UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark one)

☒

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
       OF 1934

For the quarterly period ended November 30, 2016

August 31, 2020

or

☐

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
      ACT OF 1934

For the transition period from ____________ to _______

_____

Commission File No. 001-04978

SOLITRON DEVICES, INC.

(Exact Name of Registrant as Specified in Its Charter)

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


3301 Electronics Way, West Palm Beach, Florida 33407
(Address (Address of Principal Executive Offices) (Zip(Zip Code)

(561) 848-4311

(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act: None
Indicate by check mark whether the registrantRegistrant (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 registrantRegistrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒☐    No  ☐

☒

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes ☐    No  ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one)

Large accelerated filer ☐Accelerated filer ☐
Non-accelerated filer ☐Smaller reporting company ☒

           Large accelerated filer  ☐                                                                     
Accelerated filer ☐
Non-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 ☐[X] No ☒

The number of shares of the registrant’s common stock, $0.01 par value, outstanding as of December 31, 2016,March 17, 2021, was 1,901,950.

2,083,462.

 

SOLITRON DEVICES, INC.

TABLE OF CONTENTS

   Page No.
PART 1 - FINANCIAL INFORMATION 
    
Item1.Financial Statements1
    
  Condensed Balance Sheets November 30, 2016 (unaudited) and February 29, 20161
    
  Condensed Statements of Operations (unaudited) Three and Nine Months Ended November 30, 2016 and 20152
    
  Condensed Statements of Cash Flows (unaudited) Nine Months Ended November 30, 2016 and 20153
    
  Notes to Condensed Financial Statements4-10
    
Item2.Management’s Discussion and Analysis of Financial Condition and Results of Operations11-16
   
Item4.Controls and Procedures17
    
PART II – OTHER INFORMATION 
    
Item1.Legal Proceedings18
    

Item

6.

Exhibits

18

    
Signatures  19

PART 1 - FINANCIAL INFORMATION
   Page No.
Item
1.
Financial Statements 
    
  Balance Sheets3
  August 31, 2020 (unaudited) and February 29, 2020 
    
  Statements of Operations (unaudited)4
  Three and Six Months Ended August 31, 2020 and 2019 
    
  
Statements of Stockholders’ Equity (unaudited)
Three and Six Months Ended August 31, 2020 and 2019
5
    
  Statements of Cash Flows (unaudited)6
  Six Months Ended August 31, 2020 and 2019 
    
  Notes to Financial Statements (unaudited)7
    
Item
2.
Management’s Discussion and Analysis of Financial Condition and 
       Results of Operations17
    
Item
3.
Quantitative and Qualitative Disclosures About Market Risk21
    
Item
4.
Controls and Procedures21
    
    
    
PART II – OTHER INFORMATION
 
    
Item
1. 
Legal Proceedings22
    
Item
1A
Risk Factors22


  
Item
2
Unregistered Sales of Equity Securities and Use of Proceeds 22


  
Item
6.
Exhibits22
    
Signatures
 23
    
PART I – FINANCIAL INFORMATION

ITEM 1.FINANCIAL STATEMENTS


SOLITRON DEVICES, INC.ITEM 1.

CONDENSED BALANCE SHEETS

AS OF NOVEMBER 30, 2016 AND FEBRUARY 29, 2016

  (unaudited)    
  November 30,  February 29, 
  2016  2016 
ASSETS (in thousands, except for share and per share amounts) 
CURRENT ASSETS      
Cash and cash equivalents $1,130  $634 
Treasury bills and certificates of deposit  1,993   6,740 
Accounts receivable, less allowance for doubtful accounts of $2  1,384   528 
Inventories, net (Note 4)  3,683   3,671 
Prepaid expenses and other current assets  164   184 
TOTAL CURRENT ASSETS  8,354   11,757 
         
PROPERTY, PLANT AND EQUIPMENT, net  502   436 
         
OTHER ASSETS  8   8 
TOTAL ASSETS $8,864  $12,201 
         
LIABILITIES AND STOCKHOLDERS’ EQUITY        
CURRENT LIABILITIES        
Accounts payable $494  $164 
Customer deposits  12   28 
Accrued expenses and other current liabilities (Note 6)  472   497 
TOTAL CURRENT LIABILITIES  978   689 
         
TOTAL LIABILITIES  978   689 
COMMITMENTS AND CONTINGENCIES        
STOCKHOLDERS’ EQUITY        
Preferred stock, $.01 par value, authorized 500,000 shares, none issued  -   - 
Common stock, $.01 par value, authorized 10,000,000 shares, 1,901,950 and 2,232,977 shares issued and outstanding, net of 669,284 and 338,257 shares of treasury stock as of November 30, 2016 and
February 29, 2016 respectively		  24   24 
Additional paid-in capital  1,834   2,759 
Accumulated other comprehensive income  1   17 
Retained earnings  7,793   9,266 
Less treasury stock  (1,766)  (554)
TOTAL STOCKHOLDERS’ EQUITY  7,886   11,512 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $8,864  $12,201 

FINANCIAL STATEMENTS
 
SOLITRON DEVICES, INC.
 
 
BALANCE SHEETS
 
 
AS OF AUGUST 31, 2020 AND FEBRUARY 29, 2020
 
 
(In thousands except for share and per share amounts)
 
 
 
August 31, 2020
 
 
February 29, 2020
 
 
 
(unaudited)
 
 
 
 
ASSETS
 
 
 
 
 
 
      CURRENT ASSETS
 
 
 
 
 
 
         Cash and cash equivalents
 $2,819 
 $1,332 
         Securities
  193 
  164 
         Accounts receivable
  1,782 
  1,379 
         Inventories, net
  3,168 
  2,870 
         Prepaid expenses and other current assets
  249 
  118 
            TOTAL CURRENT ASSETS
  8,211 
  5,863 
 
    
    
      Property, plant and equipment, net
  353 
  405 
      Operating lease - right-of-use asset
  535 
  723 
      Other assets
  44 
  45 
            TOTAL ASSETS
 $9,143 
 $7,036 
 
    
    
LIABILITIES AND STOCKHOLDERS’ EQUITY
    
    
CURRENT LIABILITIES
    
    
Accounts payable
 $325 
 $269 
Customer deposits
  29 
  53 
Operating lease liability
  437 
  417 
Accrued expenses and other current liabilities
  894 
  437 
TOTAL CURRENT LIABILITIES
  1,685 
  1,176 
 
    
    
Notes payable (PPP Loan)
  807 
  - 
      Operating lease liability
  153 
  377 
      Capital lease liability
  17 
  - 
TOTAL LIABILITIES
  2,662 
  1,553 
 
    
    
STOCKHOLDERS’ EQUITY
    
    
   Preferred stock, $.01 par value, authorized 500,000 shares, none issued
  - 
  - 
Common stock, $.01 par value, authorized 10,000,000 shares,
    
    
2,060,456 shares outstanding, net of 510,807 treasury shares
    
    
at August 31, 2020; 2,062,949 shares outstanding, net of
    
    
508,314 treasury shares at February 29, 2020, respectively
  21 
  21 
Additional paid-in capital
  1,834 
  1,834 
Retained earnings
  6,113 
  5,109 
Less treasury stock
  (1,487)
  (1,481)
TOTAL STOCKHOLDERS’ EQUITY
  6,481 
  5,483 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
 $9,143 
 $7,036 
The accompanying notes are an integral part of the unaudited condensed financial statements.

1

SOLITRON DEVICES, INC.

CONDENSED STATEMENTS OF OPERATIONS

FOR THE THREE AND NINE MONTHS ENDED NOVEMBER 30, 2016 AND NOVEMBER 30, 2015

(Unaudited, in thousands except for share and per share amounts)

  Three months  Nine Months 
  2016  2015  2016  2015 
             
Net Sales $2,145  $1,919  $5,833  $6,514 
Cost of Sales  1,671   1,549   4,847   5,076 
                 
Gross Profit  474   370   986   1,438 
                 
Selling, General and Administrative Expenses  323   351   2,508   1,573 
                 
Operating Income/(Loss)  151   19   (1,522)  (135)
                 
Other income                
Other income  3   -   3   - 
Interest Income  9   6   29   18 
Total other income  12   6   32   18 
                 
Income/(Loss) before provision for income taxes  163   25   (1,490)  (117)
                 
Provision for income taxes  -   (5)  -   (5)
 Net Income/(Loss) $163  $20  $(1,490) $(122)
                 
Other comprehensive income:                
Unrealized (loss)/gain on investments  1   -   1   - 
Total comprehensive (loss)/income $164  $20  $(1,489) $(122)
                 
Income/(Loss) Per Share from operating income-Basic $.08  $.01  $(.73) $(.06)
Income/Loss) Per Share from operating income-Diluted $.08  $.01  $(.73) $(.06)
                 
Net Income/(Loss) Per Share-Basic $.09  $.01  $(.72) $(.05)
Net Income/(Loss) Per Share-Diluted $.09  $.01  $(.72) $(.05)
                 
Weighted average shares outstanding-Basic  1,901,950   2,290,779   2,075,288   2,249,759 
Weighted average shares outstanding-Diluted  1,901,950   2,451,791   2,075,288   2,249,759 


 
SOLITRON DEVICES, INC.
 
 
STATEMENTS OF OPERATIONS
 
 
FOR THE THREE AND SIX MONTHS ENDED AUGUST 31, 2020 AND AUGUST 31, 2019
 
 
(Unaudited, in thousands except for share and per share amounts)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
For the three months ended
 
 
For the three months ended
 
 
For the six months ended
 
 
For the six months ended
 
 
 
August 31, 2020
 
 
August 31, 2019
 
 
August 31, 2020
 
 
August 31, 2019
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net sales
 $3,103 
 $2,420 
 $5,601 
 $4,977 
Cost of sales
  1,978 
  1,958 
  3,620 
  4,324 
 
    
    
    
    
Gross profit
  1,125 
  462 
  1,981 
  653 
 
    
    
    
    
Selling, general and administrative expenses
  526 
  779 
  1,012 
  1,223 
 
    
    
    
    
Operating income (loss)
  599 
  (317)
  969 
  (570)
 
    
    
    
    
Other income (loss)
    
    
    
    
Interest income
  - 
  1 
  - 
  1 
Dividend income
  1 
  - 
  7 
  1 
Realized gain (loss) on investments
  11 
  (4)
  26 
  (20)
Unrealized gain (loss) on investments
  24 
  - 
  2 
  19 
Total other income (loss)
  36 
  (3)
  35 
  1 
 
    
    
    
    
Net income (loss)
 $635 
 $(320)
 $1,004 
 $(569)
 
    
    
    
    
 
    
    
    
    
Net income (loss) per common share - basic and diluted
 $0.31 
 $(0.16)
 $0.49 
 $(0.29)
 
    
    
    
    
Weighted average common shares outstanding - basic and diluted
  2,060,457 
  2,013,959 
  2,061,703 
  1,957,959 
The accompanying notes are an integral part of the unaudited condensed financial statements.

2

SOLITRON DEVICES, INC.

CONDENSED STATEMENTS OF CASH FLOWS

NINE MONTHS ENDED NOVEMBER 30, 2016 AND NOVEMBER 30, 2015

(Unaudited)

  2016  2015 
  (in thousands) 
       
CASH FLOWS FROM OPERATING ACTIVITIES:      
Net (loss) $(1,490) $(122)
Adjustments to reconcile net (loss) to net cash provided by (used in) operating activities:        
Depreciation and amortization  145   162 
Decrease (increase) in operating assets:        
Accounts receivable  (856)  516 
Inventories, net  (12)  404 
Prepaid expenses and other current assets  20   (10)
Other assets  -   - 
Increase (decrease) in operating liabilities:        
Accounts payable  330   (235)
Customer deposits  (16)  (5)
Accrued expenses and other liabilities  (25)  (228)
NET CASH PROVIDED BY/(USED IN) OPERATING ACTIVITIES  (1,904)  482 
         
CASH FLOWS FROM INVESTING ACTIVITIES:        
Sales of Treasury Bills and Certificates of Deposit  4,748   5,478 
Purchases of Treasury Bills and Certificates of Deposit  -   (4,992)
Purchases of property, plant and equipment  (211)  (150)
NET CASH PROVIDED BY INVESTING ACTIVITIES  4,537   336 
         
CASH FLOWS FROM FINANCING ACTIVITIES:        
Cash from exercise of employee stock options  -   11 
Repurchase of Common Stock and Options  (2,137)  (279)
Payment of Dividends  -   (575)
NET CASH USED IN FINANCING ACTIVITIES  (2,137)  (843)
         
Net increase/(decrease) in cash and cash equivalents  496   (25)
         
Cash and cash equivalents – beginning of the period  634   820 
         
Cash and cash equivalents - end of the period $1,130  $795 
         
Supplemental disclosure of cash flow information:        
         
Cash paid during the year for income taxes $0  $9 


 
SOLITRON DEVICES, INC.
 
 
STATEMENTS OF STOCKHOLDERS’ EQUITY
 
 
FOR THE THREE AND SIX MONTHS ENDED AUGUST 31, 2020 AND AUGUST 31, 2019
 
 
(Unaudited, In thousands, except for number of shares)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Common Stock
 
 
Additional
 
 

 
 
 
 
 
 
 
 
 
Number
 
 
Treasury
 
 
 
 
 
Paid-in
 
 
Treasury Stock
 
 
Retained
 
 
 
 
 
 
of Shares
 
 
Shares
 
 
Amount
 
 
Capital
 
 
Amount
 
 
Earnings
 
 
Total
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance, February 28, 2019
  2,571,263 
  (669,304)
 $19 
 $1,834 
 $(1,761)
 $5,806 
 $5,898 
 
    
    
    
    
    
    
    
Adjustment for Adoption of ASC 842
  - 
  - 
  - 
  - 
  - 
  (91)
  (91)
Net loss
  - 
  - 
  - 
  - 
  - 
  (249)
  (249)
Balance, May 31, 2019
  2,571,263 
  (669,304)
 $19 
 $1,834 
 $(1,761)
 $5,466 
 $5,558 
 
    
    
    
    
    
    
    
Stock based Compensation
  - 
  161,000 
  2 
  - 
  280 
  - 
  282 
Net loss
  - 
  - 
  - 
  - 
  - 
  (320)
  (320)
Balance, August 31, 2019
  2,571,263 
  (508,304)
 $21 
 $1,834 
 $(1,481)
 $5,146 
 $5,520 
 
    
    
    
    
    
    
    
 
    
    
    
    
    
    
    
Balance, February 29, 2020
  2,571,263 
  (508,314)
 $21 
 $1,834 
 $(1,481)
 $5,109 
 $5,483 
 
    
    
    
    
    
    
    
Net income
  - 
  - 
  - 
  - 
  - 
  369 
  369 
Balance, May 31, 2020
  2,571,263 
  (508,314)
 $21 
 $1,834 
 $(1,481)
 $5,478 
 $5,852 
 
    
    
    
    
    
    
    
Purchase of Common Stock
  - 
  (2,493)
  - 
  - 
  (6)
  - 
  (6)
Net income
  - 
  - 
  - 
  - 
  - 
  635 
  635 
Balance, August 31, 2020
  2,571,263 
  (510,807)
 $21 
 $1,834 
 $(1,487)
 $6,113 
 $6,481 
The accompanying notes are an integral part of the unaudited condensed financial statements.

3


 
SOLITRON DEVICES, INC.
 
 
STATEMENTS OF CASH FLOWS
 
 
FOR THE SIX MONTHS ENDED AUGUST 31, 2020 AND AUGUST 31, 2019
 
 
(Unaudited, in thousands)
 
 
 
For the six months ended
 
 
For the six
 months ended
 
 
 
August 31, 2020
 
 
August 31, 2019
 
 
 
 
 
 
 
 
Net income (loss)
 $1,004 
 $(569)
Adjustments to reconcile net income (loss)
    
    
to net cash provided by operating activities:
    
    
   Depreciation and amortization
  119 
  108 
   Operating lease expense
  188 
  185 
   Net realized and unrealized losses (gains) on investments
  (28)
  1 
   Stock based compensation
  - 
  282 
   Changes in operating assets and liabilities:
    
    
   Accounts receivable
  (403)
  152 
   Inventories
  (298)
  909 
   Prepaid expenses and other current assets
  (131)
  (35)
   Other assets
  1 
    
   Payments on operating lease liabilities
  (204)
  (186)
   Accounts payable
  54 
  (303)
   Customer deposits
  (24)
  33 
Accrued expenses and other current and non-current liabilities
  448 
  (103)
Net cash provided by operating activities
  726 
  474 
 
    
    
Investing activities
    
    
   Proceeds from sale of securities
  272 
  45 
   Purchases of securities
  (272)
  (32)
   Purchases of property and equipment
  (40)
  (68)
Net cash (used in) investing activities
  (40)
  (55)
 
    
    
Financing activities
    
    
   Proceeds from SBA Paycheck Protection Program loan
  807 
  - 
   Purchase of treasury stock
  (6)
  - 
Net cash provided by financing activities
  801 
  - 
 
    
    
Net increase in cash and cash equivalents
  1,487 
  419 
Cash and cash equivalents - beginning of the year
  1,332 
  394 
Cash and cash equivalents - end of period
 $2,819 
 $813 
 
    
    
Non-cash transactions
    
    
   Capitalization of ROU asset and liability
  26 
  1,081 
   Adjustment for Adoption of ASC 842
  - 
  (91)
The accompanying notes are an integral part of the unaudited financial statements.

SOLITRON DEVICES, INC.

NOTESNOTES TO CONDENSED FINANCIAL STATEMENTS

1.ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations and Activities

UNAUDITED
1.        
THE COMPANY AND OPERATIONS
Solitron Devices, Inc., a Delaware corporation (the “Company”(“Solitron,” the “Company,” “we,” “us,” or “Solitron”“our”), 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.

2.        
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation

The unaudited condensed financial statements have been prepared in accordance with United States generally accepted accounting principles (“GAAP”) 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 condensed 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 ninethree and six months ended November 30, 2016August 31, 2020 are not necessarily indicative of the results to be expected for the year endingended February 28, 2017.

2021.

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 29, 2016.

2020.

Cash and Cash Equivalents

Cash and cash equivalents include demand deposits and money market accounts.

Investment in Treasury Bills and Certificates of Deposit

Securities

Investment in treasury billsSecurities includes investments in common stocks and certificates of deposit include treasury bills with maturities of one year or less, and is stated at market value.

All of the Company’s investments are classified as available-for-sale. As they are available for current operations, they are classified as current on the balance sheets.bonds. Investments in available-for-sale securities are reported at fair value with changes in unrecognized gains or losses net ofincluded in other income on the income statement.

The following table summarizes available-for-sale investments (in $000’s):
August 31, 2020
 
 
 
 
Gross
 
 
Gross
 
 
 
 
Marketable Securities:
 
Cost
 
 
Unrealized Gains
 
 
Unrealized Losses
 
 
Fair Value
 
Common Stocks
  200 
  15 
  (22)
  193 
 
    
    
    
    
February 29, 2020
 
 
 
 
Gross
 
 
Gross
 
 
 
 
Marketable Securities:
 
Cost
 
 
Unrealized Gains
 
 
Unrealized Losses
 
 
Fair Value
 
Common Stocks
  155 
  16 
  (7)
  164 
At August 31, 2020 and February 29, 2020, the deferred tax as a component of accumulated other comprehensive incomeliability related to unrecognized gains and is included as a separate component of stockholders’ equity. The Company monitors itslosses on short-term investments for impairment periodically and records appropriate reductions in carrying values when the declines are determined to be other-than-temporary.

As of November 30, 2016, the Company’s available for sale non-equity investments were comprised of certificates of deposits.

As of November 30, 2016, contractual maturities of the Company’s available-for-sale non-equity investments were as follows:

  Face Value  Fair Value 
  (In thousands)  (In thousands) 
Maturing within one year $1,992  $1,993 

was $0.


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:

4

SOLITRON DEVICES, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

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.

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 Company’s brokered Treasury bills and certificates of depositssecurities are subject to level 1 fair value measurement.

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.

Accounts Receivable

Accounts receivable consists of unsecured credit extended to the Company’s customers in the ordinary course of business. The Company reserves for any amounts deemed to be uncollectible based on past collection experiences and an analysis of outstanding balances, using an allowance account. The allowance amount was $2,000$0 as of November 30, 2016August 31, 2020 and February 29, 2016.

2020.

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 or market.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 maintains a three inch wafer fab which procures raw wafers and produces finished wafers based on management’s estimates of projected future demand. Finished wafers are considered work-in-process since they are usable for many years, and in some circumstances can be used on more than one finished product depending on customer parameters.

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 purchased,
Raw material /Work in process: 
All material acquired or processed and/or used in the last two fiscal years is valued at the lower of its acquisition cost or market except for wafers which function under a three year policy. All material not used in the last two fiscal years is fully reserved.
Finished goods:All finished goods with firm orders for later delivery are valued (material and overhead) at the lower of cost or market. 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 amount 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.

Revenue Recognition

Revenue is recognizedvalued 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 m 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.
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:

     Leasehold Improvements           10 years
     Machinery and Equipment         5 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 August 31, 2020, all non-interest bearing checking accounts were FDIC insured to a limit of $250,000. Deposits in excess of FDIC insured limits were approximately $2,344,000 at August 31, 2020. With respect to the account receivables, most of the Company’s products are custom made pursuant to contracts with customers whose end-products are sold to the United States Government. The Company performs ongoing credit evaluations of its customers’ financial condition and maintains allowances for potential credit losses. Actual losses and allowances have historically been within management’s expectations.
Net Income (Loss) Per Common Share
Net income (loss) per common share is presented in accordance with SEC Staff Accounting Bulletin No. 104,Revenue Recognition. This pronouncement requires that four basic criteria be met before revenue can be recognized: 1)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 no stock options outstanding during fiscal 2020 and 2021; therefore, there is evidenceno effect from dilution on earnings per share.
Revenue Recognition
On May 28, 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standard Update (ASU) No. 2014-09, Revenue from Contracts with Customers (Topic 606), 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. The ASU replaces most existing revenue recognition guidance in the United States. The standard permits the use of either the full retrospective or modified retrospective transition method.
Based on a review of its customer contracts, the Company has determined that revenue on the majority of its customer contracts will continue to be recognized at a point in time, generally upon shipment of products, consistent with the Company’s historical revenue recognition model. 

The core principle of the guidance in Topic 606 is that an arrangement exists; 2)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 occurs upon shipment or delivery. 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; 3)occurred, which is generally upon shipment.
In addition, the feeCompany may have a contract or purchase order to provide a non-recurring engineering service to a customer. These contracts are reviewed and performance obligations are determined and we recognize revenue at the point in time in which each performance obligation is fixedfully satisfied.
Effective January 1, 2018, we adopted Topic 606. Since all open contracts at that time were based on a point-in-time recognition model for revenue, there was no impact to retained earnings or determinable;revenue. The future impact of Topic 606 is dependent on the mix and 4) collectability is reasonably assured. nature of specific customer contracts.

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 determination60 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 all criteria for revenue recognition have been met. The criteria are usually metwill 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 timedistributors, current and projected market conditions, and historical experience under the programs. Our estimates require the exercise of product shipment. Shipping terms are generally FCA (Free Carrier) shipping point.

5
significant judgments.  We believe that we have a reasonable basis to estimate future credits under the programs.

SOLITRON DEVICES, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

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 Mr. Aubrey is the majority owner of ES Components. For the six months ended August 31, 2020, the Company purchased $44,792 of die from ES Components. For the six months ended August 31, 2019, the Company purchased $19,425 of die from ES Components. The Company has included these expenses in cost of goods sold in the accompanying statement of operations. The Company occasionally makes sales to ES Components. For the six months ended August 31, 2020 and August 31, 2019, sales were $0.
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. No vesting of stock options or grants occurred during the three and six month periods ended August 31, 2020 or August 31, 2019.
Financial Statement Estimates

The preparation of condensed financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates, and the differences could be material. Such estimates include depreciable life, valuation allowance, and allowance for inventory obsolescence.

Recent Accounting Pronouncements

No recent accounting pronouncements affecting the Company were issued by the Financial Accounting Standards Board or other standards-setting bodies.

2.ENVIRONMENTAL REGULATION

While


3.            
REVENUE RECOGNITION
As of August 31, 2020, and August 31, 2019, sales returns and allowances accrual activity is shown below:
 
 
August 31, 2020
 
 
August 31, 2019
 
Beginning Balance
 $261,000 
 $72,000 
Accrued Allowances
  64,000 
  14,000 
Credits Issued
  - 
  - 
Ending Balance
 $325,000 
 $86,000 
As noted 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 August 31, 2020, and February 29, 2020, the inventory balance at that distributor was believed to be $1,758,000 and $1,387,000, respectively. Based upon sales levels to and by the distributor during the period, inventory levels at the distributors, current and projected market conditions, and historical experience under the programs, we believe it is highly unlikely that the distributor would exercise termination. Should termination occur, we believe the products could be sold to other distributors or held in inventory for future sale.
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, believesany products that it hasare returned within one year after 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 impactdate of semiconductor manufacturing operations.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 August 31, 2020, and February 29, 2020, inventories, net of reserves, consist of the following:
 
 
August 31, 2020
 
 
February 29, 2020
 
Raw Materials
 $899,000 
 $766,000 
Work-In-Process
  2,164,000 
  2,058,000 
Finished Goods
  105,000 
  46,000 
Totals
 $3,168,000 
 $2,870,000 
Wafer related inventory, which includes raw wafers, work-in-process wafers, and wafer bank (completed wafers that are available to be consumed in the conductCompany’s products), net of its manufacturing operations, has handledreserves, totaled $1,244,000 as of August 31, 2020 and does handle materials that are considered hazardous, toxic or volatile under federal, state and local laws and, therefore, is subject$1,239,000 as of February 29, 2020. Wafer production was temporarily curtailed during fiscal 2020 due to regulations related to their use, storage, discharge and disposal. No assurance can be made thatimplementation of an improvement plan, which was completed in the riskfirst quarter of accidental releasefiscal 2021. As 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. In addition, the Company, along with the restAugust 31, 2020, 100% of the semiconductor industry,wafer bank inventory consisted of wafers manufactured between calendar year 2016 and 2021. We do not expect all of our wafer inventory to be consumed within twelve months; however, since it is subjectnot possible 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 subsidiariesknow which wafers will or 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.

3.EARNINGS PER SHARE

The shares used, in the computation of the Company’s basic and diluted earnings per common share werewe classify all our inventory as follows:

  For the three months ended November 30,  For the nine months ended November 30, 
  2016  2015  2016  2015 
Weighted average common shares outstanding  1,901,950   2,290,779   2,075,288   2,249,759 
Dilutive effect of employee stock options  0   161,012   0   0 
Weighted average common shares outstanding, assuming dilution  1,901,950   2,451,791   2,075,288   2,249,759 

Weighted average common shares outstanding, assuming dilution, include the incremental shares that would be issued upon the assumed exercise of stock options.

4.INVENTORIES

current.


5.            
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
As of November 30, 2016, inventories consisted of the following:

  Gross  Reserve  Net 
Raw Materials $2,051,000  $(687,000) $1,364,000 
Work-In-Process  3,945,000   (1,742,000)  2,203,000 
Finished Goods  939,000   (823,000)  116,000 
Totals $6,935,000  $(3,252,000) $3,683,000 

6

SOLITRON DEVICES, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

As of February 29, 2016, inventories consisted of the following:

  Gross  Reserve  Net 
Raw Materials $1,854,000  $(489,000) $1,365,000 
Work-In-Process  3,915,000   (1,775,000)  2,140,000 
Finished Goods  980,000   (814,500)  165,500 
Totals $6,749,000  $(3,078,500) $3,670,500 

5.INCOME TAXES

At November 30, 2016, the Company has net operating loss carryforwards of approximately $10,016,000 that expire through February 2028. Such net operating losses are available to offset future taxable income, if any. As the utilization of such net operating losses for tax purposes is not assured, the deferred tax asset has been fully reserved through the recording of a 100% valuation allowance. Should a cumulative change in the ownership of more than 50% occur within a three-year period, there could be an annual limitation on the use of the net operating loss carryforwards.

Net operating losses after 1996 are subject to a twenty-year loss carryforward. Of the Company’s $10,016,000 of net operating loss carryforwards as of November 30, 2016, approximately $1,254,000 expire in 2021, $1,248,000 expire in 2022, and $7,514,000 expire in 2028.

6.ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

As of November 30, 2016August 31, 2020, and February 29, 2016,2020, accrued expenses and other current liabilities consistedconsist of the following:

  November 30,
2016		  February 29,
2016		 
Payroll and related employee benefits $372,000  $447,000 
Property taxes  43,000   10,000 
Other liabilities  57,000   40,000 
Totals $472,000  $497,000 

7.EXPORT SALES AND MAJOR CUSTOMERS

Revenues from domestic and export sales to unaffiliated customers for the three months ended November 30, 2016 are as follows:

  Power     Field Effect  Power    
Geographic Region Transistors  Hybrids  Transistors  MOSFETS  Totals 
Europe and Australia $2,000  $0  $3,000  $24,000  $29,000 
Canada and Latin America  4,000   0   0   0   4,000 
Far East and Middle East  0   0   11,000   0   11,000 
United States  350,000   1,358,000   82,000   311,000   2,101,000 
Totals $356,000  $1,358,000  $96,000  $335,000  $2,145,000 

7

SOLITRON DEVICES, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

Revenues from domestic and export sales to unaffiliated customers for the three months ended November 30, 2015 are as follows:

  Power     Field Effect  Power    
Geographic Region Transistors  Hybrids  Transistors  MOSFETS  Totals 
Europe and Australia $0  $0  $3,000  $0  $3,000 
Canada and Latin America  9,000   0   1,000   40,000   50,000 
Far East and Middle East  15,000   5,000   7,000   99,000   126,000 
United States  259,000   698,000   138,000   645,000   1,740,000 
Totals $283,000  $703,000  $149,000  $784,000  $1,919,000 

Revenues from domestic and export sales to unaffiliated customers for the nine months ended November 30, 2016 are as follows:

  Power     Field Effect  Power    
Geographic Region Transistors  Hybrids  Transistors  MOSFETS  Totals 
Europe and Australia $13,000  $0  $8,000  $24,000  $45,000 
Canada and Latin America  13,000   0   0   0   13,000 
Far East and Middle East  83,000   0   16,000   83,000   182,000 
United States  799,000   3,941,000   251,000   602,000   5,593,000 
Totals $908,000   3,941,000  $275,000  $709,000  $5,833,000 

Revenues from domestic and export sales to unaffiliated customers for the nine months ended November 30, 2015 are as follows:

  Power     Field Effect  Power    
Geographic Region Transistors  Hybrids  Transistors  MOSFETS  Totals 
Europe and Australia $0  $0  $12,000  $0  $12,000 
Canada and Latin America  18,000   0   25,000   40,000   83,000 
Far East and Middle East  19,000   5,000   36,000   245,000   305,000 
United States  965,000   3,023,000   422,000   1,704,000   6,114,000 
Totals $1,002,000  $3,028,000  $495,000  $1,989,000  $6,514,000 

 
 
August 31, 2020
 
 
February 29, 2020
 
Payroll and related employee benefits
 $337,000 
 $303,000 
Legal fees
  1,000 
  - 
Property taxes
  22,000 
  8,000 
Return Allowance
  325,000 
  126,000 
Bonus Accrual
  200,000 
  - 
Other liabilities
  9,000 
  - 
Totals
 $894,000 
 $437,000 
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 August 31, 2020 and August 31, 2019, respectively are as follows:

Geographic Region
 
August 31, 2020
 
 
August 31, 2019
 
Europe and Australia
  - 
  - 
Canada and Latin America
  7,000 
  - 
Far East and Middle East
  - 
  - 
United States
  3,096,000 
  2,420,000 
Totals
 $3,103,000 
 $2,420,000 
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 six months ended August 31, 2020 and August 31, 2019, respectively are as follows:
Geographic Region
 
August 31, 2020
 
 
August 31, 2019
 
Europe and Australia
  - 
  - 
Canada and Latin America
  13,000 
  4,000 
Far East and Middle East
  9,000 
  - 
United States
  5,579,000 
  4,973,000 
Totals
 $5,601,000 
 $4,977,000 
For the quarterthree months ended November 30, 2016,August 31, 2020 and August 31, 2019, approximately 72% and 74%, respectively, of the Company’s sales have been attributable to contracts with customers whose products are sold to the United States government. The remaining 28% and 26%, respectively of sales are for non-military, scientific and industrial applications, or to distributors where we do not have end user information.
For the six months ended August 31, 2020 and August 31, 2019, approximately 67% and 76%, respectively, of the Company’s sales have been attributable to contracts with customers whose products are sold to the United States government. The remaining 33% and 24%, respectively of sales are for non-military, scientific and industrial applications, or to distributors where we do not have end user information.

Revenues from the Company’s top two customers consisted offor the following:

Customer% of Sales
Raytheon Company74%
United States Government12%
86%

For the quarterthree months ended November 30, 2015, sales toAugust 31, 2020 and August 31, 2019, respectively are as follows:

Customer
 
August 31, 2020
 
 
August 31, 2019
 
Raytheon
  60%
  55%
Avnet / USI Electronics
  12%
  17%
Totals
  72%
  72%
Revenues from the Company’s top two customers consisted offor the following:

Customer% of Sales
Raytheon Company54%
United States Government10%
64%

8
six months ended August 31, 2020 and August 31, 2019, respectively are as follows:

SOLITRON DEVICES, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

Customer
 
August 31, 2020
 
 
August 31, 2019
 
Raytheon
  56%
  56%
Avnet / USI Electronics
  18%
  14%
Totals
  74%
  70%
7.            
MAJOR SUPPLIERS
For the ninethree months ended November 30, 2016, sales to the Company’s top two customers consistedAugust 31, 2020, Stellar Industries accounted for 14% of the following:

Customer% of Sales
Raytheon Company68%
United States Government11%
79%

purchases of production materials, and all other suppliers were individually less than 10% of purchases. For the ninethree months ended November 30, 2015, sales to the Company’s top two customers consistedAugust 31, 2019, no supplier accounted for 10% or more of the following:

Customer% of Sales
Raytheon Company51%
United States Government12%
63%

8.purchases of production materials.
MAJOR SUPPLIERS

For the quartersix months ended November 30, 2016,August 31, 2020, purchases from the Company’s top two vendors consisted supplier, Egide USA, accounted for 24%of the following:

Vendor% of Purchases
Egide, USA17%
Air Products and Services12%
29%

Company's total purchases of production materials, with all other suppliers individually less than 10% of purchases. For the quartersix months ended November 30, 2015,August 31, 2019, purchases from the Company’s top two vendors consistedsupplier, Egide USA, accounted for 23% of the following:

Company’s total purchases of production materials, with all other suppliers individually less than 10% of purchases.
8.
COMMITMENTS AND CONTINGENCIES
The balance sheet classification of lease assets and liabilities as of August 31, 2020 was as follows:
VendorBalance Sheet Classification% of Purchases
August 31, 2020
Egide, USAAssets28%
SintermetalglassOperating lease right-of-use assets, March 1, 2020
$723,000
Amortization for the six months ended August 31, 2020
(188,000)
Total operating lease right-of-use asset, August 31, 202017
$535,000
Liabilities%
Current
   Operating lease liability, short-term45%

For the nine months ended November 30, 2016, purchases from the Company’s top two vendors consisted of the following:

Vendor% of Purchases
$437,000
Egide, USANon-current21%
Air Products10%
   Operating lease liability, long-term31%

For the nine months ended November 30, 2015, purchases from the Company’s top two vendors consisted of the following:

Vendor% of Purchases
153,000
Wuxi Streamtek LTDTotal lease liabilities18%
Sintermetalglass17%
35%

9$590,000

SOLITRON DEVICES, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

9.COMMITMENTS AND CONTINGENCIES


Future minimum lease payments as of August 31, 2020 for the Company’s manufacturing facility are as follows:

Fiscal Year Ending February 28/29 Amount 
2017 $107,000 
2018  440,000 
2019  454,000 
2020  467,000 
2021  481,000 
Thereafter  411,000 
  $2,360,000 

Fiscal Year Ending February 28/29
 
Amount
 
2021
  228,000 
2022
  388,000 
Total Future Undiscounted Cash Flows
 $616,000 
Less Imputed Interest to be recognized in lease expense
  26,000 
Operating Lease Liabilities, as reported
 $590,000 
The balance sheet classification of lease assets and liabilities as of February 29, 2020 was as follows:
10.Balance Sheet Classification
PAYMENT OF DIVIDENDFebruary 29, 2020
Assets
Operating lease right-of-use assets, March 1, 2019
$1,081,000
Amortization for the fiscal year ended February 29, 2020
(358,000)
Total operating lease right-of-use asset, February 29, 2020
$723,000
Liabilities
Current
   Operating lease liability, short-term
$417,000
Non-current
   Operating lease liability, long-term
377,000
Total lease liabilities
$794,000

Future minimum lease payments as of February 29, 2020 for the Company’s manufacturing facility was as follows:
Fiscal Year Ending February 28/29
 
Amount
 
2021
  454,000 
2022
  388,000 
Total Future Undiscounted Cash Flows
 $842,000 
Less Imputed Interest to be recognized in lease expense
  48,000 
Operating Lease Liabilities, as reported
 $794,000 

9.
NOTES PAYABLE
On July 22, 2020, the Company received loan proceeds of $807,415 under the Paycheck Protection Program (the “PPP Loan”). The Paycheck Protection Program (“PPP”) was established under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) and is administered by the U.S. Small Business Administration (“SBA”). The PPP Loan to the Company is being made through Bank of America, N.A., a national banking association. The PPP Loan matures on July 21, 2025 and bears interest at a rate of 1% per annum. Payments of principal and interest on the loan will be deferred through October 31, 2021. The Note may be prepaid by the Company at any time prior to maturity with no prepayment penalties. Funds from the PPP Loan may only be used for payroll costs, costs used to continue group health care benefits, mortgage payments, rent, utilities, and interest on certain other debt obligations. The Company intends to use the entire PPP Loan amount for qualifying expenses. Under the terms of the PPP, certain amounts of the PPP Loan may be forgiven if they are used for qualifying expenses as described in the CARES Act.
10.
EQUITY
Repurchase Program
The Board of Directors of the Company did not declare a cash dividend during the three and nine months ended November 30, 2016. In July 2015, the Company paid a dividend of $0.25 per share to all stockholders of record at the close of business on June 29, 2015. The aggregate dividend payment was approximately $575,000.

11.STOCK REPURCHASE PROGRAM

On May 29, 2015, the Board of Directors of the Companyhas authorized a stock repurchase program under which the Company may repurchase up to $500,000 of the Company’s common stock through February 29, 2016. On July 28, 2015, the Company announced that the Board of Directors had expanded the stock repurchase program to cover repurchases of up to $1,000,000$1.0 million of its outstanding common stock from time to time through February 29, 2016. On November 20, 2015,stock. Purchases under the Company purchased for $279,616 a total of 65,027 shares of the Company’s common stock pursuant to the repurchase program. On January 15, 2016, the Board of Directors of the Company amended the repurchase program under which the Company may repurchase up to $1,000,000 of its outstanding common stock without an expiration date to the repurchase program. Under the repurchase program, repurchases may be made by the Company from time to time onthrough the open market or in privately negotiated transactions dependingas determined by the Company’s management, and in accordance with the requirements of the Securities and Exchange Commission. The timing and actual number of shares repurchased will depend on market conditions, stocka variety of factors including price, corporate and regulatory requirements and other factors. conditions.

The Company did not repurchase any outstanding common stockrepurchased 2,493 shares under the stock repurchase program during the three months ended August 31, 2020, at a total cost of $5,734, or $2.30 per share.
Stock Compensation
On June 28, 2019 the Board approved restricted stock grants totaling 161,000 shares: 120,000 shares to COO and President Mark Matson, 15,000 shares to CEO Tim Eriksen, 8,000 shares to Board Chairman David Pointer, and 6,000 shares each to Directors John Chiste, Dwight Aubrey, and Charles Gillman. Fair value was approximately $282,000 based on then current price of $1.75 per share.
11.
SUBSEQUENT EVENTS
On November 13, 2020, the Company granted Mr. Eriksen and Mr. Matson the option to receive half of their bonuses in shares instead of cash, which both elected. Mr. Eriksen received 7,669 shares and Mr. Matson received 15,337 shares. Shares were issued under the 2019 Stock Incentive Plan.
On March 1, 2021, the Company entered into a Commercial Contract with 901 Sansbury LLC to purchase a facility and real estate property in West Palm Beach, Florida for a purchase price of $4,200,000. Subject to due diligence, the Company expects to close the transaction on April 15, 2021, unless extended. Assuming the Company closes the contract, it expects to begin making the necessary improvements to the property in order to completely relocate its manufacturing operation and corporate headquarters later in the three and nine months ended November 30, 2016. See Note 12 for shares and options repurchased from the former Chief Executive Officer that were not pursuant to the stock repurchase program.

12.RETIREMENT OF FORMER CHIEF EXECUTIVE OFFICER

On July 22, 2016, Shevach Saraf retired as Chairman, Chief Executive Officer, President, Chief Financial Officer, Treasurer and a member of the Board of Directors of the Company. The Separation Payment and Additional Consideration (as defined below) pursuant to the Separation Agreement entitled to Mr. Saraf included the following payments and benefits related to the repurchase of shares.

●a payment of one million two hundred ninety-four thousand three hundred fifteen dollars and ffty-seven cents ($1,294,315.57) representing the aggregate purchase price for the Company’s purchase of Mr. Saraf’s ownership of 331,027 shares of the Company’s common stock (the “Purchase Price”), of which $82,757 represented an excess paid over fair value on the Separation Date;

●a payment of nine hundred ninety-five thousand one hundred fourteen dollars and thirty-eight cents ($995,114.38) representing the aggregate payment by the Company to Mr. Saraf for the exercisable stock options held by Mr. Saraf for 290,073 shares of the Company’s common stock pursuant to his stock option agreements (the “Option Payment”), of which $69,753 represented an excess paid over fair value on the Separation Date using Black-Sholes calculations with a Risk Free Interest Rate of .55%, a Volatility of 29.2% and a Life of one year consistent with the contract expiration of these options.

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2021 calendar year.

Item 2.Management’s Discussion and Analysis of FINANCIAL CONDITION AND RESULTS of operations


Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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 financial statements should be read in conjunction with the 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 29, 20162020 and the Unaudited Condensed Financial Statements and the related Notes to Unaudited Condensed Financial Statements included in Item 1 of this Quarterly Report on Form 10-Q.

Significant Accounting Policies:

The discussion and analysis of our financial condition and results of operations are based upon the unaudited condensed financial statements included elsewhere in this Quarterly Report on Form 10-Q which are prepared in accordance with accounting principles generally accepted in the United States. Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. These estimates and assumptions are affected by management’s application of accounting policies. Our critical accounting policies include cash and cash equivalents, investment in Treasury bills and Certificates of Deposit,securities, revenue recognition, earnings per common share, shipping and handling, and inventories. A discussion of these critical accounting policies are included in Note 12 of the “Notes To Financial Statements” in Item 8 of our Annual Report on Form 10-K for the fiscal year ended February 29, 2016.

2020.

Trends and Uncertainties:

During the three months ended November 30, 2016, the Company’s book-to-bill ratio was approximately 1.08 as compared to approximately 0.34 for the three months ended November 30, 2015, reflecting an increase in the volume of orders booked. In recent years, the Company has experienced seasonality in its bookings, with the fiscal fourth quarter experiencing the highest level of bookings. The Company expects bookings in the fourth quarter of fiscal 2017 to exceed bookings in the fourth quarter of fiscal 2016, which were $4.4 million.

During the quarter, the Company was advised by one of its key customers that it was in the process of seeking out additional or alternative sources for some of the Company’s products with that customer. The Company is addressing the concerns of the customer, and subsequent to quarter end received a purchase order for the impacted products for fiscal year 2018, but it is uncertain if the Company will be successful in addressing the customer’s concerns over the long term.

Since the management change on July 22, 2016, the Company has been seeking out additional revenue sources, which may involve new products and/or products the Company has not manufactured in recent years. During the quarter, the Company received purchase orders in excess of $1.7 million from a new customer for products the company has not manufactured in recent years. The Company may incur difficulty manufacturing those products, which could result in decreased margins. Most of the products require testing over an extended duration which could result in a temporary increase in work in process and finished goods inventory until the testing is completed prior to shipment. The Company is restructuring operations to support processes for these and other potential new products.

Results of Operations-Three Months Ended November 30, 2016August 31, 2020 Compared to Three Months Ended November 30, 2015August 31, 2019:

Net sales for the three months ended November 30, 2016August 31, 2020 increased 12%28% to $2,145,000$3,103,000 as compared to $1,919,000$2,420,000 for the three months ended November 30, 2015. This increase was primarily attributableAugust 31, 2019.
Net bookings for the three months ended August 31, 2020 decreased 56% to an increase in$1,683,000 versus $3,827,000 during the valuethree months ended August 31, 2019. Backlog as of orders that were shipped in accordance with customer requirements.

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August 31, 2020 decreased 21% to $5,428,000 as compared to a backlog of $6,839,000 as of August 31, 2019.

Cost of sales for the three months ended November 30, 2016August 31, 2020 increased to $1,671,000$1,978,000 from $1,549,000$1,958,000 for the three months ended November 30, 2015,August 31, 2019, due to higher rawincreased materials associated with increased sales and an increase in inventory reserves,cost partially offset by lowerdecreased labor costs.costs and improved productivity. Expressed as a percentage of net sales, cost of sales decreased to 78%64% for the three months ended November 30, 2016August 31, 2020 from 81% for the three months ended November 30, 2015.

August 31, 2019.

Gross profit for the three months ended November 30, 2016August 31, 2020 increased to $474,000$1,125,000 from $370,000$462,000 for the three months ended November 30, 2015,August 31, 2019, due primarily to higherincreased net sales. Accordingly, gross margins on the Company’s net sales increased to 22%36% for the three months ended November 30, 2016 in comparisonAugust 31, 2020 as compared to 19% for the three months ended November 30, 2015.

August 31, 2019.

For the three months ended November 30, 2016, the CompanyAugust 31, 2020, we shipped 15,37523,343 units as compared to 23,82320,955 units shipped during the same period of the prior year. It should be noted that since the Company manufactureswe manufacture a wide variety of products with an average sales price ranging from less than one dollara few dollars to several hundred dollars, such periodic variations in the Company’sour volume of units shipped should not be regarded as a reliable indicator of the Company’sour performance.

For the three months ended November 30, 2016, the Company’s backlog of open orders increased 40% to $4,650,000 as compared to the backlog of $3,324,000 as of November 30, 2015. Changes in backlog reflect changes in the intake of orders and in the delivery requirements of customers.

The Company experienced an increase of 255% to $2,310,000 in the level of bookings during the three months ended November 30, 2016 as compared to $651,000 for the same period in the prior year. The increase in bookings for the three months ended November 30, 2016 is principally a result of an increase in the placement of orders by key customers, resulting in an increase in the monetary value of, and timing differences in, the placement of contracts by the Department of Defense and its prime contractors.

Selling, general, and administrative expenses decreased to $323,000$526,000 for the three months ended November 30, 2016August 31, 2020 from $351,000$779,000 for the same period in the prior year. The decrease reflects a credit relatedwas due to the reversal of an over accrual from the prior quarter for $80,000 and a decrease indecreased stock compensation expense, legal fees of $76,000 in the prior year,and travel expense, partially offset by an increase in selling wages, commissions, and travel expenses of $58,000 related to the Director of Sales position being vacant in the prior year period, and $39,000 in annual meeting expenses that were expensed in the November quarter versus the August quarter in the prior year due to the annual meeting occurring later in the calendar year.bonus accrual. During the three months ended November 30, 2016,August 31, 2020, selling, general and administrative expenses as a percentage of net sales decreased to 15%17% as compared to 18%32% for the three months ended November 30, 2015.

August 31, 2019.


Operating income for the three months ended November 30, 2016August 31, 2020 increased 695% to $151,000$599,000 as compared to an operating incomeloss of $19,000($317,000) for the three months ended November 30, 2015.August 31, 2019. This increase is due primarily to higherincreased net sales as described above.

and the decrease in selling, general, and administrative expense.

Interest and dividend income for the three months ended NovemberAugust 31, 2020 and August 30, 2016 increased to $9,000 as compared to $6,0002019, was consistent at $1,000. Realized gains on investments for the three months ended November 30, 2015. The interest income is primarily driven by the rateAugust 31, 2020 increased to $11,000 as compared to a loss of return on funds invested in certificates of deposit and treasury bills.

Other income($4,000) for the three months ended November 30, 2016 increased to $3,000August 31, 2019. Unrealized gains on investments for the three months ended August 31, 2020 were $24,000 as compared to $0 for the three months ended November 30, 2015.

August 31, 2019.

Net income for the three months ended November 30, 2016August 31, 2020 increased 715% to $163,000$635,000 as compared to a net incomeloss of $20,000($320,000) for the three months ended November 30, 2015.August 31, 2019. This increase is due primarily to an increase inincreased net sales, decreased cost of sales as a percentage of revenue as described above, and lower selling, general and administrative expenses as described above.

Results of Operations-NineOperations-Six Months Ended November 30, 2016August 31, 2020 Compared to NineSix Months Ended November 30, 2015August 31, 2019:

Net sales for the ninesix months ended November 30, 2016 decreased 10%August 31, 2020 increased 13% to $5,833,000$5,601,000 as compared to $6,514,000$4,977,000 for the ninesix months ended November 30, 2015. This was primarily attributableAugust 31, 2019.
Net bookings for the six months ended August 31, 2020 decreased 45% to $3,143,000 versus $5,700,000 during the six months ended August 31, 2019. Backlog as of August 31, 2020 decreased 21% to $5,428,000 as compared to a decrease in the numberbacklog of units sold and the corresponding value$6,839,000 as of the orders that were shipped in accordance with customer requirements during the nine months ended November 30, 2016.

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August 31, 2019.

Cost of sales for the ninesix months ended November 30, 2016August 31, 2020 decreased to $4,847,000$3,620,000 from $5,076,000$4,324,000 for the ninesix months ended November 30, 2015, mostlyAugust 31, 2019, due to decreased inventory obsolescence, raw materials and labor costs, due to the reduction in net sales, and a shift in the mix of products manufactured.improved productivity. Expressed as a percentage of net sales, cost of sales increaseddecreased to 83%65% for the ninesix months ended November 30, 2016August 31, 2020 from 78%87% for the ninesix months ended November 30, 2015.

August 31, 2019.

Gross profit for the ninesix months ended November 30, 2016 decreasedAugust 31, 2020 increased to $986,000$1,981,000 from $1,438,000$653,000 for the ninesix months ended November 30, 2015,August 31, 2019, due primarily to the reduction inincreased net sales and lower cost of sales. Accordingly, gross margins on the Company’s sales decreasedincreased to 17%35% for the ninesix months ended November 30, 2016 in comparisonAugust 31, 2020 as compared to 22%13% for the ninesix months ended November 30, 2015.

August 31, 2019.

For the ninesix months ended November 30, 2016, the CompanyAugust 31, 2020, we shipped 52,31748,511 units as compared to 64,25035,147 units shipped during the same period of the prior year. It should be noted that since the Company manufactureswe manufacture a wide variety of products with an average sales price ranging from less than one dollara few dollars to several hundred dollars, such periodic variations in the Company’sour volume of units shipped should not be regarded as a reliable indicator of the Company’sour performance.

For the nine months ended November 30, 2016, the Company’s backlog of open orders decreased 20% to $4,650,000 as compared to the backlog of open orders of $5,832,000 as of February 29, 2016. The Company’s backlog of $4,650,000 as of November 30, 2016 was 40% higher as compared to the backlog of open orders of $3,324,000 as of November 30, 2015. Changes in backlog resulted from changes in the intake of orders and in the delivery requirements of customers.

The Company has experienced an increase of 76% to $4,651,000 in the level of bookings during the nine months ended November 30, 2016 when compared to $2,648,000 during the nine months ended November 30, 2015. The increase occurred principally as a result of increases in the placement of orders by key customers, resulting in an increase in the monetary value of, and timing differences in, the placement of contracts by the Department of Defense and its prime contractors.

Selling, general, and administrative expenses increaseddecreased to $2,508,000$1,012,000 for the ninesix months ended November 30, 2016August 31, 2020 from $1,573,000$1,223,000 for the same period in the prior year. The increase in costsdecrease was primarily due to costs associated with the separation agreement the Company entered into with its former CEOdecreased bonus accrual/expense and certain proxy reimbursement expenses as reported in the Company’s 8-K filing on July 27, 2016. Costs related to the separation agreement included $627,000 of payments associated with the retirement of the former Chief Executive Officer, $22,000 of associated payroll taxes, $100,000 oflower legal fees, salaries and $170,000 of proxy settlement costs.travel expense. During the ninesix months ended November 30, 2016,August 31, 2020, selling, general and administrative expenses as a percentage of net sales increaseddecreased to 43%18% as compared to 24%25% for the ninesix months ended November 30, 2015.

August 31, 2019.

Operating income for the ninesix months ended November 30, 2016 decreased 1,027%August 31, 2020 increased to an operating loss of $1,522,000$969,000 as compared to an operating loss of $135,000($570,000) for the ninesix months ended November 30, 2015.August 31, 2019. This decreaseincrease is due primarily to higherincreased net sales, lower cost of sales and decreased selling general and administrative expenses and the lower net sales as described above.

The Company recorded total other

Interest and dividend income of $32,000 for the ninesix months ended November 30, 2016August 31, 2020 increased to $7,000 as compared to total other income of $18,000$2,000 for the ninesix months ended November 30, 2015. Included in other incomeAugust 31, 2019. Realized gains on investments for the ninesix months ended November 30, 2016 was $29,000August 31, 2020 increased to $26,000 as compared to a loss of interest income on investment in treasury bills and certificates of deposit, and $3,000 of other income. Included in total other income($20,000) for the ninesix months ended November 30, 2015 was $18,000August 31, 2019. Unrealized gains on investments for the six months ended August 31, 2020 were $2,000 as compared to a gain of interest income on investment in treasury bills and certificates of deposit, and $0 of other income.

$19,000 for the six months ended August 31, 2019.

Net income for the ninesix months ended November 30, 2016 decreasedAugust 31, 2020 increased to $1,004,000 as compared to a net loss of $1,490,000 from a net loss of $122,000($569,000) for the same period in 2015.six months ended August 31, 2019. This decreaseincrease is due primarily to lowerincreased net sales volume and an increase in selling, general and administrative expensesdecreased cost of sales as described above.


Liquidity and Capital Resources:

Operating Activities:

Net cash used in operating activities was $1,904,000 for the nine months ended November 30, 2016 primarily reflecting a net loss of $1,490,000 and an increase in accounts receivable of $856,000 offset by increases in accounts payable of $330,000 and depreciation and amortization of $145,000.

Net cash provided by operating activities was $482,000$726,000 for the ninesix months ended November 30, 2015August 31, 2020 primarily reflecting net income of $1,004,000, an increase in accrued expenses and other current and non-current liabilities of $448,000, depreciation and amortization of $119,000, partially offset by increases in accounts receivable of $403,000, inventories of $298,000 and prepaid and other expenses of $131,000.
Net cash provided by operating activities was $474,000 for the six months ended August 31, 2019 primarily reflecting a net loss of $122,000($569,000) offset by a decrease in inventory of $909,000, stock compensation expense of $282,000 and a decrease in accounts receivable of $516,000 and inventory of $404,000 and by depreciation and amortization of $162,000$152,000, partially offset by a decrease in accountaccounts payable of $235,000$303,000 and by accrued expenses and other current and non-current liabilities of $228,000.

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$103,000.

Investing Activities:

Net cash provided byused in investing activities was $4,537,000($40,000) for the ninesix months ended November 30, 2016August 31, 2020 principally reflecting $4,748,000$272,000 in salesproceeds from the sale of treasury bills and certificates of deposit, $0securities, offset by $272,000 in purchases of treasury billssecurities and certificates of deposit, and $211,000$40,000 in purchases of property, plant and equipment.

Net cash (used in) investing activities was ($55,000) for the six months ended August 31, 2019 principally reflecting $45,000 in proceeds from sale of securities, offset by $32,000 in purchases of securities and $68,000 in purchases of plant, property and equipment.
Financing Activities:
Net cash provided by investing activities was $336,000 for the nine months ended November 30, 2015 principally reflecting $5,478,000 in sales of treasury bills and certificates of deposit, $4,992,000 in purchases of treasury bills and certificates of deposit, and $150,000 in purchases of property, plant and equipment.

Financing Activities:

Net cash used in financing activities was $2,137,000$801,000 for the ninesix months ended November 30, 2016August 31, 2020 principally reflecting payments for the repurchase of common stock and options associated with the retirementproceeds of the former Chief Executive Officer.

NetSBA Paycheck Protection Program loan.

There was no net cash used inor provided by financing activities was $843,000 forduring the ninesix months ended November 30, 2015 primarily reflecting a $575,000 dividend paid to stockholders and $279,000 paid to a stockholder in connection with a privately negotiated stock repurchase offset by $11,000 from stock option exercises by the Company’s employees.

Subject to the following discussion, the Company expects itsAugust 31, 2019.

We expect our sole source of liquidity over the next twelve months to come frombe cash generated from operations cash on hand and cash invested in money market funds, Treasury bills and certificates of deposit. The Company anticipatescash equivalents, if necessary. We anticipate that itsour capital expenditures required to sustain operations will be approximately $250,000$300,000 during the next twelve months and will be funded from operations and/or available cash.

Based upon management’s best information as to current national defense priorities, future defense programs, the shift to Commercial Off-The-Shelf (COTS) by the defense industry, and the continued competition in the defense and aerospace market, the Company believes that it will have sufficient cash on hand and cash from operations to satisfy its operating needs over the next twelve months.

Over the long-term, based on these factors and at the current level of bookings, costs of raw materials and services, profit margins and sales levels, the Company believes that it will generate sufficient cash from operations to satisfy its operating needs over the next twelve months. In the event that bookings in the long-term decline significantly below the level experienced during the previous two fiscal years, the Company may be required to implement further cost-cutting or other downsizing measures to continue its business operations. Such cost-cutting measures could inhibit future growth prospects. In appropriate situations, the Company may seek strategic alliances, joint ventures with others or acquisitions in order to maximize marketing potential and utilization of existing resources and provide further opportunities for growth.

equivalents, if necessary.

At November 30, 2016 andAugust 31, 2020, February 29, 2016, the Company2020, and August 31, 2019, we had cash on handand cash equivalents of approximately $1,130,000$2,819,000, $1,332,000, and $634,000,$813,000, respectively. The cash increase for the ninesix months ended November 30, 2016August 31, 2020 was primarily due to income from operations and the sale of treasury bills and certificates of deposit.

SBA Paycheck Protection Program loan.

At November 30, 2016 andAugust 31, 2020, February 29, 2016, the Company2020, and August 31, 2019, we had investments in treasury bills and certificates of depositsecurities of approximately $1,993,000$193,000, $164,000, and $6,740,000,$65,000, respectively.

At November 30, 2016, the CompanyAugust 31, 2020, February 29, 2020, and August 31, 2019, we had working capital of $7,376,000 as compared with a working capital at February 29, 2016 of $11,068,000.$6,526,000, $4,687,000, and $4,699,000, respectively. The working capital decreaseincrease for the ninesix months ended November 30, 2016August 31, 2020 was due primarily due to cash used in operations and financing activities.

income from operations.

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 continue to consider additional share repurchases under the Company's stock repurchase program.

Cash Dividend:

The Board of Directors of the Company did not declare a cash dividend during the threeprogram subject to market conditions, corporate liquidity requirements and nine months ended November 30, 2016. In July 2015, the Company paid a dividend of $0.25 per share to all stockholders of record at the close of business on June 29, 2015. The aggregate dividend payment was approximately $575,000.

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Stock Repurchase Program:

On May 29, 2015, the Company announced that its Board of Directors authorized a stock repurchase program under which the Companypriorities and other factors as may repurchase up to $500,000 of its outstanding common stock from time to time through February 29, 2016. On July 28, 2015, the Company announced that the Board of Directors had expanded the stock repurchase program to cover repurchases of up to $1,000,000 of its outstanding common stock from time to time through February 29, 2016. On November 20, 2015, the Company purchased for $279,616 a total of 65,027 shares ofbe considered in the Company’s common stock pursuant to the repurchase program. On January 15, 2016, the Board of Directors of the Company amended the repurchase program under which the Company may repurchase up to $1,000,000 of its outstanding common stock without an expiration date to the repurchase program. Under the repurchase program, repurchases may be made by the Company from time to time on the open market or in privately negotiated transactions depending on markets conditions, stock price, corporate and regulatory requirements, and other factors.

The Company did not repurchase any shares under the stock repurchase program during the nine months ended November 30, 2016. See Note 12 of the Form 10-Q for the quarter ended August 31, 2016 for shares and options repurchased from the former Chief Executive Officer that were not pursuant to the stock repurchase program.

sole discretion.

Off-Balance Sheet Arrangements:

The Company has not engaged in any off-balance sheet arrangements.

Forward Looking Statements:


FORWARD-LOOKING STATEMENTS
Some of the statements in this Quarterly Report on Form 10-Q are "forward-looking statements," as that term is defined in the Private Securities Litigation Reform Act of 1995.“forward-looking statements”. These forward-looking statements include statements regarding our business, financial condition, results of operations, strategies or prospects. 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 29, 2016,2020, 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:

●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 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.
●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.
●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.
●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.
●Downturns in the business cycle 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.
●Cost reduction efforts may be unsuccessful or insufficient to improve our profitability and may adversely impact productivity.
●We may not achieve the intended effects of our business strategy, which could adversely impact our business, financial condition and results of operations.
●A shortage of three-inch silicon wafers could result in lost revenues due to an inability to build our products.

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●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 and rights agreement 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 promise 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.
●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 at historic rates or at all, 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 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.

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ITEM 4.CONTROLS AND PROCEDURES

●
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.
●
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.
●
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 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 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.
●
The COVID-19 pandemic may have a material adverse effect on our business, cash flows and results of operations.

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 disclosure controls and procedures were not effective as of November 30, 2016August 31, 2020 due to the material weakness described in the Company’s Annual Report on Form 10-K for the year ended February 29, 20162020 under “Management’s Report on Internal Control over Financial Reporting”. 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 November 30, 2016.

August 31, 2020.

Changes in Internal Control over Financial Reporting.

Other than the changes referenced in the Company’s Annual Report on Form 10-K for the year ended February 29, 20162020 under “Management’s Report on Internal Control over Financial Reporting”, there were no changes in the Company’s internal control over financial reporting during the third quarter ended November 30, 2016August 31, 2020 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

17


PARTPART II– OTHER INFORMATION

ITEM 1.LEGAL PROCEEDINGS

ITEM 1. LEGAL PROCEEDINGS
We may from time to time become a party to various legal proceedings arising in the ordinary course of business. As of November 30, 2016,August 31, 2020, we had no known material current, pending, or threatened litigation.

ITEM 1A. RISK FACTORS
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 29, 2020, which could materially affect our business, financial condition or future results.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Share repurchase activity during the three months ended August 31, 2020, was as follows:
Period
 
Total
Number
of Shares
Purchased
 
 
Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
 
 
Approximate
Dollar
Value of
Shares that
May Yet Be
Purchased
Under the
Plans or
Programs
(in thousands)
 
June 1, 2020 – June 30, 2020
  2,493 
 $2.30 
 $994 
July 1, 2020 – July 31, 2020
    
 $  
 $  
August 1, 2020 – August 31, 2020
    
 $  
 $  
Total
  2,493 
    
    
ITEM 6. EXHIBITS
Exhibits
ITEM 6.10.1EXHIBITSPromissory Note, dated July 21, 2020, by and between Solitron Devices Inc. and Bank of America (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on July 27, 2020.

Exhibits

Certification of Chief Executive Officer and Interim Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.**
Certification of Chief Executive Officer and Interim 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 Extension Definition Linkbase
101.LAB*XBRL Taxonomy Label Linkbase
101.PRE*XBRL Taxonomy Presentation Linkbase

*Filed herewith
**Furnished herewith

18

* Filed herewith
** Furnished herewith

SIGNATURESSIGNATURES

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: January 17, 2017/s/ Tim Eriksen
Tim Eriksen
Chief Executive Officer, and
Interim Chief Financial Officer

 19
SOLITRON DEVICES, INC.
 

EXHIBIT INDEX

EXHIBIT NUMBERDESCRIPTION
   
Date: March 25, 2021
By:  
/s/ Tim Eriksen
Tim Eriksenand
Chief Executive Officer,Interim Chief Financial Officer

EXHIBIT INDEX

EXHIBIT NUMBER
DESCRIPTION
31Certification of Chief Executive Officer and Interim Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.**
32Certification of Chief Executive Officer and Interim 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 Extension Definition Linkbase
101.LAB*XBRL Taxonomy Label Linkbase
101.PRE*XBRL Taxonomy Presentation Linkbase

*Filed herewith
**Furnished herewith

20

* Filed herewith
** Furnished herewith
24