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 May 31, 2009





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.  1-4978





SOLITRON DEVICES,
INC.


(Exact
Name of Registrant as Specified in Its Charter)





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




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





(561)
848-4311


(Registrant’s
Telephone Number, Including Area Code)




Indicate
by check mark whether the registrant: (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports); and (2) has been subject to such filing
requirements for the past 90 days.    Yes  x    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   ̈




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




Large
      accelerated filer   ̈
            Accelerated
      filer   ̈Non-accelerated
      filer     ̈
            Smaller
      reporting company  x




Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).    Yes  ̈   No x




The
number of shares of the registrant’s common stock, $0.01 par value, outstanding
as of June 29, 2009 was 2,263,775.





SOLITRON
DEVICES, INC.





TABLE OF
CONTENTS








Page No.PART
      1 - FINANCIAL INFORMATIONItem
                                                            1.
                                                            Financial
      Statements (unaudited)Condensed
      Balance Sheets
                                                            
                                                            3May
      31, 2009 and February 28, 2009Condensed
      Statements of Income
                                                            
                                                            4Three
      Months Ended May 31, 2009 and 2008Condensed
      Statements of Cash Flows
                                                            
                                                            5Three
      Months Ended May 31, 2009 and 2008Notes
      to Condensed Financial Statements
                                                            
                                                            6-11Item
                                                            2.
                                                            Management’s
      Discussion and Analysis of Financial Condition andResults
      of Operations
                                                            
                                                            12-14Item
                                                            3.
                                                            Quantitative
      and Qualitative Disclosures about Market Risk
                                                            
                                                            14-15Item
                                                            4.
                                                            Controls
      and Procedures
                                                            
                                                            16PART II – OTHER INFORMATIONItem
                                                            6.
                                                            Exhibits
                                                            
                                                            16Signatures
                                                            
                                                            
                                                            17




2


PART I – FINANCIAL
INFORMATION





ITEM
1.   FINANCIAL
STATEMENTS





SOLITRON DEVICES,
INC.


CONDENSED BALANCE
SHEETS


(Unaudited,
in thousands)





May 31,
                          2009
                        
                        
                        Feb 28,
                          2009ASSETSCURRENT
      ASSETS :Cash
      and cash equivalents
                        
                        $
                        402
                        
                        
                        $
                        440Treasury
      bills
                        
                        
                        5,472
                        
                        
                        
                        5,113Accounts
      receivable, less allowance for doubtful accounts
                        
                        
                        629
                        
                        
                        
                        871Inventories,
      net
                        
                        
                        2,481
                        
                        
                        
                        2,569Prepaid
      expenses and other current assets
                        
                        
                        158
                        
                        
                        
                        139TOTAL
      CURRENT ASSETS
                        
                        
                        9,142
                        
                        
                        
                        9,132PROPERTY,
      PLANT AND EQUIPMENT, net
                        
                        
                        570
                        
                        
                        
                        581OTHER
      ASSETS
                        
                        
                        52
                        
                        
                        
                        52TOTAL
      ASSETS
                        
                        $
                        9,764
                        
                        
                        $
                        9,765LIABILITIES
      AND STOCKHOLDERS’ EQUITYCURRENT
      LIABILITIES:Accounts
      payable – Post-petition
                        
                        $
                        349
                        
                        
                        $
                        443Accounts
      payable – Pre-petition, current portion
                        
                        
                        1,079
                        
                        
                        
                        1,086Customer
      deposits
                        
                        
                        155
                        
                        
                        
                        61Accrued
      expenses and other current liabilities
                        
                        
                        585
                        
                        
                        
                        570TOTAL
      CURRENT LIABILITIES
                        
                        
                        2,168
                        
                        
                        
                        2,160LONG
      TERM LIABILITIES, net of current portion
                        
                        
                        148
                        
                        
                        
                        158TOTAL
      LIABILITIES
                        
                        
                        2,316
                        
                        
                        
                        2,318COMMITMENTS
      & CONTINGENCIESSTOCKHOLDERS’
      EQUITYPreferred
      stock, $.01 par value, authorized 500,000 shares, none
    issued
                        
                        
                        -0-
                        
                        
                        
                        -0-Common
      stock, $.01 par value, authorized 10,000,000 shares,
    2,263,775shares
      issued and outstanding, net of 173,287 shares of treasury
      stock
                        
                        
                        23
                        
                        
                        
                        23Additional
      paid-in capital
                        
                        
                        2,733
                        
                        
                        
                        2,733Retained
      earnings
                        
                        
                        4,692
                        
                        
                        
                        4,691TOTAL
      STOCKHOLDERS’ EQUITY
                        
                        
                        7,448
                        
                        
                        
                        7,447TOTAL
      LIABILITIES AND STOCKHOLDERS’ EQUITY
                        
                        $
                        9,764
                        
                        
                        $
                        9,765





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


3




SOLITRON DEVICES,
INC.


CONDENSED STATEMENTS OF
INCOME


THREE MONTHS ENDED MAY
31,


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





2009
                    
                    
                    2008NET
      SALES
                    
                    $
                    1,820
                    
                    
                    $
                    2,169Cost
      of Sales
                    
                    
                    1,549
                    
                    
                    
                    1,623Gross
      Profit
                    
                    
                    271
                    
                    
                    
                    546Selling,
      General and Administrative Expenses
                    
                    
                    271
                    
                    
                    
                    284Operating
      Income
                    
                    
                    -
                    
                    
                    
                    262OTHER
      INCOMEOther
      Income/(Expense)
                    
                    
                    (6
                    )
                    
                    
                    -Interest
      Income
                    
                    
                    7
                    
                    
                    
                    10Interest
      Expense
                    
                    
                    -
                    
                    
                    
                    -Other
      Income, Net
                    
                    
                    1
                    
                    
                    
                    10Net
      Income
                    
                    $
                    1
                    
                    
                    $
                    272INCOME
      PER
      SHARE             :
      Basic
                    
                    $
                    .00
                    
                    
                    $
                    .12: Diluted
                    
                    $
                    .00
                    
                    
                    $
                    .11WEIGHTED
      AVERAGESHARES
      OUTSTANDING: Basic
                    
                    
                    2,263,775
                    
                    
                    
                    2,262,972: Diluted
                    
                    
                    2,454,884
                    
                    
                    
                    2,479,039




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


4




SOLITRON DEVICES,
INC.


CONDENSED STATEMENTS OF CASH
FLOWS


THREE MONTHS ENDED MAY
31,


(Unaudited,
in thousands)


2009
                      
                      
                      2008CASH
      FLOWS FROM OPERATING ACTIVITIESNet
      (Loss)/Income
                      
                      $
                      1
                      
                      
                      $
                      272Adjustments
      to reconcile net income to net cashprovided
      by operating activities:Depreciation
      and amortization
                      
                      
                      50
                      
                      
                      
                      49Changes
      in operating assets and liabilities:(Increase)
      Decrease in:Accounts
      receivable
                      
                      
                      242
                      
                      
                      
                      189Inventories
                      
                      
                      88
                      
                      
                      
                      141Prepaid
      expenses and other current assets
                      
                      
                      (19
                      )
                      
                      
                      (45
                      )Other
      assets
                      
                      
                      -
                      
                      
                      
                      5Increase
      (Decrease) in:Accounts
      payable – Post-petition
                      
                      
                      (94
                      )
                      
                      
                      (82
                      )Accounts
      payable – Pre-petition
                      
                      
                      (7
                      )
                      
                      
                      (8
                      )Customer
      deposit
                      
                      
                      94
                      
                      
                      
                      (83
                      )Accrued
      expenses and other current liabilities
                      
                      
                      15
                      
                      
                      
                      20Other
      long-term liabilities
                      
                      
                      (10
                      )
                      
                      
                      -NET
      CASH PROVIDED BY OPERATING ACTIVITIES
                      
                      
                      360
                      
                      
                      
                      458CASH
      FLOW FROM INVESTING ACTIVITIES:Investment
      in treasury bills
                      
                      
                      (359
                      )
                      
                      
                      (10
                      )Purchases
      of property, plant and equipment
                      
                      
                      (39
                      )
                      
                      
                      (58
                      )NET
      CASH (USED IN) INVESTING ACTIVITIES
                      
                      
                      (398
                      )
                      
                      
                      (68
                      )NET
      INCREASE/(DECREASE) IN CASH
                      
                      
                      (38
                      )
                      
                      
                      390CASH
      AT THE BEGINNING OF PERIOD
                      
                      
                      440
                      
                      
                      
                      75CASH
      AT THE END OF PERIOD
                      
                      $
                      402
                      
                      
                      $
                      465




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




5


SOLITRON
DEVICES, INC.


NOTES TO CONDENSED FINANCIAL
STATEMENTS


(Unaudited)





1.
            GENERAL AND
      SIGNIFICANT ACCOUNTING
POLICIES:





GENERAL:





The
financial information included herein is unaudited; however, such information
reflects all adjustments (consisting primarily 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 financial statements have been prepared
pursuant to the rules and regulations of the Securities and Exchange Commission
for reporting on Form 10-Q.  Pursuant to such rules and regulations,
certain information and footnote disclosures normally included in financial
statements prepared in accordance with accounting principles generally accepted
in the United States have been condensed or omitted.




The
information contained in this Quarterly Report on Form 10-Q should be read in
conjunction with the Notes to Consolidated Financial Statements appearing in the
Solitron Devices, Inc. Annual Report on Form 10-K for the year ended February
28, 2009.




The
results of operations for the three-month period ended May 31, 2009 are not
necessarily indicative of the results to be expected for the entire year ending
February 28, 2010.




SIGNIFICANT ACCOUNTING
POLICIES:




Cash


Cash
includes demand deposits and money market accounts.  As of May 31,
2009,  the Company had $402,000 in cash deposits which is $152,000
over the $250,000 limit for FDIC insurance.





Investment in Treasury
Bills


During
the first quarter of last fiscal year, the Company’s management decided to
reclassify its investment in treasury bills from cash and cash equivalents and
report it separately as “Investment in Treasury Bills”. Investment in Treasury
Bills includes treasury bills with maturities of one year or less and is stated
at market value.





Accounts
Receivable


The
Company extends unsecured credit to its customers in the ordinary course of
business but mitigates the associated credit risk by performing credit checks
and actively pursuing past due accounts.  An allowance for doubtful
accounts has been established.  The allowance amount was $2,000 as of
May 31, 2009, and $7,000 as of February 28, 2009. The Company has not had a bad
debt in the past three years.





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.  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 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’s inventory valuation policy is as follows:





Raw
      material /Work in process:
                All
      material purchased, processed and/or used in the last two fiscal years is
      valued at the lower of its acquisition cost or market.  All
      material not purchased/used in the last two fiscal years is fully reserved
      for.


6




SOLITRON
DEVICES, INC.


NOTES TO CONDENSED FINANCIAL
STATEMENTS


(Unaudited)





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.





Stock Based
Compensation


In
December 2002, the Financial Accounting Standards Board (“FASB”) issued SFAS No.
148, “Accounting for Stock-Based Compensation-Transition and Disclosure, and
amendment of FASB Statement No. 123”.  This statement amends SFAS No.
123, to provide alternative methods of transition for a voluntary change to the
fair value based method of accounting for stock-based employee
compensation.  This statement also amends the disclosure requirements
of SFAS No. 123 to require prominent disclosures in both annual and interim
financial statements about the method of accounting for stock-based employee
compensation and the effect of the method used on reported
results.  The Company has prepared its interim financial statements
for the quarters ended May 31, 2009 and May 31, 2008 in accordance with SFAS No.
148.





During
the quarters ended May 31, 2009 and May 31, 2008, the Company did not issue any
stock-based compensation to its employees or directors.




2.
            ENVIRONMENTAL
      REGULATION:





While the
Company believes that it has the environmental permits necessary to conduct its
business and that its operations conform to present environmental regulations,
increased public attention has been focused on the environmental impact of
semiconductor manufacturing operations.  The Company, in the conduct
of its manufacturing operations, has handled and does handle materials that are
considered hazardous, toxic or volatile under federal, state and local laws and,
therefore, is subject to regulations related to their use, storage, discharge
and disposal.  No assurance can be made that the risk of accidental
release of such materials can be completely eliminated.  In the event
of a violation of environmental laws, the Company could be held liable for
damages and the costs of remediation. In addition, the Company, along with the
rest of the semiconductor industry, is subject to variable interpretations and
governmental priorities concerning environmental laws and
regulations.  Environmental statutes have been interpreted to provide
for joint and several liability and strict liability regardless of actual
fault.  There can be no assurance that the Company 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.
            ENVIRONMENTAL
      LIABILITIES:





The
Company entered into an Ability to Pay Multi-Site Settlement Agreement with the
United States Environmental Protection Agency (“USEPA”), effective February 24,
2006 (“Settlement Agreement”), to resolve the Company’s alleged liability to
USEPA at the following sites:  Solitron Microwave Superfund Site, Port
Salerno, Florida (“Port Salerno Site”); Petroleum Products Corporation Superfund
Site, Pembroke Park, Florida; Casmalia Resources Superfund Site, Santa Barbara,
California (“Casmalia Site”); Solitron Devices Site, Riviera Beach, Florida (the
“Riviera Beach Site”); and City Industries Superfund Site, Orlando, Florida
(collectively, the “Sites”).  The Settlement Agreement required the
Company to pay to USEPA the sum of $74,000 by February 24, 2008; the Company
paid the entire sum of $74,000 to USEPA on February 27, 2006. In addition, the
Company is required to pay to USEPA the sum of $10,000 or 5% of Solitron’s net
after-tax income over the first $500,000, if any, whichever is greater, for each
year from fiscal years 2009-2013.  For payment to USEPA to be above
$10,000 for any of these five years, the Company’s net income must exceed
$700,000 for such year, which has happened in fiscal year 2001, fiscal year
2006, fiscal year 2008 and fiscal year 2009.  In February 2009, the
Company paid $10,000 to USEPA for fiscal year 2009 based on preliminary net
income projections. In June 2009 the Company paid an additional $15,000 pursuant
to its obligations under the Settlement Agreement. The Company accrued $40,000
for its remaining minimum obligations under the Settlement
Agreement.  This amount is reflected in “Accrued expenses and other
current liabilities” on the Company’s balance sheets at May 31,
2009.


7





SOLITRON
DEVICES, INC.


NOTES TO CONDENSED FINANCIAL
STATEMENTS


(Unaudited)





In
consideration of the payments made by the Company under the Settlement
Agreement, USEPA agreed not to sue or take any administrative action against the
Company with regard to any of the Sites.  The Company has also been
notified by a group of alleged responsible parties formed at the Casmalia Site
(“Casmalia PRP Group”) that, based on their review and lack of objection to the
Settlement Agreement, the Casmalia PRP Group does not anticipate pursuing
Solitron for cost recovery at the Casmalia site.





On
October 21, 1993, a Consent Final Judgment was entered into between the Company
and the Florida Department of Environmental Protection (“FDEP”) in the Circuit
Court of the Nineteenth Judicial Circuit of Florida in and for Martin County,
Florida, in Case No. 91-1232 CA (the “Consent Final Judgment”).  The
Consent Final Judgment required the Company to remediate the Port Salerno and
Riviera Beach Sites, make monthly payments to escrow accounts for each Site
until the sale of the Sites to fund the remediation work, take all reasonable
steps to sell the two Sites and, upon the sale of the Sites, apply the net
proceeds from the sales to fund the remediation work.  Both Sites have
been sold pursuant to purchase agreements approved by FDEP.





Prior to
the sale of the Port Salerno Site and Riviera Beach Site, USEPA took over from
FDEP as the lead regulatory agency for the remediation of the
Sites.   At the closing of the sale of each Site, the net
proceeds of sale were distributed to USEPA and/or FDEP or other parties, as
directed by the agencies.  In addition, upon the sale of the Riviera
Beach Site, the Riviera Beach Escrow Account was transferred to USEPA, as
directed by the agencies.  The current balance in the Port Salerno
Escrow Account is approximately $58,000.  At present, work at the Port
Salerno Site is being performed by USEPA.  Work at the Riviera Beach
Site is being performed by Honeywell, Inc. (“Honeywell”), pursuant to an
Administrative Order on Consent entered into between Honeywell and
USEPA.  The Company has been notified by FDEP that the successful
performance of remediation work in accordance with the Consent Final Judgment
standards by USEPA at the Port Salerno Site and by Honeywell at the Riviera
Beach Site will be construed by FDEP as discharging the Company’s remediation
obligations under the Consent Final Judgment.





There
remains a possibility that FDEP will determine at some time in the future that
the final remedy approved by USEPA and implemented at either, or both of, the
Port Salerno Site and Riviera Beach Site does not meet the State cleanup
requirements imposed by the Consent Final Judgment.  If such a final
determination is made by FDEP, there is a possibility that FDEP will require the
Company to implement additional remedial action at either, or both of, the Port
Salerno Site and Riviera Beach Site.





By letter
dated November 16, 2006, FDEP notified the Company that FDEP has unreimbursed
expenses associated with the Port Salerno Site and Riviera Beach Site of
$214,800.  FDEP further notified the Company that FDEP required the
Company to resume payments under the Consent Final Judgment to ensure that there
are adequate funds to cover FDEP’s unreimbursed expenses and the Company’s
residual liability under the Consent Final Judgment.  During a follow
up telephone conversation with the Company’s attorney, FDEP advised the Company
that FDEP will prepare a justification for the asserted unreimbursed
expenses.  Upon receipt of the cost reimbursement package, the Company
is required to transfer $55,000 from the Port Salerno Escrow Account to FDEP as
partial payment for FDEP’s unreimbursed expenses that are otherwise recoverable
under the Consent Final Judgment.  FDEP further stated, during the
telephone conversation, that FDEP will work with the Company to establish a
reduced payment schedule for the Company to resume under the Consent Final
Judgment based on an appropriate showing by the Company of financial
hardship.  The Company is currently awaiting receipt of FDEP’s cost
reimbursement package.  Upon receipt of that documentation, the
Company will be required to provide a recommendation to FDEP for resumption of
payments to FDEP under the Consent Final Judgment based on the Company’s present
ability to pay.


8




SOLITRON
DEVICES, INC.


NOTES TO CONDENSED FINANCIAL
STATEMENTS


(Unaudited)





On August
7, 2002, the Company received a Request for Information from the State of New
York Department of Environmental Conservation (“NYDEC”), seeking information on
whether the Company had disposed of certain wastes at the Clarkstown Landfill
Site located in the Town of Clarkstown, Rockland County, New York (The
Clarkstown Landfill Site”).  By letter dated August 29, 2002, the
Company responded to the Request for Information and advised NYDEC that the
Company’s former Tappan, New York facility had closed in the mid-1980’s, prior
to the initiation of the Company’s bankruptcy proceedings described
below.  The Company contends that, to the extent that NYDEC has a
claim against the Company as a result of the Company’s alleged disposal of
wastes at the Clarkstown Landfill Site prior to the closing of the Company’s
former Tappan facility in the mid-1980’s, the claim was discharged in bankruptcy
as a result of the Bankruptcy Court’s August 1993 Order.  At NYDEC’s
request, the Company entered into a revised Tolling Agreement with NYDEC on June
12, 2009, which provides for the tolling of applicable statutes of limitation
through the earlier of January 18, 2010, or the date the State institutes a suit
against the Company for any claims associated with the Clarkstown Landfill
Site.  It is not known at this time whether NYDEC will pursue a claim
against the Company in connection with the Clarkstown Landfill
Site.  As of the date of this filing, no such claim has been
made.





4.
            EARNINGS PER
      SHARE:





The
shares used in the computation of the Company’s basic and diluted earnings per
common share were as follows:





For the three months ended
                    May 31,2009
                  
                  
                  2008Weighted
      average common shares outstanding
                  
                  
                  2,263,775
                  
                  
                  
                  2,262,972Dilutive
      effect of employee stock options
                  
                  
                  191,109
                  
                  
                  
                  216,067Weighted
      average common shares outstanding, assuming dilution
                  
                  
                  2,454,884
                  
                  
                  
                  2,479,039




Weighted
average common shares outstanding, assuming dilution, include the incremental
shares that would be issued upon the assumed exercise of stock
options.  For the three month periods ended May 31, 2009 and May 31,
2008 respectively, 13,500 and 13,800 shares underlying  the Company's
stock options were excluded from the calculation of diluted earning per share
because the exercise prices of the stock options were greater than or equal to
the average price of the common shares, and therefore their inclusion would have
been anti-dilutive.





5.
            INVENTORIES:





As of May
31, 2009, inventories consist of the following:





Gross
                    
                    
                    Reserve
                    
                    
                    NetRaw
      Materials
                    
                    $
                    1,423,000
                    
                    
                    $
                    (319,000
                    )
                    
                    $
                    1,104,000Work-In-Process
                    
                    
                    1,963,000
                    
                    
                    
                    (614,000
                    )
                    
                    
                    1,349,000Finished
      Goods
                    
                    
                    469,000
                    
                    
                    
                    (441,000
                    )
                    
                    
                    28,000Totals
                    
                    $
                    3,855,000
                    
                    
                    $
                    (1,374,000
                    )
                    
                    $
                    2,481,000
  9





SOLITRON
DEVICES, INC.


NOTES TO CONDENSED FINANCIAL
STATEMENTS


(Unaudited)





6.
            INCOME
      TAXES:





At May
31, 2009, the Company has net operating loss carryforwards of approximately
$8,680,000 that expire through 2022.  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 mostly 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 carryforward.





Total net
deferred taxes are comprised of the following at May 31, 2009:




Deferred
      tax assets:Loss
      carryforwards
                  
                  $
                  3,266,000Allowance
      for doubtful accounts
                  
                  
                  2,900Inventory
      allowance
                  
                  
                  3,544,400Depreciation
                  
                  
                  80,000Section
      263A capitalized costs
                  
                  
                  342,000Total
      deferred tax assets
                  
                  
                  7,236,000Valuation
      allowance
                  
                  
                  (7,236,000
                  )Total
      net deferred taxes
                  
                  $
                  0





The
change in the valuation allowance on deferred tax assets is due principally to
the utilization of the net operating loss for the year ending May 31,
2009.





A
reconciliation of the U.S. federal statutory tax rate to the Company’s effective
tax rate for fiscal year ended May 31, 2009 is as follows:


U.S.
      federal statutory rate
                  
                  
                  34.0
                  %Change
      in valuation allowance
                  
                  
                  (34.0
                  )Alternative
      Minimum Taxes
                  
                  
                  0.3Effective
      income tax rate
                  
                  
                  0.3
                  %





7.
            OTHER
      INCOME:





The
$1,000 of other income reflected in the condensed statements of income for the
quarter ended May 31, 2009 consists of $7,000 of interest income on investment
in treasury bills net of changes in market value less $6,000 of other expense
related to receivables adjustments.  For the fiscal quarter ended May
31, 2008, the Company earned $10,000 of other income consisting entirely of
interest income on investment in treasury bills net of changes
in  market value.





8.
            ACCRUED
      EXPENSES:





As of May
31, 2009 accrued expenses and other liabilities consisted of the
following:





Payroll
      and related employee benefits
                          
                          $
                          522,000Other
      liabilities
                          
                          
                          63,000$
                          585,000


10


SOLITRON
DEVICES, INC.


NOTES TO CONDENSED FINANCIAL
STATEMENTS


(Unaudited)





9.
            EXPORT SALES AND MAJOR
      CUSTOMERS:





Revenues
from domestic and export sales to unaffiliated customers for the three months
ended May 31, 2009 are as follows:





Power
                        
                        
                        
                        
                        
                        Field Effect
                        
                        
                        PowerGeographic Region
                        
                        Transistors
                        
                        
                        Hybrids
                        
                        
                        Transistors
                        
                        
                        MOSFETS
                        
                        
                        TotalsEurope
      and Australia
                        
                        $
                        3,000
                        
                        
                        $
                        248,000
                        
                        
                        $
                        0
                        
                        
                        $
                        0
                        
                        
                        $
                        251,000Canada
      and Latin America
                        
                        
                        0
                        
                        
                        
                        0
                        
                        
                        
                        0
                        
                        
                        
                        1,000
                        
                        
                        
                        1,000Far
      East and Middle East
                        
                        
                        0
                        
                        
                        
                        0
                        
                        
                        
                        0
                        
                        
                        
                        49,000
                        
                        
                        
                        49,000United
      States
                        
                        
                        202,000
                        
                        
                        
                        797,000
                        
                        
                        
                        188,000
                        
                        
                        
                        332,000
                        
                        
                        
                        1,519,000Totals
                        
                        $
                        205,000
                        
                        
                        $
                        1,045,000
                        
                        
                        $
                        188,000
                        
                        
                        $
                        382,000
                        
                        
                        $
                        1,820,000





Revenues
from domestic and export sales to unaffiliated customers for the three months
ended May 31, 2008 are as follows:





Power
                        
                        
                        
                        
                        
                        Field Effect
                        
                        
                        PowerGeographic Region
                        
                        Transistors
                        
                        
                        Hybrids
                        
                        
                        Transistors
                        
                        
                        MOSFETS
                        
                        
                        TotalsEurope
      and Australia
                        
                        $
                        38,000
                        
                        
                        $
                        129,000
                        
                        
                        $
                        10,000
                        
                        
                        $
                        0
                        
                        
                        $
                        177,000Canada
      and Latin America
                        
                        
                        12,000
                        
                        
                        
                        0
                        
                        
                        
                        0
                        
                        
                        
                        5,000
                        
                        
                        
                        17,000Far
      East and Middle East
                        
                        
                        42,000
                        
                        
                        
                        0
                        
                        
                        
                        0
                        
                        
                        
                        0
                        
                        
                        
                        42,000United
      States
                        
                        
                        261,000
                        
                        
                        
                        1,234,000
                        
                        
                        
                        127,000
                        
                        
                        
                        311,000
                        
                        
                        
                        1,933,000Totals
                        
                        $
                        353,000
                        
                        
                        $
                        1,363,000
                        
                        
                        $
                        137,000
                        
                        
                        $
                        316,000
                        
                        
                        $
                        2,169,000





Revenues
from domestic and export sales are attributed to global geographic region
according to the location of the customer’s primary manufacturing or operating
facilities.





Sales to
the Company's top two customers, Raytheon Company and BAE Systems Australia,
accounted for 44% of net sales for the quarter ended May 31, 2009 as compared
with 52% of the Company's net sales for the quarter ended May 31,
2008.  Sales to Raytheon Company accounted for approximately 30% of
net sales for the quarter ended May 31, 2009 and 39% for the quarter ended May
31, 2008.  Sales to BAE Systems Australia accounted for 14% of sales
for the quarter ended May 31, 2009 and 6% for the quarter ended May 31,
2008.  Sales to the U.S. Government accounted for 9% of sales for the
quarter ended May 31, 2009 and 13% for the quarter ended May 31,
2008.





10. Major
Suppliers





Purchases
from the Company’s two top suppliers, Platronics Seals and Stellar Industries,
accounted for 24% of total purchases of production materials for the quarter
ended May 31, 2009.  For the quarter ended May 31, 2008, purchases
from the Company’s two top suppliers, Platronics Seals and Egide USA Inc.,
accounted for 23% of the Company's total purchases of production
materials.


11


Item
      2.
            MANAGEMENT’S
      DISCUSSION AND ANALYSIS  OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS





Overview:




Solitron
Devices, Inc., a Delaware corporation (the “Company” or “Solitron”), designs,
develops, manufactures and markets solid-state semiconductor components and
related devices primarily for the military and aerospace markets.  The
Company manufactures a large variety of bipolar and metal oxide semiconductor
(“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 U.S. Government.  Other products, such as
Joint Army/Navy transistors, diodes and Standard Military Drawings voltage
regulators, are sold as standard or catalog items.




The
following discussion and analysis of factors which have affected the Company's
financial position and operating results during the periods included in the
accompanying condensed 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 28, 2009 and the Condensed Financial Statements and the related
Notes to 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 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 inventories, valuation of plant,
equipment, revenue recognition and accounting for income taxes. A discussion of
all of these critical accounting policies can be found in Note 1 of the “Notes
To Financial Statements” in Item 8 of our Annual Report on Form 10-K for
the fiscal year ended February 28, 2009.




Trends and
Uncertainties:




During
the three months ended May 31, 2009, the Company’s book-to-bill ratio was
approximately .40 as compared to approximately .56 for the three months ended
May 31, 2008, reflecting a decrease in the volume of orders
booked.  Generally, the intake of orders over the last twenty four
months has varied greatly as a result of the fluctuations in the general
economy, variations in defense spending on programs the Company supports, and
the timing of contract awards by the Department of Defense and subsequently by
its prime contractors, which is expected to continue over the next twelve to
twenty four months. The Company continues to identify means intended to reduce
its variable manufacturing costs to offset the potential impact of low volume of
orders to be shipped.  However, should order intake continue to fall
drastically below the level experienced in the last twenty four months, the
Company might be required to implement further cost cutting or other downsizing
measures to continue its business operations.




Inventories


Inventories
are stated at the lower of cost or market.  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 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’s inventory valuation policy is as follows:





Raw
      material /Work in process:
            All
      material purchased, processed and/or used in the last two fiscal years is
      valued at the lower of its acquisition cost or market.  All
      material not purchased/used in the last two fiscal years is fully reserved
      for.


12





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.





Results of Operations-Three
Months Ended May 31, 2009 Compared to Three Months Ended May 31,
2008:





Net sales
for the three months ended May 31, 2009 decreased 16% to $1,820,000 as compared
to $2,169,000 for the three months ended May 31, 2008.  This decrease
was primarily attributable to a lower level of orders that were shipped in
accordance with customer requirements.





Cost of
sales for the three months ended May 31, 2009 decreased to $1,549,000 from
$1,623,000 for the comparable period in 2008.  Expressed as a
percentage of sales, cost of sales increased to 85% from 75% for the same period
in 2008.  This change was due primarily to a decrease in net sales
combined with a slight increase in manufacturing overhead expenses.





Gross
profit for the three months ended May 31, 2009 decreased to $271,000 from
$546,000 for the three months ended May 31, 2008.  Accordingly, gross
margins on the Company’s sales decreased to 15% for the three months ended May
31, 2009 in comparison to 25% for the three months ended May 31,
2008.  This change was due mainly to a decrease in net sales combined
with a slight increase in manufacturing overhead expenses.





For the
three months ended May 31, 2009, the Company shipped 48,459  units as
compared to 129,577 units shipped during the same period of the prior
year.  It should be noted that since the Company manufactures a wide
variety of products with an average sales price ranging from less than one
dollar to several hundred dollars, such periodic variations in the Company’s
volume of units shipped should not be regarded as a reliable indicator of the
Company’s performance.





The
Company’s backlog of open orders decreased 17% to $5,218,000 for the three
months ended May 31, 2009, as compared to a decrease of 16% to $4,886,000 for
the three months ended May 31, 2008.  Changes in backlog reflect
changes in the intake of orders and in the delivery requirements of
customers.





The
Company has experienced a decrease of 40% to $735,000 in the level of bookings
during the quarter ended May 31, 2009 as compared to a 46% decrease to
$1,226,000 in bookings for the three months ended May 31, 2008. The decline in
bookings for the current quarter is principally as a result of a decline in
defense spending, resulting in a decrease 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 $271,000 for the three
months ended May 31, 2009 from $284,000 for the comparable period in
2008.  During the three months ended May 31, 2009, selling, general,
and administrative expenses as a percentage of net sales rose to 15% as compared
with 13% for the three months ended May 31, 2008.  The percentage
increase was due primarily to a decrease in net sales.





Operating
income for the three months ended May 31, 2009 decreased to $0 as compared
to $262,000 for the three months ended May 31, 2008. This decrease is due
primarily to lower net sales.





The
Company recorded net other income of $1,000 for the three months ended May 31,
2009 as compared to $10,000 for the three months ended May 31,
2008.  Included in net other income was interest income on investment
in treasury bills net of changes in market value of $7,000 for the three months
ended May 31, 2009, offset by $6,000 of other expense related to receivables
adjustments. For the three months ended May 31, 2008, the Company recorded
$10,000 of interest income on investment in treasury bills net of changes in
market value.  The decrease in interest income is due primarily to
lower rates of return on invested funds.


13


Net
income for the three months May 31, 2009 decreased to $1,000 as compared to
$272,000 for the same period in 2008.  This decrease is due primarily
to lower net sales.




Liquidity and Capital
Resources:




Subject
to the following discussion, the Company expects its sole source of liquidity
over the next twelve months to be cash from operations.  However, due
to the level of current backlog and level of new order intake, the Company might
operate at a loss during the balance of the current fiscal year.  The
Company anticipates that its capital expenditures required to sustain operations
will be approximately $200,000 during the current fiscal year and will be funded
from operations.





Based
upon (i) management’s best information as to current national defense
priorities, future defense programs, as well as management’s expectations as to
future defense spending, (ii) the market trends signaling a decline in the level
of bookings, and an increase in the cost of raw materials and operations that
will result in the potential erosion of   profit levels and
continued price pressures due to more intense competition, and (iii) the
continued competition in the defense and aerospace market, the Company believes
that it will have sufficient cash on hand to satisfy its operating needs during
the current fiscal year.  However, due to the level of current backlog
and new order intake (due to the status of the general economy and the shift to
Commercial Off –The-Shelf (COTS) by the defense industry), the Company might
operate at a loss during  the balance of the current fiscal
year.  Thus, based on these factorsand at the current
level of bookings, costs of raw materials and services, profit margins and sales
levels, the Company may not generate sufficient cash to satisfy its operating
needs and its obligations to pre-bankruptcy creditors in accordance with the
Company’s plan of reorganization. Thus, the Company is in continuous
negotiations with all claim holders to reschedule these payments.  In
the event the Company is unable to restructure its obligations to pre-bankruptcy
creditors or the slowdown in the intake of new orders continue, the Company has
a contingency plan to further reduce its size and thereby reduce its cost of
operations within certain limitations.  Over the long-term, the
Company believes that if the volume and prices of product sales remain as
presently anticipated, the Company will generate sufficient cash from operations
to sustain operations and pay pre-bankruptcy creditor obligations at the current
reduced level of payments.  In the event that bookings in the
long-term continue to decline significantly below the level experienced during
the previous fiscal year, the Company may be required to implement 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.





The
Company reported net income of $1,000 and operating income of $0 for the three
months ended May 31, 2009.





At May
31, 2009, February 28, 2009 and May 31, 2008, the Company had cash of
approximately $402,000, $440,000 and $465,000,
respectively.  Decreases in accounts receivable and inventories
contributed $330,000 to the last three months’ cash flow generated by ongoing
operations.





At May
31, 2009, February 28, 2009 and May 31, 2008, the Company had investments in
treasury bills of approximately $5,472,000, $5,113,000 and $4,420,000,
respectively.





At May
31, 2009, the Company had working capital of $6,974,000 as compared with a
working capital at May 31, 2008 of $6,284,000.  At February 28, 2009,
the Company had a working capital of $6,972,000.  The $2,000 increase
for the three months ended May 31, 2009 was due mainly to a $330,000 combined
decrease in receivables and inventories  offset by an increase in
investments in treasury bills and an increase in accrued expenses.





Off-Balance Sheet
Arrangements:





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





ITEM
      3.
            QUANTITATIVE AND
      QUALITATIVE DISCLOSURE ABOUT MARKET
RISK





Not
applicable


14





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. 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 28, 2009,
including those identified below. We do not undertake any obligation to update
forward-looking statements.




Some of
the factors that may impact our business, financial condition, results of
operations, strategies or prospects include:





·
            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.


·
            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 new 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.


·
            Loss
      of, or reduction of business from, substantial clients could hurt our
      business by reducing our revenues, profitability and cash
      flow.


·
            A
      shortage of three-inch silicon wafers could result in lost revenues due to
      an inability to build 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 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.


·
            Natural
      disasters, like hurricanes, or occurrences of other natural disasters
      whether in the United States or internationally may affect the
      availability of raw materials which may adversely affect our
      profitability.


·
            Failure
      to protect our proprietary technologies or maintain the right to use
      certain technologies may negatively affect our ability to
      compete.


·
            The
      price of our common stock has fluctuated widely in the past and may
      fluctuate widely in the future.


15


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 effective as of the end of the
period covered by this Quarterly Report.





Changes
in Internal Control over Financial Reporting





Based on
an evaluation, under the supervision and with the participation of our
management, including our Chief Executive Officer and Chief Financial Officer,
there has been no change in our internal control over financial reporting during
our last fiscal quarter identified in connection with that evaluation, that has
materially affected, or is reasonably likely to materially affect, our internal
control over financial reporting.





PART II– OTHER
INFORMATION





ITEM
      6.
            EXHIBITS:





Exhibits





31
                  Certification
      of  Chief Executive Officer and Chief Financial Officer pursuant
      to Section 302 of the Sarbanes-Oxley Act of 2002.32
                  Certification
      of Chief Executive Officer and Chief Financial Officer pursuant to Section
      906  of the Sarbanes-Oxley Act of
  2002.


16





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, thereunto
duly authorized.





SOLITRON
      DEVICES, INC.Date:
      July 2, 2009/s/ Shevach SarafShevach
      SarafChairman,
      President,Chief
      Executive Officer,Treasurer
      andChief
      Financial Officer


17


EXHIBIT
INDEX




EXHIBIT NUMBER
                          
                          DESCRIPTION31
                          
                          Certification
      of Chief Executive Officer and Chief Financial Officer
                            pursuant
      to Section 302 of the Sarbanes-Oxley Act of 2002.32
                          
                          Certification
      of Chief Executive Officer and Chief Financial Officer
                            pursuant
      to Section 906 of the Sarbanes-Oxley Act of
  2002.




18