Post petition 408,000 380,000
Accounts payable - Pre-petition, current portion 477,000 507,000
Accrued expenses and other liabilities 1,284,000 1,319,000
Accrued Chapter 11 administrative expense 1,000 1,000
------------ ------------
Total current liabilities 2,854,000 2,837,000
OTHER LONG-TERM LIABILITIES net of current portion,
net of cost to dispose of non-operating plant facilities 651,000 710,000
------------ ------------
TOTAL LIABILITIES $ 3,505,000 $ 3,547,000
============ ============
COMMITMENTS & CONTINGENCIES
Stockholders' Equity:
Preferred stock, $.01 par value, authorized 500,000
shares, No shares issued and outstanding -0- -0-
Common stock $.01 par value, authorized 10,000,000
shares, issued and outstanding 2,068,731 21,000 21,000
Additional paid-in capital 2,617,000 2,617,000
Accumulated deficit (382,000) (65,000)
------------ ------------
Total stockholders' equity 2,256,000 2,573,000
------------ ------------
$ 5,761,000 $ 6,120,000
============ ============
The accompanying notes are an integral part
of these financial statements.
5
SOLITRON DEVICES, INC. AND SUBSIDIARIES
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CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------
(Unaudited)
Three Mos. Ended August 31, Six Mos. Ended August 31,
------------------------------ ------------------------------
2001 2000 2001 2000
------------ ------------ ------------ ------------
Net Sales $ 1,714,000 $ 2,082,000 $ 3,372,000 $ 4,127,000
Cost of Sales 1,542,000 1,464,000 3,040,000 3,035,000
------------ ------------ ------------ ------------
Gross Profit 172,000 618,000 332,000 1,092,000
Selling, General & Administrative 327,000 417,000 668,000 720,000
------------ ------------ ------------ ------------
Expenses
Operating Income (Loss) (155,000) 201,000 (336,000) 372,000
------------ ------------ ------------ ------------
OTHER INCOME (EXPENSE)
Other Income 18,000 47,000 54,000 71,000
Interest Expense (16,000) (20,000) (31,000) (40,000)
Other, Net (2,000) (2,000) (4,000) (5,000)
------------ ------------ ------------ ------------
Other Income (Expense), Net -- 25,000 19,000 26,000
------------ ------------ ------------ ------------
Net Income/(Loss) $ (155,000) $ 226,000 $ (317,000) $ 398,000
============ ============ ============ ============
INCOME/(LOSS) PER SHARE:
Basic: $ (0.07) $ 0.11 $ (0.15) $ 0.19
Diluted: $ (0.07) $ 0.10 $ (0.15) $ 0.18
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic: 2,068,731 2,068,821 2,068,731 2,068,821
Diluted: 2,068,731 2,219,357 2,068,731 2,193,745
The accompanying notes are an integral part
of these financial statements.
6
SOLITRON DEVICES, INC. AND SUBSIDIARIES
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CONSOLIDATED STATEMENT OF CASH FLOWS
------------------------------------
(Unaudited)
Six Months Ended August 31,
------------------------------
2001 2000
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net profit/(loss) $ (317,000) $ 398,000
------------ ------------
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 107,000 101,000
(Increase)/Decrease in:
Accounts Receivable 152,000 256,000
Net Inventories 85,000 44,000
Prepaid Expenses & Other Current Assets 48,000 (3,000)
Due from SV Microwave -- 1,000
Other Assets -- 24,000
Increase/(Decrease) in:
Accounts Payable 28,000 166,000
Accounts Payable pre-petition (30,000) (26,000)
Accrued Expenses & Other Liabilities (35,000) 106,000
Accrued Chapter 11 administrative expenses- -- --
Accrued Environmental Expenses 54,000 54,000
Other Long Term Liabilities (59,000) (59,000)
------------ ------------
Total adjustments 350,000 664,000
------------ ------------
Net cash provided by (used in) operating activities 33,000 1,062,000
------------ ------------
CASH FLOW FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment (193,000) (53,000)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on capital leases -- --
------------ ------------
NET INCREASE (DECREASE) IN CASH (160,000) 1,009,000
CASH AT BEGINNING OF PERIOD 2,190,000 1,184,000
------------ ------------
CASH AT END OF PERIOD $ 2,030,000 $ 2,193,000
============ ============
Supplemental cash flow disclosure: Interest paid during the six months ended
August 31, 2001 and 2000 was approximately $31,000 and $40,000 respectively.
The accompanying notes are an integral part
of these financial statements.
7
SOLITRON DEVICES, INC. AND SUBSIDIARIES
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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(Unaudited)
1. General:
--------
The financial information for Solitron Devices, Inc. and wholly-owned
Subsidiaries (the "Company") 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 fiscal year ended February 28, 2001.
The results of operations for the six-month period ended August 31, 2001 are not
necessarily indicative of the results to be expected for the fiscal year ended
February 28, 2002.
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 Regulation and Environmental Compliance sections appearing in the Company's
Annual Report on Form 10-KSB for the year ended February 28, 2001.
3. INVENTORIES:
------------
As of August 31, 2001 inventories consist of the following:
Raw Materials $ 1,331,000
Work-In-Process and Finished Goods 1,031,000
Reserve (31,000)
-----------
$ 2,362,000
8
SOLITRON DEVICES, INC. AND SUBSIDIARIES
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
(Unaudited)
4. GOING CONCERN:
--------------
The Company's consolidated financial statements are presented on a going concern
basis, which contemplates the realization of assets and satisfaction of
liabilities as they become due. Although the Company has projected that it will
be able to generate sufficient funds to support its ongoing operations, it has
significant obligations arising from settlements in connection with its
bankruptcy necessitating it to make substantial cash payments which cannot be
supported by the current level of operations. The Company must be able to obtain
continued forbearance or be able to renegotiate its bankruptcy related required
payments to unsecured creditors, the USEPA, the Florida Department of
Environmental Protection ("FDEP"), and certain taxing authorities or raise
sufficient cash in order to pay these obligations as currently due, in order to
remain a going concern.
The Company continues to negotiate with its unsecured creditors, the USEPA, the
FDEP, and taxing authorities in an attempt to arrive at reduced payment
schedules. In addition, the Company has a contingency plan to reduce its size
and thereby reduce its cost of operations within certain limitations. However,
no assurance can be made that the Company can reach a suitable agreement with
the unsecured creditors or taxing, environmental or other regulatory authorities
or obtain additional sources of capital and/or cash or that the Company can
generate sufficient cash to meet its obligations over the next year.
The financial statements do not include any adjustments to reflect the possible
future effect on the recoverability and classification of assets or the amounts
and classification of liabilities that may result from the possible inability of
the Company to continue as a going concern.
9
SOLITRON DEVICES, INC. AND SUBSIDIARIES
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
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CONDITION AND RESULTS OF OPERATIONS
-----------------------------------
Item 2. Management's Discussion and Analysis of Financial Condition and Results
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of Operations
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Forward-Looking Statements:
---------------------------
Except for historical information contained herein, certain matters discussed
herein, including any information incorporated by reference, are
"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 are 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.
Such forward-looking statements include statements regarding:
o trends in the industry, including trends concerning demand, market dynamics,
consolidation, changes in government military spending, price erosion and
competition;
o the barring of environmental claims due to the Company's bankruptcy order;
o the Company's ability to respond quickly to customers' needs and to deliver
products in a timely manner;
o the Company's compliance with environmental laws, orders and investigations
and the future costs of such compliance;
o the Company's ability to generate sufficient liquidity to continue
operations;
o the Company's ability to restructure operations (if necessary) to reduce
costs;
o the Company's ability to develop additional sales opportunities;
o the Company's ability to make payments required under its bankruptcy plan or
renegotiate such payments;
o the Company's ability to generate sufficient cash from operations or
otherwise; 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.
These forward-looking 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, risk 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 a change in government regulations which hinders the Company's ability to
perform government contracts;
o changes in or a miscalculation of trends in the industry;
o judicial or other legally enforceable interpretations of the Company's
liability under environmental laws;
o a decision to discontinue or delay the development of any or all of its
products if such decision is later determined to be in the best interests of
the Company;
10
SOLITRON DEVICES, INC. AND SUBSIDIARIES
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS
-----------------------------------
o inability to capitalize on competitive strengths or a misinterpretation of
those strengths;
o a misinterpretation of the nature of the competition;
o an inability to respond quickly to customers' needs and to deliver products
in a timely manner resulting from unforeseen circumstances;
o an increase in the expected cost of environmental compliance based on factors
unknown at this time;
o an inability to develop new sales opportunities for the Company;
o an inability to generate sufficient liquidity to continue operations;
o an inability to successfully restructure operations (if necessary) to reduce
costs sufficiently to continue business operations;
o changes in law or industry regulation; and
o other unforeseen activities, events and developments that may occur in the
future.
Overview:
---------
Solitron Devices, Inc., a Delaware corporation (the "Company" or "Solitron"),
designs, develops, manufactures and markets solid-state semiconductor components
and related devices primarily for the military and aerospace markets. The
Company manufactures a large variety of bipolar and metal oxide semiconductor
power transistors, power and control hybrids, junction and MOS field effect
transistors, thin film resistors and other related products. Most of the
Company's products are custom made pursuant to contracts with customers whose
end products are sold to the United States government. Other products, such as
Joint Army Navy transistors, diodes and Standard Military Drawings voltage
regulators, are sold as standard or catalog items.
The following discussion and analysis of factors which have affected the
Company's financial position and operating results during the periods included
in the accompanying condensed consolidated financial statements should be read
in conjunction with the Consolidated Financial Statements and the related Notes
to Consolidated Financial Statements and Management's Discussion and Analysis of
Financial Condition and Results of Operations included in the Company's Annual
Report on Form 10-KSB for the year ended February 28, 2001 and the Consolidated
Financial Statements and the related Notes to Consolidated Financial Statements
included in Item 1 of this Quarterly Report on Form 10-QSB.
Trends and Uncertainties:
-------------------------
During the six months ended August 31, 2001, the company's book-to-bill ratio
increased to approximately 1.27, reflecting both an increase in the amount of
orders booked and a lower volume of shipments. The change in the book-to-bill
ratio does not indicate an upward trend in the demand for the Company's
products. Generally, the intake of orders over the last eighteen months has been
low as a result of the general slow-down of the economy and of continued cuts in
defense spending, which is expected to continue over the next twelve to eighteen
months. The Company continued to implement steps intended to reduce its variable
manufacturing cost to offset the impact of the low volume of orders to be
shipped. However, should order intake continue at the level experienced in the
last eighteen months, the Company might be required to implement further cost
cutting or other downsizing measures to continue its business operations.
11
SOLITRON DEVICES, INC. AND SUBSIDIARIES
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS
-----------------------------------
(CONTINUED)
RESULTS OF OPERATIONS - THREE MONTHS ENDED AUGUST 31, 2001 COMPARED TO THREE
----------------------------------------------------------------------------
MONTHS ENDED AUGUST 31, 2000:
-----------------------------
Sales
-----
Net sales for the three months ended August 31, 2001 decreased approximately 18%
to $1,714,000 as compared to $2,082,000 for the three months ended August 31,
2000. The Company attributes this decrease in net sales to decreased production
due to lack of raw material and to a decrease in the requirements of its
customers.
For the three months ended August 31, 2001, the Company shipped 84,082 units as
compared with 360,325 units shipped during the same period of the prior year.
Since the Company manufactures a wide variety of products with an average sale
price ranging from less than one dollar to several hundred dollars, the Company
believes that such periodic variations in the Company's volume of units shipped
may not be a reliable indicator of the Company's performance.
The Company experienced an increase in the level in the intake of orders of
approximately 18% for the quarter ended August 31, 2001 as compared to the same
period for the previous year principally as a result of a change in the timing
in defense spending and in spite of the switch in demand from high reliability
products made by the Company to commercial off-the-shelf items which the Company
cannot manufacture and sell competitively.
Cost of Sales
-------------
Cost of Sales for the three months ended August 31, 2001 increased to $1,542,000
from $1,464,000 for the comparable period ended August 31, 2000. Expressed as a
percentage of sales, Cost of Sales increased from 70.3% to 90.0% for the same
periods. This increase is attributable to higher purchase prices of raw
materials and to an exceptional charge for material scrapped because of lower
production yields.
Gross Profit
------------
Gross margins on the Company's sales decreased to 10% for the three months ended
August 31, 2001 compared to 29.7% for the three months ended August 31, 2000.
This decrease resulted from the lower volume of shipments, the charge for
scrapped material due to lower production yields and from higher prices in
purchased raw materials. Gross profit for the three months ended August 31, 2001
decreased to $172,000 from $618,000 for the three months ended August 31, 2000.
This decrease is primarily due to a decreased sales volume and an increase in
the cost of goods sold.
12
SOLITRON DEVICES, INC. AND SUBSIDIARIES
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS
-----------------------------------
(CONTINUED)
Selling, General and Administrative Expenses
--------------------------------------------
Selling, General, and Administrative expenses decreased to $327,000 for the
three months ended August 31, 2001 from $417,000 for the comparable period ended
August 31, 2000. This decrease is primarily due to lower commissions paid to
outside sales representatives, to lower consulting fees, to lower legal fees and
to lower vacation expense. These reductions in operating expenses have been
partially offset by higher salaries. During the three-month period ended August
31, 2001, Selling, General, and Administrative expenses as a percentage of sales
decreased to 19.1% as compared with 20.0% for the three months ended August 31,
2000.
Operating Results
-----------------
Operating Results for the three months ended August 31, 2001 showed a loss of
$155,000 compared to income of $201,000 for the three months ended August 31,
2000. This decrease is principally due to a lower sales volume and to an
increase in the cost of goods sold as a percentage of sales.
Net Other Income
----------------
The Company's Net Other Income for the three months ended August 31, 2001 was
nil versus a net other income of $25,000 for the three months ended August 31,
2000. The variance was mainly due to decreases in the Company's interest income.
Net Results
-----------
Net results for the three-month period ended August 31, 2001 decreased to a loss
of $155,000 from a profit of $226,000 for the same period in 2000. The Company
attributes this decrease to a lower level of revenue and to higher costs as
discussed herein.
RESULTS OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 2001 COMPARED TO SIX MONTHS
-----------------------------------------------------------------------------
ENDED AUGUST 31, 2000:
----------------------
During the six-month period ended August 31, 2001, the Company's book-to-bill
ratio increased to approximately 1.22, reflecting a change in the demand for the
Company's products and in the timing of orders received from customers involved
in military programs. The Company continued implementing steps intended to
reduce its variable manufacturing cost to offset the impact of lower sales.
Should the intake of orders decline, the Company may be required to implement
further cost-cutting or other downsizing measures to continue its business
operations.
Sales
-----
Net sales for the six months ended August 31, 2001 decreased approximately 18%
to $3,372,000 as compared to $4,127,000 for the six months ended August 31,
2000. The Company attributes this decrease to a lower level of orders
deliverable during the six months ended August 31, 2001, as well as to decreased
production due to lack of raw material and to a decrease in the requirements of
its customers.
13
SOLITRON DEVICES, INC. AND SUBSIDIARIES
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS
-----------------------------------
(CONTINUED)
For the six months ended August 31, 2001, the Company shipped 183,661 units as
compared with 845,046 units shipped during the same period of the prior year.
Since the Company manufactures a wide variety of products with an average sale
price ranging from less than one dollar to several hundred dollars, the Company
believes that such periodic variations in the Company's volume of units shipped
may not be a reliable indicator of the Company's performance.
The Company experienced an increase in the level in the intake of orders of
approximately 28% for the six months ended August 31, 2001 as compared to the
same period for the previous year principally as a result of a change in the
timing in defense spending and in spite of the switch in demand from high
reliability products made by the Company to commercial off-the-shelf items which
the Company cannot manufacture and sell competitively.
Cost of Sales
-------------
Cost of Sales for the six months ended August 31, 2001 increased to $3,040,000
from $3,035,000 for the comparable period ended August 31, 2000. Expressed as a
percentage of sales, Cost of Sales increased from 73.5% to 90.2% for the same
periods. This increase is attributable to higher costs for material, labor and
manufacturing overhead and to an exceptional charge for material scrapped
because of lower production yields.
Gross Profit
------------
Gross margins on the Company's sales decreased to 9.8% for the six months ended
August 31, 2001 compared to 26.5% for the six months ended August 31, 2000. This
decrease resulted from increases in costs for material, labor and manufacturing
overhead. Gross profit for the six months ended August 31, 2001 decreased to
$332,000 from $1,092,000 for the six months ended August 31, 2000. This decrease
is primarily due to increased costs of sales and partially due to lower sales
volume.
Selling, General and Administrative Expenses
--------------------------------------------
Selling, General, and Administrative expenses decreased to $668,000 for the six
months ended August 31, 2001 from $720,000 for the comparable period ended
August 31, 2000. This decrease is primarily due to lower legal expenses, lower
vacation expenses, less consulting and less commissions paid to outside sales
representatives.. During the six month period ended August 31, 2001, Selling,
General, and Administrative expenses as a percentage of sales increased to 19.8%
as compared with 17.4% for the six months ended August 31, 2000. This increase
in percentage is due to lower sales volume.
Operating Results
-----------------
Operating results for the six months ended August 31, 2001 showed a loss of
$336,000 compared to income of $372,000 for the six months ended August 31,
2000. This decrease in operating results is due primarily to increased costs of
sales and to a lower volume of sales.
Net Other Income
----------------
The Company recorded a Net Other Income of $19,000 for the six months ended
August 31, 2001 versus a net other income of $26,000 for the six months ended
August 31, 2000. The variance was due to a decrease in the Company's interest
income.
14
SOLITRON DEVICES, INC. AND SUBSIDIARIES
---------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS
-----------------------------------
(CONTINUED)
Net Results
-----------
Net results for the six-month period ended August 31, 2001 decreased to a loss
of $317,000 from a profit of $398,000 for the same period in 2000. The Company
attributes this decrease to a lower level of revenue and to higher costs of
sales.
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
The Company's liquidity continues to be adversely affected by significant
non-recurring expenses associated with the Company's pre-bankruptcy obligations,
and the Company's inability to obtain additional working capital through the
sale of debt or equity securities or the sale of non-operating assets. The
Company's liquidity is also adversely affected by the Company's lower level of
sales and the fact that it operates below its break even point.
The Company reported a net loss of $317,000 and an operating loss of $336,000
for the six months ended August 31, 2001. Moreover, the Company has significant
obligations arising from settlements related to its bankruptcy proceeding, that
require it to make substantial cash payments that cannot be supported by the
Company's current level of operations. As of August 31, 2001, the Company's
total remaining obligations are $2,886,000, which consists of $1,550,000 in
environmental obligations, $1,089,000 owed to unsecured creditors and $247,000
in property taxes.
At August 31, 2001, February 28, 2001 and August 31, 2000 respectively, the
Company had cash of $2,030,000, $2,190,000 and $2,193,000. This decrease
resulted from a reduction in cash flow from operations.
At August 31, 2001, the Company had working capital of $2,365,000 as compared
with a working capital at August 31, 2000 of $3,154,000. At February 28, 2001,
the Company had a working capital of $2,827,000. The approximately $464,000
change for the six months ended August 31, 2001 was due mainly to decreases in
cash, in receivables and in inventories.
15
PART II - OTHER INFORMATION
---------------------------
ITEM 1. LEGAL PROCEEDINGS:
------------------
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS:
------------------------------------------
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES:
--------------------------------
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS:
----------------------------------------------------
None.
ITEM 5. OTHER INFORMATION:
------------------
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K:
---------------------------------
(a) Exhibits.
4.1 Rights Agreement, dated as of May 31, 2001, between Solitron
Devices, Inc. and Continental Stock Transfer & Trust Company, as
Rights Agent (incorporated by reference to the Company's Current
Report on Form 8-K dated June 20, 2001)
(b) Reports on Form 8-K.
The Company filed a Current Report on Form 8-K on June 20, 2001,
dated as of such date, reporting under Item 5 the adoption of a
Rights Agreement.
16
SIGNATURE
---------
In accordance with the requirements of the Securities Exchange Act of 1934, the
registrant has caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
SOLITRON DEVICES, INC.
Date: October 3, 2001 /s/ Shevach Saraf
--------------- ---------------------------
By: Shevach Saraf
Chairman, President and
Chief Executive Officer
17