SECURITIES & EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended May 31, 1997
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from _________ to _________
Commission file number 1-4978
SOLITRON DEVICES, INC.
- -------------------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
DELAWARE 22-1684144
-------- ----------
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
3301 ELECTRONICS WAY, WEST PALM BEACH, FLORIDA 33407
----------------------------------------------------
(Address of principal executive offices)
(561) 848-4311
--------------
(Issuer's telephone number)
- -------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to filing requirements for the past 90 days. Yes [X] No [ ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 2, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court.
Yes [X] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 1,976,799 Note: Additional shares are
issuable by the Company without further consideration pursuant to the Company's
Plan of Reorganization.
<PAGE>
SOLITRON DEVICES, INC.
INDEX
PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited):
Condensed Consolidated Balance Sheet -- May 31, 1997
Condensed Consolidated Statements of Operations -- Three Months
Ended May 31, 1997 and 1996
Condensed Consolidated Statements of Cash Flows -- Three Months
Ended May 31, 1997 and 1996
Notes to Condensed Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
Signature
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements: Pages 4 - 11
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations: Pages 12 - 15
3
<PAGE>
SOLITRON DEVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS)
ASSETS
MAY 31, 1997
------------
(Unaudited)
Current Assets:
Cash $ 534
Accounts receivable, less allowance
for doubtful accounts of $34 1,035
Inventories 2,130
Prepaid expenses and other current assets 197
Due from S/V Microwave Products, Inc. 50
-------
Total current assets 3,946
Property, plant and equipment, net 646
Non-operating plant facilities 1,745
Due from S/V Microwave Products, Inc. 67
Other assets 82
-------
$ 6,486
The accompanying notes are an integral part
of these condensed financial statements
4
<PAGE>
SOLITRON DEVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 32
Accounts payable - post-petition 402
Current portion of accounts payable - pre-petition 88
Accrued expenses 2,275
Accrued Chapter 11 administrative expenses 38
-------
Total current liabilities 2,835
-------
Long-term debt, less current maturities 22
Other long-term liabilities 2,827
-------
Stockholders' Equity
Preferred stock, $.01 par value,
authorized 500,000 shares --
Common stock $.01 par value,
authorized 10,000,000 shares,
issued and outstanding 1,977,000 20
Additional paid-in capital 2,619
Deficit (1,837)
-------
802
-------
$ 6,486
=======
The accompanying notes are an integral part
of these condensed financial statements
5
<PAGE>
SOLITRON DEVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS EXPECT PER SHARE AMOUNTS)
(UNAUDITED)
THREE MONTHS ENDED MAY 31,
1997 1996
----------------------------
NET SALES $ 1,888 $ 1,730
Cost of sales 1,526 1,395
----------- -----------
Gross Profit 362 335
Selling, general and
Administrative expenses 269 264
----------- -----------
Operating income 93 71
----------- -----------
OTHER INCOME (EXPENSE):
Other Income 15 34
Interest expense (67) (73)
Chapter 11 expenses
Other (11) (12
----------- -----------
Net other expense (63) (51)
----------- -----------
Net income $ 30 $ 20
=========== ===========
INCOME PER SHARE: $ .01 $ .01
WEIGHTED AVERAGE SHARES
OUTSTANDING 2,138,000 2,082,000
The accompanying notes are an integral part
of these condensed consolidated financial statements
6
<PAGE>
SOLITRON DEVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in Thousands)
(UNAUDITED)
THREE MONTHS ENDED MAY 31,
-------------------------
1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES:
Net profit $ 30 $ 20
----- -----
Adjustments to reconcile net loss to
Net cash used in operating activities:
Depreciation and amortization 56 56
Provision for doubtful accounts -- (5)
(Increase) decrease in account receivable (30) 53
(Increase) decrease in inventories 42 (81)
(Increase) in prepaid expenses
and other current assets (95) (75)
Decrease in due from
S/V Microwave Products, Inc. 18 4
Increase (decrease) in accounts payable (111) 54
Increase in accrued expenses
and other liabilities 132 75
Decrease in accrued Chapter 11
Administrative expenses -- (15)
----- -----
Total adjustments 12 66
----- -----
Net cash generated in operating activities 42 86
----- -----
CASH FLOW FROM INVESTING ACTIVITIES:
Proceeds from the disposal of assets, additions
to property, plant and equipment (27) (6)
----- -----
Net Cash used in investing activities (27) (6)
----- -----
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on capital leases (18) (18)
----- -----
Net cash used in financing activities (18) (18)
----- -----
NET INCREASE (DECREASE) IN CASH (3) 62
CASH AT BEGINNING OF PERIOD $ 537 $ 364
----- -----
CASH AT END OF PERIOD $ 534 $ 426
===== =====
Supplemental cash flow disclosure: Interest paid during the three months ended
May 31, 1997 and 1996 was approximately $30,000 and $36,000 respectively.
The accompanying notes are an integral part
of these condensed consolidated financial statements
7
<PAGE>
SOLITRON DEVICES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. GENERAL:
The financial information included herein is unaudited; however, such
information reflects all adjustments (consisting solely of normal recurring
adjustments), which are, in the opinion of management, necessary for a fair
statement of the results for the interim period.
The accompanying unaudited interim condensed consolidated financial statements
have been prepared pursuant to the rules and regulations of the Securities and
Exchange Commission for reporting on Form 10-QSB. Pursuant to such rules and
regulations, certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted.
The information contained in this Form 10-QSB should be read in conjunction with
the Notes to Consolidated Financial Statements appearing in the Company's Annual
Report on Form 10-KSB for the year ended February 28, 1997.
The results of operations for the three-month period ended May 31, 1997 are not
necessarily indicative of the results to be expected for the year ended February
28, 1998
As previously noted in documents filed with the SEC, on August 20, 1993, the
United States Bankruptcy Court for the Southern District of Florida (the
"Bankruptcy Court") entered an Order (the "Order of Confirmation") confirming
the Company's Fourth Amended Plan of Reorganization, as modified by the
Company's First Modification of Fourth Amended Plan of Reorganization (the "Plan
of Reorganization"). The Plan became effective on August 30, 1993 (the
"Effective Date"). On July 12, 1996, the Bankruptcy Court officially closed the
case.
Additionally, the following actions or events have taken or will take place
pursuant to the Plan of Reorganization:
(a) Pursuant to the Plan of Reorganization, which began in May 1995,
the Company is required to begin making quarterly payments to holders of
unsecured claims until they receive 35% of their claims. The Company continues
to negotiate with its unsecured creditors to reduce its quarterly payment
obligations and has proposed to those creditors that it make reduced quarterly
payments of approximately $9,000. The Company has made ten reduced payments to
its unsecured creditors, and, as of May 31, 1997, the Company has paid
approximately $74,092 to its unsecured creditors, as opposed to the $620,830
called for under the Company's Plan of Reorganization. To date, the Company's
unsecured creditors have accepted all such reduced payments, though no
assurances can be made that they will continue to do so in the future or that
the Company's negotiation with its unsecured creditors will be successful.
(b) The Company had entered into a contract with Stateside Capital
Group, LLC, to sell the old Riviera Beach property that required the Purchaser
to assume full liability for the cleanup, to enter into a Consent Agreement with
DEP reflecting such assumption of responsibility, and to post a cleanup fund in
escrow to assure performance. As of June 13, 1997 at approximately 5:30 p.m.,
Stateside Capital Group, LLC exercised its right to terminate this agreement.
8
<PAGE>
SOLITRON DEVICES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
Following the termination of the agreement to sell the old
Riviera Beach property to Stateside Capital Group, LLC, the Company is now
negotiating with the former owner of the facility on a proposed agreement under
which the former owner will undertake the responsibility for the environmental
cleanup in exchange for a security interest in the building. The predecessor
owner and operator (a multi-national Fortune 100 company) is financially able to
perform and has advised the Company that it wishes to take such steps as will
prevent EPA from proceeding to place the property on the National Priority List
(NPL) and assuming jurisdiction over the cleanup. While the aforementioned party
expressed interest, there is no assurance that the parties will reach a
satisfactory agreement. The DEP, which is aware of these negotiations, is
requesting that EPA withhold proceeding with its efforts to list the property on
the National Priority List (NPL) for an additional 30 days in order to allow for
the completion of said negotiation. Furthermore, the Company placed the old
Riviera Beach property back on the market.
(c) As disclosed in documents filed previously with the Securities
and Exchange Commission, the Company is negotiating with various taxing
authorities (including the Internal Revenue Service {IRS], Palm Beach County,
Florida, and Martin County, Florida) to restructure its payment obligations for
various back taxes. While these negotiations are pending, the Company has, in
some cases, been making reduced payments to those taxing authorities. The
following table indicates the approximate cumulative status of amounts due under
Court Plans as of May 31, 1997:
DUE PAID
------------ ----------
Martin County $ 52,000 $ 7,957
Palm Beach County 624,000 243,262
IRS 189,000
For the years since bankruptcy, additional taxes have become delinquent with
Martin and Palm Beach Counties in approximately the following amounts
respectively, $28,000 and $170,000.
To date, no objections to have been raised to the amounts of the Company's
payments to these taxing authorities, though no assurances can be made that such
an objection will not be raised in the future concerning the Company's
obligations to those taxing authorities or that any of the Company's
negotiations to restructure its payment obligations will be successful.
2. FINANCIAL CONDITIONS:
During the last several fiscal years, the Company has generally experienced
losses from operations and severe cash shortages caused by a significant decline
in both sales and open order backlog, decreased margins on products sold (which
is characteristic in the Company's industry), significant non-recurring expenses
associated with the Company's bankruptcy proceedings, and the Company's
inability to obtain additional working capital through the sale of debt or
equity securities or the sale of non-operating assets.
9
<PAGE>
SOLITRON DEVICES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
Since the Company emerged from Chapter 11 on August 30, 1993, it has experienced
a positive cash flow from recurring operations; however, overall cash flow has
been negative due primarily to the necessity to make payments of administrative
expenses and required payouts arising in connection with the bankruptcy
proceedings. The foregoing resulted in a decrease in cash and cash equivalents
following the Company's emergence from Chapter 11.
The Company currently believes, based on information available to it, that its
operations will continue to generate sufficient cash to satisfy its operating
needs over the next 12 months. However, based on the Company's current bookings,
prices, profit margins and sales levels, the Company does not believe it will
generate sufficient cash to satisfy its operating needs and its obligations to
pre-bankruptcy creditors in accordance with the Plan of Reorganization. Thus,
the Company is in negotiations with all such claim holders to reschedule the
Company's payments. In the event the Company is unable to restructure its
obligations to pre-bankruptcy claimants, the Company will be required to further
reduce its size and reduce its cost of operations. However, over the long term,
the Company believes that if the volume and prices of its product sales continue
as presently anticipated, it will, subject to the continued deferral of certain
obligations, generate sufficient cash from operations to sustain its current
operations. In the event that sales decline significantly below the current
level experienced by the Company, the Company may be required to implement
further cost-cutting or other downsizing measures to continue its business
operations. Although the Company is pursuing additional sources of financing,
there can be no assurance that financing will be available in amounts or upon
terms sufficient to meet the Company's needs. However, in appropriate
situations, the Company may seek strategic alliances, joint ventures with
others, or acquisitions in order to maximize the Company's marketing potential,
its utilization of existing resources, and to provide further opportunities for
growth.
3. ENVIRONMENTAL MATTERS:
Management of the Company believes that environmental cleanup and monitoring may
still be required at two locations: the Company's Port Salerno location and the
Company's old Riviera Beach facility.
The Company's environmental consultants have estimated the costs of remediation
to be approximately $727,000 for the Port Salerno property and $342,000 for the
old Riviera Beach property. These amounts have been accrued for in the balance
sheet as of May 31, 1997. The accrual balance is approximately $1,054,000.
Although the Company's environmental consultants have advised the Company that
they believe that this is the best estimate of such liabilities, there can be no
assurance that the actual cost of any such remediation would not exceed such
amounts.
10
<PAGE>
SOLITRON DEVICES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
As disclosed in documents filed previously with the Securities and Exchange
Commission, the Plan of Reorganization obligates the Company to make certain
periodic payments to an escrow account which funds are to be used to remediate
the Company's old Riviera Beach and Port Salerno facilities. Currently, the Plan
of Reorganization calls for the Company to make periodic payments as follows: 1)
$5,000 per month beginning on the 25th month following the Effective Date; 2)
$7,500 per month beginning on the 37th month following the Effective Date; and
3) $10,000 per month beginning on the 49th month following the Effective Date.
This funding is to be suspended when total amounts paid reach 125% of the
estimated remediation costs. The Company is negotiating with DEP to modify the
escrow payment schedule. While these negotiations are under way, the Company is
making reduced monthly payments into the escrow account. As of May 31, 1997 the
Company had deposited $20,000 into the escrow account. No objection has been
raised to the Company's reduced payments to date, though no assurance can be
given that such an objection will not be raised in the future.
During late 1996 and early 1997, the Company negotiated with prospective
purchasers of both sites to assume full responsibility for remediation of the
sites and the Company successfully consummated contracts to purchase, subject to
due diligence and closing conditions. In early 1997, EPA requested site access
to both properties for purposes of performing testing to further evaluate the
sites for National Priority List (NPL) testing and expressed its preliminary
view that both sites would qualify under the ranking formula. After a meeting
with DEP and EPA on March 21, 1997, DEP requested that two prospective
purchasers of the properties be afforded an opportunity to complete their due
diligence, obtain site data and assume responsibility for site remediation under
a state lead cleanup. EPA agreed to postpone its further processing of the sites
for ninety (90) days and determine whether DEP was in position to accept the
purchasers and their financial assurances that they would perform. DEP is
currently negotiating with the purchaser of the Port Salerno facility to assume
full responsibility to remediate and that the Company will be relieved of all
liability upon the completion thereof. The new Consent Agreements would relieve
the Company of all obligations under the Consent Final Judgement. The purchaser
of Port Salerno has inspection periods that have not yet expired and the Company
will not know whether the transaction will close until it expires in the next
several months. Following a meeting on June 16, 1997 between DEP, the Company's
President, and the attorney representing Brownfield Recovery (the Port Salerno
buyer), DEP is requesting that EPA refrain from commencing the listing of the
Port Salerno site on the National Priority List (NPL) until October 30, 1997 to
allow the buyer to complete the purchase of the site. It appears that EPA and
DEP are cooperating and DEP, on behalf of the Governor, must concur in EPA's
resumption of processing for National Priority List (NPL) listing.
11
<PAGE>
SOLITRON DEVICES, INC. AND SUBSIDIARIES
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
The following discussion and analysis of factors which have affected the
Company's financial position and operating results during the periods included
in the accompanying condensed consolidated financial statements should be read
in conjunction with the Consolidated Financial Statements and the related Notes
to Consolidated Financial Statements and Management's Discussion and Analysis of
Financial Condition and Results of Operations included in the Company's Annual
Report on Form 10-KSB for the year ended February 28, 1997 and the Condensed
Consolidated Financial Statements and the related Notes to Condensed
Consolidated Financial Statements included in Item 1 of this Quarterly Report on
Form 10-QSB.
INTRODUCTION:
This report contains forward-looking statements that are based largely on the
Company's expectations and are subject to a number of risks and uncertainties,
many of which are beyond the Company's control. Except for historical
information contained herein, the matters discussed below are forward-looking
statements made pursuant to the safe harbor provisions of the Securities
Litigation Reform Act of 1995. Actual results could differ materially from these
forward-looking statements as a result of various factors including, without
limitation, economic, competitive, governmental and technological factors
affecting the Company's operations, markets, products and prices.
RESULTS OF OPERATIONS-THREE MONTHS ENDED MAY 31, 1997 COMPARED TO THREE MONTHS
ENDED MAY 31, 1996:
Net sales for the three months ended May 31, 1997 increased 9.1% to $1,888,000,
as compared to $1,730,000 for the three months ended May 31, 1996. The Company's
backlog of open orders decreased 2.4% for the three months ended May 31, 1997 as
compared to an increase of 2.3% for the three months ended May 31, 1996. Gross
margins on the Company's sales decreased to 19.2% for the three months ended May
31, 1997 in comparison to 19.4% for the three months ended May 31, 1996. These
decreases are not significant and do not represent any significant trend.
For the three months ending May 31, 1997, the Company shipped 428,733 units as
compared with 388,672 units shipped during the same period of the prior year.
However, since the Company manufactures a wide variety of products with an
average sale price ranging from less than one dollar to several hundred dollars,
management does not consider such periodic variations in the Company's volume of
units shipped to be a reliable indicator of the Company's performance.
12
<PAGE>
SOLITRON DEVICES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
Selling, general, and administrative expenses increased to $269,000 for the
three months ended May 31, 1997 from $264,000 for the comparable period in 1996.
During the three months ending May 31, 1997, selling, general, and
administrative expenses as a percentage of sales was 14.26% as compared with
15.28% for the three months ending May 31, 1996. The decrease was due primarily
to increased sales.
The Company recorded a net other expense of $63,000 for the three months ended
May 31, 1997 versus a net other expense of $51,000 for the three months ended
May 31, 1996. The variance was due primarily to decreases in the Company's other
income of $15,000 as compared to other income of $34,000 for three months ended
May 31, 1997 and May 31, 1996, respectively.
Net income for the three months ended May 31, 1997 increased to $30,000 versus
$20,000 for the same period in 1996. The major contributing factor to this
increase was volume.
LIQUIDITY AND CAPITAL RESOURCES
The Company reported a net income of $30,000 and operating income of $93,000 for
the three months ended May 31, 1997. However, the Company has significant
obligations arising from settlements related to its bankruptcy proceeding which
requires it to make substantial cash payments which cannot be supported by the
Company's current level of operations.
At May 31, 1997, February 28, 1997 and May 31, 1996 respectively, the Company
had cash and cash equivalents of $534,000, $537,000 and $426,000. The principal
cash change from year to year was due primarily to profit of $150,000 year to
year.
At May 31, 1997, the Company had working capital of $1,111,000 as compared with
a working capital at May 31, 1996 of $1,502,000. At February 28, 1997, the
Company had working capital of $1,079,000. The approximately $32,000 change for
the three months ended May 31, 1997 was due primarily to decreases in the
amounts due to the Company. The from year to year decrease was due primarily to
a major shift from long term to short term on amounts to Palm Beach County and
DEP.
Pursuant to the Plan or Reorganization, the Company is required to pay an
aggregate of approximately $2,483,338 to holders of allowed unsecured claims in
quarterly installments of approximately $62,083. The Company has proposed to its
unsecured creditors that it reduce its payments to quarterly payments of $9,000.
As of May 31, 1997, the Company had paid to the unsecured creditors $74,092 of
the $620,830 due. Of amounts owed to unsecured creditors $88,000 is carried as
short-term debt and $1,292,000 is carried as long-term debt.
13
<PAGE>
SOLITRON DEVICES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
Pursuant to the terms of the Plan of Reorganization and Consent Final Judgment,
the Company is required to complete the assessment and remediation of the Port
Salerno facility and the old Riviera Beach facilities. The costs of these
assessments and remediations, estimated at $1,054,000, will be payable from the
proceeds of the sale or lease of these properties. As part of these
requirements, the Company performed soil remediation assessment at both
facilities. These tests indicated that no soil remediation is required at the
Port Salerno and old Riviera Beach facilities and the DEP has concurred that no
further soil remediation is required at either property. The Company is
renegotiating with DEP the terms of the cash payments into the aforementioned
escrow account and, while the negotiations are under way, the Company deposits
$1,000 per month. As of May 31, 1997, the Company had deposited $20,000 of the
$120,000 due in accordance with the Plan into the escrow account.
The Company had entered into a contract with Stateside Capital Group, LLC, to
sell the old Riviera Beach property that required the Purchaser to assume full
liability for the cleanup, to enter into a Consent Agreement with DEP reflecting
such assumption of responsibility, and to post a cleanup fund in escrow to
assure performance. As of June 13, 1997 at approximately 5:30 p.m., Stateside
Capital Group, LLC exercised its right to terminate this agreement.
Following the termination of the agreement to sell the old Riviera Beach
property to Stateside Capital Group, LLC, the Company is now negotiating with
the former owner of the facility on a proposed agreement under which the former
owner will undertake the responsibility for the environmental cleanup in
exchange for a security interest in the building. The predecessor owner and
operator (a multi-national Fortune 100 company) is financially able to perform
and has advised the Company that it wishes to take such steps as will prevent
EPA from proceeding to place the property on the National Priority List (NPL)
and assuming jurisdiction over the cleanup. While the aforementioned party
expressed interest, there is no assurance that the parties will reach a
satisfactory agreement. The DEP, which is aware of these negotiations, is
requesting that EPA withhold proceeding with its efforts to list the property on
the National Priority List (NPL) for an additional 30 days in order to allow for
the completion of said negotiation. Furthermore, the Company placed the old
Riviera Beach property back on the market.
The Company is required to pay Ellco Leasing Corporation ("Ellco") $255,000 plus
interest at six percent per annum in monthly payments until August 30, 1997 in
satisfaction of an allowed claim amounting to approximately $1,214,000. Ellco
has been granted a security interest in certain of the Company's equipment to
collateralize such obligations. In the event of any default by the Company,
Ellco would have an unsecured claim amounting to 35% of the original amount due
less payments made to the date of the default. Additionally, Ellco would be
entitled to certain amounts pursuant to a profit participation payable to
unsecured creditors and a pro rata share of the common stock issuable to
unsecured creditors pursuant to the Plan. As of May 31, 1997, the Company had
paid Ellco $232,000 and was current in amounts due to Ellco.
14
<PAGE>
SOLITRON DEVICES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
Pursuant to the Plan of Reorganization, beginning on the date the Company's net
after tax income exceeds $500,000, the Company would be required to pay certain
pre-petition creditors 10% of net after tax income until August 30, 2003 up to a
maximum aggregate of $3,000,000 in such payments. Further, the Company's lease
payments (less sublease payments from Vector) for its facilities in West Palm
Beach, Florida would increase each year from approximately $255,000 during the
current fiscal year in accordance with specified cost of living increases of not
more than 5% per year.
The Company has satisfied all of the allowed administrative claims and allowed
wage claims under the Plan of Reorganization. The Company is required to pay
allowed tax claims estimated at approximately $1,760,000 (which amount is
accrued in the accompanying financial statements including interest). For more
information as to the Company's tax obligations and their effect on the
Company's finances and prospects, reference is made to note 1(c) to the
Condensed Consolidated Financial Statements included in Item 1 of this Quarterly
Report on Form 10-QSB.
15
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS:
None
ITEM 2.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES:
See Part 1.
ITEM 4.
None.
ITEM 5.
None
ITEM 6.
None.
16
<PAGE>
SIGNATURES
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 as a duly authorized officer of the Registrant.
SOLITRON DEVICES, INC.
/s/ SHEVACH SARAF
-----------------------------------
SHEVACH SARAF
CHAIRMAN,
CHIEF EXECUTIVE OFFICER &
PRESIDENT
Dated: July 10, 1997
17
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed by the following persons on behalf of Solitron and in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/s/ SHEVACH SARAF
- ------------------------
Shevach Saraf President and July 10, 1997
Chief Executive Officer
/s/ THOMAS F. RUTH
- ------------------------
Thomas F. Ruth Chief Financial Officer July 10, 1997
/s/ DR. JAY DAVIS
- ------------------------
Dr. Jay Davis Director July 10, 1997
/s/ JOSEPH SCHLIG
- ------------------------
Joseph Schlig Director July 10, 1997
</TABLE>
18
<PAGE>
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM SOLITRON DEVICES, INC. AND SUBSIDIARIES FORM 10-QSB FOR THE
QUARTER ENDED MAY 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENT
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-START> MAR-01-1997
<PERIOD-END> MAY-31-1997
<CASH> 534,000
<SECURITIES> 0
<RECEIVABLES> 1,069,000
<ALLOWANCES> (34,000)
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<PP&E> 1,586,000
<DEPRECIATION> (940,000)
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<CURRENT-LIABILITIES> 2,835,000
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0
0
<COMMON> 20,000
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<SALES> 1,888,000
<TOTAL-REVENUES> 1,888,000
<CGS> 1,526,000
<TOTAL-COSTS> 1,795,000
<OTHER-EXPENSES> (4,000)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 67,000
<INCOME-PRETAX> 30,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 30,000
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<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 30,000
<EPS-PRIMARY> .01
<EPS-DILUTED> .01
</TABLE>
