UNITED
        STATES
 SECURITIES
        AND EXCHANGE COMMISSION
 Washington,
        D. C. 20549
 
 FORM
        10-QSB
 
 (Mark
        One)
  x
        QUARTERLY REPORT UNDER
        SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 For
        the
        quarterly period ended August 31, 2007
 
 o
        TRANSITION REPORT UNDER
        SECTION 13 OR 15(d) OF THE EXCHANGE ACT
  For
        the
        transition period from _________ to _________
  Commission
        file number 001-04978
 
 Solitron
        Devices, Inc.
 (Exact
        name of small business issuer as specified in its charter)
 Delaware
                
                22-1684144(State
                    or other jurisdiction of
                    incorporation
                      or organization)
                
                (IRS
                    Employer Identification
                    Number)
 
 3301
        Electronics Way, West Palm Beach, Florida 33407
 (Address
        of principal executive offices)
 
 (561)
        848-4311
 (Issuer’s
        telephone number, including area code)
 
 N/A
 (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 such filing requirements for the past 90 days.
 Yes x  No o
 
 Indicate
        by check mark whether the registrant is a shell company (as defined in Rule
        12b-2 of the Exchange Act).
 Yes oNo x
  APPLICABLE
        ONLY TO CORPORATE ISSUERS
  State
        the
        number of shares outstanding of each of the issuer's classes of common equity,
        as of August 31, 2007: 2,263,046  shares
        of
        common stock.
  Transitional
        Small Business Disclosure Format (check one):
 
 Yes oNox
  
  SOLITRON
        DEVICES, INC.
 
 INDEX
 Page
                    No.PART
                    1 - FINANCIAL INFORMATIONItem
                1.
                Financial
                    Statements (unaudited)Condensed
                    Consolidated Balance Sheet August 31, 2007
                
                2Condensed
                    Consolidated Statements of Income Three Months Ended August 31,
                    2007 and
                    2006
                
                3Condensed
                    Consolidated Statements of Cash Flows Three Months Ended August
                    31, 2007
                    and 2006
                
                4Notes
                    to Condensed Consolidated Financial Statements
                
                5-10Item
                2.
                Management’s
                    Discussion and Analysis or Plan of Operation
                
                11-14Item
                3.
                Controls
                    and Procedures
                
                15PART
                    II - OTHER INFORMATIONItem
                6.
                Exhibits
                
                15Signatures
                
                
                16
  1
  PART
        I
        - FINANCIAL INFORMATION
 
 ITEM
        1.   FINANCIAL
        STATEMENTS
 
 SOLITRON
        DEVICES, INC. AND SUBSIDIARIES
 CONDENSED
        CONSOLIDATED BALANCE SHEET
 (Unaudited,
        in thousands)
 
 August
                  31, 2007**ASSETS**CURRENT
                  ASSETSCash
                  and cash equivalents
              
              $
              3,880Accounts
                  receivable, less allowance for doubtful accounts of $22
              
              
              688Inventories,
                  net
              
              
              2,642Prepaid
                  expenses and other current assets
              
              
              130TOTAL
                  CURRENT ASSETS
              
              
              7,340PROPERTY,
                  PLANT AND EQUIPMENT, net
              
              
              449OTHER
                  ASSETS
              
              
              260TOTAL
                  ASSETS
              
              $
              8,049**LIABILITIES
                  AND STOCKHOLDERS’ EQUITY**CURRENT
                  LIABILITIESAccounts
                  payable - Post-petition
              
              $
              408Accounts
                  payable - Pre-petition, current portion
              
              
              1,128Accrued
                  expenses and other current liabilities
              
              
              350TOTAL
                  CURRENT LIABILITIES
              
              
              1,886LONG
                  TERM LIABILITIES, net of current portion
              
              
              355TOTAL
                  LIABILITIES
              
              
              2,241**STOCKHOLDERS’
                  EQUITY**Preferred
                  stock, $.01 par value, authorized 500,000 shares, none issued
              
              
              -0-Common
                  stock, $.01 par value, authorized 10,000,000 shares,
                  2,263,046shares
                  issued and outstanding, net of 173,287 shares of treasury
                  stock
              
              
              23Additional
                  paid-in capital
              
              
              2,733Retained
                  earnings
              
              
              3,052TOTAL
                  STOCKHOLDERS’ EQUITY
              
              
              5,808TOTAL
                  LIABILITIES AND STOCKHOLDERS’ EQUITY
              
              $
              8,049
  The
        accompanying notes are an integral part of the financial
        statements.
  2
  SOLITRON
        DEVICES, INC. AND SUBSIDIARIES
 CONDENSED
        CONSOLIDATED STATEMENTS OF INCOME
 THREE
        AND SIX MONTHS ENDED AUGUST 31,
 (Unaudited,
        in thousands except for share and per share amounts)
  Three
                  Months
              
              Six
                  Months2007
              
              2006
              
              2007
              
              2006NET
                  SALES
              
              $
              1,847
              
              $
              1,779
              
              $
              3,590
              
              $
              3,680Cost
                  of Sales
              
              
              1,551
              
              
              1,512
              
              
              2,921
              
              
              3,209Gross
                  Profit
              
              
              296
              
              
              267
              
              
              669
              
              
              471Selling,
                  General and Administrative Expenses
              
              
              235
              
              
              277
              
              
              505
              
              
              565Operating
                  Income/(Loss)
              
              
              61
              
              
              (10
              )
              
              164
              
              
              (94
              )OTHER
                  INCOME (EXPENSE)Other
                  Income/(Expense), Net
              
              
              (3
              )
              
              -
              
              
              1
              
              
              -Interest
                  Income
              
              
              46
              
              
              33
              
              
              90
              
              
              64Interest
                  Expense
              
              
              -
              
              
              -
              
              
              -
              
              
              -Other
                  income (expense), net
              
              
              43
              
              
              33
              
              
              91
              
              
              64Net
                  (loss)/income
              
              $
              104
              
              $
              23
              
              $
              255
              
              $
              (30
              )(LOSS)/INCOME
                  PER SHARE: Basic
              
              $
              .05
              
              $
              .01
              
              $
              .11
              
              $
              (0.01
              ):
                  Diluted
              
              $
              .04
              
              $
              .01
              
              $
              .10
              
              $
              (0.01
              )WEIGHTED
                  AVERAGESHARES
                  OUTSTANDING: Basic
              
              
              2,263,046
              
              
              2,261,649
              
              
              2,263,046
              
              
              2,227,888:
                  Diluted
              
              
              2,445,446
              
              
              2,477,149
              
              
              2,441,395
              
              
              2,227,888
  The
        accompanying notes are an integral part of the financial
        statements.
  3
  SOLITRON
        DEVICES, INC. AND SUBSIDIARIES
 CONDENSED
        CONSOLIDATED STATEMENTS OF CASH FLOWS
 SIX
        MONTHS ENDED AUGUST 31,
 (Unaudited,
        in thousands)
  2007
              
              2006CASH
                  FLOWS FROM OPERATING ACTIVITIESNet
                  income/(loss)
              
              $
              255
              
              $
              (30
              )Adjustments
                  to reconcile net income/(loss) to net cashprovided
                  by operating activities:Depreciation
                  and amortization
              
              
              94
              
              
              92Changes
                  in operating assets and liabilities:(Increase)
                  Decrease in:Accounts
                  receivable
              
              
              (46
              )
              
              66Inventories
              
              
              40
              
              
              (126
              )Prepaid
                  expenses and other current assets
              
              
              (2
              )
              
              (63
              )Other
                  non-current assets
              
              
              (207
              )
              
              21Increase
                  (Decrease) in:Accounts
                  payable - Post-petition
              
              
              168
              
              
              (28
              )Accounts
                  payable - Pre-petition
              
              
              (14
              )
              
              (14
              )Accrued
                  expenses and other current liabilities
              
              
              (80
              )
              
              (212
              )Other
                  non-current liabilities
              
              
              187
              
              
              -NET
                  CASH PROVIDED BY/(USED IN) OPERATING ACTIVITIES
              
              
              395
              
              
              (294
              )CASH
                  FLOW FROM INVESTING ACTIVITIES:Purchases
                  of property, plant and equipment
              
              
              (54
              )
              
              (80
              )NET
                  CASH (USED IN) INVESTING ACTIVITIES
              
              
              (54
              )
              
              (80
              )CASH
                  FLOW FROM FINANCING ACTIVITIES:Exercise
                  of stock options
              
              
              -
              
              
              21NET
                  CASH PROVIDED BY FINANCING ACTIVITIES
              
              
              -
              
              
              21NET
                  INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS
              
              
              341
              
              
              (353
              )CASH
                  AND CASH EQUIVALENTS AT THE BEGINNING OF PERIOD
              
              
              3,539
              
              
              3,181CASH
                  AND CASH EQUIVALENTS AT THE END OF PERIOD
              
              $
              3,880
              
              $
              2,828
 
 The
        accompanying notes are an integral part of the financial
        statements.
  4
 
 SOLITRON
        DEVICES, INC. AND SUBSIDIARIES
 NOTES
        TO CONDENSED CONSOLIDATED 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 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 accounting principles generally
        accepted in the United States 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 Solitron Devices,
        Inc. and Subsidiaries’ (collectively, the “Company”) Annual Report on Form
        10-KSB for the year ended February 28, 2007.
  The
        results of operations for the three-month period ended August 31, 2007 are
        not
        necessarily indicative of the results to be expected for the entire year
        ending
        February 29, 2008.
  SIGNIFICANT
        ACCOUNTING PRINCIPLES :
  Basis
        for Consolidation
  The
        condensed consolidated financial statements include the accounts of the Company.
        All significant inter-company balances and transactions have been eliminated
        in
        consolidation.
  Cash
        and Cash Equivalents
  Cash
        and
        cash equivalents include demand deposits, money market accounts, and treasury
        bills with maturities of ninety days or less.
  Earnings
        Per Common Share
  Earnings
        per common share is presented in accordance with SFAS No. 128 “Earnings per
        Share.” Basic earnings per common share is computed using the weighted average
        number of common shares outstanding during the period. Diluted earnings per
        common share incorporate the incremental shares issuable upon the assumed
        exercise of stock options to the extent they are not anti-dilutive using
        the
        treasury stock method.
 
 Shipping
        and Handling
  Shipping
        and handling costs billed to customers by the Company are recorded in net
        sales.
        Shipping costs incurred by the Company are recorded in cost of sales.
 
 5
  SOLITRON
        DEVICES, INC. AND SUBSIDIARIES
 NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)
  Stock
        Based Compensation
  In
        December 2002, the Financial Accounting Standards Board (“FASB”) issued SFAS No.
        148, “Accounting for Stock-Based Compensation-Transition and Disclosure, an
        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 fiscal quarters ended August 31, 2007 and August 31, 2006
        in
        accordance with SFAS No. 148.
 
 No
        employee stock options were granted during fiscal quarters ended August 31,
        2007
        and August 31, 2006.
 
 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
        and its subsidiaries will not be required to incur costs to comply with,
        or that
        the operations, business or financial condition of the Company will not be
        materially adversely affected by current or future environmental laws or
        regulations.
 
 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
        2008 to 2012. 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
        only happened twice in the past ten years (in fiscal year 2001 and fiscal
        year
        2006). The Company accrued $50,000 for its remaining obligations under the
        Settlement Agreement.
 
 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.
 
 6
  SOLITRON
        DEVICES, INC. AND SUBSIDIARIES
 NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)
 
 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 Site and
        Riviera Beach Site, 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 (Riviera
        Beach
        Site on October 12, 1999 and Port Salerno Site on March 17, 2003) 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 performance of remediation work 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
        $55,000.00 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.
  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 January 17, 2007, which provides
        for the
        tolling of applicable statutes of limitation through the earlier of October
        28,
        2007, 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.
 
 7
  SOLITRON
        DEVICES, INC. AND SUBSIDIARIES
 NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)
  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
                August
                  31,
              
              For
                  the six months ended
                August
                  31,2007
              
              2006
              
              2007
              
              2006Weighted
                  average common shares outstanding
              
              
              2,263,046
              
              
              2,261,649
              
              
              2,263,046
              
              
              2,227,888Dilutive
                  effect of employee stock options
              
              
              182,400
              
              
              215,500
              
              
              178,349
              
              
              0Weighted
                  average common shares outstanding, assuming dilution
              
              
              2,445,446
              
              
              2,477,149
              
              
              2,441,395
              
              
              2,227,888
  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 period ended August 31, 2007, 13,800 of 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. For the three-month period ended August 31, 2006,
        none  of
        the
        Company’s stock options were excluded from the calculation of diluted earnings
        per share.
  5.  INVENTORIES:
 
 As
        of
        August 31, 2007 net inventories consisted of the following:
 
 Raw
                  Materials
              
              $
              1,503,000Work-In-Process
              
              
              1,720,000Finished
                  Goods
              
              
              482,000Gross
                  Inventories
              
              
              3,705,000Reserve
              
              
              (1,063,000
              )Net
                  Inventories
              
              $
              2,642,000
 
 8
  SOLITRON
        DEVICES, INC. AND SUBSIDIARIES
 NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)
 
 6.  INCOME
        TAXES :
 
 At
        August
        31, 2007, the Company had net operating loss carryforwards of approximately
        $13,195,000 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 fully
        reserved through the recording of a 90% valuation allowance. Should a cumulative
        change in the ownership of more than 50% occur within a three-year period,
        there
        could be an annual limitation on the use of the net operating loss
        carryforwards.
 
 A
        reconciliation of the provision for income taxes to the amount calculated
        using
        the statutory federal rate (34%) for the periods ended August 31, 2007 and
        2006
        is provided below:
 
 Income
                  Tax Provision at
              
              August
                  31,
                2007
              
              August
                  31,
                2006U.S.
                  Statutory Rate
              
              $
              272,000
              
              $
              -State
                  Taxes, Net of Federal Benefit
              
              
              44,000
              
              
              -Alternative
                  Minimum Tax
              
              
              4,000
              
              
              -Less:
                  Prior Year Overaccrual
              
              
              (4,000
              )
              
              -Utilization
                  of Net Operating Loss Carryforward
              
              
              (316,000
              )
              
              -
                  .Income
                  Tax Provision
              
              $
              -
                  _
              
              $
              -
                  _
 
 A
        10%
        change in the valuation allowance on deferred tax assets was recorded for
        the
        quarter ended August 31, 2007. A $187,000 non-current deferred tax asset
        and
        associated $187,000 non-current deferred tax liability were recorded. No
        change
        in the valuation allowance on deferred tax assets was recorded for the period
        ended August 31, 2006.
 
 7.  OTHER
        INCOME :
 
 The
        $43,000 of other income reflected in the condensed consolidated statements
        of
        income for the quarter ended August 31, 2007 consists of $46,000 of interest
        income on cash and cash equivalents less $3,000 of other income related to
        related to the loss of an equipment deposit. For the fiscal quarter ended
        August
        31, 2006, the Company earned $33,000 of other expense consisting entirely
        of
        interest income.
 
 8.  ACCRUED
        EXPENSES :
 
 As
        of
        August 31, 2007 accrued expenses and other liabilities consisted of the
        following:
 Payroll
                    and related employee benefits
                
                $
                305,000Accrued
                    property taxes
                
                
                26,000Other
                    liabilities
                
                
                19,000$
                350,000
  9
 
 SOLITRON
        DEVICES, INC. AND SUBSIDIARIES
 NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)
  9.  EXPORT
        SALES AND MAJOR CUSTOMERS :
 
 Revenues
        from domestic and export sales to unaffiliated customers are as
        follows:
 Three
                    months ended August 31,2007
                
                2006Export
                    sales:Europe
                    and Australia
                
                $
                163,000
                
                $
                192,000Canada
                    and Latin America
                
                
                16,000
                
                
                57,000Far
                    East and Middle East
                
                
                50,000
                
                
                0United
                    States
                
                
                1,618,000
                
                
                1,530,000$
                1,847,000
                
                $
                1,779,000
  Sales
          to
          the Company's top two customers accounted for approximately 44% of net
          sales for
          the quarter ended August 31, 2007 as compared to 52% for the quarter ended
          August 31, 2006. Sales to Raytheon Company accounted for approximately
          34% of
          net sales for the quarter ended August 31, 2007 as compared to 36% for
          the
          quarter ended August 31, 2006. During the quarter ended August 31, 2007,
          sales
          to the United States Government represented approximately 10% of net sales
          as
          compared to 16% for the quarter ended August 31, 2006.
 
 10
  Item
                2.
              MANAGEMENT’S
                  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OFOPERATIONS
 
 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 United States government. Other products, such as Joint Army/Navy
        transistors, diodes and Standard Military Drawings voltage regulators, are
        sold
        as standard or catalog items.
  The
        following discussion and analysis of factors which have affected the Company's
        financial position and operating results during the periods included in the
        accompanying condensed consolidated financial statements should be read in
        conjunction with the Consolidated Financial Statements and the related Notes
        to
        Consolidated Financial Statements and Management’s Discussion and Analysis of
        Financial Condition and Results of Operations included in the Company’s Annual
        Report on Form 10-KSB for the year ended February 28, 2007 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.
  Critical
        Accounting Policies:
  The
        discussion and analysis of our financial condition and results of operations
        are
        based upon the condensed consolidated financial statements included elsewhere
        in
        this Form 10-QSB 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 and
        intangible assets, 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 the consolidated financial statements” in Item 7 of our Annual
        Report on Form 10-KSB for the fiscal year ended February 28,
        2007.
  Trends
        and Uncertainties :
  During
        the six months ended August 31, 2007, the Company’s book-to-bill ratio was
        approximately 1.48 as compared to approximately .96 for the six months ended
        August 31, 2006, reflecting an  increase
        in the volume of orders booked. The
        Company does not believe that the quarter-to-quarter change in the book-to-bill
        ratio indicates a specific trend in the demand for the Company’s products.
        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 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.
  Results
        of Operations-Three Months Ended August 31, 2007 Compared to Three Months
        Ended
        August 31, 2006 :
 
 Net
        sales
        for the three months ended August 31, 2007 increased 4% to $1,847,000 as
        compared to $1,779,000 for the three months ended August 31, 2006. This increase
        was primarily attributable to a higher level of orders that were shipped
        in
        accordance with customer requirements.
  Cost
        of
        sales for the three months ended August 31, 2007 increased to $1,551,000
        from
        $1,512,000 for the comparable period in 2006. Expressed as a percentage of
        sales, cost of sales decreased to 84% from 85% for the same period in 2006.
        This
        change was due primarily to decreases in direct labor wages and manufacturing
        overhead expenses.
  11
 
 Gross
        profit for the three months ended August 31, 2007 increased to $296,000 from
        $267,000 for the three months ended August 31, 2006. Accordingly, gross margins
        on the Company’s sales increased to 16% for the three months ended August 31,
        2007 in comparison to 15% for the three months ended August 31, 2006. This
        change was due primarily to decreases in direct labor wages and manufacturing
        overhead expenses as discussed above.
 
 For
        the
        three months ended August 31, 2007, the Company shipped 205,790 units as
        compared to 125,885 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 sale 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 increased 18%, from $5,006,000 to $5,898,000,
        for the three months ended August 31, 2007, as compared to a decrease of
        5% for
        the three months ended August 31, 2006. Changes in backlog reflect changes
        in
        the intake of orders and in the delivery dates required by
        customers.
 
 The
        Company has experienced an increase of 61% in the level of bookings during
        the
        quarter ended August 31, 2007 as compared to a 20% decrease in bookings for
        the
        same period in 2006 principally as a result of a shift in defense spending
        priorities, resulting in an increase in the monetary value of, and timing
        differences in the placement of contracts by the Department of Defense and
        its
        prime contractors.
 
 Selling,
        general, and administrative expenses decreased to $235,000  for
        the
        three months ended August 31, 2007 from $277,000 for the comparable period
        in
        2006. During the three months ended August 31, 2007, selling, general, and
        administrative expenses as a percentage of net sales decreased to 13% as
        compared with 16% for the three months ended August 31, 2006. The decrease
        was
        due primarily to decreases in sales commissions and selling wages.
 
 Operating
        income/(loss) for the three months ended August 31, 2007 increased to an
        operating income of $61,000  from
        an
        operating loss of $10,000 for the three months ended August 31, 2006. This
        increase is due mainly to an increase in sales, a decrease in cost of sales
        percentage, and a decrease in selling, general and administrative
        expenses.
  The
        Company recorded net other income of $43,000 for the three months ended August
        31, 2007 versus net other income of $33,000 for the three months ended August
        31, 2006. Included in net other income was interest income of $46,000 offset
        by
        $3,000 of other expense due to the loss of an equipment deposit, for the
        three
        months ended August 31, 2007 as compared to interest income of $33,000 for
        the
        three months ended August 31, 2006. The increase in interest income is due
        primarily to higher cash and equivalents balances invested.
  Net
        income for the three months ended August 31, 2007 increased to
        $104,000  versus
        $23,000 for the same period in 2006. This increase was due primarily to an
        increase in sales, a decrease in cost of sales percentage, and a decrease
        in
        selling, general and administrative expenses .
  Results
        of Operations-Six Months Ended August 31, 2007 Compared to Six Months Ended
        August 31, 2006 :
 
 Net
        sales
        for the six months ended August 31, 2007 decreased 2% to $3,590,000  as
        compared to $3,680,000 for the six months ended August 31, 2006. This decrease
        was primarily attributable to a lower level of orders that were shipped in
        accordance with customer requirements.
  Cost
        of
        sales for the six months ended August 31, 2007 decreased to
        $2,921,000  from
        $3,209,000  for
        the
        comparable period in 2006. Expressed as a percentage of sales, cost of sales
        decreased to 81%  from
        87%
        for the same period in 2006. The change was due primarily to lower raw material
        costs resulting from higher product yields and decreases in direct labor
        wages
        and manufacturing overhead expenses.
  Gross
        profit for the six months ended August 31, 2007 increased to
        $669,000  from
        $471,000 for the six months ended August 31, 2006. Accordingly, gross margins
        on
        the Company’s sales increased to approximately 19% for the six months ended
        August 31, 2007 in comparison to approximately 13% for the six months ended
        August 31, 2006. This change was primarily due to lower raw material costs
        resulting from higher product yields and decreases in direct labor wages
        and
        manufacturing overhead expenses as discussed above.
 
 12
  For
        the
        six months ended August 31, 2007, the Company shipped 405,136 units as compared
        to 184,373 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 increased 32%, from $4,472,000 to $5,898,000
        for the six months ended August 31, 2007, as compared to a decrease of
        approximately 6% for the six months ended August 31, 2006. Changes in backlog
        resulted from changes in the intake of orders and in the delivery dates required
        by customers.
 
 The
        Company has experienced an increase in the level of bookings of approximately
        41% for the quarter ended August 31, 2007 as compared to a decrease of 19%
        for
        the same period for the previous year principally as a result of a shift
        in
        defense spending priorities, resulting in an increase in the monetary value
        of,
        and timing differences in the placement of contracts by the Department of
        Defense and its prime contractors.
 
 Selling,
        general, and administrative expenses decreased to $505,000 for the six months
        ended August 31, 2007 from $565,000 for the comparable period in 2006. During
        the six months ended August 31, 2007, selling, general, and administrative
        expenses as a percentage of net sales decreased to 14%  as
        compared to 15% for the six months ended August 31, 2006. The decrease was
        due
        primarily to decreases in sales commissions and selling wages.
 
 Operating
        income/(loss) for the six months ended August 31, 2007 increased to income
        of
        $164,000  from
        a
        loss of $94,000  for
        the
        six months ended August 31, 2006. This increase is due mainly to an increase
        in
        sales, a decrease in cost of sales percentage, and a decrease in selling,
        general and administrative expenses.
  The
        Company recorded net other income of $91,000 for the six months ended August
        31,
        2007 versus net other income of $64,000 for the six months ended August 31,
        2006. Included in net other income was interest income of $90,000 for the
        six
        months ended August 31, 2007 as compared to $64,000 for the six months ended
        August 31, 2006. The increase in interest income is due primarily to higher
        cash
        and equivalents balances invested.
  Net
        income/(loss) for the six months ended August 31, 2007 increased to income
        of
        $255,000 from a loss of $30,000 for the same period in 2006. This increase
        was
        due primarily to a higher sales volume and lower cost of sales percentage
        as
        discussed above.
 
 Liquidity
        and Capital Resources:
  The
        Company’s sole source of cash is revenue generated by ongoing operations. The
        Company’s liquidity is expected to be adversely affected by decreased cash
        receipts due to anticipated lower level of sales volume over the next twelve
        to
        twenty-four months due to customers’ delivery requirements. The Company’s
        liquidity is not expected to improve until the Company’s revenues increase to a
        level consistently above its breakeven point.
 
 Furthermore,
        the Company’s liquidity continues to be adversely affected by the Company’s 1993
        bankruptcy petition obligations and the Company’s inability to obtain additional
        working capital through the sale of debt or equity securities. For a more
        complete discussion of the Company’s bankruptcy obligations, see “Business -
        Bankruptcy Proceedings” in the Company’s Annual Report on Form 10-KSB filed for
        the period ended February 28, 2007.
 
 The
        Company is required to make quarterly payments to holders of unsecured claims
        until they receive 35 percent (35%) of their pre-petition claims. As of August
        31, 2007, the Company has paid approximately $720,000 to its unsecured
        creditors. The Company’s remaining obligation is approximately $1,128,000 to
        holders of allowed unsecured claims to be paid in quarterly
        installments.
 
 The
        Company reported net income of $255,000 and operating income of $164,000
        for the
        six months ended August 31, 2007.
 
 At
        August
        31, 2007, February 28, 2007 and August 31, 2006, the Company had cash of
        approximately $3,880,000, $3,539,000 and $2,828,000 respectively. Increases
        in
        accounts payable contributed $168,000 to the last six months’ positive cash flow
        generated by ongoing operations.
  13
 At
          August
          31, 2007, the Company had working capital of $5,454,000 as compared with
          a
          working capital at August 31, 2006 of $4,586,000. At February 28, 2007,
          the
          Company had a working capital of $5,179,000. The $275,000 increase for
          the six
          months ended August 31, 2007 was due mainly to cash generated by net
          income.
  Off-Balance
        Sheet Arrangements:
 
 The
        Company is not involved in any off-balance sheet arrangements .
 
 FORWARD-LOOKING
        STATEMENTS
  Some
        of
        the statements in this Quarterly Report on Form 10-QSB 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 this Quarterly Report on Form 10-QSB, 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:
 ·
                the
                    loss of certification or qualification of the Company’s products or the
                    inability of the Company to capitalize on such certifications
                    and/or
                    qualifications;
  ·
                unexpected
                    rapid technological change;
  ·
                a
                    misinterpretation of the Company’s capital needs and sources and
                    availability of liquidity;
  ·
                a
                    change in government regulations which hinders the Company’s ability to
                    perform government contracts;
  ·
                a
                    shift in or misinterpretation of industry
                    trends;
  ·
                unforeseen
                    factors which impair or delay the development of any or all of
                    its
                    products;
  ·
                inability
                    to sustain or grow bookings and
                    sales;
  ·
                inability
                    to capitalize on competitive strengths or a misinterpretation
                    of those
                    strengths;
  ·
                the
                    emergence of improved, patented technology by
                    competitors;
  ·
                inability
                    to protect the Company’s proprietary
                    technologies;
  ·
                a
                    misinterpretation of the nature of the competition, the Company’s
                    competitive strengths or its reputation in the
                    industry;
  ·
                inability
                    to respond quickly to customers’ needs and to deliver products in a timely
                    manner resulting from unforeseen
                    circumstances;
  ·
                inability
                    to generate sufficient cash to sustain
                    operations;
  ·
                inability
                    to adequately respond to continued pricing pressure;
  ·
                failure
                    to successfully implement cost-cutting or downsizing measures,
                    strategic
                    plans or the insufficiency of such measures and
                    plans;
  ·
                changes
                    in military or defense
                    appropriations;
  ·
                inability
                    to make or renegotiate payments under the Plan of
                    Reorganization;
  ·
                inability
                    to move into new markets or develop new products;
  ·
                unexpected
                    impediments affecting the Company’s ability to fill
                    backlog;
  ·
                inability
                    to be released from certain environmental
                    liabilities;
  ·
                an
                    increase in the expected cost of environmental
                    compliance;
  ·
                changes
                    in law or industry regulation;
  ·
                unexpected
                    growth or stagnation of the
                    business;
  ·
                any
                    changes that render the Company’s headquarters and manufacturing
                    facilities unsuitable or inadequate to meet the Company’s current needs;
  ·
                significant
                    fluctuations in the price and volume of trading in the Company’s common
                    stock;
  ·
                unforeseen
                    effects of inflation; and
  ·
                the
                    impact of hurricanes, tornadoes and other weather conditions
                    on our
                    business.
  14
 ITEM
                      3.
                  CONTROLS
                      AND PROCEDURES
 
 Based
        on
        the evaluation of the Company’s disclosure controls and procedures as of August
        31, 2007, Shevach Saraf, Chairman, President, Chief Executive Officer, Treasurer
        and Chief Financial Officer of the Company, has concluded that the Company’s
        disclosure controls and procedures were effective as of August 31,
        2007.
 
 There
        were no changes in the Company’s internal control over financial reporting
        during the quarter ended August 31, 2007, that have materially affected or
        are
        reasonably likely to materially affect the Company’s internal control over
        financial reporting.
  ITEM
                6.
              EXHIBITS:
 
 Exhibits
  10.1
              Solitron
                  Devices, Inc. 2007 Stock Incentive Plan (incorporated by reference
                  to
                  Exhibit 10.1 of the Company’s Form 8-K/A filed on June 12,
                  2007).
 
 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
                  906of
                  the Sarbanes-Oxley Act of 2002.
  15
  SIGNATURES
 
 In
        accordance with the requirements of the Exchange Act, the registrant caused
        this
        report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
 SOLITRON
                  DEVICES, INC.Date:
                October 1, 2007/s/ Shevach
                SarafShevach
                  Saraf
                Chairman,
                  President,
                Chief
                  Executive Officer,
                Treasurer
                  and
                Chief
                  Financial Officer
 16
  EXHIBIT
        INDEX
 EXHIBIT
                    NUMBER
                
                DESCRIPTION10.1
                
                Solitron
                    Devices, Inc. 2007 Stock Incentive Plan (incorporated by reference
                    to
                    Exhibit 10.1 of the Company’s Form 8-K/A filed on June 12,
                    2007).*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.
 *
          Management contract or compensatory plan, contract or
          arrangement.
  17