SONO TEK CORP
For the period ended May 31, 2024. Filed Jul 11, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
May 31, 2024 · Filed Jul 11, 2024
SOTK$4.30-0.9%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2023-11-30; filed 2024-01-16.
0001171520-24-000022
Item 2. - Management's Discussion and Analysis of Financial Condition and Results of Operations 11 –17Current report: 10-Q
Period ended 2024-05-31; filed 2024-07-11.
0001171520-24-000249
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 70 previous paragraphs and 60 current paragraphs.
19 unchanged; 22 reworded; 19 added; 28 removed; 1 previous and 0 current paragraphs rearranged.
Tables are not compared: 9 previous and 8 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (19)
Current report
Founded in 1975, Sono-Tek Corporation is a global leader in designing and manufacturing ultrasonic coating systems that are shaping industries and driving innovation worldwide. Our ultrasonic coating systems are used to apply thin films onto parts used in diverse industries, including microelectronics, alternative energy, medical devices, advanced industrial manufacturing, and research and development sectors worldwide. Sono-Tek’s move into the clean energy sector is showing transformative results in next-gen solar cells, fuel cells, green hydrogen generation, and carbon capture applications as we shape a sustainable future.
Current report
Our comprehensive suite of thin film coating solutions and application consulting services, provided by our expert applications engineers to guide our customers in developing the complete coating process, ensures unparalleled results for our clients and helps some of the world’s most promising companies achieve technological breakthroughs and bring them the market. In anticipation of customer demands, our significant focus on R&D efforts allows us to keep pace with industry trends while continuously innovating. The company strategically delivers its products through a network of direct sales personnel, carefully chosen independent distributors, and experienced sales representatives located in North America, Latin America, Europe, and Asia, ensuring efficient market reach across diverse sectors around the globe. Approximately 39% of our sales were generated outside the United States and Canada in the first three months of fiscal year 2025.
Current report
Integrated Coating System sales increased by 142%, largely due to a $730,000 system delivered to the clean energy sector for an advanced solar application. Sales of Multi-Axis coating systems recorded a 51% increase, influenced by a shipment into the semiconductor market of a newly developed wafer coating system with integrated multi-wafer handling capabilities that sold for $370,000, and the delivery of a new 6-axis robot that sold for $182,000 to the medical device market. OEM System sales increased by 21%. Fluxing systems sales decreased 43%, or $102,000, continuing a downward trend following weak fluxing systems sales in fiscal year 2024. Although we can provide no assurance, we are hopeful that fluxing system sales will rebound in the second half of fiscal year 2025, resulting from significant changes made to our distribution channels for this product line at the beginning of fiscal 2025.
Current report
Sales to the Alternative Energy market increased by 174%. The Alternative Energy market was influenced by the continued adoption of Sono-Tek platforms used in the manufacturing of critical membranes for carbon capture, green hydrogen generation fuel cells and advanced solar cell applications. Sales to the Medical market increased by 124%, partially due to the shipment of a newly developed six-axis robot system used for a unique implantable medical device application valued at $182,000. The Emerging R&D and Other market decreased by 91% or $115,000, as several emerging applications have shifted into new market baskets as they have become fully developed. The Industrial market decreased by 65% due to the final shipment of a multi-system order delivered in the first quarter of fiscal year 2024 that did not repeat in the first quarter of fiscal year 2025; however, based on existing backlog we anticipate that the industrial market sales will rebound in the second quarter of fiscal year 2025.
Current report
In the first quarter of fiscal year 2025, approximately 61% of our sales were to customers in the US and Canada compared to 66% in the prior year period of fiscal year 2024. EMEA sales increased 192% due to several large systems shipped to multiple customers in the green energy sector and $86,000 of service-related activities and upgrades on a large system sold to the semiconductor industry several years ago. The increased sales to the US and Canada were positively impacted by several US government initiatives to invest in the green energy sector and advanced research markets. Latin America sales decreased due to a dip in PCB fluxing system sales in Mexico.
Current report
Our gross profit increased $677,000, or 38%, to $2,454,000 for the first quarter of fiscal year 2025 compared with $1,777,000 in fiscal year 2024. Our gross profit margin decreased 50 basis points to 48.8% in the first quarter of fiscal year 2025 compared to 49.3% in fiscal year 2024. The decrease in gross profit margin during the quarter is primarily due to a realignment of our organizational framework that started in the fourth quarter of fiscal year 2024 as an outcome of completion of several successful R&D endeavors, which shifted some costs from R&D to cost of goods sold.
Current report
Research and product development costs increased in the first quarter of fiscal year 2025 due to increased salaries resulting from an increase in personnel and related insurance costs, which are directed at the focused growth initiatives we continue to implement. The increase in salaries was partially offset by the reallocation of certain research and development costs to cost of goods sold. This reallocation began in the fourth quarter of fiscal year 2024.
Current report
These increases were partially offset by a decrease in salary expense due to the reallocation of our new CEO’s salary to the General and Administrative category. Prior to January 1, 2024, Mr. Harshbarger’s salary was classified under marketing and sales expenses. For the first quarter of fiscal year 2025, the total reallocated amount of Mr. Harshbarger’s salary was approximately $77,000.
Current report
Effective January 1, 2024, Steve Harshbarger became our Chief Executive Officer and President, having previously served as Chief Operating Officer and President prior to such date. We reclassified the expenses related to Mr. Harshbarger's compensation in connection with this positional change. Prior to January 1, 2024, we classified Mr. Harshbarger’s salary under sales expenses due to his instrumental involvement in nurturing strategic accounts. In connection with Mr. Harshbarger's assumption of the principal executive officer role, the costs associated with his compensation have been reallocated to the G&A category ensuring a more precise representation of resource allocation in our financial statements. For the first quarter of fiscal year 2025, the total reallocated amount of Mr. Harshbarger’s salary was approximately $77,000.
Current report
Operating Income/(Loss):
Current report
In the first quarter of fiscal year 2025, our operating income increased $330,000 to $238,000 compared to an operating loss of $92,000 in the first quarter of fiscal year 2024. The increase is due to the current period’s increase in gross profit partially offset by an increase in operating expenses.
Current report
Income Tax Expense/(Benefit):
Current report
Critical Accounting Estimates
Current report
Management’s estimates and judgements are continually evaluated and are based on historical experience and expectations regarding future events that are believed to be reasonable under the specific circumstances.
Current report
Revenue Recognition
Current report
The Company recognizes revenue in accordance with ASC 606, Revenue from Contracts with Customers, the core principle of which is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to receive in exchange for those goods or services.
Current report
Judgement is required when determining at what point in time control of the Company’s manufactured equipment is transferred to its customers. Management’s judgement is based on each customer contract and the transfer of control of the equipment to the customer. The sales revenue to be recorded is based on each contract.
Current report
In November 2023, the FASB issued ASU 2023-07,Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The amendments in this ASU require disclosures, on an annual and interim basis, of significant segment expenses that are regularly provided to the chief operating officer decision maker (“CODM”), as well as the aggregate amount of other segment items included in the reported measure of segment profit or loss. The ASU requires that a public entity disclose the title and position of the CODM and an explanation of how the CODM uses the reported measure(s) of segment profit or loss in assessing segment performance and deciding how to allocate resources. Public entities will be required to provide all annual disclosures currently required by Topic 280 in interim periods, and entities with a single reportable segment are required to provide all the disclosures required by the amendments in this ASU and existing segment disclosures in Topic 280. This ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The amendments in this ASU should be applied retrospectively to all prior periods presented in the financial statements. The Company is currently evaluating the impact of this standard on its consolidated financial statements and related disclosures, and does not expect the standard will have a material impact on the Company’s consolidated financial statements and related disclosures.
Current report
In December 2023, the FASB issued ASU 2023-09,*Improvements to Income Tax Disclosures.*This ASU requires greater disaggregation of information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid. This ASU applies to all entities subject to income taxes and is intended to help investors better understand an entity’s exposure to potential changes in jurisdictional tax legislation and assess income tax information that affects cash flow forecasts and capital allocation decisions. This ASU is effective for annual periods beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact the adoption of this ASU will have on its consolidated financial statements and related disclosures.
Removed paragraphs (28)
Previous report
Founded in 1975, Sono-Tek Corporation designs and manufactures ultrasonic coating systems that apply precise, thin film coatings to a multitude of products for the microelectronics/electronics, alternative energy, medical and industrial markets, including specialized glass applications in construction and automotive. We also sell our products to emerging research and development and other markets. We have invested significant resources to enhance our market diversity by leveraging our core ultrasonic coating technology. As a result, we have increased our portfolio of products, the industries we serve and the countries in which we sell our products.
Previous report
Our ultrasonic nozzle systems use high frequency, ultrasonic vibrations that atomize liquids into minute drops that can be applied to surfaces at low velocity providing thin layers of functional or protective materials over surfaces such as glass or metals. Our solutions are environmentally-friendly, efficient and highly reliable. They enable dramatic reductions in overspray, savings in raw materials, water and energy usage and provide improved process repeatability, transfer efficiency, high uniformity and reduced emissions.
Previous report
Total sales for the third quarter and first nine months of fiscal 2024 grew by 59% and 31%, respectively, driven by increased demand for our Multi-Axis Coating systems which are commonly used in the clean energy sector. Sales of our Multi-Axis Coating systems grew by 98%, or $1.47M, to $2.96M in the third quarter of fiscal 2024. In addition, Integrated Coating System sales accelerated by 635%, or $1.2M, to $1.4M due to continued success with our newly developed float glass coating platform and a newly completed custom built system for an important strategic customer in the solar market.
Previous report
Following uncharacteristically high revenue for Printed Circuit Board “PCB” Fluxing systems for our fiscal year ended February 28, 2023, PCB Fluxing sales dipped by 75% and 48%, respectively, for the third quarter and first nine months of fiscal 2024. Also, sales to our OEM Printed Circuit Board customers that integrate our ultrasonic nozzles into their own spray fluxers declined, causing OEM sales to decrease by 47% and 41%, respectively, for the third quarter and first nine months of fiscal 2024. We believe the PCB spray fluxer market has slowed and returned to what was closer to our historical revenue norms. The dip in OEM sales was largely offset by an increase in spare parts and service related revenue, which is a growing revenue stream that falls in the Other product category.
Previous report
Sales to the Alternative/Clean Energy market recorded growth of 189% in the third quarter of fiscal 2024, and 134% for the first nine months of fiscal 2024, which were positively impacted by a growing number of our customers transitioning from our R&D systems to production scale systems that carry much higher average selling prices.
Previous report
Electronics market revenue decreased for the first nine months of fiscal year 2024, influenced by softening sales of our PCB spray fluxers.
Previous report
Medical sales rebounded strongly with 53% growth in the third quarter of fiscal 2024, and 3% growth for the first nine months of FY 2024.
Previous report
Industrial sales remain very strong, showing growth of 95% for the first nine months of fiscal 2024, influenced by shipment of two next gen float glass coating systems totaling approximately $700,000, and the last two machines of a multi-system order to a US based customer for $432,000.
Previous report
In the first nine months of fiscal 2024, approximately 40% of sales originated outside of the United States and Canada compared with 55% in the first nine months of fiscal 2023.
Previous report
In the third quarter of fiscal 2024, approximately 40% of sales originated outside of the United States and Canada compared with 56% in the third quarter of fiscal 2023.
Previous report
We continue to record strong sales from the U.S. and Canada, growing 116% and 74%, respectively, in the third quarter of fiscal 2024 and the first nine months of fiscal 2024. U.S. government initiatives such as the CHIPS ACT and the Inflation Reduction Act have influenced these strong sales, as well as the continuing trend of onshoring for high technology products.
Previous report
Asia sales dropped 18% and 24% respectively, for the third quarter of fiscal 2024 and first nine months of fiscal 2024. This dip was due to decreased sales to China, while other areas of Asia remain more resilient showing moderate growth.
Previous report
For the third quarter of fiscal 2024, gross profit increased $1,102,000, or 60%, compared with the third quarter of fiscal 2023. The gross profit margin was 51% for both periods. Continued strong gross profit margins are maintaining despite a reduction in high margin OEM product sales, that are offset with increased sales from the US and Canada which most commonly do not have distributor discounts involved.
Previous report
Gross profit increased $1,677,000, or 29%, to $7,504,000 for the first nine months of fiscal 2024 compared with $5,827,000 in the first nine months of fiscal 2023. The gross profit margin was 50% compared with 51% for the prior year period. Continued strong gross profit margins are maintaining despite a reduction in high margin OEM product sales, that are mostly offset with increased sales from the US and Canada which most commonly do not have distributor discounts involved.
Previous report
Research and product development costs increased in the third quarter and the first nine months of fiscal 2024 due to increased salaries and research and development materials and supplies, which are used in the focused growth initiatives we continue to implement.
Previous report
Over the past twelve months the number of full-time employees engaged primarily in our research and product development efforts increased by approximately 14%. We added headcount in this area to accelerate the development of future custom machine solutions and higher value subsystems that we expect to be the cornerstone of our future business.
Previous report
Marketing and selling costs increased in the first nine months of fiscal 2024 due to increased salaries and increased travel and trade show expenses. These increases were partially offset by a decrease in commission expense. In the first nine months of fiscal 2024, the decrease in commission expense is due to a decrease in international sales being generated by our external distributors, which are commissioned at a higher rate than our in-house sales team.
Previous report
Over the past twelve months the number of full-time employees engaged in our sales and marketing efforts increased by approximately 13%. We have primarily added more technical personnel to support the growing diversity and complexity of our customers’ requirements for thin film coating applications.
Previous report
General and administrative expenses increased in the third quarter of fiscal 2024 due to increased salaries and fees for attendance at corporate investor conferences. These increases were partially offset by a decrease in stock based compensation expense.
Previous report
Operating Income:
Previous report
In the third quarter of fiscal 2024, operating income increased $618,000, or 600%, to $721,000 compared with $103,000 for the third quarter of fiscal 2023. Operating margin for the third quarter of fiscal 2024 was 13% compared with 3% in the prior year period. The current period’s increase in operating income is a result of an increase in revenue and gross profit offset by an increase in operating expenses.
Previous report
In the first nine months of fiscal 2024, operating income increased $533,000, or 81%, to $1,195,000 compared with $662,000 for the first nine months of fiscal 2023. Operating margin for the first nine months of fiscal 2024 was 8% compared with 6% in the prior year period. In the first nine months of fiscal 2024, the increase in operating income is a result of an increase in revenue and gross profit offset by an increase in operating expenses.
Previous report
Income Tax Expense:
Previous report
We recorded income tax expense of $200,000 for the third quarter of fiscal 2024 compared with $28,000 for the third quarter of fiscal 2023. For the first nine months of fiscal 2024 we recorded income tax expense of $321,000 compared with $113,000 for the first nine months of fiscal 2023.
Previous report
Net income increased by $712,000 or 124% to $1,285,000 for the first nine months of fiscal 2024 compared with $573,000 for the first nine months of fiscal 2023. The increase in net income in the first nine months of fiscal 2024 is primarily a result of an increase in gross profit and interest and dividend income partially offset by an increase in operating expenses and an increase in income tax expense.
Previous report
Impact of COVID-19
Previous report
With the exception of some lingering supply chain challenges, the residual effects of the COVID-19 pandemic did not have a significant impact on the Company's results of operations or financial condition for the three months ended November 30, 2023.
Previous report
Critical Accounting Policies
Reworded paragraphs (22)
Previous wording
We discuss expectations regarding our future performance, such as our business outlook, in our annual and quarterly reports, news releases, and other written and oral statements. These “forward-looking statements” are based on currently available competitive, financial and economic data and our operating plans. They are inherently uncertain, and investors must recognize that events could turn out to be significantly different from our expectations and could cause actual results to differ materially. These factors include, among other considerations, general economic and business conditions; political, regulatory, tax, competitive and technological developments affecting our operations or the demand for our products; inflationary and supply chain pressures; continued abatement of the COVID-19 pandemic and any residual effects; the recovery of the Electronics/Microelectronics and Medical markets following COVID-19 related slowdowns; and further adverse effects to our supply chain; maintenance of increased order backlog, including effects of any COVID-19 related cancellations; the imposition of tariffs; timely development and market acceptance of new products and continued customer validation of our coating technologies; adequacy of financing; capacity additions, the ability to enforce patents; maintenance of operating leverage; maintenance of increased order backlog; consummation of order proposals; completion of large orders on schedule and on budget; continued sales growth in the medical and alternative energy markets; successful transition from primarily selling ultrasonic nozzles and components to a more complex business providing complete machine solutions and higher value subsystems; and realization of quarterly and annual revenues within the forecasted range of sales guidance.
Current wording
We discuss expectations regarding our future performance, such as our business outlook, in our annual and quarterly reports, news releases, and other written and oral statements. These “forward-looking statements” are based on currently available competitive, financial and economic data and our operating plans. They are inherently uncertain, and investors must recognize that events could turn out to be significantly different from our expectations and could cause actual results to differ materially. These factors include, among other considerations, general economic and business conditions; political, regulatory, tax, competitive and technological developments affecting our operations or the demand for our products; inflationary and supply chain pressures; the recovery of the Electronics/Microelectronics and Medical markets; rebound of sales to the industrial market in the second quarter of fiscal year 2025; maintenance of increased order backlog; the imposition of tariffs; timely development and market acceptance of new products and continued customer validation of our coating technologies; adequacy of financing; capacity additions, the ability to enforce patents; maintenance of operating leverage; consummation of order proposals; completion of large orders on schedule and on budget; continued sales growth in the medical and alternative energy markets; successful transition from primarily selling ultrasonic nozzles and components to a more complex business providing complete machine solutions and higher value subsystems; and realization of quarterly and annual revenues within the forecasted range of sales guidance.
Previous wording
Over the last decade, we have shifted our business from primarily selling our ultrasonic nozzles and components to a more complex business providing complete machine solutions and higher value subsystems to original equipment manufacturers (“OEMs”). This strategy has resulted in significant growth of our average unit selling price; with our larger machines often selling for over $300,000 and system prices sometimes reaching over $1,000,000. As a result of this transition, we have broadened our addressable market and we believe that we can grow sales on a larger scale. We expect that we will experience wide variations in both order flow and shipments from quarter to quarter in part due to the increase of larger orders in our sales mix.
Current wording
Our product line is rapidly evolving, transitioning from R&D to high-volume production machines with significantly higher average selling prices, showcasing our market leadership and adaptability. Over the last decade, we have shifted our business from primarily selling ultrasonic nozzles and components to providing complete machine solutions and higher-value subsystems to original equipment manufacturers (OEMs). This strategy has resulted in significant growth of our average unit selling price, with our larger machines often selling for over $300,000 and system prices sometimes reaching over $1,000,000. Consequently, we have broadened our addressable market and believe we can grow sales on a larger scale. We expect that we will experience wide variations in both order flow and shipments from quarter to quarter.
Previous wording
We are a global business with approximately 40% of our sales generated from outside the United States and Canada in the first nine months of fiscal 2024. Our direct sales team and our distributor and sales representative network are located in North America, Latin America, Europe and Asia. We continue to expand our sales capabilities by increasing the size of our direct sales force and adding new distributors and sales representatives. In addition, we have established testing labs at our distribution partner sites in China, Taiwan, Germany, Turkey, Korea and Japan, while also expanding our first testing lab that is co-located with our manufacturing facilities in New York. These labs provide significant value for demonstrating to prospective customers the capabilities of our equipment and enabling us to develop custom solutions to meet their needs. Providing customers that visit our labs with a high level of application engineering expertise to develop their unique coating processes is an area of focus in our sales efforts, as we continually expand Sono-Tek’s services to best support the needs of our customers.
Current wording
We continue to expand our sales capabilities by increasing the size of our direct sales force and adding new distributors and sales representatives. In addition, we have established testing labs at our distribution partner sites in China, Taiwan, Germany, Turkey, Korea, and Japan, while also expanding our first testing lab co-located with our manufacturing facilities in New York. These labs provide significant value for demonstrating the capabilities of our equipment to prospective customers and enable us to develop custom solutions to meet their needs.
Previous wording
We believe product superiority is imperative and that it is attained through the extensive experience we have in the coatings industry, our proprietary manufacturing know-how and skills and the unique work force we have built over the years. Our growth strategy is to leverage our innovative technologies, proprietary know-how, unique talent and experience, and global reach to further advance the use of ultrasonic coating technologies for the microscopic coating of surfaces in a broader array of applications that enable better outcomes for our customers’ products and processes.
Current wording
Our growth strategy is focused on leveraging our innovative technologies, proprietary know-how, unique talent and experience, and global reach to develop thin-film coating technologies that enable better outcomes for our customers’ products and processes.
Previous wording
Third Quarter Fiscal 2024 Highlights (compared with the third quarter of fiscal 2023 unless otherwise noted) We refer to the three-month periods ended November 30, 2023 and 2022 as the third quarter of fiscal 2024 and fiscal 2023, respectively.
Current wording
First Quarter Fiscal 2025 Highlights (compared with the first quarter of fiscal 2024 unless otherwise noted) We refer to the three-month periods ended May 31, 2024 and 2023 as the first quarter of fiscal year 2025 and fiscal year 2024, respectively.
Previous wording
Marketing and selling expenses increased in the third quarter of fiscal 2024 due to increased salaries and increased travel and trade show expenses.
Current wording
Marketing and selling expenses increased in the first quarter of fiscal year 2025 due to increased travel and trade show expenses and commission expense. In the first quarter of fiscal year 2025, our commission expense increased $74,000 to $196,000, compared with $122,000 for the prior year period. The increase in commission expense is a result of the increase in sales in the first quarter of fiscal year 2025.
Previous wording
General and administrative expenses increased in the first nine months of fiscal 2024 due to increased salaries, professional fees and corporate expenses. These increases were partially offset by a decrease in stock based compensation.
Current wording
General and administrative expenses increased in the first quarter of fiscal year 2025 due to increases in salaries, legal and audit fees, corporate investor coverage and other corporate expenses.
Previous wording
Interest and dividend income increased by $111,000 to $150,000 in the third quarter of fiscal 2024 as compared with $39,000 for the third quarter of fiscal 2023. In the first nine months of fiscal 2024 interest and dividend income increased by $315,000 to $380,000 as compared with $65,000 for the first nine months of fiscal 2023. Our present investment policy is to invest excess cash in highly liquid, low risk US Treasury securities. At November 30, 2023, the majority of our holdings are rated at or above investment grade.
Current wording
Interest and dividend income increased $29,000 to $153,000 in the first quarter of fiscal year 2025 as compared with $124,000 for the first quarter of fiscal year 2024. Our present investment policy is to invest excess cash in highly liquid, lower risk US Treasury securities. At May 31, 2024, the majority of our holdings are rated at or above investment grade.
Previous wording
The increase in income tax expense in the third quarter and first nine months of fiscal 2024 is due to the increase in income before income taxes offset by the application of available research and development tax credits.
Current wording
We recorded an income tax expense of $60,000 for the first quarter of fiscal year 2025 compared with an income tax benefit of $21,000 for the first quarter of fiscal 2024. The increase in income tax expense in fiscal 2025 is due to the increase in income before income taxes offset by the application of available research and development tax credits.
Previous wording
Net income increased by $585,000 or 557% to $690,000 for the third quarter of fiscal 2024 compared with $105,000 for the third quarter of fiscal 2023. The increase in net income during the third quarter is primarily a result of an increase in gross profit and interest and dividend income partially offset by an increase in operating expenses and an increase in income tax expense.
Current wording
Net income increased by $278,000 to $331,000 in the first quarter of fiscal 2025 compared with $53,000 in the prior year period. The increase in net income is primarily a result of an increase in operating income and interest and dividend income partially offset by an increase in operating expenses.
Previous wording
Working Capital – Our working capital increased $955,000 to $12,072,000 at November 30, 2023 from $11,117,000 at February 28, 2023. The increase in working capital was mostly the result of the current period’s net income and noncash charges partially offset by purchases of equipment.
Current wording
Working Capital – Our working capital increased $368,000 to $12,491,000 at May 31, 2024 from $12,123,000 at February 29, 2024. The increase in working capital was primarily the result of the current period's net income and noncash charges partially offset by purchases of equipment.
Previous wording
We aggregate cash and cash equivalents and marketable securities in managing our balance sheet and liquidity. For purposes of the following analysis, the total is referred to as “Cash.” At November 30, 2023 and February 28, 2023, our working capital included:
Current wording
We aggregate cash, cash equivalents and marketable securities in managing our balance sheet and liquidity. For purposes of the following analysis, the total is referred to as “Cash.” At May 31, 2024 and February 29, 2024, our working capital included:
Previous wording
The following table summarizes the accounts and the major reasons for the $1,146,000 increase in “Cash”:
Current wording
The following table summarizes the accounts and the major reasons for the $304,000 increase in “Cash”:
Previous wording
Stockholders’ Equity – Stockholders’ Equity increased $1,432,000 from $14,634,000 at February 28, 2023 to $16,066,000 at November 30, 2023. The increase is a result of the current period’s net income of $1,285,000 and $147,000 in additional equity related to stock-based compensation awards.
Current wording
Stockholders’ Equity – Stockholder’s Equity increased $385,000 from $16,279,000 at February 29, 2024 to $16,664,000 at May 31, 2024. The increase is a result of the current period’s net income of $331,000 and $54,000 in additional equity related to stock-based compensation awards.
Previous wording
Operating Activities – We generated $1,442,000 of cash in our operating activities in the first nine months of fiscal 2024 compared with $995,000 of cash in the first nine months of fiscal 2023, an increase of $447,000. The increase was mostly the result of increases in accounts payable, accrued expenses and customer deposits offset by increases in inventories and accounts receivable.
Current wording
Operating Activities – We generated $328,000 of cash in our operating activities in the first quarter of fiscal year 2025 compared to $828,000 of cash in the first quarter of fiscal year 2024, a decrease of $500,000. The decrease was mostly the result of decreases in cash received for accounts receivable and customer deposits when compared to the prior year partially offset by an increase in inventories.
Previous wording
Investing Activities – We used $1,815,000 in the first nine months of fiscal 2024 in our investing activities compared with using $2,659,000 in the first nine months of fiscal 2023. For the first nine months of fiscal years 2024 and 2023, we used $327,000 and $414,000, respectively, for the purchase or manufacture of equipment, furnishings and leasehold improvements. For the first nine months of 2024 and 2023, we invested $1,488,000 and $2,245,000 in our marketable securities.
Current wording
Investing Activities – For the first quarter of fiscal year 2025, our investing activities used $61,000 of cash compared with providing $112,000 for the first quarter of fiscal year 2024. For the first quarters of fiscal years 2025 and 2024, we used $33,000 and $149,000, respectively, for the purchase or manufacture of equipment, furnishings and leasehold improvements. For the first quarters of fiscal years 2025 and 2024, our marketable securities used $28,000 and provided $261,000, respectively, of cash.
Previous wording
Net Changes in Cash and Cash Equivalents – In the first nine months of fiscal 2024, our cash balance decreased by $373,000 as compared to a decrease of $1,665,000 in the first nine months of fiscal 2023. In the first nine months of fiscal 2024, our operating activities generated $1,442,000 of cash, we invested $1,488,000 in marketable securities and used $327,000 for the purchase or manufacture of equipment, furnishings and leasehold improvements.
Current wording
Net Increase in Cash and Cash Equivalents – In the first quarter of fiscal year 2025, our cash balance increased by $267,000 as compared to an increase of $940,000 in the first quarter of fiscal year 2024. In the first quarter of fiscal year 2025, our operating activities generated $328,000 of cash and our marketable securities used $28,000 of cash. In addition, we used $33,000 for the purchase or manufacture of equipment, furnishings and leasehold improvements.
Previous wording
The discussion and analysis of the Company’s financial condition and results of operations are based upon the unaudited condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires the Company to make estimates and judgments that affect the reported amount of assets and liabilities, revenues and expenses, and related disclosure on contingent assets and liabilities at the date of the financial statements. Actual results may differ from these estimates under different assumptions and conditions.
Current wording
The discussion and analysis of the Company’s financial condition and results of operations are based upon the consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires the Company to make estimates and judgments that affect the reported amount of assets and liabilities, revenues and expenses, and related disclosure on contingent assets and liabilities at the date of the financial statements. Actual results may differ from these estimates under different assumptions and conditions.
Previous wording
Critical accounting policies are defined as those that are reflective of significant judgments and uncertainties and may potentially result in materially different results under different assumptions and conditions. The Company believes that critical accounting policies are limited to those described below. For a detailed discussion on the application of these and other accounting policies see Note 2 to the Company’s consolidated financial statements included in Form 10-K for the year ended February 28, 2023.
Current wording
Critical accounting estimates are defined as those that are reflective of significant judgments and uncertainties and may potentially result in materially different results under different assumptions and conditions. The Company believes that critical accounting policies are limited to those described below. For a detailed discussion on the application of these and other accounting policies see Note 2 to the Company’s consolidated financial statements included in Form 10-K for the year ended February 29, 2024.
Previous wording
The Company accounts for income taxes under the asset and liability method. Under this method, deferred income taxes are recognized for the tax consequences of “temporary differences” by applying enacted statutory tax rates applicable to future years to differences between the financial statement carrying amounts and the tax basis of existing assets and liabilities. If it is more likely than not that some portion or all of a deferred tax asset will not be realized, a valuation allowance is recognized. We use a recognition threshold and a measurement attribute for financial statement recognition and measurement tax positions taken or expected to be taken in a return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities.
Current wording
The Company accounts for income taxes under the asset and liability method. Under this method, deferred income taxes are recognized for the tax consequences of “temporary differences” by applying enacted statutory tax rates applicable to future years to differences between the financial statement carrying amounts and the tax basis of existing assets and liabilities. If it is more likely than not that some portion or all of a deferred tax asset will not be realized, a valuation allowance is recognized. We use a recognition threshold and a measurement attribute for financial statement recognition and measurement tax positions taken or expected to be taken in a return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. As of May 31, 2024 and May 31, 2023, there were no uncertain tax provisions.
Previous wording
The computation of the expense associated with stock-based compensation requires the use of a valuation model. ASC 718 is a complex accounting standard, the application of which requires significant judgment and the use of estimates, particularly surrounding Black-Scholes assumptions such as stock price volatility, expected option lives, and expected option forfeiture rates, to value equity-based compensation. The Company currently uses a Black-Scholes option pricing model to calculate the fair value of its stock options. The Company primarily uses historical data to determine the assumptions to be used in the Black-Scholes model and has no reason to believe that future data is likely to differ materially from historical data. However, changes in the assumptions to reflect future stock price volatility and future stock award exercise experience could result in a change in the assumptions used to value awards in the future and may result in a material change to the fair value calculation of stock-based awards. ASC 718 requires the recognition of the fair value of stock compensation in net income. Although every effort is made to ensure the accuracy of our estimates and assumptions, significant unanticipated changes in those estimates, interpretations and assumptions may result in recording stock option expense that may materially impact our financial statements for each respective reporting period.
Current wording
The computation of the expense associated with stock-based compensation requires the use of a valuation model. ASC 718 is a complex accounting standard, the application of which requires significant judgment and the use of estimates, particularly surrounding Black-Scholes assumptions such as stock price volatility, expected option lives, and expected option forfeiture rates, to value equity-based compensation. The Company currently uses a Black-Scholes option pricing model to calculate the fair value of its stock options. The Company primarily uses historical data to determine the assumptions to be used in the Black-Scholes model and has no reason to believe that future data is likely to differ materially from historical data. However, changes in the assumptions to reflect future stock price volatility and future stock award exercise experience could result in a change in the assumptions used to value awards in the future and may result in a material change to the fair value calculation of stock-based awards. ASC 718 requires the recognition of the fair value of stock compensation in net income.
Previous wording
Accounting pronouncements issued but not yet effective have been deemed to be not applicable or the adoption of such accounting pronouncements is not expected to have a material impact on the financial statements of the Company.
Current wording
Other than ASU 2023-07 and ASU 2023-09 discussed above, accounting pronouncements issued but not yet effective have been deemed to be not applicable or the adoption of such accounting pronouncements is not expected to have a material impact on the financial statements of the Company.
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
Nine Months Fiscal 2024 Highlights (compared with the first nine months of fiscal 2023 unless otherwise noted) We refer to the nine-month periods ended November 30, 2023 and 2022 as the first nine-months of fiscal 2024 and fiscal 2023, respectively.