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 November 30, 2006





[  
              ]
            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
            
            (IRS
                Employer Identification
                Number)incorporation
                or
                organization)








3301
      Electronics Way, West Palm Beach, Florida 33407


(Address
      of principal executive offices)





(561)
      848-4311


(Issuer’s
      telephone number, 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
o No
x







APPLICABLE
      ONLY TO CORPORATE ISSUERS





State
      the
      number of shares outstanding of each of the issuer's classes of common equity,
      as of November 30, 2006 : 2,263,049  shares
      of
      common stock.





Transitional
      Small Business Disclosure Format (check one):





Yes
o No
x







SOLITRON
      DEVICES, INC.





INDEX





PART
      1
      - FINANCIAL INFORMATION








Page
                No.Item1.
            Financial
                Statements (unaudited)Condensed
                Consolidated Balance Sheet
            1November
                30, 2006Condensed
                Consolidated Statements of Income
            2Three
                and Nine Months Ended November 30, 2006 and 2005Condensed
                Consolidated Statements of Cash Flows
            3Nine
                Months Ended November 30, 2006 and 2005Notes
                to Condensed Consolidated Financial Statements
            4-9Item2.
            Management’s
                Discussion and Analysis of Financial Condition and Results
                of Operations
            10-14Item3.
            Controls
                and Procedures
            14PART
                II - OTHER INFORMATIONItem6.
            Exhibits
            14Signatures
            
            15




i




PART
      I
      - FINANCIAL INFORMATION





ITEM
      1. FINANCIAL
      STATEMENTS





SOLITRON
      DEVICES, INC. AND SUBSIDIARIES


CONDENSED
      CONSOLIDATED BALANCE SHEET


(Unaudited,
      in thousands)




November
                30, 2006**ASSETS**CURRENT
                ASSETSCash
                and cash equivalents
            
            $
            2,937Accounts
                receivable, less allowance for doubtful accounts of $1
            
            
            1,051Inventories,
                net
            
            
            2,756Prepaid
                expenses and other current assets
            
            
            161TOTAL
                CURRENT ASSETS
            
            
            6,905PROPERTY,
                PLANT AND EQUIPMENT, net
            
            
            511OTHER
                ASSETS
            
            
            56TOTAL
                ASSETS
            
            $
            7,472**LIABILITIES
                AND STOCKHOLDERS’ EQUITY**CURRENT
                LIABILITIESAccounts
                payable - Post-petition
            
            $
            366Accounts
                payable - Pre-petition, current portion
            
            
            1,149Current
                portion of environmental liabilities
            
            
            13Accrued
                expenses and other current liabilities
            
            
            367TOTAL
                CURRENT LIABILITIES
            
            
            1,895LONG
                TERM LIABILITIES, net of current portion
            
            
            183TOTAL
                LIABILITIES
            
            
            2,078**STOCKHOLDERS’
                EQUITY**Preferred
                stock, $.01 par value, authorized 500,000 shares, none issued
            
            
            -0-Common
                stock, $.01 par value, authorized 10,000,000 shares,
                2,263,049shares
                issued and outstanding, net of 173,287 shares of treasury
                stock
            
            
            22Additional
                paid-in capital
            
            
            2,732Retained
                earnings
            
            
            2,640TOTAL
                STOCKHOLDERS’ EQUITY
            
            
            5,394TOTAL
                LIABILITIES AND STOCKHOLDERS’ EQUITY
            
            $
            7,472








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




1




SOLITRON
      DEVICES, INC. AND
      SUBSIDIARIES


CONDENSED
      CONSOLIDATED STATEMENTS OF INCOME


THREE
      AND NINE MONTHS ENDED NOVEMBER 30,


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




Three
                Months
            
            Nine
                Months2006
            
            2005
            
            2006
            
            2005NET
                SALES
            
            $
            2,220
            
            $
            2,136
            
            $
            5,900
            
            $
            6,250Cost
                of sales
            
            
            1,607
            
            
            1,563
            
            
            4,816
            
            
            4,793Gross
                profit
            
            
            613
            
            
            573
            
            
            1,084
            
            
            1,457Selling,
                general and administrative expenses
            
            
            223
            
            
            283
            
            
            788
            
            
            819Operating
                (loss)/income
            
            
            390
            
            
            290
            
            
            296
            
            
            638OTHER
                INCOME (EXPENSE)Gain
                on extinguishment of debt
            
            
            -
            
            
            1
            
            
            -
            
            
            145Other
                income/(expense), net
            
            
            (118
            )
            
            -
            
            
            (118
            )
            
            -Interest
                income
            
            
            33
            
            
            10
            
            
            97
            
            
            31Interest
                expense on unsecured creditors claim
            
            
            -
            
            
            -
            
            
            -
            
            
            (2
            )Other
                income (expense), net
            
            
            (85
            )
            
            11
            
            
            (21
            )
            
            174Net
                (loss)/income
            
            $
            305
            
            $
            301
            
            $
            275
            
            $
            812(LOSS)/INCOME
                PER SHARE: Basic
            
            $
            0.13
            
            $
            0.14
            
            $
            0.12
            
            $
            0.39:
                Diluted
            
            $
            0.13
            
            $
            0.13
            
            $
            0.11
            
            $
            0.36WEIGHTED
                AVERAGESHARES
                OUTSTANDING: Basic
            
            
            2,263,049
            
            
            2,145,071
            
            
            2,239,608
            
            
            2,099,124:
                Diluted
            
            
            2,424,472
            
            
            2,339,050
            
            
            2,444,939
            
            
            2,273,754








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




2


SOLITRON
      DEVICES, INC. AND SUBSIDIARIES


CONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWS


NINE
      MONTHS ENDED NOVEMBER 30,


(Unaudited,
      in thousands)




2006
            
            
            2005CASH
                FLOWS FROM OPERATING ACTIVITIESNet
                (loss)/income
            
            $
            275
            
            $
            812Adjustments
                to reconcile net income to net cashprovided
                by operating activities:Depreciation
                and amortization
            
            
            137
            
            
            145Changes
                in operating assets and liabilities:(Increase)
                Decrease in:Accounts
                receivable
            
            
            (63
            )
            
            (3
            )Inventories
            
            
            (186
            )
            
            2Prepaid
                expenses and other current assets
            
            
            (26
            )
            
            35Other
                assets
            
            
            8
            
            
            (55
            )Increase
                (Decrease) in:Accounts
                payable - Post-petition
            
            
            (147
            )
            
            (96
            )Accounts
                payable - Pre-petition
            
            
            (21
            )
            
            562Current
                portion of environmental liabilities
            
            
            13
            
            
            -Accrued
                expenses and other current liabilities
            
            
            (262
            )
            
            (853
            )Other
                long-term liabilities
            
            
            105
            
            
            (13
            )NET
                CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES
            
            
            (167
            )
            
            536CASH
                FLOW FROM INVESTING ACTIVITIES:Purchases
                of property, plant and equipment
            
            
            (98
            )
            
            (95
            )NET
                CASH (USED IN) INVESTING ACTIVITIES
            
            
            (98
            )
            
            (95
            )CASH
                FLOW FROM FINANCING ACTIVITIES:Exercise
                of stock options
            
            
            21
            
            
            44NET
                CASH PROVIDED BY FINANCING ACTIVITIES
            
            
            21
            
            
            44NET
                (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS
            
            
            (244
            )
            
            485CASH
                AND CASH EQUIVALENTS AT THE BEGINNING OF PERIOD
            
            
            3,181
            
            
            2,403CASH
                AND CASH EQUIVALENTS AT THE END OF PERIOD
            
            $
            2,937
            
            $
            2,888






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




3


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. Certain amounts in the prior year's consolidated
      financial statements have been re-classified to conform to the current year's
      presentation.





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, 2006.




The
      results of operations for the nine month period ended November 30, 2006 are
      not
      necessarily indicative of the results to be expected for the entire year ending
      February 28, 2007.





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.





4


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
      Statement of Financial Accounting Standards No. 148, Accounting for Stock-Based
      Compensation-Transition and Disclosure-an amendment of FASB Statement No. 123
      (“SFAS No. 148”). This statement amends Statement of Financial Accounting
      Standards No. 123, Accounting for Stock-Based Compensation, (“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 transition guidance and disclosure requires
      that companies that continue to account for stock-based employee compensation
      under Accounting Principles Board Opinion No. 25, Accounting for Stock Issued
      to
      Employees (“APB No. 25”) include pro forma disclosure of net income and earnings
      per share as if the fair value method prescribed by SFAS No. 123 had been
      applied in accordance with SFAS No. 148.





The
      Company complies with SFAS No. 123. During the period ended November 30, 2005,
      as permitted by SFAS No. 123, the Company continued to follow the measurement
      provisions of APB No. 25 and did not recognize compensation expense for its
      stock based incentive plan. Had compensation expense been determined based
      on
      the fair value on the grant dates consistent with the methodology prescribed
      by
      SFAS No. 123, the Company’s net income and earnings per share would have been
      reduced to the pro-forma amounts indicated below.





Nine
                Months ended November 30,2006
            
            2005Net
                (loss)/income, as reported
            
            $
            275,000
            
            $
            812,000Less:
                total stock based employeecompensation
                expense, net of tax effects
            
            
            -
            
            
            63,000Pro-forma
                net (loss)/income
            
            $
            275,000
            
            $
            749,000Reported
                basic (loss)/earnings per common share
            
            $
            0.12
            
            $
            0.39Pro-forma
                basic (loss)/earnings per common share
            
            $
            0.12
            
            $
            0.36Reported
                diluted (loss)/earnings per common share
            
            $
            0.11
            
            $
            0.36Pro-forma
                diluted (loss)/earnings per common share
            
            $
            0.11
            
            $
            0.33





The
      total
      fair value of the options granted during the nine months ended November 30,
      2006
      and 2005 was $0 and $33,000, respectively, determined under the fair value
      based
      method for all awards.





No
      employee stock options were granted during the nine months ended November 30,
      2006. The weighted average estimated value of employee stock options granted
      during the nine months ended November 30, 2005 was $.70  per
      share. The fair value of options granted during the nine months ended November
      30, 2006 and 2005 was estimated on the date of the grant using the Black-Scholes
      option-pricing model with the following weighted average
      assumptions:




Nine
                months ended November 30,2006
            
            2005Dividend
                Yields
            
            
            0.0
            %
            
            0.0
            %Expected
                Volatility
            
            
            0
            %
            
            109.8
            %Risk-free
                Interest Rates
            
            
            0
            %
            
            4.1
            %Expected
                Life (in years)
            
            
            0.0
            
            
            10.0





The
      pro-forma amounts may not be indicative of future pro-forma income and earnings
      per share.





5


SOLITRON
      DEVICES, INC. AND SUBSIDIARIES


NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)





2.
            ENVIRONMENTAL
                REGULATION:





While
      the
      Company believes that it has the environmental permits necessary to conduct
      its
      business and that its operations conform to present environmental regulations,
      increased public attention has been focused on the environmental impact of
      semiconductor operations. The Company, in the conduct of its manufacturing
      operations, has handled and does handle materials that are considered hazardous,
      toxic or volatile under federal, state, and local laws and, therefore, is
      subject to regulations related to their use, storage, discharge, and disposal.
      No assurance can be made that the risk of accidental release of such materials
      can be completely eliminated. In the event of a violation of environmental
      laws,
      the Company could be held liable for damages and the costs of remediation and,
      along with the rest of the semiconductor industry, is subject to variable
      interpretations and governmental priorities concerning environmental laws and
      regulations. Environmental statutes have been interpreted to provide for joint
      and several liability and strict liability regardless of actual fault. There
      can
      be no assurance that the Company 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
      2008-2012. 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 accrues $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.





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. 92-1232 CA. 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.





6





SOLITRON
      DEVICES, INC. AND SUBSIDIARIES


NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)





Prior
      to
      the sale of the Port Salerno and Riviera Beach Sites, 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., 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.





By
      letter
      dated November 16, 2006, FDEP notified the Company that FDEP had unreimbursed
      expenses associated with the Port Salerno and Riviera Beach Sites 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 justification package, the Company is required to transfer
      $58,000.00 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 payments 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 justification 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. Therefore, the
      Company has accrued a liability of $118,000, which is the present value of
      the
      net amount claimed owed to FDEP.





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. 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 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 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 September 20, 2006,
      which
      provides for the tolling of applicable statutes of limitation through the
      earlier of January 28, 2007 or the date the State institutes a suit against
      Solitron 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 this 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
              November
                30,
            
            For
                the nine months ended
              November
                30,2006
            
            2005
            
            2006
            
            2005Weighted
                average common shares outstanding
            
            
            2,263,049
            
            
            2,145,071
            
            
            2,239,608
            
            
            2,099,124Dilutive
                effect of employee stock options
            
            
            161,423
            
            
            193,979
            
            
            205,331
            
            
            174,630Weighted
                average common shares outstanding, assuming dilution
            
            
            2,424,472
            
            
            2,339,050
            
            
            2,444,939
            
            
            2,273,754




7




SOLITRON
      DEVICES, INC. AND SUBSIDIARIES


NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)





Weighted
      average common shares outstanding, assuming dilution, include the incremental
      shares that would be issued upon the assumed exercise of stock options. For
      the
      nine month period ended November 30, 2006, 14,300 of the Company’s stock options
      were excluded from the calculation of diluted earnings per share because the
      average price of the common shares was less than the exercise price of the
      options. For the nine month period ended November 30, 2005, none of the
      Company's stock options were excluded from the calculation of diluted earnings
      per share because the exercise prices of the stock options were less than or
      equal to the average price of the common shares, and therefore their inclusion
      would have been anti-dilutive.





5.
            INVENTORIES:





As
      of
      November 30, 2006 net inventories consist of the following:





Raw
                Materials
            
            $
            1,654,000Work-In-Process
            
            
            1,641,000Finished
                Goods
            
            
            408,000Gross
                Inventories
            
            
            3,703,000Reserve
            
            
            (947,000
            )Net
                Inventories
            
            $
            2,756,000





6.
            INCOME
                TAXES:





At
      November 30, 2006, the Company had net operating loss carryforwards of
      approximately $15,725,000 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 100%
      valuation allowance. Should a cumulative change in the ownership of more than
      50% occur within a three-year period, there could be an annual limitation on
      the
      use of the net operating loss carryforwards.





A
      reconciliation of the provision for income taxes to the amount calculated using
      the statutory federal rate (34%) for the periods ended November 30, 2006 and
      2005 is provided below:





Income
                Tax Provision at
            
            Nov.
                30,2006
            
            Nov.
                30,2005U.S.
                Statutory Rate
            
            $
            -
            
            $
            276,000State
                Taxes, Net of Federal Benefit
            
            
            -
            
            
            45,000Alternative
                Minimum Tax
            
            
            -
            
            
            -Utilization
                of Net Operating Loss Carryforward
            
            
            -
            
            
            (321,000
            )Income
                Tax Provision
            
            $
            -
            
            $
            -





No
      change
      in the valuation allowance on deferred tax assets was recorded for the period
      ended November 30, 2006.





7.
            OTHER
                INCOME/EXPENSE:





The
      $33,000 of other income reflected in the condensed consolidated statements
      of
      income for the quarter ended November 30, 2006 consists of $33,000 of interest
      income on cash and cash equivalents as compared to $10,000 for the quarter
      ended
      November 30, 2005. During the fiscal quarter ended November 30, 2005, the
      Company recognized approximately $1,000 of other income from extinguishment
      of
      pre-petition unsecured debt. During the quarter ended November 30, 2006, the
      Company recognized other expenses in the amount of $118,000 relating to an
      FDEP
      claim for its unreimbursed expenses associated with the Company’s production
      sites in accordance with the Consent Final Judgment.





8




SOLITRON
      DEVICES, INC. AND SUBSIDIARIES


NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)





8.
            ACCRUED
                EXPENSES:





As
      of
      November 30, 2006 accrued expenses and other liabilities consist of the
      following:





Payroll
                and related employee benefits
            
            $
            304,000Other
                liabilities
            
            
            63,000$
            367,000





9.
            COMMITMENTS
                AND CONTINGENCIES:





For
      a
      discussion of the Company's accrual for losses associated with environmental
      remediation obligations, see Note 3. With respect to the Settlement Agreement
      discussed in Note 3, the Company currently estimates that it will pay $10,000
      per year for years three to seven from the effective date of the Settlement
      Agreement.





10.
            EXPORT
                SALES AND MAJOR CUSTOMERS:





Revenues
      from domestic and export sales to unaffiliated customers are as
      follows:




Three
                months ended November 30,2006
            
            
            2005Export
              sales:Europe
                and Australia
            
            $
            263,000
            
            $
            91,000Canada
                and Latin America
            
            
            39,000
            
            
            50,000Far
                East and Middle East
            
            
            12,000
            
            
            19,000United
              States
            
            
            1,906,000
            
            
            1,976,000$
            2,220,000
            
            $
            2,136,000





Sales
      to
      the Company's top two customers accounted for approximately 61% of net sales
      for
      the quarter ended November 30, 2006 as compared to 54% for the quarter ended
      November 30, 2005. Sales to Raytheon Company accounted for approximately 52%
      of
      net sales for the quarter ended November 30, 2006 as compared to 44% for the
      quarter ended November 30, 2005. During the quarter ended November 30, 2006,
      the
      US Government represented approximately 9% of net sales as compared to 10%
      for
      the quarter ended November 30, 2005.





9





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, 2006 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,
      2006.





Trends
      and Uncertainties :




During
      the three months ended November 30, 2006, the Company’s book-to-bill ratio was
      approximately .35 as compared to approximately 2.02 for the three months ended
      November 30, 2005, reflecting a  decrease
      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
      continuously identifies and implements 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 at the level experienced in
      the
      last twelve months, the Company will be required to implement further cost
      cutting or other downsizing measures to continue its business operations.





Results
      of Operations-Three Months Ended November 30, 2006 Compared to Three Months
      Ended November 30, 2005 :





Net
      sales
      for the three months ended November 30, 2006 increased 4% to $2,220,000 as
      compared to $2,136,000 for the three months ended November 30, 2005. This
      increase was primarily attributable to a higher level of orders that were
      shipped in accordance with customer requirements.




10




Cost
      of
      sales for the three months ended November 30, 2006 increased to $1,607,000
      from
      $1,563,000 for the comparable period in 2005. Expressed as a percentage of
      sales, cost of sales decreased to 72% from 73% for the same period in 2005.
      This
      change was due primarily to lower raw material costs and a decrease in direct
      labor wages as a percentage of sales.





Gross
      profit for the three months ended November 30, 2006 increased to $613,000 from
      $573,000 for the three months ended November 30, 2005. Accordingly, gross
      margins on the Company’s sales increased to 28% for the three months ended
      November 30, 2006 in comparison to 27% for the three months ended November
      30,
      2005. This change was due mainly to a decrease in cost of sales percentage
      as
      well as due to the increase in sales as discussed above.





For
      the
      three months ended November 30, 2006, the Company shipped 149,231 units as
      compared to 78,648 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 decreased 22%, from $5,674,000 to $4,420,000,
      for the three months ended November 30, 2006, as compared to an increase of
      43%
      for the three months ended November 30, 2005. Changes in backlog reflect changes
      in the intake of orders and in the delivery dates required by
      customers.





The
      Company has experienced a decrease of 82% in the level of bookings during the
      quarter ended November 30, 2006 as compared to a 110% increase in bookings
      for
      the same period in 2005 principally as a result of a shift in defense spending
      priorities, resulting in a decrease in the monetary value of, and delays in
      the
      awarding of contracts by the Department of Defense and its prime
      contractors.





Selling,
      general, and administrative expenses decreased to $223,000  for
      the
      three months ended November 30, 2006 from $283,000 for the comparable period
      in
      2005. During the three months ended November 30, 2006, selling, general, and
      administrative expenses as a percentage of net sales decreased to 10% as
      compared with 13% for the three months ended November 30, 2005. The decrease
      was
      due primarily to decreases in sales commissions and legal fees.





Operating
      income for the three months ended November 30, 2006 increased to
      $390,000  from
      $290,000 for the three months ended November 30, 2005. This increase is due
      mainly to an increase in sales, a decrease in cost of sales, and a decrease
      in
      selling, general and administrative expenses.




The
      Company recorded net other expenses of $85,000 for the three months ended
      November 30, 2006 versus net other income of $11,000 for the three months ended
      November 30, 2005. This decrease was due primarily to the fact that the Company
      accrued $118, 000
      of
      environmental expenses relating to an FDEP claim for its unreimbursed expenses
      associated with two of the Company’s former sites (Port Salerno and Riviera
      Beach) in accordance with the Consent Final Judgment .
      Also
      recognized during the quarter ended November 30, 2006 was $33,000 in interest
      income as compared to $10,000 of interest income for the quarter ended November
      30, 2005.





Net
      income for the three months ended November 30, 2006 increased to
      $305,000  versus
      $301,000 for the same period in 2005. This increase was due primarily to an
      increase in sales volume and a decrease in cost of sales .





Results
      of Operations-Nine Months Ended November 30, 2006 Compared to Nine Months Ended
      November 30, 2005 :





Net
      sales
      for the nine months ended November 30, 2006 decreased 6% to
      $5,900,000  as
      compared to $6,250,000 for the nine months ended November 30, 2005. This
      decrease was primarily attributable to a lower level of orders that were shipped
      in accordance with customer requirements during the first two quarters of the
      Company’s fiscal year .





Cost
      of
      sales for the nine months ended November 30, 2006 increased to
      $4,816,000  from
      $4,793,000  for
      the
      comparable period in 2005. Expressed as a percentage of sales, cost of sales
      increased to 82%  from
      77%
      for the same period in 2005. The change was due primarily to higher costs of
      raw
      materials, outside services and labor incurred during the first two quarters
      of
      the Company’s fiscal year.





11





Gross
      profit for the nine months ended November 30, 2006 decreased to $1,084,000
      from
      $1,457,000 for the nine months ended November 30, 2005. Accordingly, gross
      margins on the Company’s sales decreased to approximately 18%  for
      the
      nine months ended November 30, 2006 as compared to 23% for the nine months
      ended
      November 30, 2005. This change was due to a decrease in sales and an increase
      in
      cost of sales percentage during the first two quarters of the Company’s fiscal
      year.





For
      the
      nine months ended November 30, 2006, the Company shipped 333,604 units as
      compared to 394,037 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 approximately 27%, from $6,042,000 to
      $4,420,000 for the nine months ended November 30, 2006, as compared to an
      increase of approximately 52% for the nine months ended November 30, 2005.
      Changes in backlog resulted from changes in the intake of orders and in the
      delivery dates required by customers.





The
      Company has experienced a decrease in the level of bookings of approximately
      50%
      for the nine months ended November 30, 2006 as compared to an increase of 76%
      for the same period for the previous year principally as a result of a shift
      in
      defense spending priorities, resulting in a decrease in the monetary value
      of,
      and delays in the awarding of contracts by the Department of Defense and its
      prime contractors.





Selling,
      general, and administrative expenses decreased to $788,000 for the nine months
      ended November 30, 2006 from $819,000 for the comparable period in 2005. During
      the nine months ended November 30, 2006, selling, general, and administrative
      expenses as a percentage of net sales remained at 13%  as
      compared with the nine months ended November 30, 2005.





Operating
      income for the nine months ended November 30, 2006 decreased to $296,000 from
      income of $638,000 for the nine months ended November 30, 2005. This decrease
      is
      due mainly to a lower sales volume and higher cost of sales as discussed
      above.




The
      Company recorded net other expenses of $21,000 for the nine months ended
      November 30, 2006 versus net other income of $174,000 for the nine months ended
      November 30, 2005. Other income decreased because income from debt forgiveness
      was recognized in the nine months ended November 30, 2005 while none was
      recognized in the nine months ended November 30, 2006. Interest income for
      the
      nine months ended November 30, 2006 increased to $97,000 from $31,000 for the
      same period in 2005 due to higher interest rates earned and higher cash and
      cash
      equivalents account balances. The Company also accrued $118,000 of environmental
      expenses relating
      to an FDEP claim for its unreimbursed expenses associated with two of the
      Company’s former sites (Port Salerno and Riviera Beach) in accordance with the
      Consent Final Judgment during the quarter
      ended November 30, 2006.





Net
      income for the nine months ended November 30, 2006 decreased to $275,000 from
      $812,000 for the same period in 2005. This decrease was due primarily to a
      lower
      sales volume, a higher cost of sales percentage and to the recognition of
      environmental expenses 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 a lower level of sales during the current fiscal year and by
      an
      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, 2006.





12




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 November
      30, 2006, the Company has paid approximately $699,000 to its unsecured
      creditors. The Company’s remaining obligation is approximately
      $1,149,000  to
      holders of allowed unsecured claims to be paid in quarterly
      installments.





The
      Company reported net income of $275,000 and operating income of $296,000 for
      the
      nine months ended November 30, 2006. The Company has significant obligations
      arising from settlements related to its bankruptcy proceeding which require
      it
      to make substantial cash payments, which cannot be supported by the Company’s
      current level of operations.





At
      November 30, 2006, February 28, 2006 and November 30, 2005, the Company had
      cash
      of approximately $2,937,000, $3,181,000 and $2,888,000 respectively. Reductions
      in accrued expenses and other current liabilities contributed $262,000 to the
      last nine months’ negative cash flow generated by ongoing
      operations.





At
      November 30, 2006, the Company had working capital of $5,011,000 as compared
      with a working capital at November 30, 2005 of $3,254,000. At February 28,
      2006,
      the Company had a working capital of $4,562,000. The $449,000 increase for
      the
      nine months ended November 30, 2006 was due mainly to decreases in current
      liabilities and an increase in inventory of $186,000 offset by a decrease in
      cash.





Off-Balance
      Sheet Arrangements:





The
      Company is not involved in any off-balance sheet arrangements .





FORWARD-LOOKING
      STATEMENTS





Information
      in this Form 10-QSB, including any information incorporated by reference herein,
      includes “forward looking statements” within the meaning of Section 27A of the
      Securities Act of 1933, as amended, and Section 21E of the Securities Act of
      1934, as amended, and is subject to the safe-harbor created by such sections.
      The Company’s actual results may differ significantly from the results discussed
      in such forward-looking statements.





Specifically,
      this quarterly report contains forward-looking statements
      regarding:





·
            the
                Company’s expectations regarding liquidity, including sources and
                availability;


·
            the
                Company’s expectations regarding a lower level of sales volume during the
                next twelve to twenty-four months;


·
            the
                Company’s beliefs regarding its ability to generate sufficient cash flow
                from operations to sustain operations;


·
            the
                Company’s beliefs regarding the quarter-to-quarter change in the
                book-to-bill ratio;


·
            the
                Company’s ability to implement effectively cost-cutting or downsizing
                measures;


·
            the
                Company’s expectations regarding fluctuations in the general economy,
                variations in defense spending and the timing of contract
                awarding;


·
            the
                Company’s compliance with environmental laws, orders and investigations
                and the future cost of such compliance;


·
            the
                Company’s ability to make payments required under settlements related to
                its bankruptcy proceedings;


·
            expectations
                of being released from certain environmental liabilities and the
                Company’s
                ability to satisfy such liabilities, including FDEP’s claim of
                unreimbursed expenses associated with the Port Salerno and Riviera
                Beach
                Sites; and


·
            the
                Company’s estimates that it will pay $10,000 per year during years three
                to seven from the effective date of the Settlement Agreement.





These
      statements are based upon assumptions and analyses made by the Company in light
      of current conditions, future developments and other factors the Company
      believes are appropriate in the circumstances, or information obtained from
      third parties and are subject to a number of assumptions, risks and
      uncertainties. Readers are cautioned that forward-looking statements are not
      guarantees of future performance and that actual results might differ materially
      from those suggested or projected in the forward-looking statements. Factors
      that may cause actual future events to differ significantly from those predicted
      or assumed include, but are not limited to:





13


·
            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 settlements related to its
                bankruptcy proceedings;


·
            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 its
                business.





ITEM
              3.
            CONTROLS
                AND PROCEDURES





Based
      on
      the evaluation of the Company’s disclosure controls and procedures as of
      November 30, 2006, 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 November 30,
      2006.





There
      were no changes in the Company’s internal control over financial reporting
      during the quarter ended November 30, 2006, that have materially affected or
      are
      reasonably likely to materially affect the Company’s internal control over
      financial reporting.





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.


14





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.December 27, 2006By:
            /s/ Shevach
              SarafName:
                Shevach SarafTitle: Chairman, President,
              Chief
              Executive Officer, Treasurer and Chief Financial
              Officer




15


EXHIBIT
      INDEX








EXHIBIT
              NUMBER
            DESCRIPTION  31
            Certification
                of Chief Executive Officer and Chief Financial Officerpursuant
                to Section 302 of the Sarbanes-Oxley Act of
                2002.




32
            Certification
                of Chief Executive Officer and Chief Financial Officerpursuant
                to Section 906 of the Sarbanes-Oxley Act of
                2002.




16