Solitron Devices Swings to Loss Amid Rising Costs, Investment Shift

TL;DR

**SODI's Q2 loss and cash burn are red flags; this stock is a sell until they prove they can execute on profitability.**

AI Summary

SOLITRON DEVICES INC (SODI) reported a net loss of $234,000 for the three months ended August 31, 2025, a significant decline from a net income of $17,000 in the prior-year period. For the six months ended August 31, 2025, the company posted a net loss of $570,000, a stark contrast to the net income of $606,000 in the same period of 2024. Net sales increased by 11.3% to $3.986 million for the three months ended August 31, 2025, compared to $3.581 million in the prior year, but decreased by 11.4% to $6.686 million for the six-month period from $7.548 million. Gross profit for the six months ended August 31, 2025, fell by 49.2% to $1.225 million from $2.413 million. Selling, general, and administrative expenses rose to $1.894 million for the six months, up from $1.571 million. The company also made a new long-term investment of $1.650 million and repurchased $63,000 of stock during the six-month period. Cash and cash equivalents decreased by $1.249 million to $2.850 million as of August 31, 2025, from $4.099 million at February 28, 2025.

Why It Matters

Solitron's shift from profitability to a net loss, coupled with declining cash reserves and a significant new long-term investment, signals a challenging period for investors. The increased SG&A expenses and reduced gross profit margin could indicate competitive pressures or operational inefficiencies, impacting future earnings potential. For employees, this financial downturn might raise concerns about job security or future growth opportunities. Customers, particularly in the military and aerospace markets, will be watching to see if these financial pressures affect product development or delivery. The broader market for specialized semiconductor components could see this as a cautionary tale, highlighting the volatility in niche defense and aerospace sectors.

Risk Assessment

Risk Level: high — The company reported a net loss of $570,000 for the six months ended August 31, 2025, a significant deterioration from a $606,000 net income in the prior year. Cash and cash equivalents decreased by $1.249 million during the six-month period, indicating a substantial cash burn from operations and investing activities, including a new $1.650 million long-term investment.

Analyst Insight

Investors should consider reducing or liquidating their positions in SODI given the significant net losses, declining cash, and increased operating expenses. Await clear evidence of a return to profitability and positive cash flow from operations before reconsidering an investment.

Financial Highlights

revenue

$6.686 million

total Assets

$24.585 million

total Debt

$7.004 million

net Income

-$570,000

gross Margin

18.3%

cash Position

$2.850 million

revenue Growth

-11.4%

Key Numbers

• $234,000 — Net Loss (3 months) (Compared to $17,000 net income in prior year, a significant decline.)
• $570,000 — Net Loss (6 months) (Compared to $606,000 net income in prior year, a substantial swing to loss.)
• $3.986 million — Net Sales (3 months) (Increased 11.3% from $3.581 million in prior year.)
• $6.686 million — Net Sales (6 months) (Decreased 11.4% from $7.548 million in prior year.)
• $1.225 million — Gross Profit (6 months) (Decreased 49.2% from $2.413 million in prior year.)
• $1.894 million — SG&A Expenses (6 months) (Increased from $1.571 million in prior year.)
• $1.650 million — Long-term Investment (New investment made during the six-month period.)
• $1.249 million — Decrease in Cash (Net decrease in cash and cash equivalents for the six months.)
• $2.850 million — Cash and Cash Equivalents (Ending balance as of August 31, 2025.)
• 2,092,703 — Common Shares Outstanding (As of October 9, 2025.)

Key Players & Entities

• SOLITRON DEVICES INC (company) — Registrant
• Micro Engineering Inc. (company) — Acquired company
• SEC (regulator) — Securities and Exchange Commission
• $234,000 (dollar_amount) — Net loss for three months ended August 31, 2025
• $17,000 (dollar_amount) — Net income for three months ended August 31, 2024
• $570,000 (dollar_amount) — Net loss for six months ended August 31, 2025
• $606,000 (dollar_amount) — Net income for six months ended August 31, 2024
• $1.650 million (dollar_amount) — Long-term investment
• $1.249 million (dollar_amount) — Decrease in cash and cash equivalents
• $2.850 million (dollar_amount) — Cash and cash equivalents as of August 31, 2025

FAQ

Risk Factors

• Deteriorating Profitability and Cash Flow [high — financial]: The company reported a net loss of $234,000 for the three months ended August 31, 2025, a significant decline from a net income of $17,000 in the prior year. For the six-month period, the net loss was $570,000, a stark contrast to a $606,000 net income in the prior year. This trend is exacerbated by a 49.2% decrease in gross profit to $1.225 million for the six months, despite an 11.3% increase in net sales for the quarter.
• Increased Operating Expenses [medium — financial]: Selling, general, and administrative (SG&A) expenses rose to $1.894 million for the six months ended August 31, 2025, up from $1.571 million in the same period last year. This increase in operating costs, coupled with declining gross profit, contributed to the shift from operating income to a significant operating loss of $669,000 for the six-month period.
• Significant Cash Burn and Investment [high — financial]: Cash and cash equivalents decreased by $1.249 million to $2.850 million as of August 31, 2025. This reduction is partly due to a new long-term investment of $1.650 million made during the six-month period, which, combined with operating losses, puts pressure on liquidity.
• Declining Six-Month Sales Performance [medium — market]: While net sales increased by 11.3% to $3.986 million for the three months ended August 31, 2025, the six-month period saw a 11.4% decrease in net sales to $6.686 million from $7.548 million in the prior year. This indicates a challenging sales environment or execution issues over the longer term.
• Inventory Management [low — operational]: Inventories, net, stood at $3.298 million as of August 31, 2025, a slight decrease from $3.440 million at February 28, 2025. While not a dramatic change, any inefficiencies in inventory turnover could tie up capital and impact profitability, especially given the current gross profit decline.

Industry Context

Soliton Devices Inc. operates in the semiconductor industry, specifically in the manufacturing of high-reliability semiconductor devices. This sector is characterized by intense competition, rapid technological advancements, and cyclical demand. Companies in this space often face challenges related to supply chain management, R&D investment, and global economic conditions impacting capital expenditures by customers.

Regulatory Implications

As a publicly traded company, Soliton Devices Inc. is subject to SEC regulations and reporting requirements, including the timely filing of 10-Q and 10-K reports. Compliance with accounting standards (GAAP) and disclosure rules is critical. There are no specific new regulatory risks highlighted in this 10-Q, but general compliance remains a constant operational requirement.

What Investors Should Do

1. Monitor SG&A Expense Control
2. Analyze Gross Profit Margin Trends
3. Evaluate Cash Flow and Investment Strategy
4. Scrutinize Revenue Performance

Key Dates

• 2025-08-31: End of the second fiscal quarter — Reporting period for the 10-Q, showing a net loss and declining gross profit compared to the prior year.
• 2025-02-28: End of the prior fiscal year — Balance sheet comparison point, showing higher cash and cash equivalents ($4.099 million) and lower total liabilities ($6.553 million).

Glossary

Treasury Shares

Shares that a company has repurchased or bought back from the open market. These shares are no longer outstanding and do not carry voting rights. (The company held 491,677 treasury shares as of August 31, 2025, reducing the number of outstanding common shares and impacting equity calculations.)

Accrued Contingent Consideration

An amount that a company may have to pay in the future based on the achievement of certain conditions or milestones, often related to acquisitions. (The company has both current ($617,000) and non-current ($254,000) accrued contingent consideration, indicating potential future cash outflows.)

Retained Earnings

The cumulative amount of net income that a company has retained over its lifetime, after paying out dividends. (Retained earnings decreased from $17.440 million to $16.870 million, reflecting the net losses incurred during the period.)

Operating Income (Loss)

A company's profit after deducting operating expenses from its revenue. It excludes interest and taxes. (The company reported an operating loss of $669,000 for the six months ended August 31, 2025, a significant deterioration from an operating income of $842,000 in the prior year.)

Year-Over-Year Comparison

Compared to the prior year, Soliton Devices Inc. has experienced a significant financial downturn. Net sales for the six months ended August 31, 2025, decreased by 11.4% to $6.686 million, a reversal from the prior year's $7.548 million. Gross profit saw a substantial decline of 49.2%, falling to $1.225 million. This, combined with a 20.6% increase in SG&A expenses to $1.894 million, has led to a net loss of $570,000 for the six-month period, compared to a net income of $606,000 in the prior year. The company's cash position also weakened, decreasing by $1.249 million.

Key Financial Figures

• $0.01 — hares of the registrant's common stock, $0.01 par value, outstanding as of October 9,
• $250,000 — ccounts were FDIC insured to a limit of $250,000. Deposits in excess of FDIC insured lim

Filing Documents

• sodi20250831_10q.htm (10-Q) — 878KB
• ex_838667.htm (EX-31.1) — 19KB
• ex_838668.htm (EX-32.1) — 13KB
• 0001437749-25-030857.txt ( ) — 4866KB
• sodi-20250831.xsd (EX-101.SCH) — 46KB
• sodi-20250831_cal.xml (EX-101.CAL) — 37KB
• sodi-20250831_def.xml (EX-101.DEF) — 283KB
• sodi-20250831_lab.xml (EX-101.LAB) — 263KB
• sodi-20250831_pre.xml (EX-101.PRE) — 308KB
• sodi20250831_10q_htm.xml (XML) — 798KB

Financial Statements

Financial Statements 2 Consolidated Condensed Balance Sheets August 31, 2025 (unaudited) and February 28, 2025 2 Consolidated Condensed Statements of Operations (unaudited) Three and Six Months Ended August 31, 2025 and 2024 3 Consolidated Condensed Statements of Changes in Stockholders' Equity (unaudited) Three and Six Months Ended August 31, 2025 and 2024 4 Consolidated Condensed Statements of Cash Flows (unaudited) Six Months Ended August 31, 2025 and 2024 5 Notes to Consolidated Condensed Financial Statements (unaudited) 6 Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

Management's Discussion and Analysis of Financial Condition and Results of Operations 15 Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Quantitative and Qualitative Disclosures About Market Risk 19 Item 4.

Controls and Procedures

Controls and Procedures 19

– OTHER INFORMATION

PART II – OTHER INFORMATION Item 1.

Legal Proceedings

Legal Proceedings 20 Item 1A

Risk Factors

Risk Factors 20 Item 6. Exhibits 20

Signatures

Signatures 21 1 Table of Contents

– FINANCIAL INFORMATION

PART I – FINANCIAL INFORMATION

FINANCIAL STATEMENTS

ITEM 1. FINANCIAL STATEMENTS SOLITRON DEVICES, INC. CONSOLIDATED CONDENSED BALANCE SHEETS AS OF August 31, 2025 AND February 28, 2025 (in thousands, except for share and per share amounts) August 31, 2025 February 28, 2025 unaudited ASSETS CURRENT ASSETS Cash and cash equivalents $ 2,850 $ 4,099 Marketable securities 595 919 Accounts receivable 2,428 2,129 Inventories, net 3,298 3,440 Prepaid expenses and other current assets 284 132 TOTAL CURRENT ASSETS 9,455 10,719 Property, plant and equipment, net 8,428 8,635 Intangible assets 2,800 2,905 Deferred tax asset 1,827 1,622 Long-term investment 1,650 - Other assets 425 555 TOTAL ASSETS $ 24,585 $ 24,436 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 811 $ 439 Customer deposits 545 118 Accrued contingent consideration, current 617 570 Mortgage loans, current portion 156 152 Accrued expenses and other current liabilities 936 846 TOTAL CURRENT LIABILITIES 3,065 2,125 Accrued contingent consideration, non-current 254 663 Mortgage loans, net of current portion 3,685 3,765 TOTAL LIABILITIES 7,004 6,553 STOCKHOLDERS' EQUITY Preferred stock, $ .01 par value, authorized 500,000 shares, none issued - - Common stock, $ .01 par value, authorized 10,000,000 shares, 2,092,703 shares outstanding, net of 491,677 treasury shares at August 31, 2025 and 2,082,553 shares outstanding, net of 487,827 treasury shares at February 28, 2025, respectively 21 21 Additional paid-in capital 2,165 1,834 Retained Earnings 16,870 17,440 Less treasury stock ( 1,475 ) ( 1,412 ) TOTAL STOCKHOLDERS' EQUITY 17,581 17,883 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 24,585 $ 24,436 The accompanying notes are an integral part of the unaudited condensed consolidated financial statements. 2 Table of Contents SOLITRON DEVICES, INC. CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS FOR THE three and six months ended August 3

View Full Filing

View this 10-Q filing on SEC EDGAR